<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM______TO _____
Commission file number 000-21640
---------
STATION CASINOS, INC.
---------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0136443
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2411 West Sahara Avenue, Las Vegas, Nevada
------------------------------------------
(Address of principal executive offices)
89102
-----
(Zip Code)
(702) 367-2411
--------------
Registrant's telephone number, including area code
N/A
---
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
-------- ---------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at July 31,1996
- ---------------------------- ---------------------------
Common stock, $.01 par value 35,318,057
1
<PAGE>
STATION CASINOS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)- 3
June 30, 1996 and March 31, 1996
Condensed Consolidated Statements of Operations (unaudited)- 4
Three months ended June 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows (unaudited)- 5
Three months ended June 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and 7
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 2. Changes in Securities 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 18
Signature 19
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATION CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, excepts share data)
(unaudited)
<TABLE>
<CAPTION>
June 30, March 31,
1996 1996
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 59,762 $114,868
Accounts and notes receivable, net................ 6,464 5,151
Inventories....................................... 2,366 2,299
Prepaid expenses and other........................ 14,211 11,121
-------- --------
TOTAL CURRENT ASSETS........................... 82,803 133,439
Property and equipment, net......................... 701,470 616,211
Land held for development........................... 26,415 28,934
Other assets, net................................... 55,307 48,730
-------- --------
TOTAL ASSETS................................... $865,995 $827,314
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................. $ 23,062 $ 23,256
Accounts payable.................................. 10,706 11,091
Accrued payroll and related....................... 11,148 11,519
Construction contracts payable.................... 49,480 27,879
Accrued interest payable.......................... 7,465 6,875
Accrued expenses and other current liabilities.... 16,816 16,706
-------- --------
TOTAL CURRENT LIABILITIES...................... 118,677 97,326
Long-term debt, less current portion................ 434,543 441,742
Deferred income taxes, net.......................... 13,183 9,776
------- -------
TOTAL LIABILITIES.............................. 566,403 548,844
------- -------
COMMITMENTS AND CONTINGENCIES (NOTE 2)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; authorized
5,000,000 shares; 2,070,000 and 1,800,000
convertible preferred shares issued and
outstanding..................................... 103,500 90,000
Common stock, par value $.01; authorized 90,000,000
shares; 35,318,057 and 35,303,346 shares issued
and outstanding................................. 353 353
Additional paid-in capital........................ 167,451 167,623
Deferred compensation - restricted stock.......... (1,665) (1,811)
Retained earnings................................. 29,953 22,305
-------- --------
TOTAL STOCKHOLDERS' EQUITY...................... 299,592 278,470
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $865,995 $827,314
======== ========
</TABLE>
The accompanying notes are in integral part of these condensed consolidated
financial statements.
3
<PAGE>
STATION CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
OPERATING REVENUES:
Casino............................................ $ 104,660 $ 71,584
Food and beverage................................. 21,166 13,305
Room.............................................. 6,444 5,182
Other............................................. 11,301 9,236
--------- --------
Gross revenues................................. 143,571 99,307
Less promotional allowances....................... (8,131) (5,171)
--------- --------
Net revenues................................... 135,440 94,136
--------- --------
OPERATING COSTS AND EXPENSES:
Casino............................................ 45,314 29,987
Food and beverage................................. 16,085 10,329
Room.............................................. 2,558 2,035
Other............................................. 5,795 6,457
Selling, general and administrative............... 28,522 20,310
Corporate expenses................................ 4,213 3,524
Development expenses.............................. 317 982
Depreciation and amortization..................... 9,823 7,478
--------- --------
112,627 81,102
--------- --------
OPERATING INCOME..................................... 22,813 13,034
--------- --------
OTHER INCOME (EXPENSE):
Interest expense, net............................. (8,293) (7,436)
Other............................................. 61 (68)
--------- ---------
(8,232) (7,504)
---------- ---------
INCOME BEFORE INCOME TAXES........................... 14,581 5,530
Income tax provision................................. (5,122) (2,019)
--------- ---------
NET INCOME........................................... 9,459 3,511
PREFERRED STOCK DIVIDENDS............................ (1,811) -
--------- ---------
NET INCOME APPLICABLE TO COMMON STOCK................ $ 7,648 $ 3,511
========= =========
EARNINGS PER COMMON SHARE............................ $ 0.22 $ 0.12
========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........... 35,308 30,132
========= =========
</TABLE>
The accompanying notes are in integral part of these condensed consolidated
financial statements.
4
<PAGE>
STATION CASINOS,INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................................................. $ 9,459 $ 3,511
---------- -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization .......................................... 9,823 7,478
Increase in deferred income taxes....................................... 3,498 320
Changes in assets and liabilities:
(Increase) decrease in accounts and notes receivable, net.............. (1,313) 2,768
Increase in inventories and prepaid expenses and other................. (3,248) (2,110)
Decrease in accounts payable........................................... (385) (3,234)
Increase (decrease) in accrued expenses and other current liabilities.. 68 (2,191)
Other, net.............................................................. 2,016 476
---------- ----------
Total adjustments............................................. 10,459 3,507
---------- ----------
Net cash provided by operating activities........................ 19,918 7,018
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................... (102,696) (16,853)
Increase in construction contracts payable.............................. 21,601 122
Other, net.............................................................. 2,945 (1,176)
---------- ----------
Net cash used in investing activities............................ (78,150) (17,907)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank facility, net..................................... - 9,000
Proceeds from the issuance of notes payable............................. - 10,994
Principal payments on notes payable..................................... (8,396) (6,433)
Proceeds from the issuance of convertible preferred stock............... 13,095 -
Dividends paid.......................................................... (1,550) -
Other, net.............................................................. (23) -
---------- ----------
Net cash provided by financing activities........................ 3,126 13,561
---------- ----------
CASH AND CASH EQUIVALENTS:
(Decrease) increase in cash and cash equivalents........................ (55,106) 2,672
Balance, beginning of period............................................ 114,868 16,961
---------- -----------
Balance, end of period.................................................. $ 59,762 $ 19,633
========== ===========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest, net of amounts capitalized...................... $ 7,216 $ 11,817
Cash paid for income taxes.............................................. $ 250 $ 1,768
Property and equipment purchases financed by debt....................... $ 361 $ 2,159
</TABLE>
The accompanying notes are in integral part of these condensed consolidated
financial statements.
5
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Station Casinos, Inc. (the "Company"), a Nevada Corporation,
is an established multi-jurisdicitional gaming enterprise that
currently owns and operates casino properties in Las Vegas, Nevada
and St. Charles, Missouri. The Company also owns and provides
slot route management services in Southern Nevada and Louisiana.
Additionally, the Company is constructing two new casino
properties, one in Las Vegas and one in Kansas City, Missouri.
The accompanying condensed consolidated financial
statements include the accounts of Station Casinos, Inc. and
its wholly-owned subsidiaries, Palace Station Hotel & Casino, Inc.
("Palace Station"), Boulder Station, Inc. ("Boulder Station"),
St. Charles Riverfront Station, Inc. ("St. Charles Station"),
Texas Station, Inc. ("Texas Station"), Kansas City Station
Corporation ("Kansas City Station"), Sunset Station, Inc.
("Sunset Station") and the Southwest Companies. The Southwest
Companies include Southwest Services, Inc., Southwest Gaming
Services, Inc. ("SGSI"), Southwest Gaming of Louisiana and SGSI's
wholly-owned subsidiaries, Tropicana Caboose, Inc. and Nellis Caboose,
Inc. Material intercompany accounts and transactions have been eliminated.
The accompanying condensed consolidated financial statements
included herein have been prepared by the Company, without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate
to make the information presented not misleading. In the
opinion of management, all adjustments (which include normal
recurring adjustments) necessary for a fair presentation of the
results for the interim periods have been made. The results for the
three months ended June 30, 1996 are not necessarily indicative of
results to be expected for the full fiscal year. These
financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1996.
RECLASSIFICATIONS
Certain reclassifications have been made to the
financial statements for the three months ended June 30, 1995 to
conform to the financial statement presentation for the three
months ended June 30, 1996. These reclassifications had no effect
on net income.
2. COMMITMENTS AND CONTINGENCIES
The Company has entered into various option agreements
whereby the Company has the option to acquire land for the development
of existing and potential new gaming projects with purchase prices
totaling $28.4 million. In consideration for these options, the
Company has paid or placed in escrow $2.3 million at June 30,
1996, all of which would be forfeited should the Company not
exercise its option to acquire the land.
6
<PAGE>
MANAGEMENT'S DISUCSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.
1. OVERVIEW
The following table highlights the results of operations for
the Company and its subsidiaries (amounts in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
-------- -------
(UNAUDITED)
<S> <C> <C>
NEVADA OPERATIONS:
- -----------------
PALACE STATION
Revenues:
Casino....................................... $ 25,230 $ 24,847
Food and beverage............................ 6,399 6,272
Room......................................... 4,241 3,918
Other........................................ 1,338 1,059
----------- ----------
Gross revenues............................ $ 37,208 $ 36,096
=========== ==========
Net revenues.............................. $ 34,320 $ 33,435
=========== ==========
Operating income................................ $ 7,893 $ 7,678
=========== ==========
EBITDA (1)...................................... $ 9,931 $ 10,157
=========== ==========
BOULDER STATION
Revenues:
Casino....................................... $ 27,399 $ 21,040
Food and beverage............................ 6,648 6,026
Room......................................... 1,342 1,264
Other........................................ 1,296 604
----------- ----------
Gross revenues............................ $ 36,685 $ 28,934
=========== ==========
Net revenues.............................. $ 34,399 $ 27,135
=========== ==========
Operating income................................ $ 8,823 $ 6,259
=========== ==========
EBITDA (1)...................................... $ 11,414 $ 7,746
=========== ==========
TEXAS STATION
Revenues:
Casino....................................... $ 14,567 $ -
Food and beverage............................ 5,328 -
Room......................................... 861 -
Other........................................ 651 -
---------- ----------
Gross revenues............................ $ 21,407 $ -
========== ==========
Net revenues.............................. $ 19,788 $ -
========== ==========
Operating income................................ $ 1,312 $ -
========== ==========
EBITDA (1)...................................... $ 3,007 $ -
========== ==========
</TABLE>
7
<PAGE>
MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
1. OVERVIEW (CONTINUED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1996 1995
--------- --------
(UNAUDITED)
<S> <C> <C>
TOTAL NEVADA OPERATIONS:
- -----------------------
Revenues:
Casino....................................... $ 67,196 $ 45,887
Food and beverage............................ 18,375 12,298
Room......................................... 6,444 5,182
Other........................................ 3,285 1,663
---------- ----------
Gross revenues............................ $ 95,300 $ 65,030
========== ==========
Net revenues.............................. $ 88,507 $ 60,570
========== ==========
Operating income................................ $ 18,028 $ 13,937
========== ==========
EBITDA (1)...................................... $ 24,352 $ 17,903
========== ==========
MISSOURI OPERATIONS:
- -------------------
ST. CHARLES STATION
Revenues:
Casino....................................... $ 36,636 $ 24,639
Food and beverage............................ 2,791 1,007
Other........................................ 1,363 418
---------- ----------
Gross revenues............................ $ 40,790 $ 26,064
========== ==========
Net revenues.............................. $ 39,525 $ 25,439
========== ==========
Operating income................................ $ 8,540 $ 3,424
========== ==========
EBITDA (1)...................................... $ 11,320 $ 6,172
========== ==========
STATION CASINOS, INC. AND OTHER:
- -------------------------------
Revenues:
Casino....................................... $ 828 $ 1,058
Other........................................ $ 6,653 $ 7,155
---------- ----------
Gross revenues............................ $ 7,481 $ 8,213
========== ==========
Net revenues.............................. $ 7,408 $ 8,127
========== ==========
Operating loss.................................. $ (3,755) $ (4,327)
========== ==========
EBITDA (1)..................................... $ (3,036) $ (3,563)
========== ==========
</TABLE>
(1) "EBITDA" consists of operating income plus depreciation and amortization,
including preopening expenses. EBITDA should not be construed as an
alternative to operating income as an indicator of the Company's operating
performance, or as an alternative to cash provided by operating activities
as a measure of liquidty. The Company has presented EBITDA solely as
supplemental disclosure because the Company believes that certain investors
consider this information useful in the evaluation of the financial performance
of the companies with substantial depreciation and amortization.
8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE
30, 1995.
Consolidated net revenues increased 43.9% to $135.4 million for the
three months ended June 30, 1996, from $94.1 million for the same period
of fiscal year 1996. This increase in net revenues is a result of
improved results at Boulder Station and St. Charles Station and the
addition of Texas Station, which opened in July 1995. Boulder Station
and St. Charles Station contributed $34.4 million and $39.5 million,
respectively, of net revenues for the three months ended June 30, 1996,
an increase of $7.3 million and $14.1 million, respectively, over the
same period of fiscal year 1996.Texas Station contributed $19.8
million of net revenues during the three months ended June 30, 1996.
For the three months ended June 30, 1995, net revenues and operating
income at St. Charles Station were adversely impacted by flooding on the
Missouri River, which closed operations for 16 days and disrupted
operations through the balance of the quarter. During the three
months ended June 30, 1996, the improved results at St. Charles Station
were achieved despite disruption created from the construction of the
new parking garage and elevated roadway which opened in May 1996.
Flooding on the Missouri River did occur again in May 1996, however the
newly completed parking garage and elevated roadway served one of
its intended purposes in minimizing business disruption casued by the flood.
St. Charles Station did incur approximately $0.7 million of expense
related to preparation for the flood and resulting clean-up costs. In
addition to minimizing disruptions caused by flooding, the parking
garage and elevated roadway provide improved access to the
gaming facility and are the foundation for future phases of the St.
Charles Station master plan.
Operating income increased 75.0% to $22.8 million for the three months
ended June 30, 1996, from $13.0 million for the same period of
fiscal year 1996. This improvement is due to the factors discussed above.
The improvement in operating income, offset by an increase in net
interest expense of $0.9 million, an increase of $3.1 million in the
income tax provision and dividends of $1.8 million on the convertible
preferred stock issued in March 1996, resulted in net income applicable to
common stock of $7.6 million, or earnings per common share of $0.22 for
the three months ended June 30, 1996, compared to net income applicable
to common stock of $3.5 million, or earnings per common share of $0.12
for the same period of fiscal year 1996.
Casino. Casino revenues increased 46.2% to $104.7 million for
the three months ended June 30, 1996, from $71.6 million for the same
period of fiscal year 1996. This increase is directly related to $14.6
million in casino revenues generated by Texas Station and combined
casino revenue increases generated by St. Charles Station and Boulder
Station of $18.4 million for the three months ended June 30, 1996.
Casino revenues at Palace Station remained flat. Revenues at the
Southwest Company's Louisiana Downs Race Track video poker operation
declined by $0.2 million for the three months ended June 30, 1996 as
compared to the same period of fiscal year 1996. The Company is considering
various alternatives for improving cash flows or possibly selling its
interest in the Louisiana Downs joint venture. In any event, the operations
of the joint venture are not material to the Company's financial position or
results of operations taken as a whole.
Casino expenses increased 51.1% to $45.3 million for the three months
ended June 30, 1996, from $30.0 million for the same period of fiscal year
1996. This increase in casino expenses is consistent with the increase in
casino revenues discussed above.
Food and Beverage. Food and beverage revenues increased 59.1%
to $21.2 million for the three months ended June 30, 1996, from $13.3
million for the same period of fiscal year 1996. This increase is
primarily due to food and beverage revenues of $5.3 million at Texas
Station and food and beverage revenue increases at St. Charles Station
and Boulder Station of $1.8 million and $0.6 million, respectively, for
the three months ended June 30, 1996. Food and beverage revenues at St.
Charles Station have increased with the opening of two full-service
restaurants in October 1995.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
Food and beverage net profit margins improved to 24.0% for the three
months ended June 30, 1996, from 22.4% for the same period of fiscal
year 1996. This increase in margin is due to improvement at the Nevada
properties as a result of continued focus on cost control. The net
profit margin at Texas Station was 15.3% for the three months ended June
30, 1996, a significant increase over previous quarters since the
property opened. Management believes that the lower margins experienced
at Texas Station in the first three quarters since opening were due to
typical initial operating inefficiencies of a new property.
Room. Room revenues increased 24.4% to $6.4 million for the three
months ended June 30, 1996, from $5.2 million for the same period of
fiscal year 1996. This increase is due primarily to the addition of
Texas Station with a total of 200 rooms which contributed $0.9 million of
room revenues for the three months ended June 30, 1996. The Company wide
room occupancy increased to 97% from 96%, while the average daily room
rate increased to $47 from $44 during the three months ended June 30,
1996.
Other. Other revenues increased 22.4% to $11.3 million for the three
months ended June 30, 1996, from $9.2 million for the same period of
fiscal year 1996. This increase is due primarily to other revenues at
Texas Station of $0.7 million, $0.5 million for the Company's interest in
the operating income of Barley's Casino & Brewing Company, $0.5
million of lease income from the lease of a riverboat gaming facility
and combined increases in other revenues at the Company's other
operating properties of $1.8 million, offset by lost revenues of $1.4
million from the vending division of Southwest Services which was sold
in September 1995.
Selling, General and Administrative. Selling, general
and administrative expenses ("SG&A") increased 40.4% to $28.5 million for
the three months ended June 30, 1996, from $20.3 million for the same
period of fiscal year 1996. This increase is primarily due to the
addition of Texas Station. SG&A as a percentage of net revenues
remained flat at approximately 21%.
Corporate Expenses. Corporate expenses increased 19.6% to $4.2
million for the three months ended June 30, 1996, from $3.5 million for
the same period of fiscal year 1996. This increase is attributable to
increases in personnel infrastructure to manage the Company's new
properties and development plans for the remainder of fiscal year 1997
and 1998. Corporate expenses declined to 3.1% of net revenues for the
three months ended June 30, 1996, from 3.7% for the same period of
fiscal year 1996.
Development Expenses. Development expenses decreased significantly
for the three months ended June 30, 1996 compared to the prior year.
This decrease is the result of reduced efforts to identify potential
gaming opportunities. Such costs are incurred by the Company in its
efforts to identify and pursue potential gaming opportunities
in selected jurisdictions, including those in which gaming has not been
approved. The Company expenses development costs including lobbying,
legal and consulting until such time as the jurisdiction has approved
gaming and the Company has identified a specific site. Costs incurred
subsequent to these criteria being met are capitalized.
Depreciation and Amortization. Depreciation and amortization
increased 31.4% to $9.8 million for the three months ended June 30,
1996, from $7.5 million in the same period of fiscal year 1996. Texas
Station contributed $1.7 million of this increase. Depreciation expense
at Boulder Station increased $1.1 million, primarily as a result of the
parking garage and entertainment facilities added during fiscal year 1996.
These increases were offset by a decrease in depreciation expense of
$0.4 million at Palace Station.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
Interest Expense, net. Interest costs incurred (expensed
and capitalized) increased 58.2% to $13.0 million for the three months
ended June 30, 1996. This increase is primarily attributable to
added interest costs associated with the 10 1/8% senior subordinated
notes issued by the Company in March 1996. In addition, the Company
recorded interest income of $0.7 million for the three months ended June
30, 1996, from investments in tax free municipal securities purchased with
the excess proceeds of the public offering completed in March 1996. Capitalized
interest is expected to continue to grow due to the construction of new
casino facilities in Las Vegas and Missouri, as well as ongoing improvements
at the Company's existing facilities (see "Liquidity and Capital Resources").
3. LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital consist of proceeds from
equity and debt offerings, cash flows from operating activities, borrowings
under bank credit facilities, and vendor and lease financing of equipment.
During the three months ended June 30, 1996, the Company's sources of
capital included $13.1 million of net proceeds from the exercise of the
underwriters' over-allotment option to purchase an additional 270,000
shares of convertible preferred stock related to 1,800,000 shares of
convertible preferred stock issued by the Company on March 29, 1996,
cash flows from operating activities of $19.9 million, and excess cash
invested from the March 29, 1996 issuance of convertible preferred stock
and senior subordinated notes. At June 30, 1996, the Company had
available borrowings of $275.0 million under its reducing revolving
credit facility, increasing to $380.0 million, subject to certain
administrative conditions ( See "Description of Certain Indebtedness and
Capital Stock") and $59.8 million in cash and cash equivalents.
During the three months ended June 30, 1996, total capital
expenditures were approximately $103.1 million, of which approximately
(I) $48.3 million was associated with the development and construction of
Kansas City Station, (ii) $13.6 million was associated with the
development and construction of Sunset Station, (iii) $14.7 million was
associated with the construction of the 4,000 space parking structure and
elevated roadway at St. Charles Station, which opened in May 1996, (iv)
$6.8 million was associated with the Texas Station bingo, casino and buffet
expansions which opened in May 1996, and additional indoor and outdoor signage,
and (v) $19.7 million was associated with various other projects and
maintenance capital expenditures.
The Company's primary requirements during the remainder of fiscal
year 1997 are expected to include the following:
. construction costs for Kansas City Station which commenced in August
1995. The Company anticipates that the project will cost approximately
$205 million (excluding net construction period interest and preopening
expenses), of which approximately $111.1 million had been incurred as of
June 30, 1996. Kansas City Station is being constructed on 171 acres,
and will feature a casino, hotel, and dining and entertainment facilities.
The property is expected to be completed in the last quarter of calendar
year 1996.
. construction costs for Sunset Station which commenced in late calendar
year 1995. The Company anticipates that the project will cost
approximately $160 million (excluding net construction period interest
and preopening expenses), of which approximately $43.9 million had been
incurred as of June 30, 1996. Sunset Station is being constructed on
approximately 100 acres in the Henderson/Green Valley area of Las Vegas
and will feature a casino, hotel, and dining and entertainment facilities.
The project is expected to be completed in mid calendar year 1997.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
. construction of an 18-story, 507-room hotel tower at Boulder Station.
The Company anticipates that the project will cost approximately $34
million (excluding net construction period interest and preopening
expenses), of which approximately $1.1 million in design costs had been
incurred as of June 30, 1996. The project is expected to be completed
within 10 to 12 months from the commencement of construction,
which is expected to begin in the fourth quarter of calendar year 1996.
. construction of a three-level, 1,044-space parking garage at Texas
Station. The Company anticipates that the parking garage, which will
be located on the south side of the facility, will cost approximately
$6.7 million (excluding net construction period interest), of which
approximately $0.4 million had been incurred as of June 30, 1996.
This project is expected to be completed during the fourth quarter of
calendar year 1996.
Other planned uses of capital include (i) the payment of construction
contracts payable of approximately $49.5 million as of June 30, 1996, (ii)
maintenance capital expenditures at Palace Station, Boulder Station, Texas
Station, St. Charles Station and the Southwest Companies, (iii) principal and
interest payments on indebtedness, (iv) dividend payments on convertible
preferred stock, and (v) general corporate purposes, including certain
elements of other planned improvements and expansion at the Company's existing
facilities. These expansions include the construction of future phases of the
St. Charles Station master plan. The master plan for St. Charles Station
includes a new gaming and entertainment complex comprised of a two-story
land-based restaurant and entertainment facility with gaming space on the first
level of each of two adjoining gaming facilities. The gaming facilities
would be docked in a man-made backwater basin adjacent to the Missouri River.
Management is currently evaluating the timing and scope of this additional
expansion. The Company is also considering an expansion at Texas Station
that would include 50,000 square feet of additional casino, restaurant and
entertainment space and a 2,200-space parking structure on the north side of
the facility. This expansion would provide improved access and interaction
between the existing movie theater complex, casino, restaurants and other
entertainment venues at Texas Station, similar to that which exists at
Boulder Station. The Company will capitalize significant preopening expenses
associated with its construction projects, which amounts will be expensed
upon the opening of the related project and could have a material adverse
impact on the Company's earnings. The Company believes that cash flows
from operations, borrowings under the reducing revolving bank credit facility,
vendor and lease financing of equipment and existing cash balances will be
adequate to satisfy the Company's anticipated uses of capital during the
remainder of fiscal year 1997. The Company, however, continually is
evaluating the financing needs of its current and planned projects.
If more attractive financing alternatives become available to the Company,
the Company may amend its financing plans with respect to such projects,
assuming such financing would be permitted under its debt agreements (see
"Description of Certain Indebtedness and Capital Stock") and other applicable
agreements.
The Company's plans for the development of additional new gaming
opportunities, as well as further expansion of the existing operations, may
require substantial amounts of additional capital. The Company has entered
into purchase agreements to acquire land for the development of existing and
potential new gaming projects with purchase prices totaling $28.4 million
as of June 30, 1996. In consideration for these options, the Company has
paid or placed in escrow $2.3 million as of June 30, 1996, all of which
would be forfeited should the Company not exercise its option to acquire
the land. To develop all of these projects, together with any new
commitments the Company may enter into, the Company will be required to
obtain additional capital through debt or equity financings. There can be
no assurance that any such financing would be available to the Company or,
if available, that any such financing would be available on favorable
terms. As discussed below, the reducing revolving bank credit facility and
the indentures governing the Company's 9 5/8% and 10 1/8% senior subordinated
notes limit
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
the incurrence of additional indebtedness by the Company and contain various
financial and other covenants.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
BANK FACILITY
In June 1993, the Company obtained an $80 million reducing revolving
bank credit facility. On July 5, 1995, the Company obtained a $275
million reducing revolving credit facility, a portion of which was used to
refinance borrowings under the $80 million facility. On March 25, 1996,
the Company amended and restated this bank facility, providing for
borrowings up to an aggregate principal amount of $400 million, reduced
to $380 million as of June 30, 1996 (the "Bank Facility"). Borrowings
of the additional $105 million increase in capacity under the Bank
Facility are contingent on the performance of certain administrative
conditions such as appraisals, consents and regulatory approvals, which
management expects to obtain in the near future. The Bank Facility is secured
by substantially all of the assets of Palace Station, Boulder Station,
Texas Station, St. Charles Station and Kansas City Station
(collectively, the "Borrowers"). The Company and the Southwest Companies
guarantee the borrowings under the Bank Facility (collectively the
"Guarantors"). The Bank Facility matures on September 30, 2000 and was
reduced by $20.0 million on June 30, 1996 and will further reduce
quarterly thereafter by varying amounts (including approximately $4.0
million for each quarter ending on or after September 30, 1996, and
on or before March 31, 1997). Borrowings under the Bank Facility bear
interest at a margin above the bank's prime rate or LIBOR, as selected by
the Company. The margin above such rates, and the fee on the
unfunded portions of the Bank Facility, will vary quarterly based on the
combined Borrower's and the Company's consolidated ratio of funded debt
to earnings before interest, taxes, depreciation and amortization
("EBITDA").
The Bank Facility contains certain financial and other covenants.
These include a maximum funded debt to EBITDA ratio for the Borrowers
combined of 3.00 to 1.00 for each fiscal quarter through June 30, 1997, 2.75
to 1.00 for each fiscal quarter through June 30, 1998, and 2.50 to 1.00 for
each fiscal quarter thereafter, a minimum fixed charge coverage ratio for the
preceding four quarters for the Borrowers combined of 1.35 to 1.00 for periods
March 31, 1996 through June 30, 1997, and 1.50 to 1.00 for periods
thereafter, a limitation on indebtedness, and limitations on capital
expenditures. As of June 30, 1996 the Borrowers funded debt to EBITDA
ratio was 0.57 to 1.00 and the fixed charge coverage ratio for the
proceeding four quarters ended June 30, 1996 was 2.76 to 1.00. A tranche
of the Bank Facility contains a Minimum Tangible Net Worth requirement for
Palace Station ($10 million plus 95% of net income determined as of the
end of each fiscal quarter with no reduction for net losses) and certain
restrictions on distributions of cash from Palace Station to the Company.
As of June 30, 1996, Palace Station's Tangible Net Worth exceeded the
requirement by approximately $7 million. These covenants limit Palace Station's
ability to make payments to the Company, a significant source of anticipated
cash for the Company.
In addition, the Bank Facility has financial covenants relating to the
Company. These include prohibitions on dividends on or redemptions of
the Company's common stock, restrictions on repayment of any subordinated
debt, limitations on indebtedness beyond existing indebtedness, the
Company's senior subordinated notes and up to $25 million of purchase
money indebtedness, minimum consolidated net worth requirements for the
Company of $165 million plus post October 1, 1995 preopening expenses, 95% of
post October 1, 1995 net income (not reduced by net losses) and 100% of net
equity offering proceeds, and limitations on capital expenditures. As of June
30, 1996 the Company's consolidated net
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
worth exceeded the requirement by approximately $12 million. The Bank facility
also includes a maximum funded debt to EBITDA ratio for the Company on a
consolidated basis of 4.75 to 1.00 for each fiscal quarter through September
30, 1997, 4.50 to 1.00 for the quarter ending December 31, 1997, 4.25 to 1.00
for the quarter ending March 31, 1998, 4.00 to 1.00 for each fiscal quarter
through September 30, 1998 and 3.75 to 1.00 thereafter. As of June 30, 1996
the Company's funded debt to EBITDA ratio was 3.80 to 1.00. In addition, the
Bank Facility prohibits the Company from holding cash and cash equivalents
in excess of the sum of the amounts necessary to make the next scheduled
interest or dividend payments on the Company's senior subordinated notes and
preferred stock, the amounts necessary to fund casino bankroll in the
ordinary course of business and $2,000,000. The Guarantors waive certain
defenses and rights including rights of subrogation and reimbursement. The
Bank Facility contains customary events of default and remedies and is cross-
defaulted to the Company's senior subordinated notes and the Change of
Control Triggering Event as defined in the indentures.
SENIOR SUBORDINATED NOTES
The Company has $382.5 million, net of unamortized discount of $8.5
million, of senior subordinated notes outstanding as of June 30, 1996. $185.7
million of these notes bear interest, payable semiannually, at a rate of
9 5/8% per year and $196.8 million bear interest, payable semi-annually, at
an rate of 10 1/8% per year (collectively, the "Notes"). The indentures
governing the Notes contain certain customary financial and other covenants
which prohibit the Company and its subsidiaries from incurring
indebtedness (including capital leases) other than (a) non-recourse debt
for certain specified subsidiaries, (b) certain equipment financings, (c) the
Notes, (d) up to $15 million of additional indebtedness, (e) additional
indebtedness if, after giving effect thereto, a 2.00 to 1.00 pro forma
Consolidated Coverage Ratio (as defined) has been met, (f) Permitted
Refinancing Indebtedness (as defined), (g) borrowings under the Bank
Facility not to exceed the greater of $200 million or 1.5 times Operating
Cash Flow (as defined) for the four most recent quarters, and (h) certain
other indebtedness. As of June 30, 1996 the Company's Consolidated Coverage
Ratio was 3.10 to 1.00. In addition, the indentures prohibit the Company from
paying dividends on any of its capital stock unless at the time of and after
giving effect to such dividend, among other things, the aggregate amount
of all Restricted Payments and Restricted Investments (as defined in the
indentures, and which include any dividends on any capital stock of the
Company) do not exceed the sum of (i) 50% of Cumulative Consolidated Net
Income (as defined) of the Company (less 100% of any consolidated net losses),
(ii) certain net proceeds from the sale of equity securities of the Company,
and (iii) $15 million. The limitation on the incurrence of additional
indebtedness and dividend restrictions in the indentures
may significantly affect the Company's ability to pay dividends on
its capital stock. The Notes also give the holders of the Notes the
right to require the Company to purchase the Notes at 101% of the
principal amount of the Notes plus accrued interest thereon upon a
Change of Control and Rating Decline (each as defined in the indentures)
of the Company.
COMMON STOCK
The Company is authorized to issue up to 90,000,000 shares of its
common stock, $.01 par value per share, 35,318,057 shares of which were
issued and outstanding as of June 30, 1996. Each holder of the
Company's common stock (the "Common Stock") is entitled to one vote for
each share held of record on each matter submitted to a vote of
stockholders. Holders of the Common Stock have no cumulative voting,
conversion, redemption or preemptive rights or other rights to subscribe
for additional shares. Subject to any preferences that may be granted to
the holders of the Company's preferred stock, each holder of Common Stock
is entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor as well as
any distributions to the stockholders
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
and, in the event of liquidation, dissolution or winding up of the Company,
is entitled to share ratably in all assets of the Company remaining after
payment of liabilities.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of its
preferred stock, $.01 par value per share ("Preferred Stock"). In March
1996, the Company completed an offering of 1,800,000 shares of $3.50
Convertible Preferred Stock (the "Convertible Preferred Stock"). In
April 1996, the underwriters exercised the over allotment of an
additional 270,000 shares of the Convertible Preferred Stock. The Board of
Directors, without further action by the holders of Common Stock or the
Convertible Preferred Stock, may issue shares of Preferred Stock in one
or more series and may fix or alter the rights, preferences,
privileges and restrictions, including the voting rights, redemption
provisions (including sinking fund provisions), dividend rights,
dividend rates, liquidation rates, liquidation preferences, conversion
rights and the description and number of shares constituting any wholly
unissued series of Preferred Stock. Except as described above, the
Board of Directors, without further stockholder approval, may issue
shares of Preferred Stock with rights that could adversely affect the
rights of the holders of Common Stock or the Convertible Preferred
Stock. The issuance of shares of Preferred Stock under certain
circumstances could have the effect of delaying or preventing a change
of control of the Company or other corporate action.
CONVERTIBLE PREFERRED STOCK
As of June 30, 1996, the Company has 2,070,000 shares of Convertible
Preferred Stock outstanding, each with a liquidation preference of
$50.00 per share plus an amount equal to any accumulated and unpaid
dividends at the annual rate of $3.50 per share, or 7.0% of such
liquidation preference. Such dividends accrue and are cumulative from
the date of issuance and are payable quarterly. The Convertible
Preferred Stock is convertible at the option of the holder thereof at
any time, unless previously redeemed, into shares of Common Stock at an
initial conversion rate of 3.2573 shares of Common Stock for each share
of Convertible Preferred Stock (equivalent to a 24.0% conversion premium per
share of Common Stock), subject to adjustment in certain circumstances. The
Company may reduce the conversion price of the Convertible Preferred Stock
by any amount for any period of at least 20 days, so long as the
decrease is irrevocable during such period. The Convertible Preferred
Stock is redeemable, at the option of the Company, in whole or in part, for
shares of Common Stock, at any time after March 15, 1999, initially at a
price or $52.45 per share of Convertible Preferred Stock, and thereafter at
prices decreasing annually to $50.00 per share of Convertible Preferred Stock
on and after March 15, 2006, plus accrued and unpaid dividends. The Common
Stock to be issued is determined by dividing the redemption price by the
lower of the average daily closing price for the Company's Common Stock
for the preceding 20 trading days or the closing price of the Company's
Common Stock on the first business day preceding the date of the redemption
notice. Any fractional shares would be paid in cash. There is no
mandatory sinking fund obligation with respect to the Convertible Preferred
Stock. The holders of the Convertible Preferred Stock do not have any voting
rights, except as required by applicable law and except that, among other
things, whenever accrued and unpaid dividends on the Convertible Preferred
Stock are equal to or exceed the equivalent of six quarterly dividends
payable on the Convertible Preferred Stock, the holders of the Convertible
Preferred Stock, voting separately as a class with the holders of any
other series of parity stock upon which like voting rights have been
conferred and are exercisable, will be entitled to elect two directors
to the Board of Directors until dividend arrearage has been paid or
amounts have been set apart for such payment. The Convertible
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Preferred Stock is senior to the Common Stock with respect to dividends and
upon liquidation, dissolution or winding up.
FORWARD LOOKING STATEMENTS
This document contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. The forward-
looking statements in this document are intended to be subject to the safe
harbor protection provided by Section 21E. All forward-looking statements
involve risks and uncertainties. Although the Company believes that its
expectations are based upon reasonable assumptions within the bounds of its
knowledge of its business and operations, there can be no assurance that actual
results will not materially differ from its expectations. Factors that could
cause actual results to differ materially from expectations include, among
other things, the Company's competition, the limitations on capital resources
imposed by the Company's bank facility and the terms of the indentures
governing the Company's senior subordinated debt, the Company's ability to
meet its interest expense and principal repayment obligations, the
Company's ability to obtain licenses for its new projects, loss of the
Company's riverboat and dockside facilities from service, construction risks,
the Company's dependence on key gaming markets, the Company's ability to
take advantage of new gaming development opportunities and gaming
regulations. For other factors that may cause actual results to
materially differ from expectations and underlying assumptions, refer to
the Registration Statement on Form S-3 (File No. 333-1102) (and
particularly the section labeled "Risk Factors" therein) and periodic
reports, including the Annual Report on Form 10-K for the year ended
March 31, 1996, filed by the Company with the Securities and Exchange
Commission (and particularly the section labeled "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
therein). Readers are cautioned not to place undue reliance on any
forward-looking statements, which speak only as of the date thereof. The
Company undertakes no obligation to publicly release any revisions to
such forward-looking statements to reflect events or circumstances
after the date hereof.
16
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings --
The Company and its subsidiaries are defendants in various lawsuits
relating to routine matters incidental to their business. Management
does not believe that the outcome of such litigation, in the aggregate,
will have a material adverse effect on the Company.
A suit seeking status as a class action lawsuit was filed by
plaintiff, William H. Poulos, et. al, as class representative, on April
26, 1994, in the United States District Court, Middle District of
Florida, naming 41 manufacturers, distributors and casino operators of
video poker and electronic slot machines, including the Company. On May
10, 1994, a lawsuit alleging substantially identical claims was filed by
another plaintiff, William Ahearn, et. al, as class representative, in
the United States District Court, Middle District of Florida, against 48
manufacturers, distributors and casino operators of video poker and
electronic slot machines, including the Company and most of the other
major hotel-casino companies. The lawsuits allege that the defendants
have engaged in a course of fraudulent and misleading conduct intended
to induce persons to play such games based on a false belief concerning
how the gaming machines operate, as well as the extent to which there is
an opportunity to win. The two lawsuits have been consolidated into a
single action, and have been transferred to the United States District
Court, for the State of Nevada. On September 26, 1995, a lawsuit
alleging substantially identical claims was filed by plaintiff,
Larry Schreier, et. al, as class representative, in the United States
District court for the District of Nevada, naming 45 manufacturers,
distributors, and casino operators of video poker and electronic slot
machines, including the Company. Motions to dismiss the Poulos/Ahearn
and Schreier cases were filed by Defendants. On April 17, 1996, the
Poulos/Ahearn lawsuits were dismissed, but plaintiffs were given leave to
file amended Complaints on or before May 31, 1996. On May 31, 1996, an
amended Compliant was filed, naming William H. Poulos, et. al, as plaintiff.
Motions to dismiss are before the court. The Ahearn case was not refiled
and the Schreier case remains before the court. Management believes
that the claims are wholly without merit and does not expect that the
lawsuits will have a material adverse effect on the Company's financial
position or results of operations.
A suit seeking status as a class action lawsuit was filed
by plaintiffs, Thomas Hyland and Zelijko Ranogajel, et. al, as class
representatives, on May 25, 1995, in the United States District Court,
District of New Jersey, Camden Division, naming 80 credit reporting
agencies and casino operators, including the Company. The lawsuit
alleges that the exclusion of blackjack players who "count cards" from
casinos and the sharing of information about them violates certain state
and federal antitrust, consumer protection, and credit reporting statutes.
On May 30, 1996, the Court dismissed this case.
A suit seeking status as a class action was filed by Paul Winkleman
et. al, as class representative, on February 26, 1996, in the Circuit
Court of the City of St. Louis, Missouri, naming St. Charles Station and
one other casino operator in Missouri as defendants. The lawsuit seeks
to recover losses that occurred within three months of the filing of the
suit under a 1939 Missouri statute that purports to permit recovery of
gaming losses. Based on the advice of counsel, management believes the
statute has been superseded by an amendment to the constitution of the
State of Missouri that was passed on November 9, 1994, and by the
Missouri Gaming Law promulgated subsequent to a statewide referendum in
November 1992 and further clarified subsequent to the constitutional
amendment, each of which permit riverboat gaming. On May 13, 1996,
St. Charles Station filed a motion to dismiss on this basis. On August 5,
1996, the Court dismissed this case.
17
<PAGE>
Item 2. CHANGES IN SECURITIES - None.
Item 3. DEFAULTS UPON SENIOR SECURITIES - None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
Item 5. OTHER INFORMATION - None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit
Number
------
10.1 Second Amendment to Joint Venture Agreement, dated as of
April 22, 1996, between First Holdings Company and Kansas
City Station Corporation.
10.2 Second Amendment to Lease Agreement, dated as of
April 22, 1996, between Station/First Joint Venture and
Kansas City Station Corporation.
27 Financial Data Schedule
(b) Reports on Form 8-K - The registrant filed no reports on Form 8-K
during the three month period ended June 30, 1996.
18
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Station Casinos, Inc.,
Registrant
DATE: August 9, 1996 /s/ Glenn C. Christenson
-------------------------
Glenn C. Christenson,
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS
OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE
YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000898660
<NAME> STATION CASINOS,INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 59762
<SECURITIES> 0
<RECEIVABLES> 6464
<ALLOWANCES> 0
<INVENTORY> 2366
<CURRENT-ASSETS> 82803
<PP&E> 809881
<DEPRECIATION> 108411
<TOTAL-ASSETS> 865995
<CURRENT-LIABILITIES> 118677
<BONDS> 382459
0
103500
<COMMON> 353
<OTHER-SE> 195739
<TOTAL-LIABILITY-AND-EQUITY> 865995
<SALES> 0
<TOTAL-REVENUES> 135440
<CGS> 0
<TOTAL-COSTS> 69752
<OTHER-EXPENSES> 9823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8293
<INCOME-PRETAX> 14581
<INCOME-TAX> 5122
<INCOME-CONTINUING> 9459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9459
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
Exhibit 10.2
SECOND AMENDMENT TO LEASE AGREEMENT
This SECOND AMENDMENT TO LEASE AGREEMENT (this "SECOND AMENDMENT") is made
and entered into this ___ day of April, 1996, by and between STATION/FIRST JOINT
VENTURE, a Missouri partnership ("LANDLORD") and KANSAS CITY STATION
CORPORATION, a Missouri corporation ("TENANT").
W I T N E S S E T H:
WHEREAS, Landlord and Tenant entered into that certain Lease Agreement
dated as of April 1, 1994, wherein Landlord leased to Tenant the Premises, as
described therein, as amended pursuant to that certain First Amendment to Lease
Agreement dated March 19, 1996 (the "ORIGINAL LEASE", and as amended herein, the
"LEASE"); and
WHEREAS, Landlord and Tenant desire to amend the Original Lease as provided
herein;
NOW, THEREFORE, in exchange for the mutual promises and covenants contained
herein, the sufficiency of which is hereby acknowledged by each of the
undersigned, the undersigned parties agree as follows:
1. The Original Lease is hereby amended by deleting Section 2.1 in its
entirety and replacing in lieu thereof:
2.1 Lease Term.
(a) The initial term of this Lease (the "INITIAL LEASE TERM")
shall be for a period beginning at 12:00 noon on April 1, 1994 (the
"COMMENCEMENT DATE") and ending at 12:00 noon on March 31, 2006 (the
"INITIAL EXPIRATION DATE") unless sooner terminated pursuant to the
terms hereof.
(b) Tenant shall have the option to extend the term of this
Lease for up to eight (8) renewal periods of ten (10) years each (each
such period, a "RENEWAL PERIOD"), plus one (1) additional renewal
period of seven (7) years. Each such renewal option is exercisable by
Tenant at any time prior to thirty (30) days prior to the date such
Renewal Period is to commence.
(c) The Initial Lease Term, together with all Renewal Periods
for which Tenant has exercised its renewal option, shall collectively
be referred to herein as the "LEASE TERM," and the last day of the
last Renewal Period for which Tenant has exercised its renewal option
shall be referred to herein as the "EXPIRATION DATE."
2. The Original Lease is hereby amended by deleting Section 2.2 in its
entirety.
3. The Original Lease is hereby amended by deleting Section 2.3 in its
entirety and replacing in lieu thereof:
2.3 Amount of Rent.
(a) Commencing May 1, 1995 and continuing until April 30, 1996,
Tenant shall pay to Landlord, without demand, rent for the Premises in
an amount equal to One Hundred Thousand and no/100 U.S. Dollars
($100,000.00) per month.
(b) Commencing May 1, 1996 and continuing until March 31, 1997,
Tenant shall pay to Landlord, without demand, rent for the Premises in
an amount equal to Eighty-Five Thousand and no/100 U.S. Dollars
($85,000.00) per month
(c) Commencing April 1, 1997 and continuing throughout the Lease
Term, Tenant shall pay to Landlord, without demand, rent for the
Premises in an amount equal to Ninety Thousand and no/100 U.S. Dollars
($90,000.00) per month, subject to Subsection 2.3(d) hereof.
(d) Commencing April 1, 1998, and upon every anniversary
thereafter during the Lease Term, rent for the Premises shall be
increased by multiplying it by the Cost of Living Factor (as
hereinafter defined) The "Cost of Living Factor" for any date during
the Term shall be a fraction whose numerator is the index figure
stated in the Consumer Price Index for All Urban Consumers (CPI-U;
U.S. City Average; All Items 1982-84=100) published by the Bureau of
Statistics of the United States Department of Labor in effect on such
date and whose denominator is the index figure for such Consumer Price
Index in effect twelve months prior to such date; provided, however,
that regardless of the actual Cost of Living Factor calculated in the
foregoing manner the Cost of Living Factor shall never be less than
One and Two Hundredths (1.02) nor more than One and Five Hundredths
(1.05). If such "Consumer Price Index" is discontinued, the Cost of
Living Factor shall be based on comparable statistics on changes in
the purchasing power of the consumer dollar for the applicable periods
as published by a responsible financial periodical report of a
recognized governmental or private authority.
4. The Original Lease is hereby amended by deleting Article 11 in its
entirety and replacing in lieu thereof:
ARTICLE 11. TENANT'S ENCUMBRANCE OF LEASE; ASSIGNMENT AND SUBLETTING
11.1 Right to Encumber. Any provision herein contained to the
contrary notwithstanding, Tenant shall have the right, from time to time,
without the consent of Landlord, to encumber by way of one or more deeds
of trust, mortgages, or other security instruments or any amendments of any
existing Deed of Trust, (collectively, a "Deed of Trust") all or any
portion of Tenant's right, title and interest in, to and under this Lease.
Any such Deed of Trust may contain such terms, conditions and maturity as
Tenant may determine. Tenant may enter into any and all such extensions,
modifications or amendments of any such Deed of Trust as it may desire. The
execution and delivery of any such Deed of Trust shall not be deemed to
constitute such an assignment or transfer of this Lease as would require
the holder or holders thereof, as such, to assume the obligation or
performance of any of the terms, covenants or conditions on the part of
Tenant to be performed hereunder. The beneficiary and its respective
assigns under each Deed of Trust (the "BENEFICIARY") may enforce such Deed
of Trust and may acquire title to the leasehold estate of Tenant in any
lawful way(in which event the Beneficiary and/or such assign shall
expressly agree to observe and perform all the covenants of Tenant
hereunder for so long as Beneficiary and/or such assign retains title to
Tenant's interest hereunder) and, pending foreclosure of such Deed of Trust
(or bona fide sale or assignment in lieu of foreclosure) may take
possession of and sublease the Premises, or cause any person having the
relationship of an independent contractor to the Beneficiary to take
possession of and sublease the Premises. Upon foreclosure thereof (or any
bona fide sale or assignment in lieu of foreclosure) the Beneficiary may,
subject to Section 11.3, sell and assign this Lease, by assignment in which
the assignee shall expressly assume and agree to observe and perform all
the covenants of Tenant hereunder for so long as it shall retain title to
Tenant's interest hereunder. Any assignee who has acquired title to this
Lease by way of foreclosure or deed in lieu thereof may only assign its
rights under the Lease, other than by way of Deed of Trust, in compliance
with Section 11.3 hereto.
11.2 Protection of Beneficiary. In the event that Tenant shall
encumber the leasehold estate by way of Deed of Trust (including, without
limitation, the existing Deed of Trust which presently encumbers Tenant's
leasehold estate hereunder) in compliance with the terms of this Lease, the
following provisions shall apply and inure to and for the benefit of the
Beneficiary therein named, and its successors and assigns, any provision
herein contained to the contrary notwithstanding:
(a) This Lease shall not be amended, altered, modified, or
rescinded by Landlord and Tenant, prior to the expiration of the term
of the Deed of Trust, without the prior written consent of the
Beneficiary. All costs and expenses incurred to obtain the consent of
the Beneficiary to any such amendment, alteration, modification or
rescission shall be paid by Tenant. If such a Deed of Trust is in
effect, this Lease may be terminated only in accordance with the
provisions of this Section 11.2. Without limiting the generality of
the foregoing, neither Landlord nor Tenant shall terminate the Lease
pursuant to Section 3.2, 7, 10.2(b), 15.1 (except for a condemnation
of the entire Premises) or 15.2 without the Beneficiary's prior
written consent. Any attempted amendment, alteration, modification,
rescission or termination of this Lease without such prior written
consent shall, at the Beneficiary's option be void.
(b) Landlord shall, upon serving Tenant any notice of default
under the provisions of or with respect to this Lease, at the same
time serve a copy of such notice upon the Beneficiary, by registered
mail, addressed to it at the address shown in the Deed of Trust, and
no notice of default by Landlord to Tenant shall be deemed to have
been duly given unless and until a copy thereof has been so served
upon the Beneficiary.
(c) The Beneficiary shall have the right (but not the
obligation) to cure without penalty any default by Tenant under the
Lease. Landlord shall allow the Beneficiary and its representatives
access to the Premises for the purpose of effecting any such cure, and
any cure by the Beneficiary shall have the same effect as cure by
Tenant. Landlord will not terminate the Lease upon a default by
Tenant unless:
(i) in the case of a monetary payment default, the Beneficiary
has not, within 15 days after the Beneficiary receives written notice
of such default, cured such monetary default; or
(ii) in the case of a non-monetary default that is curable by the
Beneficiary, the Beneficiary has not, within 30 days after the
Beneficiary receives written notice of such default, either (A) if the
default is reasonably susceptible of cure within such period, cured
such default, or (B) if the default is not reasonably susceptible of
cure within such period, commenced reasonable efforts (including
proceedings for foreclosure of the Deed of Trust or appointment of a
receiver) to cure such default, provided that the Beneficiary
thereafter diligently and in good faith pursues the completion of such
cure to the extent not prohibited by law; or
(iii) in the case of a non-monetary default that is not
curable by the Beneficiary, the Beneficiary has not, within 30 days
after the Beneficiary receives written notice of such default,
commenced proceedings for foreclosure of the Deed of Trust, provided
that the Beneficiary thereafter diligently and in good faith pursues
the completion of such foreclosure to the extent not prohibited by
law.
Following any foreclosure of a Deed of Trust (or assignment by deed in
lieu thereof), and provided that Landlord has notified the applicable
assignee of one or more existing defaults of the previous Tenant which
remain uncured and which are reasonably susceptible of being cured by
such assignee, Landlord shall have all applicable remedies under this
Lease with respect to each such default (including termination, to the
extent applicable) in the event that such assignee does not cure each
such default: (A) in the case of a monetary payment default, within 15
days after such assignee receives written notice of such default; or
(B) in the case of a non-monetary default, within 30 days after such
assignee receives written notice of such default (provided that, to
the extent that any such default is not reasonably susceptible of cure
by such assignee within such 30-day period, Landlord shall not be
entitled to exercise any remedies with respect thereto so long as such
assignee commences cure within such 30 days and thereafter diligently
prosecutes such cure to completion).
(d) Following any foreclosure of a Deed of Trust (or assignment
by deed in lieu thereof), the successor to Tenant's interest shall be
personally liable only with respect to the liabilities of Tenant which
accrue following such assignment and prior to a subsequent assignment
by such assignee in accordance with this Lease.
11.3 Assignment and Subletting.
(a) Except as otherwise provided herein, Tenant shall not assign
or transfer this Lease or any interest therein, or sublet the Premises
in whole without Landlord's prior written consent, which consent shall
not be unreasonably withheld; PROVIDED, HOWEVER, that nothing herein
shall prohibit Tenant from (i) assigning this Lease to a wholly-owned
subsidiary of Tenant, an entity that owns the issued and outstanding
stock of Tenant ("Tenant's Parent"), or a wholly-owned subsidiary of
Tenant's Parent, PROVIDED, HOWEVER, that no such assignment shall
decrease Tenant's obligations hereunder, (ii) entering into a sublease
as authorized by Section 11.3 (b) below; or (iii) entering into Deeds
of Trust as permitted by this Article 11; and PROVIDED, FURTHER, that
Landlord will not require the payment of any money for any such
consent other than such reasonable costs and expenses as may be
incurred by Landlord in connection with such consent not to exceed
$5,000. Subject to the limitations of Section 11.2(d), above, each
assignee, other than Landlord, shall assume and be deemed to have
assumed this Lease and shall become and remain liable jointly and
severally with Tenant for the payment of the Rent and other payments
due hereunder, and for the due agreements herein contained on Tenant's
part to be performed for the term of this Lease.
(b) Tenant may enter into subleases with sublessees to use or
occupy portions of the Premises during the Term of this Lease without
the consent of Landlord.
5. The Original Lease is hereby amended by inserting the following as the
last sentence of Section 13.1:
Any and all improvements constructed by Tenant on the Premises during
the Lease Term shall be property of Tenant during the Term of Lease;
provided, however, that upon Tenant's surrender of the Premises to
Landlord, Tenant may only remove those improvements that are capable
of being detached and removed within thirty (30) days, and all
improvements not removed by Tenant within such time period shall
become property of the Landlord.
6. The Original Lease is hereby amended by inserting the following as
Section 19.14:
19.14 Landlord Participation. Landlord shall cooperate with
Tenant to the extent that, from time to time, Landlord's participation
is legally required (or otherwise reasonably necessary) in connection
with (a) obtaining land use variances, permits and other governmental
authorizations with respect to Tenant's operations at the Premises,
(b) entering into dedications, easement agreements, CC&R's and other
contracts (with governmental entities and/or private parties) that
Tenant reasonably determines to be beneficial in connection with its
operations at the Premises, (c) contesting any tax or other law
applicable to the Premises, or (d) pursuing or defending any lawsuit
or other proceeding with respect to the Premises. Tenant shall
reimburse Landlord, within 10 business days following written demand
from time to time, for all costs reasonably incurred by Landlord as a
result of any such cooperation.
7. Except as amended herein, the Lease remains in full force and effect,
and Landlord and Tenant ratify the Lease as amended herein.
8. All capitalized terms used in this Second Amendment but not defined
herein shall have the meanings ascribed thereto in the Original Lease.
9. This Second Amendment shall be governed by and construed in accordance
with the laws of the State of Missouri.
10. This Second Amendment may be executed in any number of counterparts,
each of which will be deemed an original and all of which together will
constitute one and the same instrument.
11. Upon mutual execution hereof, this Second Amendment will be binding
upon each of the undersigned parties, but will not become effective until Bank
of America, NTSA, (the "Bank") has granted its consent hereto or any portion
hereof. In the event the Bank has not granted such consent within thirty (30)
days after the execution hereof, this Second Amendment shall automatically
become void.
WITNESS THE EXECUTION hereof by each of the undersigned as of the date
first set forth above.
LANDLORD TENANT
STATION/FIRST JOINT VENTURE, a Missouri KANSAS CITY STATION CORPORATION,
partnership a Missouri corporation
By: KANSAS CITY STATION CORPORATION, By: _________________________
a Missouri corporation, its managing Name: _______________________
partner Title: ________________________
By: ____________________________
Name: __________________________
Title: ___________________________
CONSENT
By its execution in the space provided below, FIRST HOLDINGS COMPANY, a
Mississippi partnership, acknowledges that it has reviewed this Second
Amendment, and, in its capacity as a partner of Station/First Joint Venture,
consents to all the terms and provisions hereof.
FIRST HOLDINGS COMPANY, a
Mississippi partnership
By: _______________________
Name: _____________________
Title: ______________________
Exhibit 10.1
SECOND AMENDMENT TO JOINT VENTURE AGREEMENT
This SECOND AMENDMENT TO JOINT VENTURE AGREEMENT (this "SECOND
AMENDMENT") is entered into as of this ___ day of April, 1996, by and
between FIRST HOLDINGS COMPANY, a Mississippi partnership ("FHC") and
KANSAS CITY STATION CORPORATION, a Missouri corporation ("KCSC").
W I T N E S S E T H:
WHEREAS, FHC and Station Casinos, Inc., a Nevada corporation ("STCI")
entered into that certain Joint Venture Agreement dated September 25, 1993,
as amended by that certain letter agreement dated November 15, 1993 (the
"ORIGINAL AGREEMENT" and, as amended herein, the "JOINT VENTURE
AGREEMENT"), pursuant to which FHC and STCI formed Station/First Joint
Venture, a Missouri partnership; and
WHEREAS, STCI assigned its interest in the Original Agreement to KCSC
pursuant to that certain Assignment and Assumption dated March 26, 1996;
and
WHEREAS, FHC and KCSC desire to amend the Original Agreement as
provided herein;
NOW, THEREFORE, in exchange for the mutual promises and covenants
contained herein, the sufficiency of which is hereby acknowledged by each
of the undersigned, the undersigned parties agree as follows:
1. The Original Agreement is hereby amended by deleting the
definition of "Managing Partner" as set forth in Article I, and replacing
in lieu thereof:
"MANAGING PARTNER" means Kansas City Station Corporation, a
Missouri corporation.
2. The Original Agreement is hereby amended by deleting Section 2.7
in its entirety, and replacing in lieu thereof:
SECTION 2.7 TERM. THE JOINT VENTURE SHALL COMMENCE ON THE
DATE OF THIS AGREEMENT AND SHALL CONTINUE UNTIL APRIL 1, 2093 UNLESS
SOONER DISSOLVED AND TERMINATED PURSUANT TO THE PROVISIONS OF THIS
AGREEMENT.
3. The Original Agreement is hereby amended by deleting the final
paragraph of Section 3.1.
4. The Original Agreement is hereby amended by deleting Section 3.4
in its entirety, and replacing in lieu thereof:
Section 3.4 JOINT VENTURE EXPENSES, FEES AND LIABILITIES.
(a) The Joint Venture will be responsible for and will pay
its own operating expenses, including legal, auditing,
accounting, brokerage, finder, placement, investment banking,
interest, filing or other fees or expenses incurred by the Joint
Venture or by the Partners on behalf of the Joint Venture. Each
Partner shall bear the costs and expenses incurred by it in
connection with the organization of, and management of such
Partner's investment in the Joint Venture including, without
limitation, accounting and legal fees and expenses. No Partner
other than the Managing Partner shall incur any costs, expenses
or liabilities on behalf of the Joint Venture without the prior
consent of all Partners. The Managing Partner shall not incur
expenses on behalf of the Joint Venture which are not incident to
the day-to-day business and operations of the Joint Venture.
Expenses and liabilities on behalf of the Joint Venture and
accruing from and after April 22, 1996 will be payable by the
Managing Partner out of the Management Fee (as hereinafter
defined).
(b) In consideration for its services in managing the Joint
Venture, the Joint Venture shall pay the Managing Partner a
management fee (the "Management Fee") each month to be determined
by the Managing Partner from time to time in its reasonable
discretion.
5. The Original Agreement is hereby amended by inserting the
following phrase at the end of Section 4.2(b):
, subject to Section 4.2 (c).
6. The Original Agreement is hereby amended by deleting Seciton
4.2(c) in its entirety and replacing in lieu thereof:
(c) In the event the Management Fee as provided for in Section
3.4 is insufficient to cover the liabilities and expenses of the Joint
Venture which accrue after September 25, 1993, the Managing Partner
shall contribute additional capital in an amount sufficient to cover
such liabilities and expenses.
7. The Original Agreement is hereby amended by deleting Section 5.1
in its entirety, and replacing in lieu thereof:
Section 5.1 Guaranteed Payment. Commencing on April 1, 1994,
and on or before the first day of each month thereafter, FHC shall be
paid, as interest on its Capital account, a guaranteed monthly payment
(the "Guaranteed Monthly Payment") in the amount of Forty Thousand and
No/100 U.S. Dollars ($40,000.00). Beginning October 1, 1994, or upon
receipt of permits pursuant to Section 10 of the Rivers and Harbors
Act of 1899 and Section 404 of the Clean Water Act, from the United
States Army Corps of Engineers, whichever first occurs, the Guaranteed
Monthly Payment shall increase to Sixty Thousand Dollars ($60,000.00)
per month. Beginning May 1, 1995, or upon receipt of a gaming license
from the state of Missouri for operation of a riverboat gaming
facility, whichever first occurs, the Guaranteed Monthly Payment shall
increase to Ninety-Six Thousand Dollars ($96,000.00) per month.
Beginning May 1, 1996, the Guaranteed Monthly Payment shall decrease
to Eighty-One Thousand, Nine Hundred Dollars ($81,900) per month.
Beginning April 1, 1997, the Guaranteed Monthly Payment shall increase
to Eighty-Seven Thousand Seven Hundred Fifty Dollars ($87,750) per
month. Commencing April 1, 1998, and upon every anniversary
thereafter during the Lease Term, the Guaranteed Monthly Payment shall
be increased by multiplying it by the Cost of Living Factor (as
hereinafter defined). The "Cost of Living Factor" for any date during
the Term shall be a fraction whose numerator is the index figure
stated in the Consumer Price Index for All Urban Consumers (CPI-U;
U.S. City Average; All Items 1982-84=100) published by the Bureau of
Statistics of the United States Department of Labor in effect on such
date and whose denominator is the index figure for such Consumer Price
Index in effect twelve months prior to such date; provided, however,
that regardless of the actual Cost of Living Factor calculated in the
foregoing manner the Cost of Living Factor shall never be less than
One and Two Hundredths (1.02) nor more than One and Five Hundredths.
If such "Consumer Price Index" is discontinued, the Cost of Living
Factor shall be based on comparable statistics on changes in the
purchasing power of the consumer dollar for the applicable periods as
published by a responsible financial periodical report of a recognized
governmental or private authority.
8. The Original Agreement is hereby amended by inserting the
following phrase at the end of the first sentence of Section 9.2:
, subject, however, to Section 4.2(c).
9. The Original Agreement is hereby amended by deleting the second
sentence of Section 10.14 in its entirety, and replacing in lieu thereof
the following:
However, each party hereto and the Joint Venture shall have a ten (10)-
day period to cure any default of any of its obligations hereunder,
such period to begin upon receipt by the defaulting party of written
notice from the non-defaulting party.
10. Except as amended herein, the Joint Venture Agreement remains in
full force and effect, and FHC and KCSC ratify the Joint Venture Agreement
as amended herein.
11. All capitalized terms used in this Second Amendment but not
defined herein shall have the meanings ascribed thereto in the Joint
Venture Agreement.
12. This Second Amendment may be executed in any number of
counterparts, each of which will be deemed an original and all of which
together will constitute one and the same instrument.
WITNESS THE EXECUTION hereof by each of the undersigned as of the date
first set forth above.
FHC KCSC
FIRST HOLDINGS COMPANY,
a Mississippi KANSAS CITY STATION CORPORATION,
partnership a Missouri corporation
By: ___________________________ By: _________________________
Name: _________________________ Name: _______________________
Its General Partner Title: ________________________
