<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 DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM______TO _____
Commission file number 000-21640
---------
STATION CASINOS, INC.
---------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0136443
------ ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2411 West Sahara Avenue, Las Vegas, Nevada
------------------------------------------
(Address of principal executive offices)
89102
-----
(Zip Code)
(702) 367-2411
--------------
Registrant's telephone number, including area code
N/A
---
(Former name, former address and former fiscal
year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
-------- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 1998
- ---------------------------- -------------------------------
Common stock, $.01 par value 35,306,657
1
<PAGE>
STATION CASINOS, INC.
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited)- 3
December 31, 1997 and March 31, 1997
Condensed Consolidated Statements of Operations (unaudited)- 4
Three and Nine months ended December 31, 1997 and 1996
Condensed Consolidated Statements of Cash Flows (unaudited)- 5
Nine months ended December 31, 1997 and 1996
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 22
Item 2. Changes in Securities 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signature 25
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>
December 31, March 31,
1997 1997
--------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 53,662 $ 42,522
Accounts and notes receivable, net................ 16,455 7,852
Inventories....................................... 4,825 3,473
Prepaid gaming taxes.............................. 7,022 4,291
Prepaid expenses and other........................ 14,618 11,231
---------- ----------
TOTAL CURRENT ASSETS........................... 96,582 69,369
Property and equipment, net......................... 1,141,268 1,069,052
Land held for development........................... 27,114 26,354
Other assets, net................................... 59,432 69,343
---------- ----------
TOTAL ASSETS................................... $1,324,396 $1,234,118
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt................. $ 14,955 $ 18,807
Accounts payable.................................. 15,762 21,106
Accrued payroll and related....................... 19,243 13,460
Construction contracts payable.................... 12,543 94,835
Accrued interest payable.......................... 13,970 10,625
Accrued expenses and other........................ 39,102 26,433
---------- ----------
TOTAL CURRENT LIABILITIES...................... 115,575 185,266
Long-term debt, less current portion................ 904,609 742,156
Deferred income taxes, net.......................... 12,975 7,848
---------- ---------
TOTAL LIABILITIES.............................. 1,033,159 935,270
---------- ---------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01; authorized
5,000,000 shares; 2,070,000 convertible
preferred shares issued and outstanding......... 103,500 103,500
Common stock, par value $.01; authorized 90,000,000
shares; 35,306,657 and 35,318,057 shares issued
and outstanding................................. 353 353
Additional paid-in capital........................ 167,155 167,397
Deferred compensation - restricted stock.......... (652) (1,225)
Retained earnings................................. 20,881 28,823
---------- ----------
TOTAL STOCKHOLDERS' EQUITY...................... 291,237 298,848
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $1,324,396 $1,234,118
========== ==========
</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 NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Casino............................................ $ 154,172 $ 102,002 $ 436,872 $ 314,074
Food and beverage................................. 34,282 20,954 97,859 63,580
Room.............................................. 10,474 7,053 27,692 19,711
Other............................................. 12,557 12,440 41,233 35,192
--------- --------- --------- ---------
Gross revenues................................. 211,485 142,449 603,656 432,557
Less promotional allowances....................... (14,289) (8,682) (38,847) (25,316)
--------- --------- --------- ---------
Net revenues................................... 197,196 133,767 564,809 407,241
--------- --------- --------- ---------
OPERATING COSTS AND EXPENSES:
Casino............................................ 73,910 45,976 211,502 139,254
Food and beverage................................. 22,764 15,499 67,626 47,774
Room.............................................. 3,520 2,328 10,001 7,425
Other............................................. 5,744 5,659 19,225 16,919
Selling, general and administrative............... 45,523 26,781 127,419 82,387
Corporate expenses................................ 3,524 4,735 11,168 13,377
Development expenses.............................. - 377 104 979
Depreciation and amortization..................... 17,227 10,876 50,396 30,968
Preopening expenses............................... - - 10,866 -
--------- --------- --------- ---------
172,212 112,231 508,307 339,083
--------- --------- --------- ---------
OPERATING INCOME..................................... 24,984 21,536 56,502 68,158
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense, net............................. (19,884) (7,631) (55,597) (23,891)
Other............................................. 199 (116) (4,797) (50)
--------- --------- --------- ---------
(19,685) (7,747) (60,394) (23,941)
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES.................... 5,299 13,789 (3,892) 44,217
Income tax (provision) benefit....................... (1,874) (5,033) 1,384 (15,884)
-------- --------- --------- ---------
NET INCOME (LOSS).................................... 3,425 8,756 (2,508) 28,333
PREFERRED STOCK DIVIDENDS............................ (1,812) (1,812) (5,434) (5,434)
-------- --------- --------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK......... $ 1,613 $ 6,944 $ (7,942) $ 22,899
======== ========= ========= =========
EARNINGS (LOSS) PER COMMON SHARE..................... $ 0.05 $ 0.20 $ (0.22) $ 0.65
======== ========= ========= =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........... 35,307 35,318 35,309 35,315
======== ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
4
<PAGE>
STATION CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
1997 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income ................................................ $ (2,508) $ 28,333
---------- ----------
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization................................. 50,396 30,968
Increase in deferred income taxes............................. 3,089 7,772
Preopening expenses........................................... 10,866 -
Changes in assets and liabilities:
Increase in accounts and notes receivable, net.............. (8,603) (6,586)
Increase in inventories and prepaid expenses and other...... (5,432) (3,532)
(Decrease) increase in accounts payable..................... (5,344) 4,007
Increase in accrued expenses and other...................... 20,265 7,384
Other, net.................................................... 10,597 5,196
---------- ----------
Total adjustments...................................... 75,834 45,209
---------- ----------
Net cash provided by operating activities................... 73,326 73,542
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.......................................... (121,824) (373,496)
(Decrease) increase in construction contracts payable......... (82,292) 56,882
Preopening expenses........................................... (8,516) -
Other, net.................................................... 3,523 (22,659)
---------- ----------
Net cash used in investing activities....................... (209,109) (339,273)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Payments) borrowings under bank facility, net................ (47,000) 183,500
Borrowings under Sunset loan agreement........................ 64,000 22,500
Proceeds from the issuance of notes payable................... 16,250 2,250
Principal payments on notes payable........................... (23,381) (25,147)
Proceeds from the issuance of senior subordinated notes, net.. 144,287 -
Proceeds from the issuance of preferred stock, net............ - 13,095
Dividends paid................................................ (5,434) (5,174)
Other, net.................................................... (1,799) (4,735)
---------- ----------
Net cash provided by financing activities................... 146,923 186,289
---------- ----------
CASH AND CASH EQUIVALENTS:
Increase (decrease) in cash and cash equivalents.............. 11,140 (79,442)
Balance, beginning of period.................................. 42,522 114,868
---------- ----------
Balance, end of period........................................ $ 53,662 $ 35,426
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest, net of amounts capitalized............ $ 47,121 $ 18,287
Cash paid for income taxes.................................... $ 92 $ 5,950
Property and equipment purchases financed by debt............. $ 3,532 $ 361
</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 four casino properties in Las Vegas,
Nevada, a gaming and entertainment complex in St. Charles,
Missouri and a gaming and entertainment complex in Kansas City,
Missouri. The Company also owns and provides slot route
management services in Southern Nevada.
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. ("Station Casino St. Charles"), Texas
Station, Inc. ("Texas Station"), Kansas City Station Corporation
("Station Casino Kansas City"), opened January 16, 1997, Sunset
Station, Inc. ("Sunset Station"), opened June 10, 1997 and
Southwest Gaming Services, 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 nine months ended December 31, 1997 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, 1997.
2. MERGER AGREEMENT
On January 16, 1998, the Company entered into an Agreement
and Plan of Merger (the "Merger Agreement") with Crescent Real
Estate Equities Company, a Texas real estate investment trust
("Crescent"). Pursuant to the Merger Agreement, the Company will
be merged with and into Crescent (the "Merger"). The Merger
Agreement also provides for certain alternative structures to
facilitate the combination of the businesses of the Company and
Crescent.
Upon consummation of the Merger, each share of the Company's
$.01 par value common stock issued and outstanding immediately
prior to the effective time of the Merger (the "Effective Time")
together with the associated rights issued pursuant to the Rights
Agreement dated October 6, 1997 shall as of the Effective Time,
be converted into the right to receive 0.466 validly issued,
fully paid and nonassessable shares of Crescent's $.01 par value
common shares of beneficial interest. Each share of the
Company's $3.50 Convertible Preferred Stock issued and
outstanding immediately prior to the Effective Time shall as of
the Effective Time be converted into the right to receive one
validly issued, fully paid and nonassessable $3.50 Convertible
Preferred Share of Crescent convertible into the number of
Crescent common shares and having the terms required by the
Company's Convertible Preferred Stock. In addition, at the
option of the Company, the Company will issue to Crescent and
Crescent has agreed to purchase subject to the terms, conditions
and procedures set forth in the Merger Agreement up to an
aggregate of 115,000 shares of a new series of preferred stock of
the Company (the "Redeemable Preferred Stock") at a price of
$1,000 per share (plus accrued dividends) in cash in increments
of 5,000 shares. The Redeemable Preferred Stock is convertible
at the option of the holder any time after January 16, 1999,
unless previously redeemed, into shares of common stock at a
conversion rate of 60.606 Shares of Common Stock for each share
of Redeemable Preferred Stock subject to ordinary
6
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
2. MERGER AGREEMENT (CONTINUED)
antidilution provisions. Unless written consent from Crescent is
received, the Company has agreed to use the net proceeds from the
sale of the Redeemable Preferred Stock to repay indebtedness
under its revolving loan agreement, borrowings under which were
used for acquisitions and master-planned expansions.
Consummation of the Merger is subject to the satisfaction of
certain closing conditions, including the approval of the
Company's stockholders, expiration or termination of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of
1974 and the approval of any other governmental entity with
jurisdiction in respect of gaming laws required or necessary in
connection with the Merger, the Merger Agreement and the
transactions contemplated by the Merger Agreement. The Merger
Agreement entitles Crescent to a $54 million break-up fee if such
agreement is terminated (i) by either Crescent or the Board of
Directors of the Company if any required approval of the Merger
is not obtained by failure to obtain the required vote of
stockholders, (ii) by Crescent if the Board of Directors of the
Company withdraws its approval or recommendation of the Merger,
or modifies the agreement in a manner adverse to Crescent or
(iii) by the Board of Directors of the Company if it receives a
superior proposal that Crescent does not match or exceed.
Upon consummation of the Merger, an operating company owned
equally by the Company's management team and Crescent Operating,
Inc. (the "Operating Company") will operate the six casino
properties currently operated by the Company pursuant to one or
more leases with Crescent. Each lease will be a 10-year lease
with one, five-year renewal option. Each lease also will be a
triple-net lease, and will provide that the Operating Company is
required to maintain the property in good condition at its
expense during the term of the lease. Each lease provides for
base and percentage rent but the amount of the rent has not yet
been determined.
Immediately prior to the execution of the Merger Agreement,
the Company amended its Rights Agreement dated October 6, 1997
(the "Rights Agreement"), to exclude Crescent and its affiliates
from the definition of Acquiring Person to the extent that it is
a Beneficial Owner (as defined in the Rights Agreement) as a
result of the approval, execution or delivery of, or the
consummation of the transactions contemplated by, the Merger
Agreement, including, without limitation, the purchase by
Crescent of the Redeemable Preferred Stock.
7
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. LONG-TERM DEBT
Long-term debt consists of the following (amounts in thousands):
<TABLE>
December 31, March 31,
1997 1997
---------- -----------
<S> <C> <C>
STATION CASINOS, INC. (EXCLUDING SUNSET STATION):
- ------------------------------------------------
Reducing revolving credit facility, secured by substantially all of the
assets of Palace Station, Boulder Station, Texas Station, Station
Casino St. Charles and Station Casino Kansas City, $330 million
limit at December 31, 1997, due September 2000, interest at a margin
above the bank's prime rate or the Eurodollar Rate (8.21% at
December 31, 1997).................................................. $ 230,000 $ 277,000
9 5/8% senior subordinated notes, payable interest only semi-annually,
principal due June 1, 2003, net of unamortized discount of $6.2
million at December 31, 1997........................................ 186,841 186,248
9 3/4% senior subordinated notes, payable interest only semi-annually,
principal due April 15, 2007, net of unamortized discount of $5.5
million at December 31, 1997........................................ 144,541 -
10 1/8% senior subordinated notes, payable interest only semi-annually,
principal due March 15, 2006, net of unamortized discount of $1.1
million at December 31, 1997........................................ 196,885 196,818
Notes payable to banks and others, collateralized by slot machines,
furniture and equipment, monthly installments including interest
ranging from 7.8% to 8.0% at December 31, 1997...................... 16,710 27,564
Capital lease obligations, collateralized by furniture and equipment.... 18,488 7,703
Other long-term debt.................................................... 16,099 19,630
---------- ----------
Sub-total................................................ 809,564 714,963
SUNSET STATION, INC.:
- ---------------------
$110 million Sunset Station 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
(9.58% at December 31, 1997), due September 2000.................... 110,000 46,000
---------- ----------
Total long-term debt..................................... 919,564 760,963
Current portion of long-term debt....................................... (14,955) (18,807)
---------- ----------
Total long-term debt, less current portion............... $ 904,609 $ 742,156
========== ==========
</TABLE>
In April 1997, the Company completed an offering of $150
million of senior subordinated notes due in April 2007, that rank
pari passu with the Company's existing senior subordinated notes.
The $150 million senior subordinated notes have a coupon rate of
9 3/4% and were priced to yield 10.37% to maturity. The discount
on the $150 million senior subordinated notes is recorded as a
reduction to long-term debt. Proceeds from the offering were
used to pay down amounts outstanding under the reducing revolving
credit facility.
In June 1997, the Company obtained an amendment to the
reducing revolving credit facility (the "Bank Facility"). This
amendment modified the covenant restricting the maximum
consolidated funded debt to EBITDA ratio as follows: 5.75 to 1.00
for the fiscal quarter ended December 31, 1997, 5.75 to 1.00 for
the fiscal quarter ending March 31, 1998, 5.00 to 1.00 for the
fiscal quarter ending June 30, 1998, 4.75 to 1.00 for the fiscal
quarter ending September 30, 1998, 4.50 to 1.00 for the fiscal
quarter
8
<PAGE>
STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. LONG-TERM DEBT (CONTINUED)
ending December 31, 1998, 4.25 to 1.00 for each fiscal quarter
through June 30, 1999, 4.00 to 1.00 for the fiscal quarter ending
September 30, 1999 and 3.75 to 1.00 thereafter. For the quarter
ended December 31, 1997, the Company obtained a one time waiver
modifying the funded debt to EBITDA ratio to a maximum of 5.90 to
1.00. As of December 31, 1997, the Company's funded debt to
EBITDA ratio was 5.80 to 1.00. In addition, in July 1997, the
Company reduced the total amount available under the Bank
Facility by $30 million. As a result, no additional reductions
are required until June 30, 1998, at which time the Bank Facility
will reduce by $22.4 million each fiscal quarter through March
31, 2000.
4. OTHER MATTERS
PREOPENING EXPENSES
Prior to the opening of a facility, all operating expenses,
including incremental salaries and wages, related thereto are
capitalized as preopening expenses. The Company expenses
preopening expenses upon the opening of the related facility. In
June 1997, Sunset Station Hotel & Casino opened. During the
nine months ended December 31, 1997, $10.9 million of preopening
expenses primarily related to Sunset Station were expensed.
EXPIRED OPTION PAYMENTS
In June 1997, $5 million of certain expired option payments
to lease or acquire land for future development, which had
previously been capitalized, were expensed. Such amounts are
included in other income/expense in the accompanying condensed
consolidated statements of operations for the nine months ended
December 31, 1997.
EARNINGS PER SHARE
The Financial Accounting Standards Board has issued
Statement on Financial Accounting Standards ("SFAS") No. 128,
"Earnings Per Share", which is effective for fiscal years ending
after December 15, 1997. This statement replaces primary
earnings per share ("EPS") with basic EPS. No dilution for
potentially dilutive securities is included in basic EPS. This
statement also requires when applying the treasury stock method
for diluted EPS to compute dilution for options and warrants, to
use average share price for the period, rather than the more
dilutive greater of the average share price or end-of-period
share price. The Company will adopt SFAS No. 128 in its fiscal
year 1998 annual financial statements. Management believes the
adoption of SFAS No. 128 will have no impact on the Company's
previously reported earnings per share.
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 NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------- --------------------------
1997 1996 1997 1996
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
NEVADA OPERATIONS:
- ------------------
PALACE STATION
Net revenues........................................ $ 32,314 $ 32,059 $ 95,704 $ 100,559
Operating income.................................... $ 7,087 $ 7,222 $ 21,075 $ 23,407
EBITDA (1).......................................... $ 9,018 $ 9,214 $ 27,232 $ 29,444
BOULDER STATION
Net revenues........................................ $ 34,814 $ 35,904 $ 103,897 $ 105,948
Operating income.................................... $ 9,214 $ 9,054 $ 28,060 $ 27,267
EBITDA (1).......................................... $ 12,063 $ 11,818 $ 36,805 $ 35,285
TEXAS STATION
Net revenues........................................ $ 24,560 $ 19,435 $ 67,217 $ 59,239
Operating income.................................... $ 3,962 $ 476 $ 8,618 $ 2,324
EBITDA (1).......................................... $ 6,228 $ 2,814 $ 15,296 $ 8,153
SUNSET STATION
Net revenues........................................ $ 32,479 $ - $ 74,629 $ -
Operating income ................................... $ 5,661 $ - $ 2,275 $ -
EBITDAR (1)......................................... $ 9,847 $ - $ 21,674 $ -
EBITDA (1).......................................... $ 7,420 $ - $ 16,696 $ -
TOTAL NEVADA OPERATIONS:
Net revenues........................................ $ 124,167 $ 87,398 $ 341,447 $ 265,746
Operating income.................................... $ 25,924 $ 16,752 $ 60,028 $ 52,998
EBITDA (1).......................................... $ 34,729 $ 23,846 $ 96,029 $ 72,882
MISSOURI OPERATIONS:
- --------------------
STATION CASINO ST. CHARLES
Net revenues........................................ $ 29,629 $ 39,209 $ 90,779 $ 120,026
Operating income.................................... $ 2,159 $ 9,221 $ 8,749 $ 27,451
EBITDA (1).......................................... $ 5,441 $ 12,235 $ 18,588 $ 36,317
STATION CASINO KANSAS CITY
Net revenues........................................ $ 37,601 $ - $ 112,595 $ -
Operating loss...................................... $ (77) $ - $ (2,391) $ -
EBITDA (1).......................................... $ 4,534 $ - $ 11,052 $ -
TOTAL MISSOURI OPERATIONS:
Net revenues........................................ $ 67,230 $ 39,209 $ 203,374 $ 120,026
Operating income.................................... $ 2,082 $ 9,221 $ 6,358 $ 27,451
EBITDA (1).......................................... $ 9,975 $ 12,235 $ 29,640 $ 36,317
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(amounts in thousands)
(unaudited)
1. OVERVIEW (CONTINUED)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
----------------------- --------------------------
1997 1996 1997 1996
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
STATION CASINOS, INC. AND OTHER:
- --------------------------------
Net revenues........................................ $ 5,799 $ 7,160 $ 19,988 $ 21,469
Operating loss...................................... $ (3,022) $ (4,437) $ (9,884) $ (12,291)
EBITDA (1).......................................... $ (2,493) $ (3,669) $ (7,905) $ (10,073)
</TABLE>
(1) "EBITDA" consists of operating income plus depreciation and
amortization, including preopening expenses. "EBITDAR" consists of operating
income plus depreciation, amortization, preopening expenses and rent expense.
EBITDA and EBITDAR should not be construed as alternatives to operating income
as an indicator of the Company's operating performance, or as alternatives to
cash provided by operating activities as a measure of liquidity. The Company
has presented EBITDA and EBITDAR 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, amortization, preopening expenses and rent expense.
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO
THREE AND NINE MONTHS ENDED DECEMBER 31, 1996.
Consolidated net revenues increased 47.4% to $197.2 million
for the three months ended December 31, 1997, from $133.8 million
in the prior year. The Company's Nevada Operations contributed
$124.2 million of net revenues for the three months ended
December 31, 1997, an increase of 42.1% over the prior year.
This increase in net revenues is due primarily to the opening of
Sunset Station in June 1997, as well as the continued improvement
at Texas Station. Net revenues at Boulder Station declined 3.0%
due primarily to the opening of Sunset Station on June 10, 1997.
The Company's Missouri Operations contributed $67.2 million of
net revenues for the three months ended December 31, 1997, an
increase of 71.5% over the prior year. This increase in net
revenues is due to the opening of Station Casino Kansas City in
January 1997, offset by a decline of 24.4% in net revenues at
Station Casino St. Charles due to increased competition in the
St. Louis market with the opening of a new hotel/casino in
Maryland Heights in March 1997. For the nine months ended
December 31, 1997, consolidated net revenues increased 38.7% to
$564.8 million, as compared to $407.2 million in the prior year.
The Nevada Operations contributed $341.4 million of net revenues
for the nine months ended December 31, 1997, an increase of $75.7
million over the prior year. The Missouri Operations contributed
$203.4 million of net revenues for the nine months ended December
31, 1997, an increase of $83.3 million over the prior year.
These net improvements are due to the factors noted above.
Consolidated operating income increased 16.0% to $25.0
million for the three months ended December 31, 1997, from $21.5
million in the prior year. Operating income at the Company's
Nevada Operations increased 54.8% to $25.9 million for the three
months ended December 31, 1997, from $16.8 million in the prior
year. Operating income at the Company's Missouri Operations
declined 77.4% to $2.1 million for the three months ended
December 31, 1997, from $9.2 million in the prior year. The
increase in consolidated operating income, together with an
increase in net interest expense of $12.3 million and a decrease
in the income tax provision resulted in net income applicable to
common stock of $1.6 million, or earnings per common share of
$0.05 for the three months ended December 31, 1997. For the nine
months ended December 31, 1997, consolidated operating income
decreased 17.1% to $56.5 million, from $68.2 million in the prior
year. The Nevada Operations generated operating income of $60.0
million, an increase of 13.3% compared to the prior year.
Excluding $10.9 million of preopening expenses primarily related
to the opening of Sunset Station, the Nevada Operations generated
operating income of $70.9 million, an increase of 33.8% over the
prior year. The Missouri Operations generated operating income
of $6.4 million, a decrease of 76.8% due primarily to a decrease
of $18.7 million at Station Casino St. Charles related to
increased competition and an operating loss of $2.4 million at
Station Casino Kansas City. The decline in consolidated
operating income, an increase in net interest expense of $31.7
million, and the expiration of certain option payments to lease
or acquire land for future development resulting in an expense of
$5.0 million, resulted in a net loss applicable to common stock
of $7.9 million, or a loss per common share of $0.22 for the nine
months ended December 31, 1997, compared to net income applicable
to common stock of $22.9 million, or earnings per common share of
$0.65 in the prior year.
CASINO. Casino revenues increased 51.1% to $154.2 million
for the three months ended December 31, 1997, from $102.0 million
in the prior year. For the nine months ended December 31, 1997,
casino revenues increased 39.1% to $436.9 million, from $314.1
million in the prior year. These increases are due to the
opening of Sunset Station in June 1997, the opening of Station
Casino Kansas City in January 1997 and improvements at Texas
Station, offset by a decrease at Station Casino St. Charles due
to the factors noted above.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
Casino expenses increased 60.8% to $73.9 million for the
three months ended December 31, 1997, from $46.0 million in the
prior year. For the nine months ended December 31, 1997, casino
expenses increased 51.9% to $211.5 million, from $139.3 million
in the prior year. These increases in casino expenses are
consistent with the increase in casino revenues noted above. The
casino net profit margin decreased to 52.1% for the three months
ended December 31, 1997, from 54.9% in the prior year. The
Company's Nevada Operations experienced a slight increase in net
casino margin, while the Missouri Operations were negatively
impacted in St. Charles due to the increased competition and
Station Casino Kansas City which has a lower margin due to the
start-up nature of its operations, and its late entry into the
Kansas City market. In addition, the Missouri Operations have a
lower margin than the Company's combined margin, due primarily to
higher gaming tax rates in Missouri as compared to Nevada. For
the nine months ended December 31, 1997, the casino net profit
margin declined to 51.6% from 55.7% in the prior year for the
same reasons as noted above.
FOOD AND BEVERAGE. Food and beverage revenues increased
63.6% to $34.3 million for the three months ended December 31,
1997, from $21.0 million in the prior year. For the nine months
ended December 31, 1997, food and beverage revenues increased
53.9% to $97.9 million, from $63.6 million in the prior year.
These increases are due to the opening of Station Casino Kansas
City and Sunset Station as noted above.
Food and beverage net profit margins improved to 33.6% for
the three months ended December 31, 1997, from 26.0% in the prior
year. For the nine months ended December 31, 1997, food and
beverage net profit margins improved to 30.9%, from 24.9% in the
prior year. These increases in margin are due to improvement at
the Company's Nevada Operations, especially Texas Station,
primarily as a result of continued focus on cost control.
ROOM. Room revenues increased 48.5% to $10.5 million for
the three months ended December 31, 1997, from $7.1 million in
the prior year. For the nine months ended December 31, 1997,
room revenues increased 40.5% to $27.7 million, from $19.7
million in the prior year. These increases are due primarily to
the opening of Station Casino Kansas City and Sunset Station
which added 632 rooms for a total of 2,160 rooms company-wide.
Room occupancy company-wide decreased to 93% from 96%, while the
average daily room rate increased to $52 from $48 during the nine
months ended December 31, 1997.
OTHER. Other revenue increased 1.0% to $12.6 million for
the three months ended December 31, 1997, from $12.4 million in
the prior year. For the nine months ended December 31, 1997,
other revenues increased 17.2% to $41.2 million from $35.2
million in the prior year. These increases are due primarily to
the addition of Station Casino Kansas City and Sunset Station.
Revenues from the Company's slot route business increased 10.4%
to $17.0 million for the nine months ended December 31, 1997.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses ("SG&A") increased 70.0% to $45.5 million
for the three months ended December 31, 1997, from $26.8 million
in the prior year. For the nine months ended December 31, 1997,
SG&A increased 54.7% to $127.4 million, from $82.4 million in the
prior year. These increases are due to the addition of Station
Casino Kansas City and Sunset Station. SG&A as a percentage of
net revenues increased to 23.1% for the three months ended
December 31, 1997, from 20.0% in the prior year. For the nine
months ended December 31, 1997, SG&A as a percentage of net
revenues increased to 22.6% from 20.2% in the prior year. These
increases are due primarily to the new operations at Sunset
Station and Station Casino Kansas City which, as new properties,
tend to have a higher percentage of SG&A to net revenues.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS (CONTINUED)
CORPORATE EXPENSES. Corporate expenses decreased 25.6% to
$3.5 million for the three months ended December 31, 1997, from
$4.7 million in the prior year. For the nine months ended
December 31, 1997, corporate expenses decreased 16.5% to $11.2
million, from $13.4 million in the prior year. Corporate
expenses declined to 1.8% of net revenues for the three months
ended December 31, 1997, from 3.5% in the prior year. For the
nine months ended December 31, 1997, corporate expenses declined
to 2.0% of net revenues from 3.3% in the prior year. These
reductions were the result of management's efforts to lower
corporate expenses.
DEVELOPMENT EXPENSES. The Company incurred no development
expenses during the three months ended December 31, 1997. Such
costs have historically been 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 58.4% to $17.2 million for the three
months ended December 31, 1997, from $10.9 million in the prior
year. For the nine months ended December 31, 1997, depreciation
and amortization increased 62.7% to $50.4 million, from $31.0
million in the prior year. These increases are due primarily to
the addition of Station Casino Kansas City and Sunset Station.
PREOPENING EXPENSES. The Company capitalizes preopening
expenses associated with its construction projects, including
Sunset Station which opened June 10, 1997. These amounts are
expensed upon the opening of the related project. During the
nine months ended December 31, 1997, the Company expensed
preopening expenses of $10.9 million related primarily to Sunset
Station.
INTEREST EXPENSE, NET. Interest costs incurred (expensed
and capitalized) increased 57.9% to $23.7 million for the three
months ended December 31, 1997. For the nine months ended
December 31, 1997 interest costs incurred increased 67.3% to
$68.9 million. This increase is primarily attributable to added
interest costs associated with the 9 3/4% senior subordinated notes
issued by the Company in April 1997, borrowings under the Sunset
Station loan agreement and borrowings under the reducing
revolving credit facility. Effective January 1, 1998, the
Company will stop capitalizing interest on the St. Charles
Expansion Project.
3. LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended December 31, 1997, the
Company's sources of capital included net proceeds of $144.3
million from the issuance of 9 3/4% senior subordinated notes,
which were used to re-pay amounts outstanding under the Company's
reducing revolving bank credit facility, cash flows from
operating activities of $73.3 million, and borrowings under the
Sunset Loan Agreement (as defined herein) of $64.0 million. At
December 31, 1997, the Company had available borrowings of
$100.0 million under its reducing revolving credit facility,
subject to covenant restrictions and $53.7 million in cash and
cash equivalents. Also, in connection with the Merger Agreement,
the Company will issue to Crescent and Crescent has agreed to
purchase up to an aggregate of 115,000 shares of a new series of
preferred stock of the Company at a price of $1,000 per share
(plus accrued dividends) in cash in increments of 5,000 shares
(See Liquidity and Capital Resources - New Series of Preferred
Stock).
During the nine months ended December 31, 1997, total
capital expenditures were approximately $125.4 million, of which
approximately (i) $43.6 million was associated with the
development and construction of Sunset Station, (ii) $31.6
million was associated with the development
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
and construction of the expansion project at Station Casino St.
Charles, (iii) $7.0 million was associated with the acquisition
of land adjacent to Boulder Station, and (iv) $43.2 million was
associated with various other projects, maintenance capital
expenditures and net construction period interest.
The Company's primary capital requirements during the remainder of
fiscal year 1998 are expected to include (i) the payment of
construction contracts payable of approximately $12.5 million as
of December 31, 1997, (ii) maintenance capital expenditures,
(iii) principal and interest payments on indebtedness, (iv)
dividend payments on convertible preferred stock, and (v) general
corporate purposes.
The Company has commenced construction of an expansion
project at Station Casino St. Charles (the "St. Charles Expansion
Project"). As of December 31, 1997, approximately $131.2 million
(excluding construction period interest) had been incurred. As
of December 31, 1997, construction on the project has ceased and
management does not expect that any major construction on the
project will resume before the Merger with Crescent is
consummated (See Note 2 to Condensed Consolidated Financial
Statements). Once the merger is consummated, the Company jointly
with Crescent will determine the scope and timing of the project.
Effective January 1, 1998, the Company will stop capitalizing
interest on the St. Charles Expansion Project.
The Company believes that cash flows from operations,
borrowings under the reducing revolving bank credit facility,
vendor and lease financing of equipment, the Redeemable Preferred
Stock (See Note 2 to Condensed Consolidated Financial Statements)
and existing cash balances will be adequate to satisfy the
Company's anticipated uses of capital during the remainder of
fiscal year 1998. The Company, however, continually is evaluating
its financing needs. If more attractive financing alternatives
become available to the Company, the Company may amend its
financing plans assuming such financing would be permitted under
its existing debt agreements (See "Description of Certain
Indebtedness and Capital Stock") and other applicable agreements,
including the Merger Agreement which requires the Company to
obtain the consent of the other party prior to issuing additional
securities or selling assets.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
BANK FACILITY
The Company's secured, Amended and Restated Reducing
Revolving Loan Agreement, dated as of March 19, 1996, as amended
on June 27, 1997 (the "Bank Facility"), is a reducing revolving
credit facility which provides for borrowings up to an aggregate
principal amount of $330 million as of December 31, 1997. The
Bank Facility is secured by substantially all of the assets of
Palace Station, Boulder Station, Texas Station, Station Casino
Kansas City and Station Casino St. Charles (collectively, the
"Borrowers"). The Company and Southwest Gaming Services, Inc.
guarantee the borrowings under the Bank Facility (collectively
the "Guarantors"). The Bank Facility matures on September 30,
2000. In July 1997, the Company reduced the total amount
available under the Bank Facility by $30 million. As a result,
no additional reductions are required until June 30, 1998 at
which time the Bank Facility will reduce by $22.4 million each
fiscal quarter through March 31, 2000. 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
Borrowers' and the Company's consolidated (exclusive of Sunset
Station) ratio of funded debt to earnings before interest, taxes,
depreciation and amortization ("EBITDA") adjusted for preopening
expenses. As of December 31, 1997, the Borrowers' margin above
the Eurodollar Rate on borrowings under the Bank Facility was
2.25%. Such margin will increase to 2.75% if the maximum funded
debt to EBITDA (adjusted for preopening expenses) ratio is
reached.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
The Bank Facility contains certain financial and other
covenants. These include a maximum funded debt to EBITDA
(adjusted for preopening expenses) ratio for the Borrowers
combined of 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 the
periods March 31, 1996 through June 30, 1998, and 1.50 to 1.00
for periods thereafter, a limitation on indebtedness, and
limitations on capital expenditures. As of December 31, 1997,
the Borrowers funded debt to EBITDA ratio was 2.01 to 1.00 and
the fixed charge coverage ratio for the preceeding four quarters
ended December 31, 1997 was 1.38 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 December 31, 1997, Palace
Station's tangible net worth exceeded the requirement by
approximately $7.9 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 other specified indebtedness, minimum
consolidated tangible net worth requirements (adjusted upwards
for post October 1, 1995 preopening expenses, not to exceed $18
million and for potential losses on disposed or discontinued
assets, not to exceed $30 million), for the Company of $165
million plus 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 and investments. As of
December 31, 1997, the Company's consolidated net worth exceeded
the requirement by approximately $18.5 million. In March and
June 1997, the Company obtained certain amendments to the Bank
Facility in order to enhance its borrowing capacity under the
Bank Facility. As amended, the Bank Facility includes a maximum
funded debt to EBITDA (adjusted for preopening expenses) ratio,
including annualized EBITDA (adjusted for preopening expenses)
for any new venture, as defined, open less than a year, for the
Company on a consolidated basis of 5.75 to 1.00 for the fiscal
quarter ended December 31, 1997, 5.75 to 1.00 for the fiscal
quarter ending March 31, 1998, 5.00 to 1.00 for the fiscal
quarter ending June 30, 1998, 4.75 to 1.00 for the fiscal quarter
ending September 30, 1998, 4.50 to 1.00 for the fiscal quarter
ending December 31, 1998, 4.25 to 1.00 for each fiscal quarter
through June 30, 1999, 4.00 to 1.00 for the fiscal quarter ending
September 30, 1999 and 3.75 to 1.00 thereafter. For the quarter
ended December 31, 1997, the Company obtained a one time waiver
modifying the funded debt to EBITDA ratio to a maximum of 5.90 to
1.00. As of December 31, 1997, the Company's funded debt to
EBITDA ratio was 5.80 to 1.00. Such consolidated calculations
for the Company do not include Sunset Station. 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 governing the senior subordinated
notes.
SENIOR SUBORDINATED NOTES
The Company has $528.2 million, net of unamortized discount
of $12.8 million, of senior subordinated notes outstanding as of
December 31, 1997, $186.8 million of these notes bear interest,
payable semi-annually, at a rate of 9 5/8% per year, $196.9
million of these notes bear interest, payable semi-annually, at a
rate of 10 1/8% per year and $144.5 million of the 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 9 3/4% per year (collectively the
"Notes"). The indentures governing the Notes (the "Indentures")
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 (the Line A Commitment), of
which no amounts were outstanding as of December 31, 1997 and (h)
certain other indebtedness. At December 31, 1997, the Company's
Consolidated Coverage Ratio was 2.01 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 dividends, 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 Indentures 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 LOAN AGREEMENT, SUPPLEMENTAL LOAN AGREEMENT AND SUNSET
OPERATING LEASE
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 America NT&SA"),
Bank of Scotland, Societe Generale and each of the other lenders
party to such agreement, pursuant to which Sunset Station
received a commitment for $110 million to finance the remaining
development and construction costs of Sunset Station. The
Company also entered into an operating lease for certain
furniture, fixtures and equipment with a cost of $40 million to
be subleased to Sunset Station.
The Sunset Loan Agreement includes a first mortgage term
note in the amount of $110 million (the "Sunset Note") which is
non-recourse 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,
and except that the Company has pledged all of the stock of
Sunset Station as security for the Sunset Loan Agreement. As of
December 31, 1997, Sunset Station had borrowed the full $110
million under the Sunset Note. The Sunset Note is to reduce $1.8
million for each fiscal quarter ending March 1998 through
December 1998, $2.3 million for each fiscal quarter ending March
1999 through December 1999, and $2.0 million for the fiscal
quarters ending March 2000 and June 2000 and matures in September
2000. In addition, the Sunset Note is subject to prepayment
subsequent to July 1998 by an amount equal to a specified
percentage of Excess Cash Flow (as defined). The Sunset Note
carries an interest rate of 375 basis points over the Eurodollar
Rate (as defined in the Sunset Loan Agreement). The Sunset Note
is secured by substantially all of the assets of Sunset Station,
including a deed of trust with respect to the real property on
which Sunset Station is situated, a portion of which is subject
to a lease from the Company to Sunset Station, and the remainder
of which property is owned by Sunset Station, and a security
agreement as to all tangible and intangible personal property
including Sunset Station's rights under an operating lease for
certain furniture, fixtures and equipment.
The Sunset Loan Agreement contains certain customary
financial and other covenants (related exclusively to Sunset
Station) including a minimum fixed charge coverage ratio as of
the last day of any
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
full quarter after the opening of Sunset Station of not less than
1.10 to 1.00, a maximum senior funded debt to EBITDA (adjusted
for certain cash contributions or advances by the Company) ratio
after opening of 4.50 to 1.00 for the first full quarter reducing
by 0.25 on certain quarters thereafter to 3.25 to 1.00 for the
tenth quarter and each quarter thereafter, and a minimum net
worth as of any quarter end after opening of not less than $52
million plus 80% of net income (not reduced by net losses), plus
100% of certain additional equity contributions by the Company
and Supplemental Loans (as defined). As of December 31, 1997,
Sunset Station's fixed charge coverage ratio was 2.98 to 1.00 and
the funded debt to EBITDA ratio was 3.76 to 1.00. As of December
31, 1997, Sunset Station's net worth exceed the minimum
requirement by approximately $8.5 million. In addition, the
Sunset Loan Agreement places restrictions on indebtedness and
guarantees, dividends, stock redemptions, mergers, acquisitions,
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"). The Sunset Loan Agreement requires Sunset Station
to draw amounts under the Supplemental Loan Agreement in the
event of the failure of certain financial covenants under the
Sunset Loan Agreement. Loans under this funding commitment may
be drawn down up to $10 million during the first year after
September 30, 1997, up to $10 million during the second year
after such date and up to $5 million during the third year after
such date. The Supplemental Loan Agreement also provides for an
additional, separate funding commitment up to $40 million in
connection with a purchase option for certain furniture, fixtures
and equipment currently financed under the Sunset Operating Lease
(as defined herein). 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 Supplemental Loan
Agreement expires in September 2001. The funding commitments
under the Supplemental Loan Agreement are subject to limitations
imposed by the Indentures and the Bank Facility.
In order to manage the interest rate risk associated with
the Sunset Note, Sunset Station entered into an interest rate
swap agreement with Bank of America NT&SA. This agreement swaps
the variable rate interest pursuant to the Sunset Note to a fixed
rate of 9.58% on $100 million notional amount in December 1997
and then decreases to $95 million in June 1998. The agreement
expires in December 1998. The difference paid or received
pursuant to the swap agreement is accrued as interest rates
change and recognized as an adjustment to interest expense for
the Sunset Note. Sunset Station is exposed to credit risk in the
event of non-performance by the counterparty to the agreement.
The Company believes the risk of non-performance by the
counterparty is minimal.
The Company has also entered into an operating lease for
furniture, fixtures and equipment (the "Equipment") with a cost
of $40 million, dated as of September 25, 1996 (the "Sunset
Operating Lease") between the Company and First Security Trust
Company of Nevada. The Sunset Operating Lease expires in October
2000 and carries a lease rate of 225 basis points above the
Eurodollar Rate. As of December 31, 1997, $35.7 million of this
facility had been drawn and no further draws pursuant to the
lease will be made. 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 Sunset
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 (subject to the limitations on
funding contained in the Supplemental Loan Agreement).
In connection with the Sunset 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 Sunset Operating Lease, and holders
of beneficial interests in the Lessor Trust (the "Holders").
Pursuant to the Participation Agreement, the Holders advanced
funds to the trustee for the purchase by
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
the trustee of, or to reimburse the Company for the purchase, of
the Equipment, which is currently being leased to the Company
under the Sunset Operating Lease, 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, $0.01 par value per share (the "Common
Stock"), 35,306,657 shares of which were issued and outstanding
as of December 31, 1997. Each holder of 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 other
than pursuant to the Rights Plan described below. 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.
Rights Plan
On October 6, 1997, the Company declared a dividend of one
preferred share purchase right (a "Right") for each outstanding
share of Common Stock. The dividend was paid on October 21,
1997. Each Right entitles the registered holder to purchase from
the Company one one-hundredth of a share of Series A Preferred
Stock, par value $0.01 per share ("Preferred Shares") of the
Company at a price of $40.00 per one one-hundredth of a Preferred
Share, subject to adjustment. The Rights are not exercisable
until the earlier of 10 days following a public announcement that
a person or group of affiliated or associated persons have
acquired beneficial ownership of 15% or more of the outstanding
Common Stock ("Acquiring Person") or 10 business days (or such
later date as may be determined by action of the Board of
Directors prior to such time as any person or group of affiliated
persons becomes an Acquiring Person) following the commencement
of, or announcement of an intention to make, a tender offer or
exchange offer, the consummation of which would result in the
beneficial ownership by a person or group of 15% or more of the
outstanding Common Stock. The Rights will expire on October 21,
2007. Acquiring Persons do not have the same rights to receive
Common Stock as other holders upon exercise of the Rights.
Because of the nature of the Preferred Shares' dividend,
liquidation and voting rights, the value of one one-hundredth
interest in a Preferred Share purchasable upon exercise of each
Right should approximate the value of one Common Share. In the
event that any person or group of affiliated or associated
persons becomes an Acquiring Person, the proper provisions will
be made so that each holder of a Right, other than Rights
beneficially owned by the Acquiring Person (which will thereafter
become void), will thereafter have the rights to receive upon
exercise that number of Common Shares having a market value of
two times the exercise price of the Right. In the event that the
Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning
power are sold after a person or group has become an Acquiring
Person, proper provision will be made so that each holder of a
Right will thereafter have the right to receive, upon exercise
thereof, that number of shares of common stock of the acquiring
company which at the time of such transaction will have a market
value of two times the exercise price of the Right. Because of
the characteristics of the Rights in connection with a person or
group of affiliated or associated persons becoming an Acquiring
Person, the Rights may have the effect of making an acquisition
of the Company more difficult and may discourage such an
acquisition.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
Immediately prior to the execution of the Merger Agreement,
the Company amended its Rights Agreement dated October 6, 1997 to
exclude Crescent and its affiliates from the definition of
Acquiring Person to the extent that it is a Beneficial Owner (as
defined in the Rights Agreement) as a result of the approval,
execution or delivery of, or the consummation of the transactions
contemplated by, the Merger Agreement, including, without
limitation, the purchase by Crescent of the Redeemable Preferred
Stock.
PREFERRED STOCK
The Company is authorized to issue up to 5,000,000 shares of
its preferred stock, $0.01 par value per share (the "Preferred
Stock"). As of December 31, 1997, 2,070,000 shares of $3.50
Convertible Preferred Stock (the "Convertible Preferred Stock")
has been issued and are outstanding. 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
Each of the Convertible Preferred Stock shares outstanding,
have 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, 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.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)
NEW SERIES OF PREFERRED STOCK
At the option of the Company, the Company will issue to
Crescent and Crescent has agreed to purchase subject to the
terms, conditions and procedures set forth in the Merger
Agreement up to an aggregate of 115,000 shares of a new series of
preferred stock of the Company (the "Redeemable Preferred Stock")
at a price of $1,000 per share (plus accrued dividends) in cash
in increments of 5,000 shares. The Redeemable Preferred Stock is
convertible at the option of the holder any time after January
16, 1999, unless previously redeemed, into shares of common stock
at a conversion rate of 60.606 shares of Common Stock for each
share of Redeemable Preferred Stock subject to ordinary
antidilution provisions. Crescent must fund the purchase price
for the purchase of shares of Redeemable Preferred Stock on the
10th business day following notice from the Company or, in the
case of a notice to sell 25,000 or more shares of Redeemable
Preferred Stock, the 20th business day following such notice.
The Company may not require Crescent to purchase shares of
Redeemable Preferred Stock more than two times in any 30-day
period. The Company may redeem the Redeemable Preferred Stock at
any time for cash or for common stock of the Company that has a
then market price (determined on the basis of closing prices for
such stock for the 20 trading days immediately preceding the
redemption notice) equal to approximately 111% of the redemption
price for the Redeemable Preferred Shares to be redeemed. Any
such issuance in redemption will be made such that stock held by
each owner of such common stock so issued in excess of 9.9% of
the Company's outstanding common stock will generally be non-
voting common stock. The Redeemable Preferred Stock will have no
voting rights except as required by law. Dividends of $100 per
share of Redeemable Preferred Stock per annum shall accrue
without interest and be payable when, as, and if declared out of
legally available funds on a fully cumulative basis. Unless
written consent from Crescent is received, the Company has agreed
to use the net proceeds from the sale of the Redeemable Preferred
Stock to repay indebtedness under its revolving loan agreement,
borrowings under which were used for acquisitions and master-
planned expansions.
FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. The forward-looking statements in this document are
intended to be subject to the safe harbor protection provided by
Section 21E. All forward-looking statements involve risks and
uncertainties. Although the Company believes that its
expectations are based upon reasonable assumptions within the
bounds of its knowledge of its business and operations, there can
be no assurance that actual results will not materially differ
from its expectations. Factors that could cause actual results
to differ materially from expectations include, among other
things, the Company's competition, the limitations on capital
resources imposed by the Company's Bank Facility and the terms of
the Indentures governing the Company's Notes, the Company's
ability to meet its interest expense and principal repayment
obligations, 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-4 (File No. 333-
30685) (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, 1997, 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.
21
<PAGE>
PART II - OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS --
Poulos/Ahearn Case
- ------------------
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. 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 manufactures, distributors and
casino operators of video poker and electronic slot machines. A
similar suit was filed by Larry Schreier in the United States
District Court of the District of Nevada naming virtually
identical defendants and alleging virtually identical claims.
The cases were transferred to Nevada and consolidated into one
action. The Company and most of the other major hotel-casino
companies, have been named as defendants in the consolidated
action. The lawsuit alleges that the defendants have been
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. Specifically, the
plaintiffs have alleged that the video poker machines and video
slot machines utilized by the defendants are not truly random as
advertised to the public, but are pre-programmed in a predictable
and manipulative manner. The Court has stayed discovery pending
resolution of various motions, including motions to dismiss
pursuant to Rule 12(b)(6) of the Federal Rules of Civil
Procedure.
On or about December 19, 1997, the Court issued formal
Opinions granting in part and denying in part defendants' Motions
to Dismiss. In so doing, the Court ordered plaintiffs to file an
Amended Complaint in accordance with the Court's Orders in
January of 1998. The Company along with all other defendants,
continue to deny the allegations contained in the consolidated
Amended Complaint filed on behalf of plaintiffs. The defendants
have committed to vigorously defend all claims and allegations
contained in the consolidated action.
Anderson Case
- -------------
A suit seeking status as a class action lawsuit was filed by
plaintiff Nicole Anderson, et. al., as class representative, on
September 24, 1997, in the Eastern District of Missouri, Eastern
Division. The lawsuit alleges certain racially based
discriminatory hiring and employment practices at Station Casino
St. Charles. The Company has not yet responded to the complaint.
The Company does not believe the suit has merit and intends to
defend itself vigorously in this suit.
Akin Case
- ---------
On January 16, 1997, the Company's gaming licenses for
Station Casino Kansas City were formally issued for its facility
which is located in a man-made basin filled with water piped in
from the surface of the Missouri River. In reliance on numerous
approvals from the Missouri Gaming Commission specific to the
configuration and granted prior to the formal issuance of its
gaming license, the Company built and opened the Station Casino
Kansas City facility. The licenses issued to the Company and the
resolutions related thereto specifically acknowledge that the
Missouri Gaming Commission had reviewed and approved this
configuration.
On November 25, 1997, the Supreme Court of Missouri ruled,
in a case challenging the gaming licensing of certain operators
located in Maryland Heights, Missouri who compete with Station
Casino St. Charles, that gaming may occur only in artificial
spaces that are contiguous to the surface stream of the Missouri
or Mississippi Rivers. The case was remanded to the trial court
for a factual determination as to whether such competing
operators meet this requirement.
22
<PAGE>
Item 1. Legal Proceedings - (continued)
Based upon this Missouri Supreme Court ruling (the so-called
"Akin Ruling"), the Missouri Gaming Commission attempted to
issue preliminary orders for disciplinary action to all licensees
in Missouri that operate gaming facilities in artificial
basins. These preliminary orders started the hearing process
which allow the affected licensees to demonstrate that they
are infact, continguous to the surface stream of the Missouri or
Mississippi River. The preliminary orders were challendged by the
licensees. The Circuit Court of Cole County has entered writs of
prohibition preventing the Missouri Gaming Commission from
proceeding with such hearings under the Missouri Gaming Commission's
existing procedures. The Missouri Gaming Commission is currently
seeking further review of these writs of prohibition in the
Missouri Supreme Court, which has not yet ruled on the matter.
Further, the Akin case was dismissed by the plaintiffs
without prejudice after the Akin Ruling was entered by the
Missouri Supreme Court, but before any further proceedings on
remand. Therefore, the status of the Akin Ruling is unclear.
On January 16, 1998, Station Casino Kansas City's licenses
were renewed for one year, subject to the satisfactory
resolutions of the issues raised in the Akin Ruling. This renewal
occurred before any writs of prohibition were entered preventing
the Missouri Gaming Commission from proceeding with hearings
concerning Station Casino Kansas City or any other licensees for
alleged non-compliance with the Akin Ruling.
Because of the open questions raised but not answered in the
Akin Ruling, it is not possible to predict what effect the Akin
Ruling or Missouri Gaming Commission's actions at such
relicensing hearing will have on operations at Station Casino
Kansas City.
At this time, based on discussions with Missouri legal
counsel, management believes that it has potentially meritorious
defenses in any lawsuit or administrative action based on the
Akin Ruling.
However, management cannot provide any assurance as to
whether the Station Casino Kansas City facility would be found to
comply with the guidelines described in the Akin Ruling, whether
it would be permitted to modify the facility to comply with such
standards, or whether the Company's legal defenses, legislative
alternatives, or other means available to permit the continued
use of this current configuration would succeed.
Further, it is unclear, in the event of a determination that
the configuration at Station Casino Kansas City does not comply
with the Akin Ruling, whether Station Casino Kansas City would be
able to continue to operate or whether such findings would result
in the possible temporary or permanent closure of Station Casino
Kansas City. The Company cannot provide any assurance that there
would not be a material adverse impact in such an eventuality.
The Company does not believe the Akin Ruling will have a
material adverse impact on the Station Casino St. Charles
operations.
Small Case
- ----------
A class action lawsuit was filed by plaintiff, Stephen B.
Small, et. al., as class representative, on November 28, 1997, in
the United States District Court, Western District of Missouri,
naming four gaming operators in Kansas City, Missouri, including
Kansas City Station Corporation. The lawsuit alleges that the
defendants are conducting gaming operations that are not located
on the Missouri River in violation of certain state and federal
statutes. Management believes that the claims are wholly without
merit and does not expect that the lawsuit will have a material
adverse effect on Station Casinos, Inc.'s financial position or
results of operations.
23
<PAGE>
ITEM 2. CHANGES IN SECURITIES - None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None.
ITEM 5. OTHER INFORMATION - None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits -
Exhibit
Number
-------
27 Financial Data Schedule
(b) Reports on Form 8-K.
On October 9, 1997, the Company filed a current report on Form 8-K
dated October 6, 1997. The Company reported under Item 5 the
declaration of a dividend of one preferred share purchase right
(a "Right") for each outstanding share of common stock of the
Company. The description and terms of the Rights are set forth
in a Rights Agreement dated as of October 6, 1997 between the
Company and Continental Stock Transfer & Trust Company, as Rights
Agent.
24
<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: February 13, 1998 /s/ Glenn C. Christenson
-----------------------------
Glenn C. Christenson,
Executive Vice President,
Chief Financial Officer and
Chief Administrative Officer
(Principal Accounting Officer)
25
<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
NINE MONTHS ENDED DECEMBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000898660
<NAME> STATION CASINOS INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 53,662
<SECURITIES> 0
<RECEIVABLES> 16,455
<ALLOWANCES> 0
<INVENTORY> 4,825
<CURRENT-ASSETS> 96,582
<PP&E> 1,291,425
<DEPRECIATION> 150,157
<TOTAL-ASSETS> 1,324,396
<CURRENT-LIABILITIES> 115,575
<BONDS> 528,267
0
103,500
<COMMON> 353
<OTHER-SE> 187,384
<TOTAL-LIABILITY-AND-EQUITY> 1,324,396
<SALES> 0
<TOTAL-REVENUES> 564,809
<CGS> 0
<TOTAL-COSTS> 308,354
<OTHER-EXPENSES> 50,396
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,597
<INCOME-PRETAX> (3,892)
<INCOME-TAX> (1,384)
<INCOME-CONTINUING> (2,508)
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