Station to write down value of Fiesta Rancho

Thursday, March 21, 2002 | 11:11 a.m.

Despite a stronger-than-expected first quarter, Station Casinos Inc. said Wednesday it expects to take a charge on write-offs related to the Fiesta Rancho casino in North Las Vegas.

The amount of the write-off has yet to be determined, said Station Chief Financial Officer Glenn Christenson. Station announced that, prior to this charge, it expects to post earnings of 16 cents to 18 cents per share for the quarter ending March 31, well ahead of analyst expectations.

"We'll be looking at its fair market value today versus the value as we have it recorded," Christenson said. "To the extent there's a shortfall, we'd have to take an impairment charge. (The valuation) could potentially be less than what we paid for it originally."

Station paid $185 million for the Fiesta in January 2001.

The writedown reflects a change in accounting principles that went into effect in January affecting "goodwill" -- the difference between the actual value of a company's assets and the price paid for that company.

Prior to January, companies could gradually remove goodwill by "amortization," or a series of equal non-cash charges taken over a long period of time. Under the new principles, the difference between fair market value and book value must be immediately written off a company's books through a non-cash "impairment" charge.

"It's unfortunate, because the accounting pronouncement doesn't allow you to write it back up again," Christenson said. "Absent this pronouncement, nothing would have happened. But we don't have the ability to decide which pronouncements we like or don't like."

"You'll see a lot of this over the course of the next few weeks," Christenson added. "We won't be the only one (gaming company) that does this."

The lower market value reflects a disappointing performance at the Fiesta during 2001. Christenson blamed this largely on customers shying away from the Fiesta after it changed hands, and business lost to the Suncoast, which opened in Summerlin in September 2000. But customers are starting to come back, Christenson said.

"It's doing much better now, and we're pleased with the progress we're making," Christenson said. "With time, we're winning some of those customers back."