Good Times For Las Vegas Giant - Saturday 6th of May 2006

by Howard Stutz

Las Vegas Gaming Wire

LAS VEGAS For once it wasn't all about Red Rock Resort.

Station Casinos announced the company's first-quarter earnings Thursday, saying cash flow and revenue were driven largely by Green Valley Ranch Resort. The quarter was the last the company will report without including revenue from the $925 million Summerlin casino, which opened April 18. The company's second-quarter earnings will cover 73 days of operating results from Red Rock.

The Las Vegas-based casino operator said it had a net income of $41.1 million in the quarter that ended March 31, a 1.2 percent increase compared with $40.6 million in the first quarter of 2005. Earnings per share was 62 cents, compared with 59 cents a year ago.

Analysts polled by Thomson First Call had predicted the company would report 69 cents per share.

Station Casinos Chief Financial Officer Glenn Christenson said $14.1 million in preopening costs, predominately attributed to Red Rock, affected net income.

The company's net revenue in the quarter was $292.5 million, an increase of 7 percent from $273.5 million a year ago. Station Casinos' cash flow reported as earnings before interest, taxes, depreciation and amortization was $132.6 million, a 10 percent increase from $120.9 million a year ago.

Green Valley Ranch Resort, which the company jointly owns with the Greenspun Corp., had net revenue of $67.1 million and cash flow of $30.1 million, a margin of 43.2 percent.

Station Casino President Lorenzo Fertitta said that the casino performed well during the quarter despite new competition from the nearby $600 million South Coast, which Boyd Gaming Corp. opened in December.

"The results at Green Valley Ranch are very impressive considering we continue to experience significant construction disruption related to the Phase III expansion of that property, as well as new supply in the market," he said.

Still, on a morning conference with gaming analysts to discuss the results, analysts focused on Red Rock Resort and how the property has been handling customers since its opening. Station Casinos executives cautioned that it was still too early to pinpoint future results based on two weeks of operations.

"Not only are we getting people from around other parts of the city, but we're getting people who are staying on the Strip that want to come and check out the new property," Fertitta said. "It's only been open two weeks, but so far, so good."

Gaming analysts pressed Station Casinos for more definitive guidance a company's prediction on its future quarterly earnings.

Because Red Rock is still new, Christenson said the company would still stick with margins of the high teens to 20 percent.

"This was one of the strongest quarters we ever had and our goal is to build a long-term portfolio of assets that will be worth more down the road," Christenson said.

Goldman Sachs gaming analyst Steve Kent, in a note to investors, said the new property will probably take customers from its competition and other Station Casinos properties.

"We believe the greater challenge to results will come over the second quarter and third quarter when the company's recently opened Red Rock may cause locals market cannibalization, and the seasonal slowdown may exacerbate the competitive environment," Kent said.

Station Casinos, which already owns seven potential casino development sites in the Las Vegas Valley, two sites in Reno and has contracts for four potential American Indian casinos, told analysts it paid $26 million for a 9-acre site in Las Vegas, but wouldn't disclose the location.

Christenson said the company is on track to complete parking garage expansions at three casinos Santa Fe Station, Green Valley Ranch and Fiesta Henderson and still plans to break ground in early 2007 on the proposed $450 million Aliante Station in North Las Vegas.

The company will continue to develop master plans for three other potential casinos at Durango Road and Interstate 215, in Reno and on the site of the recently imploded Castaways.

Shares in Station Casinos were off in trading on the New York Stock Exchange for much of Thursday, rebounding by the end of the day to close at $76.98, up 33 cents or 0.43 percent.

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