Station Casinos Announces Fourth Quarter Results

LAS VEGAS--(BUSINESS WIRE)--Station Casinos, Inc. (NYSE: STN; "Station" or the “Company") today announced the results of its operations for the fourth quarter ended December 31, 2006 and other Company-related news.

“The fourth quarter revenue and EBITDA results came in as expected. Trends for the quarter in terms of same store revenues and the promotional environment were consistent with our guidance”

Notable events include:

• Fourth quarter EBITDA (1) of $141.5 million, an increase of 14% over the prior year’s fourth quarter.
• Net revenues from its Major Las Vegas Operations, excluding Green Valley Ranch, increased 29% from the prior year’s fourth quarter.
• Adjusted for non-recurring items and development expenses, diluted earnings per share (“EPS”) of $0.53 compared to $0.69 in the prior year’s fourth quarter, a decrease of 23%.
• The opening of a portion of the Phase II expansion of Red Rock Casino Resort Spa and a portion of the Phase III expansion of Santa Fe Station in December 2006.
• On February 23, 2007, the United States District Court for the District of Columbia ruled in favor of the Gun Lake Tribe and the Department of Interior (“DOI”) and dismissed the complaint that had been filed by local gaming opponents that had delayed the DOI’s taking of land into trust for the Gun Lake Tribe’s proposed casino and entertainment project.
• Declaring a quarterly cash dividend of $0.2875 per share payable on March 12, 2007 to shareholders of record on February 26, 2007.
• For the third year in a row, the Company was selected as one of Fortune magazine’s “100 Best Companies to Work For”.
• On February 23, 2007, the Company entered into a definitive merger agreement with Fertitta Colony Partners LLC (“FCP”), pursuant to which FCP agreed to acquire all of Station’s outstanding common stock for $90 per share in cash. FCP is a new company formed by Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, Lorenzo J. Fertitta, Vice Chairman and President of Station and Colony Capital Acquisitions, LLC, an affiliate of Colony Capital, LLC.

Results of Operations

The Company's net revenues for the fourth quarter ended December 31, 2006 were approximately $358.8 million, an increase of 26% compared to the prior year's fourth quarter. The Company reported EBITDA for the quarter of $141.5 million, an increase of 14% compared to the prior year's fourth quarter. This marks the 20th consecutive quarter of year-over-year growth of Adjusted EBITDA. For the fourth quarter, Adjusted Earnings (2) applicable to common stock were $29.5 million, or $0.53 per diluted share, compared to last year’s $0.69 per diluted share on a comparable basis.

During the fourth quarter, the Company incurred a $2.5 million loss related to costs associated with the cancellation of the residential project at Red Rock, $2.3 million in costs to develop new gaming opportunities, primarily related to Native American gaming, $2.0 million in preopening costs related to various master planned expansions, $2.5 million related to costs associated with the FCP transaction noted above and $0.6 million of lease termination costs. Including these items, the Company reported net income of $23.1 million and diluted earnings applicable to common stock of $0.41 per share.

The Company’s earnings from its Green Valley Ranch joint venture for the fourth quarter were $13.1 million, which represents a combination of the Company's management fee plus 50% of Green Valley Ranch’s operating income. For the quarter, Green Valley Ranch generated EBITDA before management fees of $30.1 million, a 7% increase compared to the prior year’s fourth quarter.

Las Vegas Market Results

For the fourth quarter, net revenues from the Major Las Vegas Operations, excluding Green Valley Ranch, increased to $320.5 million, a 29% increase compared to the prior year’s quarter, while EBITDA from those operations increased 15% to $117.5 million.

“The fourth quarter revenue and EBITDA results came in as expected. Trends for the quarter in terms of same store revenues and the promotional environment were consistent with our guidance,” said Lorenzo J. Fertitta, vice chairman and president of the Company.

EBITDA and Adjusted Earnings are not generally accepted accounting principles (“GAAP”) measurements and are presented solely as a supplemental disclosure because the Company believes that they are widely used measures of operating performance in the gaming industry and as a principal basis for valuation of gaming companies. EBITDA and Adjusted Earnings are further defined in footnotes 1 and 2, respectively.

Balance Sheet Items and Capital Expenditures

Long-term debt was $3.47 billion as of December 31, 2006. Total capital expenditures were $117.4 million for the fourth quarter. Expansion and project capital expenditures included $45.1 million for Phases II and III of Red Rock Resort, $32.2 million for the expansion of Santa Fe Station and $12.7 million for the purchase of land. As of December 31, 2006, the Company’s debt to cash flow ratio, as defined in its bank credit facility, was 6.0 to 1.

Aliante Station

The groundbreaking for Aliante Station was on February 22, 2007. The Company is jointly developing Aliante Station with the Greenspun Corporation which will be located on a 40-acre site on the northeast corner of Interstate 215 and Aliante Parkway in North Las Vegas. Construction is expected to be completed by the end of 2008 at a cost of approximately $650 million to $675 million. The first phase of Aliante Station is expected to include 200 hotel rooms, approximately 3,000 slot machines, multiple full-service restaurants and a multi-screen movie theater complex.

Gun Lake Project Update

On February 23, 2007, the United States District Court for the District of Columbia issued a decision in favor of the Gun Lake Tribe (“Gun Lake”) and the United States Department of Interior (“DOI”) and dismissed the lawsuit filed by Michigan Gambling Opposition (“MichGO”) against the DOI and officials of the DOI. MichGO’s complaint sought injunctive and declaratory relief against the DOI as a result of the DOI’s determination to take certain land into trust for the benefit of Gun Lake. The District Court found that there were no facts which would entitle MichGO to any relief on the four issues raised in its complaint and, therefore, granted the DOI and Gun Lake’s motions to dismiss or, in the alternative, for summary judgment. Unless the District Court’s decision is appealed and a stay is granted pending such appeal, the DOI is now free to take the land into trust, which is necessary for the commencement of construction of Gun Lake’s proposed gaming facility. It is anticipated that MichGO will appeal the District Court’s decision and seek a stay pending appeal.

Dividend

On February 14, 2007 the Company’s Board of Directors declared a quarterly cash dividend of $0.2875 per share. The dividend is payable on March 12, 2007 to shareholders of record on February 26, 2007.

Proposed Merger

On February 23, 2007, the Company entered into a definitive merger agreement with Fertitta Colony Partners LLC (“FCP”), pursuant to which FCP agreed to acquire all of Station’s outstanding common stock for $90 per share in cash. FCP is a new company formed by Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, Lorenzo J. Fertitta, Vice Chairman and President of Station and Colony Capital Acquisitions, LLC, an affiliate of Colony Capital, LLC. The transaction is expected to be completed in six to nine months, subject to regulatory approvals and customary closing conditions.

IMPORTANT ADDITIONAL INFORMATION REGARDING THE MERGER WILL BE FILED WITH THE SEC.

In connection with the proposed merger, the Company will file a proxy statement with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION ABOUT THE MERGER AND THE PARTIES THERETO. Investors and security holders may obtain a free copy of the proxy statement (when available) and other documents filed by the Company at the Securities and Exchange Commission's website at http://www.sec.gov. The proxy statement and such other documents may also be obtained for free from the Company by directing such request to Station Casinos, Inc. Investor Relations, 2411 W. Sahara Avenue, Las Vegas, NV 89102, telephone: [phone].

Station and its directors, executive officers and certain other members of its management and employees may be deemed to be participants in the solicitation of proxies from its stockholders in connection with the proposed merger. Information regarding the interests of Station’s participants in the solicitation will be included in the proxy statement relating to the proposed merger when it becomes available.

Conference Call Information

The Company will host a conference call today, Wednesday, February 28 at 12:00 p.m. (Eastern Time) to discuss its fourth quarter 2006 financial results. Those interested in participating in the call should dial [phone] or [phone] for international callers, approximately 10 minutes before the call start time. A live audio webcast of the call, as well as supplemental tables and charts, will also be available at the Company's website, www.stationcasinos.com (3). A replay of the call will be available from 5:00 p.m. (Eastern Time) on February 28, 2007, until 12:00 p.m. (Eastern Time) on March 6, 2007 at [phone]. The reservation number is 8033905.

Company Information and Forward Looking Statements

Station Casinos, Inc. is the leading provider of gaming and entertainment to the residents of Las Vegas, Nevada. Station's properties are regional entertainment destinations and include various amenities, including numerous restaurants, entertainment venues, movie theaters, bowling and convention/banquet space, as well as traditional casino gaming offerings such as video poker, slot machines, table games, bingo and race and sports wagering. Station owns and operates Red Rock Casino Resort Spa, Palace Station Hotel & Casino, Boulder Station Hotel & Casino, Santa Fe Station Hotel & Casino, Wildfire Casino and Wild Wild West Gambling Hall & Hotel in Las Vegas, Nevada, Texas Station Gambling Hall & Hotel and Fiesta Rancho Casino Hotel in North Las Vegas, Nevada, and Sunset Station Hotel & Casino, Fiesta Henderson Casino Hotel, Magic Star Casino, Gold Rush Casino and Lake Mead Casino in Henderson, Nevada. Station also owns a 50% interest in Green Valley Ranch Station Casino, Barley's Casino & Brewing Company and The Greens in Henderson, Nevada and a 6.7% interest in the Palms Casino Resort in Las Vegas, Nevada. In addition, Station manages Thunder Valley Casino near Sacramento, California on behalf of the United Auburn Indian Community.

This press release contains certain forward-looking statements with respect to the Company and its subsidiaries which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with FCP; the outcome of any legal proceedings that have been, or will be, instituted against the Company related to the merger agreement; the inability to complete the merger due to the failure to obtain stockholder approvals for the merger or the failure to satisfy other conditions to complete the merger, including the receipt of all regulatory approvals related to the merger; the failure to obtain the necessary financing arrangements set forth in the debt and equity commitment letters delivered pursuant to the merger agreement; risks that the proposed transaction disrupts current plans and operations and the potential difficulties in employee retention as a result of the merger; the ability to recognize the benefits of the merger; the amount of the costs, fees, expenses and charges related to the merger and the actual terms of certain financings that will be obtained for the merger; the impact of the substantial indebtedness to be incurred to finance the consummation of the merger; the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming and hotel industries in particular; changes in laws, including increased tax rates, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies; litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation; acts of war or terrorist incidents or natural disasters; the effects of competition, including locations of competitors and operating and market competition; and other risks described in the filings of the Company with the Securities and Exchange Commission, including, but not limited to, the Company's Annual Report on Form 10-K for the year ended December 31, 2005, and its Registration Statement on Form S-3ASR File No. 333-134936. All forward-looking statements are based on the Company’s current expectations and projections about future events. All forward-looking statements speak only as of the date hereof and the Company undertakes no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. Additional financial information, including presentations from recent investor conferences, is available in the "Investors" section of the Company's website at www.stationcasinos.com (3).

Construction projects such as the master-planned expansions of Red Rock, Santa Fe Station, Fiesta Henderson and Green Valley Ranch entail significant risks, including shortages of materials or skilled labor, unforeseen regulatory problems, work stoppages, weather interference, floods and unanticipated cost increases. The anticipated costs and construction periods are based on budgets, conceptual design documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met.

Development of the proposed gaming and entertainment projects with the Gun Lake Tribe, the Federated Indians of Graton Rancheria, the Mechoopda Indian Tribe of Chico Rancheria and the North Fork Rancheria of Mono Indians and the operation of Class III gaming at each of the projects is subject to certain governmental and regulatory approvals, including, but not limited to, approval of state gaming compacts with the State of Michigan or the State of California, the Department of the Interior completing the process of taking land into trust for the benefit of the tribes and approval of the management agreements by the National Indian Gaming Commission. No assurances can be given as to when, or if, these governmental and regulatory approvals will be received.

(1) EBITDA consists of net income plus income tax provision, interest and other expense, net, loss on early retirement of debt, loss or gain on asset disposals, net, preopening expenses, lease terminations, other non-recurring costs, depreciation, amortization and development expense. EBITDA is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the gaming industry and as a principal basis for valuation of gaming companies. The Company believes that in addition to cash flows and net income, EBITDA is a useful financial performance measurement for assessing the operating performance of the Company. Together with net income and cash flows, EBITDA provides investors with an additional basis to evaluate the ability of the Company to incur and service debt and incur capital expenditures. To evaluate EBITDA and the trends it depicts, the components should be considered. The impact of income tax provision, interest and other expense, loss on early retirement of debt, loss or gain on asset disposals, preopening expenses, lease terminations, other non-recurring costs, depreciation, amortization and, each of which can significantly affect the Company’s results of operations and liquidity and should be considered in evaluating the Company’s operating performance, cannot be determined from EBITDA. Further, EBITDA does not represent net income or cash flows from operating, financing and investing activities as defined by generally accepted accounting principles (“GAAP”) and does not necessarily indicate cash flows will be sufficient to fund cash needs. It should not be considered as an alternative to net income, as an indicator of the Company’s operating performance or to cash flows as a measure of liquidity. In addition, it should be noted that not all gaming companies that report EBITDA or adjustments to such measures may calculate EBITDA or such adjustments in the same manner as the Company, and therefore, the Company’s measure of EBITDA may not be comparable to similarly titled measures used by other gaming companies. A reconciliation of EBITDA to net income is included in the financial schedules accompanying this release.

(2) Adjusted Earnings excludes development expense, preopening expenses, lease terminations, loss or gain on asset disposals, loss on early retirement of debt and other non-recurring costs. Adjusted Earnings is presented solely as a supplemental disclosure because the Company believes that it is a widely used measure of operating performance in the gaming industry and as a principal basis for valuation of gaming companies, as this measure is considered by the Company to be a better measure on which to base expectations of future results than GAAP net income. A reconciliation of Adjusted Earnings and EPS to GAAP net income and EPS is included in the financial schedules accompanying this release.

(3) The hyperlink to the Company’s URL is included herein solely for the convenience of investors in accessing the audio webcast of the fourth quarter conference call. All other references herein to the Company’s URL are inactive textual references. None of the information contained on the Company’s website shall be deemed incorporated by reference or otherwise included herein.

Station Casinos, Inc.
Condensed Consolidated Balance Sheets
(amounts in thousands)
(unaudited)
			December 31,
			2006	2005
Assets:
	Cash and cash equivalents		$ 116,898	$ 85,552
	Receivables, net		40,762	19,604
	Other current assets		43,891	34,055
		Total current assets	201,551	139,211
	Property and equipment, net		2,586,473	1,990,584
	Other long-term assets		928,672	799,248
		Total assets	$ 3,716,696	$ 2,929,043
Liabilities and stockholders' (deficit) equity:
	Current portion of long-term debt		$ 341	$ 108
	Other current liabilities		251,565	228,657
		Total current liabilities	251,906	228,765
	Revolving credit facility		1,155,800	330,000
	Senior and senior subordinated notes		2,304,737	1,606,545
	Other debt		8,855	9,136
	Interest rate swaps, mark-to-market		(905)	(1,461)
	Other long-term liabilities		183,161	125,244
		Total liabilities	3,903,554	2,298,229
	Stockholders' (deficit) equity		(186,858)	630,814
		Total liabilities and stockholders' (deficit) equity	$ 3,716,696	$ 2,929,043

Station Casinos, Inc.
Condensed Consolidated Statements of Operations
(amounts in thousands, except per share data)
(unaudited)
			Three Months Ended		Twelve Months Ended
			December 31,		December 31,
			2006	2005	2006	2005
Operating revenues:
	Casino		$ 258,951	$ 212,674	$ 969,147	$ 825,995
	Food and beverage		58,795	37,433	211,579	146,774
	Room		22,924	15,167	82,431	61,238
	Other		18,517	14,341	70,245	52,550
	Management fees		25,302	24,214	99,485	95,144
		Gross revenues	384,489	303,829	1,432,887	1,181,701
	Promotional allowances		(25,694)	(18,761)	(93,863)	(72,868)
		Net revenues	358,795	285,068	1,339,024	1,108,833
Operating costs and expenses:
	Casino		93,754	73,340	348,659	286,503
	Food and beverage		42,591	26,436	152,300	102,970
	Room		7,995	5,368	29,962	21,094
	Other		7,040	4,577	26,244	17,799
	Selling, general and administrative		62,626	47,221	230,278	181,670
	Corporate		18,275	14,763	63,066	57,619
	Development		2,251	1,998	9,036	8,747
	Depreciation and amortization		37,208	25,833	131,094	101,356
	Preopening		1,984	3,106	29,461	6,560
	Loss on asset disposals, net		1,056	318	1,736	3,916
	Lease terminations		553	3,000	1,053	14,654
			275,333	205,960	1,022,889	802,888
Operating income			83,462	79,108	316,135	305,945
	Earnings from joint ventures		10,977	10,529	41,861	38,885
Operating income and earnings from joint ventures			94,439	89,637	357,996	344,830
Other expense:
	Interest expense, net		(54,419)	(22,062)	(171,729)	(80,378)
	Interest and other expense from joint ventures		(1,925)	(1,648)	(6,815)	(6,947)
	Loss on early retirement of debt		-	-	-	(1,278)
			(56,344)	(23,710)	(178,544)	(88,603)
Income before income taxes			38,095	65,927	179,452	256,227
	Income tax provision		(15,027)	(24,250)	(69,240)	(94,341)
Net income			$ 23,068	$ 41,677	$ 110,212	$ 161,886
Earnings per common share:
		Basic	$ 0.43	$ 0.63	$ 1.90	$ 2.46
		Diluted	$ 0.41	$ 0.61	$ 1.85	$ 2.40
Weighted average common shares outstanding
		Basic	54,063	66,189	57,969	65,707
		Diluted	55,917	68,102	59,671	67,588
Dividends paid per common share			$ 0.29	$ 0.25	$ 1.08	$ 0.92

Station Casinos, Inc.
Summary Information and
Reconciliation of Net Income to EBITDA
(amounts in thousands, except occupancy percentage and ADR)
(unaudited)
				Three Months Ended		Twelve Months Ended
				December 31,		December 31,
				2006	2005	2006	2005
		Major Las Vegas Operations (a):
		Net revenues		$ 320,506	$ 248,872	$1,189,099	$ 968,017
		Net income		$ 30,983	$ 38,825	$ 120,107	$ 154,907
			Income tax provision	19,015	22,802	73,614	90,977
			Interest and other expense, net	30,442	16,086	97,202	57,500
			Depreciation and amortization	35,276	24,157	123,752	94,784
			Gain on asset disposals, net	(111)	(22)	(518)	(201)
			Preopening expenses	1,899	-	29,034	147
		EBITDA		$ 117,504	$ 101,848	$ 443,191	$ 398,114
		Green Valley Ranch (50% owned):
		Net revenues		$ 70,531	$ 64,702	$ 262,354	$ 238,355
		Net income		$ 16,470	$ 16,072	$ 62,385	$ 55,532
			Interest and other expense, net	6,615	6,008	23,875	23,293
			Depreciation and amortization	6,962	5,873	25,374	22,262
			Preopening expenses	8	-	294	-
			Loss on asset disposals, net	-	51	25	1,210
			Lease terminations	-	-	-	1,632
		EBITDA		$ 30,055	$ 28,004	$ 111,953	$ 103,929
		Major Las Vegas Operations including Green Valley Ranch:
		Net revenues		$ 391,037	$ 313,574	$1,451,453	$1,206,372
		Net income		$ 47,453	$ 54,897	$ 182,492	$ 210,439
			Income tax provision	19,015	22,802	73,614	90,977
			Interest and other expense, net	37,057	22,094	121,077	80,793
			Depreciation and amortization	42,238	30,030	149,126	117,046
			Preopening expenses	1,907	-	29,328	147
			(Gain) loss on asset disposals, net	(111)	29	(493)	1,009
			Lease terminations	-	-	-	1,632
		EBITDA		$ 147,559	$ 129,852	$ 555,144	$ 502,043
		Total Station Casinos, Inc. (b):
		Net income		$ 23,068	$ 41,677	$ 110,212	$ 161,886
			Income tax provision	15,027	24,250	69,240	94,341
			Interest and other expense, net	56,344	23,710	178,544	87,325
			Depreciation and amortization	37,208	25,833	131,094	101,356
			Development expense	2,251	1,998	9,036	8,747
			Preopening expenses	1,984	3,106	29,461	6,560
			Preopening expenses at Green Valley Ranch (50%)	4	-	147	-
			Loss on asset disposals, net	1,056	318	1,736	3,916
			Other non-recurring costs	4,026	-	4,389	-
			Lease terminations	553	3,000	1,053	15,470
			Loss on early retirement of debt	-	-	-	1,278
		EBITDA		$ 141,521	$ 123,892	$ 534,912	$ 480,879
		Occupancy percentage		92%	94%	95%	96%
		ADR		$ 79	$ 60	$ 73	$ 61
(a)	Includes the wholly owned properties of Red Rock (since April 18, 2006), Palace Station, Boulder Station, Texas Station, Sunset Station, Santa Fe Station, Fiesta Rancho and Fiesta Henderson.
(b)	Includes the Major Las Vegas Operations, Wild Wild West, Wildfire, Magic Star, Gold Rush, Lake Mead Casino (since October 2006), the Company's earnings from joint ventures, management fees and corporate expense.

Station Casinos, Inc.
Reconciliation of GAAP Net Income and EPS
to Adjusted Earnings and EPS
(amounts in thousands, except per share data)
(unaudited)
	Three Months Ended		Twelve Months Ended
	December 31,		December 31,
	2006	2005	2006	2005
Adjusted Earnings (a):
Net income	$ 23,068	$ 41,677	$ 110,212	$ 161,886
Development expense	1,463	1,299	5,874	5,686
Preopening expenses	1,290	2,019	19,150	4,264
Loss on asset disposals	686	206	1,128	2,545
Lease terminations	359	1,950	684	10,055
Loss on early retirement of debt	-	-	-	831
Preopening expenses at Green Valley Ranch (50%)	3	-	96	-
Other non-recurring costs	2,617	-	2,853	-
Adjusted Earnings	$ 29,486	$ 47,151	$ 139,997	$ 185,267
Adjusted basic earnings per common share (a):
Net income	$ 0.43	$ 0.63	$ 1.90	$ 2.46
Development expense	0.03	0.02	0.10	0.09
Preopening expenses	0.02	0.03	0.33	0.07
Loss on asset disposals	0.01	-	0.03	0.04
Lease terminations	0.01	0.03	0.01	0.15
Cancellation of certain insurance policies, net	-	-	-	-
Loss on early retirement of debt	-	-	-	0.01
Preopening expenses at Green Valley Ranch (50%)	-	-	-	-
Other non-recurring costs	0.05	-	0.05	-
Adjusted basic earnings per common share	$ 0.55	$ 0.71	$ 2.42	$ 2.82
Weighted average common shares outstanding - basic	54,063	66,189	57,969	65,707
Adjusted diluted earnings per common share (a):
Net income	$ 0.41	$ 0.61	$ 1.85	$ 2.40
Development expense	0.03	0.02	0.10	0.08
Preopening expenses	0.02	0.03	0.32	0.06
Loss on asset disposals	0.01	-	0.02	0.04
Lease terminations	0.01	0.03	0.01	0.15
Loss on early retirement of debt	-	-	-	0.01
Preopening expenses at Green Valley Ranch (50%)	-	-	-	-
Other non-recurring costs	0.05	-	0.05	-
Adjusted diluted earnings per common share	$ 0.53	$ 0.69	$ 2.35	$ 2.74
Weighted average common shares outstanding - diluted	55,917	68,102	59,671	67,588
(a) All dollar and per share amounts are shown net of tax.