Station, MGM Mirage Execs Reap Millions from Options

LAS VEGAS -- Top executives at Station Casinos Inc. reaped a profit of some $130 million from the exercise of stock options last year while MGM Mirage executives exercising options made about $34 million.

The value of the options -- which doesn't include salaries or bonuses for executives -- is considered large for the casino industry and is in part a function of record stock price gains experienced by the major Las Vegas-based casino companies.

Executives exercised a significant chunk of their available options, from as little as 18 percent to as much as 93 percent of remaining options as of year-end 2004, according to proxy statements issued by Station Casinos and MGM Mirage to shareholders. Other companies haven't yet released similar statements.

Station Casinos Inc. Chief Executive Frank Fertitta III reaped a profit of $75.4 million from the exercise of 2.4 million stock options last year -- about 71 percent of Fertitta's available options and by far the largest profit realized by executives at either company.

"It's a huge number considering the size of the company," said Graef Crystal, a Las Vegas-based compensation consultant and contributor to Bloomberg News. "But he has a gleaming record and my guess is that shareholders aren't going to be angry at him."

Station Casinos stock rose about 80 percent last year -- among the highest of any gaming company.

At year-end Fertitta had about 964,500 remaining options available to be exercised worth about $40 million.

Profit is defined as the market value of the stock on the date it was exercised minus the exercise price. Those shares may or may not have been eventually sold.

Station Chief Financial Officer Glenn Christenson said shareholders have questioned the company in the past about sizable stock option sales.

"They want to know if there's something we know that they don't," he said.

But Christenson said he has reassured shareholders that executives -- who still own millions of shares in Station -- still have a "huge financial interest" in the company.

Over the past two to three years executives have exercised options and sold some stock to achieve some "liquidity and diversification," he said.

The company's stock has continued to increase even after executives have sold shares, he said.

"Over the last several years we have performed -- we have done everything we said we would do in terms of guidance."

Last year Fertitta received a salary of $1.5 million and a bonus of $3.2 million, up from $1.4 million and $1.8 million, respectively, in 2003.

Station President Lorenzo Fertitta last year reaped a profit of $30.5 million from the exercise of 779,500 shares. He had 145,000 remaining options available for exercise worth about $6.6 million at year end.

Lorenzo Fertitta received a salary of $1.1 million and a bonus of $1.7 million -- up from $975,500 and $1 million, respectively.

The remaining executives received salaries and bonus awards of less than $1 million per year.

Chief Operating Officer William Warner reaped a profit of $9.8 million on the exercise of 293,100 options. He had 30,000 options available to exercise at year end.

Christenson realized a profit of $4.2 million on the exercise of 169,845 options and had 55,001 options available to exercise at year end.

Chief Legal Officer Scott Nielson realized a profit of $10.1 million on the exercise of 260,000 options and had 19,999 options available to exercise at year end.

Separately, MGM Mirage Chief Executive Officer Terry Lanni reaped a profit of $15.6 million last year on the exercise of 700,000 stock options. He had 410,000 options available to exercise at year end worth about $17 million.

Lanni received a salary of $2 million and a performance-based bonus of $3.3 million last year. That compares with $2 million each in 2003.

Bobby Baldwin, president and chief executive of the company's Mirage Resorts subsidiary, didn't exercise options last year. He had 840,000 options available to exercise at year end worth about $33.5 million.

Baldwin received a salary of $1.5 million and a bonus of $2.5 million compared with $1.5 million each in 2003.

John Redmond, president and chief executive of the company's MGM Grand subsidiary, reaped a profit of $9.4 million on the exercise of 445,000 stock options. He had 308,338 options available to exercise at year end worth about $14.6 million.

Redmond received a salary of $1.3 million and a bonus of $2.2 million compared with $1.3 million each in 2003.

President and Chief Financial Officer Jim Murren realized a profit of $6.7 million on the exercise of 200,000 options. He had 900,000 options available to exercise at year end worth about $46.7 million.

Murren received a salary of $1.2 million and a bonus of $2 million compared with $1.2 million each in 2003.

General Counsel and Secretary Gary Jacobs realized a profit of $2.6 million on the exercise of 131,100 options. He had 428,900 options available to exercise at year end worth about $16.9 million.

Jacobs received a salary of $700,000 and a bonus of $1.2 million, compared with $700,000 each in 2003.