Station Casinos Announces Third Quarter 2012 Results and Agreement to Acquire a Majority Interest in Fertitta Interactive Business Wire LAS VEGAS -- November 13, 2012 Station Casinos LLC ("Station" or the “Company") today announced the results of its operations for the third quarter ended September 30, 2012. In addition, the Company announced that it has entered into an agreement to acquire a 50.1% ownership interest in Fertitta Interactive LLC, which operates Ultimate Gaming. The Company believes that Fertitta Interactive is well positioned to become a leader in online gaming by leveraging its existing capabilities and platform as well as its exclusive relationship with the Ultimate Fighting Championship (the “UFC”). “Despite a challenging operating environment, we experienced continued improvements in our operating results during the third quarter, and for the third consecutive quarter we experienced gains in both revenues and operating income in all of our major departments,” stated Marc Falcone, Executive Vice President and Chief Financial Officer. Consolidated Results of Operations The Company's consolidated net revenues for the third quarter ended September 30, 2012 were approximately $295.7 million, an increase of 4.7% compared to the prior year third quarter net revenues of $282.4 million. Consolidated adjusted EBITDAM for the third quarter was $71.7 million, an increase of 3.2% compared to the prior year third quarter adjusted EBITDAM of $69.5 million. Adjusted EBITDAM is not a generally accepted accounting principle (“GAAP”) measurement and 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 is a principal basis for valuation of gaming companies. Adjusted EBITDAM is further defined in footnote 1. Guarantor Group Results of Operations The net revenues for Station Casinos LLC and the subsidiaries that own Red Rock, Palace Station, Boulder Station and Sunset Station (the “Guarantor Group”) for the third quarter ended September 30, 2012 were approximately $158.8 million, an increase of 3.9% compared to the prior year. The Company reported adjusted EBITDAM of $40.3 million for the Guarantor Group for the quarter, an increase of 2.6% compared to the prior year. Balance Sheet Items and Capital Expenditures As of September 30, 2012, the outstanding principal balance of long-term debt was $2.2 billion on a consolidated basis (excluding a nonrecourse land loan of $108 million), including $1.6 billion for the Guarantor Group. Year to date, the Company has repaid approximately $205 million of debt on a consolidated basis. Since June 17, 2011, the date the Company acquired assets from Station Casinos, Inc., on a consolidated basis, the Company has repaid over $270 million of debt. As of September 30, 2012, the Company’s consolidated debt to EBITDAM ratio was approximately 6.2x. Year to date, total consolidated capital expenditures were $46.4 million, of which $23.5 million were made by the Guarantor Group. Acquisition of Fertitta Interactive The Company also announced that it has entered into an agreement to purchase a 50.1% ownership interest in Fertitta Interactive. The transaction is expected to close by the end of November. Fertitta Interactive was formed in 2011 with the purchase of Cyber-Arts, an Oakland, California based company, which has developed a real money and social gaming platform under the Ultimate Gaming brand. The Cyber-Arts technology provides a proprietary, highly scalable and robust platform that has a proven track record in the global online marketplace. “This technology represents one of the few established online poker platforms in the world that has never taken wagers from a jurisdiction in which such wagers were illegal,” Falcone said. “It is critically important to us that we own the technology, which allows us to control the perpetual innovation cycle. We are one of the only U.S. gaming companies to develop and own its technology. We are excited about the possibilities that Ultimate Gaming presents and believe this creates a long-term value driver for Station Casinos,” continued Falcone. Conference Call Information The Company will host a conference call on, Tuesday, November 13, 2012 at 1:30 p.m. (PST) to discuss its third quarter financial results. The conference call will consist of prepared remarks from the Company and will include a question and answer session. Those interested in participating in the call should dial (877) 331-7677 or (713) 936-6995 for international callers, approximately 15 minutes before the call start time. A replay of the call will be available from 5:00 p.m. (PST) on November 14, 2012 at www.sclv.com/en/investor-relations.aspx. The reservation number is 11132012. A live audio webcast of the call will also be available at www.sclv.com. Company Information and Forward Looking Statements Station Casinos LLC is the leading provider of gaming and entertainment to the residents of Las Vegas, Nevada. Station's properties, which are located throughout the Las Vegas valley, 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, Sunset Station Hotel & Casino, Green Valley Ranch Resort Casino Spa, Santa Fe Station Hotel & Casino, Texas Station Gambling Hall & Hotel, Fiesta Rancho Casino Hotel, Fiesta Henderson Casino Hotel, Wildfire Rancho, Wildfire Boulder, Wild Wild West Gambling Hall & Hotel, Wildfire Sunset and Lake Mead Casino. Station also owns a 50% interest in Barley's Casino & Brewing Company, Wildfire Lanes and Casino and The Greens. In addition, Station owns a 50% interest in MPM Enterprises, LLC, which is the manager of the Gun Lake Casino in southwestern Michigan. Fertitta Interactive was established by Frank Fertitta III, Lorenzo Fertitta, Tom Breitling and Tim Poster. Fertitta Interactive works to build strong global brands and businesses online. The group has worked together since the early 1990's, when the Fertittas were investors in Travelscape, an online travel company that was founded by Breitling and Poster and purchased by Microsoft's Expedia, Inc. in 2000. 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 risks relating to the acquisition of Fertitta Interactive; the economic downturn, and in particular the economic downturn in Nevada, and its effect on consumer spending and our business; the effects of intense competition that exists in the gaming industry; the risk that new gaming licenses or gaming activities, such as internet gaming, are approved and result in additional competition; our substantial outstanding indebtedness and the effect of our significant debt service requirements on our operations and ability to compete; the risk that we will not be able to finance our development and investment projects or refinance our outstanding indebtedness; the impact of extensive regulation from gaming and other government authorities on our ability to operate our business and the risk that regulatory authorities may revoke, suspend, condition or limit our gaming or other licenses, impose substantial fines or take other actions that adversely affect us; risks associated with changes to applicable gaming and tax laws that could have a material adverse effect on our financial condition; general business conditions including competitive practices, changes in customer demand and the cyclical nature of the gaming and hospitality business in general, and general economic conditions, including interest rates, on our business and results of operations; adverse outcomes of legal proceedings and the development of, and changes in, claims or litigation reserves; risks, such as cost overruns and construction delays, associated with development, construction and management of new projects or the expansion of existing facilities, including the Graton Resort and Casino; and other risks described in the filings of the Company with the Securities and Exchange Commission. (1) Adjusted EBITDAM consists of net income plus interest, net, loss on early retirement of debt, preopening expenses, charges relating to share based compensation, gains on Native American development, certain items attributable to non-controlling affiliates or joint ventures, other non-recurring costs, changes in fair value of derivative instruments, depreciation, amortization and management fee expense. EBITDA and Adjusted EBITDAM are presented solely as 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. The Company believes that in addition to cash flows and net income, EBITDA and adjusted EBITDAM are a useful financial performance measurement for assessing the operating performance of the Company. Together with net income and cash flows, EBITDA and adjusted EBITDAM provide 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 adjusted EBITDAM and the trends they depict, the components should be considered. The impact of interest and other expense, net, loss on early retirement of debt, loss or gain on asset disposals, net, preopening expenses, charges relating to share based compensation, gains on Native American development, certain items attributable to non-controlling affiliates or joint ventures, other non-recurring costs, changes in fair value of derivative instruments, depreciation, amortization and management fee 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 or adjusted EBITDAM. Further, EBITDA and adjusted EBITDAM do not represent net income or cash flows from operating, financing and investing activities as defined by generally accepted accounting principles (“GAAP”) and do not necessarily indicate cash flows will be sufficient to fund cash needs. Such measures should not be considered as alternatives to net income, as indicators 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, EBITDAM or adjustments to such measures may calculate EBITDA, EBITDAM or such adjustments in the same manner as the Company, and therefore, the Company’s measure of EBITDA and adjusted EBITDAM may not be comparable to similarly titled measures used by other gaming companies. A reconciliation of EBITDA and adjusted EBITDAM to net income is included in the financial schedules accompanying this release. Station Casinos LLC Condensed Consolidated Statements of Operations (amounts in thousands) (unaudited) Consolidated Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Actual Actual Actual Pro Forma (a) Operating revenues: Casino $ 212,406 $ 203,176 $ 664,856 $ 631,227 Food and 56,603 53,395 180,063 167,482 beverage Room 25,829 25,121 81,897 75,377 Other 18,130 18,068 53,271 54,039 Management 6,829 5,731 22,007 17,458 fees Gross 319,797 305,491 1,002,094 945,583 revenues Promotional (24,069 ) (23,093 ) (75,873 ) (70,887 ) allowances Net 295,728 282,398 926,221 874,696 revenues Operating costs and expenses: Casino 87,243 80,592 265,054 252,212 Food and 39,911 39,463 120,649 119,147 beverage Room 10,874 10,252 32,592 30,529 Other 7,909 7,749 20,578 22,222 Selling, general, 76,571 72,505 217,774 213,555 administrative and corporate Development 41 356 171 1,696 and preopening Depreciation and 31,999 34,522 94,301 90,483 amortization Management 10,121 9,638 33,338 30,648 fees Impairment of 10,066 - 10,066 - other assets Write-downs and other 6,626 881 7,825 4,954 charges, net 281,361 255,958 802,348 765,446 Operating income 14,367 26,440 123,873 109,250 Earnings from 352 290 1,302 1,227 joint ventures Gain on dissolution of - - - 250 joint venture Operating income and earnings 14,719 26,730 125,175 110,727 from joint ventures Other (expense) income: Interest (52,439 ) (45,100 ) (144,763 ) (142,595 ) expense, net Loss on debt (51,794 ) - (51,794 ) - extinguishment Gain on Native American 102,816 - 102,816 - development Change in fair value of (800 ) - (800 ) - derivative instruments (2,217 ) (45,100 ) (94,541 ) (142,595 ) Net income 12,502 (18,370 ) 30,634 (31,868 ) (loss) Less: Net income attributable 1,349 794 5,106 4,766 to noncontrolling interests Net income (loss) attributable to $ 11,153 $ (19,164 ) $ 25,528 $ (36,634 ) Station Casinos LLC members Pro forma information is based on the sum of the consolidated results for Station Casinos, Inc. and Green Valley Ranch Gaming, LLC before the Effective Date and the consolidated results of Station Casinos LLC after the Effective Date. Pro forma information is presented solely for purposes of analysis and comparison with current operating results and does not, and is not intended to, comply with the requirements set forth in Regulation S-X. Pro forma adjustments include elimination of intercompany management fee revenue, costs eliminated as a result of the restructuring, elimination of share-based compensation expense, (a) adjustments to depreciation and amortization expense as a result of resetting the carrying values of assets and liabilities to their estimated fair values in fresh-start reporting, adjustments to interest expense as a result of the Restructuring Transactions, the conversion of a portion of the Company’s new debt from a variable rate to a fixed rate and the entry into new floating-to-fixed interest rate swaps, elimination of intercompany interest expense, recognition of management fees payable to subsidiaries of Fertitta Entertainment, elimination of historical gains and losses on derivative instruments, and elimination of income taxes reflecting the status of the Company as a pass-through entity. Station Casinos LLC Summary Information and Reconciliation of Net Income (Loss) to EBITDA to Adjusted EBITDAM (amounts in thousands, except occupancy percentage and ADR) (unaudited) Consolidated Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Actual Actual Actual Pro Forma (a) Net revenues $ 295,728 $ 282,398 $ 926,221 $ 874,696 Net revenues attributable to (3,347 ) (2,808 ) (10,781 ) (8,511 ) noncontrolling interests Net revenues attributable to $ 292,381 $ 279,590 $ 915,440 $ 866,185 Station Casinos LLC members Net income $ 12,502 $ (18,370 ) $ 30,634 $ (31,868 ) (loss) Interest and other expense, 52,439 45,100 144,763 142,595 net Depreciation and 31,999 34,522 94,301 90,483 amortization EBITDA 96,940 61,252 269,698 201,210 EBITDA attributable to (3,283 ) (2,643 ) (10,439 ) (8,020 ) noncontrolling interests Management fee 10,121 9,638 33,338 30,648 expense Development 41 356 171 1,696 and preopening Share-based 1,380 - 1,380 - compensation Impairment of 10,066 - 10,066 - other assets Write-downs and other 6,626 881 7,825 4,954 charges, net Write-downs and other charges at 16 - 45 - joint ventures (50%) Loss on debt 51,794 - 51,794 - extinguishment Gain on Native American (102,816 ) - (102,816 ) - development Change in fair value of 800 - 800 - derivative instruments Adjusted EBITDAM $ 71,685 $ 69,484 $ 261,862 $ 230,488 Occupancy 90 % 86 % 89 % 86 % percentage ADR $ 67 $ 69 $ 73 $ 70 Principal amount of long-term debt at September 30, 2012: Guarantor $ 1,598,523 Group Opco and Green 577,451 Valley Ranch Land loan 108,267 Total $ 2,284,241 Station Casinos LLC and Guarantor Subsidiaries Condensed Combined Statements of Operations (amounts in thousands) (unaudited) Station Casinos Guarantor Group Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Actual Actual Actual Pro Forma (b) Operating revenues: Casino $ 113,086 $ 109,831 $ 356,421 $ 340,449 Food and 33,421 31,236 105,932 98,467 beverage Room 16,840 16,245 53,945 48,708 Other 9,237 8,756 26,305 25,807 Gross 172,584 166,068 542,603 513,431 revenues Promotional (13,812 ) (13,183 ) (42,659 ) (40,335 ) allowances Net 158,772 152,885 499,944 473,096 revenues Operating costs and expenses: Casino 46,012 43,425 141,331 136,212 Food and 23,529 22,920 70,453 70,039 beverage Room 6,875 6,585 20,754 19,336 Other 3,987 3,684 9,676 10,000 Selling, general, 38,719 37,026 108,767 108,705 administrative and corporate Development - 116 8 677 and preopening Depreciation and 17,579 18,308 51,929 48,838 amortization Management 5,525 5,302 18,434 16,893 fees Write-downs and other 5,961 478 6,409 3,791 charges, net 148,187 137,844 427,761 414,491 Operating income 10,585 15,041 72,183 58,605 Equity in earnings (losses) of 33,090 (4,956 ) 49,258 (648 ) unconsolidated subsidiaries (c) Operating income and earnings (losses) from 43,675 10,085 121,441 57,957 unconsolidated subsidiaries Other (expense) income: Interest (32,527 ) (29,249 ) (95,918 ) (94,591 ) expense, net Change in fair value of 5 - 5 - derivative instruments Net income (loss) attributable to $ 11,153 $ (19,164 ) $ 25,528 $ (36,634 ) Station Casinos LLC members Pro forma information is based on the results of the Guarantor Group after the Effective Date and the results of the entities that were predecessors to the Guarantor Group prior to the Effective Date. Pro Forma information is presented solely for purposes of analysis and comparison with current operating results and does not, and is not intended to, comply with the requirements set forth in Regulation S-X. Pro forma adjustments include elimination of intercompany management fee revenue, costs eliminated as a result of the restructuring, elimination of share-based compensation expense, adjustments to (b) depreciation and amortization expense as a result of resetting the carrying values of assets and liabilities to their estimated fair values in fresh-start reporting, adjustments to interest expense as a result of the Restructuring Transactions, the conversion of a portion of the Company’s new debt from a variable rate to a fixed rate and the entry into a new floating-to-fixed interest rate swap, elimination of intercompany interest expense, recognition of management fees payable to subsidiaries of Fertitta Entertainment, elimination of historical gains and losses on derivative instruments, and elimination of income taxes reflecting the status of the Company as a pass-through entity. Excludes $1.3 million, $0.8 million, $5.1 million and $4.8 million, (c) respectively, of net income attributable to noncontrolling interests in Station's 50% owned variable interest entity. Station Casinos LLC and Guarantor Subsidiaries Summary Information and Reconciliation of Net Income (Loss) to EBITDA to Adjusted EBITDAM (amounts in thousands, except occupancy percentage and ADR) (unaudited) Station Casinos Guarantor Group Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Actual Pro Forma Actual Pro Forma (b) (b) Net revenues $ 158,772 $ 152,885 $ 499,944 $ 473,096 Net income (loss) $ 11,153 $ (19,164 ) $ 25,528 $ (36,634 ) Interest and other expense, 32,527 29,249 95,918 94,591 net Depreciation and 17,579 18,308 51,929 48,838 amortization EBITDA 61,259 28,393 173,375 106,795 Management fee 5,525 5,302 18,434 16,893 expense Share-based 625 - 625 - compensation Write-downs and other 5,961 478 6,409 3,791 charges, net Development - 116 8 677 and preopening Equity in (earnings) losses of (33,090 ) 4,956 (49,258 ) 648 unconsolidated subsidiaries Change in fair value of (5 ) - (5 ) - derivative instruments Adjusted EBITDAM $ 40,275 $ 39,245 $ 149,588 $ 128,804 Occupancy 90 % 86 % 90 % 87 % percentage ADR $ 68 $ 70 $ 75 $ 71 Contact: Station Casinos LLC Marc J. Falcone Executive Vice President and Chief Financial Officer (702) 495-3600 or Thomas M. Friel Executive Vice President and Treasurer (702) 495-4210 or Lori B. Nelson Vice President of Corporate Communications (702) 495-4248
Station Casinos Announces Third Quarter 2012 Results and Agreement to Acquire a Majority Interest in Fertitta Interactive
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