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Jennifer Robison

Station Casinos' Profit Increases 40 Percent

29 July 2005

Brisk population growth and job expansion in Southern Nevada have propelled a 40 percent increase in profit at Station Casinos, executives of the Las Vegas-based casino operator said Thursday.

The company's net income was $40.6 million, or 58 cents a share, in the three-month period ended June 30, up from with $29 million, or 43 cents a share, a year ago.

Revenue rose 14.1 percent, to $274 million from $240.2 million,

Earnings before interest, taxes, depreciation and amortization reached a record $118.3 million, a 27 percent increase from the same quarter a year ago. Same-store revenue from Station's Las Vegas properties grew 16 percent over the prior year's second quarter.

Executives also announced plans for a $110 million expansion at Green Valley Ranch Station in Henderson and said they would enter the competitive local high-rise condominium market with a residential project of up to 600 units at the $925 million Red Rock Station, under construction at West Charleston Boulevard and Interstate 215 in Summerlin.

"The supply-and-demand dynamics in this market are really exceptional," said Glenn Christenson, Station's chief financial officer. "The properties we own are in rapidly growing areas (of the Las Vegas Valley). I think that, coupled with our marketing programs, is helping to drive our business. People like Station's properties, and as the economy here continues to grow and people spend more of their incremental dollars on entertainment, Station Casinos is going to be a beneficiary."

The proposed condo tower is a joint venture of Station, local timeshare developer Stephen Cloobeck and condominium builder Steven Molasky. Station would hold 80 percent of the joint venture, which would rest on 8 acres adjacent to the resort's swimming pool.

Christenson had few details on the condo project, saying that the developers would begin taking reservations in six months to nine months. The demand will shape the project's scope and whether it will offer the option to rent units through the hotel, he said. He noted that within an hour of announcing the condo property on Thursday, Station fielded about 20 phone calls from Wall Street analysts interested in buying there. He said its Summerlin location would help sales by differentiating it from the myriad condo towers planned across the valley.

"That particular area has great demographics, lots of retail and access to medical facilities. It's also right off the (Las Vegas) Beltway, so it's a lot easier to get to various places around the valley," Christenson said. "We expect high demand."

Consumer demand is also driving the $110 million expansion of the company's Green Valley Ranch Station. On tap are a 1,500-space parking garage, a 500-seat entertainment lounge, 14,000 square feet of convention space to supplement the existing 50,000 square feet of space, a new poker room and additional slot machines.

The plans follow the company's announcement earlier this year that it will give Santa Fe Station a $120 million overhaul, while Fiesta Henderson will receive a $70 million upgrade. Improvements at all three properties will begin this year and open in phases beginning in the third quarter of 2006.

"Master-plan expansions of existing properties are part of our growth story going forward," Christenson said. "They have a lower risk profile and higher returns on investment relative to other types of development."

Christenson also pointed to the possibility that future enhancements to Station's local properties would include additional condominium towers. He singled out Durango Station in the southwest valley, the Wild Wild West at Tropicana Avenue and Industrial Road and Sunset Station in Henderson as "very attractive locations" for residential high-rise.

"The value of our portfolio is exceptional because (land holdings are) the catalyst for future shareholder growth at Station," he said.

He estimated the company's land values were worth $9 to $12 a share.

Station also boosted by $15 million its projected earnings before interest, taxes, depreciation and amortization for 2006 -- a move that gladdened gaming analysts.

"We think this demonstrates the remarkable leverage to the (Station) model and the ability of management to carry more and more of the incremental revenues to the bottom line," said Steven Kent, an analyst with Goldman Sachs in New York. "It is exactly for these reasons that we view Station as one of the best long-term gaming investments."

Christenson also announced Station would increase its annual dividend by 19 percent to $1.

Station Casinos' Profit Increases 40 Percent is republished from