Profit jumps at Station Casinos

By Liz Benston (contact)

Tuesday, Oct. 19, 2004 | 10:53 a.m.

Strong revenue growth across Station Casinos Inc.'s locals casinos in Las Vegas boosted the company's profit by 47 percent in the third quarter, beating analysts' expectations, the company said today.

Station Casinos also said its board of directors on Monday approved a 20 percent increase in the company's quarterly cash dividend, to 21 cents per share. The dividend is payable Dec. 3 to shareholders of record on Nov. 12.

Station Casinos reported profit of $29.1 million in the third quarter compared with $19.8 million for the same quarter a year earlier.

On a per share basis, Station reported profit of 43 cents per share in the third quarter compared with 32 cents for the same quarter a year ago.

Executives said the company's performance and continued positive economic growth in Las Vegas has allayed analysts' concerns about this month's announcement by Pulte Homes Inc.

The homebuilder slashed home prices in some local neighborhoods by hundreds of thousands of dollars, saying the homes were overpriced. The news sent homebuilder stocks tumbling and led other experts to question whether Las Vegas -- one of the hottest real estate markets in the country -- was headed for a meltdown.

New home sales are up about 25 percent through August and new home permits are up about 40 percent, Station Chief Financial Officer Glenn Christenson said. Homebuilders have indicated that they expect next year's home sales to be in line with this year's, he said.

"We continue to see 5,000 to 8,000 people move here each month," Christenson said. "I find it almost amusing about the concern about Pulte Homes."

Executives also said the company is considering accelerating its development plans for future casinos in Las Vegas based on strong revenue growth so far.

After Station opens its planned Red Rock Station hotel and casino in Summerlin in 2006, the company plans to build a major resort at the site of its Wild Wild West casino on Tropicana Avenue near Interstate 15 and has several other sites around the valley for future casinos.

Station this month purchased the site of the defunct Castaways casino on Fremont Street. Christenson said today the company intends to develop the site but didn't say when or how. "We don't intend to develop it in its current configuration," he said.

Excluding certain one-time charges, Station reported profit of $31.1 million compared with $21.9 million a year ago.

Per share profit excluding those charges was 46 cents per share -- 2 cents above analysts' average estimate for the third quarter -- compared with 35 cents a year ago.

One-time charges included $800,000 tied to the settlement of a fine related to the company's failure to file cash transaction reports with regulators and $2.1 million to develop new casino projects, primarily with Indian tribes.

Station also increased profit expectations for the fourth quarter. The company expects to earn 48 cents to 52 cents per share compared with analysts' estimate of 48 cents. The increase assumes revenue growth of 10 percent to 12 percent in Las Vegas, the company said.

"This should quell concerns that the locals market is slowing," Fulcrum Global Partners analyst Joe Greff said in a research note today.

"Station continues to benefit from the significant population growth and substantial development in the community, including new housing coupled with an extremely robust local economy where unemployment is at a multi-year low and new job formation continues at a robust pace," Greff said.

Revenue across the company's properties rose 11 percent to $242.9 million and cash flow rose 19 percent to $90.7 million. Cash flow -- defined as earnings before interest, taxes and other expenses -- rose 18.8 percent to $90.7 million.

Revenue at the company's eight largest casinos in Las Vegas rose 14 percent to $257.7 million in the third quarter and cash flow grew 27 percent to $93.7 million.

The raised dividend marks the second increase since Station introduced a dividend in 2003.

"Our strong operational performance and significant free cash flows allow us to provide significant cash returns to our shareholders while continuing to grow the business through new unit development and master-planned expansions," Station Chief Financial Officer Glenn Christenson said.

Station shares rose sharply in early trading this morning, nearing a 52-week high of $50.96 Oct. 4. Shares rose $2.28 per share or 4.73 percent to $50.45.