Station to drop Andersen

Thursday, May 23, 2002 | 11:12 a.m.

Station Casinos Inc., the largest operator of locals' casinos in Las Vegas, Wednesday joined the parade of gaming companies to drop Arthur Andersen as its independent auditor and to hire Deloitte & Touche.

The move was prompted by news this week that five partners with decades of experience in the gaming industry are leaving Andersen for Deloitte.

"When you engage one of these firms, you're really dealing with individuals," Station Chief Financial Officer Glenn Christenson said today. "We were very pleased with the quality of service that we were getting."

Station's contact at Andersen, Tom Roche, is a former Nevada Gaming Control Board member and recently assumed the title of national gaming industry director at Deloitte.

Andersen billed Station $410,000 for services in 2001.

Shareholders were expected to vote on management's initial recommendation that Station retain Andersen at the company's annual shareholder meeting Wednesday, but the item was instead removed from the agenda. With events unfolding daily in the federal investigation of Andersen, indicted on obstruction of justice charges, Station didn't have enough time to include the information in its proxy statements, the company said.

Station managers met with the company's audit committee late Wednesday and decided to terminate a 10-year relationship with Andersen and hire Deloitte. Once the largest provider of auditing services to the gaming industry, Andersen has lost many of those clients because of the Enron scandal.

In Las Vegas, Station joined MGM MIRAGE, Mandalay Resort Group, Harrah's Entertainment Inc. and Alliance Gaming Corp. in dropping Andersen and hiring Deloitte.

Separately, executives presented a glowing picture of financial health to several hundred investors at the annual meeting at Station's Green Valley Ranch Station Casino in Henderson.

"The Las Vegas locals' market is very strong and continues to grow," Station Chairman and Chief Executive Frank Fertitta III said. "This is the best strategy in the gaming industry."

Overall, Station's properties yielded growth in "same-store" cash flow in 2001. By contrast, many dominant gaming companies on the Strip report growth figures that largely reflect the addition of new properties and upgrades, he said.

The local gaming market is expected to grow by 50 percent by 2010, company executives said. The population is expected to swell by 27 percent during the period, to nearly 2 million people. Warm weather, entertainment options, master-planned senior communities and a favorable tax climate continues to draw new residents, especially from the Midwest and East Coast, Fertitta said.

Station is in the best position to draw from the growing local demand for gambling, executives said. The company owns or controls four parcels of land in the Las Vegas Valley that are available for future casino development, three of which are on the west side of town. The company hasn't yet outlined plans for these parcels. Meanwhile, Fertitta said, government and legislative controls have restricted the availability of such land for competitors.

The company's new Green Valley Ranch casino-hotel -- a partnership with the Greenspun family, owner of the Las Vegas Sun -- and cost controls elsewhere helped the company beat its earnings estimates for the quarter ended March 31.

Cash flow -- often used by analysts to determine a gaming company's ability to pay down debt from acquisitions and expensive property upgrades -- grew 10 percent from a year ago, while net income rose 10.5 percent.