<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 September 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 Identification No.)
incorporation or organization)
2411 West Sahara Avenue, Las Vegas, Nevada 89102
------------------------------------------------------
(Address of principal executive offices - 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 October 31, 1996
- ---------------------------- -------------------------------
Common stock, $.01 par value 35,318,057
1
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STATION CASINOS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) - 3
September 30, 1996 and March 31, 1996
Condensed Consolidated Statements of Operations (unaudited) - 4
Three and Six Months Ended September 30, 1996 and 1995
Condensed Consolidated Statements of Cash Flows (unaudited) - 5
Six Months Ended September 30, 1996 and 1995
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and 10
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Submission of Matters to a Vote of Security Holders 22
Item 5. Other Information 22
Item 6. Exhibits and Reports on Form 8-K 22
Signature 23
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATION CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1996 1996
------------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.................................................... $ 30,624 $ 114,868
Accounts and notes receivable, net........................................... 6,543 5,151
Inventories.................................................................. 2,195 2,299
Prepaid expenses and other................................................... 14,957 11,121
----------- -----------
TOTAL CURRENT ASSETS..................................................... 54,319 133,439
Property and equipment, net.................................................... 807,221 616,211
Land held for development...................................................... 26,422 28,934
Other assets, net.............................................................. 65,111 48,730
----------- -----------
TOTAL ASSETS............................................................. $ 953,073 $ 827,314
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt............................................ $ 22,434 $ 23,256
Accounts payable............................................................. 17,572 11,091
Accrued payroll and related.................................................. 10,015 11,519
Construction contracts payable............................................... 55,072 27,879
Accrued interest payable..................................................... 7,676 6,875
Accrued expenses and other current liabilities............................... 20,675 16,706
----------- -----------
TOTAL CURRENT LIABILITIES................................................ 133,444 97,326
Long-term debt, less current portion........................................... 496,831 441,742
Deferred income taxes, net..................................................... 14,752 9,776
----------- -----------
TOTAL LIABILITIES........................................................ 645,027 548,844
----------- -----------
COMMITMENTS AND CONTINGENCIES (NOTE 3)
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..................................... (1,518) (1,811)
Retained earnings............................................................ 38,260 22,305
----------- -----------
TOTAL STOCKHOLDERS' EQUITY............................................... 308,046 278,470
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY............................... $ 953,073 $ 827,314
=========== ===========
</TABLE>
The accompanying notes are an 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 SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
---------- --------- --------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Casino......................................... $ 107,412 $ 92,376 $ 212,072 $ 163,960
Food and beverage.............................. 21,460 18,268 42,626 31,573
Room........................................... 6,214 5,609 12,658 10,791
Other.......................................... 11,451 10,210 22,752 19,446
--------- --------- --------- ---------
Gross revenues.............................. 146,537 126,463 290,108 225,770
Less promotional allowances.................... (8,503) (6,630) (16,634) (11,801)
--------- --------- --------- ---------
Net revenues................................ 138,034 119,833 273,474 213,969
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Casino......................................... 47,964 38,185 93,278 68,173
Food and beverage.............................. 16,190 14,864 32,275 25,192
Room........................................... 2,539 2,307 5,097 4,342
Other.......................................... 5,465 7,003 11,260 13,460
Selling, general and administrative............ 27,084 25,778 55,606 46,088
Corporate expenses............................. 4,429 3,909 8,642 7,434
Development expenses........................... 285 843 602 1,824
Depreciation and amortization.................. 10,269 8,397 20,092 15,875
Preopening expenses............................ - 898 - 898
--------- --------- --------- ---------
114,225 102,184 226,852 183,286
--------- --------- --------- ---------
OPERATING INCOME................................. 23,809 17,649 46,622 30,683
OTHER INCOME (EXPENSE):
Interest expense, net.......................... (7,967) (7,394) (16,260) (14,830)
Other.......................................... 5 1,204 66 1,136
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES....................... 15,847 11,459 30,428 16,989
Income tax provision........................... (5,729) (4,202) (10,851) (6,221)
--------- --------- --------- ---------
NET INCOME....................................... 10,118 7,257 19,577 10,768
PREFERRED STOCK DIVIDENDS........................ (1,811) - (3,622) -
--------- --------- --------- ---------
NET INCOME APPLICABLE TO COMMON STOCK............ $ 8,307 $ 7,257 $ 15,955 $ 10,768
========= ========= ========= =========
EARNINGS PER COMMON SHARE........................ $ 0.24 $ 0.21 $ 0.45 $ 0.33
========= ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING....... 35,318 35,026 35,314 32,593
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
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STATION CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................... $ 19,577 $ 10,768
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization................................. 20,092 15,875
Preopening expenses........................................... - 898
Increase in deferred income taxes............................. 4,621 1,858
Changes in assets and liabilities:
Increase in accounts and notes receivable, net.............. (1,392) (170)
Increase in inventories and prepaid expenses and other...... (3,377) (4,967)
Increase in accounts payable................................ 6,481 4,393
Increase in accrued expenses and other current liabilities.. 3,006 4,904
Other, net.................................................... 3,169 407
---------- ----------
Total adjustments...................................... 32,600 23,198
---------- ----------
Net cash provided by operating activities................... 52,177 33,966
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... (218,436) (126,762)
Increase (decrease) in construction contracts payable......... 27,193 (1,231)
Other, net.................................................... (4,610) (37)
---------- ----------
Net cash used in investing activities....................... (195,853) (128,030)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under bank facility, net........................... 73,000 31,000
Proceeds from the issuance of notes payable................... - 12,125
Principal payments on notes payable........................... (19,482) (9,691)
Proceeds from the issuance of convertible preferred stock..... 13,095 -
Proceeds from the issuance of common stock.................... - 77,360
Dividends paid................................................ (3,362) -
Other, net.................................................... (3,819) (6,570)
---------- ----------
Net cash provided by financing activities................... 59,432 104,224
---------- ----------
CASH AND CASH EQUIVALENTS:
(Decrease) increase in cash and cash equivalents.............. (84,244) 10,160
Balance, beginning of period.................................. 114,868 16,961
---------- ----------
Balance, end of period........................................ $ 30,624 $ 27,121
---------- ----------
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest, net of amounts capitalized............ $ 13,832 $ 13,570
Cash paid for income taxes.................................... $ 4,450 $ 5,168
Property and equipment purchases financed by debt............. $ 361 $ 16,679
</TABLE>
The accompanying notes are an 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 and six months ended September
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 and six months ended September 30, 1995 to conform to the
financial statement presentation for the three and six months ended
September 30, 1996. These reclassifications had no effect on net income.
6
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
September 30, March 31,
1996 1996
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<S> <C> <C>
Reducing revolving credit facility, secured by substantially
all of the assets of Palace Station, Boulder Station,
Texas Station, St. Charles Station and Kansas City Station,
$376 million limit at September 30, 1996, reducing quarterly
by varying amounts until September 2000 when the remaining
principal balance is due, interest at a margin above the bank's
prime rate or the Eurodollar Rate (7.56% at September 30, 1996)..... $ 73,000 $ -
9 5/8% senior subordinated notes, payable interest only
semi-annually, principal due June 1, 2003, net of unamortized
discount of $7.1 million at September 30, 1996...................... 185,880 185,531
10 1/8% senior subordinated notes, payable interest only
semiannually, principal due March 15, 2006, net of unamortized
discount of $1.2 million at September 30, 1996...................... 196,777 196,737
$110 million first mortgage construction/term loan agreement,
secured by substantially all of the assets of Sunset Station,
interest at a margin of 375 basis points above the Eurodollar
Rate (9.38% at September 30, 1996), due September 30, 2000.......... - -
Notes payable to banks and others, collateralized by slot machines
and related equipment, monthly installments including interest
ranging from 7.35% to 9.25%......................................... 19,838 24,726
Capital lease obligations, collateralized by furniture
and equipment....................................................... 10,330 12,171
Other long-term debt.................................................... 33,440 45,833
----------- -----------
Long-term debt................................................. 519,265 464,998
Current portion of long-term debt....................................... (22,434) (23,256)
----------- -----------
Long-term debt, less current portion........................... $ 496,831 $ 441,742
=========== ===========
</TABLE>
On September 25, 1996, Sunset Station, a wholly-owned
subsidiary of the Company, entered into a Construction/Term Loan Agreement
(the "Sunset Loan Agreement") with Bank of America National Trust
and Savings Association, Bank of Scotland, Societe Generale and each of
the other Lenders party to such agreement, pursuant to which Sunset
Station has received a commitment for $110 million to finance the
remaining development and construction costs of Sunset Station Hotel &
Casino. In connection with the Sunset Loan Agreement, the Company
also entered into an operating lease for certain furniture, fixtures and
equipment with a cost of $40.0 million. (See Note 3)
The Sunset Loan Agreement includes a first mortgage term note in
the amount o f $110 million (the "Note") which is nonrecourse to the
Company, except as to certain construction matters pursuant to a completion
guarantee dated as of September 25, 1996, executed by the Company on
behalf of Sunset Station. The Note matures on September 30, 2000 and will
reduce $1.8 million for each fiscal quarter ending March 31, 1998
through December 31, 1998, $2.3 million for each fiscal quarter ending
March 31, 1999 through December 31, 1999, and $2.0 million for the fiscal
quarters ending March 31, 2000 and June 30, 2000. In addition, the Note is
subject to prepayment subsequent to July 31, 1998 by an amount equal to a
specified percentage of Excess Cash Flow, as defined. The Note carries
an interest rate of
7
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. LONG-TERM DEBT (CONTINUED)
375 basis points over the Eurodollar Rate (as
defined in the Sunset Loan Agreement). The Note is secured by
substantially all of the assets of Sunset Station, including a leasehold
deed of trust with respect to a portion of the real property on which
Sunset Station Hotel & Casino is being constructed, which portion is
subject to a sublease from the Company to Sunset Station, a deed of trust
with respect to the remainder of such property which is owned by Sunset
Station and an assignment of an operating lease for certain furniture,
fixtures and equipment to be used by Sunset Station.
The Sunset Loan Agreement contains certain customary financial and
other covenants including a minimum fixed charge coverage ratio as of the
last day of any quarter after the opening of Sunset Station Hotel & Casino
of not less than 1.10 to 1.00, a maximum senior funded debt to earnings
before interest, taxes, depreciation and amortization ratio after opening
of 4.50 to 1.00 for the first quarter, reducing by varying amounts each
quarter thereafter to 3.25 to 1.00 for the tenth quarter and each quarter
thereafter, and a minimum net worth as of any quarter after opening of not
less than $52 million plus 80% of net income for each quarter after
opening, plus 100% of any additional equity contributions by the Company
and Supplemental Loans, as defined. In addition, the agreement places
restrictions on indebtedness and guarantees, dividends, stock redemptions,
sale of assets or sale of stock in subsidiaries and limitations on capital
expenditures.
In addition, the Company has provided a funding commitment to Sunset
Station of up to an additional $25 million pursuant to a supplemental loan
agreement (the "Supplemental Loan Agreement"). Sunset Station will be
required to draw amounts under the Supplemental Loan Agreement in the event
of the failure of certain financial covenants under the Sunset Loan
Agreement. The Supplemental Loan Agreement expires on September 30, 2000.
Loans under this funding commitment may be drawn down beginning on the last
day of the first full calendar quarter ending after Sunset Station opens
for business in the amount of up to $10 million during the first year after
such date, up to $10 million during the second year after such date and up
to $5 million during the third year after such date. Sunset Station will
pay interest at a rate per annum equal to the three month Eurodollar Rate,
the interest being payable solely in the form of commensurate additions to
the principal of the Supplemental Loans. The funding commitments under the
Supplemental Loan Agreement are subject to limitations imposed by the
indentures governing the Company's existing senior subordinated notes and
the Company's reducing revolving bank credit facility.
3. COMMITMENTS AND CONTINGENCIES
EQUIPMENT LEASE
In connection with the Sunset Loan Agreement, the Company has entered
into an operating lease for furniture, fixtures and equipment (the
"Equipment") with a cost of $40.0 million, dated as of September 25, 1996
(the "Operating Lease") between the Company and First Security Trust
Company of Nevada. The Operating Lease expires on October 31, 2000 and
carries a lease rate of 225 basis points over the Eurodollar Rate. The
Company has entered into a sublease with Sunset Station for the Equipment
pursuant to an operating lease with financial terms substantially similar
to the Operating Lease. In the event that Sunset Station elects to
purchase the Equipment, the Company has provided a funding commitment up
to the amount necessary for such purchase pursuant to the Supplemental Loan
Agreement.
In connection with the Operating Lease, the Company also entered
into a participation agreement, dated as of September 25, 1996 (the
"Participation Agreement") with the trustee, as lessor under the Operating
Lease, and holders of beneficial interests in the Lessor Trust (the
"Holders").
8
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Pursuant to the Participation Agreement, the Holders will advance funds to
the trustee for the purchase by the trustee of, or to reimburse the Company
for the purchase of the Equipment, which will then be leased to the
Company, and in turn subleased to Sunset Station. Pursuant to the
Participation Agreement, the Company also agreed to indemnify the Lessor
and the Holders against certain liabilities.
LAND OPTIONS
The Company has entered into various option agreements whereby the
Company has the option to acquire or lease land for the development of
existing and potential new gaming projects with purchase prices totaling
$31.0 million. In consideration for these options, the Company has paid
or placed in escrow $3.9 million at September 30, 1996, all of which would
be forfeited should the Company not exercise its options to acquire or
lease the land.
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(amounts in thousands)
(unaudited)
1. OVERVIEW
The following table highlights the results of operations for the Company
and its subsidiaries:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NEVADA OPERATIONS:
- ------------------
PALACE STATION
Net revenues.................. $ 34,180 $ 32,025 $ 68,500 $ 65,460
Operating income.............. $ 8,292 $ 6,866 $ 16,185 $ 14,544
EBITDA (1).................... $ 10,299 $ 9,332 $ 20,230 $ 19,489
BOULDER STATION
Net revenues.................. $ 35,645 $ 28,751 $ 70,044 $ 55,885
Operating income.............. $ 9,390 $ 6,146 $ 18,213 $ 12,405
EBITDA (1).................... $ 12,053 $ 7,652 $ 23,467 $ 15,398
TEXAS STATION
Net revenues.................. $ 20,016 $ 18,227 $ 39,804 $ 18,227
Operating income.............. $ 536 $ 2,150 $ 1,848 $ 2,150
EBITDA (1).................... $ 2,332 $ 3,835 $ 5,339 $ 3,835
TOTAL NEVADA OPERATIONS:
Net revenues.................. $ 89,841 $ 79,003 $ 178,348 $ 139,572
Operating income.............. $ 18,218 $ 15,162 $ 36,246 $ 29,099
EBITDA (1).................... $ 24,684 $ 20,819 $ 49,036 $ 38,722
MISSOURI OPERATIONS:
- -------------------
ST. CHARLES STATION
Net revenues................... $ 41,292 $ 32,448 $ 80,817 $ 57,887
Operating income............... $ 9,690 $ 7,121 $ 18,230 $ 10,545
EBITDA (1)..................... $ 12,762 $ 9,891 $ 24,082 $ 16,063
STATION CASINOS, INC. AND OTHER
- -------------------------------
Net revenues................... $ 6,901 $ 8,382 $ 14,309 $ 16,510
Operating income............... $ (4,099) $ (4,634) $ (7,854) $ (8,961)
EBITDA (1)..................... $ (3,368) $ (3,766) $ (6,404) $ (7,329)
</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 activites as a measure of liquidity. 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 companies with substantial depreciation and
amortization.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE AND
SIX MONTHS ENDED SEPTEMBER 30, 1995.
Consolidated net revenues increased 15.2% to $138.0 million for the
three months ended September 30, 1996, from $119.8 million in the prior
year. This increase in net revenues is primarily due to strong results at
Boulder Station and St. Charles Station, as well as increases at Palace
Station and Texas Station. Nevada Operations contributed $89.8 million of
net revenues for the three months ended September 30, 1996, an increase of
$10.8 million over the prior year. St. Charles Station contributed $41.3
million of net revenues, an increase of $8.8 million over the prior year.
For the six months ended September 30, 1996, consolidated net revenues
increased 27.8% to $273.5 million, as compared to $214.0 million in the
prior year. Nevada Operations contributed $178.3 million of net revenues
for the six months ended September 30, 1996, an increase of $38.8 million
over the prior year. This improvement is primarily due to the increased
operations from the expansion project at Boulder Station which opened in
late November 1995, and the operations of Texas Station which opened in
July 1995. St. Charles Station contributed $80.8 million of net revenues
for the six months ended September 30, 1996, an increase of $22.9 million
over the prior year. For the six months ended September 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 six
months ended September 30, 1996, the improved results at St. Charles
Station were achieved despite disruption created from the construction of
a new parking garage and elevated roadway, which opened in May 1996,
and construction related to the further development of the property's
master plan. 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
caused 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 34.9% to $23.8 million for the three
months ended September 30, 1996, from $17.6 million in the prior year. For
the six months ended September 30, 1996 operating income increased 51.9% to
$46.6 million, from $30.7 million in the prior year. These improvements
are due to the factors discussed above. The improvement in operating
income, offset by an increase in net interest expense of $0.6 million, an
increase of $1.5 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 $8.3 million, or earnings per
common share of $0.24 for the three months ended September 30, 1996,
compared to net income applicable to common stock of $7.3 million, or
earnings per common share of $0.21 in the prior year. For the six months
ended September 30, 1996, the improved results, partially offset by an
increase in net interest expense of $1.4 million, an increase in the
income tax provision of $4.6 million and dividends of $3.6 million on the
convertible preferred stock, resulted in net income applicable to common
stock of $16.0 million, or earnings per common share of $0.45, compared to
net income applicable to common stock of $10.8 million or earnings per
share of $0.33 in the prior year.
CASINO. Casino revenues increased 16.3% to $107.4 million for the
three months ended September 30, 1996, from $92.4 million in the prior
year. This increase is directly related to the improved results at Boulder
Station and St. Charles Station. Casino revenues increased $5.6 million
and $6.7 million for Boulder Station and St. Charles Station,
respectively, for the three months ended September 30, 1996. For the six
months ended September 30, 1996, casino revenues increased 29.3% to $212.1
million, from $164.0 million in the prior year. This increase is due to a
full six months of operations at
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
Texas Station, as well as improved results at both Boulder Station and St.
Charles Station. Casino revenues increased $30.0 million and $18.7
million for the Nevada Operations and St. Charles Station, respectively.
Casino expenses increased 25.6% to $48.0 million for the three months
ended September 30, 1996, from $38.2 million in the prior year. For the
six months ended September 30, 1996, casino expenses increased 36.8% to
$93.3 million, from $68.2 million in the prior year. These increases in
casino expenses are consistent with the increases in casino revenues
discussed above.
FOOD AND BEVERAGE. Food and beverage revenues increased 17.5% to
$21.5 million for the three months ended September 30, 1996, from $18.3
million in the prior year. Food and beverage revenues for the Nevada
Operations increased $1.2 million, while the results at St. Charles Station
improved by $2.0 million due to the addition of two full-service
restaurants in October 1995. For the six months ended September 30, 1996,
food and beverage revenues increased 35.0% to $42.6 million, from $31.6
million in the prior year. This improvement is primarily due to an
increase in food and beverage revenues at St. Charles Station of $3.8
million, resulting from the new restaurants, and an increase of $5.2 million
related to Texas Station which opened in July 1995.
Food and beverage net profit margins improved to 24.6% for the three
months ended September 30, 1996, from 18.6% in the prior year. For the six
months ended September 30, 1996, food and beverage net profit margin
improved to 24.3%, from 20.2% in the prior year. These increases in net
margin are primarily due to improvements at the Nevada Operations as a
result of continued focus on cost control and strong margins at St.
Charles Station with the addition of the two full-service restaurants.
ROOM. Room revenues increased 10.8% to $6.2 million for the three
months ended September 30, 1996, from $5.6 million in the prior year. For
the six months ended September 30, 1996, room revenues increased 17.3% to
$12.7 million, from $10.8 million in the prior year. This increase is due
primarily to the addition of Texas Station with a total of 200 rooms which
contributed an increase of $1.2 million of room revenues for the six
months ended September 30, 1996. The Company-wide room occupancy
increased to 97% from 95%, while the average daily room rate increased to
$45 from $42 for the three months ended September 30, 1996. For the six
months ended September 30, 1996, the Company-wide occupancy increased to
97% from 95%, while the average daily room rate increased to $46 from $43.
OTHER. Other revenues increased 12.2% to $11.5 million for the
three months ended September 30, 1996, from $10.2 million in the prior
year. This increase is due primarily to $0.5 million for the Company's
interest in the operating income of Barley's Casino & Brewing Company
which opened in January 1996, $0.9 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 $1.5 million, offset by lost
revenues of $1.5 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 5.1% to $27.1 million for the
three months ended September 30, 1996, from $25.8 million in the prior
year. For the six months ended September 30, 1996, SG&A increased 20.7% to
$55.6 million from $46.1 million in the prior year. This increase is
primarily due to the addition of Texas Station in July 1995. SG&A as a
percentage of net revenues decreased to 19.6% from 21.5% for the three
months ended September 30, 1996. For the six months ended September 30,
1996, SG&A as a percentage of net revenues decreased to 20.3%, from 21.5%
in the prior year.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
CORPORATE EXPENSES. Corporate expenses increased 13.3% to $4.4
million for the three months ended September 30, 1996, from $3.9 million
for the same period of fiscal year 1996. For the six months ended
September 30, 1996, corporate expenses increased 16.2% to $8.6 million,
from $7.4 million in the prior year. These increases are
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 decreased to 3.2% of net revenues
for the three months ended September 30, 1996, from 3.3% in the prior
year. For the six months ended September 30, 1996, corporate expenses
decreased to 3.2% of net revenues, from 3.5% in the prior year.
DEVELOPMENT EXPENSES. Development expenses decreased significantly
for the three months ended September 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 22.3% to $10.3 million for the three months ended September 30,
1996, from $8.4 million in the same period of fiscal year 1996. For the
six months ended September 30, 1996, depreciation and amortization
increased 26.6% to $20.1 million, from $15.9 million in the prior year.
Texas Station contributed $2.7 million of this increase. Depreciation
expense at Boulder Station increased $1.1 million and $2.2 million for the
three and six months ended September 30, 1996, respectively, primarily as
a result of the parking garage and entertainment facilities added during
mid-fiscal year 1996. These increases were offset by decreases in
depreciation expense of $0.5 million and $0.9 million at Palace Station
for the three and six months ended September 30, 1996, respectively.
INTEREST EXPENSE, NET. Interest costs incurred (expensed and
capitalized) increased 76.6% to $13.1 million for the three months
ended September 30, 1996. For the six months ended September 30, 1996,
interest costs were $26.1 million, a 66.9% increase over the prior
year. 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. 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 offerings 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 cash flows
from operating activities, borrowings under bank credit facilities,
proceeds from equity and debt offerings, and vendor and lease financing of
equipment.
During the six months ended September 30, 1996, the Company's sources
of capital included borrowings under the Company's reducing revolving bank
credit facility of $73.0 million, cash flows from operating activities of
$52.2 million, 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 of $13.1 million
and excess cash invested from the March 29, 1996 issuance of convertible
preferred stock and senior
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
subordinated notes. At September 30, 1996, the Company had available
borrowings of $303.0 million under its reducing revolving credit
facility and $30.6 million in cash and cash equivalents.
During the six months ended September 30, 1996, total capital
expenditures were approximately $218.8 million, of which approximately (i)
$124.7 million was associated with the development and construction of
Kansas City Station, (ii) $26.5 million was associated with the
development and construction of Sunset Station, (iii) $14.7 million was
associated with the construction of a 4,000 space parking structure and
elevated roadway at St. Charles Station, which opened in May 1996, (iv)
$27.6 million was associated with the construction of the next phase of the
St. Charles Station master plan and (v) $25.3 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:
. Station Casino Kansas City - The Company anticipates that the
project will cost approximately $255.0 million (excluding net
construction period interest and preopening expenses), of which
approximately $184.9 million had been incurred as of September 30,
1996. Station Casino Kansas City is being constructed on 171
acres, and will feature a casino, hotel, and dining and entertainment
facilities. The property is expected to open in the last quarter of
calendar year 1996.
. Sunset Station - The Company anticipates that the project will cost
approximately $160.0 million (excluding net construction period
interest and preopening expenses), of which approximately $55.5
million had been incurred as of September 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.
. Texas Station Parking Garage - The Company anticipates that the
1,044-space 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 $3.2 million had been incurred as of September 30, 1996.
This project is expected to be completed during the fourth quarter
of calendar year 1996.
. Boulder Station Hotel Expansion - The Company anticipates that the
507-room, 18-story hotel project will cost approximately $34.0
million (excluding net construction period interest and preopening
expenses), of which approximately $1.2 million in design costs had
been incurred as of September 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 first quarter of
calendar year 1997.
. Station Casino St. Charles Master Plan - The Company is currently
evaluating the timing and scope of the next phase of the master
plan and had incurred approximately $42.4 million (excluding net
construction period interest and preopening expenses) as of
September 30, 1996, related to this project. The completed master
plan 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 will be docked in a man-made
backwater basin adjacent to the Missouri River.
Other planned uses of capital include (i) the payment of
construction contracts payable of approximately $55.1 million as of
September 30, 1996, (ii) maintenance capital expenditures at Palace
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Station, Boulder Station, Texas Station, St. Charles Station and the
Southwest Companies, (iii) principal and interest payments
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.
The Sunset Loan Agreement requires the Company to contribute $52.0 million
of equity to the Sunset Station project, which was met as of September 30,
1996. The Company is considering an expansion at Texas Station that
would include 50,000 square feet of additional casino, restaurant
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. As
of September 30, 1996, the Company had incurred $7.7 million of preopening
expenses related to Kansas City Station and will continue to incur a
significant amount of such costs through the date of opening. The Company
believes that cash flows from operations, borrowings under the reducing
revolving bank credit facility, borrowings under the Sunset Loan Agreement,
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 various options agreements to acquire or lease land for the development
of existing and potential new gaming projects with purchase prices totaling
$31.0 million as of September 30, 1996. In consideration for these options,
the Company had paid or placed in escrow $3.9 million as of September 30,
1996, all of which would be forfeited should the Company not exercise its
option to acquire or lease 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 the incurrence of
additional indebtedness by the Company and its subsidiaries and contain
various financial and other covenants. In addition, the Sunset Loan
Agreement contains similar restrictions related to Sunset Station.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
BANK 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 a previously existing 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 $376 million as
of September 30, 1996 (the "Bank Facility"). As of September 30, 1996, the
Company had borrowed $73.0 million under the Bank Facility. 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
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Facility matures on September 30, 2000 and reduces
quarterly by varying amounts (including approximately $4.0 million for
each quarter ending December 31, 1996 and March 31, 1997). Borrowings under
the Bank Facility bear interest at a margin above the bank's prime rate
or the Eurodollar Rate, 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 September 30, 1996, the
Borrowers funded debt to EBITDA ratio was 0.77 to 1.00 and the fixed
charge coverage ratio for the proceeding four quarters ended September 30,
1996, was 2.64 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 September 30, 1996, Palace
Station's Tangible Net Worth exceeded the requirement by approximately
$7.0 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 September 30, 1996, the Company's consolidated net worth exceeded the
requirement by approximately $13.0 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 September 30, 1996, the Company's funded debt to EBITDA ratio was 3.81
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
$2.0 million. 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 $382.7 million, net of unamortized discount of $8.3
million, of senior subordinated notes outstanding as of September 30,
1996. $185.9 million of these notes bear interest, payable semi-annually,
at a rate of 9 5/8% per year and $196.8 million of these notes bear
interest, payable semi-
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
annually, at a 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 of up to $72 million under the Bank Facility and (h) certain
other indebtedness. As of September 30, 1996 the Company's Consolidated
Coverage Ratio was 3.04 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.
SUNSET STATION CONSTRUCTION/TERM LOAN AGREEMENT
On September 25, 1996, Sunset Station, a wholly-owned subsidiary of
the Company, entered into a Construction/Term Loan Agreement (the "Sunset
Loan Agreement") with Bank of America National Trust and Savings
Association, Bank of Scotland, Societe Generale and each of the other
Lenders party to such agreement, pursuant to which Sunset Station has
received a commitment for $110 million to finance the remaining
development and construction costs of Sunset Station Hotel & Casino. In
connection with the Sunset Loan Agreement, the Company entered into an
operating lease for certain furniture, fixtures and equipment with a
cost of $40.0 million.
The loan under the Sunset Loan Agreement is evidenced by a first
mortgage term note in the amount of $110 million (the "Note") which is
nonrecourse to the Company, except as to certain construction
matters pursuant to a completion guarantee dated as of September 25,
1996, executed by the Company on behalf of Sunset Station. The Note
matures on September 30, 2000 and will reduce $1.8 million for each
fiscal quarter ending March 31, 1998 through December 31, 1998, $2.3
million for each fiscal quarter ending March 31, 1999 through December
31, 1999, and $2.0 million for the fiscal quarters ending March 31, 2000
and June 30, 2000. In addition, the Note is subject to prepayment
subsequent to July 31, 1998 by an amount equal to a specified percentage of
Excess Cash Flow, as defined. The Note carries an interest rate of 375
basis points over the Eurodollar Rate (as defined in the Sunset Loan
Agreement). The Note is secured by substantially all of the assets of
Sunset Station, including a leasehold deed of trust with respect to a
portion of the real property on which Sunset Station Hotel &
Casino is being constructed, which portion is subject to a sublease from
the Company to Sunset Station, a deed of trust with respect to the
remainder of such property which is owned by Sunset Station and an
assignment of an operating lease agreement for certain furniture, fixtures
and equipment to be used by Sunset Station.
The Sunset Loan Agreement contains certain customary financial and
other covenants including a minimum fixed charge coverage ratio as of the
last day of any quarter after the opening of Sunset Station Hotel & Casino
of not less than 1.10 to 1.00, a maximum senior funded debt to EBITDA
ratio after opening of 4.50 to 1.00 for the first quarter reducing by
varying amounts each quarter thereafter to
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
3.25 to 1.00 for the tenth quarter and each quarter thereafter, and a
minimum net worth as of any quarter after opening of not less then $52.0
million plus 80% of net income for each quarter after opening, plus 100%
of any additional equity contributions by the Company and Supplemental
Loans, as defined. In addition, the agreement places restrictions
on indebtedness and guarantees, dividends, stock redemptions, sale of assets
or sale of stock in subsidiaries and limitations on capital expenditures.
In addition, the Company has provided a funding commitment to Sunset
Station of up to an additional $25 million pursuant to a supplemental loan
agreement (the "Supplemental Loan Agreement"). Sunset Station will be
required to draw amounts under the Supplemental Loan Agreement in the
event of the failure of certain financial covenants under the Sunset Loan
Agreement. The Supplemental Loan Agreement expires on September 30, 2000.
Loans under this funding commitment may be drawn down beginning on the
last day of the first full calendar quarter ending after Sunset Station
opens for business in the amount of up to $10 million during the first
year after such date, up to $10 million during the second year after such
date and up to $5 million during the third year after such date. Sunset
Station will pay interest at a rate per annum equal to the three month
Eurodollar Rate, the interest being payable solely in the form of
commensurate additions to the principal of the Supplemental Loans. The
funding commitments under the Supplemental Loan Agreement are subject to
limitations imposed by the indentures governing the Notes and the Bank
Facility.
The Company has also entered into an operating lease for furniture,
fixtures and equipment (the "Equipment") with a cost of $40.0 million, dated
as of September 25, 1996 (the "Operating Lease") between the Company and
First Security Trust Company of Nevada. The Operating Lease expires on
October 31, 2000 and carries a lease rate of 225 basis points over the
Eurodollar Rate. The Company has entered into a sublease with Sunset
Station for the Equipment pursuant to an operating lease with financial terms
substantially similar to the Operating Lease. In the event that Sunset
Station elects to purchase the Equipment, the Company has provided a
funding commitment up to the amount necessary for such purchase pursuant
to the Supplemental Loan Agreement.
In connection with the Operating Lease, the Company also entered into
a participation agreement, dated as of September 25, 1996 (the
"Participation Agreement") with the trustee, as lessor under the Operating
Lease, and holders of beneficial interests in the Lessor Trust (the
"Holders"). Pursuant to the Participation Agreement, the Holders will
advance funds to the trustee for the purchase by the trustee of, or to
reimburse the Company for the purchase of the Equipment, which will then
be leased to the Company, and in turn subleased to Sunset Station.
Pursuant to the Participation Agreement, the Company also agreed to
indemnify the Lessor and the Holders against certain liabilities.
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 September 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 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.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 September 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 of $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
Preferred Stock is senior to the Common Stock with respect to dividends and
upon liquidation, dissolution or winding up.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
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 forwardlooking
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.
20
<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. On August 15, 1996, the Schreier lawsuit was dismissed
with leave to amend. On September 27, 1996, Schreier filed an Amended
Compliant. Defendants filed motions to Dismiss the Amended Compliant,
which are pending before the Court. The Ahearn case was not refiled.
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
representative, 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.
21
<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
The Company's Annual Meeting of Stockholders was held August 20,
1996. At the meeting Frank J. Fertitta III, Chairman of the Board,
Chief Executive Officer and President, Lorenzo J. Fertitta and Delise
F. Sartini were re-elected to the Board of Directors to serve for a
term of three years until the 1999 Annual Meeting of Stockholders.
The result of the stockholder vote for each nominee was as follows:
In Favor Withheld
---------- --------
Frank J. Fertitta III 33,732,882 176,714
Lorenzo J. Fertitta 33,727,538 182,058
Delise F. Sartini 33,732,740 176,856
The Stockholders also approved an amendment to the Company's Stock
Compensation Program, increasing the maximum aggregate number of
shares of the Company's common stock subject to the Stock
Compensation Program and qualifying the Stock Compenstation Program
for certain tax benefits. The amendment was approved by the
stockholders by a vote of 22,013,980 shares in favor, 7,064,496
shares opposed and 4,831,120 shares abstained or were broker
nonvotes. Further, the Stockholders ratified the appointment of
Arthur Andersen LLP as the Company's independent public accountants
for the 1997 fiscal year with 33,814,394 shares in favor, 70,201
shares opposed and 25,001 shares abstained.
ITEM 5.OTHER INFORMATION - None.
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit
Number
-------
10 Standard Form of Agreement and General Conditions between
owner and contractor, dated as of August 9, 1996, between
Kansas City Station Corporation and Walton/Diggs Joint
Venture.
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 September 30,
1996.
22
<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: November 14, 1996 /s/ Glenn C. Christenson
------------------------
Glenn C. Christenson,
Executive Vice President and Chief Financial
Officer (Principal Accounting Officer)
23
Exhibit 10
---------------------------------------------
STANDARD FORM
OF
AGREEMENT
AND
GENERAL CONDITIONS
BETWEEN
OWNER AND CONTRACTOR
(WHERE THE BASIS OF PAYMENT IS THE
COST OF THE WORK PLUS A FIXED FEE)
-----------------------------------------------
TABLE OF CONTENTS
ARTICLE 1
AGREEMENT ........................................................... 1
ARTICLE 2
GENERAL PROVISIONS .................................................. 2
ARTICLE 3
CONTRACTOR'S RESPONSIBILITIES ....................................... 3
ARTICLE 4
OWNER'S RESPONSIBILITIES ............................................ 9
ARTICLE 5
SUBCONTRACTS ........................................................ 10
ARTICLE 6
CONTRACT TIME ....................................................... 10
ARTICLE 7
COMPENSATION ........................................................ 11
ARTICLE 8
COST OF THE WORK .................................................... 12
ARTICLE 9
CHANGES IN THE WORK ................................................. 14
ARTICLE 10
PAYMENT FOR CONSTRUCTION PHASE SERVICES ............................. 15
ARTICLE 11
INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION ...................... 16
ARTICLE 12
TERMINATION OF THE AGREEMENT AND OWNER'S RIGHT TO PERFORM CONTRACTOR'S
RESPONSIBILITIES .................................................... 19
ARTICLE 13
DISPUTE RESOLUTION .................................................. 22
ARTICLE 14
MISCELLANEOUS PROVISIONS ............................................ 22
ARTICLE 15
CONFIDENTIALITY ..................................................... 23
ARTICLE 16
EXISTING CONTRACT DOCUMENTS ......................................... 23
ARTICLE 1
AGREEMENT
This Agreement is made this 9th day of August, in the year 1996, by and
between the
OWNER
KANSAS CITY STATION CORPORATION
8201 N.E. Birmingham Road
Kansas City, Missouri 64161
and the
CONTRACTOR
WALTON/DIGGS JOINT VENTURE and WALTON/DIGGS JOINT VENTURE 8201 N.E.
Birmingham Road 3252 Roanoke Road
Kansas City, Missouri 64161 Kansas City, MO 64111
for services in connection with the following
PROJECT
The Contractor shall furnish all labor, equipment, material, and
shop drawings for all or any portion of the following scope of work
as directed and at the sole discretion of the Owner:
ALL intended buildings and site improvements as developed by
Architects, Engineers and Designers employed by Owner for the
referenced project. There will be excluded that portion of work
included in the Massman Construction Scope of Work and any portion
of the Work not authorized by the Owner through a written Directive
or written Change Order.
The Project Scope of Work is divided into the following
sub-projects:
Site Improvements - Primarily mass excavating
and land balance, curbs, asphalt, site lighting, water,
sanitary and sewer utilities
Off-Site Improvements - Primarily improvements to Eldon Road and
Route 210. Also, includes minor improvements along
Birmingham Road.
Low Rise Shell and Central Plant Primarily the land based
support facility containing ticketing, restaurants, hotel lobby
and retail along with the Central Power/Utility support facility.
Low Rise Tenant Improvements Primarily the theme restaurants in
the land based facility.
Porte Cochere Primarily the main grand
entrance tower and porte cochere to the Low Rise building.
Casino I and Casino II Primarily the gaming facilities
constructed on floating platforms provided by others.
General Conditions Primarily the general direct costs
incurred by the General Contractor incidental to the execution
of the entire project.
NOTICE TO THE PARTIES SHALL BE GIVEN AT THE ABOVE ADDRESSES. NOTICE TO
WALTON/DIGGS MUST BE AT BOTH ADDRESSES LISTED ABOVE.
ARTICLE 2
GENERAL PROVISIONS
2.1 ARCHITECT/ENGINEER Architectural and engineering services shall be
procured from licensed, independent design professionals retained by the
Owner. The persons or entities providing architectural and engineering
services shall be referred to as the Architect/Engineer.
2.2 GENERAL Having carefully examined all the provisions hereof,
the site and all conditions affecting the Work, the Contractor
undertakes to perform the Work herein described.
2.3 TEAM RELATIONSHIP The Owner, the Owner's Representatives, and the
Contractor shall take all actions reasonably necessary to perform this
Agreement in an economical and timely manner, including consideration
of design modifications and alternative materials or equipment that will
permit the Work to be constructed by the dates of
Substantial Completion, as established in Exhibit A attached hereto and
incorporated herein by reference.
2.4 PARTIAL CONTRACTS The Owner may, at its sole discretion, convert
any portion of the Project to Lump Sum or GMP, with new and separate
contracts with Contractor; provided, however, if the parties cannot agree on
a new contract, then the Work will be performed under this Agreement.
2.5 EXTENT OF AGREEMENT This Agreement is solely for the benefit
of the parties, represents the entire and integrated agreement between
the parties, and supersedes all prior negotiations, representations or
agreements, either written or oral.
2.6 DEFINITIONS
2.6.1 The Contract Documents consist of:
2.6.1.1 this Agreement;
2.6.1.2 Change Orders and written amendments to this
Agreement signed by both the Owner and Contractor.
2.6.1.3 the most current Documents approved by the Owner
pursuant to Subparagraph 3.1.6;
2.6.1.4 the information provided by the Owner pursuant to
Subparagraph 4.1.2.1;
2.6.1.5 the Contract Documents in existence at the time of
execution of this Agreement which have been submitted
to the City of Kansas City, Missouri for review and
permitting purposes and are set forth in Article 16;
2.6.1.6 the Owner's Program provided pursuant
to Subparagraph 4.1.1.
2.6.2 The Work is the Construction Phase Services provided in
accordance with Paragraph 3.3, any Additional Services that may be
provided in accordance with Paragraph 3.8 and other services which
are necessary to complete the Project.
2.6.3 The term Day shall mean calendar day.
2.6.4 A Subcontractor is a person or entity who has an agreement with
the Contractor to perform any portion of the Work. The term
Subcontractor does not include the Architect/Engineer or any
separate contractor employed by the Owner or any separate
contractor's subcontractors.
2.6.5 A Subsubcontractor is a person or entity who has
an agreement with a Subcontractor to perform any portion
of the Subcontractor's work.
2.6.6 Substantial Completion of the Work, or of a designated portion,
occurs on the date when construction is sufficiently complete in
accordance with the Contract Documents so that the Owner can occupy
or utilize the Project, or a designated portion, for the use for
which is it intended unless substantial completion cannot be achieved
due to design code issues or owner related issues that are not caused
by Contractor. This date shall be confirmed by a certificate of
Substantial Completion signed by the Owner and Contractor. The
certificate shall state the respective responsibilities of the
Owner and Contractor for security, maintenance, heat, utilities,
damage to the Work, and insurance. The certificate shall also list
the items to be completed or corrected, and establish the time for
their completion and correction. A certificate of substantial
completion shall be issued for each portion of the work as it is
occupied by the Owner.
2.6.7 INTENTIONALLY OMITTED.
ARTICLE 3
CONTRACTOR'S RESPONSIBILITIES
The Contractor shall be responsible for the construction of the Work. The
Contractor shall exercise reasonable skill and judgment in the
performance of its services.
3.1 INTENTIONALLY OMITTED.
3.1.1 INTENTIONALLY OMITTED.
3.1.2 INTENTIONALLY OMITTED.
3.1.3 INTENTIONALLY OMITTED.
3.1.4 INTENTIONALLY OMITTED.
3.1.5 INTENTIONALLY OMITTED.
3.1.6 CONSTRUCTION DOCUMENTS The Construction Documents prepared by
the Architect/Engineer shall set forth in detail the requirements
for construction of the Work, and shall consist of drawings and
specifications based upon codes, laws or regulations enacted at
the time of their preparation. Construction shall be in strict
accordance with these approved Construction Documents.
3.1.7 OWNERSHIP OF DOCUMENTS All Documents shall be the
property of the Owner, and all thereof shall be
forthwith delivered to Owner upon completion of the Project.
3.2 BASIS OF THE FEE
3.2.1 INTENTIONALLY OMITTED.
3.2.2 INTENTIONALLY OMITTED.
3.2.3 The basis of payment is the Cost of the Work plus
a Fixed Fee, all as more specifically set forth in
Exhibit A attached hereto and incorporated herein by reference.
3.2.4 INTENTIONALLY OMITTED.
3.2.4.1 INTENTIONALLY OMITTED.
3.2.4.2 INTENTIONALLY OMITTED.
3.2.4.3 INTENTIONALLY OMITTED.
3.2.4.4 INTENTIONALLY OMITTED.
3.2.4.5 INTENTIONALLY OMITTED.
3.2.4.6 INTENTIONALLY OMITTED.
3.2.4.7 INTENTIONALLY OMITTED.
3.2.4.8 INTENTIONALLY OMITTED.
3.2.5 INTENTIONALLY OMITTED.
3.2.6 INTENTIONALLY OMITTED.
3.2.7 INTENTIONALLY OMITTED.
3.2.8 INTENTIONALLY OMITTED.
3.2.9 INTENTIONALLY OMITTED.
3.2.10 Although the Contractor is not responsible for identifying any
such errors, omissions or failures in the Contract Documents,
if the Contractor becomes aware of any error, omission or failure
to meet the requirements of the Contract Documents or any fault
or defect in the Work; the Contractor shall give written
notice to the Owner within five (5) days. If the Contractor
is delayed due to any such errors, omissions or failures in the
Contract Documents, the Contractor shall be entitled to a time
extension to the date of the Substantial Completion and
additional compensation as provided in paragraph 6.3.1.
3.3 CONSTRUCTION PHASE SERVICES
3.3.1 The Construction Phase will commence upon the
issuance by the Owner of a written directive to proceed with
construction. The Owner's written notice to proceed shall
list the documents that are applicable to the part of the Work
which the Owner has authorized.
3.3.2 In order to complete the Work, the Contractor shall
provide all necessary construction supervision, inspection,
construction equipment,labor, materials, tools, and subcontracted
items.
3.3.3 The Contractor shall give all notices and comply
with all laws, ordinances and building codes legally
enacted at the date of execution of the Agreement which
govern the proper performance of the Work.
3.3.4 The Contractor shall prepare and submit reliable
cost estimates and a Schedule of Work for the Owner's
review. These estimates shall be based on competitive
pricing, and will form the basis for the construction
budget for the Project. The Schedule shall indicate the dates
for the start and completion of the various stages of
the construction including the dates when information
and approvals are required from the Owner, and shall be
coordinated with Owner's Master Schedule. It shall be revised
as required by the conditions of the Work, but not less often
than monthly. Contractor shall cooperate with its Subcontractors
in preparing and revising schedules.
3.3.5 The Contractor shall obtain and pay for the
building permits necessary for the construction of the
Project.
3.3.6 The Contractor shall take necessary precautions for the safety
of its employees on the Project, and shall comply with all
applicable provisions of federal, state and municipal safety laws
to prevent accidents or injury to persons on, about or adjacent
to the Project site. The Contractor, directly or through its
Subcontractors, shall erect and properly maintain at all
times, as required by the conditions and progress of the Work,
necessary safeguards for the protection of workers and the
public. The Contractor, however, shall not be responsible for
the elimination or abatement of safety hazards created or
otherwise resulting from work at the Project site carried on
by the Owner or its employees, agents, separate contractors
or tenants. The Owner agrees to cause its employees, agents,
separate contractors and tenants to abide by and fully adhere
to all applicable provisions of federal, state and municipal
safety laws and regulations.
3.3.7 The Contractor shall prepare and keep such full and detailed
accounts as may be necessary for proper financial management
under this Agreement. Upon reasonable notice, which
at a minimum shall be three (3) business days, the Owner shall
be afforded access to all the Contractor's records, books,
correspondence, instructions, drawings, receipts, vouchers,
memoranda and similar data Contractor shall preserve all such
records for a period of three Contractor shall make available
those records kept at the project site at its earliest possible
convenience.
3.3.8 The Contractor shall provide written reports, not less often
than monthly, to the Owner on the progress of the Work.
3.3.9 The Contractor shall develop an accurate system of cost reporting
for the Work, including regular monitoring of actual costs
for activities in progress and estimates for uncompleted tasks
and proposed or directed changes in the Work. The reports shall
be presented to the Owner at mutually agreeable intervals, but
not less often than monthly.
3.3.10 At all times the Contractor shall maintain the site of the Work
free from debris and waste materials resulting from the Work. At
the completion of the Work, the Contractor shall remove from the
premises all construction equipment, tools, surplus materials,
waste materials and debris, and leave the premises in a "final
clean" condition.
3.3.11 The Contractor shall assist the Owner in securing design
information and issues resolution necessary to facilitate
construction progress.
3.3.12 The Contractor is aware of, and shall assist the Owner in that
portion pertaining to the Contractor in the fulfillment of,
Owner's Development Agreement with the Kansas City Port
Authority. The Owner also certifies that he has provided the
Contractor with all of the Agreements that pertain to the
commitments to the Kansas City Port Authority. The Contractor
shall endeavor to secure certified MBE/WBE companies as
subcontractors, with targets of 25% MBE and 10% WBE
participation based on the total Cost of the Work. The Contractor
shall exceed these percentage goals whenever practical, to assist
Owner's overall percentages of MBE/WBE participation in the
development of the Project.
3.3.13 Other than the dates of Substantial Completion set forth in
Exhibit A hereto, any and all estimates, of either cost or time,
required of the Contractor herein shall be done to best of the
Contractor's reasonable and good faith abilities, but the
Contractor shall not be bound by such estimates so long as the
estimates are reasonable and are made in good faith. The
dates of Substantial Completion are contingent upon the Owner
timely and fully performing all of its obligations and the
Contractor not encountering conditions or events beyond its
control.
3.4 HAZARDOUS MATERIAL
3.4.1 A Hazardous Material is any substance or material
identified now or in the future as hazardous under any federal,
state or local law or regulation, or any other substance or
material which may be considered hazardous or otherwise subject
to statutory or regulatory requirements governing handling,
disposal and/or cleanup. The Contractor shall not be obligated to
commence or continue Work until any known or suspected Hazardous
Material discovered at the Project site has been removed,
rendered or determined to be harmless by the Owner as certified
by an independent testing laboratory.
3.4.2 If after the commencement of the Work, known or suspected
Hazardous Material is discovered at the Project site, the
Contractor shall be entitled to immediately stop Work in the
affected area, and the Contractor shall report the condition
to the Owner and, if required, by law, the government agency with
jurisdiction.
3.4.3 The Contractor shall not be required to perform any Work
relating to or in the area of known or suspected Hazardous
Material without written mutual agreement.
3.4.4 The Owner shall be responsible for retaining an independent
testing laboratory to determine the nature of the material
encountered and whether it is a Hazardous Material requiring
corrective measures and/or remedial action. Such measures shall
be the sole responsibility of the Owner, and shall be performed
in a manner minimizing any adverse effect upon the Work of the
Contractor. The Contractor shall resume Work in the area
affected by any Hazardous Material only when the Hazardous
Material has been removed or rendered harmless.
3.4.5 If the Contractor is delayed due to the presence of known
or suspected Hazardous Material, the Contractor shall be
entitled to a time extension to the date of Substantial
Completion and additional compensation as provided
in paragraph 6.3.1, unless caused solely by the Contractor.
3.5 ROYALTIES, PATENTS AND COPYRIGHTS The Contractor shall pay all
royalties and license fees which may be due on the inclusion of any patented
or copyrighted materials, methods or systems selected by the
Contractor and incorporated in the Work. The Contractor shall defend,
indemnify and hold the Owner harmless from all suits or claims for
infringement of any patent rights or copyrights arising out of such
selection, including, without limitation, losses, costs, expenses,
damages, attorney's fees, whether direct, indirect or consequential. The
Owner agrees to defend, indemnify and hold the Contractor harmless from any
suits or claims or infringement of any patent rights or copyrights
arising out of any patented or copyrighted materials, methods or systems
specified by the Owner.
3.6 TAX EXEMPTION If in accordance with the Owner's direction
an exemption is claimed for taxes, the Owner agrees to defend, indemnify
and hold the Contractor harmless from any liability, penalty, interest,
fine, tax assessment, attorneys fees or other expense or cost incurred by
the Contractor as a result of any action taken by the Contractor in
accordance with the Owner's direction.
3.7 WARRANTIES AND COMPLETION
3.7.1 The Contractor warrants that all materials and
equipment furnished under the Construction Phase of this
Agreement will be new unless otherwise specified, of the
best quality, in conformance with the Contract Documents,
and free from defective workmanship and materials. Warranties
shall commence on the date of Substantial Completion of the
Work or of a designated portion. The Contractor agrees to
correct all construction performed under this Agreement which
proves to be defective in workmanship and materials within a
period of one year from the date of Substantial Completion of
each designated portion of the work, or for such longer
periods of time as may be set forth with respect to specific
warranties required by the Contract Documents, provided that
payment for original work performed has been made unless such
failure to pay is a result of a material bona-fide dispute.
3.7.2 Those products, equipment, systems or materials incorporated
in the Work at the direction of or upon the specific request
of the Owner shall be covered exclusively by the warranty of
the manufacturer. There are no warranties which extend beyond
the description of the face thereof.
3.7.3 The Contractor shall secure required certificates of
inspection, testing or approval and deliver them to the Owner.
3.7.4 The Contractor shall collect all written warranties and
equipment manuals and deliver them to the Owner.
3.7.5 With the assistance of the Owner's maintenance personnel,
the Contractor shall direct the check-out of utilities and
operations of systems and equipment for readiness,
and assist in their initial start-up and testing.
3.7.6 The Contractor shall maintain at the site of the Work, and
cause its subcontractors to maintain, complete and accurate
as-built drawings of the Work as it is performed. As-built
drawings will be delivered to the Owner upon completion of
the Project, and shall be one of the precedents to final
payment to the Contractor.
3.8 ADDITIONAL SERVICES The Contractor shall provide or procure the
following Additional Services upon the request of the Owner. A separate
written agreement between the Owner and Contractor shall define the extent
of such Additional Services.
3.8.1 Documentation of the Owner's Program, investigating
sources of financing, general business planning and other
information and documentation as may be required to the
feasibility of the Project.
3.8.2 Consultations, negotiations, and documentation
supporting the procurement of Project financing.
3.8.3 INTENTIONALLY OMITTED.
3.8.4 Appraisals of existing equipment, existing
properties, new equipment and developed properties.
3.8.5 Soils, subsurface and environmental studies,
reports and investigations required for submission to
governmental authorities or others having jurisdiction over
the Project.
3.8.6 Consultations and representations other than
normal assistance in securing building permits, before
governmental authorities or others having jurisdiction
over the Project.
3.8.7 INTENTIONALLY OMITTED.
3.8.8 Artistic renderings or models of the Project.
Mockups of the Project do not constitute Additional
Services under this Agreement.
3.8.9 Inventories of existing furniture, fixtures,
furnishings and equipment which might be under
consideration for incorporation into the Work.
3.8.10 Interior design and related services, excluding
procurement and placement of furniture, furnishings, art
work and decorations.
3.8.11 INTENTIONALLY OMITTED.
3.8.12 INTENTIONALLY OMITTED.
3.8.13 Estimates, proposals, appraisals, consultations,
negotiations and services in connection with the repair or
replacement of an insured loss.
3.8.14 The premium portion of overtime work ordered by the Owner that
is necessitated by the fault of the Owner.
3.8.15 INTENTIONALLY OMITTED.
3.8.16 INTENTIONALLY OMITTED.
3.8.17 Services for tenant or rental spaces not a part of
this Agreement.
3.8.18 Services requested by the Owner which are not
specified in the Contract Documents and which are not normally
part of generally accepted construction practice.
3.8.19 Serving or preparing to serve as an expert witness
in connection with any proceeding, legal or otherwise,
regarding the Project.
3.8.20 Preparing reproducible record drawings from marked-
up prints, drawings or other documents that incorporate
significant changes in the Work made during the
Construction Phase.
ARTICLE 4
OWNER'S RESPONSIBILITIES
4.1 INFORMATION AND SERVICES PROVIDED BY OWNER
4.1.1 The Owner shall provide full information in a
timely manner regarding requirements for the Project,
including the Construction Documents and other relevant
information.
4.1.2 The Owner shall also provide:
4.1.2.1 inspection and testing services during
construction as required by law or as mutually
agreed; and
4.1.2.2 unless otherwise provided in the
Contract Documents, necessary approvals, site
plan review, rezoning, easements
and assessments, necessary permits, fees and
charges required for the construction, use,
occupancy or renovation of permanent structures,
including legal and other required services.
4.1.3 The Contractor shall be entitled to rely on the
completeness and accuracy of the information and
services required by this Paragraph 4.1.
4.2 INTENTIONALLY OMITTED.
4.2.1 INTENTIONALLY OMITTED.
4.3 OWNER'S RESPONSIBILITIES DURING CONSTRUCTION PHASE
4.3.1 The Owner shall review and timely approve or
reject the cost estimates and Schedule of the Work as set
forth in Subparagraph 3.3.4.
4.3.2 If the Owner becomes aware of any error, omission
or failure to meet the requirements of the Contract
Documents or any fault or defect in the Work, the Owner shall
give written notice to the Contractor within a reasonable time,
not to exceed five (5) days.
4.3.3 The Owner shall communicate with the Contractor's
Subcontractors and suppliers only through the
Contractor. The Owner shall have no contractual
obligations to Subcontractors and suppliers of the
Contractor.
4.3.4 The Owner shall provide insurance for the Project
as provided in Article 11.
4.4 OWNER'S REPRESENTATIVE The Owner's Representative is Norman Nelms, who
is agreed to by the Contractor. The representative:
4.4.1 shall be fully acquainted with the Project;
4.4.2 agrees to furnish the information and services
required of the Owner pursuant to Paragraph 4.1;
4.4.3 shall have authority to bind the Owner in all
matters requiring the Owner's approval, authorization or
written notice. If the Owner changes its representative
or the representative's authority as listed above, the
Owner shall notify the Contractor in advance in writing; and
4.4.4 shall be assisted by an on-site staff of Owner's
employees and/or consultants who will facilitate
design and construction of the Project.
ARTICLE 5
SUBCONTRACTS
Work not performed by the Contractor with its own forces shall be performed
by licensed Subcontractors.
5.1 RETAINING SUBCONTRACTORS The Contractor shall not retain
any Subcontractor to whom the Owner has a reasonable and timely
objection. The Contractor shall not be required to retain any
Subcontractor to whom the Contractor has a reasonable objection.
Contractor agrees to utilize reasonable practices and solicit a
sufficient number of bidders to assure to Owner the lowest cost.
5.2 MANAGEMENT OF SUBCONTRACTORS The Contractor shall be responsible
for the management of the Subcontractors in the performance of their
work which includes, without limitation, the obligation to obtain input
from Subcontractors and coordinate their work to assure the timely completion
of the Project within the budgets established for the Project.
5.3 ASSIGNMENT OF SUBCONTRACT AGREEMENTS The Contractor shall provide
for assignment of subcontract agreements in the event this Agreement is
terminated as provided in this Agreement. Following such termination, the
Owner shall notify in writing those subcontractors whose assignments will
be accepted, subject to the rights of sureties.
ARTICLE 6
CONTRACT TIME
6.1 COMMENCEMENT OF THE WORK The Work commenced on or about
August 1, 1995, and shall proceed in general accordance with the schedule of
work as such schedule may be amended from time to time, subject, however,
to the provisions of Paragraph 3.4.
6.2 SUBSTANTIAL COMPLETION The dates for Substantial Completion of all
Work are set forth in Exhibit A attached hereto and incorporated herein
by reference. Time shall be of the essence of this Agreement.
6.3 DELAYS IN THE WORK
6.3.1 If causes beyond the Contractor's control delay
the progress of the Work, then the date of Substantial
Completion and Cost of the Work shall be modified by
Change Order as appropriate. Causes beyond Contractor's
control shall include but not be limited to: changes
ordered in the Work, acts or omissions of the Owner or
separate contractors employed by the Owner, the Owner
preventing the Contractor from performing the Work pending
dispute resolution, Hazardous Materials, adverse weather
conditions not reasonably anticipated, fire, unusual
transportation delays, labor disputes, or unavoidable
accidents or circumstances. Delays by Subcontractors
are not delays beyond Contractor's control.
The Contractor's remedy shall be limited to an extension
of time and reimbursement of those compensable costs set
forth in paragraph 8.2. plus Contractor's fee.
6.3.2 Notwithstanding anything herein or elsewhere contained to
the contrary, this Project is a "fast track" construction
project, and Contractor acknowledges that the Contract
Documents do not include 100% complete Contract Drawings,
it being understood that plans are being drawn and developed
during the Construction Phase.
The Contractor is not responsible for any delays caused by
incomplete Contract Drawing or Documents. If the Contractor is
delayed due to the Contract Drawings or Documents, the
Contractor shall be entitled to a time extension to the date
of substantial completion and additional compensation as
provided in paragraph 6.3.1.
6.3.3 In the event delays to the Project are encountered
for any reason, the parties agree to undertake reasonable steps
to mitigate the effect of such delays.
ARTICLE 7
COMPENSATION
7.1 INTENTIONALLY OMITTED.
7.2 INTENTIONALLY OMITTED.
7.2.1 INTENTIONALLY OMITTED.
7.2.2 INTENTIONALLY OMITTED.
7.2.3 INTENTIONALLY OMITTED.
7.2.4 INTENTIONALLY OMITTED.
7.3 CONSTRUCTION PHASE COMPENSATION
7.3.1 In addition to the cost of the work, the Owner
shall compensate the Contractor a fixed fee for Work
performed following the commencement of Construction on the
basis described in Exhibit A attached hereto and incorporated
herein by reference (the "Contractor's Fee").
7.3.1.1 INTENTIONALLY OMITTED.
7.3.1.2 The Contractor's Fee shall be paid
proportionately to the ratio that the monthly
Cost of the Work bears to the total estimated
Cost of the Work.
7.3.2 INTENTIONALLY OMITTED.
7.3.3 Payment for Construction Phase Services shall be
as set forth in Article 10.
7.4 INTENTIONALLY OMITTED.
7.4.1 INTENTIONALLY OMITTED.
7.4.2 INTENTIONALLY OMITTED.
7.4.3 INTENTIONALLY OMITTED.
7.5 ADJUSTMENTS IN THE CONTRACTOR'S FEE Adjustment in the
Contractor's Fee shall be made as follows:
7.5.1 for Changes in the Work as provided in Article 9,
the Contractor's Fee shall be adjusted as agreed and
presented in the Fee Schedule attached hereto as
Exhibit A and incorporated herein by reference, or by Change
Order or as determined by the dispute resolution procedures
set forth herein; and
7.5.2 INTENTIONALLY OMITTED.
7.6 RETAINAGE To insure the proper performance of this
Agreement, and except for payment of Contractor s Fee and general
conditions, the Owner shall retain five percent (5%) of each payment
hereunder until the date of Substantial Completion of each phased portion
of the work, at which time the retainage for that portion of the work
shall be released and the pro rata portion of the retention related to
the occupied portion shall be released; provided, however, even after
Substantial Completion Owner may withhold a reasonable amount pending
completion of any "punch list" or similar work but not to exceed 150% of
the value of such work as estimated by the Architect/Engineer.
7.7 EFFECT OF PAYMENT Payments made hereunder are made
provisionally and do not constitute acceptance of work not in
accordance with the Contract Documents.
ARTICLE 8
COST OF THE WORK
The Owner agrees to pay the Contractor for the Cost of the Work as
defined herein. This payment shall be in addition to the Contractor's
Fee.
8.1 INTENTIONALLY OMITTED.
8.1.1 INTENTIONALLY OMITTED.
8.2 COST ITEMS FOR CONSTRUCTION PHASE SERVICES
8.2.1 Wages paid for field labor in the direct employ of
the Contractor in the performance of the Work.
8.2.2 Salaries of Contractor's employees who are
permanently stationed at the field office, in whatever
capacity employed, including Brian Rayburn, MIS
Director and Lotus Lietzke, EEOP Director when
providing services directly related to the project.
8.2.3 Cost of all employee benefits and taxes including
but not limited to workers' compensation, unemployment
compensation, Social Security, health, welfare,
retirement and other fringe benefits as required by law,
labor agreements, or paid under the Contractor's standard
personnel policy, insofar as such costs are paid to employees
of the Contractor who are included in the Cost of the Work under
Subparagraphs 8.2.1 and 8.2.2.
8.2.4 Reasonable transportation, travel, hotel and moving expenses
of the Contractor's personnel incurred in connection with the
Work.
8.2.5 Cost of all materials, supplies and equipment
incorporated in the Work, including costs of
inspection, testing, transportation, storage and handling.
8.2.6 Payments made by the Contractor to Subcontractors for work
performed under this agreement.
8.2.7 Fees and expenses for design services procured by
the Contractor.
8.2.8 The reasonable cost, including transportation and
maintenance of all materials, supplies, equipment,
temporary facilities and hand tools not owned by the workers
that are used or consumed in the performance of the Work, less
salvage value.
8.2.9 The reasonable rental charges of all necessary
machinery and equipment, exclusive of hand tools owned by
workers, used at the site of the Work, whether rented from
the Contractor or others, including installation, repair and
replacement, dismantling, removal, maintenance, transportation
and delivery costs at rental charges consistent with those
prevailing in the area.
8.2.10 Cost of the premiums for all insurance and surety
bonds which the Contractor is required to procure or
deems necessary.
8.2.11 Sales, use, gross receipts or other taxes, tariffs
or duties related to the Work for which the Contractor is
liable.
8.2.12 Permits, fees, licenses, tests, royalties, costs
of defending suits for which the Contractor is not
responsible as set forth in Paragraph 3.5, and deposits lost for
causes other than the Contractor's fault or
negligence.
8.2.13 All costs associated with establishing, equipping,
operating, maintaining and demobilizing the field
office.
8.2.14 Reproduction costs, photographs, cost of
telegrams, facsimile transmissions, long distance
telephone calls, data processing services, postage, express
delivery charges, telephone service at the site and reasonable
petty cash expenses at the field office.
8.2.15 All water, power and fuel costs necessary for the
Work.
8.2.16 Cost of removal of all nonhazardous substances,
debris and waste materials.
8.2.17 Costs incurred due to an emergency affecting the
safety of persons and/or property.
8.3 DISCOUNTS AND SAVINGS All trade discounts, savings, rebates
and refunds, and all returns from sale of surplus materials and equipment
shall, regardless of by whom paid, be credited to the Cost of the Work.
ARTICLE 9
CHANGES IN THE WORK
Changes in the Work which are within the general scope of this Agreement
may be accomplished by directive or Change Order without invalidating
this Agreement.
9.1 CHANGE ORDERS A Change Order is an instrument, issued
after execution of this Agreement, signed by the Owner and
Contractor stating their agreement upon a change in the scope of the
Project which necessitates an adjustment in the dates of Substantial
Completion and/or Contractor's Fee.
9.2 DETERMINATION OF COST A change in the Cost of the Work
shall be determined by one or more of the following methods:
9.2.1 unit prices set forth in this Agreement or as
subsequently agreed;
9.2.2 a mutually accepted, itemized lump sum;
9.2.3 costs determined as defined in Article 8 and a
mutually acceptable Contractor's Fee as determined in
Subparagraph 7.5.1; or
9.2.4 if an increase or decrease cannot be agreed to as
set forth in Subparagraphs 9.2.1 through 9.2.3 and the Owner
issues a written order for the Contractor to proceed with
the change, the cost of the change in the Work shall be
determined by the reasonable expense and savings of the
performance of the Work resulting from the change.
The Contractor shall maintain a documented, itemized accounting
evidencing the expenses and savings.
9.3 OBLIGATION TO PERFORM Effective upon the date of the execution
of this Agreement, upon notice or directive by Owner, Contractor shall be
obligated to perform changed Work even if a Change Order has not been
executed by the Owner and Contractor, in which event the provisions of
Article 13 shall apply. Owner shall use its best efforts to provide
written direction in a timely manner.
9.4 ADJUSTMENT OF UNIT PRICES If a proposed Change Order alters original
quantities to a degree that application of previously agreed to unit prices
would be inequitable to either the Owner or the Contractor, the unit prices
and the Cost of the Work shall be equitably adjusted.
9.5 UNKNOWN CONDITIONS If in the performance of the Work the Contractor
finds latent, concealed physical conditions which differ from the
conditions the Contractor reasonably anticipated, then the date of
Substantial Completion shall be equitably adjusted by Change Order
within a reasonable time after the conditions are first observed and any
additional compensation as provided in Paragraph 6.3.1.
9.6 CLAIMS FOR ADDITIONAL COST OR TIME For any claim for an increase in
the Cost of the Work and/or an extension in the date of Substantial
Completion, the Contractor shall give the Owner notice of the claim
within five (5) days after the Contractor first recognizes, or ought to
recognize, the condition giving rise to the claim. Except in an emergency,
notice shall be given before proceeding with the Work. Any change in the
Cost of the Work and/or date of Substantial Completion resulting from such
claim shall be authorized by Change Order or Directive, as appropriate.
9.7 EMERGENCIES In any emergency affecting the safety of persons
and/or property, the Contractor shall act, at its discretion, to
prevent threatened damage, injury or loss. Any change in the Cost of the
Work and/or extension of the date of Substantial Completion on account of
emergency work shall be determined as provided in this Article.
ARTICLE 10
PAYMENT FOR CONSTRUCTION PHASE SERVICES
10.1 PROGRESS PAYMENTS
10.1.1 On or before the last day of each month after the
Construction Phase has commenced, the Contractor shall
submit to the Owner an Application for Payment consisting
of the Cost of the Work performed up to the 20th day of that
same month, including the cost of material stored on the site
or at other locations approved by the Owner, along with a
proportionate share of the Contractor's Fee. Prior to submission
of the next Application for Payment, the Contractor shall
furnish to the Owner a statement accounting for the disbursement
of funds received under the previous Application. The
extent of such statement shall be as agreed upon between the
Owner and Contractor.
10.1.2 Within twenty-five (25) days after receipt of each
monthly Application for Payment, or by the 25th of the
following month, whichever is later, the Owner shall pay
directly to the Contractor the appropriate amount for which
Application for Payment is made, less amounts previously paid by
the Owner.
10.1.3 If the Owner fails to pay the Contractor at the time payment
of any amount becomes due, then the Contractor may, at any
time thereafter, upon serving written notice that the Work
will be stopped within five (5) days after receipt of the
notice by the Owner and after such five (5) day period, stop
the Work until payment of the amount owing has been received.
10.1.4 Payments due but not paid shall bear interest at the current
prime rate of Boatmen's Bank as of the date of default.
10.1.5 The Contractor warrants and guarantees that title
to all Work, materials and equipment covered by an
Application for Payment, whether incorporated in the Project
or not, will pass to the Owner upon receipt of such payment by
the Contractor free and clear of all liens, claims, security
interests or encumbrances, hereinafter referred to as
"liens".
10.1.6 The Owner's progress payment, occupancy or use of
the Project, whether in whole or in part, shall not be
deemed an acceptance of any Work not conforming to the
requirements of the Contract Documents.
10.2 FINAL PAYMENT
10.2.1 Final payment, consisting of the unpaid balance of the
incurred Cost of the Work and the Contractor's fee, shall be
due and payable not later than thirty (30) days after the Work
is fully completed. However, if application for final payment
is not made within one hundred seventy-nine (179) days after
the Work is fully completed, Contractor's right to receive
such final payment shall be deemed conclusively waived. Before
issuance of final payment, the Owner may request satisfactory
evidence that all payrolls, materials bills and other
indebtedness connected with the Work have been paid or
otherwise satisfied.
10.2.2 In accepting final payment, the Contractor waives
all claims. In the event of any claims by the
Contractor, the Owner shall timely pay all sums that are
not in dispute.
10.3 LIEN WAIVER AND INDEMNITY Any and all application(s) for a progress
or final payment shall be accompanied by a lien waiver and indemnity form
furnished by Owner.
ARTICLE 11
INDEMNITY, INSURANCE AND WAIVER OF SUBROGATION
11.1 INDEMNITY
11.1.1 To the fullest extent permitted by law, the
Contractor shall defend, indemnify and hold the Owner
harmless from any and all claims, including but not
limited to, claims for bodily injury, property damage (other
than to the Work itself and other property insured under
Paragraph 11.5) and the resulting loss of use that may arise
from the performance of the Work. Such indemnity shall include
payment to Owner of its reasonable attorney's fees and
expenses paid or incurred.
The above-mentioned indemnification shall extend to any and
all such claims which result from the negligent acts or
omissions or willfull misconduct of the Contractor,
Subcontractors or anyone employed or retained directly or
indirectly by any of them or any party that the Contractor or
Subcontractor may be liable. The Contractor shall not be
required to defend, indemnify or hold harmless the Owner for
any negligent acts, or omissions or willful misconduct of the
Owner, Owner's employees, agents or separate contractors.
11.1.2 To the fullest extent permitted by law, the Owner
shall defend, indemnify and hold the Contractor
harmless from any and all claims, including but not limited
to, claims for bodily injury and property damage (and the
resulting loss of use of any such property) that arises out
of or during the performance of the Work. Such indemnity shall
include payment to the Contractor of its reasonable attorney's
fees and expenses paid or incurred. The above-mentioned
indemnification shall extend to any and all such claims which
result from the negligent acts or omissions or willful
misconduct of the Owner, the Owner's agents, and to anyone
employed or retained directly or indirectly by the Owner. The
Owner shall not be required to defend, indemnity or hold
harmless the Contractor for any negligent acts or omissions
or willful misconduct of the Contractor, Contractor's
employees, agents or separate contractors.
11.2 CONTRACTOR'S LIABILITY INSURANCE
11.2.1 The Contractor shall obtain and maintain projectspecific
insurance coverage for the following claims which may arise
out of the performance of this Agreement, whether resulting
from the Contractor's operations or by the operations of any
Subcontractor, anyone in the employ of any of them, or by an
individual or entity for whose acts they may be liable:
11.2.1.1 workers' compensation, disability and other employee
benefit claims under acts applicable to the Work;
11.2.1.2 under applicable employers liability law, bodily
injury, occupational sickness, disease or death
claims of the Contractor's employees;
11.2.1.3 bodily injury, sickness, disease or death claims
for damages to persons not employed by the
Contractor;
11.2.1.4 usual personal injury liability claims for damages
directly or indirectly related to the person's
employment by the Contractor or for damages to
any other person;
11.2.1.5 damage to or destruction of tangible property,
including resulting loss of use, claims for property
other than the Work itself and other property insured
under Paragraph 11.5;
11.2.1.6 bodily injury, death or property damage claims
resulting from motor vehicle liability in the use,
maintenance or ownership of any motor vehicle; and
11.2.1.7 contractual liability claims involving the
Contractor's obligations under Subparagraph 11.1.1.
11.2.2 The Contractor's Commercial General and Automobile Liability
Insurance as required by Subparagraph 11.2.1 shall be
written for not less than the following limits of liability:
11.2.2.1 Commercial General Liability Insurance
11.2.2.1.1 Each Occurrence Limit $1,000,000
11.2.2.1.2 General Aggregate $2,000,000
11.2.2.1.3 Products/Completed
Operations Aggregate $2,000,000
11.2.2.1.4 Personal and Advertising
Injury Limit $1,000,000
11.2.2.2 Comprehensive Automobile Liability Insurance
11.2.2.2.1 Combined Single Limit
Bodily Injury and
Property Damage $1,000,000
Each Occurrence
or
11.2.2.2.2 Bodily Injury -Not Applicable-
Each Person
-Not Applicable-
Each Occurrence
11.2.2.2.3 Property Damage -Not Applicable-
Each Occurrence
11.2.3 Commercial General Liability Insurance may be arranged under
a single policy for the full limits required or by a
combination of underlying policies and an excess or Umbrella
Liability policy.
11.2.4 The policies shall contain a provision that
coverage will not be canceled or not renewed until at least
thirty (30) days' prior written notice has been given to the
Owner. Certificates of Insurance showing required coverage to
be in force shall be filed with the Owner prior to commencement
of the Work.
11.2.5 Products and Completed Operations insurance shall be maintained
for a minimum period of at least three (3) years after either
ninety (90) days following the date of Substantial Completion or
final payment, whichever is earlier.
11.2.6 A copy of Contractor's current Certificate of Insurance
is attached hereto as Exhibit B and incorporated herein
by reference. Where inconsistent with this Agreement, the
attached Certificate shall control.
11.3 INTENTIONALLY OMITTED.
11.4 NOTICE All insurance furnished by Contractor and its
Subcontractors located on the site shall include Owner and Station
Casinos, Inc. as additional insureds or named insureds, and a Certificate
of Insurance shall be furnished to Owner prior to commencement of the
Work. Contractor shall procure and furnish Owner the agreement of each
insurance company to give Owner not less than thirty (30) days' notice of
cancellation, nonrenewal or any endorsement eliminating or reducing coverage.
11.5 INSURANCE TO PROTECT PROJECT
11.5.1 The Owner shall obtain and maintain property insurance upon
the entire Project for the full cost of replacement at the time
of any loss. This insurance shall insure against loss from the
perils of fire and extended coverage, and shall include "all
risk" insurance for physical loss or damage including without
duplication of coverage at least: theft, vandalism, malicious
mischief, transit, collapse, falsework, temporary buildings,
debris removal, flood and earthquake. The Owner shall increase
limits of coverage, if necessary, to reflect estimated
replacement cost. The Owner shall be responsible for any
coinsurance penalties or deductibles.
11.5.2 If the Owner occupies or uses a portion of the Project prior
to its Substantial Completion, such occupancy or use shall
not commence prior to a time mutually agreed to by the Owner
and the Contractor and to which the insurance company
or companies providing the property insurance have consented
by endorsing the policy or policies. This insurance shall
not be canceled or lapsed on account of partial occupancy.
Consent of the Contractor to such early occupancy or use shall
not be unreasonably withheld.
11.5.3 The Owner shall obtain and maintain boiler and machinery
insurance as necessary.
11.5.4 The Owner shall purchase and maintain insurance to
protect against loss of use of Owner's property due to those
perils insured pursuant to Paragraph 11.5.
11.5.5 The Contractor shall be given thirty (30) days' notice of
cancellation, non-renewal, or any endorsements restricting or
reducing coverage. The Owner shall give written notice to
the Contractor before commencement of the Work if the Owner
will not be obtaining property insurance. In that case, the
Contractor may obtain insurance in order to protect its interest
in the Work as well as the interest of Architect/Engineer,
Subcontractors and Subsubcontractors in the Work. The cost
of this insurance shall be a Cost of the Work pursuant to
Article 8. If the Contractor is damaged by failure of the
Owner to purchase or maintain property insurance or to so
notify the Contractor, the Owner shall bear all reasonable
costs incurred by the Contractor arising from the damage.
11.6 PROPERTY INSURANCE LOSS ADJUSTMENT
11.6.1 Any insured loss shall be adjusted with the Owner
and the Contractor and made payable to the Owner and
Contractor as trustees for the insureds, as their interests
may appear, subject to any applicable mortgagee clause.
11.6.2 Upon the occurrence of an insured loss, monies received will
be deposited in a separate account and the trustees shall make
distribution in accordance with the agreement of the parties
in interest, or in the absence of such agreement, in
accordance with Article 13. If the trustees are unable to
agree between themselves on the settlement of the loss, such
dispute shall also be submitted for resolution pursuant to
Article 13.
11.7 WAIVER OF SUBROGATION
11.7.1 The Owner and Contractor waive all rights against each other,
the Architect/Engineer, and any of their respective employees,
agents, consultants, subcontractors and subsubcontractors for
damages caused by risks covered by insurance provided in
Paragraph 11.5 to the extent they are covered by that insurance,
except such rights as they may have to the proceeds of such
insurance held by the Owner and Contractor as trustees. The
Contractor shall require similar waivers from the
Architect/Engineer and all Subcontractors, and shall require
each of them to include similar waivers in their
subsubcontracts and consulting agreements.
11.7.2 The Owner waives subrogation against the Contractor,
Architect/Engineer, Subcontractors and Subsubcontractors
on all property and consequential loss policies carried
by the Owner on adjacent properties and under property
and consequential loss policies purchased for the Project after
its completion.
11.7.3 If the policies of insurance referred to in this Paragraph
require an endorsement to provide for continued coverage
where there is a waiver of subrogation, the owners of
such policies will cause them to be so endorsed.
11.8 PRIORITY OF INSURANCE Any insurance policy obtained by the
Contractor or its Subcontractors to fulfill the insurance
requirements of this Agreement or any subcontract agreement shall be deemed
primary insurance to any similar insurance the Owner may obtain for its
own benefit, which shall be excess or secondary but not contributing
insurance. Each such policy obtained by the Contractor or its
Subcontractors shall provide that the insurer shall defend any suit
against the Owner, its parent company, subsidiaries, operating
divisions, partners, officers, agents or employees, even if such suits are
frivolous or fraudulent. Such insurance shall provide the Owner
and Contractor the right to engage counsel who is mutually acceptable for
the purpose of defending any legal action against the Owner. The Contractor
and its Subcontractors shall indemnify the Owner for costs and expenses,
including but not limited to, attorney's fees, Owner's staff/labor costs
and travel costs incurred in support of or in anticipation of such
litigation, arising out of or incurred in the defense of actions against
the Owner arising from the Project.
ARTICLE 12
TERMINATION OF THE AGREEMENT AND OWNER'S RIGHT TO PERFORM
CONTRACTOR'S RESPONSIBILITIES
PERFORM CONTRACTOR'S RESPONSIBILITIES;
12.1 TERMINATION BY THE CONTRACTOR
12.1.1 Upon twenty (20) days' written notice to the Owner, the
Contractor may terminate this Agreement for any of the
following reasons:
12.1.1.1 if the Work has been stopped for a consecutive
fifteen (15) day period
12.1.1.1.1 under court order or order of other
governmental authorities having
jurisdiction;
12.1.1.1.2 as a result of the declaration of a
national emergency or other governmental
act during which, through no act or
fault of the Contractor, materials are
not available; or
12.1.1.1.3 because of the Owner's failure to pay
the Contractor in accordance with this
Agreement;
12.1.1.2 if the Work is suspended by the Owner for fifteen
(15) days;
12.1.1.3 if the Owner materially delays the Contractor in
the performance of the Work; or
12.1.1.4 if the Owner otherwise materially breaches this
Agreement, provided, however that the notice period
for termination due to Owner's failure to pay shall
be governed by 10.1.3.
12.1.2 Upon termination by the Contractor in accordance with
Subparagraph 12.1.1, the Contractor shall be entitled to
recover from the Owner payment for the cost of the work as
defined in Article 8 plus the prorata Contractor's fee for
such work, plus all demobilization costs. In addition, the
Contractor shall be paid an amount calculated as set forth in
Subparagraph 12.3.
12.2 OWNER'S RIGHT TO PERFORM CONTRACTOR'S OBLIGATIONS AND TERMINATION
BY THE OWNER FOR CAUSE
12.2.1 If the Owner determines that the Contractor is adjudged as
bankrupt, or if it makes a general assignment for the benefit
of its creditors, or if a receiver is appointed on account
of its insolvency, or if it persistently or repeatedly
refuses or fails, except in cases for which extension of
time is provided, to supply enough properly skilled workmen or
proper materials, pay its Subcontractors or suppliers, or if it
persistently performs substandard work, or persistently
disregards laws, ordinances, rules, regulations or orders of
any public authority having jurisdiction, or otherwise is
guilty of a substantial violation of a provision of the
Contract Documents, or fails to so prosecute the Work as to
insure its completion, within the time, or any extension
thereof, specified in this Agreement, then the Owner may,
without prejudice to any right or remedy and after giving the
Contractor and its surety, if any, ten (10) days' written
notice, terminate the employment of the Contractor and take
possession of the site and of all materials, equipment,
tools, construction equipment and machinery thereon owned by the
Contractor. Should the surety fail to respond within fifteen
(15) days following such notice and pursue completion of the
work with diligence acceptable to the Owner, the Owner may
arrange for completion of the Work and deduct the cost thereof
from the unpaid fees or costs incurred by Contractor, including
the cost of additional Architect/Engineer services and of Owner
contract administration costs made necessary by such default
or neglect, in which event no further payment shall then be made
by the Owner until all costs of completing the Work shall have
been paid. If the unpaid balance of the fees and costs incurred
by the Contractor exceeds the costs of finishing the Work,
including compensation for the Architect/Engineer's and
Owner's additional services made necessary thereby, such excess
shall be paid to the Contractor or its surety as applicable.
If such costs exceed the unpaid balance, the Contractor or its
surety shall pay the difference to the Owner.
12.2.2 In the event the Owner exercises its rights under
Subparagraph 12.2.1, upon the request of the Contractor
the Owner shall provide a detailed accounting of the cost
incurred by the Owner.
12.2.3 Contractor acknowledges that Owner's parent corporation, Station
Casinos, Inc. (STCI) is a publiclytraded company, that STCI's
wholly-owned subsidiaries hold gaming licenses in various
jurisdictions, and that STCI's NASDAQ membership and its
subsidiaries' gaming licenses are of vital importance to its
business. In this regard, Contractor agrees to comply with
all reasonable requests made by Owner for information
concerning Contractor's background, which may include, without
limitation, completion by Contractor of STCI's standard form
of Corporate Background Questionnaire and/or Personal Background
Questionnaire, as appropriate. Owner may terminate this
Agreement immediately upon written notice to the Contractor in
the event that:
12.2.3.1 Contractor fails to comply with information requests
as set forth in the foregoing sentence; or
12.2.3.2 Owner makes a reasonable determination that continued
association with Contractor would jeopardize STCI's
NASDAQ membership or the status of any gaming license
of any of STCI's subsidiaries.
12.3 TERMINATION BY OWNER WITHOUT CAUSE If the Owner terminates this
Agreement other than as set forth in Paragraph 12.2, the Owner shall pay
the Contractor for all Work executed plus the prorata Contractor s fee for
such work, as well as and for any proven loss, cost or expense in
connection with the Work, plus all demobilization costs. In addition, the
Contractor shall be paid an amount calculated as set forth below:
12.3.1 INTENTIONALLY OMITTED.
12.3.2 If the Owner terminates this Agreement after
commencement of the Construction Phase, the Contractor shall
be paid the cost of the work as defined in this article and
Article 8, the Contractor's Costs and the prorata portion of
the Contractor's Fee.
12.3.3 INTENTIONALLY OMITTED.
12.3.4 The Owner shall also pay to the Contractor fair
compensation, either by purchase or rental at the
election of the Owner, for any equipment retained. The Owner
shall assume and become liable for obligations, commitments
and unsettled claims that the Contractor has previously
undertaken or incurred in good faith in connection with the
Work or as a result of the termination of this Agreement.
As a condition of receiving the payments provided under this
Article 12, the Contractor shall cooperate with the Owner by
taking all steps necessary to accomplish the legal assignment
of the Contractor's rights and benefits to the Owner, including
the execution and delivery of required papers.
12.4 TERMINATION FOR CONVENIENCE OF OWNER Prior to or during the performance
of the Work, the Owner reserves the right to terminate this
Agreement for unforeseen causes not limited to court orders, loss of
funding, acts of the federal government to discontinue the Work, etc.,
that may occur. Upon such an occurrence, the following procedures will
be adhered to:
12.4.1 The Owner will immediately notify the Contractor in
writing, specifying the effective termination date of the
Contract.
12.4.2 After receipt of the notice of termination, the Contractor
shall immediately proceed with the following obligations,
regardless of any delay in determining or adjusting any amounts
due at that point in the Contract.
12.4.2.1 Stop all work.
12.4.2.2 Place no further subcontracts or orders for materials
or services.
12.4.2.3 Terminate all subcontracts.
12.4.2.4 Cancel all material and equipment orders as
applicable.
12.4.2.5 Take action that is necessary to protect and preserve
all property related to this Agreement which is in
the possession of the Contractor.
12.4.3 Within sixty (60) days of the date of the notice of
termination, the Contractor shall submit a final termination
settlement proposal to the Owner based upon costs up to the
date of termination, reasonable demobilization costs and
a reasonable portion of Contractor's Fee. If the Contractor
fails to submit the proposal within the time allowed, the
Owner may determine the amount due to the Contractor because
of the termination and shall pay the determined amount to the
Contractor.
12.4.4 If the Contractor and the Owner fail to agree on the
settlement amount, the matter will be handled as a dispute
in accordance with the procedure described in Article 13.
12.5 ASSIGNMENT In the event of termination by Owner, with or without
cause, Owner may, at its option, obtain the assignment of any or all
subcontracts. The Contractor shall not allow language in its Subcontracts
which prevents assignment of Subcontracts to Owner.
ARTICLE 13
DISPUTE RESOLUTION
13.1 INITIAL DISPUTE RESOLUTION If a dispute arises out of or relates to
this Agreement or its breach, before either party commences litigation the
parties shall endeavor to settle the dispute first through direct
discussions.
13.2 WORK CONTINUANCE AND PAYMENT Unless otherwise agreed in writing,
the Contractor shall continue the Work and maintain the approved schedules
during any discussions or legal proceedings. The Owner shall continue to
make payments in accordance with this Agreement, including timely payments of
all sums not in dispute.
13.3 ATTORNEYS FEES AND COSTS If any legal action or other
proceeding is brought by any party to this Agreement against any other party
to this Agreement for the enforcement or the interpretation of any of
the rights or provisions of this Agreement, or because of an alleged
dispute, breach, default or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party
shall be entitled to recover its reasonable attorneys fees and all other
costs and expenses incurred in that action or proceeding, in addition
to any other relief to which it may be entitled.
ARTICLE 14
MISCELLANEOUS PROVISIONS
14.1 ASSIGNMENT The Contractor shall not assign its interest in this
Agreement without the written consent of the Owner.
14.2 GOVERNING LAW This Agreement shall be governed and construed
in accordance with the laws of the State of Missouri.
14.3 SEVERABILITY The partial or complete invalidity of any one or more
provisions of this Agreement shall not affect the validity or
continuing force and effect of any other provision.
14.4 AMENDMENTS AND MODIFICATIONS No modifications or
alterations of this Agreement shall be effective unless made in writing and
signed by both parties hereto.
14.5 NEGOTIATED TRANSACTION The provisions of this Agreement were
negotiated by the parties hereto and said Agreement shall be deemed to have
been drafted by both parties hereto.
14.6 NO WAIVER OF PERFORMANCE The failure of either party to insist, in
any one or more instances, on the performance of any of the terms,
covenants or conditions of this Agreement, or to exercise any of its
rights, shall not be construed as a waiver or relinquishment of such term,
covenant, condition or right with respect to further performance.
14.7 TITLES The title given to the Articles of this Agreement are for
ease of reference only and shall not be relied upon or cited for any other
purpose.
14.8 OTHER PROVISIONS
14.8.1 VENUE The venue for any lawsuit or deposition in
connection with any dispute arising out of or related to this Agreement
or the work called for in this Agreement shall be Kansas City,
Missouri.
ARTICLE 15
CONFIDENTIALITY
Contractor hereby agrees that during the term of this Agreement and
indefinitely thereafter, Contractor shall not directly or indirectly
disclose, publish or use for the benefit of Contractor or any party, except
in carrying out its duties for Owner, any "Confidential Information" (as
defined below), without the prior written consent of Owner. For the
purposes of this Agreement, Confidential Information shall include, but is
not limited to, all information, data, contracts, agreements (including,
but not limited to, this Agreement), files, records, documents,
specifications, accounts, candidate lists, ideas, forms, procedures,
techniques, expertise, attorney work-product, resumes, referral
slips, phone records, correspondence, memoranda, names, addresses,
sites, identities or telephone numbers of any contacts, payments, fees
and other similar items relating to the matters that are the subject of the
activities of Owner, or matters that are the subject of the activities
of Owner, or the Services to be performed hereunder. Contractor
acknowledges and agrees that the Confidential Information provided by
Owner is unique to Owner's business and that monetary damages for a violation
of this Agreement may not be an adequate remedy at law. Contractor agrees
that should it violate any terms or provisions of this Agreement, in
addition to monetary damages, injunctive relief in any court of competent
jurisdiction is an appropriate remedy to protect Owner's interests.
ARTICLE 16
EXISTING CONTRACT DOCUMENTS
The Contract Documents in existence at the time of execution of this
Agreement are those documents listed in Exhibit "C" attached hereto and
incorporated herein by reference.
EXHIBIT "A"
-----------
PROJECTED COSTS
---------------
1) Contract "A" - Scope of Work
Sitework 12,850,000
Offsite 4,150,000
Lowrise Building 62,000,000
Casino #1 20,700,000
Casino #2 18,850,000
General Conditions 7,392,000
-----------
Total Projected Cost of Base Project 125,942,000
2) A fixed fee of $4,650,000 is established for a projected cost range
of $121,000,000 to $131,000,000. The Owner may elect to change the
scope of Contract "A" within this range, without a change to the
Contractor's fixed fee. The Contractor is not authorized to exceed
the line item projected costs above, without written approval from
the Owner.
In the event that the final cost of the work exceeds or falls below
the cost range limits, then the fixed fee will be increased or reduced
by change order the exact amount of the variance outside of the cost
range x 4%.
3) Contract "B" - Lowrise Line 5 to 0.3 (with Boardwalk) 3,000,000
Projected Cost of Work 120,000
---------
Fixed Fee - For cost of work range of +/- 10% 3,120,000
4) Contract "C" - Casino #1/2nd Floor
Projected Cost of Work 4,000,000
Fixed Fee - For cost of work range of +/- 10% 160,000
---------
Total 4,160,000
5) Contract "D" - Casino #2/2nd Floor
Projected Cost of Work 4,250,000
Fixed Fee - For cost of work range of +/- 10% 170,000
---------
4,420,000
6) Contract "E" - Theater Connector Pad
Projected Cost of Work 580,000
Fixed Fee - For cost of work range of +/- 10% 23,200
---------
Total 603,200
7) Contract "F" - Theater Connector Building
Projected Cost of Work TBD
Fixed Fee - For cost of work range of +/- 10% TBD
--------
Total TBD
8) If for any reason including scope change, the cost of the work for
contracts "B", "C", "D", "E" or "F" exceed or fall below their
individual cost ranges, then the respective fee will be adjusted by
the exact amount of the variance outside of the cost range x 4%.
9) Nothing herein precludes the parties from negotiating GMPs or lump
sums for any portion of this work, which are then performed and paid
as such based on any new agreement or change order to this contract.
10) Schedule - The approved baseline schedule for this project is ST 22
dated March 2, 1996. The following are major substantial completion
dates:
Major Division of Work Substantial Completion
---------------------------------------------------------------------
Sitework 01-Nov-96
Offsites 01-Nov-96
Lowrise Building to Line 7 & Lowrise Shell Building to
Line 0.3: Contracts A & B 15-Nov-96
Lowrise Central Plant/Loading Dock/HR 15-Jun-96
Casino #1/ - Contracts A & C 01-Oct-96
Casino #2/ - Contracts A & D 15-Oct-96
11) The parties understand and agree that all budgets are estimates only
and are not to be construed as guaranteed maximum prices. The
substantial completion dates set forth above are based and contingent
upon the Owner's timely and fully performing all of its obligations,
including, but not limited to, providing to the Contractor in a timely
manner those items requested in the Contractor's letters to Owner dated
July 10 and 11, 1996 (copies of which are attached to the Agreement as
Exhibit "D" and incorporated herein by reference) and the Contractor
not encountering conditions or events beyond its control. To the
extent that the substantial completion dates set forth above conflict
with any substantial completion dates contained in ST 22 dated March
2, 1996, the substantial completion dates set forth above shall
control.
<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
Six months ended September 30, 1996, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000898660
<NAME> STATION CASINOS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> MAR-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 30,624
<SECURITIES> 0
<RECEIVABLES> 6,543
<ALLOWANCES> 0
<INVENTORY> 2,195
<CURRENT-ASSETS> 54,319
<PP&E> 902,857
<DEPRECIATION> 95,636
<TOTAL-ASSETS> 953,073
<CURRENT-LIABILITIES> 133,444
<BONDS> 382,657
0
103,500
<COMMON> 353
<OTHER-SE> 204,193
<TOTAL-LIABILITY-AND-EQUITY> 953,073
<SALES> 0
<TOTAL-REVENUES> 273,474
<CGS> 0
<TOTAL-COSTS> 141,910
<OTHER-EXPENSES> 20,092
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,260
<INCOME-PRETAX> 30,428
<INCOME-TAX> 10,851
<INCOME-CONTINUING> 19,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,955
<EPS-PRIMARY> .45
<EPS-DILUTED> .45
</TABLE>
