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Profits Plunge at Station Casinos

LAS VEGAS, Nevada -- Third-quarter profits fell 71 percent for locals casino giant Station Casinos in the aftermath of the Sept. 11 terrorist attacks in the Northeast and the December sale of the company's two Missouri casinos, according to figures released Tuesday by Station executives.

The company's net revenues fell nearly 15 percent to $212.4 million, while the company's cash flow fell nearly 31 percent to $47.6 million for the quarter ended Sept. 30.

Profits fell to $3.4 million, or 6 cents, a share before accounting for preopening charges of $800,000 tied to the planned December opening of Green Valley Ranch in Henderson and a $2.7 million gain on the sale of the company's slot route operations and a 29-acre site across from the Fiesta in North Las Vegas.

The charge and gains resulted in quarterly profits of $4.6 million, or 8 cents a share, but were down from $15.9 million, or 25 cents a share, in the third quarter of 2000.

"We got whacked pretty good because of Sept. 11," said Station Casinos Chief Financial Officer Glenn Christenson.

The company also sustained hits to cash flow and net revenues after selling its St. Louis and Kansas City, Mo.-area, casinos last year to Ameristar Casinos, as Station executives left the Midwest gambling market after a series of regulatory troubles. The riverboats generated third-quarter 2000 net revenues of $85.2 million and cash flow of $24.2 million.

"We expected them to be down," Christenson said of the resulting declines to cash flow and net revenue, but not as much as was caused by the fallout from the terror attacks on the World Trade Center and Pentagon.

The disappointing numbers were the latest in a series of poor third-quarter results to be released by such key Las Vegas casino operators as MGM Mirage, Park Place Entertainment and Venetian parent Las Vegas Sands.

Station executives have long argued that their company, with its dependence on Las Vegas- and Henderson-area residents, is more resilient than the tourist-dependent Strip market.

They blamed much of the company's woes on competition from the 14-month-old Suncoast in Northwest Las Vegas, construction disruption caused by work at several Station properties and a softening of the local economy.

But Station's core properties, which include Boulder Station, Palace Station, Sunset Station and Texas Station, were also hurt by the worldwide travel decline that has plagued Las Vegas among other international tourist destinations.

As many as 15,000 Las Vegas casino industry workers were laid off in the aftermath of the attacks, and tens of thousands of others were put on reduced work schedules, cutting into the business generated by much of Station's customer base.

Nevada economists estimate that for every job lost within the region's casino industry one is lost outside of the sector, creating an additional drag on Station's business.

Net revenues at the company's four core properties was down 3 percent for the quarter, leading to a 21 percent decline in cash flow, which is a commonly used gauge of casino industry profitability that measures earnings before accounting for interest and tax expenses, depreciation and amortization.

Elsewhere in the United States, locals casinos continued to generate good results despite the economic fallout from the attacks, according to Wall Street financial analysts.

"Other locals-oriented, drive-in markets in the U.S. have been more resilient since 9-11, as they are not impacted by air travel concerns," reads a report by USB Warburg casino industry analyst Robin Farley, who Tuesday downgraded her recommendation on the company's stock to "hold" from "buy."

Station stock was up 33 cents a share for the day to close at $8.59 on the New York Stock Exchange, which was down from its 52-week high of $19.13.

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