Station Casinos Announces First Quarter Results and Declares Dividend

Station Casinos, Inc. (NYSE: STN - News; "Station" or the "Company") today announced the results of its operations for the first quarter ended March 31, 2007 and other Company-related news. Notable events include: Station’s Board of Directors approved a $90 per share buy-out offer. First quarter EBITDA (1) of $152.3 million, an increase of 15% over the prior year’s first quarter. Net revenues from its Major Las Vegas Operations, excluding Green Valley Ranch, increased 32% from the prior year’s first quarter. Adjusted for non-recurring items and development expenses, diluted earnings per share ("EPS”) of $0.51 compared to $0.78 in the prior year’s first quarter, a decrease of 35%. Declaring a quarterly cash dividend of $0.2875 per share payable on June 4, 2007 to shareholders of record on May 21, 2007. Results of Operations The Company's net revenues for the first quarter ended March 31, 2007 were approximately $372.4 million, an increase of 27% compared to the prior year's first quarter. The Company reported EBITDA for the quarter of $152.3 million, an increase of 15% compared to the prior year's first quarter. This marks the twenty-first consecutive quarter of year-over-year growth of Adjusted EBITDA. For the first quarter, Adjusted Earnings (2) applicable to common stock were $28.7 million, or $0.51 per diluted share, compared to last year’s $0.78 per diluted share on a comparable basis. During the first quarter, the Company incurred $2.3 million in costs to develop new gaming opportunities, primarily related to Native American gaming, $4.8 million related to costs associated with the FCP transaction noted below and $0.8 million of other non-recurring 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 first quarter were $13.3 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 $29.2 million, a 3% decrease compared to the prior year’s first quarter. Las Vegas Market Results For the first quarter, net revenues from the Major Las Vegas Operations, excluding Green Valley Ranch, increased to $335.0 million, a 32% increase compared to the prior year’s quarter, while EBITDA from those operations increased 19% to $129.8 million. 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 $3.30 billion as of March 31, 2007. Total capital expenditures were $138.0 million for the first quarter. Expansion and project capital expenditures included $35.2 million for Phases II and III of Red Rock Resort, $11.5 million for the expansion of Santa Fe Station and $32.7 million for the purchase of land. As of March 31, 2007, the Company’s debt to cash flow ratio, as defined in its bank credit facility, was 5.7 to 1. Dividend On May 7, 2007 the Company’s Board of Directors declared a quarterly cash dividend of $0.2875 per share. The dividend is payable on June 4, 2007 to shareholders of record on May 21, 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. On May 7, 2007, Station filed a preliminary proxy statement and related materials with the Securities and Exchange Commission that provides details about the pending sale of the Company. IMPORTANT ADDITIONAL INFORMATION REGARDING THE MERGER HAS BEEN FILED WITH THE SEC. In connection with the proposed merger, the Company has filed a preliminary proxy statement and related materials with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE ADVISED TO READ THE DEFINITIVE 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: (800) 544-2411. 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 definitive proxy statement relating to the proposed merger when it becomes available. 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 joint venture that owns 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, as amended, for the year ended December 31, 2006, 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 "Investor Relations" section of the Company's website at www.stationcasinos.com. Construction projects such as the master-planned expansions of Red Rock and Fiesta Henderson and the development of Aliante 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, 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, 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, net, 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. Station Casinos, Inc. Condensed Consolidated Balance Sheets (amounts in thousands) (unaudited)     March 31,2007 December 31,2006   Assets: Cash and cash equivalents $ 115,904  $ 116,898  Receivables, net 41,389  40,762  Other current assets 46,091  43,891  Total current assets 203,384  201,551  Property and equipment, net 2,672,219  2,586,473  Other long-term assets 818,458  928,672  Total assets $ 3,694,061  $ 3,716,696        Liabilities and stockholders' deficit: Current portion of long-term debt $ 580  $ 341  Other current liabilities 248,986  251,565  Total current liabilities 249,566  251,906  Revolving credit facility 984,400  1,155,800  Senior and senior subordinated notes 2,304,661  2,304,737  Other debt 8,593  8,855  Interest rate swaps, mark-to-market 840  (905) Due to unconsolidated affiliate 100,000  -  Other long-term liabilities 224,379  183,161  Total liabilities 3,872,439  3,903,554  Stockholders' deficit (178,378) (186,858) Total liabilities and stockholders' deficit $ 3,694,061  $ 3,716,696  Station Casinos, Inc. Condensed Consolidated Statements of Operations (amounts in thousands, except per share data) (unaudited)   Three Months Ended March 31, 2007  2006  Operating revenues: Casino $ 264,695  $ 216,223  Food and beverage 61,563  38,871  Room 30,748  17,021  Other 17,428  13,972  Management fees 24,828  25,900  Gross revenues 399,262  311,987  Promotional allowances (26,824) (19,517) Net revenues 372,438  292,470    Operating costs and expenses: Casino 95,300  74,180  Food and beverage 43,062  26,576  Room 9,416  5,544  Other 6,227  4,583  Selling, general and administrative 61,928  44,623  Corporate 21,310  16,287  Development 2,259  2,132  Depreciation and amortization 40,222  25,664  Preopening 4  14,122  Gain on asset disposals, net (46) (843) Lease terminations -  500  279,682  213,368    Operating income 92,756  79,102  Earnings from joint ventures 11,516  11,923  Operating income and earnings from joint ventures 104,272  91,025    Other expense: Interest expense, net (56,530) (23,816) Interest and other expense from joint ventures (5,898) (1,568) (62,428) (25,384)   Income before income taxes 41,844  65,641  Income tax provision (18,794) (24,519) Net income $ 23,050  $ 41,122    Earnings per common share: Basic $ 0.42  $ 0.64  Diluted $ 0.41  $ 0.62    Weighted average common shares outstanding Basic 54,385  64,104  Diluted 56,320  66,054    Dividends paid per common share $ 0.29  $ 0.25  Station Casinos, Inc. Summary Information and Reconciliation of Net Income to EBITDA (amounts in thousands, except occupancy percentage and ADR) (unaudited)   Three Months Ended March 31, 2007  2006  Major Las Vegas Operations (a): Net revenues $ 335,004  $ 254,720    Net income $ 38,474  $ 44,468  Income tax provision 23,581  26,341  Interest and other expense, net 29,652  14,632  Depreciation and amortization 38,306  23,901  Gain on asset disposals, net (32) (254) Preopening expenses (184) -  EBITDA $ 129,797  $ 109,088    Green Valley Ranch Station (50% owned): Net revenues $ 69,441  $ 67,094    Net income $ 10,976  $ 17,835  Interest and other expense, net 10,841  6,194  Depreciation and amortization 5,682  5,998  Loss on asset disposals, net -  23  Loss on early retirement of debt 1,655  -  Preopening expenses 3  -  EBITDA $ 29,157  $ 30,050    Major Las Vegas Operations including Green Valley Ranch: Net revenues $ 404,445  $ 321,814    Net income $ 49,450  $ 62,303  Income tax provision 23,581  26,341  Interest and other expense, net 40,493  20,826  Depreciation and amortization 43,988  29,899  Gain on asset disposals, net (32) (231) Loss on early retirement of debt 1,655  -  Preopening expenses (181) -  EBITDA $ 158,954  $ 139,138    Total Station Casinos, Inc. (b): Net income $ 23,050  $ 41,122  Income tax provision 18,794  24,519  Interest and other expense, net 62,428  25,384  Depreciation and amortization 40,222  25,664  Development expense 2,259  2,132  Gain on asset disposals, net (46) (843) Preopening expenses 4  14,122  Lease terminations -  500  Other non-recurring costs 5,601  -  EBITDA $ 152,312  $ 132,600    Occupancy percentage 94% 98% ADR $ 97  $ 66  (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 March 31, 2007  2006    Adjusted Earnings (a): Net income $ 23,050  $ 41,122  Development expense 1,468  1,386  Preopening expenses 3  9,179  Lease terminations -  325  Gain on asset disposals (30) (548) Other non-recurring costs 3,641  -  Loss on early retirement of debt at Green Valley Ranch Station (50%) 538  -  Adjusted Earnings $ 28,670  $ 51,464    Adjusted basic earnings per common share(a): Net income $ 0.42  $ 0.64  Development expense 0.03  0.02  Preopening expenses -  0.14  Lease terminations -  0.01  Gain on asset disposals -  (0.01) Other non-recurring costs 0.07  -  Loss on early retirement of debt at Green Valley Ranch Station (50%) 0.01  -  Adjusted basic earnings per common share $ 0.53  $ 0.80    Weighted average common shares outstanding - basic 54,385  64,104      Adjusted diluted earnings per common share (a): Net income $ 0.41  $ 0.62  Development expense 0.03  0.02  Preopening expenses -  0.14  Lease terminations -  0.01  Gain on asset disposals -  (0.01) Other non-recurring costs 0.06  -  Loss on early retirement of debt at Green Valley Ranch Station (50%) 0.01  -  Adjusted diluted earnings per common share $ 0.51  $ 0.78    Weighted average common shares outstanding - diluted 56,320  66,054  (a) All Dollar and per share amounts are shown net of tax.