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[STATION CASINOS LOGO]
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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 MARCH 31, 2000
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
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STATION CASINOS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 88-0136443
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2411 West Sahara Avenue, Las Vegas, Nevada
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(Address of principal executive offices)
89102
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(Zip Code)
(702) 367-2411
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Registrant's telephone number, including area code
N/A
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(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 April 28, 2000
- ---------------------------- -----------------------------
Common stock, $.01 par value 40,378,876
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STATION CASINOS, INC.
INDEX
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets (unaudited) -
March 31, 2000 and December 31, 1999 3
Condensed Consolidated Statements of Operations (unaudited) -
Three months ended March 31, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows (unaudited) -
Three months ended March 31, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities 20
Item 3. Defaults Upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
</TABLE>
2
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Part I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATION CASINOS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................................... $ 61,830 $ 73,072
Accounts and notes receivable, net............................................ 10,822 12,346
Inventories .................................................................. 5,140 6,013
Prepaid gaming taxes.......................................................... 9,825 10,035
Prepaid expenses.............................................................. 9,426 8,219
Deferred income tax........................................................... 8,583 10,519
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Total current assets...................................................... 105,626 120,204
Property and equipment, net......................................................... 1,019,381 1,025,753
Land held for development........................................................... 53,006 18,839
Deferred income tax, net............................................................ 16,987 21,823
Other assets, net................................................................... 90,759 89,654
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Total assets.............................................................. $ 1,285,759 $ 1,276,273
=================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............................................. $ 13,089 $ 8,647
Accounts payable.............................................................. 11,228 11,998
Accrued payroll and related................................................... 23,369 25,065
Construction contracts payable................................................ 718 750
Accrued interest payable...................................................... 17,753 12,341
Accrued progressives.......................................................... 8,995 8,877
Accrued expenses and other current liabilities................................ 44,718 50,011
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Total current liabilities................................................. 119,870 117,689
Long-term debt, less current portion................................................ 938,040 933,833
Other long-term liabilities, net.................................................... 10,211 7,950
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Total liabilities......................................................... 1,068,121 1,059,472
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Commitments and contingencies
Temporary equity.................................................................... 27,786 -
Stockholders' equity:
Common stock, par value $.01; authorized 90,000,000 shares;
42,537,071 and 42,455,999 shares issued.................................... 425 424
Treasury stock, 2,173,929 and 778,329 shares, at cost......................... (37,781) (11,862)
Additional paid-in capital.................................................... 258,019 282,294
Deferred compensation - restricted stock...................................... (7,240) (7,432)
Accumulated deficit........................................................... (23,571) (45,907)
Accumulated other comprehensive income........................................ - (716)
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Total stockholders' equity................................................ 189,852 216,801
------------------- -------------------
Total liabilities and stockholders' equity................................ $ 1,285,759 $ 1,276,273
=================== ===================
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
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STATION CASINOS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
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<S> <C> <C>
Operating revenues:
Casino................................................................. $ 208,910 $ 186,124
Food and beverage...................................................... 35,248 36,121
Room................................................................... 11,665 10,744
Other.................................................................. 16,115 14,400
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Gross revenues.................................................... 271,938 247,389
Promotional allowances................................................. (17,095) (17,458)
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Net revenues...................................................... 254,843 229,931
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Operating costs and expenses:
Casino................................................................. 93,118 89,088
Food and beverage...................................................... 21,025 22,419
Room................................................................... 3,914 3,855
Other.................................................................. 8,685 6,988
Selling, general and administrative.................................... 45,830 49,043
Corporate expense...................................................... 7,911 4,825
Depreciation and amortization.......................................... 16,054 17,937
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196,537 194,155
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Operating income............................................................. 58,306 35,776
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Other expense:
Interest expense, net.................................................. (22,407) (21,327)
Merger and related legal costs......................................... - (1,250)
Other.................................................................. (446) (202)
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(22,853) (22,779)
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Income before income taxes and extraordinary item............................ 35,453 12,997
Income tax provision......................................................... (13,117) (4,881)
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Income before extraordinary item............................................. 22,336 8,116
Extraordinary item - loss on early retirement of debt, net of
applicable income tax benefit.......................................... - (10,350)
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Net income (loss)............................................................ 22,336 (2,234)
Preferred stock dividends.................................................... - (1,811)
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Net income (loss) applicable to common stock................................. $ 22,336 $ (4,045)
============== ===============
Basic and diluted earnings (loss) per common share:
Earnings (loss) applicable to common stock, before
extraordinary item:
Basic.............................................................. $ 0.55 $ 0.18
Diluted............................................................ $ 0.53 $ 0.18
Earnings (loss) applicable to common stock:
Basic.............................................................. $ 0.55 $ (0.11)
Diluted............................................................ $ 0.53 $ (0.11)
Weighted average common shares outstanding:
Basic.............................................................. 40,717 35,312
Diluted............................................................ 42,236 35,726
</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>
THREE MONTHS ENDED
MARCH 31,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................................ $ 22,336 $ (2,234)
--------------- ---------------
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization................................................. 16,054 17,937
Amortization of debt discount and issuance costs.............................. 590 679
Loss on early retirement of debt.............................................. - 15,923
Increase (decrease) in deferred income tax.................................... 6,772 (1,543)
Changes in assets and liabilities:
Decrease in accounts and notes receivable, net.............................. 1,524 7,170
(Increase) decrease in inventories and prepaid expenses..................... (124) 519
Decrease in accounts payable................................................ (770) (3,896)
Increase in accrued expenses and other liabilities.......................... 802 3,425
Other, net.................................................................... (1,257) (340)
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Total adjustments................................................... 23,591 39,874
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Net cash provided by operating activities........................... 45,927 37,640
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Cash flows from investing activities:
Capital expenditures.......................................................... (9,839) (23,919)
Proceeds from sale of property and equipment.................................. 1,030 438
Land held for development..................................................... (33,622) -
Decrease in construction contracts payable.................................... (32) (1,323)
Other, net.................................................................... (686) 147
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Net cash used in investing activities............................... (43,149) (24,657)
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Cash flows from financing activities:
Borrowings (payments) under bank facility, net................................ 10,600 (14,000)
Principal payments on notes payable........................................... (2,088) (5,465)
Defeasance of 9 5/8% senior subordinated notes................................ - (201,670)
Purchase of treasury stock.................................................... (25,919) -
Sale of put options........................................................... 2,348 -
Dividends paid on preferred stock............................................. - (1,811)
Exercise of stock options..................................................... 39 -
Other, net.................................................................... 1,000 (475)
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Net cash used in financing activities............................... (14,020) (223,421)
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Cash and cash equivalents:
Decrease in cash and cash equivalents......................................... (11,242) (210,438)
Balance, beginning of period.................................................. 73,072 261,423
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Balance, end of period........................................................ $ 61,830 $ 50,985
=============== ===============
Supplemental cash flow disclosures:
Cash paid for interest, net of amounts capitalized............................ $ 16,453 $ 19,554
Cash paid for income taxes.................................................... $ - $ 1,501
</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-jurisdictional gaming and entertainment enterprise that
currently owns and operates four major hotel/casino properties and two smaller
casino properties in Las Vegas, Nevada, and gaming and entertainment complexes
in St. Charles and 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 the Company and its wholly owned subsidiaries, Palace Station
Hotel & Casino, Inc. ("Palace Station"), Boulder Station, Inc. ("Boulder
Station"), Texas Station, Inc. ("Texas Station"), Sunset Station, Inc.
("Sunset Station"), St. Charles Riverfront Station, Inc. ("Station Casino St.
Charles"), Kansas City Station Corporation ("Station Casino Kansas City"),
Southwest Gaming Services, Inc. ("SGSI"), and Tropicana Station, Inc., the
operator of the Wild Wild West Gambling Hall & Hotel ("Wild Wild West"). The
Company also owns a 50% interest in Town Center Amusements, Inc., d.b.a.
Barley's Casino & Brewing Company ("Barley's"). All significant intercompany
accounts and transactions have been eliminated.
The accompanying condensed consolidated financial statements included
herein have been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. In the opinion of management, all adjustments (which include normal
recurring adjustments) necessary for a fair presentation of the results for the
interim periods have been made. The results for the three months ended March 31,
2000 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 December 31, 1999.
Certain amounts in the three months ended March 31, 1999 condensed
consolidated financial statements have been reclassified to be consistent with
the current year presentation. These reclassifications had no effect on the
previously reported net loss.
6
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STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
2. LONG-TERM DEBT
Long-term debt consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
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<S> <C> <C>
Amended and restated reducing revolving credit facility, $380.8 million
limit at March 31, 2000, due September 30, 2003, interest at a
margin above the bank's prime rate or the Eurodollar Rate (7.78%
at March 31, 2000)................................................... $ 188,400 $ 177,300
Secured term loan facility, $199.5 million limit at March 31, 2000,
due December 31, 2005, interest at 2.50% above the Eurodollar
Rate (8.60% at March 31, 2000)....................................... 199,500 200,000
8 7/8% senior subordinated notes, interest payable semi-annually,
principal due December 1, 2008....................................... 199,900 199,900
9 3/4% senior subordinated notes, interest payable semi-annually,
principal due April 15, 2007, net of unamortized discount of $4.6
million at March 31, 2000............................................ 145,435 145,326
10 1/8% senior subordinated notes, interest payable semi-annually,
principal due March 15, 2006, net of unamortized discount of $0.9
million at March 31, 2000............................................. 197,115 197,087
Other long-term debt, collateralized by various assets, including slot
machines, furniture and equipment, and land, monthly installments
including interest ranging from 8.11% to 9.00% at March 31, 2000...... 20,779 22,867
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Total long-term debt............................................ 951,129 942,480
Current portion of long-term debt....................................... (13,089) (8,647)
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Total long-term debt, less current portion...................... $ 938,040 $ 933,833
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</TABLE>
In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new secured term loan facility
(the "Term Loan") (collectively, "the Amended Bank Facility"). The Amended Bank
Facility is secured by substantially all of the assets of Palace Station,
Boulder Station, Texas Station, Sunset Station, Station Casino St. Charles and
Station Casino Kansas City (the "Borrowers"). The proceeds from the Term Loan
were used to repay the Company's existing $75.0 million secured term loan
facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
provides for borrowings up to an aggregate principal amount of $199.5 million at
March 31, 2000. The Term Loan matures on December 31, 2005 and amortizes in
installments of $0.5 million on each fiscal quarter end from March 31, 2000
until and including December 31, 2004 and of $47.5 million on each fiscal
quarter end thereafter. The interest rate on the Term Loan is 2.50% above the
Eurodollar Rate. The Term Loan contains financial covenants substantially
identical to the covenants in the indentures governing the Company's senior
subordinated notes.
In March 2000, the Company exercised its right to increase the
Revolving Facility by $50.0 million. The Revolving Facility provides for
borrowings up to an aggregate principal amount of $380.8 million at March 31,
2000. The Revolving Facility matures on September 30, 2003. The availability
under the Revolving Facility will reduce by $14.0 million on each of March 31,
2001 and June 30, 2001; by $17.5 million on each fiscal quarter end until and
including September 30, 2002; by $30.6 million on each fiscal quarter end until
and including June 30, 2003; and by $173.4 million on September 30, 2003.
Borrowings under the Revolving Facility bear interest at a margin above the
Alternate Base Rate or the Eurodollar Rate (each, as defined in the Revolving
Facility), as selected by the Company. The margin above such rates, and the fee
on the unfunded portions of the Revolving Facility, will vary quarterly based on
the Company's combined consolidated ratio of debt to EBITDA (each, as defined in
the Revolving Facility).
7
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STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
As of March 31, 2000, the Borrowers' margin above the Eurodollar Rate on
borrowings under the Revolving Facility was 1.63% and will reduce to 1.50% on
May 16, 2000. The maximum margin for Eurodollar Rate borrowings is 2.75%. The
maximum margin for Alternate Base Rate borrowings is 1.50%. As of March 31,
2000, the fee for the unfunded portion of the Revolving Facility was 40 basis
points and will reduce to 35 basis points on May 16, 2000.
The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of March 31,
2000, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.46 to
1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended March 31, 2000 was 3.11 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of March 31, 2000, Palace Station's tangible net worth exceeded the
requirement by approximately $9.6 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 Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 4.85 to 1.00 on March 31, 2000 and reducing quarterly to 4.00 to 1.00
on September 30, 2001. Other covenants limit prepayments of indebtedness or rent
(including, subordinated debt other than refinancings meeting certain criteria),
limitations on asset dispositions, limitation on dividends, limitations on
indebtedness, limitations on investments and limitations on capital
expenditures. The Revolving Facility also prohibits the Company from holding
excess cash and cash equivalents. As of March 31, 2000, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.59 to 1.00. The Company
has pledged the stock of all of its subsidiaries except Kansas City Station
Corporation and St. Charles Riverfront Station, Inc. and has agreed to pledge
the stock of the latter two subsidiaries upon regulatory approval (which is
expected to be obtained).
In December 1998, the Company completed an offering of $199.9
million of senior subordinated notes due in December 2008 that have equal
priority with the Company's other senior subordinated notes. The $199.9
million senior subordinated notes bear interest payable semi-annually, at a
rate of 8 7/8% per year (the "8 7/8% Notes"). At December 31, 1998, the
Company had deposited the net proceeds from the sale of the 8 7/8% Notes and
a portion of the funds borrowed under the Amended Bank Facility in a separate
trust account with the trustee under the indenture relating to the 9 5/8%
senior subordinated notes (the "9 5/8% Notes") to redeem and to pay accrued
interest and redemption premiums related to the 9 5/8% Notes on the
redemption date. The redemption occurred on January 4, 1999. The Company
recorded an extraordinary charge of $10.4 million (net of applicable tax
benefit) to reflect the write-off of the unamortized debt discount,
unamortized loan costs and the premium to redeem the 9 5/8% Notes.
3. EQUITY
The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of March 31, 2000, the Company had purchased 2.2
million shares at a cost of $37.8 million.
During the quarter ended March 31, 2000, the Company sold put
options on 1.5 million shares of its Common Stock. The Company has the option
to settle in cash or shares of Common Stock. The proceeds from the sale of
the put options of $2.3 million have been recorded in additional paid-in
capital. As of March 31, 2000, the Company's potential obligation of $27.8
million to buy back 1.5 million shares of its Common Stock has been charged
to additional paid-in capital and reflected as temporary equity on the
condensed consolidated balance sheet. On April 27, 2000, options on 750,000
shares expired unexercised. The remaining 750,000 options expire later in
fiscal 2000.
8
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STATION CASINOS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. OTHER MATTERS
GREEN VALLEY PROJECT
A 50/50 joint venture between the Company and GCR Gaming, LLC has
proposed to build a new resort/casino in Henderson, Nevada. Construction has
commenced and is expected to be completed in the fourth quarter of 2001. The
estimated construction cost of this project is $270 to $280 million. The
project is expected to be funded with total equity contributions from the
partners of approximately $80 million and third party financing for the
remainder. If third party financing cannot be obtained or is insufficient to
fund the construction costs, the Company and GCR Gaming, LLC would be
obligated to contribute amounts necessary to finance the construction and
opening of the project.
UNITED AUBURN INDIAN COMMUNITY
On October 12, 1999, the Company announced that it has entered into
a Development Services Agreement and a Management Agreement with the United
Auburn Indian Community (the "UAIC"). Subject to the receipt of certain
governmental approvals, as well as voter approval of a proposed amendment to
the California constitution, the Company and the UAIC intend to develop a
gaming and entertainment facility on 49 acres, approximately seven miles
north of Interstate 80, in Placer County, California, near Sacramento. Voter
approval of the proposed amendment to the California constitution was
received in March 2000, however, there can be no assurances when or if the
necessary government approvals will be received. The scope and the timing of
this project have yet to be determined.
LAND HELD FOR DEVELOPMENT
In addition to the Green Valley Project, the Company has purchased or
has options to purchase an additional 151 acres of land for two additional
gaming sites in the Las Vegas Valley which will be used for future development.
The Rhodes Ranch site consists of two parcels totaling 83 acres, located at the
intersection of Durango Road and the Southern Beltway/I-215 located in the
southwest quadrant of Las Vegas. The Boulder/Tropicana site is a 68-acre site
consisting of two parcels at the intersection of Boulder Highway and Tropicana
Avenue in eastern Las Vegas. The Company is leasing (with an option to purchase)
34 acres of the site and has entered into an option to purchase the adjacent
34-acre parcel. The Company paid $30.2 million for the land mentioned above and
will make combined lease and option payments of $1.6 million per year. The
Company has no immediate plans to develop these sites.
5. SUBSEQUENT EVENTS
On April 19, 2000, the Company announced that it had secured a
gaming site in North Las Vegas. The site is a 34-acre parcel near the
intersection of Martin Luther King Jr. Drive and Craig Road in North Las
Vegas, Nevada. The Company has entered into a long-term ground lease with an
option to purchase the property. The parcel is already entitled for gaming.
As part of the transaction, the Company also placed a deed restriction
prohibiting casino gaming on an 18-acre parcel, approximately 1.5 miles east
of this site, that was previously entitled for gaming. The Company is
currently evaluating the size, scope and timing of this project. In order to
maintain its gaming entitlements, the Company would be required to complete
the facility prior to the end of 2002.
9
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
1. OVERVIEW
The following table highlights the results of operations for the Company and its
subsidiaries (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, PERCENT
2000 1999 CHANGE
----------- ------------ ------
<S> <C> <C> <C>
NET REVENUES - TOTAL $ 254,843 $ 229,931 10.8%
Nevada Operations (a) 160,271 141,189 13.5%
Missouri Operations (a) 82,477 78,356 5.3%
Other (a) 12,095 10,386 16.5%
OPERATING INCOME (LOSS) - TOTAL $ 58,306 $ 35,776 63.0%
Nevada Operations (a) 47,903 32,478 47.5%
Missouri Operations (a) 17,066 7,956 114.5%
Other (a) (6,663) (4,658) (43.0%)
OPERATING MARGIN - TOTAL 22.9% 15.6%
Nevada Operations (a) 29.9% 23.0%
Missouri Operations (a) 20.7% 10.2%
CASH FLOWS FROM:
Operating activities $ 45,927 $ 37,640 22.0%
EBITDA (b) - total $ 74,360 $ 53,713 38.4%
Nevada Operations (a) 57,953 42,013 37.9%
Missouri Operations (a) 22,236 15,683 41.8%
Other (a) (5,829) (3,983) (46.3%)
EBITDA, AS ADJUSTED FOR THE
SUNSET EQUIPMENT LEASE (c) - TOTAL $ 74,360 $ 55,698 33.5%
Nevada Operations (a) 57,953 43,998 31.7%
</TABLE>
(a) The Nevada Operations include the accounts of: Palace Station, Boulder
Station, Texas Station and Sunset Station. The Missouri Operations include the
accounts of: Station Casino St. Charles and Station Casino Kansas City. Other
includes the operations of Wild Wild West, the Company's Investment in Barley's,
Southwest Gaming and Corporate expense.
(b) EBITDA consists of operating income plus depreciation and amortization. The
Company believes that in addition to cash flows and net income, EBITDA is a
useful financial performance measurement for assessing the operating performance
of the Company. Together with net income and cash flows, EBITDA provides
investors with an additional basis to evaluate the ability of the Company to
incur and service debt and incur capital expenditures. To evaluate EBITDA and
the trends it depicts, the components should be considered. The impact of
interest, taxes, depreciation and amortization, each of which can significantly
affect the Company's results of operations and liquidity and should be
considered in evaluating the Company's operating performance, cannot be
determined from EBITDA. Further, EBITDA does not represent net income or cash
flows from operating, financing and investing activities as defined by generally
accepted accounting principles ("GAAP") and does not necessarily indicate cash
flows will be sufficient to fund cash needs. It should not be considered as an
alternative to net income, as an indicator of the Company's operating
performance or to cash flows as a measure of liquidity. In addition, it should
be noted that not all gaming companies that report EBITDA or adjustments to such
measures may calculate EBITDA, or such adjustments in the same manner as the
Company, and therefore, the Company's measure of EBITDA may not be comparable to
similarly titled measures used by other gaming companies.
(c) EBITDA, as adjusted for the Sunset equipment lease consists of EBITDA
(described above) plus the rent related to the Sunset Station equipment lease.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
2. RESULTS OF OPERATIONS
CONSOLIDATED NET REVENUES
The increase in consolidated net revenues for the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999 is due to
increasing revenues at all of the Company's properties, with the exception of
Station Casino St. Charles which declined 2.2%. Increased revenues at the Nevada
Operations are partially a result of the completed master-planned expansion at
Texas Station, which was completed in February 1999. In addition, revenues at
the Nevada Operations increased due to the introduction of the Boarding Pass
player rewards program in April 1999, which makes it more convenient for
customers to redeem points earned from gaming activity at any of the Nevada
Operations. Net revenues at Station Casino Kansas City increased 9.8%.
OPERATING INCOME/OPERATING MARGIN
Consolidated operating income improved by $22.5 million in the three
months ended March 31, 2000 as compared to the three months ended March 31,
1999, with operating income at all of the Company's properties increasing by at
least 30%. The increases at the Nevada Operations are attributed to the same
factors affecting consolidated net revenues discussed above and due to a
reduction in operating costs. The increases at the Missouri Operations are
primarily due to significant improvement in operations at both Station Casino
St. Charles and Station Casino Kansas City. Operating income at Station Casino
St. Charles increased significantly despite a slight decrease in revenues due to
a reconfiguration of the gaming operations which transferred all gaming
activities from the riverboat to the barge. The new configuration is much more
efficient from a cost perspective than the two facility layout. Also, included
in prior year was $1.4 million of costs related to ongoing dredging requirements
and costs related to low-water levels at Station Casino St. Charles as compared
to $0.7 million in current year.
Consolidated operating margin improved in the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999, due to the
operating margin at the Missouri Operations improving 10.5 percentage points and
the Nevada Operations improving 6.9 percentage points.
The following table highlights the various sources of revenues and
expenses for the Company as compared to the prior period (dollars in thousands,
unaudited):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------- PERCENT
2000 1999 CHANGE
----------- ------------ -------
<S> <C> <C> <C>
Casino revenues $ 208,910 $ 186,124 12.2%
Casino expenses 93,118 89,088 4.5%
Margin 55.4% 52.1%
Food and beverage revenues $ 35,248 $ 36,121 (2.4%)
Food and beverage expenses 21,025 22,419 (6.2%)
Margin 40.4% 37.9%
Room revenues $ 11,665 $ 10,744 8.6%
Room expenses 3,914 3,855 1.5%
Margin 66.4% 64.1%
Other revenues $ 16,115 $ 14,400 11.9%
Selling, general and administrative $ 45,830 $ 49,043 (6.6%)
Percent of net revenues 18.0% 21.3%
Corporate expense $ 7,911 $ 4,825 64.0%
Percent of net revenues 3.1% 2.1%
</TABLE>
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CASINO. Casino revenues increased for the three months ended
March 31, 2000 as compared to the three months ended March 31, 1999 as a result
of the same factors affecting consolidated net revenues discussed above. The
casino profit margin increased to 55.4% for the three months ended March 31,
2000 from 52.1% for the three months ended March 31, 1999 with all properties
improving their margin with the exception of Station Casino St. Charles which
remained consistent for both periods.
FOOD AND BEVERAGE. Food and beverage revenues for the three months
ended March 31, 2000 decreased 2.4% over food and beverage revenues for the
three months ended March 31, 1999. This decrease in food and beverage revenues
is primarily due to decreases in food covers at all of the properties. In
addition, food and beverage revenues at Station Casino St. Charles were down 36%
during the quarter due primarily to the construction disruption caused by the
casino reconfiguration.
Food and beverage net profit margins increased to 40.4% for the three
months ended March 31, 2000 from 37.9% in the three months ended March 31, 1999.
This increase in margin is due to improvement at the Nevada Operations,
primarily as a result of continued focus on cost control, purchasing
efficiencies, as well as selected menu price increases. The increase in margin
at the Nevada Operations was offset by a decrease at Station Casino St. Charles
primarily due to the construction disruption mentioned above.
ROOM. Room revenues for the three months ended March 31, 2000 increased
8.6% over room revenues for the three months ended March 31, 1999. The increase
in room revenues is primarily due to the average daily room rate at Palace
Station increasing 20.9% over prior year and smaller increases at the other
Nevada properties. The average daily room rate increased to $59 in the three
months ended March 31, 2000 as compared to $54 in the three months ended March
31, 1999.
The Company-wide room occupancy decreased to 88% in the three months
ended March 31, 2000 as compared to 91% in the three months ended March 31, 1999
due to the Company increasing room rates at the Nevada properties. The decrease
at the Nevada properties was partially offset by an increase in occupancy at
Station Casino Kansas City.
SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). As a percent of net
revenues, SG&A decreased to 18.0% in the three months ended March 31, 2000, as
compared to 21.3% for the three months ended March 31, 1999. This decrease is
due primarily to the fine tuning of operations at Sunset Station and Station
Casino Kansas City. In the Company's experience, when a new property opens, SG&A
as a percent of net revenues is higher than normal, and reduces as the
property's operations mature. Also, due to the fixed cost nature of some of
these expenses, they decrease on a percentage basis as the Company continues to
increase revenue.
CORPORATE EXPENSE. Corporate expense as a percent of net revenues
increased to 3.1% in the three months ended March 31, 2000 as compared to
2.1% in the three months ended March 31, 1999. The Company has increased its
corporate infrastructure and spending on Information Technology and Human
Resources as it continues to lay the foundation for future growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased
10.5% in the three months ended March 31, 2000 to $16.1 million as compared to
$17.9 million in the three months ended March 31, 1999. This decrease is
primarily due to the write down of assets at Station Casino St. Charles in the
fourth quarter of 1999 and a portion of the original equipment at Boulder
Station and Station Casino Kansas City became fully depreciated in fiscal 1999
and January 2000, respectively. This decrease was offset by an increase at
Sunset Station due to the purchase of various equipment leases in October 1999.
INTEREST EXPENSE. Interest costs incurred (expensed and capitalized)
increased 3.7% to $22.7 million for the three months ended March 31, 2000, from
$21.9 million in the prior year. This increase is due to an increase of $10.8
million in total long-term debt from the prior year.
OTHER. During the three months ended March 31, 1999, the Company
recorded an extraordinary charge of $10.4 million (net of applicable tax
benefit) to reflect the write-off of the unamortized debt
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
discount, unamortized loan costs and the premium to redeem the 9 5/8% senior
subordinated notes, which were repaid on January 4, 1999.
3. LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 2000, the Company generated
cash flows from operating activities of $45.9 million. At March 31, 2000, the
Company had total available borrowings of $580.3 million under the Amended Bank
Facility, of which $387.9 million was directly outstanding and $4.8 million was
reserved for the potential payment of an outstanding letter of credit. Total
available borrowings will reduce each quarter in accordance with the terms of
the Amended Bank Facility (see "Description of Certain Indebtedness and Capital
Stock-Amended Bank Facility"). The Company also had $61.8 million in cash and
cash equivalents.
During the three months ended March 31, 2000, total capital
expenditures were approximately $9.8 million, of which approximately (i) $1.1
million was associated with the expansion project at Texas Station, (ii) $1.6
million was associated with the reconfiguration of the Station Casino St.
Charles facility to a more efficient layout, and (iii) $7.1 million was
associated with maintenance capital expenditures and various other projects.
The Company's primary capital requirements during the remainder of
fiscal year 2000 are expected to include (i) the remaining costs of the
expansion project at Texas Station, estimated to cost approximately $55 million,
(ii) equity contributions to the proposed Green Valley Ranch project expected to
be approximately $40 million, (iii) strategic land purchases throughout the Las
Vegas area, (iv) opportunistic repurchases of the Company's common stock, (v)
maintenance capital expenditures, and (vi) principal and interest payments on
indebtedness.
The Company believes that cash flows from operations, borrowings under
the Amended Bank Facility (see Note 2), 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 2000. The Company, however, continually
is evaluating its financing needs. If more attractive financing alternatives or
expansion, development or acquisition opportunities 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.
FUTURE DEVELOPMENT
GREEN VALLEY PROJECT
A 50/50 joint venture between the Company and GCR Gaming, LLC has
proposed to build a new resort/casino in Henderson, Nevada. Construction has
commenced and is expected to be completed in the fourth quarter of 2001. The
estimated construction cost of this project is $270 to $280 million. The
project is expected to be funded with total equity contributions from the
partners of approximately $80 million and third party financing for the
remainder. If third party financing cannot be obtained or is insufficient to
fund the construction costs, the Company and GCR Gaming, LLC would be
obligated to contribute amounts necessary to finance the construction and
opening of the project.
UNITED AUBURN INDIAN COMMUNITY
On October 12, 1999, the Company announced that it has entered into
a Development Services Agreement and a Management Agreement with the United
Auburn Indian Community (the "UAIC"). Subject to the receipt of certain
governmental approvals, as well as voter approval of a proposed amendment to
the California constitution, the Company and the UAIC intend to develop a
gaming and entertainment facility on 49 acres, approximately seven miles
north of Interstate 80, in Placer County, California, near Sacramento. Voter
approval of the proposed amendment to the California constitution was received
in March 2000, however, there can be no assurances when or if the necessary
government approvals will be received. The scope and the timing of this
project have yet to be determined.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LAND HELD FOR DEVELOPMENT
In addition to the Green Valley Project, the Company has purchased or
has options to purchase an additional 151 acres of land for two additional
gaming sites in the Las Vegas Valley which will be used for future development.
The Rhodes Ranch site consists of two parcels totaling 83 acres, located at the
intersection of Durango Road and the Southern Beltway/I-215 located in the
southwest quadrant of Las Vegas. The Boulder/Tropicana site is a 68-acre site
consisting of two parcels at the intersection of Boulder Highway and Tropicana
Avenue in eastern Las Vegas. The Company is leasing (with an option to purchase)
34 acres of the site and has entered into an option to purchase the adjacent
34-acre parcel. The Company paid $30.2 million for the land mentioned above and
will make combined lease and option payments of $1.6 million per year. The
Company has no immediate plans to develop these sites.
On April 19, 2000, the Company announced that it had secured a
gaming site in North Las Vegas. The site is a 34-acre parcel near the
intersection of Martin Luther King Jr. Drive and Craig Road in North Las
Vegas, Nevada. The Company has entered into a long-term ground lease with an
option to purchase the property. The parcel is already entitled for gaming.
As part of the transaction, the Company also placed a deed restriction
prohibiting casino gaming on an 18-acre parcel, approximately 1.5 miles east
of this site, that was previously entitled for gaming. The Company is
currently evaluating the size, scope and timing of this project. In order to
maintain its gaming entitlements, the Company would be required to complete
the facility prior to the end of 2002.
The Company's capital requirements in 2000 could also include amounts
necessary to fund the proposed development of the project with the United Auburn
Indian Community to the extent development of such project is commenced in 2000.
In addition, the Company has in the past, and may in the future, make
acquisitions and enter into joint ventures on an opportunistic basis. While the
Company has not entered into any agreement with respect to any such future
acquisition or joint venture other than as disclosed in this report, the
Company's capital requirements in 2000 may include amounts necessary to permit
the Company to pursue such expansion activities.
DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK
AMENDED BANK FACILITY
In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new secured term loan facility
(the "Term Loan") (collectively, "the Amended Bank Facility"). The Amended Bank
Facility is secured by substantially all of the assets of Palace Station,
Boulder Station, Texas Station, Sunset Station, Station Casino St. Charles and
Station Casino Kansas City (the "Borrowers"). The proceeds from the Term Loan
were used to repay the Company's existing $75.0 million secured term loan
facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
provides for borrowings up to an aggregate principal amount of $199.5 million at
March 31, 2000. The Term Loan matures on December 31, 2005 and amortizes in
installments of $0.5 million on each fiscal quarter end from March 31, 2000
until and including December 31, 2004 and of $47.5 million on each fiscal
quarter end thereafter. The interest rate on the Term Loan is 2.50% above the
Eurodollar Rate. The Term Loan contains financial covenants substantially
identical to the covenants in the indentures governing the Company's senior
subordinated notes.
In March 2000, the Company exercised its right to increase the
Revolving Facility by $50.0 million. The Revolving Facility provides for
borrowings up to an aggregate principal amount of $380.8 million at March 31,
2000. The Revolving Facility matures on September 30, 2003. The availability
under the Revolving Facility will reduce by $14.0 million on each of March 31,
2001 and June 30, 2001; by $17.5 million on each fiscal quarter end until and
including September 30, 2002; by $30.6 million on each fiscal quarter end until
and including June 30, 2003; and by $173.4 million on September 30, 2003.
Borrowings under the Revolving Facility bear interest at a margin above the
Alternate Base Rate or the Eurodollar
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Rate (each, as defined in the Revolving Facility), as selected by the Company.
The margin above such rates, and the fee on the unfunded portions of the
Revolving Facility, will vary quarterly based on the Company's combined
consolidated ratio of debt to EBITDA (each, as defined in the Revolving
Facility). As of March 31, 2000, the Borrowers' margin above the Eurodollar Rate
on borrowings under the Revolving Facility was 1.63% and will reduce to 1.50% on
May 16, 2000. The maximum margin for Eurodollar Rate borrowings is 2.75%. The
maximum margin for Alternate Base Rate borrowings is 1.50%. As of March 31,
2000, the fee for the unfunded portion of the Revolving Facility was 40 basis
points and will reduce to 35 basis points on May 16, 2000.
The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of March 31,
2000, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.46 to
1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended March 31, 2000 was 3.11 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of March 31, 2000, Palace Station's tangible net worth exceeded the
requirement by approximately $9.6 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 Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 4.85 to 1.00 on March 31, 2000 and reducing quarterly to 4.00 to 1.00
on September 30, 2001. Other covenants limit prepayments of indebtedness or rent
(including, subordinated debt other than refinancings meeting certain criteria),
limitations on asset dispositions, limitation on dividends, limitations on
indebtedness, limitations on investments and limitations on capital
expenditures. The Revolving Facility also prohibits the Company from holding
excess cash and cash equivalents. As of March 31, 2000, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.59 to 1.00. The Company
has pledged the stock of all of its subsidiaries except Kansas City Station
Corporation and St. Charles Riverfront Station, Inc. and has agreed to pledge
the stock of the latter two subsidiaries upon regulatory approval (which is
expected to be obtained).
SENIOR SUBORDINATED NOTES
The Company has $542.4 million, net of unamortized discount of $5.5
million, of senior subordinated notes outstanding as of March 31, 2000, $198
million of these notes bear interest, payable semi-annually, at a rate of
10 1/8% per year, $150 million of these notes bear interest, payable
semi-annually, at a rate of 9 3/4% per year and $199.9 million of these notes
bear interest, payable semi-annually, at a rate of 8 7/8% per year
(collectively the "Notes"). The indentures governing the Notes (the
"Indentures") contain certain customary financial and other covenants which
limit the Company and its subsidiaries' ability to incur additional debt and
to pay dividends. At March 31, 2000, the Company's Consolidated Coverage
Ratio (as defined) was 1.70 to 1.00. The Indentures provide that the Company
may not incur additional indebtedness, other than specified types of
indebtedness, unless the Consolidated Coverage Ratio is at least 2.00 to
1.00. As a result, the covenant limits the Company's ability to incur
additional indebtedness for borrowings under the Amended Bank Facility not to
exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined) for the four most recent quarters, plus $15 million. The limitation
on the incurrence of additional indebtedness and dividend restrictions in the
Indentures significantly restrict 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.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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"), 42,537,071 shares
of which were issued and 2,173,929 shares were held in treasury as of March 31,
2000. 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 right to
receive upon exercise that number of shares of Common Stock 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.
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 June
14, 1999, the Company redeemed all 2,070,000 shares of its $3.50 Convertible
Preferred Stock in exchange for 6,741,632 shares of the Company's Common Stock.
The Board of Directors, without further action by the holders of Common 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
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
rights that could adversely affect the rights of the holders of Common 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.
TREASURY STOCK
The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of March 31, 2000, the Company had purchased 2.2
million shares at a cost of $37.8 million.
PUT OPTIONS
During the quarter ended March 31, 2000, the Company sold put
options on 1.5 million shares of its Common Stock. The Company has the option
to settle in cash or shares of Common Stock. The proceeds from the sale of
the put options of $2.3 million have been recorded in additional paid-in
capital. As of March 31, 2000, the Company's potential obligation of $27.8
million to buy back 1.5 million shares of its Common Stock has been charged
to additional paid-in capital and reflectd as temporary equity on the
condensed consolidated balance sheet. On April 27, 2000, options on 750,000
shares expired unexercised. The remaining 750,000 options expire later in
fiscal 2000.
FORWARD-LOOKING STATEMENTS
When used in this report and elsewhere by management from time to time,
the words "believes", "anticipates", and "expects" and similar expressions are
intended to identify forward-looking statements with respect to the financial
condition, results of operations and the business of the Company and its
subsidiaries including the expansion, development and acquisition projects,
legal proceedings and employee matters of the Company and its subsidiaries.
Certain important factors, including but not limited to, competition from other
gaming operations, leverage, construction risks, the inherent uncertainty and
costs associated with litigation, and licensing and other regulatory risks,
could cause the Company's actual results to differ materially from those
expressed in the Company's forward-looking statements. Further information on
potential factors which could affect the financial condition, results of
operations and business of the Company and its subsidiaries including, without
limitation, the expansion, development and acquisition projects, legal
proceedings and employee matters of the Company and its subsidiaries are
included in the filings of the Company with the Securities and Exchange
Commission. 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.
17
<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.
POULOS/AHEARN CASE
On April 26, 1994, a suit seeking status as a class action lawsuit was
filed by plaintiff, William H. Poulos, et al., as class representative, 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 District 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 Complaint was filed, naming
William H. Poulos, et. al, as plaintiff. Defendants filed a motion to dismiss.
On August 15, 1996, the Schreier lawsuit was dismissed with leave to amend. On
September 27, 1996, Schreier filed an Amended Complaint. Defendants filed
motions to dismiss the Amended Complaint. In December 1996, the Court
consolidated the Poulos/Ahearn, the Schreier, and a third case not involving the
Company and ordered all pending motions be deemed withdrawn without prejudice,
including Defendants' Motions to Dismiss the Amended Complaints. The plaintiffs
filed a Consolidated Amended Complaint on February 13, 1997. On or about
December 19, 1997, the Court issued formal opinions granting in part and denying
in part the defendants' motion 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. Accordingly, plaintiffs amended their complaint and filed it
with the United States District Court for the District of Nevada in February
1998. The Company and all other defendants continue to deny the allegations
contained in the amended complaint filed on behalf of plaintiffs. The plaintiffs
are seeking compensatory, special, consequential, incidental, and punitive
damages in unspecified amounts. The defendants have committed to vigorously
defend all claims and allegations contained in the consolidated action. The
parties have fully briefed the issues regarding class certification, which are
currently pending before the court. The Company does not expect that the
lawsuits will have a material adverse effect on the Company's financial position
or results of operations.
STEPHEN B. 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 for the Western District of Missouri, naming four gaming operators in
Kansas City, Missouri, including Kansas City Station Corporation. The lawsuit
alleged that the defendants are conducting gaming operations that are not
located on the Missouri River, in violation of certain state and federal
statutes. The plaintiff also sought compensatory, special, consequential, and
incidental damages in unspecified amounts. On September 1, 1998, the United
States District Court granted Kansas City Station Corporation's motion to
dismiss the lawsuit. On February 16, 1999, the plaintiff served the defendants
with a notice of appeal of the federal court dismissal. On February 15, 2000,
the United States Court of Appeals for the Eighth Circuit affirmed the United
States District Court's dismissal of the federal lawsuit. On October 30, 1998,
the plaintiff filed a similar lawsuit in
18
<PAGE>
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
the Circuit Court of Cole County, Missouri. The lawsuit alleged that the
operators were conducting illegal games of chance prior to December 3, 1998, the
effective date of a Constitutional amendment passed by Missouri voters on
November 3, 1998, legalizing gaming facilities within 1,000 feet of the main
channel of the Mississippi and Missouri Rivers. On February 9, 1999, the Cole
County Circuit Court granted Kansas City Station Corporation's motion to dismiss
the lawsuit. On February 19, 1999, the plaintiff served the defendants with a
notice of appeal of the state court dismissal. Management believes that the
plaintiff's claims are without merit and does not expect that the lawsuit will
have a material adverse effect on the Company's financial position or results of
operations.
19
<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
--------
4.1 Facility Increase Global Document to Third Amended and Restated
Reducing Revolving Loan Agreement dated as of March 24, 2000
27 Financial Data Schedule
(b) Reports on Form 8-K - None.
20
<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: May 12, 2000 /s/ Glenn C. Christenson
--------------------------
Glenn C. Christenson,
Executive Vice President,
Chief Financial Officer, and
Chief Administrative Officer
(Principal Accounting Officer)
21
<PAGE>
EXHIBIT 4.1
FACILITY INCREASE GLOBAL DOCUMENT
Reference is hereby made to that certain Third Amended and
Restated Reducing Revolving Loan Agreement dated as of August 25, 1999 among
Palace Station Hotel & Casino, Inc., Boulder Station, Inc., Texas Station, Inc.,
St. Charles Riverfront Station, Inc., Kansas City Station Corporation and Sunset
Station, Inc. (collectively, the "Borrowers"), Station Casinos, Inc. ("Parent")
(but only for the purpose of making the covenants set forth in Articles 8 and 9
of such Loan Agreement), the Lenders party thereto, Societe Generale, as
Documentation Agent, Bank of Scotland, as Co-Agent, and Bank of America, N.A.,
as Administrative Agent (the "Administrative Agent") (as heretofore amended, the
"Loan Agreement"). Capitalized terms used but not defined herein are used with
the meanings set forth for those terms in the Loan Agreement.
R E C I T A L S
A. Pursuant to Section 2.13 of the Loan Agreement, by letter dated
February 8, 2000 forwarded to the Lenders by the Administrative Agent by its
letter dated February 17, 2000, Borrowers requested a Facility Increase of
$50,000,000. In response to that request, three (3) existing Lenders agreed to
increase their respective aggregate Commitments by the following amounts:
- Bank of America, N.A. $ 5,000,000
("Bank of America")
- Bank One, N.A. $ 3,571,428
("Bank One")
- Wells Fargo Bank, N.A. $20,714,286
("Wells Fargo")
In addition, the following new Lender agreed to join the Loan
Agreement with its aggregate Commitments as follows:
- Credit Lyonnais Los Angeles Branch $20,714,286
("Credit Lyonnais")
Accordingly, the requested Facility Increase of $50,000,000 has been
agreed upon by Bank of America, Bank One, Wells Fargo and Credit Lyonnais
(collectively, the "Increasing Lenders").
1
<PAGE>
B. There are two (2) Commitments under the Loan Agreement: the Line A
Commitment and the Line B Commitment. As of immediately prior to the Facility
Increase, the amounts thereof were as follows:
- Line A Commitment $72,000,000
- Line B Commitment $258,750,000
Pursuant to the Loan Agreement, the Facility Increase of $50,000,000
will be applied to the Line B Commitment, and will therefore result in the
Line B Commitment being $308,750,000 as of the date hereof. Pursuant to
Section 2.6 of the Loan Agreement, on March 31, 2001 and each following
Reduction Date, the Line B Commitment (and eventually the Line A Commitment)
will be reduced by the applicable Reduction Amount.
C. The Loan Agreement requires that each Lender hold the same Pro Rata
Share of the Line A Commitment and the Line B Commitment. Section 2.13 of the
Loan Agreement obligates the Lenders in connection with a Facility Increase to
make such assignments and purchases of the Commitments as may be necessary to
maintain the same Pro Rata Share of the Commitments. Because the Facility
Increase is being implemented on a non-pro rata basis by the existing Lenders
(including the joinder of a new Lender), it will be necessary for all of the
Lenders to make assignments and purchases of the Commitments among the Lenders
to result in the same Pro Rata Share of the Line A Commitment and Line B
Commitment being held by each Lender.
D. As of the date hereof, the following Loans and Letters of Credit are
outstanding under the Loan Agreement:
- Line A Loans - $-0-
- Line B Loans - $198,000,000
- Letter of Credit - $ 4,800,000
(under Line B
Commitment)
The Letter of Credit referred to above is No. LC 3017345 dated July
23, 1999 in favor of Mercantile Bank, N.A. (the "Outstanding Letter of
Credit").
2
<PAGE>
E. Borrowers, the Administrative Agent, the Increasing Lenders and the
Lenders desire to execute and deliver this Facility Increase Global Document in
order to:
- Implement the Facility Increase described above;
- Add Credit Lyonnais as an additional Lender;
- Effect such assignments and purchases of the Commitments by the
Lenders to result in each Lender holding the same Pro Rata of the
Line A Commitment and Line B Commitment; and
- Provide for various payments among the Lenders in connection with
the foregoing.
F. Under Section 13.1 of the Loan Agreement, the Administrative
Agent is appointed as agent of the Lenders for purposes incidental to the
provisions of the Loan Agreement as determined by the Administrative Agent.
The Administrative Agent has determined that execution and delivery of this
Facility Increase Global Document as agent on behalf of the Lenders (OTHER
THAN the Increasing Lenders) to effect the assignments and purchases agreed
upon in Section 2.13 of the Loan Agreement is so incidental.
A G R E E M E N T
Borrowers, the Administrative Agent, the Increasing Lenders and the
Lenders (acting through the Administrative Agent pursuant to Section 13.1 of
the Loan Agreement) hereby agree as follows:
1. CONFIRMATION OF FACILITY INCREASE. A Facility Increase in the
amount of $50,000,000 is hereby confirmed, effective as of the effective date
(the "Effective Date") of this Facility Increase Global Document. As of the
Effective Date, the Line B Commitment is confirmed, subject to Sections 2.5
and 2.6, at $308,750,000. Borrowers acknowledge that (a) pursuant to Section
2.6 of the Loan Agreement, the Line B Commitment shall be reduced on March
31, 2001 and each subsequent Reduction Date by the applicable Reduction
Amount and (b) no further Facility Increases are available under Section 2.13
of the Loan Agreement.
3
<PAGE>
2. JOINDER OF NEW LENDER. Credit Lyonnais hereby joins as of the
Effective Date the Loan Agreement as a Lender and agrees to be obligated as a
Lender thereunder, and under each other Loan Document, with Commitments and
Pro Rata Share as follows:
- Line A Commitment $ 3,917,081
- Line B Commitment $16,797,205
- Pro Rata Share of Line A
Commitment and Line B
Commitment 5.440390282%
, in each case as set forth in Schedule 1.1A in the form of EXHIBIT A to this
Facility Increase Global Document.
Credit Lyonnais expressly assumes its Pro Rata Share of its
obligations as a Lender with respect to the Outstanding Letter of Credit.
Credit Lyonnais acknowledges that (a) it has received copies of the Loan
Agreement and all other Loan Documents, (b) it has received copies of such
financial and other information furnished to the Lenders under ARTICLE 10 of
the Loan Agreement as it has requested of Borrowers, (c) it is acquiring its
interest in the rights and obligations of a Lender under the Loan Agreement
directly from Borrowers, and not from any other Lender or the Administrative
Agent and (d) it has made its own credit evaluation with respect to the
obligations of Borrowers under the Loan Agreement and is not relying on any
express or implied representations of any Lender or the Administrative Agent.
Credit Lyonnais shall pay to the Administrative Agent the amount set forth
opposite its name in EXHIBIT B to this Facility Increase Global Document,
which represents its Pro Rata Share of the Line B Loans outstanding as of the
Effective Date. Such amount shall be paid by the Administrative Agent to the
other Lenders in accordance with EXHIBIT B.
3. INCREASE OF COMMITMENTS OF CERTAIN EXISTING LENDERS. Bank of
America, Bank One and Wells Fargo each hereby agrees to assume the increased
amounts of their respective Pro Rata Shares of the Line A Commitment and Line
B Commitment as is set forth in SCHEDULE 1.1A in the form of EXHIBIT A to
this Facility Increase Global Document, which gives effect to the Facility
Increase. Bank of America, Bank One and Wells Fargo shall each pay to the
Administrative Agent the amount set forth opposite its name in EXHIBIT B to
this Facility Increase Global Document, which represents its incremental Pro
Rata Share of the Line B Loans outstanding as of the Effective Date. Such
amount shall be paid by the Administrative Agent to the other Lenders in
accordance with EXHIBIT B.
4. ASSIGNMENTS AND PURCHASES OF COMMITMENTS. Each of the Lenders
(the "Existing Lenders"), other than Credit Lyonnais, hereby makes as of the
4
<PAGE>
Effective Date such assignments and purchases of its respective Pro Rata
Share of the Line A Commitment and Line B Commitment as are necessary to
result in the Pro Rata Shares of the Line A Commitment and Line B Commitment
as is set forth in SCHEDULE 1.1A in the form of Exhibit A to this Facility
Increase Global Document. The provisions of the Commitments Assignment and
Acceptance (Exhibit A to the Loan Agreement) shall apply to such assignments
and purchases, which provisions are incorporated herein by this reference.
Such assignments and purchases shall be effected by payment/receipt by each
Lender of the amounts set forth in EXHIBIT B to this Facility Increase Global
Document.
5. CONDITIONS PRECEDENT. The effectiveness of this Facility Increase
Global Document shall be conditioned upon receipt by the Administrative Agent
of all of the following:
(a) Counterparts of this Facility Increase Global Document
executed by Borrowers, the Administrative Agent and the
Increasing Lenders;
(b) Written consents of each of the Sibling Guarantors to the
execution, delivery and performance hereof in the form
of EXHIBIT C to this Facility Increase Global Document;
(c) Line A Notes and Line B Notes executed by Borrowers in
favor of each Lender in the amounts of their respective
Pro Rata Shares of the Line A Commitment and Line B
Commitment;
(d) A Certificate of the Secretary of Borrowers certifying that
the attached resolutions of their respective Boards of
Directors authorizing the Facility Increase have been
duly adopted and remain in effect;
(e) The payments required to be made by the Increasing Lenders
and the purchasing Lenders pursuant to Paragraphs 2, 3 and
4 above; and
(f) Such other assurances, certificates, documents, consents or
opinions as the Administrative Agent or the Lenders
reasonably may require.
6. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and
warrant that no Default or Event of Default has occurred and remains
continuing.
5
<PAGE>
7. CONSENT OF PARENT. The execution of this Amendment by Parent
shall constitute its consent, in its capacity as guarantor under the Parent
Guaranty, to this Facility Increase Global Document.
8. CONFIRMATION. In all other respects, the terms of the Loan
Agreement and the other Loan Documents are hereby confirmed.
6
<PAGE>
IN WITNESS WHEREOF, Borrowers, the Administrative Agent and Credit
Lyonnais have executed this Facility Increase Global Document as of March 24,
2000 by their duly authorized representatives.
PALACE STATION HOTEL & CASINOS, INC.
BOULDER STATION, INC.
TEXAS STATION, INC.
ST. CHARLES RIVERFRONT STATION, INC.
KANSAS CITY STATION CORPORATION
SUNSET STATION, INC.
By: ------------------------------
Glenn C. Christenson
Senior Vice President
STATION CASINOS, INC.
By: ------------------------------
Glenn C. Christenson
Executive Vice President and
Chief Financial Officer
BANK OF AMERICA, N.A., as
Administrative Agent
By: ------------------------------
Janice Hammond
Vice President
BANK OF AMERICA, N.A., as a Lender
By: ------------------------------
------------------------------
[Printed Name and Title]
7
<PAGE>
BANK ONE, N.A., as a Lender
By: ------------------------------
------------------------------
[Printed Name and Title]
WELLS FARGO BANK, N.A., as a Lender
By: ------------------------------
------------------------------
[Printed Name and Title]
CREDIT LYONNAIS LOS ANGELES BRANCH,
as a Lender
By: ------------------------------
Dianne M. Scott
First Vice President and Manager
Credit Lyonnais Los Angeles Branch
515 South Flower Street, 22nd Floor
Los Angeles, California 90071
Attention: Steven Bradley
Vice President
Telephone: (213) 362-5956
Telecopier: (213) 623-3437
8
<PAGE>
Exhibit A to Facility Increase Global Document
SCHEDULE 1.1A
<TABLE>
<CAPTION>
- --------------------------- ---------------------------------------- -------------------------------------------
Lender Line A Commitment Line B Commitment
- --------------------------- ---------------------------------------- -------------------------------------------
Amount Pro Rata Share Amount Pro Rata Share
- --------------------------- ------------------ --------------------- -------------------- ----------------------
<S> <C> <C> <C> <C>
Bank of America 13,454,497.68 18.686802362% 57,695,502.26 18.686802362%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Societe Generale 8,934,996.72 12.409717663% 38,315,003.28 12.409717663%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Bank of Scotland 7,147,997.37 9.927774130% 30,652,002.63 9.927774130%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
ABN AMRO Bank 4,467,498.36 6.204858831% 19,157,501.64 6.204858831%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Bank One, N.A. 5,142,857.03 7.142856993% 22,053,570.97 7.142856993%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Wells Fargo Bank 8,384,579.36 11.645249114% 35,954,706.64 11.645249114%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
CIBC Inc. 3,573,998.69 4.963887085% 15,326,001.31 4.963887085%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Bank Austria Creditanstalt 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Bank of Hawaii 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
BankBoston 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
First Security Bank 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Summit Bank 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Hibernia National Bank 2,680,499.02 3.722915299% 11,494,500.99 3.722915299%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
CIT Group/ Equipment 893,499.67 1.240971766% 3,831,500.33 1.240971766%
Financing
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Credit Lyonnais, Los 3,917,081.00 5.440390282% 16,797,205.00 5.440390282%
Angeles Branch
- --------------------------- ------------------- --------------------- -------------------- ---------------------
Totals $72,000,000.00 100.000000000% $308,750,000.00 100.000000000%
- --------------------------- ------------------- --------------------- -------------------- ---------------------
</TABLE>
9
<PAGE>
Exhibit B to Facility Increase Global Document
LENDER PAYMENTS AND RECEIPTS
LINE B OUTSTANDING PRINCIPAL
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------ ----------------------------- ---------------------------
LENDER PAY RECEIVE
- ------------------------------------------------------ ----------------------------- ---------------------------
Bank of America $2,534,471.45
- ------------------------------------------------------ ----------------------------- ---------------------------
ABN Amro Bank $1,810,336.74
- ------------------------------------------------------ ----------------------------- ---------------------------
Bank Austria Creditanstalt $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
Bank of Hawaii $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
Bank of Scotland $2,896,538.79
- ------------------------------------------------------ ----------------------------- ---------------------------
Bank One $0.29
- ------------------------------------------------------ ----------------------------- ---------------------------
BankBoston $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
CIBC $1,448,269.40
- ------------------------------------------------------ ----------------------------- ---------------------------
CIT Group/Equipment Financing $362,067.35
- ------------------------------------------------------ ----------------------------- ---------------------------
Credit Lyonnais $10,499,953.24
- ------------------------------------------------------ ----------------------------- ---------------------------
First Security Bank $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
Hibernia National Bank $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
Societe Generale $3,620,673.48
- ------------------------------------------------------ ----------------------------- ---------------------------
Summit Bank $1,086,202.04
- ------------------------------------------------------ ----------------------------- ---------------------------
Wells Fargo Bank $8,689,616.50
- ------------------------------------------------------ ----------------------------- ---------------------------
Totals $19,189,569.74 $19,189,569.74
- ------------------------------------------------------ ----------------------------- ---------------------------
</TABLE>
10
<PAGE>
Exhibit C to Facility Increase Global Document
CONSENT OF SIBLING GUARANTORS
Reference is hereby made to that certain Third Amended and Restated
Reducing Revolving Loan Agreement dated as of August 25, 1999 among Palace
Station Hotel & Casino, Inc., Boulder Station, Inc., Texas Station, Inc., St.
Charles Riverfront, Inc., Kansas City Station Corporation and Sunset Station
(collectively, the "Borrowers"), Station Casinos, Inc. ("Parent") (but only
for the purpose of making the covenants set forth in Articles 8 and 9 of the
Loan Agreement (as defined below)), the Lenders party thereto, Societe
Generale, as Documentation Agent, Bank of Scotland, as Co-Agent, and Bank of
America, N.A., as Administrative Agent, (as heretofore amended, the "Loan
Agreement"). Capitalized terms not otherwise defined herein shall have the
meanings set forth in the Loan Agreement.
Each of the undersigned hereby consents to the execution, delivery
and performance by Borrowers of the Facility Increase Global Document in
connection with the Loan Agreement.
Each of the undersigned represents and warrants to the
Administrative Agent and the Lenders that the Sibling Guaranty remains in
full force and effect in accordance with its terms.
Dated: March 24, 2000
GREEN VALLEY STATION, INC. SOUTHWEST GAMING SERVICES, INC.
By: ------------------------------ By: ------------------------------
Glenn C. Christenson Blake L. Sartini
Vice President and Secretary
Chief Financial Officer
TROPICANA STATION, INC. SOUTHWEST SERVICES, INC.
By: ------------------------------ By: ------------------------------
Glenn C. Christenson Blake L. Sartini
Senior Vice President Secretary
-11-
<PAGE>
SUNSET STATION LEASING COMPANY, LLC
By: ------------------------------
Glenn C. Christenson
Senior Vice President
-12-
<TABLE> <S> <C>
<PAGE>
<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 THREE
MONTHS ENDED MARCH 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 61,830
<SECURITIES> 0
<RECEIVABLES> 10,822
<ALLOWANCES> 0
<INVENTORY> 5,140
<CURRENT-ASSETS> 105,626
<PP&E> 1,274,383
<DEPRECIATION> (255,002)
<TOTAL-ASSETS> 1,285,759
<CURRENT-LIABILITIES> 119,870
<BONDS> 938,040
0
0
<COMMON> 425
<OTHER-SE> 189,427
<TOTAL-LIABILITY-AND-EQUITY> 1,285,759
<SALES> 0
<TOTAL-REVENUES> 254,843
<CGS> 0
<TOTAL-COSTS> 126,742
<OTHER-EXPENSES> 16,054
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,407
<INCOME-PRETAX> 35,453
<INCOME-TAX> 13,117
<INCOME-CONTINUING> 22,336
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,336
<EPS-BASIC> .55
<EPS-DILUTED> .53
</TABLE>
