Station Casinos reports loss in third quarter

By Sun Staff (contact)

Published Monday, Nov. 10, 2008 | 9:33 a.m.

Updated Monday, Nov. 10, 2008 | 11:51 a.m.

Station Casinos announced this morning it swung to a loss in the third quarter as the slowing economy took its toll on the largest operator of suburban casinos in Las Vegas.

The locals casino company reported a loss of $23.4 million for the quarter ending Sept. 30. That compares to income of $3.7 million for the third quarter in 2007.

Net revenues dropped 10 percent from last year to $317 million. Station's earnings, before certain expenses, fell 13 percent in the third quarter to $108.7 million. Including only the company's nine major casinos, earnings fell 16 percent to $110.2 million. Earnings at Green Valley Ranch, which is half owned by the Greenspun family, fell 22 percent in the quarter.

Other property-specific information wasn't available.

"The decline in revenues for the major Las Vegas operations accelerated during the course of the third quarter, and we experienced revenue declines at those properties in October that were in excess of third quarter levels. The market continues to be very challenging and it is unclear as to when it may improve," said Thomas M. Friel, Station's chief accounting officer and treasurer.

Deutsche Bank bond analyst Andrew Zarnett said the economic slowdown will likely continue through 2009 "as local Las Vegas residents face job uncertainties and larger mortgage payments which affect discretionary spending."

"Higher foreclosures, job layoffs, few workable hours and reduced tips along with a faltering Las Vegas Strip economy as well as large household debt burdens will put continued pressure on the locals market and Station Casinos results in the near term," Zarnett said in a research note to investors today.

Station may need to renegotiate terms and conditions with its lenders by year-end so as not to default on a requirement that the company stay below a certain level of debt relative to earnings, Zarnett said. While banks have curtailed lending amid the credit crunch, Station has more than $400 million though a revolving bank loan that it can use to fund future expenses, he said.

Falling earnings and rising debt costs have raised the likelihood that gaming companies will violate such leverage requirements.

Station is the managing partner of Aliante Station, a $662 million project expected to open Tuesday at the 215 Beltway and Aliante Parkway. Aliante Station is a joint venture between Station Casinos and affiliates of the Greenspun family, which publishes the Las Vegas Sun.