CasinoCityTimes.com

Home
Gaming Strategy
Featured Stories
News
Newsletter
Legal News Financial News Casino Opening and Remodeling News Gaming Industry Executives Author Home Author Archives Search Articles Subscribe
Newsletter Signup
Stay informed with the
NEW Casino City Times newsletter!
Recent Articles
Arnold M. Knightly
 

Station forges ahead despite quarterly loss

13 May 2008

LAS VEGAS, Nevada -- Station Casinos posted sharp declines in key revenue categories during the first three months of the year, although a gaming analyst said the locals casino giant is showing no signs of cutting back on development.

The company posted a net loss of $29.7 million for the quarter ended March 31 compared to a net profit of $23 million last year, according to a Monday filing with the Securities and Exchange Commission.

The loss was driven by a decrease in revenue and increased operating expenses as well as interest expenses tied to debt from the company's private-equity buyout last year.

However, Station Casinos is going ahead with new projects despite the economic downturn.

"The bigger thing is Station continues to invest," Wachovia Capital Markets bond analyst Dennis Farrell Jr. said. "It's not like they're cutting back."

The tightening credit markets have not affected construction of the $675 million Aliante Station in North Las Vegas, scheduled to open by the end of the year.

The project is a joint venture with land developer American Nevada Co., which partnered with the company to build Green Valley Ranch Resort.

The company also recently discussed plans for its Viva project, a multibillion-dollar mixed-use development planned for 110 acres on Tropicana Avenue and Dean Martin Drive just west of Interstate 15.

In mid-April, Chairman and Chief Executive Officer Frank Fertitta III and President Lorenzo Fertitta said Viva, which would replace the Wild Wild West casino, would rival MGM Mirage's $8 billion CityCenter in size.

The company is also positioned to start construction on the 67-acre gaming site on Durango Drive and the Las Vegas Beltway in the fourth quarter, but has yet to make an announcement on its plans.

The company has other land holdings in Clark County, including the 26-acre Castaways site, 61 acres on Cactus Lane and Las Vegas Boulevard, and 45 acres acquired in November in the Inspirada development in Henderson.

"They continue to reinvest, they continue to acquire land," Farrell said. "They're well-positioned for a turnaround when it does occur."

The current economic slowdown is posing some challenges for the locals gaming operator, though.

Company revenue dropped for the second straight quarter, declining 5.4 percent to $352.3 million from $372.4 million in 2007 while operational expenses increased 4.5 percent.

The revenue decline was driven by a 5.4 percent drop in casino revenues while room, food and beverage revenues remained flat.

Room occupancy dropped 6 percent to 88 percent but average daily room rates climbed $1 to $98 per day.

Revenue has been on a steady decline since the second quarter of last year when it rose 6.4 percent before the slowdown.

Cash flow, described as earnings before interest, taxes, depreciation and amortization, declined for the third consecutive quarter, dropping 10.6 percent to $136.2 million from $152.3 million.

Station Casinos, which is now privately owned, did not hold a conference call for investors and gaming analysts on Monday.

"Everyone is feeling pressure," Farrell said. "It's driven just by the weakened consumer and the environment."

Station Casinos, along with many other gaming companies, has been combatting the slowdown at many of its properties through layoffs and job attrition.

Although it has declined to discuss how widespread layoffs have been, the company confirmed laying off nearly 70 corporate-level employees.

Station forges ahead despite quarterly loss is republished from Online.CasinoCity.com.