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Station Casinos Earnings, Revenue Decline in Fourth Quarter

Results of Operations:

The Company reported net revenues for the fourth quarter ended December 31, 2001, of $204.4 million compared to $243.4 million in the prior year's quarter. Earnings before interest, taxes, depreciation and amortization (EBITDA), adjusted for preopening expenses, declined to $54.3 million, compared to $59.5 million in the prior year. Results for the prior year's quarter included the operations of Station Casino Kansas City and Station Casino St. Charles which were sold in December 2000.

During the prior year's quarter, these properties contributed $67.7 million in net revenues and $13.5 million in EBITDA. Combined net revenues for the Company's major Las Vegas operations (excluding results from Green Valley Station) increased 21 percent to $198.6 million, while EBITDA increased 16 percent to $59.1 million. These increases are attributable to the acquisition of Santa Fe Station in October 2000, and the acquisitions of Fiesta Rancho and Fiesta Henderson (formerly The Reserve) in January 2001.

During the quarter, earnings applicable to common stock decreased to $7.3 million, or $0.13 per share, prior to the impact of $4.4 million in preopening expenses related to the development of Green Valley Station. Including preopening expenses, the Company reported net income of $4.5 million, or $0.08 per share. In the prior year's quarter, the Company reported earnings applicable to common stock of $11.1 million, or $0.18 per share, excluding certain nonrecurring items.

Property Results:

Net revenues at the Company's four core Station properties (Palace Station, Boulder Station, Texas Station and Sunset Station) declined two percent to $144.5 million when compared to the prior year's quarter, resulting in a seven percent decline in EBITDA to $44.1 million. However, EBITDA exceeded the Company's guidance for the quarter which was a range of $41 million to $43 million. The Company's same store EBITDA margin increased to 31 percent from 26 percent in the third quarter of 2001.

``As we have previously indicated, our business was significantly impacted by the events of September 11th. While visitor volume from our local customers has rebounded substantially, the spend per visit is still lower than we have seen in recent years. Hotel occupancy levels increased to 88 percent from 86 percent in the prior year. However, EBITDA from hotel operations at the four core properties was $1.3 million lower in the fourth quarter of 2001, as compared to the prior year's quarter, due to lower room rates,'' stated Glenn C. Christenson, Executive Vice President and Chief Financial Officer.

At the Company's three acquired properties (Santa Fe Station, Fiesta Rancho and Fiesta Henderson), combined EBITDA for the quarter was $15.0 million, compared to the Company's previous guidance of $13.0 million.

``We are pleased with the results of the acquired properties. During December 2001, the Company completed the re-branding of The Reserve to Fiesta Henderson, which will allow us to further benefit from the customer acceptance of the Fiesta product in the Henderson market. This allows us to use joint promotions and marketing which provide exceptional value to the customer, while at the same time taking advantage of economies of scale and reducing the Company's operating costs,'' stated Christenson.

Green Valley Station is located at the intersection of the I-215 Southern Beltway and Green Valley Parkway in Henderson, Nevada. The Company jointly developed the project on 40 acres with GCR Gaming, which is principally owned by members of the Greenspun family. The casino includes 2,500 slot machines, 49 table games, and a 170-seat race and sports book. In addition, there are seven full-service and six quick-service restaurants, a 10-screen movie theater complex, 201 hotel rooms, 11,000 square foot meeting/convention facility, and a 10,000 square foot spa.

Green Valley Station generated EBITDA of $2.5 million for the 14 days ended December 31, 2001, prior to approximately $0.3 million of management fees. As managing partner, Station is paid a management fee equal to approximately two percent of revenue and five percent of EBITDA.

For the quarter ended December 31, 2001, the Company reported earnings from its Green Valley Station joint venture of $1.4 million, which represents a combination of Station's management fee plus 50% of Green Valley Station's operating income. Included in interest expense is $0.2 million of interest related to the Green Valley Station joint venture.

Balance Sheet Items and Capital Expenditures:

The Company's long-term debt (including construction payables) increased to $1.24 billion in the quarter ended December 2001, consistent with the Company's guidance. The increase is attributable to total capital expenditures (including maintenance) of $31.4 million primarily related to construction at Santa Fe Station of two restaurant pads and increased casino space ($4.6 million), the re-branding of The Reserve to Fiesta Henderson ($5.4 million), and further installation of the Acres Slot System ($2.6 million). In addition to these expenditures, the Company accelerated approximately $11.0 million of its 2002 maintenance capital expenditures into the fourth quarter of 2001. As a result, 2002 maintenance capital expenditures will be lower than previous guidance and will approximate $20 million.

Calendar 2002 Guidance:

``We continue to be very excited about our Company's strategy,'' stated Christenson. ``We have ten properties strategically located throughout one of the fastest growing metropolitan areas in the country. Even after the impact of September 11th, total employment in Las Vegas in December 2001 increased 2.2 percent over the prior year. New homes sales set records in October and December 2001 and for the full year of 2001, posting a 12 percent increase over the prior year.''

The Company expects EBITDA of approximately $54 million and earnings per share (``EPS'') of $0.09 for the first quarter of 2002. For the year, the Company expects EBITDA and EPS of $220 million and $0.40, respectively. This guidance excludes any impact from the implementation of SFAS 142 (see below).

``The EBITDA and EPS estimates for 2002 are on the upper end of the guidance given previously, due to our current operating levels and our optimism about the continuing recovery in the local economy during 2002. We also believe that increased visitors and total occupancy rates over recent trends will help fuel the economy. However, we believe it is premature to increase our guidance until we have more visibility with respect to how quickly the recovery occurs,'' stated Christenson.

``During 2002, our primary focus will be on improving operations and shrinking the Company's capital base, either through the reduction of debt or the repurchase of stock. Based on our projected cash flows, we should generate approximately $67 million of free cash flow for this purpose, or approximately $1.12 per share,'' said Christenson.

New Accounting Pronouncement:

In July 2001, Statement of Financial Accounting Standards No. 142, ``Goodwill Accounting,'' (``SFAS 142'') was issued. SFAS 142 changes the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, will cease upon the adoption of Statement 142. The Company will implement Statement 142 on January 1, 2002 and test for impairment in accordance with the provisions of Statement 142 within the first interim period of 2002 and annually thereafter.

Any impairment loss will be measured as of the date of adoption and recognized as the cumulative effect of a change in accounting principle in that first interim period. At January 1, 2002, the Company had unamortized goodwill that will be subject to the provisions of SFAS 142 in the amount of $184.4 million. Amortization expense related to this goodwill was $4.7 million for the year ended December 31, 2001. The impairment tests are currently in process and, upon completion of the tests, the Company anticipates taking an impairment charge related to Fiesta Rancho in the first quarter of 2002.

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