Cash flow improves at Station Casinos

Station Casinos Inc. of Las Vegas said the writedown of a Missouri riverboat asset led to a $20.1 million loss for the fiscal 1999 third quarter ended Dec. 31, though the company recorded its sixth straight quarter of higher cash flow.

The third-quarter loss compared with net income of $1.6 million, or 5 cents a share, in the year-ago period, Station said today. Revenue rose 13 percent to $222.5 million from $197.2 million, the company said.

The latest period's loss included a $30 million writedown of a riverboat and several parcels of land that were being held for future development in St. Charles, Mo. Station said it is trying to sell the riverboat, which had been leased to Argosy Gaming, and associated assets by summer in an attempt to cut its debt load. The sale won't affect Station Casino St. Charles.

Station said earnings before interest, taxes, depreciation and amortization (EBIDTA) -- often referred to as cash flow -- jumped 22 percent in the latest quarter to $59.8 million from $44.3 million in the year-earlier quarter.

The company said its Boulder, Texas and Sunset Station casinos in the Las Vegas market all reported record revenue for the recent quarter. It said its Las Vegas operations, which include Palace Station, have recorded a 24 percent cash-flow return on investment over the past 12 months.

Station said its Missouri operations also reported record revenue and cash flow, due to its Kansas City casino; results at St. Charles declined from the previous year's quarter.

The St. Charles operation has been a headache for Station. In December, St. Charles Mayor Bob Moeller told the Missouri Gaming Commission that Station's unfinished work there ``is a real eyesore to our city.''

The Post-Dispatch newspaper in St. Louis reported Moeller complained Station is spending millions of dollars on other projects in Las Vegas while it has done little work in the last 21 months on its St. Charles expansion, leaving an exposed steel infrastructure.

Station had spent about $180 million on the project and needs another $100 million to complete it.

Moeller and two city councilmen asked the Gaming Commission to pressure Station into completing the project, or into at least covering the sides of it.

``The bare and rusting structural steel fronting Interstate 70 is an embarrassment to historic St. Charles,'' Councilman Rory Riddler told the Commission.

The company said two debt refinancings completed during the third quarter resulted in a $17 million net increase increase in long-term debt, but extended the terms of a bond issue and will result in a $2 million annual reduction in interest expenses.

Station said it will incur a $10.2 million charge in the current quarter reflecting costs associated with the issue of new senior subordinated notes. Because the company changed to a calender from fiscal reporting year on Dec. 31, the charge will be reflected in the results for the 1999 first quarter.

``There's no question these guys have very substantial operating skills and have done an outstanding job of bringing value out in the locals market,'' said Dave Ehlers of Las Vegas Advisors Inc.

``And there's no question the North Las Vegas and Boulder Strip areas are growing very fast, with slot win in those two areas growing at four to six times the rate of Strip slot win over the past two years.

``But the company continues to feel the effects of decisions made in the past that were unduly aggressive, as evidenced the the $30 million abandonment charge in Missouri,'' Ehlers said.

``Without that impairment charge, they'd have had operating income of $34 million, up from $25 million.''

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