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Howard Stutz

Station Casinos says customers still hesitant to spend

13 August 2014

LAS VEGAS -- Station Casinos, Inc. executives said Tuesday all signs point toward improvements in the Southern Nevada economy.

But the benefits of those results haven’t materialized inside casino drop boxes.

Still, the company said it increased revenue and cash flow in the second quarter despite the struggles of a challenging market.

“The big picture is that the economic indicators are better,” Station Casinos Chief Financial Officer Marc Falcone told investors on a conference call to discuss the company’s results for the quarter that ended June 30.

“Visits are stable, but customers are hesitant to spend,” Falcone said. “We’re still not seeing the levels of discretionary income we saw in the past.”

Despite the softness in gaming revenue and costs the company experienced through some $55 million in renovations at Red Rock Casino, Resort & Spa and Green Valley Ranch Resort, Spa and Casino, Station Casinos increased overall revenue 2.4 percent to $324.2 million in the second quarter.

Adjusted cash flow, a nontraditional reporting figure, increased 6.9 percent to $104.4 million.

Company officials said the cash flow number marked the 13th consecutive quarterly increase.

“Our same-store Las Vegas properties continued to perform well on many measures in the second quarter,” Falcone said in a statement.

Falcone told analysts the Las Vegas locals market is still not experiencing the growth in gaming revenue felt by Strip resorts. He said the announcement of new projects on the Strip will boost the locals market when construction jobs and other factors are added.

“We’re still kind of the tale of two cities,” he said.

Station Casinos is adding new restaurants to both Red Rock and Green Valley.

At Red Rock, Tbones Chophouse was renovated and the Mercadito Mexican Restaurant and The Weiner Circle opened. Hearthstone Kitchen &Cellar is expected to open by the end of the year, along with both a new Asian noodle bar concept and renovated Italian restaurant.

Also, the new connection between Red Rock and the Downtown Summerlin retail district and additional parking are being created.

At Green Valley Ranch Resort, the four new food offerings and bar concepts and renovated guest rooms are expected to be complete in 2015.

“We see a lot of potential from those projects,” Falcone said.

Meanwhile, the Station Casinos’ Indian casino management contracts have provided another revenue source.

The Graton Resort in Northern California, which the company manages for an Indian tribe, had $88.9 million in revenue in the quarter, cash flow of $53.8 million, and Station Casinos recorded $6.7 million in management fees.

The company’s management contract from the Gun Lake Casino in Michigan provided another $4.1 million in management fees in the quarter.

Station Casinos said its 57 percent ownership in Ultimate Gaming, which operates online wagering in Nevada and New Jersey, had a negative effect of $2.5 million on the company’s cash flow.

Falcone said the market has been slower than anticipated, but changes in various aspects, such payment processing by credit card companies, could improve the prospects for the activity.

Station Casinos is not publicly traded but has $2.1 billion in publicly held debt.

Falcone said the company has reduced its debt by $60.5 million during the six months that ended June 30.
Station Casinos says customers still hesitant to spend is republished from