Station Casinos reports $11.2 million profit, buys controlling interest in Fertitta Interactive
Las Vegas locals casino operator Station Casinos today reported a profit for the third quarter as revenue increased.
The company also said it’s acquiring a controlling interest in Fertitta Interactive, owner of the newly-licensed Ultimate Gaming/Ultimate Poker online gaming business. The Fertitta family is behind Station Casinos, Ultimate Gaming and Ultimate Gaming’s sister company the Ultimate Fighting Championship. Terms of the deal weren’t immediately disclosed.
Station has 17 locals properties that were part of the old Station Casinos Inc.
The new Station emerged from the prior company’s bankruptcy in June 2011.
Station said third-quarter net revenue increased year-to-year from $282.4 million to $295.7 million and that it earned $11.2 million versus $19.2 million lost in the year-ago quarter.
EBITDAM, a key profitability measure, was $71.7 million, an increase of 3.2 percent. EBITDAM means earnings before interest, taxes, depreciation, amortization and management fees. The EBITDAM growth rate slowed from 15.8 percent in the second quarter.
“Despite a challenging operating environment, we experienced continued improvements in our operating results during the third quarter, and for the third consecutive quarter we experienced gains in both revenue and operating income in all of our major departments,” Marc Falcone, executive vice president and chief financial officer, said in a statement.
Despite the higher revenue, Station executives told analysts they want to boost profit. They said they're hopeful that the locals market, which is marked by a cyclical high level of promotional spending in the form of giveways to gamblers, will return to more normal levels. For Station, such promotional spending increased year-over-year from about $23 million to $24 million.
Despite persistently high unemployment that's now at 11.5 percent locally, Falcone said economic indicators, including tourism, are looking up. This "suggests a further recovery of the local economy," he said.
Besides the Las Vegas locals market, Station has Indian gaming deals, including one to manage the Graton Tribe's casino that is under construction 43 miles from San Francisco. Station expects to start booking revenue from that deal when the property opens in late 2013. The tribe landed $850 million in financing this summer for the project with Station's help.
On the Internet gaming deal for Fertitta Interactive, Station executives said the cash price for the company's 50.1 percent ownership won't markedly change the company's balance sheet. The price will be disclosed next year.
They said ownership of the other half of the company will be divided, with affiliates of the Fertitta family owning about 25 percent and co-founders Tom Breitling and Tim Poster each holding a 12.5 percent stake.
"This acquisition will provide Station the opportunity to capitalize on the global growth of online poker and other online gaming opportunities," Falcone said. "We believe this transaction will be a long-term value driver for Station Casinos."
The Nevada Gaming Commission on Oct. 18 approved a license that allows Ultimate Gaming/Ultimate Poker to participate in Nevada's new intrastate online poker market. Station officials said they expect to launch real-money play in the second quarter of 2013, after final technical testing and regulatory approvals.
Station, like much of the casino industry, is hopeful Congress will approve federal oversight of online poker as it expands on a state-by-state basis. The casino industry generally favors legislation limiting online gaming to player-to-player poker, but such legislation faces stiff competition from states with lotteries contemplating the establishment of online casinos with house-backed games such as slot machines.
"While we prefer online poker be subject to federal legislation, we are in fact prepared to move forward if legislation occurs on a state-by-state basis," Falcone said.