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Liz Benston

Station May Accelerate Development Of Casinos

25 January 2005

LAS VEGAS -- With several local future casino projects on tap to fuel profit over the next several years, Station Casinos Inc. is contemplating speeding up the development process for those casinos because of stronger than expected performance in recent months.

"We're evaluating the entire pipeline of development opportunities that we have," Station Casinos Chairman and Chief Executive Officer Frank Fertitta III said during a conference call to investors Monday.

The company may prioritize some projects over others depending on how profitable they are expected to be, he said.

Station Casinos on Monday reported its highest fourth quarter earnings per share on record as well as its highest full-year earnings in 2004. The company also said it is expected to report even higher earnings this year based on the success of its "Jumbo Jackpot" casino promotions as well as the continued strength of the Las Vegas economy.

Besides growth in several categories such as population, jobs and income, about 40 percent of new Las Vegas residents are people over 55 years old -- a group that has historically fueled business at locals casinos, executives said.

The company generated about $90 million more in cash flow last year from the same properties it operated in 2003.

Discussions about accelerating future casino projects have become more serious in the past several months, Chief Financial Officer Glenn Christenson said.

Station is in a financial position to develop new projects -- both expansions of existing casinos and new resorts -- on short notice, he said.

"It's all about flexibility and access to capital," he said. "We have the ability to do what we want in terms of timing."

The company expects to have at least $300 million in cash left over this year after spending on existing projects and corporate costs, he added.

Station Casinos is still on track to complete its next locals casino, Red Rock Station, by the end of next year's first quarter, executives said.

The 400-room Summerlin property, with an 87,000 square-foot casino, is expected to generate from $60 million to $65 million in cash flow in its first year of operation.

The company is still planning the scope of its next locals casino after Red Rock Station. That project, an urban-style casino and hotel at the site of its aging Wild Wild West casino at Tropicana Avenue and Interstate 15, is expected to start soon after the first-quarter opening of Red Rock Station, executives said.

Durango Station, located near Durango Road and Interstate 215, could be developed in conjunction with the Wild Wild West site or afterward depending on market demand, Christenson said.

The company already manages the Thunder Valley Casino near Sacramento for an Indian tribe and has contracts to develop casinos for three additional California tribes. Station also has an ownership stake in a group developing a tribal casino in Michigan.

The timing of these four other casino projects, which still require state casino compacts as well as federal approvals, has become increasingly difficult to handicap, executives said. Controversy over the spread of Indian casinos as well as the complications inherent in obtaining federal regulatory approvals for tribal casinos have contributed to delays, they said.

While the company still expects all of the casino projects to eventually come to fruition, it isn't releasing specific opening dates for the casinos, Christenson said.

Most of the company's spending will be concentrated in Las Vegas over the next several years, he said.

"There's a lot happening in Las Vegas and around the country," he said. "You have to make sure you keep your options open."

Station May Accelerate Development Of Casinos is republished from