Station revenue, profit increases

John Wilen

Wednesday, Oct. 14, 1998 | 11:47 a.m.

Station Casinos Inc. reported increased revenues, profits and cash flows in the quarter ending Sept. 30, but noted that debts and liabilities have also increased.

The company made $1 million in the quarter, or 3 cents per share, on revenues of $229.6 million, up from $546,000, or 2 cents per share, earned on revenues of $207.8 million in the year-ago quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 19 percent to $50 million from $42.2 million one year ago.

But Station's overall liabilities, which includes debt, have increased since the March 31 end of the company's fiscal year from $1.013 billion to $1.024 billion. Glenn Christenson, Station's chief financial officer, said the increase primarily reflects an $82 million bridge loan the company has taken to let it complete planned expansions at the Sunset and Texas Station casinos.

Analysts have been highly critical of Station's debt load. But David Wolfe, an analyst at CIBC Oppenheimer, sees signs the company's debt position may be improving. Though the absolute amount of debt is increasing, cash flows are more than keeping pace, said Wolfe.

"Their ratio of debt to cash flow has actually come down in recent quarters," said Wolfe.

Overall, Wolfe was impressed with the September quarter.

"I think the results are really strong," said Wolfe.

Station attributed the higher operating results to same-store sales growth of nine percent, EBITDA growth from Nevada operations of 17 percent, and improved operating results at the company's Station Casino Kansas City.

"We've been real pleased with the way that has come together," said Christenson.

In Nevada, where Station owns four casinos, EBITDA increased from $33 million one year ago to $38.9 million in the September quarter. Net revenues grew from $117.8 million to $128.9 million.

"Despite a 12 percent increase in competitive supply in February 1998, our gaming revenues and cash flow along the Boulder Strip have continued to increase," said Christenson. "That is really a function of having our Las Vegas strategy in place."

In Missouri, where Station owns St. Charles Riverfront Station Inc. and Kansas City Station Corp., EBITDA increased from $11.8 million last year to $15.6 million in the September quarter. Net revenues jumped from $69.5 million to $75.7 million.

The Missouri increases were attributable to the company's Kansas City casino and came despite declines in operating performance at the St. Charles facility.

Gaming revenue increased 23 percent at the Station Casino Kansas City, driven by increased market share and a 15 percent increase in win-per-admission, said Station. Revenues at the casino rose to $46.4 million while EBITDA more than doubled to $11.1 million. At the same time, net revenues at Station Casino St. Charles declined 2 percent, while EBITDA fell to $4.6 million.

Christenson said the company's success in Kansas City reflects the fine-tuning of its marketing strategy, and revamping its cost structure. Station attributed the declines at St. Charles to increased marketing expenses resulting from construction on a highway adjacent to the casino.

Station Casinos corporate expenses increased from $3.8 million to $5.4 million as a result of the company's involvement in two referendums. In Missouri, the company is involved in the "boats in moats," issue, and in California, Station is fighting the referendum to legalize Indian gaming.

Station said its Sunset and Texas Station expansions are on track for completion in November 1998, and the first quarter of 1999, respectively. The expansions represent a combined investment of $100 million.

Station's earnings announcement did not mention costs of litigation against Crescent Real Estate Equities Co., the Dallas real estate income trust whose acquisition of Station fell apart in July amid preferred shareholder concerns about share conversion rates, and general Crescent shareholder discontent with the real estate company's foray into the volatile gaming industry.