-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dozh10DNVeM21SQvRzvqjwTiYg5xDemtheuY7E2JUrj/SU28pveZwss7t8TpX2su Ei9JEferMH3NIAtkPhM4Ww== 0000898660-96-000007.txt : 19960813 0000898660-96-000007.hdr.sgml : 19960813 ACCESSION NUMBER: 0000898660-96-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960812 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: STATION CASINOS INC CENTRAL INDEX KEY: 0000898660 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880136443 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12037 FILM NUMBER: 96607717 BUSINESS ADDRESS: STREET 1: 2411 W. SAHARA AVENUE CITY: LAS VEGAS STATE: NV ZIP: 89102 BUSINESS PHONE: 702-221-6731 MAIL ADDRESS: STREET 1: P.O. BOX 295000 CITY: LAS VEGAS STATE: NV ZIP: 89126 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM______TO _____ Commission file number 000-21640 --------- STATION CASINOS, INC. --------------------- (Exact name of registrant as specified in its charter) Nevada 88-0136443 ------ ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2411 West Sahara Avenue, Las Vegas, Nevada ------------------------------------------ (Address of principal executive offices) 89102 ----- (Zip Code) (702) 367-2411 -------------- Registrant's telephone number, including area code N/A --- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at July 31,1996 - ---------------------------- --------------------------- Common stock, $.01 par value 35,318,057 1 STATION CASINOS, INC. INDEX PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets (unaudited)- 3 June 30, 1996 and March 31, 1996 Condensed Consolidated Statements of Operations (unaudited)- 4 Three months ended June 30, 1996 and 1995 Condensed Consolidated Statements of Cash Flows (unaudited)- 5 Three months ended June 30, 1996 and 1995 Notes to Condensed Consolidated Financial Statements (unaudited) 6 Item 2. Management's Discussion and Analysis of Financial Condition and 7 Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings 17 Item 2. Changes in Securities 18 Item 3. Defaults Upon Senior Securities 18 Item 4. Submission of Matters to a Vote of Security Holders 18 Item 5. Other Information 18 Item 6. Exhibits and Reports on Form 8-K 18 Signature 19 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATION CASINOS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (amounts in thousands, excepts share data) (unaudited)
June 30, March 31, 1996 1996 --------- ---------- ASSETS CURRENT ASSETS: Cash and cash equivalents......................... $ 59,762 $114,868 Accounts and notes receivable, net................ 6,464 5,151 Inventories....................................... 2,366 2,299 Prepaid expenses and other........................ 14,211 11,121 -------- -------- TOTAL CURRENT ASSETS........................... 82,803 133,439 Property and equipment, net......................... 701,470 616,211 Land held for development........................... 26,415 28,934 Other assets, net................................... 55,307 48,730 -------- -------- TOTAL ASSETS................................... $865,995 $827,314 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt................. $ 23,062 $ 23,256 Accounts payable.................................. 10,706 11,091 Accrued payroll and related....................... 11,148 11,519 Construction contracts payable.................... 49,480 27,879 Accrued interest payable.......................... 7,465 6,875 Accrued expenses and other current liabilities.... 16,816 16,706 -------- -------- TOTAL CURRENT LIABILITIES...................... 118,677 97,326 Long-term debt, less current portion................ 434,543 441,742 Deferred income taxes, net.......................... 13,183 9,776 ------- ------- TOTAL LIABILITIES.............................. 566,403 548,844 ------- ------- COMMITMENTS AND CONTINGENCIES (NOTE 2) STOCKHOLDERS' EQUITY: Preferred stock, par value $.01; authorized 5,000,000 shares; 2,070,000 and 1,800,000 convertible preferred shares issued and outstanding..................................... 103,500 90,000 Common stock, par value $.01; authorized 90,000,000 shares; 35,318,057 and 35,303,346 shares issued and outstanding................................. 353 353 Additional paid-in capital........................ 167,451 167,623 Deferred compensation - restricted stock.......... (1,665) (1,811) Retained earnings................................. 29,953 22,305 -------- -------- TOTAL STOCKHOLDERS' EQUITY...................... 299,592 278,470 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY..... $865,995 $827,314 ======== ========
The accompanying notes are in integral part of these condensed consolidated financial statements. 3 STATION CASINOS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (amounts in thousands, except per share data) (unaudited)
THREE MONTHS ENDED JUNE 30, 1996 1995 -------- -------- OPERATING REVENUES: Casino............................................ $ 104,660 $ 71,584 Food and beverage................................. 21,166 13,305 Room.............................................. 6,444 5,182 Other............................................. 11,301 9,236 --------- -------- Gross revenues................................. 143,571 99,307 Less promotional allowances....................... (8,131) (5,171) --------- -------- Net revenues................................... 135,440 94,136 --------- -------- OPERATING COSTS AND EXPENSES: Casino............................................ 45,314 29,987 Food and beverage................................. 16,085 10,329 Room.............................................. 2,558 2,035 Other............................................. 5,795 6,457 Selling, general and administrative............... 28,522 20,310 Corporate expenses................................ 4,213 3,524 Development expenses.............................. 317 982 Depreciation and amortization..................... 9,823 7,478 --------- -------- 112,627 81,102 --------- -------- OPERATING INCOME..................................... 22,813 13,034 --------- -------- OTHER INCOME (EXPENSE): Interest expense, net............................. (8,293) (7,436) Other............................................. 61 (68) --------- --------- (8,232) (7,504) ---------- --------- INCOME BEFORE INCOME TAXES........................... 14,581 5,530 Income tax provision................................. (5,122) (2,019) --------- --------- NET INCOME........................................... 9,459 3,511 PREFERRED STOCK DIVIDENDS............................ (1,811) - --------- --------- NET INCOME APPLICABLE TO COMMON STOCK................ $ 7,648 $ 3,511 ========= ========= EARNINGS PER COMMON SHARE............................ $ 0.22 $ 0.12 ========= ========= WEIGHTED AVERAGE COMMON SHARES OUTSTANDING........... 35,308 30,132 ========= =========
The accompanying notes are in integral part of these condensed consolidated financial statements. 4 STATION CASINOS,INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (amounts in thousands) (unaudited)
THREE MONTHS ENDED JUNE 30, 1996 1995 ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income................................................................. $ 9,459 $ 3,511 ---------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .......................................... 9,823 7,478 Increase in deferred income taxes....................................... 3,498 320 Changes in assets and liabilities: (Increase) decrease in accounts and notes receivable, net.............. (1,313) 2,768 Increase in inventories and prepaid expenses and other................. (3,248) (2,110) Decrease in accounts payable........................................... (385) (3,234) Increase (decrease) in accrued expenses and other current liabilities.. 68 (2,191) Other, net.............................................................. 2,016 476 ---------- ---------- Total adjustments............................................. 10,459 3,507 ---------- ---------- Net cash provided by operating activities........................ 19,918 7,018 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures.................................................... (102,696) (16,853) Increase in construction contracts payable.............................. 21,601 122 Other, net.............................................................. 2,945 (1,176) ---------- ---------- Net cash used in investing activities............................ (78,150) (17,907) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings under bank facility, net..................................... - 9,000 Proceeds from the issuance of notes payable............................. - 10,994 Principal payments on notes payable..................................... (8,396) (6,433) Proceeds from the issuance of convertible preferred stock............... 13,095 - Dividends paid.......................................................... (1,550) - Other, net.............................................................. (23) - ---------- ---------- Net cash provided by financing activities........................ 3,126 13,561 ---------- ---------- CASH AND CASH EQUIVALENTS: (Decrease) increase in cash and cash equivalents........................ (55,106) 2,672 Balance, beginning of period............................................ 114,868 16,961 ---------- ----------- Balance, end of period.................................................. $ 59,762 $ 19,633 ========== =========== SUPPLEMENTAL CASH FLOW DISCLOSURES: Cash paid for interest, net of amounts capitalized...................... $ 7,216 $ 11,817 Cash paid for income taxes.............................................. $ 250 $ 1,768 Property and equipment purchases financed by debt....................... $ 361 $ 2,159
The accompanying notes are in integral part of these condensed consolidated financial statements. 5 STATION CASINOS, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION Station Casinos, Inc. (the "Company"), a Nevada Corporation, is an established multi-jurisdicitional gaming enterprise that currently owns and operates casino properties in Las Vegas, Nevada and St. Charles, Missouri. The Company also owns and provides slot route management services in Southern Nevada and Louisiana. Additionally, the Company is constructing two new casino properties, one in Las Vegas and one in Kansas City, Missouri. The accompanying condensed consolidated financial statements include the accounts of Station Casinos, Inc. and its wholly-owned subsidiaries, Palace Station Hotel & Casino, Inc. ("Palace Station"), Boulder Station, Inc. ("Boulder Station"), St. Charles Riverfront Station, Inc. ("St. Charles Station"), Texas Station, Inc. ("Texas Station"), Kansas City Station Corporation ("Kansas City Station"), Sunset Station, Inc. ("Sunset Station") and the Southwest Companies. The Southwest Companies include Southwest Services, Inc., Southwest Gaming Services, Inc. ("SGSI"), Southwest Gaming of Louisiana and SGSI's wholly-owned subsidiaries, Tropicana Caboose, Inc. and Nellis Caboose, Inc. Material intercompany accounts and transactions have been eliminated. The accompanying condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of the results for the interim periods have been made. The results for the three months ended June 30, 1996 are not necessarily indicative of results to be expected for the full fiscal year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1996. RECLASSIFICATIONS Certain reclassifications have been made to the financial statements for the three months ended June 30, 1995 to conform to the financial statement presentation for the three months ended June 30, 1996. These reclassifications had no effect on net income. 2. COMMITMENTS AND CONTINGENCIES The Company has entered into various option agreements whereby the Company has the option to acquire land for the development of existing and potential new gaming projects with purchase prices totaling $28.4 million. In consideration for these options, the Company has paid or placed in escrow $2.3 million at June 30, 1996, all of which would be forfeited should the Company not exercise its option to acquire the land. 6 MANAGEMENT'S DISUCSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. 1. OVERVIEW The following table highlights the results of operations for the Company and its subsidiaries (amounts in thousands):
THREE MONTHS ENDED JUNE 30, 1996 1995 -------- ------- (UNAUDITED) NEVADA OPERATIONS: - ----------------- PALACE STATION Revenues: Casino....................................... $ 25,230 $ 24,847 Food and beverage............................ 6,399 6,272 Room......................................... 4,241 3,918 Other........................................ 1,338 1,059 ----------- ---------- Gross revenues............................ $ 37,208 $ 36,096 =========== ========== Net revenues.............................. $ 34,320 $ 33,435 =========== ========== Operating income................................ $ 7,893 $ 7,678 =========== ========== EBITDA (1)...................................... $ 9,931 $ 10,157 =========== ========== BOULDER STATION Revenues: Casino....................................... $ 27,399 $ 21,040 Food and beverage............................ 6,648 6,026 Room......................................... 1,342 1,264 Other........................................ 1,296 604 ----------- ---------- Gross revenues............................ $ 36,685 $ 28,934 =========== ========== Net revenues.............................. $ 34,399 $ 27,135 =========== ========== Operating income................................ $ 8,823 $ 6,259 =========== ========== EBITDA (1)...................................... $ 11,414 $ 7,746 =========== ========== TEXAS STATION Revenues: Casino....................................... $ 14,567 $ - Food and beverage............................ 5,328 - Room......................................... 861 - Other........................................ 651 - ---------- ---------- Gross revenues............................ $ 21,407 $ - ========== ========== Net revenues.............................. $ 19,788 $ - ========== ========== Operating income................................ $ 1,312 $ - ========== ========== EBITDA (1)...................................... $ 3,007 $ - ========== ==========
7 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1. OVERVIEW (CONTINUED)
THREE MONTHS ENDED JUNE 30, 1996 1995 --------- -------- (UNAUDITED) TOTAL NEVADA OPERATIONS: - ----------------------- Revenues: Casino....................................... $ 67,196 $ 45,887 Food and beverage............................ 18,375 12,298 Room......................................... 6,444 5,182 Other........................................ 3,285 1,663 ---------- ---------- Gross revenues............................ $ 95,300 $ 65,030 ========== ========== Net revenues.............................. $ 88,507 $ 60,570 ========== ========== Operating income................................ $ 18,028 $ 13,937 ========== ========== EBITDA (1)...................................... $ 24,352 $ 17,903 ========== ========== MISSOURI OPERATIONS: - ------------------- ST. CHARLES STATION Revenues: Casino....................................... $ 36,636 $ 24,639 Food and beverage............................ 2,791 1,007 Other........................................ 1,363 418 ---------- ---------- Gross revenues............................ $ 40,790 $ 26,064 ========== ========== Net revenues.............................. $ 39,525 $ 25,439 ========== ========== Operating income................................ $ 8,540 $ 3,424 ========== ========== EBITDA (1)...................................... $ 11,320 $ 6,172 ========== ========== STATION CASINOS, INC. AND OTHER: - ------------------------------- Revenues: Casino....................................... $ 828 $ 1,058 Other........................................ $ 6,653 $ 7,155 ---------- ---------- Gross revenues............................ $ 7,481 $ 8,213 ========== ========== Net revenues.............................. $ 7,408 $ 8,127 ========== ========== Operating loss.................................. $ (3,755) $ (4,327) ========== ========== EBITDA (1)..................................... $ (3,036) $ (3,563) ========== ==========
(1) "EBITDA" consists of operating income plus depreciation and amortization, including preopening expenses. EBITDA should not be construed as an alternative to operating income as an indicator of the Company's operating performance, or as an alternative to cash provided by operating activities as a measure of liquidty. The Company has presented EBITDA solely as supplemental disclosure because the Company believes that certain investors consider this information useful in the evaluation of the financial performance of the companies with substantial depreciation and amortization. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2. RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO THREE MONTHS ENDED JUNE 30, 1995. Consolidated net revenues increased 43.9% to $135.4 million for the three months ended June 30, 1996, from $94.1 million for the same period of fiscal year 1996. This increase in net revenues is a result of improved results at Boulder Station and St. Charles Station and the addition of Texas Station, which opened in July 1995. Boulder Station and St. Charles Station contributed $34.4 million and $39.5 million, respectively, of net revenues for the three months ended June 30, 1996, an increase of $7.3 million and $14.1 million, respectively, over the same period of fiscal year 1996.Texas Station contributed $19.8 million of net revenues during the three months ended June 30, 1996. For the three months ended June 30, 1995, net revenues and operating income at St. Charles Station were adversely impacted by flooding on the Missouri River, which closed operations for 16 days and disrupted operations through the balance of the quarter. During the three months ended June 30, 1996, the improved results at St. Charles Station were achieved despite disruption created from the construction of the new parking garage and elevated roadway which opened in May 1996. Flooding on the Missouri River did occur again in May 1996, however the newly completed parking garage and elevated roadway served one of its intended purposes in minimizing business disruption casued by the flood. St. Charles Station did incur approximately $0.7 million of expense related to preparation for the flood and resulting clean-up costs. In addition to minimizing disruptions caused by flooding, the parking garage and elevated roadway provide improved access to the gaming facility and are the foundation for future phases of the St. Charles Station master plan. Operating income increased 75.0% to $22.8 million for the three months ended June 30, 1996, from $13.0 million for the same period of fiscal year 1996. This improvement is due to the factors discussed above. The improvement in operating income, offset by an increase in net interest expense of $0.9 million, an increase of $3.1 million in the income tax provision and dividends of $1.8 million on the convertible preferred stock issued in March 1996, resulted in net income applicable to common stock of $7.6 million, or earnings per common share of $0.22 for the three months ended June 30, 1996, compared to net income applicable to common stock of $3.5 million, or earnings per common share of $0.12 for the same period of fiscal year 1996. Casino. Casino revenues increased 46.2% to $104.7 million for the three months ended June 30, 1996, from $71.6 million for the same period of fiscal year 1996. This increase is directly related to $14.6 million in casino revenues generated by Texas Station and combined casino revenue increases generated by St. Charles Station and Boulder Station of $18.4 million for the three months ended June 30, 1996. Casino revenues at Palace Station remained flat. Revenues at the Southwest Company's Louisiana Downs Race Track video poker operation declined by $0.2 million for the three months ended June 30, 1996 as compared to the same period of fiscal year 1996. The Company is considering various alternatives for improving cash flows or possibly selling its interest in the Louisiana Downs joint venture. In any event, the operations of the joint venture are not material to the Company's financial position or results of operations taken as a whole. Casino expenses increased 51.1% to $45.3 million for the three months ended June 30, 1996, from $30.0 million for the same period of fiscal year 1996. This increase in casino expenses is consistent with the increase in casino revenues discussed above. Food and Beverage. Food and beverage revenues increased 59.1% to $21.2 million for the three months ended June 30, 1996, from $13.3 million for the same period of fiscal year 1996. This increase is primarily due to food and beverage revenues of $5.3 million at Texas Station and food and beverage revenue increases at St. Charles Station and Boulder Station of $1.8 million and $0.6 million, respectively, for the three months ended June 30, 1996. Food and beverage revenues at St. Charles Station have increased with the opening of two full-service restaurants in October 1995. 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2. RESULTS OF OPERATIONS (CONTINUED) Food and beverage net profit margins improved to 24.0% for the three months ended June 30, 1996, from 22.4% for the same period of fiscal year 1996. This increase in margin is due to improvement at the Nevada properties as a result of continued focus on cost control. The net profit margin at Texas Station was 15.3% for the three months ended June 30, 1996, a significant increase over previous quarters since the property opened. Management believes that the lower margins experienced at Texas Station in the first three quarters since opening were due to typical initial operating inefficiencies of a new property. Room. Room revenues increased 24.4% to $6.4 million for the three months ended June 30, 1996, from $5.2 million for the same period of fiscal year 1996. This increase is due primarily to the addition of Texas Station with a total of 200 rooms which contributed $0.9 million of room revenues for the three months ended June 30, 1996. The Company wide room occupancy increased to 97% from 96%, while the average daily room rate increased to $47 from $44 during the three months ended June 30, 1996. Other. Other revenues increased 22.4% to $11.3 million for the three months ended June 30, 1996, from $9.2 million for the same period of fiscal year 1996. This increase is due primarily to other revenues at Texas Station of $0.7 million, $0.5 million for the Company's interest in the operating income of Barley's Casino & Brewing Company, $0.5 million of lease income from the lease of a riverboat gaming facility and combined increases in other revenues at the Company's other operating properties of $1.8 million, offset by lost revenues of $1.4 million from the vending division of Southwest Services which was sold in September 1995. Selling, General and Administrative. Selling, general and administrative expenses ("SG&A") increased 40.4% to $28.5 million for the three months ended June 30, 1996, from $20.3 million for the same period of fiscal year 1996. This increase is primarily due to the addition of Texas Station. SG&A as a percentage of net revenues remained flat at approximately 21%. Corporate Expenses. Corporate expenses increased 19.6% to $4.2 million for the three months ended June 30, 1996, from $3.5 million for the same period of fiscal year 1996. This increase is attributable to increases in personnel infrastructure to manage the Company's new properties and development plans for the remainder of fiscal year 1997 and 1998. Corporate expenses declined to 3.1% of net revenues for the three months ended June 30, 1996, from 3.7% for the same period of fiscal year 1996. Development Expenses. Development expenses decreased significantly for the three months ended June 30, 1996 compared to the prior year. This decrease is the result of reduced efforts to identify potential gaming opportunities. Such costs are incurred by the Company in its efforts to identify and pursue potential gaming opportunities in selected jurisdictions, including those in which gaming has not been approved. The Company expenses development costs including lobbying, legal and consulting until such time as the jurisdiction has approved gaming and the Company has identified a specific site. Costs incurred subsequent to these criteria being met are capitalized. Depreciation and Amortization. Depreciation and amortization increased 31.4% to $9.8 million for the three months ended June 30, 1996, from $7.5 million in the same period of fiscal year 1996. Texas Station contributed $1.7 million of this increase. Depreciation expense at Boulder Station increased $1.1 million, primarily as a result of the parking garage and entertainment facilities added during fiscal year 1996. These increases were offset by a decrease in depreciation expense of $0.4 million at Palace Station. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 2. RESULTS OF OPERATIONS (CONTINUED) Interest Expense, net. Interest costs incurred (expensed and capitalized) increased 58.2% to $13.0 million for the three months ended June 30, 1996. This increase is primarily attributable to added interest costs associated with the 10 1/8% senior subordinated notes issued by the Company in March 1996. In addition, the Company recorded interest income of $0.7 million for the three months ended June 30, 1996, from investments in tax free municipal securities purchased with the excess proceeds of the public offering completed in March 1996. Capitalized interest is expected to continue to grow due to the construction of new casino facilities in Las Vegas and Missouri, as well as ongoing improvements at the Company's existing facilities (see "Liquidity and Capital Resources"). 3. LIQUIDITY AND CAPITAL RESOURCES The Company's principal sources of capital consist of proceeds from equity and debt offerings, cash flows from operating activities, borrowings under bank credit facilities, and vendor and lease financing of equipment. During the three months ended June 30, 1996, the Company's sources of capital included $13.1 million of net proceeds from the exercise of the underwriters' over-allotment option to purchase an additional 270,000 shares of convertible preferred stock related to 1,800,000 shares of convertible preferred stock issued by the Company on March 29, 1996, cash flows from operating activities of $19.9 million, and excess cash invested from the March 29, 1996 issuance of convertible preferred stock and senior subordinated notes. At June 30, 1996, the Company had available borrowings of $275.0 million under its reducing revolving credit facility, increasing to $380.0 million, subject to certain administrative conditions ( See "Description of Certain Indebtedness and Capital Stock") and $59.8 million in cash and cash equivalents. During the three months ended June 30, 1996, total capital expenditures were approximately $103.1 million, of which approximately (I) $48.3 million was associated with the development and construction of Kansas City Station, (ii) $13.6 million was associated with the development and construction of Sunset Station, (iii) $14.7 million was associated with the construction of the 4,000 space parking structure and elevated roadway at St. Charles Station, which opened in May 1996, (iv) $6.8 million was associated with the Texas Station bingo, casino and buffet expansions which opened in May 1996, and additional indoor and outdoor signage, and (v) $19.7 million was associated with various other projects and maintenance capital expenditures. The Company's primary requirements during the remainder of fiscal year 1997 are expected to include the following: . construction costs for Kansas City Station which commenced in August 1995. The Company anticipates that the project will cost approximately $205 million (excluding net construction period interest and preopening expenses), of which approximately $111.1 million had been incurred as of June 30, 1996. Kansas City Station is being constructed on 171 acres, and will feature a casino, hotel, and dining and entertainment facilities. The property is expected to be completed in the last quarter of calendar year 1996. . construction costs for Sunset Station which commenced in late calendar year 1995. The Company anticipates that the project will cost approximately $160 million (excluding net construction period interest and preopening expenses), of which approximately $43.9 million had been incurred as of June 30, 1996. Sunset Station is being constructed on approximately 100 acres in the Henderson/Green Valley area of Las Vegas and will feature a casino, hotel, and dining and entertainment facilities. The project is expected to be completed in mid calendar year 1997. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) . construction of an 18-story, 507-room hotel tower at Boulder Station. The Company anticipates that the project will cost approximately $34 million (excluding net construction period interest and preopening expenses), of which approximately $1.1 million in design costs had been incurred as of June 30, 1996. The project is expected to be completed within 10 to 12 months from the commencement of construction, which is expected to begin in the fourth quarter of calendar year 1996. . construction of a three-level, 1,044-space parking garage at Texas Station. The Company anticipates that the parking garage, which will be located on the south side of the facility, will cost approximately $6.7 million (excluding net construction period interest), of which approximately $0.4 million had been incurred as of June 30, 1996. This project is expected to be completed during the fourth quarter of calendar year 1996. Other planned uses of capital include (i) the payment of construction contracts payable of approximately $49.5 million as of June 30, 1996, (ii) maintenance capital expenditures at Palace Station, Boulder Station, Texas Station, St. Charles Station and the Southwest Companies, (iii) principal and interest payments on indebtedness, (iv) dividend payments on convertible preferred stock, and (v) general corporate purposes, including certain elements of other planned improvements and expansion at the Company's existing facilities. These expansions include the construction of future phases of the St. Charles Station master plan. The master plan for St. Charles Station includes a new gaming and entertainment complex comprised of a two-story land-based restaurant and entertainment facility with gaming space on the first level of each of two adjoining gaming facilities. The gaming facilities would be docked in a man-made backwater basin adjacent to the Missouri River. Management is currently evaluating the timing and scope of this additional expansion. The Company is also considering an expansion at Texas Station that would include 50,000 square feet of additional casino, restaurant and entertainment space and a 2,200-space parking structure on the north side of the facility. This expansion would provide improved access and interaction between the existing movie theater complex, casino, restaurants and other entertainment venues at Texas Station, similar to that which exists at Boulder Station. The Company will capitalize significant preopening expenses associated with its construction projects, which amounts will be expensed upon the opening of the related project and could have a material adverse impact on the Company's earnings. The Company believes that cash flows from operations, borrowings under the reducing revolving bank credit facility, vendor and lease financing of equipment and existing cash balances will be adequate to satisfy the Company's anticipated uses of capital during the remainder of fiscal year 1997. The Company, however, continually is evaluating the financing needs of its current and planned projects. If more attractive financing alternatives become available to the Company, the Company may amend its financing plans with respect to such projects, assuming such financing would be permitted under its debt agreements (see "Description of Certain Indebtedness and Capital Stock") and other applicable agreements. The Company's plans for the development of additional new gaming opportunities, as well as further expansion of the existing operations, may require substantial amounts of additional capital. The Company has entered into purchase agreements to acquire land for the development of existing and potential new gaming projects with purchase prices totaling $28.4 million as of June 30, 1996. In consideration for these options, the Company has paid or placed in escrow $2.3 million as of June 30, 1996, all of which would be forfeited should the Company not exercise its option to acquire the land. To develop all of these projects, together with any new commitments the Company may enter into, the Company will be required to obtain additional capital through debt or equity financings. There can be no assurance that any such financing would be available to the Company or, if available, that any such financing would be available on favorable terms. As discussed below, the reducing revolving bank credit facility and the indentures governing the Company's 9 5/8% and 10 1/8% senior subordinated notes limit 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) the incurrence of additional indebtedness by the Company and contain various financial and other covenants. DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK BANK FACILITY In June 1993, the Company obtained an $80 million reducing revolving bank credit facility. On July 5, 1995, the Company obtained a $275 million reducing revolving credit facility, a portion of which was used to refinance borrowings under the $80 million facility. On March 25, 1996, the Company amended and restated this bank facility, providing for borrowings up to an aggregate principal amount of $400 million, reduced to $380 million as of June 30, 1996 (the "Bank Facility"). Borrowings of the additional $105 million increase in capacity under the Bank Facility are contingent on the performance of certain administrative conditions such as appraisals, consents and regulatory approvals, which management expects to obtain in the near future. The Bank Facility is secured by substantially all of the assets of Palace Station, Boulder Station, Texas Station, St. Charles Station and Kansas City Station (collectively, the "Borrowers"). The Company and the Southwest Companies guarantee the borrowings under the Bank Facility (collectively the "Guarantors"). The Bank Facility matures on September 30, 2000 and was reduced by $20.0 million on June 30, 1996 and will further reduce quarterly thereafter by varying amounts (including approximately $4.0 million for each quarter ending on or after September 30, 1996, and on or before March 31, 1997). Borrowings under the Bank Facility bear interest at a margin above the bank's prime rate or LIBOR, as selected by the Company. The margin above such rates, and the fee on the unfunded portions of the Bank Facility, will vary quarterly based on the combined Borrower's and the Company's consolidated ratio of funded debt to earnings before interest, taxes, depreciation and amortization ("EBITDA"). The Bank Facility contains certain financial and other covenants. These include a maximum funded debt to EBITDA ratio for the Borrowers combined of 3.00 to 1.00 for each fiscal quarter through June 30, 1997, 2.75 to 1.00 for each fiscal quarter through June 30, 1998, and 2.50 to 1.00 for each fiscal quarter thereafter, a minimum fixed charge coverage ratio for the preceding four quarters for the Borrowers combined of 1.35 to 1.00 for periods March 31, 1996 through June 30, 1997, and 1.50 to 1.00 for periods thereafter, a limitation on indebtedness, and limitations on capital expenditures. As of June 30, 1996 the Borrowers funded debt to EBITDA ratio was 0.57 to 1.00 and the fixed charge coverage ratio for the proceeding four quarters ended June 30, 1996 was 2.76 to 1.00. A tranche of the Bank Facility contains a Minimum Tangible Net Worth requirement for Palace Station ($10 million plus 95% of net income determined as of the end of each fiscal quarter with no reduction for net losses) and certain restrictions on distributions of cash from Palace Station to the Company. As of June 30, 1996, Palace Station's Tangible Net Worth exceeded the requirement by approximately $7 million. These covenants limit Palace Station's ability to make payments to the Company, a significant source of anticipated cash for the Company. In addition, the Bank Facility has financial covenants relating to the Company. These include prohibitions on dividends on or redemptions of the Company's common stock, restrictions on repayment of any subordinated debt, limitations on indebtedness beyond existing indebtedness, the Company's senior subordinated notes and up to $25 million of purchase money indebtedness, minimum consolidated net worth requirements for the Company of $165 million plus post October 1, 1995 preopening expenses, 95% of post October 1, 1995 net income (not reduced by net losses) and 100% of net equity offering proceeds, and limitations on capital expenditures. As of June 30, 1996 the Company's consolidated net 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) worth exceeded the requirement by approximately $12 million. The Bank facility also includes a maximum funded debt to EBITDA ratio for the Company on a consolidated basis of 4.75 to 1.00 for each fiscal quarter through September 30, 1997, 4.50 to 1.00 for the quarter ending December 31, 1997, 4.25 to 1.00 for the quarter ending March 31, 1998, 4.00 to 1.00 for each fiscal quarter through September 30, 1998 and 3.75 to 1.00 thereafter. As of June 30, 1996 the Company's funded debt to EBITDA ratio was 3.80 to 1.00. In addition, the Bank Facility prohibits the Company from holding cash and cash equivalents in excess of the sum of the amounts necessary to make the next scheduled interest or dividend payments on the Company's senior subordinated notes and preferred stock, the amounts necessary to fund casino bankroll in the ordinary course of business and $2,000,000. The Guarantors waive certain defenses and rights including rights of subrogation and reimbursement. The Bank Facility contains customary events of default and remedies and is cross- defaulted to the Company's senior subordinated notes and the Change of Control Triggering Event as defined in the indentures. SENIOR SUBORDINATED NOTES The Company has $382.5 million, net of unamortized discount of $8.5 million, of senior subordinated notes outstanding as of June 30, 1996. $185.7 million of these notes bear interest, payable semiannually, at a rate of 9 5/8% per year and $196.8 million bear interest, payable semi-annually, at an rate of 10 1/8% per year (collectively, the "Notes"). The indentures governing the Notes contain certain customary financial and other covenants which prohibit the Company and its subsidiaries from incurring indebtedness (including capital leases) other than (a) non-recourse debt for certain specified subsidiaries, (b) certain equipment financings, (c) the Notes, (d) up to $15 million of additional indebtedness, (e) additional indebtedness if, after giving effect thereto, a 2.00 to 1.00 pro forma Consolidated Coverage Ratio (as defined) has been met, (f) Permitted Refinancing Indebtedness (as defined), (g) borrowings under the Bank Facility not to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as defined) for the four most recent quarters, and (h) certain other indebtedness. As of June 30, 1996 the Company's Consolidated Coverage Ratio was 3.10 to 1.00. In addition, the indentures prohibit the Company from paying dividends on any of its capital stock unless at the time of and after giving effect to such dividend, among other things, the aggregate amount of all Restricted Payments and Restricted Investments (as defined in the indentures, and which include any dividends on any capital stock of the Company) do not exceed the sum of (i) 50% of Cumulative Consolidated Net Income (as defined) of the Company (less 100% of any consolidated net losses), (ii) certain net proceeds from the sale of equity securities of the Company, and (iii) $15 million. The limitation on the incurrence of additional indebtedness and dividend restrictions in the indentures may significantly affect the Company's ability to pay dividends on its capital stock. The Notes also give the holders of the Notes the right to require the Company to purchase the Notes at 101% of the principal amount of the Notes plus accrued interest thereon upon a Change of Control and Rating Decline (each as defined in the indentures) of the Company. COMMON STOCK The Company is authorized to issue up to 90,000,000 shares of its common stock, $.01 par value per share, 35,318,057 shares of which were issued and outstanding as of June 30, 1996. Each holder of the Company's common stock (the "Common Stock") is entitled to one vote for each share held of record on each matter submitted to a vote of stockholders. Holders of the Common Stock have no cumulative voting, conversion, redemption or preemptive rights or other rights to subscribe for additional shares. Subject to any preferences that may be granted to the holders of the Company's preferred stock, each holder of Common Stock is entitled to receive ratably such dividends as may be declared by the Board of Directors out of funds legally available therefor as well as any distributions to the stockholders 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) and, in the event of liquidation, dissolution or winding up of the Company, is entitled to share ratably in all assets of the Company remaining after payment of liabilities. PREFERRED STOCK The Company is authorized to issue up to 5,000,000 shares of its preferred stock, $.01 par value per share ("Preferred Stock"). In March 1996, the Company completed an offering of 1,800,000 shares of $3.50 Convertible Preferred Stock (the "Convertible Preferred Stock"). In April 1996, the underwriters exercised the over allotment of an additional 270,000 shares of the Convertible Preferred Stock. The Board of Directors, without further action by the holders of Common Stock or the Convertible Preferred Stock, may issue shares of Preferred Stock in one or more series and may fix or alter the rights, preferences, privileges and restrictions, including the voting rights, redemption provisions (including sinking fund provisions), dividend rights, dividend rates, liquidation rates, liquidation preferences, conversion rights and the description and number of shares constituting any wholly unissued series of Preferred Stock. Except as described above, the Board of Directors, without further stockholder approval, may issue shares of Preferred Stock with rights that could adversely affect the rights of the holders of Common Stock or the Convertible Preferred Stock. The issuance of shares of Preferred Stock under certain circumstances could have the effect of delaying or preventing a change of control of the Company or other corporate action. CONVERTIBLE PREFERRED STOCK As of June 30, 1996, the Company has 2,070,000 shares of Convertible Preferred Stock outstanding, each with a liquidation preference of $50.00 per share plus an amount equal to any accumulated and unpaid dividends at the annual rate of $3.50 per share, or 7.0% of such liquidation preference. Such dividends accrue and are cumulative from the date of issuance and are payable quarterly. The Convertible Preferred Stock is convertible at the option of the holder thereof at any time, unless previously redeemed, into shares of Common Stock at an initial conversion rate of 3.2573 shares of Common Stock for each share of Convertible Preferred Stock (equivalent to a 24.0% conversion premium per share of Common Stock), subject to adjustment in certain circumstances. The Company may reduce the conversion price of the Convertible Preferred Stock by any amount for any period of at least 20 days, so long as the decrease is irrevocable during such period. The Convertible Preferred Stock is redeemable, at the option of the Company, in whole or in part, for shares of Common Stock, at any time after March 15, 1999, initially at a price or $52.45 per share of Convertible Preferred Stock, and thereafter at prices decreasing annually to $50.00 per share of Convertible Preferred Stock on and after March 15, 2006, plus accrued and unpaid dividends. The Common Stock to be issued is determined by dividing the redemption price by the lower of the average daily closing price for the Company's Common Stock for the preceding 20 trading days or the closing price of the Company's Common Stock on the first business day preceding the date of the redemption notice. Any fractional shares would be paid in cash. There is no mandatory sinking fund obligation with respect to the Convertible Preferred Stock. The holders of the Convertible Preferred Stock do not have any voting rights, except as required by applicable law and except that, among other things, whenever accrued and unpaid dividends on the Convertible Preferred Stock are equal to or exceed the equivalent of six quarterly dividends payable on the Convertible Preferred Stock, the holders of the Convertible Preferred Stock, voting separately as a class with the holders of any other series of parity stock upon which like voting rights have been conferred and are exercisable, will be entitled to elect two directors to the Board of Directors until dividend arrearage has been paid or amounts have been set apart for such payment. The Convertible 15 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 3. LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) Preferred Stock is senior to the Common Stock with respect to dividends and upon liquidation, dissolution or winding up. FORWARD LOOKING STATEMENTS This document contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. The forward- looking statements in this document are intended to be subject to the safe harbor protection provided by Section 21E. All forward-looking statements involve risks and uncertainties. Although the Company believes that its expectations are based upon reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that actual results will not materially differ from its expectations. Factors that could cause actual results to differ materially from expectations include, among other things, the Company's competition, the limitations on capital resources imposed by the Company's bank facility and the terms of the indentures governing the Company's senior subordinated debt, the Company's ability to meet its interest expense and principal repayment obligations, the Company's ability to obtain licenses for its new projects, loss of the Company's riverboat and dockside facilities from service, construction risks, the Company's dependence on key gaming markets, the Company's ability to take advantage of new gaming development opportunities and gaming regulations. For other factors that may cause actual results to materially differ from expectations and underlying assumptions, refer to the Registration Statement on Form S-3 (File No. 333-1102) (and particularly the section labeled "Risk Factors" therein) and periodic reports, including the Annual Report on Form 10-K for the year ended March 31, 1996, filed by the Company with the Securities and Exchange Commission (and particularly the section labeled "Management's Discussion and Analysis of Financial Condition and Results of Operations" therein). Readers are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof. 16 PART II - OTHER INFORMATION Item 1. Legal Proceedings -- The Company and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. Management does not believe that the outcome of such litigation, in the aggregate, will have a material adverse effect on the Company. A suit seeking status as a class action lawsuit was filed by plaintiff, William H. Poulos, et. al, as class representative, on April 26, 1994, in the United States District Court, Middle District of Florida, naming 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company. On May 10, 1994, a lawsuit alleging substantially identical claims was filed by another plaintiff, William Ahearn, et. al, as class representative, in the United States District Court, Middle District of Florida, against 48 manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company and most of the other major hotel-casino companies. The lawsuits allege that the defendants have engaged in a course of fraudulent and misleading conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win. The two lawsuits have been consolidated into a single action, and have been transferred to the United States District Court, for the State of Nevada. On September 26, 1995, a lawsuit alleging substantially identical claims was filed by plaintiff, Larry Schreier, et. al, as class representative, in the United States District court for the District of Nevada, naming 45 manufacturers, distributors, and casino operators of video poker and electronic slot machines, including the Company. Motions to dismiss the Poulos/Ahearn and Schreier cases were filed by Defendants. On April 17, 1996, the Poulos/Ahearn lawsuits were dismissed, but plaintiffs were given leave to file amended Complaints on or before May 31, 1996. On May 31, 1996, an amended Compliant was filed, naming William H. Poulos, et. al, as plaintiff. Motions to dismiss are before the court. The Ahearn case was not refiled and the Schreier case remains before the court. Management believes that the claims are wholly without merit and does not expect that the lawsuits will have a material adverse effect on the Company's financial position or results of operations. A suit seeking status as a class action lawsuit was filed by plaintiffs, Thomas Hyland and Zelijko Ranogajel, et. al, as class representatives, on May 25, 1995, in the United States District Court, District of New Jersey, Camden Division, naming 80 credit reporting agencies and casino operators, including the Company. The lawsuit alleges that the exclusion of blackjack players who "count cards" from casinos and the sharing of information about them violates certain state and federal antitrust, consumer protection, and credit reporting statutes. On May 30, 1996, the Court dismissed this case. A suit seeking status as a class action was filed by Paul Winkleman et. al, as class representative, on February 26, 1996, in the Circuit Court of the City of St. Louis, Missouri, naming St. Charles Station and one other casino operator in Missouri as defendants. The lawsuit seeks to recover losses that occurred within three months of the filing of the suit under a 1939 Missouri statute that purports to permit recovery of gaming losses. Based on the advice of counsel, management believes the statute has been superseded by an amendment to the constitution of the State of Missouri that was passed on November 9, 1994, and by the Missouri Gaming Law promulgated subsequent to a statewide referendum in November 1992 and further clarified subsequent to the constitutional amendment, each of which permit riverboat gaming. On May 13, 1996, St. Charles Station filed a motion to dismiss on this basis. On August 5, 1996, the Court dismissed this case. 17 Item 2. CHANGES IN SECURITIES - None. Item 3. DEFAULTS UPON SENIOR SECURITIES - None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None. Item 5. OTHER INFORMATION - None. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Exhibit Number ------ 10.1 Second Amendment to Joint Venture Agreement, dated as of April 22, 1996, between First Holdings Company and Kansas City Station Corporation. 10.2 Second Amendment to Lease Agreement, dated as of April 22, 1996, between Station/First Joint Venture and Kansas City Station Corporation. 27 Financial Data Schedule (b) Reports on Form 8-K - The registrant filed no reports on Form 8-K during the three month period ended June 30, 1996. 18 SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Station Casinos, Inc., Registrant DATE: August 9, 1996 /s/ Glenn C. Christenson ------------------------- Glenn C. Christenson, Executive Vice President and Chief Financial Officer (Principal Accounting Officer) 19 EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEETS AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOUND ON PAGES 3 AND 4 OF THE COMPANY'S FORM 10-Q FOR THE YEAR-TO-DATE, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000898660 STATION CASINOS,INC. 1000 3-MOS MAR-31-1997 JUN-30-1996 59762 0 6464 0 2366 82803 809881 108411 865995 118677 382459 0 103500 353 195739 865995 0 135440 0 69752 9823 0 8293 14581 5122 9459 0 0 0 9459 .22 .22
EX-10 3 Exhibit 10.2 SECOND AMENDMENT TO LEASE AGREEMENT This SECOND AMENDMENT TO LEASE AGREEMENT (this "SECOND AMENDMENT") is made and entered into this ___ day of April, 1996, by and between STATION/FIRST JOINT VENTURE, a Missouri partnership ("LANDLORD") and KANSAS CITY STATION CORPORATION, a Missouri corporation ("TENANT"). W I T N E S S E T H: WHEREAS, Landlord and Tenant entered into that certain Lease Agreement dated as of April 1, 1994, wherein Landlord leased to Tenant the Premises, as described therein, as amended pursuant to that certain First Amendment to Lease Agreement dated March 19, 1996 (the "ORIGINAL LEASE", and as amended herein, the "LEASE"); and WHEREAS, Landlord and Tenant desire to amend the Original Lease as provided herein; NOW, THEREFORE, in exchange for the mutual promises and covenants contained herein, the sufficiency of which is hereby acknowledged by each of the undersigned, the undersigned parties agree as follows: 1. The Original Lease is hereby amended by deleting Section 2.1 in its entirety and replacing in lieu thereof: 2.1 Lease Term. (a) The initial term of this Lease (the "INITIAL LEASE TERM") shall be for a period beginning at 12:00 noon on April 1, 1994 (the "COMMENCEMENT DATE") and ending at 12:00 noon on March 31, 2006 (the "INITIAL EXPIRATION DATE") unless sooner terminated pursuant to the terms hereof. (b) Tenant shall have the option to extend the term of this Lease for up to eight (8) renewal periods of ten (10) years each (each such period, a "RENEWAL PERIOD"), plus one (1) additional renewal period of seven (7) years. Each such renewal option is exercisable by Tenant at any time prior to thirty (30) days prior to the date such Renewal Period is to commence. (c) The Initial Lease Term, together with all Renewal Periods for which Tenant has exercised its renewal option, shall collectively be referred to herein as the "LEASE TERM," and the last day of the last Renewal Period for which Tenant has exercised its renewal option shall be referred to herein as the "EXPIRATION DATE." 2. The Original Lease is hereby amended by deleting Section 2.2 in its entirety. 3. The Original Lease is hereby amended by deleting Section 2.3 in its entirety and replacing in lieu thereof: 2.3 Amount of Rent. (a) Commencing May 1, 1995 and continuing until April 30, 1996, Tenant shall pay to Landlord, without demand, rent for the Premises in an amount equal to One Hundred Thousand and no/100 U.S. Dollars ($100,000.00) per month. (b) Commencing May 1, 1996 and continuing until March 31, 1997, Tenant shall pay to Landlord, without demand, rent for the Premises in an amount equal to Eighty-Five Thousand and no/100 U.S. Dollars ($85,000.00) per month (c) Commencing April 1, 1997 and continuing throughout the Lease Term, Tenant shall pay to Landlord, without demand, rent for the Premises in an amount equal to Ninety Thousand and no/100 U.S. Dollars ($90,000.00) per month, subject to Subsection 2.3(d) hereof. (d) Commencing April 1, 1998, and upon every anniversary thereafter during the Lease Term, rent for the Premises shall be increased by multiplying it by the Cost of Living Factor (as hereinafter defined) The "Cost of Living Factor" for any date during the Term shall be a fraction whose numerator is the index figure stated in the Consumer Price Index for All Urban Consumers (CPI-U; U.S. City Average; All Items 1982-84=100) published by the Bureau of Statistics of the United States Department of Labor in effect on such date and whose denominator is the index figure for such Consumer Price Index in effect twelve months prior to such date; provided, however, that regardless of the actual Cost of Living Factor calculated in the foregoing manner the Cost of Living Factor shall never be less than One and Two Hundredths (1.02) nor more than One and Five Hundredths (1.05). If such "Consumer Price Index" is discontinued, the Cost of Living Factor shall be based on comparable statistics on changes in the purchasing power of the consumer dollar for the applicable periods as published by a responsible financial periodical report of a recognized governmental or private authority. 4. The Original Lease is hereby amended by deleting Article 11 in its entirety and replacing in lieu thereof: ARTICLE 11. TENANT'S ENCUMBRANCE OF LEASE; ASSIGNMENT AND SUBLETTING 11.1 Right to Encumber. Any provision herein contained to the contrary notwithstanding, Tenant shall have the right, from time to time, without the consent of Landlord, to encumber by way of one or more deeds of trust, mortgages, or other security instruments or any amendments of any existing Deed of Trust, (collectively, a "Deed of Trust") all or any portion of Tenant's right, title and interest in, to and under this Lease. Any such Deed of Trust may contain such terms, conditions and maturity as Tenant may determine. Tenant may enter into any and all such extensions, modifications or amendments of any such Deed of Trust as it may desire. The execution and delivery of any such Deed of Trust shall not be deemed to constitute such an assignment or transfer of this Lease as would require the holder or holders thereof, as such, to assume the obligation or performance of any of the terms, covenants or conditions on the part of Tenant to be performed hereunder. The beneficiary and its respective assigns under each Deed of Trust (the "BENEFICIARY") may enforce such Deed of Trust and may acquire title to the leasehold estate of Tenant in any lawful way(in which event the Beneficiary and/or such assign shall expressly agree to observe and perform all the covenants of Tenant hereunder for so long as Beneficiary and/or such assign retains title to Tenant's interest hereunder) and, pending foreclosure of such Deed of Trust (or bona fide sale or assignment in lieu of foreclosure) may take possession of and sublease the Premises, or cause any person having the relationship of an independent contractor to the Beneficiary to take possession of and sublease the Premises. Upon foreclosure thereof (or any bona fide sale or assignment in lieu of foreclosure) the Beneficiary may, subject to Section 11.3, sell and assign this Lease, by assignment in which the assignee shall expressly assume and agree to observe and perform all the covenants of Tenant hereunder for so long as it shall retain title to Tenant's interest hereunder. Any assignee who has acquired title to this Lease by way of foreclosure or deed in lieu thereof may only assign its rights under the Lease, other than by way of Deed of Trust, in compliance with Section 11.3 hereto. 11.2 Protection of Beneficiary. In the event that Tenant shall encumber the leasehold estate by way of Deed of Trust (including, without limitation, the existing Deed of Trust which presently encumbers Tenant's leasehold estate hereunder) in compliance with the terms of this Lease, the following provisions shall apply and inure to and for the benefit of the Beneficiary therein named, and its successors and assigns, any provision herein contained to the contrary notwithstanding: (a) This Lease shall not be amended, altered, modified, or rescinded by Landlord and Tenant, prior to the expiration of the term of the Deed of Trust, without the prior written consent of the Beneficiary. All costs and expenses incurred to obtain the consent of the Beneficiary to any such amendment, alteration, modification or rescission shall be paid by Tenant. If such a Deed of Trust is in effect, this Lease may be terminated only in accordance with the provisions of this Section 11.2. Without limiting the generality of the foregoing, neither Landlord nor Tenant shall terminate the Lease pursuant to Section 3.2, 7, 10.2(b), 15.1 (except for a condemnation of the entire Premises) or 15.2 without the Beneficiary's prior written consent. Any attempted amendment, alteration, modification, rescission or termination of this Lease without such prior written consent shall, at the Beneficiary's option be void. (b) Landlord shall, upon serving Tenant any notice of default under the provisions of or with respect to this Lease, at the same time serve a copy of such notice upon the Beneficiary, by registered mail, addressed to it at the address shown in the Deed of Trust, and no notice of default by Landlord to Tenant shall be deemed to have been duly given unless and until a copy thereof has been so served upon the Beneficiary. (c) The Beneficiary shall have the right (but not the obligation) to cure without penalty any default by Tenant under the Lease. Landlord shall allow the Beneficiary and its representatives access to the Premises for the purpose of effecting any such cure, and any cure by the Beneficiary shall have the same effect as cure by Tenant. Landlord will not terminate the Lease upon a default by Tenant unless: (i) in the case of a monetary payment default, the Beneficiary has not, within 15 days after the Beneficiary receives written notice of such default, cured such monetary default; or (ii) in the case of a non-monetary default that is curable by the Beneficiary, the Beneficiary has not, within 30 days after the Beneficiary receives written notice of such default, either (A) if the default is reasonably susceptible of cure within such period, cured such default, or (B) if the default is not reasonably susceptible of cure within such period, commenced reasonable efforts (including proceedings for foreclosure of the Deed of Trust or appointment of a receiver) to cure such default, provided that the Beneficiary thereafter diligently and in good faith pursues the completion of such cure to the extent not prohibited by law; or (iii) in the case of a non-monetary default that is not curable by the Beneficiary, the Beneficiary has not, within 30 days after the Beneficiary receives written notice of such default, commenced proceedings for foreclosure of the Deed of Trust, provided that the Beneficiary thereafter diligently and in good faith pursues the completion of such foreclosure to the extent not prohibited by law. Following any foreclosure of a Deed of Trust (or assignment by deed in lieu thereof), and provided that Landlord has notified the applicable assignee of one or more existing defaults of the previous Tenant which remain uncured and which are reasonably susceptible of being cured by such assignee, Landlord shall have all applicable remedies under this Lease with respect to each such default (including termination, to the extent applicable) in the event that such assignee does not cure each such default: (A) in the case of a monetary payment default, within 15 days after such assignee receives written notice of such default; or (B) in the case of a non-monetary default, within 30 days after such assignee receives written notice of such default (provided that, to the extent that any such default is not reasonably susceptible of cure by such assignee within such 30-day period, Landlord shall not be entitled to exercise any remedies with respect thereto so long as such assignee commences cure within such 30 days and thereafter diligently prosecutes such cure to completion). (d) Following any foreclosure of a Deed of Trust (or assignment by deed in lieu thereof), the successor to Tenant's interest shall be personally liable only with respect to the liabilities of Tenant which accrue following such assignment and prior to a subsequent assignment by such assignee in accordance with this Lease. 11.3 Assignment and Subletting. (a) Except as otherwise provided herein, Tenant shall not assign or transfer this Lease or any interest therein, or sublet the Premises in whole without Landlord's prior written consent, which consent shall not be unreasonably withheld; PROVIDED, HOWEVER, that nothing herein shall prohibit Tenant from (i) assigning this Lease to a wholly-owned subsidiary of Tenant, an entity that owns the issued and outstanding stock of Tenant ("Tenant's Parent"), or a wholly-owned subsidiary of Tenant's Parent, PROVIDED, HOWEVER, that no such assignment shall decrease Tenant's obligations hereunder, (ii) entering into a sublease as authorized by Section 11.3 (b) below; or (iii) entering into Deeds of Trust as permitted by this Article 11; and PROVIDED, FURTHER, that Landlord will not require the payment of any money for any such consent other than such reasonable costs and expenses as may be incurred by Landlord in connection with such consent not to exceed $5,000. Subject to the limitations of Section 11.2(d), above, each assignee, other than Landlord, shall assume and be deemed to have assumed this Lease and shall become and remain liable jointly and severally with Tenant for the payment of the Rent and other payments due hereunder, and for the due agreements herein contained on Tenant's part to be performed for the term of this Lease. (b) Tenant may enter into subleases with sublessees to use or occupy portions of the Premises during the Term of this Lease without the consent of Landlord. 5. The Original Lease is hereby amended by inserting the following as the last sentence of Section 13.1: Any and all improvements constructed by Tenant on the Premises during the Lease Term shall be property of Tenant during the Term of Lease; provided, however, that upon Tenant's surrender of the Premises to Landlord, Tenant may only remove those improvements that are capable of being detached and removed within thirty (30) days, and all improvements not removed by Tenant within such time period shall become property of the Landlord. 6. The Original Lease is hereby amended by inserting the following as Section 19.14: 19.14 Landlord Participation. Landlord shall cooperate with Tenant to the extent that, from time to time, Landlord's participation is legally required (or otherwise reasonably necessary) in connection with (a) obtaining land use variances, permits and other governmental authorizations with respect to Tenant's operations at the Premises, (b) entering into dedications, easement agreements, CC&R's and other contracts (with governmental entities and/or private parties) that Tenant reasonably determines to be beneficial in connection with its operations at the Premises, (c) contesting any tax or other law applicable to the Premises, or (d) pursuing or defending any lawsuit or other proceeding with respect to the Premises. Tenant shall reimburse Landlord, within 10 business days following written demand from time to time, for all costs reasonably incurred by Landlord as a result of any such cooperation. 7. Except as amended herein, the Lease remains in full force and effect, and Landlord and Tenant ratify the Lease as amended herein. 8. All capitalized terms used in this Second Amendment but not defined herein shall have the meanings ascribed thereto in the Original Lease. 9. This Second Amendment shall be governed by and construed in accordance with the laws of the State of Missouri. 10. This Second Amendment may be executed in any number of counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. 11. Upon mutual execution hereof, this Second Amendment will be binding upon each of the undersigned parties, but will not become effective until Bank of America, NTSA, (the "Bank") has granted its consent hereto or any portion hereof. In the event the Bank has not granted such consent within thirty (30) days after the execution hereof, this Second Amendment shall automatically become void. WITNESS THE EXECUTION hereof by each of the undersigned as of the date first set forth above. LANDLORD TENANT STATION/FIRST JOINT VENTURE, a Missouri KANSAS CITY STATION CORPORATION, partnership a Missouri corporation By: KANSAS CITY STATION CORPORATION, By: _________________________ a Missouri corporation, its managing Name: _______________________ partner Title: ________________________ By: ____________________________ Name: __________________________ Title: ___________________________ CONSENT By its execution in the space provided below, FIRST HOLDINGS COMPANY, a Mississippi partnership, acknowledges that it has reviewed this Second Amendment, and, in its capacity as a partner of Station/First Joint Venture, consents to all the terms and provisions hereof. FIRST HOLDINGS COMPANY, a Mississippi partnership By: _______________________ Name: _____________________ Title: ______________________ EX-10 4 Exhibit 10.1 SECOND AMENDMENT TO JOINT VENTURE AGREEMENT This SECOND AMENDMENT TO JOINT VENTURE AGREEMENT (this "SECOND AMENDMENT") is entered into as of this ___ day of April, 1996, by and between FIRST HOLDINGS COMPANY, a Mississippi partnership ("FHC") and KANSAS CITY STATION CORPORATION, a Missouri corporation ("KCSC"). W I T N E S S E T H: WHEREAS, FHC and Station Casinos, Inc., a Nevada corporation ("STCI") entered into that certain Joint Venture Agreement dated September 25, 1993, as amended by that certain letter agreement dated November 15, 1993 (the "ORIGINAL AGREEMENT" and, as amended herein, the "JOINT VENTURE AGREEMENT"), pursuant to which FHC and STCI formed Station/First Joint Venture, a Missouri partnership; and WHEREAS, STCI assigned its interest in the Original Agreement to KCSC pursuant to that certain Assignment and Assumption dated March 26, 1996; and WHEREAS, FHC and KCSC desire to amend the Original Agreement as provided herein; NOW, THEREFORE, in exchange for the mutual promises and covenants contained herein, the sufficiency of which is hereby acknowledged by each of the undersigned, the undersigned parties agree as follows: 1. The Original Agreement is hereby amended by deleting the definition of "Managing Partner" as set forth in Article I, and replacing in lieu thereof: "MANAGING PARTNER" means Kansas City Station Corporation, a Missouri corporation. 2. The Original Agreement is hereby amended by deleting Section 2.7 in its entirety, and replacing in lieu thereof: SECTION 2.7 TERM. THE JOINT VENTURE SHALL COMMENCE ON THE DATE OF THIS AGREEMENT AND SHALL CONTINUE UNTIL APRIL 1, 2093 UNLESS SOONER DISSOLVED AND TERMINATED PURSUANT TO THE PROVISIONS OF THIS AGREEMENT. 3. The Original Agreement is hereby amended by deleting the final paragraph of Section 3.1. 4. The Original Agreement is hereby amended by deleting Section 3.4 in its entirety, and replacing in lieu thereof: Section 3.4 JOINT VENTURE EXPENSES, FEES AND LIABILITIES. (a) The Joint Venture will be responsible for and will pay its own operating expenses, including legal, auditing, accounting, brokerage, finder, placement, investment banking, interest, filing or other fees or expenses incurred by the Joint Venture or by the Partners on behalf of the Joint Venture. Each Partner shall bear the costs and expenses incurred by it in connection with the organization of, and management of such Partner's investment in the Joint Venture including, without limitation, accounting and legal fees and expenses. No Partner other than the Managing Partner shall incur any costs, expenses or liabilities on behalf of the Joint Venture without the prior consent of all Partners. The Managing Partner shall not incur expenses on behalf of the Joint Venture which are not incident to the day-to-day business and operations of the Joint Venture. Expenses and liabilities on behalf of the Joint Venture and accruing from and after April 22, 1996 will be payable by the Managing Partner out of the Management Fee (as hereinafter defined). (b) In consideration for its services in managing the Joint Venture, the Joint Venture shall pay the Managing Partner a management fee (the "Management Fee") each month to be determined by the Managing Partner from time to time in its reasonable discretion. 5. The Original Agreement is hereby amended by inserting the following phrase at the end of Section 4.2(b): , subject to Section 4.2 (c). 6. The Original Agreement is hereby amended by deleting Seciton 4.2(c) in its entirety and replacing in lieu thereof: (c) In the event the Management Fee as provided for in Section 3.4 is insufficient to cover the liabilities and expenses of the Joint Venture which accrue after September 25, 1993, the Managing Partner shall contribute additional capital in an amount sufficient to cover such liabilities and expenses. 7. The Original Agreement is hereby amended by deleting Section 5.1 in its entirety, and replacing in lieu thereof: Section 5.1 Guaranteed Payment. Commencing on April 1, 1994, and on or before the first day of each month thereafter, FHC shall be paid, as interest on its Capital account, a guaranteed monthly payment (the "Guaranteed Monthly Payment") in the amount of Forty Thousand and No/100 U.S. Dollars ($40,000.00). Beginning October 1, 1994, or upon receipt of permits pursuant to Section 10 of the Rivers and Harbors Act of 1899 and Section 404 of the Clean Water Act, from the United States Army Corps of Engineers, whichever first occurs, the Guaranteed Monthly Payment shall increase to Sixty Thousand Dollars ($60,000.00) per month. Beginning May 1, 1995, or upon receipt of a gaming license from the state of Missouri for operation of a riverboat gaming facility, whichever first occurs, the Guaranteed Monthly Payment shall increase to Ninety-Six Thousand Dollars ($96,000.00) per month. Beginning May 1, 1996, the Guaranteed Monthly Payment shall decrease to Eighty-One Thousand, Nine Hundred Dollars ($81,900) per month. Beginning April 1, 1997, the Guaranteed Monthly Payment shall increase to Eighty-Seven Thousand Seven Hundred Fifty Dollars ($87,750) per month. Commencing April 1, 1998, and upon every anniversary thereafter during the Lease Term, the Guaranteed Monthly Payment shall be increased by multiplying it by the Cost of Living Factor (as hereinafter defined). The "Cost of Living Factor" for any date during the Term shall be a fraction whose numerator is the index figure stated in the Consumer Price Index for All Urban Consumers (CPI-U; U.S. City Average; All Items 1982-84=100) published by the Bureau of Statistics of the United States Department of Labor in effect on such date and whose denominator is the index figure for such Consumer Price Index in effect twelve months prior to such date; provided, however, that regardless of the actual Cost of Living Factor calculated in the foregoing manner the Cost of Living Factor shall never be less than One and Two Hundredths (1.02) nor more than One and Five Hundredths. If such "Consumer Price Index" is discontinued, the Cost of Living Factor shall be based on comparable statistics on changes in the purchasing power of the consumer dollar for the applicable periods as published by a responsible financial periodical report of a recognized governmental or private authority. 8. The Original Agreement is hereby amended by inserting the following phrase at the end of the first sentence of Section 9.2: , subject, however, to Section 4.2(c). 9. The Original Agreement is hereby amended by deleting the second sentence of Section 10.14 in its entirety, and replacing in lieu thereof the following: However, each party hereto and the Joint Venture shall have a ten (10)- day period to cure any default of any of its obligations hereunder, such period to begin upon receipt by the defaulting party of written notice from the non-defaulting party. 10. Except as amended herein, the Joint Venture Agreement remains in full force and effect, and FHC and KCSC ratify the Joint Venture Agreement as amended herein. 11. All capitalized terms used in this Second Amendment but not defined herein shall have the meanings ascribed thereto in the Joint Venture Agreement. 12. This Second Amendment may be executed in any number of counterparts, each of which will be deemed an original and all of which together will constitute one and the same instrument. WITNESS THE EXECUTION hereof by each of the undersigned as of the date first set forth above. FHC KCSC FIRST HOLDINGS COMPANY, a Mississippi KANSAS CITY STATION CORPORATION, partnership a Missouri corporation By: ___________________________ By: _________________________ Name: _________________________ Name: _______________________ Its General Partner Title: ________________________ -----END PRIVACY-ENHANCED MESSAGE-----