Thursday, April 13, 2006

Station Casinos announced Tuesday it had repurchased $232 million of its common stock as part of an accelerated share buyback program that the company initiated in February. The announcement came a week before Station opens Red Rock Resort, its most ambitious resort project to date. In all, Station said it expects to buy back more than 10 percent of its outstanding common shares during 2006. Under the plan, Station Casinos will buy back between 7.1 million and 7.4 million shares at prices ranging between $75 and $86 a share. Previously, Station Casinos announced it had spent $230 million to buy back stock in February.

After the repurchase, Station Casinos will have 63 million shares outstanding.

"We continue to believe in the long-term strength of our business model," Station Casinos President Lorenzo Fertitta said, adding the stock repurchase wouldn't change the timetable for the company to develop new properties or complete any master-planned expansions.

Stations Casinos is spending $1.25 billion on capital improvements, including the cost of the $925 million Red Rock Resort, which opens Tuesday. Three other company-run casinos, Green Valley Ranch Resort, Santa Fe Station and Fiesta Henderson, are receiving parking garage expansions.

The company has already announced plans to start construction next year on the $450 million Aliante Station in North Las Vegas. Station is also looking at developing casino sites in Reno, at Durango Road and Interstate 215, and on the site of the recently imploded Castaways-Showboat.

Station will tap its $2 billion revolving line of credit to finance the stock buyback. Station is using the same credit line to fund its expansion projects.

The repurchased shares will be held by the company, but could be either reissued or retired.

"We would rather own more of our own stock than any of the opportunities we have right now for capital," said Station Casinos Chief Financial Officer Glenn Christenson. "We are in a good position and we have flexibility in our capital structure which allows to both buy back stock and continue with our growth program."

Wall Street gave its approval the announcement, which was made before the stock market opened Tuesday. Shares in Station Casinos shot up more than 3 percent when trading opened on the New York Stock Exchange. By the end of the day, shares in the company closed at $77.23, up $1 or 1.31 percent. Almost 1.2 million shares were traded.

Gaming analysts said Station's buyback reflects the company's faith in Red Rock Resort's success.

"We would view these significant share repurchases as a very bullish move by management," Deutsche Bank gaming analyst Marc Falcone said in a note to investors.

In his comment to investors, Bear Sterns gaming analyst Joe Greff added: "We believe the repurchase activity speaks toward management's confidence in the soon to open Red Rock as we do not believe management would be active in repurchases if it were concerned about near-term operating trends in the Las Vegas locals market or the opening."