UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

---

FORM 10-K

|(Mark One)                                  |                                                                                         
|------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                           | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|for the fiscal year ended December 31, 2007
|OR                                         
|o                                           | 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(State or other jurisdiction of incorporation or organization)                                        |  | 88-0136443(I.R.S. Employer Identification No.)
|----------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|1505 South Pavilion Center Drive, Las Vegas, Nevada 89135(Address of principal executive offices, Zip Code)

Registrant's telephone number, including area code:(702) 495-3000

Securities
registered pursuant to Section 12(b) of the Act:None

Securities
registered pursuant to Section 12(g) of the Act:Common Stock, $0.01 par value

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes ý    No o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No ý

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 ý    No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
the Form 10-K. ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ý

Accelerated filer oNon-accelerated filer o
(Do not check if a smaller reporting company)

Smaller reporting company o


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). Yes o    No ý

The aggregate market value of the voting stock held by non-affiliates (all persons other than executive officers or directors) of the registrant as of
June 29, 2007, the last trading day of the registrant's second quarter, based on the closing price per share of $86.80 as reported on the New York Stock Exchange was $3,833,703,499.

There
is no established public trading market for any of the common stock of the registrant as of November 7, 2007.

Documents Incorporated by Reference

The information required by Part III (Items 10, 11, 12, 13 and 14) will be filed with the Commission not later than 120 days after the
end of the fiscal year as an amendment to this Annual Report on Form 10-K.



---





PART I

ITEM 1.    BUSINESS

Unless the context indicates otherwise, all references to the "Company", "Station", "we", "our", "ours" and "us" refer to Station Casinos, Inc. and its
consolidated subsidiaries.

Recent Events

On November 7, 2007, the Company completed its merger (the "Merger") with FCP Acquisition Sub, a Nevada corporation ("Merger Sub"), pursuant to which
Merger Sub merged with and into the Company with the Company continuing as the surviving corporation. The Merger was completed pursuant to the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of February 23, 2007 and amended as of May 4, 2007, among the Company, Fertitta Colony Partners LLC, a Nevada limited liability company ("FCP"), and Merger Sub, as
amended.

As
a result of the Merger, 24.1% of the issued and outstanding shares of non-voting common stock of the Company are owned by Fertitta Partners LLC, a Nevada limited
liability company ("Fertitta Partners"), which is owned by affiliates of Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, affiliates of Lorenzo J. Fertitta, Vice Chairman and
President of Station, affiliates of Blake L. Sartini and Delise F. Sartini, and certain officers and other members of management of the Company. The remaining 75.9% of the issued and outstanding
shares of non-voting common stock of the Company are owned by FCP Holding, Inc., a Nevada corporation ("FCP HoldCo") and a wholly-owned subsidiary of FCP. FCP is owned by an
affiliate of Colony Capital, LLC ("Colony") and affiliates of Frank J. Fertitta III and Lorenzo J. Fertitta. Substantially simultaneously with the consummation of the Merger, shares of
voting common stock of
Station were issued for nominal consideration to FCP VoteCo LLC, a Nevada limited liability company ("FCP VoteCo"), which is owned equally by Frank J. Fertitta III, Lorenzo J. Fertitta and
Thomas J. Barrack, Jr., Chairman and Chief Executive Officer of Colony.

At
the effective time of the Merger, each outstanding share of our common stock, including any rights associated therewith (other than shares of our common stock owned by FCP, Merger
Sub, FCP HoldCo, Fertitta Partners or any wholly-owned subsidiary of the Company or shares of our common stock held in treasury by us) was cancelled and converted into the right to receive $90 in
cash, without interest. Following the consummation of the Merger, the Company is privately owned through FCP HoldCo, Fertitta Partners and FCP VoteCo. Station common stock ceased trading on the New
York Stock Exchange at market close on November 7, 2007, and will no longer be listed on any exchange or quotation system. The Company's voting common stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended.

Forward-looking Statements

When used in this report and elsewhere by management from time to time, the words "believes", "anticipates", "expects" and similar expressions are intended to
identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansions, development and acquisition projects, legal proceedings
and employee matters. Certain important factors, including but not limited to, financial market risks, could cause our actual results to differ materially from those expressed in our forward-looking
statements. Further information on potential factors which could affect our financial condition, results of operations and business including, without limitation, the ability to recognize the benefits
of the Merger, the impact of the substantial indebtedness incurred to finance the consummation of the Merger, the ability to maintain existing management, integration of acquisitions, competition
within the gaming industry, the cyclical nature of the hotel business and gaming business, economic conditions, development and construction risks, regulatory matters and litigation are included in
our filings 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. We undertake no

1

---



obligation
to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date hereof.

General

We are a gaming and entertainment company that currently owns and operates nine major hotel/casino properties (one of which is 50% owned) under the Station and
Fiesta brand names and eight smaller casino properties (three of which are 50% owned), in the Las Vegas metropolitan area, as well as
manages a casino for a Native American tribe. Our growth strategy includes the master-planned expansions of our existing gaming facilities in Nevada, the development of gaming facilities on certain
real estate we own or are under contract to acquire in the Las Vegas valley and Reno, Nevada, the evaluation and pursuit of additional acquisition or development opportunities in Nevada and other
gaming markets and the pursuit of additional management agreements with Native American tribes.

We
own and operate Palace Station Hotel & Casino ("Palace Station"), Boulder Station Hotel & Casino ("Boulder Station"), Texas Station Gambling Hall & Hotel ("Texas
Station"), Sunset Station Hotel & Casino ("Sunset Station"), Santa Fe Station Hotel & Casino ("Santa Fe Station"), Red Rock Casino Resort Spa ("Red Rock"), Fiesta Rancho Casino Hotel
("Fiesta Rancho"), Fiesta Henderson Casino Hotel ("Fiesta Henderson"), Wild Wild West Gambling Hall & Hotel ("Wild Wild West"), Wildfire Casino ("Wildfire"), Magic Star Casino ("Magic Star"),
Gold Rush Casino ("Gold Rush") and Lake Mead Casino ("Lake Mead Lounge"). We also own a 50% interest in Green Valley Ranch Resort Spa Casino ("Green Valley Ranch"), Barley's Casino & Brewing
Company ("Barley's"), The Greens Gaming and Dining ("The Greens") and Renata's Casino ("Renata's"). Each of our casinos cater primarily to local Las Vegas area residents. We market the seven "Station"
casinos (including Green Valley Ranch and Red Rock) together under the Station Casinos' brand and the two "Fiesta" casinos under the Fiesta brand, offering convenience and choices to residents
throughout the Las Vegas valley with our strategically located properties. In addition, we manage Thunder Valley Casino ("Thunder Valley") in Sacramento, California on behalf of the United Auburn
Indian Community ("UAIC").

Operating Strategy

We believe that the following key principles have been integral to our success as a gaming operator and we intend to continue to employ these strategies at each
of our properties.



Our operating strategy emphasizes attracting and retaining customers primarily from the local and repeat visitor markets. Our casino properties attract customers
through:



Although
perceived value initially attracts a customer to our casino properties, actual value generates customer satisfaction and loyalty. We believe that actual value becomes apparent
during the customer's visit through an enjoyable, affordable and high-quality entertainment experience. Las Vegas, which is and has been one of the fastest growing cities in the United
States, is characterized by a historically strong economy and demographics, which include an increasing number of retirees and other active gaming customers. We believe that our
out-of-town patrons are also discerning customers who enjoy our value-oriented, high-quality approach. We believe that our patrons view our hotel and casino product
as a

2

---



preferable
alternative to attractions located on the Las Vegas Strip and downtown Las Vegas. In markets outside of Las Vegas we believe customers come from farther distances, a radius in some cases of
more than 150 miles; however, the business model for local customers remains the same.



Because we target the repeat customer, we are committed to providing a high-value entertainment experience for our customers in our restaurants,
hotels, casinos and other entertainment amenities. We develop regional entertainment destinations for locals that include other amenities such as spas, movie theaters, bowling centers, ice skating,
live entertainment venues and child care facilities. In addition, we believe the value offered by restaurants at each of our casino properties is a major factor in attracting local gaming customers,
as dining is a primary motivation for casino visits by many locals. Through their restaurants, each of which has a distinct style of cuisine, our casino properties offer generous portions of
high-quality food at reasonable prices. In addition, our operating strategy focuses on slot and video poker machine play. Our target market consists of frequent gaming patrons who seek not
only a friendly atmosphere and convenience, but also higher than average payout rates. Because locals and repeat visitors demand variety and quality in their slot and video poker machine play, our
casino properties offer the latest in slot and video poker technology.

As
part of our commitment to providing a quality entertainment experience for our patrons, we are dedicated to ensuring a high level of customer satisfaction and loyalty by providing
attentive customer service in a friendly, casual atmosphere. We recognize that consistent quality and a comfortable atmosphere stem from the collective care and friendliness of each employee. We began
as a family-run business, and have maintained close-knit relationships among our management and we endeavor to instill among our employees this same sense of loyalty. Toward
this end, we take a hands-on approach through active and direct involvement with employees at all levels.



We employ an innovative marketing strategy that utilizes frequent high profile promotional programs in order to attract customers and establish a high level of
name recognition. In addition to aggressive marketing through television, radio and newspaper advertising, we have created and sponsored promotions that have become a tradition in the locals' market.

In
1999, we introduced a unified Boarding Pass player rewards program at our Station properties. The Boarding Pass program allows guests to earn points based on their level of gaming
activity. The Fiesta properties offer a similar player rewards program called the Amigo Club. Members of the Boarding Pass and the Amigo Club can redeem points at any of our properties for meals in
any of the restaurants, hotel rooms, movie passes, entertainment tickets or merchandise from our gift shops.

We
are heavily focused on using cutting edge technology to drive customer traffic with products such as our Jumbo Brand products, which include "Jumbo Jackpot", "Jumbo Pennies", "Jumbo
Bingo", "Jumbo Keno" and "Jumbo Hold'Em". Jumbo Jackpot, which was introduced in April 2003, is an exclusive progressive slot jackpot that allows customers using a Boarding Pass or Amigo Card the
opportunity to win between $100,000 and $150,000 just for playing slot machines. Other products include "Xtra Play Cash", "Sports Connection" and "Million $ Bingo", among others. We believe
that these products create sustainable competitive advantages and distinguish us from our competitive set.

3

---



Properties

Set forth below is certain information as of December 31, 2007 concerning our properties, all of which we own and/or operate except as otherwise indicated.
The properties are more fully described following the table.

|                   |                                | Hotel Rooms |       | Slots(1) |       | Gaming Tables(2) |     | Parking Spaces(3) |       | Acreage
|------------------ | ------------------------------ | ----------- | ----- | -------- | ----- | ---------------- | --- | ----------------- | ----- | -------
|Casino Properties  |                                |             |       |          |       |                  |     |                   |       |        
|                   | Palace Station                 |             | 1,000 |          | 1,676 |                  | 49  |                   | 2,600 |        
|                   | Boulder Station                |             | 300   |          | 2,885 |                  | 42  |                   | 4,800 |        
|                   | Texas Station                  |             | 200   |          | 2,335 |                  | 37  |                   | 5,900 |        
|                   | Sunset Station                 |             | 457   |          | 2,578 |                  | 47  |                   | 5,500 |        
|                   | Santa Fe Station               |             | 200   |          | 3,002 |                  | 47  |                   | 5,200 |        
|                   | Red Rock                       |             | 815   |          | 2,954 |                  | 64  |                   | 7,800 |        
|                   | Green Valley Ranch (50% owned) |             | 490   |          | 2,687 |                  | 55  |                   | 3,900 |        
|                   | Fiesta Rancho                  |             | 100   |          | 1,637 |                  | 14  |                   | 2,000 |        
|                   | Fiesta Henderson               |             | 224   |          | 1,839 |                  | 18  |                   | 3,000 |        
|Other Properties   |                                |             |       |          |       |                  |     |                   |       |        
|                   | Wild Wild West                 |             | 262   |          | 236   |                  | 6   |                   | 600   |        
|                   | Wildfire                       |             |      |          | 235   |                  |    |                   | 265   |        
|                   | Magic Star                     |             |      |          | 176   |                  |    |                   | 230   |        
|                   | Gold Rush                      |             |      |          | 154   |                  |    |                   | 125   |        
|                   | Lake Mead Lounge               |             |      |          | 101   |                  |    |                   | 64    |        
|                   | Barley's (50% owned)           |             |      |          | 199   |                  |    |                   |      |        
|                   | The Greens (50% owned)         |             |      |          | 36    |                  |    |                   |      |        
|                   | Renata's (50% owned)           |             |      |          | 178   |                  |    |                   |      |        
|Managed Properties |                                |             |       |          |       |                  |     |                   |       |        
|                   | Thunder Valley (4)             |             |      |          | 2,676 |                  | 100 |                   | 4,500 |        

---

Casino Properties



Palace Station is strategically located at the intersection of Sahara Avenue and Interstate 15, one of Las Vegas' most heavily traveled areas. Palace Station is a
short distance from McCarran International Airport and from major attractions on the Las Vegas Strip and downtown Las Vegas. Palace Station features a
turn-of-the-20th-century railroad station theme with non-gaming amenities including newly remodeled hotel rooms, eight
full-service restaurants, a 275-seat entertainment lounge, three additional bars, two swimming pools, an approximately 20,000-square-foot banquet and
convention center, a 24-hour gift shop and a non-gaming video arcade.

4

---



Palace Station's eight full-service restaurants have a total of approximately 1,300 seats. These restaurants offer a variety of high-quality food at reasonable
prices, including the Grand Café (featuring American and Chinese fare), Feast Gourmet Buffet, The Broiler Steaks and Seafood, Pasta Palace (an Italian restaurant), Cabo Mexican
Restaurant, Jack's Irish Pub, an 18-seat Oyster Bar and Chang's (gourmet Hong Kong cuisine). In addition to these restaurants, Palace Station offers various fast-food outlets
and the Sound Trax Club, an entertainment club.



Boulder Station, which opened in August 1994, is strategically located on Boulder Highway, immediately adjacent to the Interstate 515 interchange. We believe that
this highly visible location at this well-traveled intersection offers a competitive advantage relative to existing hotels and casinos located on Boulder Highway. Boulder Station is
located approximately four miles east of the Las Vegas Strip and approximately four miles southeast of downtown Las Vegas. Boulder Station features a
turn-of-the-20th-century railroad station theme with non-gaming amenities including five full-service restaurants, a
750-seat entertainment lounge, six additional bars, an 11-screen movie theater complex, a Kid's Quest child care facility, a swimming pool, a non-gaming video
arcade and a gift shop.

Boulder
Station's five full-service restaurants have a total of over 1,400 seats. These restaurants offer a variety of high-quality meals at reasonable prices,
including, the 24-hour Boulder Café (featuring American and Chinese fare), Feast Gourmet Buffet, The Broiler Steaks and Seafood, Pasta Palace (an Italian restaurant) and
Guadalajara Bar & Grille (a Mexican restaurant). In addition to these restaurants, Boulder Station offers various fast-food outlets.



Texas Station, which opened in July 1995, is strategically located at the corner of Lake Mead Boulevard and Rancho Drive in North Las Vegas. Texas Station
features a friendly Texas atmosphere, highlighted by distinctive early Texas architecture with non-gaming amenities including five full-service restaurants, a Kid's Quest child
care facility, a 300-seat entertainment lounge, a 1,700-seat event center, eight additional bars, an 18-screen movie theater complex, a swimming pool, a
non-gaming video arcade, a gift shop, a 60-lane bowling center and approximately 40,000 square feet of meeting and banquet space.

Texas
Station's five full-service restaurants have a total of approximately 1,200 seats. These restaurants offer a variety of high-quality food at reasonable
prices, including the 24-hour Texas Café, Austins Steakhouse, San Lorenzo (an Italian restaurant), Feast Around the World Buffet (featuring seven different food stations)
and Texas Star Oyster Bar, which has 110 seats. In addition to the Texas Station-themed restaurants, guests may also enjoy the unique features of several bars and lounges including Martini Ranch,
Whiskey Bar, Garage Bar, A Bar and Armadillo Honky Tonk. Texas Station also offers a variety of fast-food outlets to enhance the customers' dining selection.



Sunset Station, which opened in June 1997, is strategically located at the intersection of Interstate 515 and Sunset Road. Multiple access points provide
customers convenient access to the gaming complex and parking areas. Situated in a highly concentrated commercial corridor along Interstate 515, Sunset Station has prominent visibility from the
freeway and the Sunset commercial corridor. Sunset Station is located approximately nine miles east of McCarran International Airport and approximately seven miles southeast of Boulder Station. Sunset
Station features a Spanish/Mediterranean-style theme with non-gaming amenities including eight full-service restaurants themed to capitalize on the familiarity of the
restaurants at our other properties, a 520-seat entertainment lounge, a 4,000-seat outdoor amphitheater, eight additional bars, a gift shop, a non-gaming video
arcade, a 13-screen movie theater complex, a 72-lane bowling center, a Kid's Quest child care facility and a swimming pool.

5

---



Sunset
Station's eight full-service restaurants have a total of approximately 2,300 seats featuring "live-action" cooking and simulated patio dining. These
restaurant facilities offer a variety of high-quality food at reasonable prices, including the 24-hour Sunset Café (featuring American fare), Sonoma Cellar
Steakhouse, Costa Del Sol (a seafood restaurant), Capri Italian Ristorante, Guadalajara Bar & Grille (a Mexican restaurant), Feast Buffet, a live action buffet featuring Mexican, Italian,
barbecue, American and Chinese cuisine, Hooter's and a 65-seat Oyster Bar. Guests may also enjoy the Gaudi Bar, a centerpiece of the casino featuring over 8,000 square feet of stained
glass. Sunset Station also offers a variety of fast-food outlets to enhance the customers' dining selection.



In October 2000, we purchased Santa Fe Station which is strategically located at the intersection of Highway 95 and Rancho Drive, approximately five miles
northwest of Texas Station. Santa Fe Station features non-gaming amenities including seven full-service restaurants, a gift shop, a non-gaming video arcade, a
swimming pool, a 500-seat entertainment lounge, eight additional bars, a 60-lane bowling center, a 16-screen movie theater complex, a Kid's Quest child care
facility and over 14,000 square feet of meeting and banquet facilities.

Santa
Fe Station's seven full-service restaurants have a total of approximately 1,300 seats, which include the Grand Café, The Charcoal Room (a steakhouse),
Cabo Mexican Restaurant, Turf Grill, The Salt Lick Bar B-Q, Tides Oyster Bar and the Feast Buffet, a live action buffet featuring Mexican, Italian, barbecue, American and Chinese cuisine.
Guests may also enjoy 4949 Lounge, a centerpiece of the casino. Santa Fe Station also offers a variety of fast-food outlets to enhance the customers' dining selection.



Red Rock, which opened on April 18, 2006, is located on Charleston Boulevard at the Interstate 215/Charleston interchange in the Summerlin master-planned
community in Las Vegas, Nevada. Red Rock features an elegant desert oasis theme with a contemporary design, offering 815 hotel rooms featuring ultra-modern design filled with the most
up-to-date luxury amenities. In addition to its standard guestrooms, the hotel offers six styles of suites, including one-of-a-kind custom
villas and penthouse suites. Additional non-gaming amenities include ten full-service restaurants, a 16-screen movie theater complex, 94,000 square feet of meeting
and convention space, a night club, a full-service spa, a 72-lane bowling center and a Kid's Quest child care facility.

Red
Rock's ten full-service restaurants have a total of over 1,900 seats and include Hachi (a contemporary Japanese restaurant), T-bones Chophouse, Terra Rossa
(an Italian restaurant), Cabo Mexican Restaurant, the Grand Café, The Salt Lick Bar B-Q, Tides Oyster Bar, Feast Buffet, a live action buffet featuring Mexican, Italian,
barbecue, American and Chinese cuisine, Turf Grill (featuring blue plate specials and your favorite comfort foods) and Sand Bar. Red Rock also offers a variety of fast-food outlets to
enhance the customers' dining selection.



Green Valley Ranch, which opened in December 2001, is strategically located at the intersection of Interstate 215 and Green Valley Parkway in Henderson, Nevada.
Green Valley Ranch is approximately five minutes from McCarran International Airport and seven minutes from the Las Vegas Strip. We jointly developed the project on 40 acres of a 170-acre
multi-use commercial development with GCR Gaming. In addition to our 50% ownership, we are also the managing partner of Green Valley Ranch and receive a management fee equal to 2% of the
property's revenues and approximately 5% of Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA").

Green
Valley Ranch was designed to complement the Green Valley master-planned community. The AAA Four Diamond resort features a Mediterranean-style villa theme with
non-gaming amenities

6

---



including
nine full-service restaurants, a 4,200-square-foot non-gaming arcade, a state-of-the-art spa with outdoor
pools, a 10-screen movie theater complex, a gift shop, approximately 65,000 square feet of meeting and convention space and an entertainment lounge. Green Valley Ranch also offers an
8-acre complex featuring private poolside cabanas, a contemporary poolside bar and grill, one and a half acres of vineyards and an outdoor performance venue.

Green
Valley Ranch's nine full-service restaurants include the Grand Café, China Spice (a Chinese restaurant), Sushi+Sake, Terra Verde (an Italian restaurant),
Hank's Fine Steaks and Martinis, The Original Pancake House, Feast Around the World Buffet, a live action buffet featuring Mexican, Italian, barbecue, American and Chinese cuisine, Tides Oyster Bar
and Turf Grill. Green Valley Ranch also offers a variety of fast-food outlets to enhance the customers' dining selection. Guests may also enjoy the Drop Bar, a centerpiece of the casino,
and Lobby Bar, a 5,300-square-foot nightclub.



Fiesta Rancho was purchased in January 2001 and is strategically located at the intersection of Lake Mead Boulevard and Rancho Drive in North Las Vegas across
from Texas Station. Fiesta Rancho features a Southwestern theme with non-gaming amenities including four full-service restaurants, a gift shop, a non-gaming video
arcade, a swimming pool, a 700-seat entertainment lounge, a regulation-size ice skating rink and four additional bars.

Fiesta
Rancho's four full-service restaurants have a total of over 700 seats, and include the 24-hour Baja Beach Café (featuring American fare),
Garduno's (a Mexican restaurant), Blue Agave Steakhouse and Festival Buffet. Fiesta Rancho also offers a variety of fast-food outlets to enhance the customers' dining selection.



Fiesta Henderson was purchased in January 2001 and is strategically located at the intersection of Interstate 215 and Interstate 515 in Henderson, Nevada. The
property features four full-service restaurants, a 12-screen movie theater complex, a gift shop, a swimming pool, three bars and lounges and meeting space.

Fiesta
Henderson's four full-service restaurants have a total of approximately 1,100 seats, and include the 24-hour Baja Beach Café (featuring
American and Chinese fare), Fuego Steakhouse, Amigo's Mexican Cantina and Festival Buffet.

Other Properties



Wild Wild West, which we acquired in July 1998, is strategically located on Tropicana Avenue and immediately adjacent to Interstate 15. Wild Wild West's
non-gaming amenities include a full-service restaurant, a bar, a gift shop and a truck plaza.



In January 2003, we purchased Wildfire located on Rancho Drive across from Texas Station. Wildfire's non-gaming amenities include a lounge, outdoor
patio and a full-service restaurant.



In August 2004, we purchased Magic Star and Gold Rush. Magic Star is located on Boulder Highway in Henderson, Nevada. Gold Rush is located at the intersection of
Interstate 515 and Sunset Road,

7

---



adjacent
to Sunset Station in Henderson, Nevada. Both properties offer non-gaming amenities which include a full service restaurant and a bar.



In September 2006, we purchased Lake Mead Lounge located in Henderson, Nevada. Lake Mead Lounge's non-gaming amenities include a
full-service restaurant and bar.



Barley's, which opened in January 1996, is a casino and brew pub located in Henderson, Nevada. Barley's non-gaming amenities include a
full-service restaurant, a pizza kitchen and a bar. In November 2005, we purchased a 50% interest in The Greens, a restaurant and lounge, located in Henderson, Nevada. The Greens'
non-gaming amenities include a full-service restaurant and bar. In October 2007, we purchased a 50% interest in Renata's located in Henderson, Nevada. Renata's
non-gaming features include a full-service restaurant, a bar and a 24-lane bowling center. We are the managing partner for Barley's, The Greens and Renata's and
receive a management fee equal to approximately 10% of EBITDA.

Managed Properties



We have entered into a Development Services Agreement and a Management Agreement with the UAIC. Our seven-year Management Agreement was approved by
the National Indian Gaming Commission (the "NIGC") and expires in June 2010. Pursuant to those agreements, and in compliance with a Memorandum of Understanding entered into by the UAIC and Placer
County, California, we developed, with the UAIC, Thunder Valley, a gaming and entertainment facility located approximately seven miles north of Interstate 80 on Highway 65, in Placer County,
California, near Sacramento, opened on June 9, 2003. We receive a management fee equal to 24% of the facility's net income (as defined in the management agreement). Thunder Valley's
non-gaming amenities include three specialty restaurants, a 500-seat buffet, a food court and a center pit bar.

Expansion Strategy



We believe that a highly visible location, convenient access and ample parking are critical factors in attracting local patronage and repeat visitors.
Additionally, sites must be large enough to support multi-phased, master-planned growth to capitalize on growing demand in incremental stages. We select sites that are located within a dense
population base so that the facility cannot be cut-off from its primary market. These sites generally have been adjacent to high-traffic surface streets and interstate
highways. We believe that each of our Casino Properties' locations has provided us with a significant competitive advantage to attract our targeted customer base. In the Las Vegas metropolitan area,
as a result of Senate Bill 208, there are a limited number of sites available for development off of "The Strip" or downtown and we control a number of these sites.



Our expansion strategy includes the master-planned expansion of our existing and future gaming locations. In designing project sites, we plan and engineer for
multi-phased facility expansions to accommodate future growth and to allow us to develop dominant properties. A project's master-planned design typically allows the option of adding hotel rooms,
casino space, parking structures and non-gaming

8

---



entertainment
such as movie theaters, additional restaurants, retail shops and various other entertainment venues.

We
continually evaluate the timing and scope of our master-planned developments at each of our properties and may determine from time to time to expand the scope of, improve on or
suspend the implementation of our master plans. These decisions are dependent upon the availability of financing, competition and future economic and gaming regulatory environments, many of which are
beyond our control.



We have acquired several parcels of land in the Las Vegas valley, northern California and Reno, Nevada, which can be used for new casino development or other
associated development. In addition,
we have agreements to acquire additional parcels of land in the Las Vegas valley and Reno, Nevada. We also evaluate other development and acquisition opportunities in current and emerging gaming
markets, including land-based, dockside, riverboat and Native American gaming. Our decision whether to proceed with any new gaming development or acquisition opportunity is dependent upon
future economic and regulatory factors, the availability of financing and competitive and strategic considerations, many of which are beyond our control.

In
December 2005, we entered into an agreement with the Greenspun Corporation to develop Aliante Station, a hotel and casino in the Aliante master-planned community located in North Las
Vegas, Nevada. We are developing and will manage the facility, to be located on a gaming-entitled 40-acre site on the northeast corner of Interstate 215 and Aliante Parkway, which was
contributed by the Greenspun Corporation for their 50% ownership in the joint venture. We will receive a management fee equal to 2% of the property's revenues and approximately 5% of EBITDA. The first
phase of Aliante Station is expected to include 201 hotel rooms, approximately 2,600 slot machines, multiple full-service restaurants and a multi-screen movie theater complex. Construction
on Aliante Station began in February 2007 and is expected to be completed by the end of 2008 at a cost of approximately $675 million. Pursuant to the terms of the agreement, in January 2006, we
contributed a 54-acre site located on Losee Road in North Las Vegas, Nevada, as well as approximately $2.2 million, for our 50% ownership in the joint venture.

In
December 2006, we entered into an amended and restated operating agreement with FBLV Holding Company LLC ("FBLV"). Pursuant to the amended and restated operating agreement, the
parties contributed approximately 52 acres (with approximately 20 acres contributed by us for our 50% ownership and approximately 32 acres contributed by FBLV for their 50% ownership) of improved and
unimproved real property located along Rancho Road south of Palace Station in Las Vegas, Nevada into a joint venture. It is anticipated that the joint venture will develop, construct and manage,
pursuant to a master development plan, a mixed-use residential, retail and entertainment project on all or a portion of such property. The timing, cost and scope of the project have yet to
be determined.



We have entered into Development and Management Agreements with the Federated Indians of Graton Rancheria (the "FIGR"), a federally recognized Native American
tribe. Pursuant to those agreements, we will assist the FIGR in developing and operating a gaming and entertainment project to
be located in Sonoma County, California. The FIGR selected us to assist them in designing, developing and financing their project and, upon opening; we will manage the facility on behalf of the FIGR.
The Management Agreement has a term of seven years from the opening of the facility and we will receive a management fee equal to 24% of the facility's net income. We will also receive a development
fee equal to 2% of the cost of the project upon the opening of the facility.

9

---



In
October 2003, the FIGR entered into a Memorandum of Understanding with the City of Rohnert Park. In August 2005, we purchased 270 acres of land just west of the Rohnert Park city
limits in Sonoma County, California. In March 2006, we purchased an additional 4.7 acres adjacent to the previously acquired property. The property purchased is approximately one-quarter
mile from Highway 101 and approximately 43 miles from downtown San Francisco. Development of the gaming and entertainment project is subject to certain governmental and regulatory approvals,
including, but not limited to, negotiating a gaming compact with the State of California, the United States Department of the Interior ("DOI") accepting a portion of the land into trust on behalf of
the FIGR and approval of the Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. As of December 31,
2007, we have advanced approximately $140.3 million toward the development of this project, primarily to complete the environmental impact study and secure real estate for the project, which is
included on our consolidated balance sheets. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from the FIGR's gaming revenues. In addition, we have agreed
to pay approximately $11.3 million upon achieving certain milestones, which will not be reimbursed. As of December 31, 2007, approximately $2.0 million of these payments had been
made and were expensed in development expense as incurred. The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory
approvals. There can be no assurances when or if these approvals will be obtained.



On November 13, 2003, we agreed to purchase a 50% interest in MPM Enterprises, LLC, a Michigan limited liability company ("MPM"). Concurrently with
our agreement to purchase that interest, MPM and the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, a federally recognized Native
American tribe commonly referred to as the Gun Lake Tribe ("Gun Lake"), entered into amended Development and Management Agreements, pursuant to which MPM agreed to assist Gun Lake in developing and
operating a gaming and entertainment project to be located in Allegan County, Michigan. On July 29, 2005, MPM and Gun Lake entered into amended and restated Development and Management
Agreements. We have agreed to pay $6.0 million for our 50% interest in MPM, which is payable upon achieving certain milestones and is not reimbursable. As of December 31, 2007,
approximately $2.0 million of these payments had been made and were expensed in development expense as incurred. An additional $12.0 million in total
may be paid by us in years six and seven of the amended and restated Management Agreement, subject to certain contingencies. Under the terms of the amended and restated Development Agreement, we have
agreed to arrange financing for the ongoing development costs and construction of the project. As of December 31, 2007, we have advanced approximately $38.3 million toward the
development of this project, primarily to complete the environmental assessment and secure real estate for the project, which is included on our consolidated balance sheets. Funds advanced by us are
expected to be repaid from the proceeds of the project financing or from Gun Lake's gaming revenues. The amended and restated Management Agreement has a term of seven years from the opening of the
facility and provides for a management fee of 30% of the project's net income to be paid to MPM. Pursuant to the terms of the MPM Operating Agreement, our portion of the management fee is 50% of the
first $24 million of management fees earned, 83% of the next $24 million of management fees and 93% of any management fees in excess of $48 million.

The
proposed project will be located on approximately 146 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently contemplated,
the project will include up to 2,500 slot machines, 75 table games, a buffet and specialty restaurants. Construction of the project includes the conversion of an existing 192,000
square-foot building into the casino and entertainment facility. Development of the gaming and entertainment project and operation of Class III gaming is subject to certain
governmental and regulatory approvals, including, but not limited to, the signing of a gaming compact by the Governor of the State of Michigan, the DOI taking the land into trust on behalf of Gun Lake
and approval of the Management Agreement by the NIGC.

10

---



On
February 27, 2004, the DOI issued a Finding Of No Significant Impact with respect to the proposed project. On May 13, 2005, the DOI published in the Federal Register a
Notice of Final Agency Determination (the "Determination") to take certain land into trust for the benefit of Gun Lake. The publication commenced a thirty-day period in which interested
parties could seek judicial review of the Determination. On June 13, 2005, Michigan Gambling Opposition filed a complaint (the "Complaint") in the United States District Court, District of
Columbia, seeking declaratory and injunctive relief against the DOI and officials of the DOI. The Complaint seeks judicial review of the Determination. On July 27, 2005, Gun Lake filed a motion
to intervene in that lawsuit. On September 1, 2005, the District Court granted Gun Lake's motion to intervene. On January 6, 2006, Gun Lake filed a motion for judgment on the pleadings
or, in the alternative, for summary judgment. Also on January 6, 2006, the DOI filed a motion to dismiss or, in the alternative, for summary judgment. By May 2006, all responsive pleadings had
been filed and the case was ready for consideration by the District Court. On October 27, 2006, the Department of Justice filed a Notice with the District Court indicating that the DOI planned
to take the 146-acre site into trust on January 5, 2007, if the plaintiffs did not seek injunctive relief or failed to persuade the court to issue any relief precluding the DOI from
doing so. The DOI subsequently amended that date to March 5, 2007, in order to provide the Court sufficient time to render its decision. The Court set oral arguments on the parties' motions to
dismiss or, in the alternative, for summary judgment for November 29, 2006. Oral arguments were heard on that date. On February 23, 2007, the District Court issued its decision in favor
of the DOI and Gun Lake, finding that there were no facts which would entitle plaintiffs to any relief on the four issues raised in the Complaint, and granted the parties' motion to dismiss or, in the
alternative for summary judgment (the "Dispositive Motions"). On March 1, 2007, the plaintiffs filed a
motion for stay pending appeal with the District Court. On March 5, 2007, the District Court granted the plaintiffs' motion for stay pending appeal, thereby precluding the DOI from taking the
site into trust for the benefit of Gun Lake until the District Court's decision granting the Dispositive Motions has been reviewed on appeal. On March 22, 2007, plaintiffs filed a notice of
appeal of the District Court's decision granting the Dispositive Motions with the United States Court of Appeals for the District of Columbia Circuit. On May 21, 2007, the plaintiffs filed
their appellate brief. On July 6, 2007, the DOI and Gun Lake filed their responsive briefs. On July 30, 2007, the plaintiffs filed their reply brief. Oral arguments were heard on
October 19, 2007. The parties are currently waiting for the appellate court to render its decision. As with all litigation, no assurances can be provided as to the outcome of this lawsuit.

On
March 9, 2007, Gun Lake and the State of Michigan entered into a tribal-state Class III gaming compact. The compact is subject to approval by the Michigan Legislature
and, if approved, will regulate gaming at Gun Lake's proposed gaming and entertainment project to be developed on the site. On August 8, 2007, the Michigan House of Representatives ratified the
compact. No assurances can be provided as to whether the Michigan Senate will approve the compact. Prior to obtaining third-party financing, we will contribute significant financial support to the
project. The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if
these approvals will be obtained.



We have entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "MITCR"), a federally recognized
Native American tribe. Pursuant to those agreements, we will assist the MITCR in developing and operating a gaming and entertainment facility to be located on a portion of an approximately
650-acre site in Butte County, California, at the intersection of State Route 149 and Highway 99, approximately 10 miles southeast of Chico, California and 80 miles north of Sacramento,
California. Under the terms of the Development Agreement, we have agreed to arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are expected
to be repaid from the proceeds of the project financing or from the MITCR's gaming revenues. As of December 31, 2007, we have advanced approximately $9.8 million toward the development
of this project, primarily to complete the environmental assessment and secure real estate for

11

---



the
project, which is included on our consolidated balance sheets. In addition, we have agreed to pay approximately $2.2 million of payments upon achieving certain milestones, which will not be
reimbursed. As of December 31, 2007, $50,000 of these payments had been made and were expensed in development expense as incurred. The Management Agreement has a term of seven years from the
opening of the facility and provides for a management fee of 24% of the facility's net income. As currently contemplated, the facility will include approximately 700 slot machines, 12 table games and
dining and entertainment amenities. Development of the facility is subject to certain governmental and regulatory approvals, including, but not limited to, negotiating a gaming compact with the State
of California, the DOI accepting land into trust on behalf of the MITCR and approval of the Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant
financial support to the project. The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no
assurances when or if these approvals will be obtained.



We have entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians (the "Mono"), a federally recognized Native American
tribe located near Fresno, California. Pursuant to those agreements, we will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County, California.
We have purchased, for the benefit of the Mono, a 305-acre parcel of land located on Highway 99 north of the city of Madera. Under the terms of the Development Agreement, we have agreed to
arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from the Mono's
gaming revenues. As of December 31, 2007, we have advanced approximately $12.4 million toward the development of this project, primarily to complete the environmental impact study and
secure real estate for the project, which is included on our consolidated balance sheets. In addition, we have agreed to pay approximately
$1.3 million of payments upon achieving certain milestones, which will not be reimbursed and will be expensed as incurred. As of December 31, 2007, none of these payments had been made.
The Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 24% of the facility's net income. As currently contemplated, the facility will
include approximately 2,000 slot machines, 60 table games, restaurants, a hotel and entertainment amenities. Development of the gaming and entertainment project is subject to certain governmental and
regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of California, the DOI accepting the land into trust on behalf of the Mono and approval of the
Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. The timing of this type of project is difficult to predict,
and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.

Employees

As of January 31, 2008, we had approximately 14,500 employees in Nevada, which includes Green Valley Ranch, Aliante Station, Barley's, The Greens and
Renata's. From time to time, certain of our employees are contacted by unions and we engage in discussions with such employees regarding establishment of collective bargaining agreements. While we are
faced with such movements by employees from time to time, we do not believe that such movements will have any broad-based impact on our employees; however, there can be no assurances to that effect.
Additionally, we believe that we have good relationships with our employees which has been demonstrated by being named one of FORTUNE magazine's 100 best companies to work for the past four years.

12

---



Available Information

We are a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and file annual reports, quarterly reports and other
documents with the Securities and Exchange Commission (the "SEC"). You may also read and copy any of our filings at the SEC's public reference room at 100 F Street N.E., Room 1580,
Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room. Because we submit filings to the SEC
electronically, access to this information is available at the SEC's internet website (www.sec.gov). This site contains reports and other information regarding issuers that file electronically with
the SEC.

We
also make available, free of charge, at our principal internet address (www.stationcasinos.com) our Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and, if applicable, amendments to those reports filed or furnished pursuant to the Exchange Act as soon as reasonably
practicable after we electronically file such material with, or furnish it to, the SEC.

Our
Code of Business Conduct and Ethics includes a code of ethics for our principal executive officer and our principal accounting officer and applies to all of our employees and
non-employee directors. Our Code of Business Conduct and Ethics is available on the Investor Relations section of our website at www.stationcasinos.com.

ITEM 1A. RISK FACTORS

We face substantial competition in the gaming industry.

Our Nevada casino properties face competition from all other casinos and hotels in the Las Vegas area, including to some degree, from each other. In addition, our
casino properties face competition from all smaller non-restricted gaming locations and restricted gaming locations (locations with 15 or fewer slot machines) in the greater Las Vegas
area. As of December 31, 2007, there were over 1,400 restricted gaming locations with over 15,000 slot machines. We compete with other hotel/casinos and restricted gaming locations by focusing
on repeat customers and attracting these customers through innovative marketing programs. Our value-oriented, high-quality approach is designed to generate repeat business. Additionally,
our casino properties are strategically located and designed to permit convenient access and ample parking, which are critical factors in attracting local visitors and repeat patrons. Currently, there
are approximately 35 major gaming properties located on or near the Las Vegas Strip, 15 located in the downtown area and several located in other areas of Las Vegas. Major additions, expansions or
enhancements of existing properties or the construction of new properties by competitors, could also have a material adverse effect on the business of our casino properties. While past additions to
capacity have had little, if any, impact on our casino properties' hotel occupancy or casino volume to date, there can be no assurance that hotel occupancy or casino volume will not be adversely
affected in the future.

Our
Nevada casino properties also face competition from 89 non-restricted gaming locations in the Las Vegas area primarily targeted to the local and the repeat visitor
markets. Some of these competitors have completed expansions and existing competitors and new entrants into these markets are in the planning stages or under construction on other projects. Although
we have competed strongly in these marketplaces, there can be no assurance that additional capacity will not have a negative impact on our business.

In
1997, the Nevada legislature enacted Senate Bill 208. This legislation identified certain gaming enterprise districts wherein casino gaming development would be permitted throughout
the Las Vegas valley and established more restrictive criteria for the establishment of new gaming enterprise districts. We believe the growth in gaming supply in the Las Vegas locals' market has
been, and will continue to be, limited by the provisions of Senate Bill 208.

To
a lesser extent, our Nevada operations compete with gaming operations in other parts of the state of Nevada, such as Reno, Laughlin and Lake Tahoe, riverboat gaming markets in the
Midwest and South,

13

---



facilities
in Atlantic City, New Jersey, casinos located on Native American land and in other parts of the world, with state-sponsored lotteries, on-and-off-track
pari-mutuel wagering, card rooms and other forms of legalized gambling.

Native
American gaming in California, as it currently exists, has had little, if any impact on our Nevada operations to date, although there are no assurances as to future impact. In
total, the State of California has signed and ratified Tribal-State Compacts with 67 Native American tribes. Currently there are 57 Native American casinos in operation in the State of California.
These Native American tribes are allowed to operate slot machines, lottery games, and banking and percentage games (including "21") on Native American lands. It is not certain if any expansion of
Native American gaming in California will affect our Nevada operations given that visitors from California make up Nevada's largest visitor market. Moreover, it is uncertain how soon expansion will
affect our interests in Native American gaming in California. Increased competition from Native American gaming may result in a decline in our revenues and may have a material adverse effect on our
business.

The
gaming industry also includes land-based casinos, dockside casinos, riverboat casinos, racetracks with slots, casinos located on Native American land and other forms of
legalized gaming. There is intense competition among companies in the gaming industry, some of which have significantly greater resources than we do. Several states are currently considering
legalizing casino gaming in designated areas. Legalized casino gaming in such states and on Native American land will provide strong competition to us and could adversely affect our operations,
particularly to the extent that such gaming is conducted in areas close to our operations.

Certain construction risks may arise during the building of any new property.

We are currently providing funding for the construction of Aliante Station and the proposed gaming facilities for the Federated Indians of Graton Rancheria, the
Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, the Mechoopda Indian Tribe of Chico Rancheria, California and the North Fork Rancheria
of Mono Indians (collectively the "Native American Tribes"). We evaluate expansion opportunities as they become available, and we may in the future develop projects in addition to the above listed
projects.

Construction
projects, such as Aliante Station and the proposed gaming facilities for the Native American Tribes entail significant risks, including the following:



any
of which can give rise to delays or cost overruns.

The
anticipated costs and construction periods are based upon budgets, conceptual design documents and construction schedule estimates prepared by us in consultation with our architects
and contractors. Construction, equipment, staffing requirements, problems or difficulties in obtaining any of the requisite licenses, permits, allocations or authorizations from regulatory authorities
can increase the cost or delay the construction or opening of each of the proposed facilities or otherwise affect the project's planned design and features. We cannot be sure that we will not exceed
the budgeted costs of these projects or that the projects will commence operations within the contemplated time frame, if at all. Budget overruns and

14

---



delays
with respect to expansion and development projects could have a material adverse impact on our results of operations.

We may experience difficulty integrating operations of our acquired companies and developed properties and managing our overall growth which could have a material adverse
effect on our operating results.

We may not be able to manage the combined operations of Station Casinos, Inc., including, the projects with the Native American Tribes and Aliante Station
and future acquired companies or acquired or developed properties effectively, or realize any of the anticipated benefits of the acquisitions, including streamlining operations or gaining efficiencies
from the elimination of duplicative functions. The integration of other companies as assets will require continued dedication of management resources and may temporarily detract attention from our
day-to-day business.

In
addition, because we plan to continue to pursue expansion and acquisition opportunities, we face significant challenges not only in managing and integrating the projects with the
Native American Tribes and Aliante Station, but also managing our expansion projects and any other gaming operations we may acquire in the future. Management of these new projects will require
increased managerial resources, and we intend to continue our efforts to enhance our gaming management team. However, there can be no assurances that we will succeed in doing so. Failure to manage our
growth effectively could have a material adverse effect on our operating results.

We rely on key personnel, the loss of the services of whom could materially and adversely affect our results of operations.

Our ability to operate successfully and competitively is dependent, in part, upon the continued services of certain of our officers and key employees. In the
event that these officers and/or employees were to leave us, we might not be able to find suitable replacements. We believe that the loss of the services of these officers and/or employees could have
a material adverse effect on our results of operations.

We regularly pursue new gaming acquisition and development opportunities and may not be able to recover our investment or successfully expand to additional locations.

We regularly evaluate and pursue new gaming acquisition and development opportunities in existing and emerging jurisdictions. These opportunities have in the
past, and may in the future, take the form of joint ventures. To the extent that we decide to pursue any new gaming acquisition or development opportunities, our ability to benefit from such
investments will depend upon a number of factors including:



Most
of these factors are beyond our control. Therefore, we cannot be sure that we will be able to recover our investment in any new gaming development opportunities or acquired
facilities, or successfully expand to additional locations.

15

---



We
have invested, and will likely continue to invest, in real property in connection with the pursuit of expansion opportunities. These investments are subject to the risks generally
incident to the ownership of real property, including:



The
development of such properties is also subject to restrictions under our credit facilities. We cannot be sure that we will be able to recover our investment in any such properties or
be able to prevent incurring investment losses.

We are subject to extensive state and local regulation and licensing and gaming authorities have significant control over our operations which could have an adverse effect on
our business.



The ownership and operation of casino gaming facilities and the manufacture and distribution of gaming devices in Nevada are subject to: (i) the Nevada
Gaming Control Act and the rules and regulations promulgated thereunder (collectively, the "Nevada Act"); and (ii) various local ordinances and regulations. Our gaming operations in Nevada are
subject to the licensing and regulatory control of the Nevada Gaming Commission (the "Nevada Commission"), the Nevada State Gaming Control Board (the "Nevada Board"), the City of Las Vegas, the Clark
County Liquor and Gaming Licensing Board (the "Clark County Board"), the City of North Las Vegas, the City of Henderson and certain other local regulatory agencies. The Nevada Commission, Nevada
Board, City of Las Vegas, Clark County Board, City of North Las Vegas, City of Henderson, and certain other local regulatory agencies are collectively referred to as the "Nevada Gaming Authorities".

The
laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things:
(i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of
responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for
internal controls and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the
prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures
could have an adverse effect on our gaming operations.

Our
direct and indirect subsidiaries that conduct gaming operations in Nevada are required to be licensed by the Nevada Gaming Authorities. The gaming licenses require the periodic
payment of fees and taxes and are not transferable. Palace Station Hotel & Casino, Inc. ("PSHC"), Boulder Station, Inc. ("BSI"), Texas Station, LLC ("TSL"),
Sunset Station, Inc. ("SSI"), Tropicana Station, Inc. ("TRSI"), Santa Fe Station, Inc. ("SFSI"), Charleston Station, LLC. ("CSL"), Fiesta
Station, Inc. ("FSI"), Rancho Station, LLC ("RSL"), Lake Mead Station, Inc. ("LMSI"), Gold Rush Station, LLC ("GRS"), Magic Star Station, LLC ("MSS")
and LML Station, LLC ("LML") have received licenses to conduct non-restricted gaming operations. In addition, Green Valley Ranch Gaming, LLC ("GVRG") has
received licenses to conduct non-restricted gaming operations at Green Valley Ranch Resort Spa Casino. Our ownership in GVRG is held through an intermediary company known as GV Ranch
Station, Inc. ("GVRS"), which is licensed as a member and manager of GVRG. Town Center Amusements, Inc. ("TCAI") has been licensed to conduct non-restricted gaming operations
at Barley's Casino & Brewing Company ("Barley's"),

16

---



a
micro brewery and casino located in Henderson, Nevada. Greens Café, LLC ("GC") has been licensed to conduct non-restricted gaming operations at The Greens, a
restaurant and bar located in Henderson, Nevada and Sunset GV, LLC ("SGV") has been licensed to conduct non-restricted gaming operations at Renata's Supper Club ("Renata's"), a
casino located in Henderson, Nevada. Station's ownership in TCAI, GC and SGV is held through an intermediary company known as Green Valley Station, Inc. ("GVSI"), which is licensed as a member
and manager of TCAI, GC and SGV. We also own a minority interest in Fiesta Palms, LLC, d.b.a. Palms Casino Resort, which we hold through our subsidiary, Palms Station, LLC
("PSL"). Station is registered by the Nevada Commission as a publicly traded corporation (a "Registered Corporation") and has been found suitable to own the stock of PSHC, BSI, TSL,
SSI, TRSI, GVSI, SFSI, CSL, GVRS, FSI, RSL, LMSI, GRS, MSS and LML. We are also licensed as a manufacturer and distributor of gaming devices. PSHC, BSI, SSI, TRSI, GVSI, SFSI, CSL, GVRG, FSI and LMSI
are each a corporate gaming licensee and TCAI, TSL, GVRG, RSL, GRS, MSS, GC, PSL, LML and SGV are each a limited liability company licensee (individually a "Gaming Subsidiary" and collectively the
"Gaming Subsidiaries") under the terms of the Nevada Act. As a Registered Corporation, Station is required periodically to submit detailed financial and operating reports to the Nevada Commission and
the Nevada Board and furnish any other information, which the Nevada Commission or the Nevada Board may require. No person may become a stockholder or holder of an interest of, or receive any
percentage of profits from the Gaming Subsidiaries without first obtaining licenses and approvals from the Nevada Gaming Authorities. Station and the Gaming Subsidiaries have obtained from the Nevada
Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses (individually, a "Gaming License" and collectively, the "Gaming Licenses") required in order to
engage in gaming activities in Nevada.

The
Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, a Registered Corporation, such as Station or the Gaming
Subsidiaries, which hold licenses, in order to determine whether such individual is suitable or should be licensed as a business associate of a Registered Corporation or a gaming licensee. Officers,
directors and certain key employees of the Gaming Subsidiaries must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming
Authorities. Our officers, directors and key employees who are actively and directly involved in gaming activities of the Gaming Subsidiaries may be required to be licensed or found suitable by the
Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause, which they deem reasonable. A finding of suitability is comparable to licensing, and both
require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the
investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in corporate position.

If
the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue to have a relationship with Station or the Gaming
Subsidiaries, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require Station or the Gaming Subsidiaries to terminate the
employment of any person who refuses to file the appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.

Station
and the Gaming Subsidiaries are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of
securities and similar financing transactions by us and our Gaming Subsidiaries must be reported to or approved by the Nevada Commission and/or the Nevada Board.

If
it were determined that the Nevada Act was violated by a Gaming Subsidiary, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance
with certain statutory and regulatory procedures. In addition, Station, the Gaming Subsidiaries and the persons involved could

17

---



be
subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate
Palace Station, Boulder Station, Texas Station, Sunset Station, Santa Fe Station, Red Rock, Green Valley Ranch, Fiesta Rancho, Fiesta Henderson, Wild Wild West, Wildfire, Barley's, Gold Rush, Magic
Star, The Greens, Lake Mead Lounge and Renata's and, under certain circumstances, earnings generated during the supervisor's appointment (except for the reasonable rental value of the premises) could
be forfeited to the State of Nevada. Limitation, conditioning or suspension of the Gaming Licenses of the Gaming Subsidiaries or the appointment of a supervisor could (and revocation of any Gaming
License would) have a material adverse affect on our gaming operations.

Any
beneficial owner of our voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have their suitability as a
beneficial owner of our voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of
Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation.

The
Nevada Act provides that persons who acquire beneficial ownership of more than 5% of the voting securities of a Registered Corporation must report the acquisition to the Nevada
Commission. The Nevada Act also requires that beneficial owners of more than 10% of the voting securities of a
Registered Corporation must apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. An
"institutional investor," as defined in the Nevada Commission's regulations, which acquires beneficial ownership of more than 10%, but not more than 15% of our voting securities may apply to the
Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a
waiver may, in certain circumstances, hold up to 19% of our voting securities and maintain its waiver for a limited period of time. An institutional investor shall not be deemed to hold voting
securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly
or indirectly, the election of a majority of the members of our Board of Directors, any change in our corporate charter, bylaws, management policies or our operations, or any of our gaming affiliates,
or any other action which the Nevada Commission finds to be inconsistent with holding our voting securities for investment purposes only. Activities which are not deemed to be inconsistent with
holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type
normally made by securities analysts for informational purposes and not to cause a change in our management, policies or operations; and (iii) such other activities as the Nevada Commission may
determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed
business and financial information including a list of beneficial owners. The applicant is required to pay all costs of the investigation.

Any
person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada
Board may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder who is found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the common stock of a Registered Corporation beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a
criminal offense. We are subject to disciplinary action if, after we receive notice that a person is unsuitable to be a stockholder or to have any other relationship with us or our Gaming
Subsidiaries, we (i) pay that person any dividend or interest upon our voting securities, (ii) allow that person to exercise, directly or indirectly, any voting right conferred through
securities held by that person, (iii) pay remuneration in any form to that person for services rendered or otherwise, or (iv) fail to pursue all lawful efforts to require such unsuitable
person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities for

18

---



cash
at fair market value. Additionally, the Clark County Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming licensee.

The
Nevada Commission may, in its discretion, require the holder of any debt security of a Registered Corporation to file applications, be investigated and be found suitable to own the
debt security of a Registered Corporation if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the
Nevada Commission determines that a person is unsuitable to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if
without the prior approval of the Nevada Commission, it: (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with
such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.

We
are required to maintain a current stock ledger in Nevada, which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. Failure to make such disclosure may be grounds for finding the record
holder unsuitable. We are also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require our stock certificates to bear
a legend indicating that the securities are subject to the Nevada Act. However, to date, the Nevada Commission has not imposed such a requirement on us.

We
may not make a public offering of our securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. On May 17, 2007, the Nevada Commission granted us prior approval to make public
offerings for a period of two years, subject to certain conditions ("Shelf Approval"). The Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory
stop order by the Chairman of the Nevada Board and must be renewed at the end of the two-year approval period. The Shelf Approval also applies to any affiliated company wholly owned by
Station (an "Affiliate"), which is a publicly traded corporation or would thereby become a publicly traded corporation pursuant to a public offering. The Shelf Approval includes approval for us to
place restrictions upon the transfer of, and to enter into agreements not to encumber the equity securities of the Gaming Subsidiaries, as applicable, in conjunction with public offerings made under
the Shelf Approval, and also includes approval for the Gaming Subsidiaries to guarantee any security issued by, or to hypothecate their assets to secure the payment or performance of any obligations
evidenced by a security issued by, Station or an Affiliate in a public offering under the Shelf Approval. The Shelf Approval does not constitute a finding, recommendation or approval by the Nevada
Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful.

Changes
in control of the Company through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby such person
obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and the Nevada
Commission that they meet a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the
transaction.

The
Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate
gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and

19

---



productive
corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the
corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before a
Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The
Nevada Act also requires prior approval of a plan of re-capitalization proposed by the Registered Corporation's Board of Directors in response to a tender offer made directly to the
Registered Corporation's stockholders for the purpose of acquiring control of the Registered Corporation.

License
fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the
Nevada licensee's respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A live entertainment tax is also
paid by casino operations where entertainment is furnished in connection with admission charges, the serving or selling of food or refreshments or the selling of any merchandise. Nevada licensees that
hold a license as an operator of a slot route, or manufacturer's or distributor's license also pay certain fees and taxes to the State of Nevada.

Any
person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to
become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of
investigation by the Nevada Board of their participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Commission. Thereafter, licensees
are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of
the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming
operations, engage in activities or enter into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees, or employ, contract with or associate with a person
in the foreign operation who has been denied a license or finding of suitability in Nevada on the grounds of unsuitability or whom a court in the state of Nevada has found guilty of cheating. The loss
or restriction of our gaming licenses in Nevada would have a material adverse effect on our business and could require us to cease gaming operations in Nevada.



The sale of alcoholic beverages at Palace Station, Wildfire and Santa Fe Station is subject to licensing control and regulation by the City of Las Vegas. Red
Rock, Boulder Station and Wild Wild West are subject to liquor licensing control and regulation by the Clark County Board. Texas Station and Fiesta Rancho are subject to liquor licensing control and
regulation by the City of North Las Vegas. Sunset Station, Green Valley Ranch, Fiesta Henderson, Barley's, Gold Rush, Magic Star, The Greens, Lake Mead Lounge and Renata's are subject to liquor
licensing control and regulation by the City of Henderson. All liquor licenses are revocable and are not transferable. The agencies involved have full power to limit, condition, suspend or revoke any
such license, and any such disciplinary action could (and revocation would) have a material adverse effect on the operations of the Gaming Subsidiaries.

20

---



We are subject to Native American gaming regulations which could have an adverse effect on our business.

The terms and conditions of management contracts and the operation of casinos and all gaming on land held in trust for Native American tribes in the United States
are subject to the Indian Gaming Regulatory Act of 1988 (the "IGRA"), which is administered by the National Indian Gaming Commission (the "NIGC") and the gaming regulatory agencies of tribal
governments. The IGRA is subject to interpretation by the NIGC and may be subject to judicial and legislative clarification or amendment.

The
IGRA established three separate classes of tribal gaming-Class I, Class II and Class III. Class I gaming includes all traditional or social games solely
for prizes of minimal value played by a tribe in connection with celebrations or ceremonies. Class II gaming includes games such as bingo, pull-tabs, punchboards, instant bingo and
non-banked card games (those that are not played against the house), such as poker. Class III gaming is casino-style gaming and includes banked table games such as blackjack, craps
and roulette, and gaming machines such as slots, video poker, lotteries and pari-mutuel wagering. Thunder Valley may provide Class II gaming and, as limited by the tribal-state
compact, Class III gaming.

The
IGRA requires NIGC approval of management contracts for Class II and Class III gaming as well as the review of all agreements collateral to the management contracts.
The management agreement relating to our management of the casino owned by the UAIC was approved by the NIGC with respect to Thunder Valley in December 2002. The NIGC will not approve a management
contract if a director
or a 10% shareholder of the management company: (i) is an elected member of the governing body of the Native American tribe which is the party to the management contract; (ii) has been
or subsequently is convicted of a felony or gaming offense; (iii) has knowingly and willfully provided materially important false information to the NIGC or the tribe; (iv) has refused
to respond to questions from the NIGC; or (v) is a person whose prior history, reputation and associations pose a threat to the public interest or to effective gaming regulation and control, or
create or enhance the chance of unsuitable activities in gaming or the business and financial arrangements incidental thereto. In addition, the NIGC will not approve a management contract if the
management company or any of its agents have attempted to unduly influence any decision or process of tribal government relating to gaming, or if the management company has materially breached the
terms of the management contract or the tribe's gaming ordinance or resolution, or a trustee, exercising the skill and due diligence that a trustee is commonly held to, would not approve the
management contract. A management contract can be approved only after the NIGC determines that the contract provides, among other things, for: (i) adequate accounting procedures and verifiable
financial reports, which must be furnished to the tribe; (ii) tribal access to the daily operations of the gaming enterprise, including the right to verify daily gross revenues and income;
(iii) minimum guaranteed payments to the tribe, which must have priority over the retirement of development and construction costs; (iv) a ceiling on the repayment of such development
and construction costs and (v) a contract term not exceeding five years and a management fee not exceeding 30% of net revenues (as determined by the NIGC); provided that the NIGC may approve up
to a seven year term and a management fee not to exceed 40% of net revenues if the NIGC is satisfied that the capital investment required, and the income projections for the particular gaming activity
require the larger fee and longer term. There is no periodic or ongoing review of approved contracts by the NIGC. The only post-approval action that could result in possible modification
or cancellation of a contract would be as the result of an enforcement action taken by the NIGC based on a violation of the law or an issue affecting suitability.

The
IGRA prohibits all forms of Class III gaming unless the tribe has entered into a written agreement with the state that specifically authorizes the types of Class III
gaming the tribe may offer (a "tribal-state compact"). These tribal-state compacts provide, among other things, the manner and extent to which each state will conduct background investigations and
certify the suitability of the manager, its officers, directors, and key employees to conduct gaming on Native American lands. We have been licensed by the UAIC's tribal gaming agency to manage
Thunder Valley.

21

---



Title
25, Section 81 of the United States Code states that "no agreement shall be made by any person with any tribe of Indians, or individual Indians not citizens of the United
States, for the payment or delivery of any money or other thing of value... in consideration of services for said Indians relative to their lands... unless such contract or agreement be executed and
approved" by the Secretary or his or her designee. An agreement or contract for services relative to Native American lands which fails to conform with the requirements of Section 81 is void and
unenforceable. All money or other things of value paid to any person by any Native American or tribe for or on his or their behalf, on account of such services, in excess of any amount approved by the
Secretary or his or her authorized representative will be subject to forfeiture. We believe that we have complied with the requirements of Section 81 with respect to our management contract for
Thunder Valley and intend to comply with
Section 81 with respect to any other contract to manage casinos located on Native American land in the United States.

Native
American tribes are sovereign nations with their own governmental systems, which have primary regulatory authority over gaming on land within the tribes' jurisdiction. Therefore,
persons engaged in gaming activities, including Station, are subject to the provisions of tribal ordinances and regulations on gaming. These ordinances are subject to review by the NIGC under certain
standards established by the IGRA. The NIGC may determine that some or all of the ordinances require amendment, and those additional requirements, including additional licensing requirements, may be
imposed on us. We have received no such notification regarding Thunder Valley. The possessions of valid licenses from the UAIC are ongoing conditions of our management agreement with that tribe.

Several
bills have been introduced in Congress that would amend the IGRA. While there have been a number of technical amendments to the IGRA, to date there have been no material changes.
Any amendment of the IGRA could change the governmental structure and requirements within which Thunder Valley could conduct gaming, and may have an adverse effect on our results of operations or
impose additional regulatory or operational burdens.



In California, licensing and registration requirements for tribal financing sources are governed by the compact, amended compact and by regulations adopted by the
California Gambling Control Commission and the Tribal Gaming Agency (the "TGA").

The
UAIC's compact was set to expire on December 31, 2020. The Amended Compact extended the term until December 31, 2030. The UAIC's compact and amended compact require
that any person who directly or indirectly extend financing to the UAIC's gaming facility or gaming operation must be licensed as a "financial source" by the TGA. However, as permitted by the compact
and amended compact, the TGA has the discretion to exempt federally and state regulated banks, savings and loan associations and other federal and state regulated lending institutions, entities
identified by Regulation CGCC-2, subdivision (f) of the California Gambling Control Commission, as well as persons who hold less than 10% of notes issued by the UAIC or a related
entity. The Amended Compact further specifies that entities identified by Regulation CGCC-2, subdivision (h) of the California Gambling Control Commission, and persons or entities
whose sole connection with extending financing to the UAIC is to provide loan brokerage or debt servicing for a financial source at no cost to the UAIC or the Gaming Operation are not considered
financial sources. For an applicant who is a non-exempted business entity, these licensing provisions also apply to the entity's officers, directors, principal management employees, owners
(if an unincorporated entity), partners and greater than 10% shareholders. Under the compact and amended compact, a permanent license cannot be issued unless the TGA has conducted an investigation as
to the suitability of the applicant. Any application for a gaming license may be denied, and any license issued may be revoked,
if the TGA determines the applicant to be unsuitable or otherwise unqualified for a gaming license. Each license is subject to review for compliance at least every two years.

22

---





Prior to receiving a license, an applicant must apply to the California Gambling Control Commission for a determination of suitability. The California Department of Justice, Division of
Gambling Control will then conduct an investigation of the applicant following the guidelines set forth in the California Gambling Control Act and will provide its suitability recommendation to the
California Gambling Control Commission. If the TGA receives notice that the Commission has determined that a person is unsuitable, the compact requires that the TGA revoke any license it has issued to
such person.

The
compact and amended compact state that any agreement between the UAIC and a financial source terminates upon revocation or non-renewal of the financial source's license
because of a determination of unsuitability by the California Gambling Control Commission. Upon such a termination, the UAIC's only liability is for a bona fide repayment of all outstanding sums
(exclusive of interest) owed as of the termination date, exclusive of unpaid accrued interest.

Further,
the UAIC is not permitted to enter into, or continue to make payments under, any financing agreement with anyone whose application to the California Gambling Control Commission
for a determination of suitability has been denied or has expired without renewal. Station California, LLC, our wholly owned subsidiary, has been found suitable as a Gaming Resource Supplier
and Financial Source by the California Gambling Control Commission. This finding of suitability is subject to review for compliance annually.



If we become involved in gaming operations in any other jurisdictions, such gaming operations will subject us and certain of our officers, directors, key
employees, stockholders and other affiliates ("Regulated Persons") to strict legal and regulatory requirements, including mandatory licensing and approval requirements, suitability requirements, and
ongoing regulatory oversight with respect to such gaming operations. Such legal and regulatory requirements and oversight will be administered and exercised by the relevant regulatory agency or
agencies in each jurisdiction (the "Regulatory Authorities"). We and the Regulated Persons will need to satisfy the licensing, approval and suitability requirements of each jurisdiction in which we
seek to become involved in gaming operations. These requirements vary from jurisdiction to jurisdiction, but generally concern the responsibility, financial stability and character of the owners and
managers of gaming operations as well as persons financially interested or involved in gaming operations. In general, the procedures for gaming licensing, approval and finding of suitability require
Station and each Regulated Person to submit detailed personal history
information and financial information to demonstrate that the proposed gaming operation has adequate financial resources generated from suitable sources and adequate procedures to comply with the
operating controls and requirements imposed by law and regulation in each jurisdiction, followed by a thorough investigation by such Regulatory Authorities. In general, Station and each Regulated
Person must pay the costs of such investigation. An application for any gaming license, approval or finding of suitability may be denied for any cause that the Regulatory Authorities deem reasonable.
Once obtained, licenses and approvals may be subject to periodic renewal and generally are not transferable. The Regulatory Authorities may at any time revoke, suspend, condition, limit or restrict a
license, approval or finding of suitability for any cause that they deem reasonable. Fines for violations may be levied against the holder of a license or approval and in certain jurisdictions, gaming
operation revenues can be forfeited to the state under certain circumstances. There can be no assurance that we will obtain all of the necessary licenses, approvals and findings of suitability or that
our officers, directors, key employees, other affiliates and certain other stockholders will satisfy the suitability requirements in one or more jurisdictions, or that such licenses, approvals and
findings of suitability, if obtained, will not be revoked, limited, suspended or not renewed in the future.

Failure
by us to obtain, or the loss or suspension of, any necessary licenses, approval or findings of suitability would prevent us from conducting gaming operations in such jurisdiction
and possibly in other jurisdictions, which may have an adverse effect on our results of operations. We may be required to submit detailed financial and operating reports to Regulatory Authorities.

23

---



Factors affecting the economy and consumer confidence may harm our operating results.

Our properties draw a substantial number of customers from the Las Vegas valley, as well as certain geographic areas, including Southern California, Arizona and
Utah. Adverse economic conditions in any of these regions could have a significant adverse effect on our business, financial condition and results of operations. Since all of our properties are
located in the Las Vegas valley or Northern California, any terrorist activities or disasters in or around Southern Nevada or Northern California could have a significant adverse effect on our
business, financial condition and results of operations.

Our
properties use significant amounts of electricity, natural gas and other forms of energy. While no shortages of energy have been experienced, the substantial increases in the cost of
electricity, natural gas and gasoline in the United States may negatively affect our operating results. In addition, energy price increases in the regions that constitute a significant source of
customers for our properties could result in a decline in disposable income of potential customers and a corresponding decrease in visitation and spending at our properties, which could negatively
impact revenues.

We depend on key markets and may not be able to continue to attract a sufficient number of guests and gaming customers in Nevada to make our operations profitable.

Our operating strategies emphasize attracting and retaining customers from the Las Vegas local and repeat visitor market. All of our owned casino properties are
dependent upon attracting Las Vegas residents. We cannot be sure that we will be able to continue to attract a sufficient number of guests, gaming customers and other visitors in Nevada to make our
operations profitable. In addition, our operating strategy, including the master-planning of our casinos for future expansion, has been developed, in part, based on expected population growth in Las
Vegas. There can be no assurance that growth will continue in Las Vegas or that we will be able to successfully adapt to any downturn.

We may incur losses that are not adequately covered by insurance which may harm our results of operations.

Although we maintain insurance customary and appropriate for our business, we cannot assure you that insurance will be available or adequate to cover all loss and
damage to which our business or our assets might be subjected. The lack of adequate insurance for certain types or levels of risk could expose us to significant losses in the event that a catastrophe
occurred for which we are underinsured. Any losses we incur that are not adequately covered by insurance may decrease our future operating income, require us to find replacements or repairs for
destroyed property and reduce the funds available for payments of our obligations.

Factors affecting tax laws could have an adverse effect on our business.

The gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time,
various state and federal legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada Legislature concluded their 2007
session and there were no increases in taxes affecting the gaming industry. The Nevada Legislature meets again in 2009.

There
are several gaming tax increase proposals currently circulating in Nevada. These proposals would take the form of voter referendums, which in Nevada require passage by voters on
two separate occasions, the next two being 2008 and 2010. If a proposal to increase the gaming tax is passed in both elections, the earliest the increase could go into effect would be 2011. An
increase in the gaming tax could have an adverse effect on our results of operations.

24

---



Our high leverage and debt service obligations could adversely affect our ability to raise additional capital to fund our operations, increase our vulnerability to general
adverse economic and industry conditions, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations.

As a result of the Merger, we are highly leveraged. Our ability to make scheduled payments on, or to refinance our debt obligations depends on our financial
condition and operating performance, which is subject to general economic, financial, competitive and other factors that are beyond our control. While we believe that we currently have adequate cash
flows to service our indebtedness, if our economic performance were to deteriorate significantly, we may be unable to maintain a level of cash flows from operating activities sufficient to enable us
to pay the principal, premium, if any, and interest on our indebtedness.

Our
high level of debt and the covenants contained in our senior secured credit facilities could have important consequences, including:



We
and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions contained in our senior secured credit facilities and the
indentures governing our senior and senior subordinated notes. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

Recent instability in the financial markets may have an impact on our ability to raise additional indebtedness.

Recent developments in the financial markets, including a series of rating agency downgrades of sub-prime U.S. mortgage-related assets and significant provisions
for loan losses recorded by several major financial institutions, have caused the fair value of sub-prime related investments to decline. The decline in fair value has become especially problematic
for certain large financial institutions and has had an effect through the U.S. economy, including limiting access to capital markets for certain borrowers at reasonable rates and also affecting the
market value of certain investments whether or not linked to sub-prime mortgages. Currently, we have not been materially impacted by events in the current credit market. However, we cannot predict
with any certainty whether or not we will be impacted in the future by the current conditions which may affect our ability to secure additional indebtedness.

If our economic performance were to decline, we may not be able to generate sufficient cash to service all of our indebtedness and may be forced to take other actions to
satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations depends on our financial condition and operating performance, which is subject to
general economic, financial, competitive and other factors that are beyond our control. While we believe that we currently have adequate cash flows to service our indebtedness, if our economic
performance were to deteriorate significantly, we may be

25

---



unable
to maintain a level of cash flows from operating activities sufficient to enable us to pay the principal, premium, if any, and interest on our indebtedness.

If,
due to such a deterioration in our economic performance, our cash flows and capital resources were to be insufficient to fund our debt service obligations, we may be forced to reduce
or delay investments and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not
permit us to meet our scheduled debt service obligations. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of
material assets or operations to meet our debt service and other obligations. Our senior secured credit facilities and the indentures governing our senior and senior subordinated notes restrict our
ability to dispose of assets, use the proceeds from any disposition of assets and to refinance our indebtedness. We may not be able to consummate those dispositions or to obtain the proceeds that we
could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

Recent instability in the financial markets may have an impact on our business.

Recently, the residential real estate market in Las Vegas and the U.S. has experienced a significant downturn due to declining real estate values, substantially
reducing mortgage loan originations and securitizations, and precipitating more generalized credit market dislocations and a significant contraction in available liquidity globally. These factors,
combined with rising oil prices, declining business and consumer confidence and increased unemployment, have precipitated an economic slowdown and fears of a possible recession. Individual consumers
are experiencing higher delinquency rates on various consumer loans and defaults on indebtedness of all kinds have increased. Further declines in real estate values in Las Vegas and the U.S. or
elsewhere and continuing credit and liquidity concerns could have an adverse affect on our results of operations.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

None.

ITEM 2.    PROPERTIES

Substantially all of the property that we own and lease is subject to liens to secure borrowings under our senior secured credit facilities.

Palace
Station is situated on approximately 30 acres that we own located on the west side of Las Vegas, Nevada.

Boulder
Station is situated on approximately 54 acres located on the east side of Las Vegas, Nevada. We own 27 acres and lease the remaining 27 acres from KB Enterprises, a company owned
by Frank J. Fertitta, Jr. and Victoria K. Fertitta (the "Related Lessor"), the parents of Frank J. Fertitta III, Chairman of the Board and Chief Executive Officer of Station and Lorenzo J. Fertitta,
Vice Chairman and President of Station. The lease has a maximum term of 65 years, ending in June 2058. The lease provides for monthly payments of $183,333 through June 2008. In July 2008, and
every ten years thereafter, the rent will be adjusted by a cost of living factor. In July 2013, and every ten years thereafter, the rent will be adjusted to the product of the fair market value of the
land and the greater of (i) the then prevailing annual rate of return for comparably situated property or (ii) 8% per year. In no event will the rent for any period be less than the
immediately preceding period. Pursuant to the ground lease, we have an option, exercisable at five-year intervals with the next option in June 2008, to purchase the land at fair market
value. We believe that the terms of the ground lease are as fair to us as could be obtained from an independent third party.

Texas
Station is situated on approximately 47 acres located in North Las Vegas, Nevada. We lease this land from Texas Gambling Hall & Hotel, Inc., a company owned by the
Related Lessor. The lease has a

26

---



maximum
term of 65 years, ending in July 2060. The lease provides for monthly rental payments of $337,417 through June 2010. In July 2010, and every ten years thereafter, the rent will be
adjusted to the product of the fair market value of the land and the greater of (i) the then prevailing annual rate of return being realized for owners of comparable land in Clark County or
(ii) 8% per year. In July 2015, and every ten years thereafter, the rent will be adjusted by a cost of living factor. In no event will the rent for any period be less than the immediately
preceding period. Pursuant to the ground lease, we have an option, exercisable at five-year intervals with the next option in May 2010, to purchase the land at fair market value. We
believe that the terms of the ground lease are as fair to us as could be obtained from an independent third party.

Sunset
Station is situated on approximately 82 acres that we own located in Henderson, Nevada.

Santa
Fe Station is situated on approximately 38 acres that we own located on the northwest side of Las Vegas, Nevada.

Red
Rock is situated on approximately 64 acres that we own located on the northwest side of Las Vegas, Nevada.

Green
Valley Ranch, a 50% owned joint venture, is situated on approximately 40 acres in Henderson, Nevada that is owned by the joint venture.

Fiesta
Rancho is situated on approximately 25 acres that we own in North Las Vegas, Nevada.

Fiesta
Henderson is situated on approximately 46 acres that we own in Henderson, Nevada.

We
also have acquired or are under contract to acquire approximately 106 acres of land on which Wild Wild West is located and the surrounding area of which, approximately 72 acres have
been acquired as of December 31, 2007. In 2003, we exercised our option to purchase the 19-acre parcel of leased land on which Wild Wild West is located which was to occur in July
2005 at a purchase price of approximately $36 million. We have extended the date for the close of escrow to no later than January 2009.

We
currently own or lease seven sites, which have been acquired for potential gaming projects, consisting of 263 acres in the Las Vegas valley, 147 acres in northern California and 203
acres in Reno, Nevada.

ITEM 3.    LEGAL PROCEEDINGS

Station and our subsidiaries are defendants in various lawsuits relating to routine matters incidental to our business. As with all litigation, no assurance can
be provided as to the outcome of the following matters and litigation inherently involves significant costs. Following is a summary of key litigation impacting us and our subsidiaries.



On February 4, 2008, Josh Luckevich, Cathy Scott and Julie St. Cyr filed a purported class action complaint in the United States District Court for
the District of Nevada, Case No. CV-00141, against the Company. The plaintiffs are all former employees of the Company. The complaint alleges that the Company (i) failed to
pay its employees for all hours worked, (ii) failed to pay overtime, (iii) failed to timely pay wages and (iv) unlawfully converted certain earned
wages. The complaint seeks, among other relief, class certification of the lawsuit, compensatory damages in excess of $5,000,000, punitive damages and an award of attorneys' fees and expenses to
plaintiffs' counsel. The Company has yet to file a response to the complaint. The Company believes that the allegations in the complaint are without merit and intends to vigorously defend the
same.

27

---





As previously disclosed, on December 4, 2006, the Company announced that it had received a proposal from Fertitta Colony Partners LLC ("FCP") to acquire
all of the Company's outstanding common stock for $82 per share in cash. Six cases (the "Actions") were brought in the District Court for Clark County, Nevada (the "District Court"), alleging that the
actions of Frank J. Fertitta III and Lorenzo J. Fertitta in participating with FCP in making the proposal and entering into the Merger Agreement and the actions of the members of a special committee
of Station's Board of Directors composed entirely of independent directors (the "Special Committee") in responding to the proposal, and entering into the Merger Agreement, were breaches of fiduciary
duty:

Roessler v. Station Casinos, Inc., et al., Case No. A532637;

Filhaber v. Station Casinos Inc., et al., Case No. A532499;

Traynor v. Station Casinos, Inc., et al, Case No. A532407;

Goldmann v. Station Casinos, Inc., et al., Case No. A532395;

Griffiths v. Station Casinos, Inc., et al., Case No. A533806; and

West Palm Beach Firefighters' Pension Fund v. Station Casinos, Inc., et al., Case No. 07-A536211.

The
Company was a defendant in the Actions and others were named as defendants in one or more of the Actions. No specific monetary relief was sought against the Company in the Actions.
On January 4, 2007, the Actions were consolidated under the headingIn re Station Casinos Shareholder Litigation, Master Case
No. A-532367 (the "Consolidated Action").

On
June 1, 2007, the plaintiffs filed an amended consolidated class action complaint (the "Amended Complaint") in the District Court against Station, Station's directors, Frank J.
Fertitta III, Lorenzo J. Fertitta, Blake L. Sartini and Delise F. Sartini, Colony Capital, LLC ("Colony"), Colony Capital Acquisitions, LLC ("Colony Acquisitions") and FCP. The Amended
Complaint alleges that Station's directors breached their fiduciary duties to Station and its stockholders as follows:

A.    The
defendants failed to engage in a fair process that would maximize value to Station's stockholders because the defendants put into place covenants in Station's bond
indentures that could, under certain circumstances, require a purchaser of Station not affiliated with Frank J. Fertitta III and Lorenzo J. Fertitta to redeem those bonds, put into place a stockholder
rights plan and a staggered board, adopted a supermajority voting requirement in connection with any merger transaction and imposed a $160 million termination fee on Station.

B.    The
process being used to sell Station is wrongful, unfair and harmful and is an attempt by the defendants to aggrandize their personal and financial positions. It does
not reflect the true inherent value of Station that was known only to the defendants. This value, which far exceeds the $90.00 per share Merger consideration, includes the returns from Red Rock, the
Company's Native American casino-management contracts and the expected returns from Aliante Station and other expansion projects.

C.    The
directors have not and are not exercising independent business judgment and have acted and are acting to the detriment of the plaintiff class. In particular, the
members of the Special Committee are not independent of Frank J. Fertitta III and Lorenzo J. Fertitta, were handpicked for Station's Board of Directors by Frank J. Fertitta III and Lorenzo J.
Fertitta, are loyal and beholden to them and will do what Frank J. Fertitta III and Lorenzo J. Fertitta tell them to do. The Special Committee failed to properly shop Station, artificially depressing
the value of Station's stock, thereby depriving plaintiffs of the right to receive the maximum value for their shares. They are taking steps to avoid competitive bidding, to cap the price of Station
stock and to give FCP and other members of the buying group an unfair advantage by, among other things, failing to solicit other potential acquirers or alternative transactions.

28

---



D.    The
Company's preliminary proxy statement filed with the SEC on May 7, 2007 (the "Preliminary Proxy Statement") misrepresented material facts and omits material
information necessary for stockholders to make an informed decision concerning the transaction because, in part, it did not discuss whether the defendants considered alternative transaction forms, nor
did it properly detail the sale process.

E.    The
Preliminary Proxy Statement did not detail whether Bear, Stearns & Co., Inc. ("Bear Stearns"), financial advisor to the Special Committee,
performed any sensitivity studies or whether it valued Station assuming Station would be split into separate operating and holding companies. The Preliminary Proxy Statement also failed to detail the
proper valuation for Station, or the basis for the valuation. In addition, Bear Stearns is in a conflict position because it owns 36,639 shares of Station common stock.

The
Amended Complaint also alleges that Frank J. Fertitta III, Lorenzo J. Fertitta, Blake L. Sartini, Delise F. Sartini, FCP, Colony and Colony Acquisitions knowingly aided and abetted
the Company's directors in breaching their fiduciary duties to the Company's public stockholders.

The
Amended Complaint sought an injunction preliminarily and permanently enjoining the defendants from proceeding with, consummating or closing the Merger transaction, and demanded that
the plaintiffs be awarded their costs and disbursements incurred in connection with this action, including reasonable attorneys' fees and reimbursement of expenses.

In
November 2007, in order to resolve the litigation and avoid further cost and delay, the Company and the individual defendants, without admitting any wrongdoing, entered into a global
stipulation of settlement with plaintiffs ("Proposed Settlement"). Pursuant to the Proposed Settlement, the Company made supplemental disclosures in its Definitive Proxy Statement filed with the SEC
on July 9, 2007, to address certain of the disclosure claims raised in the Consolidated Action. As part of the Proposed Settlement, plaintiffs' counsel applied to the Court for an award of
attorneys' fees in the amount of $1.9 million, inclusive of costs and expenses. The Company agreed to pay the fees and expenses on behalf of all plaintiffs as awarded by the court in an amount
up to $1.9 million.

On
December 11, 2007, the District Court preliminarily approved the Proposed Settlement. Thereafter, notice of the Proposed Settlement was disseminated to more than 31,000 former
shareholders of Station and published in theWall Street Journal(national edition), theLos Angeles
Timesand theLas Vegas Review Journal.

None
of the former shareholders objected to the terms of the Proposed Settlement. Consequently, at a hearing on February 11, 2008, Judge Mark R. Denton of the District Court
approved the Proposed Settlement of the Consolidated Action. Given that there were no objections to the settlement, we do not expect an appeal and regard the litigation as concluded.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth quarter of 2007.

29

---





PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

All of the outstanding common stock of Station Casinos, Inc. is privately held and there is no established public trading market for our common stock.

Holders

As of January 31, 2008, there were two holders of record of our non-voting common stock and one holder of record of our voting common stock.

Dividends

During the year ended December 31, 2007, we paid a quarterly cash dividend of $0.2875 per share to stockholders of record on February 26, 2007,
May 21, 2007 and October 5, 2007. The total amount paid in dividends for 2007 was $49.1 million.

During
the year ended December 31, 2006, we paid a quarterly cash dividend of $0.25 per share to stockholders of record on February 10, 2006 and May 12, 2006 and
$0.2875 per share to stockholders of record on August 11, 2006 and November 13, 2006. The total amount paid in dividends for 2006 was $65.4 million.

The
payment of dividends in the future will be at the discretion of our Board of Directors. Restrictions imposed by our debt instruments and other agreements limit the payment of
dividends (see "Management's Discussion and Analysis of Financial Condition and Results of OperationsDescription of Certain Indebtedness and Capital Stock").

Issuer Purchases of Equity Securities

The table below sets forth the information with respect to purchases made by or on behalf of us of our common stock during the three months ended
December 31, 2007 (unaudited):

|Period                |  | Total number
of shares
purchased (a) |  | Average price
paid per
share |       | Total number of
shares purchased as
part of publicly
announced plans or
programs |   | Maximum
number of
shares that may
yet be purchased
under the plans
or programs (b)
|--------------------- |  | ------------------------------------ |  | ---------------------------- | ----- | -------------------------------------------------------------------------------- | - | ----------------------------------------------------------------------------------
|October 1 - 31, 2007  |  | 369                                  |  | $                            | 89.16 |                                                                                  |  |                                                                                   
|November 1 - 30, 2007 |  |                                     |  |                              |      |                                                                                  |  |                                                                                   
|December 1 - 31, 2007 |  |                                     |  |                              |      |                                                                                  |  |                                                                                   
|                      |  |                                      |  |                              |       |                                                                                  |   |                                                                                   
|Total                 |  | 369                                  |  | $                            | 89.16 |                                                                                  |  |                                                                                   
|                      |  |                                      |  |                              |       |                                                                                  |   |                                                                                   

---

30

---



ITEM 6.    SELECTED FINANCIAL DATA

The selected consolidated financial data presented below for the successor period from November 8, 2007 through December 31, 2007 (the "Successor
Period") and the period then ended, the predecessor period from January 1, 2007 through November 7, 2007 (the "Predecessor Period"), and as of and for the fiscal years ended
December 31, 2006, 2005, 2004, and 2003 have been derived from our consolidated financial statements which, except for 2004 and 2003, are contained elsewhere in this Annual Report on
Form 10-K. The selected consolidated financial data set forth below are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Consolidated Financial Statements, the notes thereto and other financial and statistical information included elsewhere in this Annual Report
on Form 10-K.

|                                                                 |  | Successor |           | Predecessor |  
|---------------------------------------------------------------- |  | --------- | --------- | ----------- | -
|
|
|
|
|Operating Results:                                               |  |           |           |             |  
|Net revenues                                                     |  | $         | 209,711   |             | $
|Operating costs and expenses, excluding the following items (d): |  |           | 461,661   |             |  
|Development (e)                                                  |  |           | 1,294     |             |  
|Preopening (f)                                                   |  |           | 251       |             |  
|Merger transaction costs (g)                                     |  |           |          |             |  
|Impairment loss (h)                                              |  |           |          |             |  
|Management agreement/lease terminations (i)                      |  |           |          |             |  
|Litigation settlement (j)                                        |  |           |          |             |  
|                                                                 |  |           |           |             |  
|Operating (loss) income                                          |  |           | (253,495  | )           |  
|Earnings from joint ventures                                     |  |           | 5,875     |             |  
|                                                                 |  |           |           |             |  
|Operating (loss) income and earnings from joint ventures         |  |           | (247,620  | )           |  
|Loss on early retirement of debt (k)                             |  |           | (20,311   | )           |  
|Interest expense, net                                            |  |           | (66,019   | )           |  
|                                                                 |  |           |           |             |  
|(Loss) income before income taxes                                |  |           | (333,950  | )           |  
|Income tax benefit (provision)                                   |  |           | 15,996    |             |  
|                                                                 |  |           |           |             |  
|Net (loss) income                                                |  | $         | (317,954  | )           | $
|                                                                 |  |           |           |             |  
|Balance Sheet Data:                                              |  |           |           |             |  
|Total assets                                                     |  | $         | 8,988,666 |             |  
|Long-term debt                                                   |  |           | 5,244,424 |             |  
|Stockholders' equity (deficit)                                   |  |           | 2,571,062 |             |  

---

31

---



32

---





ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On November 7, 2007, the Company completed its merger (the "Merger") with FCP Acquisition Sub, a Nevada corporation ("Merger Sub"), pursuant to which
Merger Sub merged with and into the Company with the Company continuing as the surviving corporation. The Merger was completed pursuant to the Agreement and Plan of Merger (the "Merger Agreement"),
dated as of February 23, 2007 and amended as of May 4, 2007, among the Company, Fertitta Colony Partners LLC, a Nevada limited liability company ("FCP"), and Merger Sub, as
amended. By going private, the Merger provides the Company with greater operating flexibility, allowing management to concentrate on long-term growth, reduce its focus on the
quarter-to-quarter performance often emphasized by the public markets and pursue alternatives.

As
a result of the Merger, 24.1% of the issued and outstanding shares of non-voting common stock of the Company are owned by Fertitta Partners LLC, a Nevada limited
liability company ("Fertitta Partners"), which is owned by affiliates of Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, affiliates of Lorenzo J. Fertitta, Vice Chairman and
President of Station, affiliates of Blake L. Sartini and Delise F. Sartini, and certain officers and other members of management of the Company. The remaining 75.9% of the issued and outstanding
shares of non-voting common stock of the Company are owned by FCP Holding, Inc., a Nevada corporation ("FCP HoldCo") and a wholly-owned subsidiary of FCP. FCP is owned by an
affiliate of Colony Capital, LLC ("Colony") and affiliates of Frank J. Fertitta III and Lorenzo J. Fertitta. Substantially simultaneously with the consummation of the Merger, shares of
voting common stock of Station were issued for nominal consideration to FCP VoteCo LLC, a Nevada limited liability company ("FCP VoteCo"), which is owned equally by Frank J. Fertitta III,
Lorenzo J. Fertitta and Thomas J. Barrack, Jr., Chairman and Chief Executive Officer of Colony.

At
the effective time of the Merger, each outstanding share of our common stock, including any rights associated therewith (other than shares of our common stock owned by FCP, Merger
Sub, FCP HoldCo, Fertitta Partners or any wholly-owned subsidiary of the Company or shares of our common stock held in treasury by us) was cancelled and converted into the right to receive $90 in
cash, without interest. Following the consummation of the Merger, the Company is privately owned through FCP HoldCo, Fertitta Partners and FCP VoteCo. Station common stock ceased trading on the New
York Stock Exchange at market close on November 7, 2007, and will no longer be listed on any exchange or
quotation system. The Company's voting common stock is registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended.

The
Merger resulted in a greater than 50% change in control of the Company and was a "business combination" for accounting purposes, requiring that FCP, Fertitta Partners, FCP VoteCo and
their respective owners (the "Investors"), pursuant to Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", record the acquired assets and assumed liabilities
at their fair market values as of the acquisition date, resulting in a new basis of accounting. As a result of the Securities and Exchange Commission's rules and guidance regarding
"push-down" accounting, the Investors' new accounting basis in our assets and liabilities is reflected in our consolidated financial statements to the extent that the Investors paid cash
for the non-voting stock of the Company as of the consummation of the Merger. The accompanying consolidated statements of operations, stockholders' equity (deficit) and cash flows for 2007
are presented for two periods: January 1, 2007 through November 7, 2007 (the "Predecessor Period") and November 8, 2007 through December 31, 2007 (the "Successor Period").
The Predecessor Period reflects the historical accounting basis in our assets and liabilities, while the Successor Period reflects the push down of the Investors' new basis to our consolidated
financial statements.

The
following discussion and analysis should be read in conjunction with "Selected Financial Data" and the consolidated financial statements and notes thereto included elsewhere in this
Annual Report on Form 10-K.

33

---



Results of Operations

The following table highlights the results of our operations (dollars in thousands):

|                                  |                                    | Successor |          | Predecessor |   | 2007
Combined (a) |           |   |           | Predecessor |       
|--------------------------------- | ---------------------------------- | --------- | -------- | ----------- | - | ----------------- | --------- | - | --------- | ----------- | ------
|
|Net revenuestotal                |                                    | $         | 209,711  |             | $ | 1,237,284         |           | $ | 1,446,995 |             | 8.1   
|                                  | Major Las Vegas Operations (b)     |           |          | 192,489     |   |                   | 1,117,190 |   |           | 1,309,679   |       
|                                  | Management fees (c)                |           |          | 9,708       |   |                   | 78,077    |   |           | 87,785      |       
|                                  | Other Operations and Corporate (d) |           |          | 7,514       |   |                   | 42,017    |   |           | 49,531      |       
|Operating (loss) incometotal     |                                    | $         | (253,495 | )           | $ | 113,635           |           | $ | (139,860  | )           | (144.2
|                                  | Major Las Vegas Operations (b)     |           |          | 39,793      |   |                   | 264,413   |   |           | 304,206     |       
|                                  | Management fees (c)                |           |          | 9,708       |   |                   | 78,077    |   |           | 87,785      |       
|                                  | Other Operations and Corporate (d) |           |          | (302,996    | ) |                   | (228,855  | ) |           | (531,851    | )     
|Cash flows provided by (used in): |                                    |           |          |             |   |                   |           |   |           |             |       
|                                  | Operating activities               |           | $        | 18,689      |   | $                 | 273,473   |   | $         | 292,162     |       
|                                  | Investing activities               |           |          | (4,323,965  | ) |                   | (530,418  | ) |           | (4,854,383  | )     
|                                  | Financing activities               |           |          | 4,302,933   |   |                   | 238,782   |   |           | 4,541,715   |       

---



Consolidated net revenues for 2007 Combined increased 8.1% to $1.45 billion as compared to $1.34 billion for the year ended December 31,
2006. Year over year net revenues increased primarily due to revenue increases at our Major Las Vegas Operations, which were offset by decreased management fees.

Combined
net revenues from our Major Las Vegas Operations increased 10.1% to $1.31 billion for 2007 Combined as compared to $1.19 billion for the year ended
December 31, 2006. The increase is a result of a full year of operations at Red Rock, which opened on April 18, 2006, the completion of the phase II master-planned expansion at
Red Rock in December 2006, which included an additional 400 rooms, the completion of the phase III expansion at Red Rock in April 2007, which included a 72-lane bowling center, as
well as the completion of expansions at Santa Fe Station in December 2006 and Fiesta Henderson in August 2006, offset by decreases at several of our other Major Las Vegas Operations due to

34

---



a
weakened economy. Combined net revenues from our Major Las Vegas Operations, excluding Red Rock, decreased approximately 1% during 2007 Combined as compared to the year ended December 31,
2006.

Consolidated
net revenues for the year ended December 31, 2006 increased 20.8% to $1.34 billion as compared to $1.11 billion for the year ended December 31,
2005. Year over year net revenues increased primarily due to the opening of Red Rock on April 18, 2006. Combined net revenue from our Major Las Vegas Operations increased 22.8% to
$1.19 billion for the year ended December 31, 2006 as compared to $968.0 million for the year ended December 31, 2005, as a result of opening Red Rock as noted above.
Combined net revenue from our Major Las Vegas Operations, excluding Red Rock, remained virtually unchanged for the year ended December 31, 2006 as compared to the year ended December 31,
2005.



Consolidated operating income decreased significantly in 2007 Combined as compared to the year ended December 31, 2006. The decrease is primarily a result
of $156.5 million in merger transaction costs incurred during 2007 Combined related to the Merger described above, as compared to $2.5 million during the year ended December 31,
2006. 2007 Combined was also impacted by $288.1 million of share-based compensation expense related to equity-based awards granted upon the consummation of the Merger and a $16.6 million
impairment loss. In addition, operating income for the year ended December 31, 2006 was impacted by $29.5 million of preopening expenses as compared to $2.1 million during 2007
Combined. Excluding these items, operating income for 2007 Combined decreased approximately 7.1% while operating margin decreased 3.6 percentage points, as compared to the year ended
December 31, 2006. These decreases are primarily related to increased operating and depreciation expenses at Red Rock, Fiesta Henderson and Santa Fe Station related to the recent expansions,
the addition of amortization expense related to definite-lived intangible assets recorded in conjunction with the Merger and a decrease in gaming revenues at several of our other Major Las Vegas
Operations due to a weakened economy, offset by improving operating margins at Red Rock.

Consolidated
operating income increased 3.3% in the year ended December 31, 2006 as compared to the year ended December 31, 2005 while the operating margin decreased to
23.6% from 27.6% for the
same periods. The increase in the consolidated operating income is a result of increased consolidated net revenues as noted above offset by operating expenses for Red Rock as well as preopening
expenses of $29.5 million in the year ended December 31, 2006 as compared to $6.6 million in the year ended December 31, 2005. The decrease in operating margin was the
result of lower operating margins at Red Rock.



Effective January 1, 2006, we adopted SFAS 123R, "Share-Based Payment", utilizing the modified prospective application. Under the modified
prospective application, SFAS 123R applies to new awards and awards that were outstanding on December 31, 2005 that are subsequently modified, repurchased or cancelled. Under the
modified prospective application, compensation cost recognized in the year ended December 31, 2006 and subsequent periods includes compensation cost of all share-based payments granted prior
to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123 and compensation cost for
all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Accordingly,
prior period amounts are not restated to reflect the impact of adopting SFAS 123R under the modified prospective application.

The
recognition of compensation expense related to the issuance of restricted stock did not change with the adoption of SFAS 123R, except for the addition of the estimate of
forfeitures, and such compensation expense continued to be expensed in the consolidated statements of operations. During the year ended December 31, 2006, income before income tax and net
income were reduced by approximately $2.2 million and $1.4 million, respectively, as a result of adopting SFAS 123R.

35

---



The
following table highlights our various sources of revenues and expenses as compared to prior years (dollars in thousands):

|                                             |                         | Successor |         | Predecessor |   | 2007 Combined (a) |  |   |           | Predecessor |      
|-------------------------------------------- | ----------------------- | --------- | ------- | ----------- | - | ----------------- |  | - | --------- | ----------- | -----
|
|Casino revenues                              |                         | $         | 151,867 |             | $ | 879,097           |  | $ | 1,030,964 |             | 6.4  
|Casino expenses                              |                         |           | 60,946  |             |   | 331,009           |  |   | 391,955   |             | 12.4 
|                                             | Margin                  |           |         |             |   |                   |  |   |           | 62.0        | %    
|Food and beverage revenues                   |                         | $         | 37,885  |             | $ | 210,698           |  | $ | 248,583   |             | 17.5 
|Food and beverage expenses                   |                         |           | 27,236  |             |   | 149,998           |  |   | 177,234   |             | 16.4 
|                                             | Margin                  |           |         |             |   |                   |  |   |           | 28.7        | %    
|Room revenues                                |                         | $         | 14,926  |             | $ | 97,514            |  | $ | 112,440   |             | 36.4 
|Room expenses                                |                         |           | 5,548   |             |   | 32,103            |  |   | 37,651    |             | 25.7 
|                                             | Margin                  |           |         |             |   |                   |  |   |           | 66.5        | %    
|Other revenues                               |                         | $         | 12,543  |             | $ | 64,800            |  | $ | 77,343    |             | 10.1 
|Other expenses                               |                         |           | 4,363   |             |   | 24,586            |  |   | 28,949    |             | 10.3 
|Selling, general and administrative expenses |                         | $         | 37,567  |             | $ | 217,596           |  | $ | 255,163   |             | 10.8 
|                                             | Percent of net revenues |           |         |             |   |                   |  |   |           | 17.6        | %    
|Corporate expense                            |                         | $         | 292,955 |             | $ | 47,541            |  | $ | 340,496   |             | 462.4
|                                             | Percent of net revenues |           |         |             |   |                   |  |   |           | 23.5        | %    
|Earnings from joint ventures                 |                         | $         | 5,875   |             | $ | 34,247            |  | $ | 40,122    |             | (4.1 

---

Casino.Casino revenues increased 6.4% for 2007 Combined as compared to the year ended December 31,
2006, due to the same factors affecting the combined net revenues for our Major Las Vegas Operations noted above. Casino expenses increased 12.4% over the same period primarily due to a full year of
operations at Red Rock, which includes approximately 3,000 slot machines and 60 table games, the completion of the phase II master-planned expansion at Santa Fe Station in December 2006, which
included 400 additional slot machines and a remodeled and expanded race and sports book, and to a lesser extent, completion of the phase II master-planned expansion at Fiesta Henderson in
August 2006, which included an additional 350 slot machines and a remodeled and expanded sports book.

Casino
revenues and expenses increased 17.3% and 21.7%, respectively, for the year ended December 31, 2006 as compared to the year ended December 31, 2005. The increase in
casino revenues and casino expenses was primarily due to the opening of Red Rock in April 2006. Red Rock opened with approximately 3,200 slots machines and 60 table games.

Food and Beverage.Food and beverage revenues increased 17.5% for 2007 Combined as compared to the year ended
December 31, 2006, due to a full year of operations at Red Rock, which included the addition of nine restaurants at opening, and the addition of an Asian-themed full service restaurant at Red
Rock in July 2007, as well as the completion of a 500-seat Feast Buffet and a 200-seat barbeque restaurant

36

---



at
Santa Fe Station in December 2006 and April 2007, respectively. Food covers increased 6.3% for 2007 Combined as compared to the year ended December 31, 2006, primarily due to the opening of
the additional restaurants noted above. The average guest check increased 6.0% for 2007 Combined as compared to the year ended December 31, 2006, primarily due to increases in select menu
prices and the addition of the Feast Buffet and barbeque restaurant at Santa Fe Station. Food and beverage expenses increased 16.4% for 2007 Combined as compared to the year ended December 31,
2006, due to the same factors affecting food and beverage revenue discussed above. Food and beverage net operating margin increased 0.7 percentage points for the same period due to improved
operating results at Red Rock offset by lower than normal operating margins experienced at Santa Fe Station due to the recent opening of the Feast Buffet in December 2006 and the barbeque restaurant
in April 2007.

Food
and beverage revenues increased 44.2% for the year ended December 31, 2006 as compared to the year ended December 31, 2005, as a result of the opening of Red Rock in
April 2006. Food covers increased 20.6% and average guest check increased 14.8% for the year ended December 31, 2006 as compared to the year ended December 31, 2005. Food and beverage
expenses increased 47.9% primarily due to the opening of Red Rock as noted above.

Room.Room revenues increased 36.4% for 2007 Combined as compared to the year ended December 31, 2006. Room expenses
increased 25.7% for 2007 Combined as compared to the year ended December 31, 2006. The increase in both room revenue and expense is primarily due to the opening of Red Rock in April 2006 with
over 400 rooms and the opening of over 400 additional rooms at Red Rock in December 2006. Room operating margin for 2007 Combined increased 2.8 percentage points over the year ended
December 31, 2006 due primarily to Red Rock as noted above. Room occupancy decreased to 90% for 2007 Combined from 95% for the year ended December 31, 2006. The average daily room rate
increased to $93 for 2007 Combined from $73 for the year ended December 31, 2006, primarily due to increased room rates at our Major Las Vegas Operations, including an increase of Red Rock's
average daily room rate to $180 for 2007 Combined from $169 for the year ended December 31, 2006.

Room
revenues increased 34.6% for the year ended December 31, 2006 as compared to the year ended December 31, 2005. Room expenses increased 42.0% for the year ended
December 31, 2006 as compared to the year ended December 31, 2005, which is due to the opening of Red Rock which included approximately 400 hotel rooms. Room occupancy was 95% for the
year ended December 31, 2006, as compared to 96% for the year ended December 31, 2005. The average daily room rate increased to $73 for the year ended December 31, 2006 from $61
for the year ended December 31, 2005, primarily due to an average daily room rate of $169 for the year ended December 31, 2006 at Red Rock.

Other.Other revenues primarily include income from gift shops, bowling, entertainment, leased outlets and the spa. Other
revenues increased 10.1% for 2007 Combined as compared to the year ended December 31, 2006. The increase in other revenues is primarily due to the opening of Red Rock in April 2006 with a
full-service spa and several leased outlets including a 16-screen movie theater complex and the opening of a 72-lane bowling center in April 2007.

Other
revenues increased 33.7% for the year ended December 31, 2006 as compared to the year ended December 31, 2005. The increase in other revenues is primarily due to the
opening of Red Rock with the amenities noted above.

Management Fees.We manage Thunder Valley on behalf of the United Auburn Indian Community (the "UAIC") and receive a
management fee equal to 24% of net income (as defined in the management agreement). In addition, we are the managing partner for Green Valley Ranch, Barley's, The Greens and Renata's and receive a
management fee equal to 2% of revenues and approximately 5% of Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") from Green Valley Ranch and 10% of EBITDA from Barley's, The
Greens and Renata's. For 2007 Combined, management fees decreased to $87.8 million as compared to $99.5 million for the year ended December 31, 2006 primarily due to our

37

---



portion
of expenses at Thunder Valley related to litigation and California Compact Referendum laws of approximately $3.1 million. Management fees increased to $99.5 million for the year
ended December 31, 2006 as compared to $95.1 million for the year ended December 31, 2005 primarily due to improved results at both Green Valley Ranch and Thunder Valley.

Selling, General and Administrative ("SG&A").SG&A expenses increased 10.8% for 2007 Combined as compared to the year ended
December 31, 2006, primarily due to the opening of Red Rock in April 2006 and the recently completed expansions at Red Rock, Santa Fe Station and Fiesta Henderson. SG&A as a percentage of net
revenues increased to 17.6% in 2007 Combined as compared to 17.2% in the year ended December 31, 2006.

SG&A
as a percentage of net revenues increased to 17.2% in the year ended December 31, 2006 as compared to 16.4% in the year ended December 31, 2005. SG&A expenses
increased by 26.8% to $230.3 million for the year ended December 31, 2006, from $181.7 million for the year ended December 31, 2005. The increase is primarily related to
the opening of Red Rock in April 2006.

Corporate Expense.Corporate expenses increased to approximately $340.5 million for 2007 Combined as compared to
approximately $60.5 million for the year ended December 31, 2006. The increase is primarily due to $287.1 million of share-based compensation expense related to equity-based
awards
granted upon the consummation of the Merger, which was offset by a reduction in corporate incentive compensation.

Corporate
expense increased to approximately $60.5 million for the year ended December 31, 2006 as compared to approximately $57.6 million for the year ended
December 31, 2005. The increase is primarily due to stock option expense as a result of adopting SFAS 123R (see "Share-Based Compensation"), and additional restricted stock awards offset
by lower cash bonuses.

Development Expense.Development expense includes costs to identify potential gaming opportunities, the internal costs
incurred to bring the Native American projects currently under contract to fruition and other development opportunities, which include payroll, travel and legal expenses. Development expenses for 2007
Combined and the years ended December 31, 2006 and 2005 were $8.4 million, $9.0 million and $8.7 million, respectively.

Depreciation and Amortization.Depreciation and amortization increased 28.8% to approximately $168.8 million for 2007
Combined as compared to $131.1 million for the year ended December 31, 2006. This increase was due primarily to additional depreciation expense from the opening of Red Rock in April
2006, as well as the completion of recent expansions at Red Rock, Santa Fe Station and Fiesta Henderson and the completion of the corporate office building in September 2007. In addition, we recorded
approximately $799.1 million in definite-lived intangible assets in connection with the Merger which are subject to amortization. Amortization expense of approximately $11.3 million
associated with these intangibles was recorded during 2007 Combined.

Depreciation
increased 29.3% to approximately $131.1 million for the year ended December 31, 2006 as compared to $101.4 million for the year ended
December 31, 2005. This increase was due primarily to the opening of Red Rock in April 2006, the completion of portions of the phase II master-planned expansion at Fiesta Henderson in
August 2006 and the remodel of the buffet at Sunset Station in December 2005.

Preopening Expense.We incurred preopening expenses of approximately $2.1 million, $29.5 million and
$6.6 million during 2007 Combined and the years ended December 31, 2006 and 2005, respectively. Preopening expenses incurred during 2007 Combined were primarily related to projects under
development. Preopening expenses incurred during the years ended December 31, 2006 and 2005 were primarily related to the development of Red Rock which opened in April 2006.

38

---



Merger Transaction Costs.During 2007 Combined, the Company recorded approximately $156.5 million in costs related to
the Merger. These costs include approximately $31.6 million of accounting, investment banking, legal and other costs associated with the Merger and $124.9 million of expense related to
the accelerated vesting and buyout of employee stock options and restricted stock awards upon consummation of the Merger.

Impairment Loss.During 2007 Combined, we recorded an impairment loss of approximately $16.6 million. Included in the
impairment loss is $8.0 million related to the impairment of goodwill at Magic Star and Gold Rush as a result of a recent third-party business valuation and $8.6 million related to the
write-down of the corporate office building prior to its sale-leaseback transaction.

Management agreement/lease terminations.During 2007 Combined, we incurred approximately $3.8 million in management
agreement/lease termination expense primarily due to the termination of the management agreement related to Cherry nightclub at Red Rock. During the years ended December 31, 2006 and 2005, we
recorded approximately $1.1 million and $14.7 million, respectively, to terminate various leases primarily related to land adjacent to the current Wild Wild West property.

Earnings From Joint Ventures.We own a 50% interest in various joint ventures including Green Valley Ranch, and a 6.7%
interest in a joint venture that owns the Palms Casino Resort. We recorded our share of the earnings from these joint ventures of $40.1 million, $41.9 million and $38.3 million
for 2007 Combined and the years ended December 31, 2006 and 2005, respectively. The decrease in our share of earnings from joint ventures in 2007 Combined as compared to the year ended
December 31, 2006 is primarily the result of our 50% portion of costs related to terminating a management agreement and a lease agreement at Green Valley Ranch of approximately
$1.9 million. The increase in earnings from joint ventures for the year ended December 31, 2006 as compared to the year ended December 31, 2005 is primarily due to improved
results at Green Valley Ranch as a result of the completion of various portions of the phase III master-planned expansion in October 2006.

Interest Expense.Interest expense, net of capitalized interest, increased 50.6% to $258.6 million in 2007 Combined as
compared to $171.7 million in the year ended December 31, 2006. Gross interest expense increased approximately $75.1 million due to an increase in our long-term debt
of approximately $1.8 billion in 2007 Combined, and an increase in the weighted average cost of debt to 7.1% from 6.7% for 2007 Combined and the year ended December 31, 2006,
respectively. Capitalized interest decreased approximately $10.2 million for 2007 Combined primarily due to the completion of Red Rock in April 2006. In conjunction with the Merger, we incurred
significant indebtedness at increased interest rates and as such we expect interest expense to be higher in future periods.

Interest
expense, net of capitalized interest, increased 113.7% to $171.7 million in the year ended December 31, 2006 as compared to $80.4 million in the year ended
December 31, 2005. Gross interest expense increased approximately $100.3 million due to an increase in our long-term debt of approximately $1.5 billion in the year
ended December 31, 2006, and an increase in the weighted average cost of debt to 6.7% from 6.2% for the years ended December 31, 2006 and 2005, respectively. Capitalized interest
increased approximately $7.4 million for the year ended December 31, 2006 as
compared to the year ended December 31, 2005, primarily due to interest capitalized for the construction of Red Rock.

Interest and Other Expense from Joint Ventures.For 2007 Combined and the years ended December 31, 2006 and 2005, we
recorded $28.2 million, $6.8 million and $6.3 million, respectively, in interest and other expense related to our unconsolidated joint ventures. The increase in expense during
2007 Combined as compared to the prior periods is due to the new $830 million credit facility at Green Valley Ranch entered into on February 16, 2007, which resulted in an increase in
debt of approximately $582.8 million in the year ended December 31, 2007, as well as an $0.8 million charge for a loss on early retirement of debt related to the prior credit
facility.

39

---



Loss on Early Retirement of Debt.During 2007 Combined, in conjunction with the Merger, we terminated our then existing
revolving facility resulting in a loss on early retirement of debt of $20.3 million, which includes the write-off of unamortized loan costs as well as costs to terminate our then
existing interest rate swaps.

During
2005, we redeemed the remaining $16.9 million of outstanding 83/8% senior notes due 2008 and $17.4 million of outstanding 97/8% senior
subordinated notes due 2010. As a result of these redemptions, we recorded a loss on early retirement of debt of approximately $1.3 million to reflect the write-off of the
unamortized loan costs, unamortized discount and call premium.

Liquidity and Capital Resources

The following liquidity and capital resources discussion contains certain forward-looking statements with respect to our business, financial condition, results of
operations, dispositions, acquisitions, expansion projects and our subsidiaries, which involve risks and uncertainties that cannot be predicted or quantified, and consequently, actual results may
differ materially from those expressed or implied herein. Such risks and uncertainties include, but are not limited to, financial market risks, the ability to maintain existing management, integration
of acquisitions, competition within the gaming industry, the cyclical nature of the hotel business and gaming business, economic conditions, regulatory matters and litigation and other risks described
in our filings with the Securities and Exchange Commission. In addition, construction projects such as Aliante Station entail significant risks, including shortages of materials or skilled labor,
unforeseen regulatory problems, work stoppages, weather interference, floods and unanticipated cost increases. The anticipated costs and construction periods are based on budgets, conceptual design
documents and construction schedule estimates. There can be no assurance that the budgeted costs or construction period will be met. All forward-looking statements are based on our current
expectations and projections about future events.

In
connection with the Merger on November 7, 2007, we received $2.71 billion in cash equity contributions, $2.475 billion from the issuance of the CMBS Loans (see
"Description of Certain Indebtedness and Capital StockCMBS Loans") and entered into a $900 million Credit Agreement with initial borrowings of $510 million (see "Description
of Certain Indebtedness and Capital StockCredit Agreement"). In addition, we paid $4.17 billion for the Merger consideration payment for each outstanding share of our common stock,
$1.38 billion to terminate our then existing revolving credit facility and $12.2 million to terminate interest rate swaps tied to such revolving credit facility.

During
2007 Combined, we generated cash flows from operating activities of $292.2 million. In addition, we received approximately $70 million from the
sale-leaseback of the corporate office building. At December 31, 2007, we had total available borrowings of $900 million under our Credit Agreement, which was reduced by
borrowings of $543.1 million and various letters of credit totaling approximately $11.9 million, leaving approximately $345.0 million available as of December 31, 2007. We
had $96.4 million in cash and cash equivalents as of December 31, 2007, virtually all of which is used for the day-to-day operations of our casinos.

During
2007 Combined, total capital expenditures were $585.9 million, of which approximately $297.2 million was for the purchase of land, approximately $66.3 million
was for the construction of the new corporate office building, approximately $89.7 million related to master-planned expansions at Red Rock, approximately $23.7 million was related to
the phase II master-planned expansion at Fiesta Henderson, approximately $12.2 million was for the phase III master-planned expansion at Santa Fe and approximately
$96.8 million was related to maintenance and various other projects. In addition to capital expenditures, we paid approximately $19.5 million in reimbursable advances for our Native
American development projects (see "Future Development"), approximately $49.1 million in common stock dividends, approximately $110.2 million to repurchase 1.3 million shares of
our common stock and approximately $103.8 million was contributed to various joint ventures.

40

---



Our primary cash requirements for 2008 are expected to include (i) principal and interest payments on indebtedness, (ii) maintenance and other capital expenditures,
(iii) other strategic land purchases, (iv) equity contributions to joint ventures, (v) payments to our existing and potential Native American projects and (vi) payments for
design and development costs of future projects.

We
believe that cash flows from operations, available borrowings under the Credit Agreement, the Land Loan (see "Description of Certain Indebtedness and Capital StockLand
Loan") and existing cash balances will be adequate to satisfy our anticipated uses of capital during 2008. However, we are continually evaluating our financing needs. Although recent developments in
the financial markets have had an effect through the U.S. economy, including limiting access to capital markets to certain borrowers at reasonable rates, if more attractive financing alternatives, or
expansion, development or acquisition opportunities become available to us, we may amend our financing plans assuming such financing would be permitted under our existing debt agreements (see
"Description of Certain Indebtedness and Capital Stock") and other applicable agreements.



As of December 31, 2007, we have certain off-balance sheet arrangements that affect our financial condition, liquidity and results of
operations, which include interest rate swaps with a combined notional amount of $1.36 billion (see "Description of Certain Indebtedness and Capital StockInterest Rate Swaps") and
a completion guarantee related to the financing at Aliante Station (see "Description of Certain Indebtedness and Capital StockAliante Station Financing").

The
following table summarizes our contractual obligations and commitments (amounts in thousands):

|                     |            | Contractual obligations
|-------------------- | ---------- | -----------------------
|
|Payments due by year |            |                        
|                     | 2008       |                        
|                     | 2009       |                        
|                     | 2010       |                        
|                     | 2011       |                        
|                     | 2012       |                        
|                     | Thereafter |                        
|                     |            |                        
|                     |            | Total                  
|                     |            |                        

---

As
further discussed in Note 17 to the Consolidated Financial Statements in this Annual Report on Form 10-K, we adopted the provisions of FIN 48 on January 1,
2007. We had $3.3 million of unrecognized tax benefits as of December 31, 2007. Due to the inherent uncertainty of the underlying tax positions, it is not possible to assign the
liability as of December 31, 2007 to any particular years in the table.

41

---



Future DevelopmentLas Vegas



In December 2005, we entered into an agreement with the Greenspun Corporation to develop Aliante Station, a hotel and casino in the Aliante master-planned
community located in North Las Vegas, Nevada. We are developing and will manage the facility, to be located on a gaming-entitled 40-acre site on the northeast corner of Interstate 215 and
Aliante Parkway, which was contributed by the Greenspun Corporation for their 50% ownership in the joint venture. We will receive a management fee equal to 2% of the property's revenues and
approximately 5% of EBITDA. The first phase of Aliante Station is expected to include 201 hotel rooms, approximately 2,600 slot machines, multiple full-service restaurants and a
multi-screen movie theater complex. Construction on Aliante Station began in February 2007 and is expected to be completed by the end of 2008 at a cost of approximately $675 million. Pursuant
to the terms of the agreement, in January 2006, we contributed a 54 acre site located on Losee Road in North Las Vegas, Nevada, as well as approximately $2.2 million, for our 50% ownership in
the joint venture. As of December 31, 2007, we have contributed an additional $79.5 million to fund design and development costs.



In December 2006, we entered into an amended and restated operating agreement with FBLV Holding Company LLC ("FBLV"). Pursuant to the amended and restated
operating agreement, the parties contributed approximately 52 acres (with approximately 20 acres contributed by us for our 50% ownership and approximately 32 acres contributed by FBLV for their 50%
ownership) of improved and unimproved real property located along Rancho Road south of Palace Station in Las Vegas, Nevada into a joint venture. It is anticipated that the joint venture will develop,
construct and manage, pursuant to a master development plan, a mixed-use residential, retail and entertainment project on all or a portion of such property. The timing, cost and scope of
the project have yet to be determined. As of December 31, 2007, we have contributed an additional $24.7 million to fund the acquisition of additional property and design and development
costs.



We have entered into Development and Management Agreements with the Federated Indians of Graton Rancheria (the "FIGR"), a federally recognized Native American
tribe. Pursuant to those agreements, we will assist the FIGR in developing and operating a gaming and entertainment project to be located in Sonoma County, California. The FIGR selected us to assist
them in designing, developing and financing their project and, upon opening, we will manage the facility on behalf of the FIGR. The Management Agreement has a term of seven years from the opening of
the facility and we will receive a management fee equal to 24% of the facility's net income. We will also receive a development fee equal to 2% of the cost of the project upon the opening of the
facility.

In
October 2003, the FIGR entered into a Memorandum of Understanding with the City of Rohnert Park. In August 2005, we purchased 270 acres of land just west of the Rohnert Park city
limits in Sonoma County, California. In March 2006, we purchased an additional 4.7 acres adjacent to the previously acquired property. The property purchased is approximately one-quarter
mile from Highway 101 and approximately 43 miles from downtown San Francisco. Development of the gaming and entertainment project is subject to certain governmental and regulatory approvals,
including, but not limited to, negotiating a gaming compact with the State of California, the United States Department of the Interior ("DOI") accepting a portion of the land into trust on behalf of
the FIGR and approval of the Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. As of December 31,
2007, we have advanced approximately $140.3 million toward

42

---



the
development of this project, primarily to complete the environmental impact study and secure real estate for the project, which is included on our consolidated balance sheets. Funds advanced by us
are expected to be repaid from the proceeds of the project financing or from the FIGR's gaming revenues. In addition, we have agreed to pay approximately $11.3 million upon achieving certain
milestones, which will not be reimbursed. As of December 31, 2007, approximately $2.0 million of these payments had been made and were expensed in development expense as incurred. The
timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals
will be obtained.



On November 13, 2003, we agreed to purchase a 50% interest in MPM Enterprises, LLC, a Michigan limited liability company ("MPM"). Concurrently with
our agreement to purchase that interest, MPM and the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, a federally recognized Native
American tribe commonly referred to as
the Gun Lake Tribe ("Gun Lake"), entered into amended Development and Management Agreements, pursuant to which MPM agreed to assist Gun Lake in developing and operating a gaming and entertainment
project to be located in Allegan County, Michigan. On July 29, 2005, MPM and Gun Lake entered into amended and restated Development and Management Agreements. We have agreed to pay
$6.0 million for our 50% interest in MPM, which is payable upon achieving certain milestones and is not reimbursable. As of December 31, 2007, approximately $2.0 million of these
payments had been made and were expensed in development expense as incurred. An additional $12.0 million in total may be paid by us in years six and seven of the amended and restated Management
Agreement, subject to certain contingencies. Under the terms of the amended and restated Development Agreement, we have agreed to arrange financing for the ongoing development costs and construction
of the project. As of December 31, 2007, we have advanced approximately $38.3 million toward the development of this project, primarily to complete the environmental assessment and
secure real estate for the project, which is included on our consolidated balance sheets. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from Gun Lake's
gaming revenues. The amended and restated Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 30% of the project's net income to be
paid to MPM. Pursuant to the terms of the MPM Operating Agreement, our portion of the management fee is 50% of the first $24 million of management fees earned, 83% of the next
$24 million of management fees and 93% of any management fees in excess of $48 million.

The
proposed project will be located on approximately 146 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently contemplated,
the project will include up to 2,500 slot machines, 75 table games, a buffet and specialty restaurants. Construction of the project includes the conversion of an existing 192,000
square-foot building into the casino and entertainment facility. Development of the gaming and entertainment project and operation of Class III gaming is subject to certain
governmental and regulatory approvals, including, but not limited to, the signing of a gaming compact by the Governor of the State of Michigan, the DOI taking the land into trust on behalf of Gun Lake
and approval of the Management Agreement by the NIGC.

On
February 27, 2004, the DOI issued a Finding Of No Significant Impact with respect to the proposed project. On May 13, 2005, the DOI published in the Federal Register a
Notice of Final Agency Determination (the "Determination") to take certain land into trust for the benefit of Gun Lake. The publication commenced a thirty-day period in which interested
parties could seek judicial review of the Determination. On June 13, 2005, Michigan Gambling Opposition filed a complaint (the "Complaint") in the United States District Court, District of
Columbia, seeking declaratory and injunctive relief against the DOI and officials of the DOI. The Complaint seeks judicial review of the Determination. On July 27, 2005, Gun Lake filed a motion
to intervene in that lawsuit. On September 1, 2005, the District Court granted Gun Lake's motion to intervene. On January 6, 2006, Gun Lake filed a motion for judgment on the pleadings
or, in the alternative, for summary judgment. Also on January 6, 2006, the DOI filed a motion to

43

---



dismiss
or, in the alternative, for summary judgment. By May 2006, all responsive pleadings had been filed and the case was ready for consideration by the District Court. On October 27, 2006,
the Department of Justice filed a Notice with the District Court indicating that the DOI planned to take the 146-acre site into trust on January 5, 2007, if the plaintiffs did not
seek injunctive relief or failed to persuade the court to issue any relief precluding the DOI from doing so. The DOI subsequently amended that date to March 5, 2007, in order to provide the
Court sufficient time to render its decision. The Court set oral arguments on the parties' motions to dismiss or, in the alternative, for summary judgment for November 29, 2006. Oral arguments
were heard on that date. On February 23, 2007, the District Court issued its decision in favor of the DOI and Gun Lake, finding that there were no facts which would entitle plaintiffs to any
relief on the four issues raised in the Complaint, and granted the parties' motion to discuss or, in the alternative for summary judgment (the "Dispositive Motions"). On March 1, 2007, the
plaintiffs filed a motion for stay pending appeal with the District Court. On March 5, 2007, the District Court granted the plaintiffs' motion for stay pending appeal, thereby precluding the
DOI from taking the site into trust for the benefit of Gun Lake until the District Court's decision granting the Dispositive Motions has been reviewed on appeal. On March 22, 2007, plaintiffs
filed a notice of appeal of the District Court's decision granting the Dispositive Motions with the United States Court of Appeals for the District of Columbia Circuit. On May 21, 2007, the
plaintiffs filed their appellate brief. On July 6, 2007, the DOI and Gun Lake filed their responsive briefs. On July 30, 2007, the plaintiffs filed their reply brief. Oral arguments were
heard on October 19, 2007. The parties are currently waiting for the appellate court to render its decision. As with all litigation, no assurances can be provided as to the outcome of this
lawsuit.

On
March 9, 2007, Gun Lake and the State of Michigan entered into a tribal-state Class III gaming compact. The compact is subject to approval by the Michigan Legislature
and, if approved, will regulate gaming at Gun Lake's proposed gaming and entertainment project to be developed on the site. On August 8, 2007, the Michigan House of Representatives ratified the
compact. No assurances can be provided as to whether the Michigan Senate will approve the compact. Prior to obtaining third-party financing, we will contribute significant financial support to the
project. The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if
these approvals will be obtained.



We have entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "MITCR"), a federally recognized
Native American tribe. Pursuant to those agreements, we will assist the MITCR in developing and operating a gaming and entertainment facility to be located on a portion of an approximately
650-acre site in Butte County, California, at the intersection of State Route 149 and Highway 99, approximately 10 miles southeast of Chico, California and 80 miles north of Sacramento,
California. Under the terms of the Development Agreement, we have agreed to arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are expected
to be repaid from the proceeds of the project financing or from the MITCR's gaming revenues. As of December 31, 2007, we have advanced approximately $9.8 million toward the development
of this project, primarily to complete the environmental assessment and secure real estate for the project, which is included on our consolidated balance sheets. In addition, we have agreed to pay
approximately $2.2 million of payments upon achieving certain milestones, which will not be reimbursed. As of December 31, 2007, $50,000 of these payments had been made and were expensed
in development expense as incurred. The Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 24% of the facility's net income. As
currently contemplated, the facility will include approximately 700 slot machines, 12 table games and dining and entertainment amenities. Development of the facility is subject to certain governmental
and regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of California, the DOI accepting land into trust on behalf of the MITCR and approval of the
Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. The timing

44

---



of
this type of project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be
obtained.



We have entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians (the "Mono"), a federally recognized Native American
tribe located near Fresno, California. Pursuant to those agreements, we will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County, California.
We have purchased, for the benefit of the Mono, a 305-acre parcel of land located on Highway 99 north of the city of Madera. Under the terms of the Development Agreement, we have agreed to
arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from the Mono's
gaming revenues. As of December 31, 2007, we have advanced approximately $12.4 million toward the development of this project, primarily to complete the environmental impact study and
secure real estate for the project, which is included on our consolidated balance sheets. In addition, we have agreed to pay approximately
$1.3 million of payments upon achieving certain milestones, which will not be reimbursed and will be expensed as incurred. As of December 31, 2007, none of these payments had been made.
The Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 24% of the facility's net income. As currently contemplated, the facility will
include approximately 2,000 slot machines, 60 table games, restaurants, a hotel and entertainment amenities. Development of the gaming and entertainment project is subject to certain governmental and
regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of California, the DOI accepting the land into trust on behalf of the Mono and approval of the
Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. The timing of this type of project is difficult to predict,
and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.

Land Acquisition

We have acquired certain parcels of land as part of future development activities. Our decision whether to proceed with any new gaming or development opportunity
is dependent upon future economic and regulatory factors, the availability of financing and competitive and strategic considerations. As many of these considerations are beyond our control, no
assurances can be made that we will be able to secure additional, acceptable financing in order to proceed with any particular project.

As
of December 31, 2007, we had $516.2 million of land held for development that consists primarily of seven sites that are owned or leased, which comprise 263 acres in the
Las Vegas valley, 147 acres in the northern California and 203 acres in Reno, Nevada. The primary gaming-entitled land that we own in the Las Vegas valley consists of 68 acres located at the
intersection of Durango Road and the Southern Beltway/Interstate 215 in the southwest area of Las Vegas, 49 acres also located in southwest Las Vegas at the intersection of Flamingo Road and
Interstate 215, 45 acres in Henderson, Nevada, 61 acres located on the southern end of Las Vegas Boulevard at Cactus Avenue of which we lease and have an option to purchase 2.5 acres and 30 acres on
Boulder Highway at the site formerly known as the Castaways Hotel Casino and Bowling Center.

We
also have acquired or are under contract to acquire approximately 106 acres of land on which Wild Wild West is located and the surrounding area of which, approximately 72 acres have
been acquired as of December 31, 2007. During 2007 Combined and the years ended December 31, 2006 and 2005 we incurred and expensed approximately $25,000, $1.1 million and
$11.7 million, respectively to terminate various leases related to this land. In 2003, we exercised our option to purchase the 19-acre parcel of leased land on which Wild Wild West
is located which was to occur in July 2005 at a purchase price of approximately

45

---



$36 million.
We have extended the date for the close of escrow to no later than January 2009. Additionally, the lease expense was reduced from $2.9 million to $1.6 million per
year beginning in July 2005. No amounts related to this purchase option have been recorded on our consolidated balance sheets at December 31, 2007 and 2006.

Regulation and Taxes

We are subject to extensive regulation by the Nevada gaming authorities and will be subject to regulation, which may or may not be similar to that in Nevada, by
any other jurisdiction in which we may conduct gaming activities in the future, including the NIGC and tribal gaming agency of the UAIC.

The
gaming industry represents a significant source of tax revenue, particularly to the State of Nevada and its counties and municipalities. From time to time, various state and federal
legislators and officials have proposed changes in tax law, or in the administration of such law, affecting the gaming industry. The Nevada Legislature concluded their 2007 session and there were no
increases in taxes affecting the gaming industry. The Nevada Legislature meets again in 2009.

There
are several gaming tax increase proposals currently circulating in Nevada. These proposals would take the form of voter referendums, which in Nevada require passage by voters on
two separate occasions, the next two being 2008 and 2010. If a proposal to increase the gaming tax is passed in both elections, the earliest the increase could go into effect would be 2011. An
increase in the gaming tax could have an adverse effect on our results of operations.

We
believe that our recorded tax balances are adequate. However, it is not possible to determine with certainty the likelihood of possible changes in tax law or in the administration of
such law, regulations or compact provisions. Such changes, if adopted, could have a material adverse effect on our operating results.

Description of Certain Indebtedness and Capital Stock



In conjunction with the Merger on November 7, 2007, we terminated our $2.0 billion revolving credit facility (the "Revolving Facility") due December
2010. As a result we recorded a loss on early retirement of debt of approximately $8.1 million during the Successor Period to reflect the write off of the unamortized loan costs. In addition,
we terminated two cash flow hedge interest rate swaps with a notional amount of $500 million, which were due to terminate in December 2010 and tied directly to the Revolving Facility. These
cash flow hedge interest rate swaps were terminated at market value, and as a result, we paid approximately $12.2 million which is included in our loss on early retirement of debt in the
Successor Period.



In connection with the Merger, Station, as borrower, entered into a new $900 million senior secured credit agreement (the "Credit Agreement") consisting of
a $650 million revolving facility (the "Revolver") and a $250 million term loan (the "Term Loan"). The maturity date for both the Term Loan and the Revolver is August 7, 2012
subject to a single 15-month extension (as further defined in the Credit Agreement). The Term Loan requires quarterly principal payments of $625,000 beginning March 31, 2008. The
Revolver contains no principal amortization. Initial borrowings, including full funding of the Term Loan and $260 million drawn on the Revolver for an aggregate amount of $510 million,
were used to repay a portion of the outstanding amounts under the Revolving Facility. Borrowings under the Credit Agreement bear interest at a margin above the Alternate Base Rate or the Eurodollar
Rate (each as defined in the Credit Agreement), as selected by us. The margin above such rates, and the fee on the unfunded portions of the Revolver, will vary quarterly based on our combined
consolidated ratio of debt to Adjusted EBITDA (as defined in the Credit Agreement). As of December 31, 2007, the borrower's margin

46

---



above
the Eurodollar Rate on borrowings under the Credit Agreement was 2.50%. The maximum margin for Eurodollar Rate borrowings is 2.50%. The maximum margin for Alternate Base Rate borrowings is
1.50%. As of December 31, 2007, the fee for the unfunded portion of the Revolver was 0.375%.

The
Credit Agreement contains certain financial and other covenants. These include a minimum interest coverage ratio of 1.50 to 1.00 beginning March 31, 2008 through
June 30, 2008, which increases to 1.75 to 1.00 on September 30, 2008 through December 31, 2008, to 2.00 to 1.00 on March 31, 2009 through December 31, 2009, to 2.25
to 1.00 on March 31, 2010 through December 31, 2010, and to 2.50 to 1.00 on March 31, 2011. The Credit Agreement has financial covenants that require that the maximum total debt
to Adjusted EBITDA (as defined in the Credit Agreement) ratio can be no more than 8.50 to 1.00 beginning March 31, 2008, which reduces to 8.25 to 1.00 on June 30, 2008, to 8.00 to 1.00
on September 30, 2008, to 7.75 to 1.00 on December 31, 2008, to 7.50 to 1.00 on March 31, 2009, to 7.25 to 1.00 on June 30, 2009, to 7.00 to 1.00 on September 30,
2009, to 6.75 to 1.00 on December 31, 2009, to 6.25 to 1.00 on March 31, 2010, to 6.00 to 1.00 on June 30, 2010 through December 31, 2010, to 5.75 on March 31, 2011,
to 5.5 to 1.00 on June 30, 2011 through September 30, 2011, and to 5.00 to 1.00 on December 31, 2011. In addition, total senior secured debt to Adjusted EBITDA (as defined in the
Credit Agreement) can be no more than 2.25 to 1.00 beginning March 31, 2008 through June, 30, 2008 and reduces to 2.00 to 1.00 on September 30, 2008. The covenants limit our ability to
incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions or repurchase
our own capital stock; make investments, loans or advances; make certain acquisitions; engage in certain transactions with affiliates; capital expenditures and fundamentally change our business. All
obligations under the Credit Agreement are secured by substantially all of our assets with the exception of the collateral securing the CMBS Loans, the Land Loan and other excluded items as described
in the Credit Agreement.



In connection with the Merger, on November 7, 2007, a number of wholly-owned unrestricted direct and indirect subsidiaries of Station (collectively, the
"CMBS Borrower") entered into a mortgage loan and related mezzanine financings in the aggregate principal amount of $2.475 billion (the "CMBS Loans"), for the purpose of financing the Merger
consideration payable to the Company's stockholders upon consummation of the Merger and paying fees and expenses incurred in connection with the Merger.

The
CMBS Loans are collateralized by substantially all fee and leasehold real property comprising Palace Station, Boulder Station, Sunset Station and Red Rock (collectively, the "CMBS
Property") and will mature in November 2009, subject to three one-year extensions as defined in the CMBS Loans. Interest on the CMBS Loans is equal to one-month LIBOR plus 2.3%
per annum. The CMBS Borrower is required to hedge the LIBOR interest rate such that it will not exceed 5.5% on a blended basis. As a result, the CMBS Borrower purchased an interest rate cap with a
$1.11 billion notional amount and a strike price of 5.77% for an initial premium of $3.6 million. This premium is being amortized to interest expense ratably over the term of the
interest rate cap. In addition, the CMBS Borrower entered into a cash flow hedge interest rate swap with a notional amount of $1.36 billion terminating in November 2012. As of
December 31, 2007, we paid a fixed rate of 5.3% and received one-month LIBOR which approximated 5.0%. This interest rate swap is designated and qualifies as a cash flow hedge
resulting in the effective portion of the gain or loss reported as a component of other comprehensive income (loss) with an offsetting adjustment to the carrying value of the related debt. For the
year ended December 31, 2007, we recorded other comprehensive loss of $73.4 million, related to the change in market value of this interest rate swap and a corresponding increase in
long-term debt.

The
loan documents for the CMBS Loans (the "CMBS Loan Documents") contain a number of covenants that, among other things, restrict, subject to certain exceptions, each wholly-owned
unrestricted direct and indirect subsidiary's ability to incur additional indebtedness; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions;
make investments, loans or

47

---



advances;
make certain acquisitions; engage in certain transactions with affiliates; and fundamentally change its business. In addition, the CMBS Loan Documents require the CMBS Borrower to maintain a
minimum lease coverage ratio and also contain certain customary affirmative covenants and certain events of default. The CMBS Loan Documents also require the CMBS Borrower to fund specific reserves
(as defined in the CMBS Loan Documents).



On August 15, 2006, we issued $400.0 million of 73/4% senior notes due August 15, 2016. On March 13, 2006, we issued
$300.0 million of 65/8% senior subordinated notes due March 2018. Proceeds from the sale of the notes were used to reduce a portion of the amount outstanding on our Revolving
Facility.

During
2005, we redeemed the remaining $16.9 million of outstanding 83/8% senior notes due 2008 and $17.4 million of outstanding 97/8% senior
subordinated notes due 2010. As a result of these redemptions, we recorded a loss on early retirement of debt of approximately $1.3 million in the year ended December 31, 2005 to reflect
the write-off of the unamortized loan costs, discounts and call premium.

The
indentures (the "Indentures") governing our senior and senior subordinated notes (the "Notes") contain certain customary financial and other covenants, which limit our and our
subsidiaries' ability to incur additional debt. At December 31, 2007, our Consolidated Coverage Ratio (as defined in the Indentures) was 2.11 to 1.00. The Indentures provide that we may not
incur additional indebtedness, other than specified types of indebtedness, unless the Consolidated Coverage Ratio is at least 2.00 to 1.00. In the event our Consolidated Coverage Ratio is below 2.00
to 1.00, the covenant limits our ability to incur additional indebtedness for borrowings under the Revolver not to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined in the Indentures) for the four most recent quarters, plus $15 million. The Indentures also give the holders of the Notes the right to require us 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. In addition, the indenture governing the
senior notes contains a limitation on liens we can incur.



On February 7, 2008, a wholly-owned, indirect subsidiary of Station, as borrower, entered into a $250 million delay-draw term loan which
is collateralized by land located on the southern end of Las Vegas Boulevard at Cactus Avenue and land surrounding Wild Wild West in Las Vegas, Nevada (the "Land Loan"). The Land Loan contains no
principal amortization and matures on February 7, 2011. At closing, $200 million was drawn and the proceeds were used to fund a distribution to Station, establish an interest reserve and
pay transaction expenses. The borrower has the option to request an additional $50 million under the Land Loan to purchase certain real property. Borrowings under the Land Loan bear interest at
LIBOR plus 3.5% per annum or at the Alternate Base Rate (as defined in the Land Loan) plus 2.5% per annum, at the borrower's request. The borrower is required to hedge the interest rate such that it
will not exceed 6.5%. As a result, the borrower entered into a cash flow hedge interest rate swap with a notional amount of $200 million in which the borrower pays a fixed rate of 2.97% and
receives one-month LIBOR, terminating in February 2011.

The
Land Loan contains a number of covenants that, among other things, restrict, subject to certain exceptions, the borrower's ability to incur additional indebtedness; create liens on
assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions; make investments, loans or advances; make certain acquisitions; engage in certain transactions with
affiliates; and fundamentally change its business. In addition, the Land Loan requires the borrower to maintain a loan-to-value ratio of no more than 40% and also contains
customary affirmative covenants and certain events of default.

48

---





In November 2007, we terminated a fair value hedge interest rate swap with a notional amount of $50.0 million, which was due to terminate in April 2012.
The fair value hedge interest rate swap was terminated at market value and, as a result, we paid approximately $1.2 million. This fair value hedge interest rate swap was tied directly to our
$450 million 6.0% senior notes. The mark-to-market adjustment is being amortized as interest expense over the remaining contract life of the interest rate swap.

In
January 2008, we entered into a cash flow hedge interest rate swap with a notional amount of $250 million that converts a portion of our floating-rate debt to a
fixed rate based on one-month LIBOR rates, terminating in January 2011.

The
difference between amounts received and paid under such agreements, as well as any costs or fees, is recorded as a reduction of, or an addition to, interest expense as incurred over
the life of the interest rate swaps. The net effect of the interest rate swaps resulted in an increase of interest expense of approximately $0.4 million in 2007 Combined and a reduction of
interest expense of approximately $0.2 million and $2.1 million for the years ended December 31, 2006 and 2005, respectively.



In November 2007, we entered into a sale-leaseback agreement related to our corporate office building with a third party real estate investment firm.
We sold the corporate office building for approximately $70 million and subsequently entered into a lease with the purchaser for an initial period of 20 years with four options to extend
the lease, each option for an extension of five years. Annual lease payments for the first year will be approximately $5.3 million and will increase approximately 1.2% annually to approximately
$6.7 million in the final year of the original term. In conjunction with the sale, we recorded an impairment loss of approximately $8.6 million which is included on our consolidated
statement of operations. The lease also contains two options for us to repurchase the corporate office building, one option at the end of the fifth year of the lease term and a second option at the
end of the tenth year of the lease term, which is considered continuing involvement under SFAS 98, "Accounting for Leases; Sale-Leaseback Transactions Involving Real Estate;
Sales-Type Leases of Real Estate; Definition of Lease Term; Initial Direct Costs of Direct Financing Leases". Because of this continuing involvement, the sale-leaseback
transaction is being accounted for as a financing transaction, with the sales proceeds recorded as a liability and the lease payments recorded as interest expense. In addition, we continue to include
the corporate office building within property and equipment, net on our consolidated balance sheet and it continues to be depreciated. During 2007 Combined, we recorded approximately
$0.9 million of interest expense related to this transaction. Future minimum lease payments related to this lease are approximately $5.3 million, $5.3 million,
$5.4 million, $5.5 million and $5.5 million for the years ended December 31, 2008, 2009, 2010, 2011 and 2012, respectively.



In October 2007, we completed financing for Aliante Station (the "Aliante Financing"). The Aliante Financing was completed with a group of banks and provides for
borrowings of up to $430 million at a margin above the LIBOR rate of up to 325 basis points. The loan requires initial equity contributions from each partner, Station and G.C.
Investments, LLC (G.C. Investments, LLC being principally owned by members of the Greenspun family) of $105 million and equity contributions for a completion
guarantee, if necessary, for project costs that exceed $618 million exclusive of land acquisition costs and financing costs. The completion guarantee is a joint and several obligation of each
partner, with G.C. Investment, LLC's obligation collateralized.

49

---







On February 16, 2007, Green Valley Ranch entered into a new $830 million credit facility (the "Green Valley Facility"). The Green Valley Facility
includes a $550 million first lien term loan due February 2014, a $250 million second lien term loan due August 2014 and a $30 million revolver due February 2012. At the time of
close, the revolver was unfunded. Proceeds from the Green Valley Facility were used to repay outstanding borrowings under the previous revolving credit facility and term loan, as well as an equal
distribution to the members, which was comprised of approximately $185 million in distributions to each member and a $100 million promissory note from each member, for a total of
approximately $570 million. The outstanding balance of the Green Valley Facility as of December 31, 2007, was approximately $789.0 million.

Effective
January 1, 2008, Green Valley Ranch agreed to effectively forgive $200 million in notes receivable and the related interest from its members. As a result, the
$100 million due to unconsolidated affiliate and related accrued interest recorded on our consolidated balance sheet at December 31, 2007 will be forgiven during the three months ended
March 31, 2008 with a corresponding reduction in our investments in joint ventures.



We are authorized to issue up to 10,000 shares of voting common stock, $0.01 par value per share. At December 31, 2007, there were 41.7 shares of voting
common stock issued and outstanding. Each holder of issued and outstanding shares of voting common stock is entitled to one vote for each share held of record on each matter submitted to a vote of
stockholders. Holders of our voting common stock have no cumulative voting, conversion or redemption rights. Under the Equityholders Agreement of Station, FCP and Fertitta Partners, as amended, in
certain circumstances, FCP VoteCo, as the holder of Station's voting common stock, shall have the preemptive right to purchase or subscribe to any voting stock to be sold or issued by Station on the
terms and conditions as such voting stock is being offered and sold or issued. Subject to any preferences that may be granted to the holders of our preferred stock, each holder of voting common stock
is entitled to receive ratably, such dividends as may be declared by our Board of Directors out of funds legally available therefore, as well as any distributions
to the stockholders and, in the event of our liquidation, dissolution or winding up is entitled to share ratably in all our assets remaining after payment of liabilities.

During
the Predecessor Period, we paid a quarterly cash dividend of $0.2875 per share to stockholders of record on February 26, 2007, May 21, 2007 and October 5,
2007. The total amount paid in dividends for 2007 was $49.1 million.

During
the year ended December 31, 2006, we paid a quarterly cash dividend of $0.25 per share to stockholders of record on February 10, 2006 and May 12, 2006 and
$0.2875 per share to stockholders of record on August 11, 2006 and November 13, 2006. The total amount paid in dividends for 2006 was $65.4 million.



We are authorized to issue up to 100,000,000 shares of non-voting common stock, $0.01 par value per share. At December 31, 2007, there were
41,674,838 shares of non-voting common stock issued and outstanding. Holders of issued and outstanding shares of non-voting common stock are not entitled to vote on any matters
to be voted on by the stockholders of the Company and are not to be included in determining the number of shares voting or entitled to vote. Holders of our non-voting common stock have no cumulative
voting, conversion or redemption rights. Under the Equityholders Agreement of Station, FCP and Fertitta Partners, as amended, in certain circumstances, holders of non-voting common stock shall have
the preemptive right to purchase or subscribe to any equity interests (other than voting stock) to be sold or issued by Station on the same terms and conditions as such equity interests are being
offered

50

---



and
sold or issued. Subject to any preferences that may be granted to the holders of our preferred stock, each holder of non-voting common stock is entitled to receive ratably, such
dividends as may be declared by our Board of Directors out of funds legally available therefor, as well as any distributions to the stockholders and, in the event of our liquidation, dissolution or
winding up is entitled to share ratably in all our assets remaining after payment of liabilities.



We are authorized to issue up to 10,000 shares of preferred stock, $0.01 par value per share of which none are issued. The Board of Directors, without further
action by the holders of our 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, our 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 our 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 Station or other
corporate action.



During the Predecessor Period, we repurchased approximately 1.3 million shares of our common stock for approximately $110.2 million, primarily
through open market purchases. On November 7, 2007, upon consummation of the Merger, all of our treasury stock was cancelled and retired.

Critical Accounting Policies



We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. Certain of our accounting
policies, including the determination of slot club program liability, the estimated useful lives assigned to our assets, asset impairment, insurance reserves, bad debt expense, purchase price
allocations made in connection with our acquisitions and the calculation of our income tax liabilities, require that we apply significant judgment in defining the appropriate assumptions for
calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. Our judgments are based on our historical experience, terms of existing contracts,
observance of trends in the gaming industry and information available from other outside sources. There can be no assurance that actual results will not differ from our estimates. To provide an
understanding of the methodology we apply, our significant accounting policies and basis of presentation are discussed below, as well as where appropriate in this discussion and analysis and in the
notes to our consolidated financial statements.



Our Boarding Pass and Amigo Club player rewards programs (the "Programs") allow customers to redeem points earned from their gaming activity at all Station and
Fiesta properties for complimentary food, beverage, rooms, entertainment and merchandise. At the time redeemed, the retail value of complimentaries under the Programs is recorded as revenue with a
corresponding offsetting amount included in promotional allowances. The cost associated with complimentary food, beverage, rooms, entertainment and merchandise redeemed under the Programs is recorded
in casino costs and expenses. We also record a liability for the estimated cost of the outstanding points under the Programs that we believe will ultimately be redeemed.

51

---





We are self insured up to certain stop loss amounts for workers' compensation and general liability costs. We are also self insured for major medical claims.
Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not reported. In estimating these accruals, we
consider historical loss experience and make judgments about the expected levels of costs per claim. We believe our estimates of future liability are reasonable based upon our methodology; however,
changes in health care costs, accident frequency and severity and other factors could materially affect the estimate for these liabilities.



From time to time we enter into interest rate swaps in order to manage interest rate risks associated with our current and future borrowings. As such, we have
adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" and as amended by SFAS 138 and 149, to account for our interest rate swaps. The pronouncements require us
to recognize our interest rate swaps as either assets or liabilities in the consolidated balance sheets at fair value. The accounting for changes in fair value (i.e. gains or losses) of the
interest rate swap agreements depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. Additionally, the difference
between amounts received and paid under such agreements as well as any
costs or fees, is recorded as a reduction of, or an addition to, interest expense as incurred over the life of the swap.

For
derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of
other comprehensive income (loss) and the ineffective portion, if any, is recorded in the consolidated statement of operations.

Derivative
instruments that are designated as a fair value hedge and qualify for the "shortcut" method under SFAS 133 and as amended by SFAS 138 and 149, allows for an
assumption of no ineffectiveness. As such, there is no impact on the consolidated statement of operations from the changes in the fair value of the hedging instrument. Instead, the fair value of the
instrument is recorded as an asset or liability on our balance sheet with an offsetting adjustment to the carrying value of the related debt.



Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives
of the assets or the terms of the capitalized lease, whichever is less. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

We
evaluate our property and equipment and other long-lived assets for impairment in accordance with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". For assets to be disposed of, we recognize the asset to be sold at the lower of carrying value or fair market value less costs of disposal. Fair market value for assets
to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model. For assets to be held and used, we review fixed assets for impairment
whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If
the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value
compared to carrying value, with fair value typically based on a discounted cash flow model. Our consolidated financial statements reflect all adjustments required by SFAS 144 as of
December 31, 2007 and 2006.

52

---





In accordance with SFAS 142, "Goodwill and Other Intangible Assets", we test for impairment of goodwill and indefinite-lived intangible assets annually.
For the Predecessor Period, we utilized fair values established through a third-party business valuation to determine any possible impairment. For the years ending December 31, 2006 and 2005,
we utilized the Income Approach, which focuses on the income-producing capability of the respective property during the fourth quarter of each fiscal year. The underlying premise of this approach is
that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in
applying this approach include estimating the expected after-tax cash flows attributable to the respective property and converting these after-tax cash flows to present value
through discounting. The discounting process uses a rate of return, which accounts for both the time value of money and investment risk factors. The present value of the after-tax cash
flows is then totaled to arrive at an indication of the fair value of the assets. Under both methods, if the fair value of the assets exceeds the carrying value, then impairment is measured based on
the difference between the calculated fair value and the carrying value. For the Predecessor Period, we determined that an impairment of goodwill at Magic Star and Gold Rush totaling approximately
$8.0 million existed which we expensed accordingly. We have determined that there was no impairment during 2006 or 2005.



We are subject to income taxes in the U.S. and file a consolidated federal income tax return. We account for income taxes according to SFAS 109,
"Accounting for Income Taxes". SFAS 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carry-forwards and certain temporary
differences.

Effective
January 1, 2007, we adopted Financial Interpretation No. 48, "Accounting for Uncertainty in Income TaxesAn Interpretation of FASB Statement
No. 109" ("FIN 48"). FIN 48 contains a two-step approach to recognizing and measuring uncertain tax positions accounted for in accordance with SFAS 109. The first step is
to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including
resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely to be realized upon settlement.

Although
we believe that we have adequately reserved for our uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different. We
adjust these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is
different than the amounts
recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and
changes to reserves that are considered appropriate, as well as the related net interest.



In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS 141R, "Business Combinations". Under SFAS 141R, an acquiring entity
will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with limited exceptions, replacing SFAS 141's
cost-allocation process. SFAS 141R also includes a substantial number of new disclosure requirements. SFAS 141R is to be applied prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. We will adopt
SFAS 141R in the first quarter of 2009 and expect SFAS 141R will have an impact on our accounting for future business combinations once adopted; however, the effect is dependent upon
acquisitions that are made in the future.

53

---



In
December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51". SFAS 160
establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of
a noncontrolling interest as equity in the consolidated financial statements and separate from the parent's equity. In addition, the amount of net income attributable to the noncontrolling interest
should be included in consolidated net income on the face of the income statement. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Early adoption is prohibited. We are evaluating SFAS 160 and have not yet determined the impact the adoption will have on the consolidated financial statements.

In
February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement 115" that
provides companies with an option to report certain financial assets and liabilities in their entirety at fair value. This statement is effective for fiscal years beginning after November 15,
2007. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. A business entity would report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting date. We are evaluating our options provided for under this statement and their potential impact on the consolidated
financial statements when implemented. SFAS 159 is being reviewed in conjunction with the requirements of SFAS 157 discussed below.

In
September 2006, the FASB issued SFAS 157, "Fair Value Measurements". This statement defines fair value, establishes a framework for measuring fair value for both assets and
liabilities through a fair value hierarchy and expands disclosure requirements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. In February 2008, FASB issued FASB Staff Position ("FSP") FAS 157-2, which defers the effective date of SFAS 157 to fiscal
years beginning November 15, 2008, and interim periods within those fiscal years, for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in an
entity's financial statements on a recurring basis. We are evaluating SFAS 157 and have not yet determined the impact the adoption will have on the consolidated financial statements.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity
prices. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We attempt to limit our exposure to interest rate risk by managing the mix of our
long-term and short-term borrowings under the Credit Agreement. Borrowings under the Credit Agreement bear interest at a margin above the Alternate Base Rate or the Eurodollar
Rate (each as defined in the Credit Agreement) as selected by us. However, the amount of outstanding borrowings is expected to fluctuate and may be reduced from time to time. The borrowings under the
Credit Agreement mature in August 2012.

54

---



The
following table provides information about our long-term debt at December 31, 2007 (see also "Description of Certain Indebtedness and Capital Stock") (amounts in
thousands):

|                                                                 |       | Maturity
date     |  | Face
amount |           | Carrying
value |   | Estimated
fair value
|---------------------------------------------------------------- | ----- | ----------------- |  | ----------- | --------- | -------------- | - | --------------------
|CMBS Loans, weighted average interest rate of approximately 7.8% |       | November 2012 (a) |  | $           | 2,475,000 |                | $ | 2,475,000           
|Revolver, weighted-average interest rate of approximately 8.2%   |       | August 2012       |  |             | 650,000   |                |   | 293,100             
|Term Loan, weighted-average interest rate of approximately 8.0%  |       | August 2012       |  |             | 250,000   |                |   | 250,000             
|6% senior notes                                                  |       | April 2012        |  |             | 450,000   |                |   | 424,608             
|73/4% senior notes                                               |       | August 2016       |  |             | 400,000   |                |   | 391,455             
|61/2% senior subordinated notes                                  |       | February 2014     |  |             | 450,000   |                |   | 395,093             
|67/8% senior subordinated notes                                  |       | March 2016        |  |             | 700,000   |                |   | 607,214             
|65/8% senior subordinated notes                                  |       | March 2018        |  |             | 300,000   |                |   | 251,937             
|Other debt, weighted-average interest rate of approximately 8.0% |       | 2009-2026         |  |             | 83,100    |                |   | 82,742              
|Market value of interest rate swaps                              |       | November 2012     |  |             | 73,275    |                |   | 73,275              
|                                                                 |       |                   |  |             |           |                |   |                     
|                                                                 | Total |                   |  |             | $         | 5,831,375      |   | $                   
|                                                                 |       |                   |  |             |           |                |   |                     

---

We
are also exposed to market risk in the form of fluctuations in interest rates and their potential impact upon our debt. This market risk is managed by utilizing derivative financial
instruments in accordance with established policies and procedures. We evaluate our exposure to market risk by monitoring interest rates in the marketplace, and do not utilize derivative financial
instruments for trading purposes. Our derivative financial instruments consist exclusively of interest rate swap agreements. Interest differentials resulting from these agreements are recorded on an
accrual basis as an adjustment to interest expense. Interest rate swaps related to debt are matched with specific debt obligations.

The
following table provides information about our financial instruments at December 31, 2007 that are sensitive to changes in interest rates (amounts in thousands):

|                                            |                         | During the year ending December 31, |  
|------------------------------------------- | ----------------------- | ----------------------------------- | -
|
|Long-term debt (including current portion): |                         |                                     |  
|                                            | Fixed-rate              |                                     | $
|                                            | Average interest rate   |                                     |  
|                                            | Variable-rate           |                                     | $
|                                            | Average interest rate   |                                     |  
|Interest rate swaps:                        |                         |                                     |  
|                                            | Notional amount         |                                     | $
|                                            | Average payable rate    |                                     |  
|                                            | Average receivable rate |                                     |  

55

---





ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                          |  | Page
|--------------------------------------------------------- |  | ----
|Reports of Independent Registered Public Accounting Firm  |  | 57  
|Consolidated Balance Sheets                               |  | 59  
|Consolidated Statements of Operations                     |  | 60  
|Consolidated Statements of Stockholders' Equity (Deficit) |  | 61  
|Consolidated Statements of Cash Flows                     |  | 62  
|Notes to Consolidated Financial Statements                |  | 64  

56

---





Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Station Casinos, Inc.:

We
have audited the accompanying consolidated balance sheets of Station Casinos, Inc. and its subsidiaries (the "Company") as of December 31, 2007 (Successor) and 2006 (Predecessor), and
the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the period from November 8, 2007 through December 31, 2007, (Successor), the period
from January 1, 2007 through November 7, 2007 (Predecessor) and for each of the two years in the period ended December 31, 2006 (Predecessor). These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2007 (Successor) and 2006
(Predecessor), and the consolidated results of its operations and its cash flows for the period from November 8, 2007 through December 31, 2007, (Successor), the period from
January 1, 2007 through November 7, 2007 (Predecessor) and for each of the two years in the period ended December 31, 2006 (Predecessor), in conformity with U.S. generally
accepted accounting principles.

As
discussed in Notes 14 and 16, in 2006 the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment, and Statement of Financial Accounting Standards
No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of
December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated
February 28, 2008 expressed an unqualified opinion thereon.



Las
Vegas, Nevada
February 28, 2008

57

---



Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Station Casinos, Inc.:

We
have audited Station Casinos, Inc. and its subsidiaries' (the "Company") internal control over financial reporting as of December 31, 2007 based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). The Company's management is responsible for maintaining
effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management's Report on
Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007 based on the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial position of the Company at December 31, 2007
(Successor) and 2006 (Predecessor), and the consolidated results of its operations and its cash flows for the period from November 8, 2007 through December 31, 2007, (Successor), the
period from January 1, 2007 through November 7, 2007 (Predecessor) and for each of the two years in the period ended
December 31, 2006 (Predecessor) of the Company and our report dated February 28, 2008 expressed an unqualified opinion thereon.



Las
Vegas, Nevada
February 28, 2008

58

---





STATION CASINOS, INC.        CONSOLIDATED BALANCE SHEETS        (amounts in thousands, except share data)

|                                               |                                                | Successor                                                                                         |                                                      | Predecessor |    
|---------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------------------------------------------- | ---------------------------------------------------- | ----------- | ---
|
|ASSETS                                         |                                                |                                                                                                   |                                                      |             |    
|Current assets:                                |                                                |                                                                                                   |                                                      |             |    
|                                               | Cash and cash equivalents                      |                                                                                                   | $                                                    | 96,392      |    
|                                               | Restricted cash                                |                                                                                                   |                                                      | 966         |    
|                                               | Receivables, net                               |                                                                                                   |                                                      | 48,680      |    
|                                               | Inventories                                    |                                                                                                   |                                                      | 12,496      |    
|                                               | Prepaid gaming tax                             |                                                                                                   |                                                      | 21,541      |    
|                                               | Prepaid expenses                               |                                                                                                   |                                                      | 14,472      |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total current assets                                 |             |    
|Property and equipment, net                    |                                                |                                                                                                   | 3,563,497                                            |             |    
|Goodwill                                       |                                                |                                                                                                   | 2,964,938                                            |             |    
|Intangible assets, net                         |                                                |                                                                                                   | 1,002,617                                            |             |    
|Land held for development                      |                                                |                                                                                                   | 516,186                                              |             |    
|Investments in joint ventures                  |                                                |                                                                                                   | 391,953                                              |             |    
|Native American development costs              |                                                |                                                                                                   | 200,667                                              |             |    
|Other assets, net                              |                                                |                                                                                                   | 154,261                                              |             |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total assets                                         |             | $  
|                                               |                                                |                                                                                                   |                                                      |             |    
|LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |                                                |                                                                                                   |                                                      |             |    
|Current liabilities:                           |                                                |                                                                                                   |                                                      |             |    
|                                               | Current portion of long-term debt              |                                                                                                   | $                                                    | 2,610       |    
|                                               | Accounts payable                               |                                                                                                   |                                                      | 16,954      |    
|                                               | Construction contracts payable                 |                                                                                                   |                                                      | 23,151      |    
|                                               | Accrued expenses and other current liabilities |                                                                                                   |                                                      | 178,018     |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total current liabilities                            |             |    
|Long-term debt, less current portion           |                                                |                                                                                                   | 5,241,814                                            |             |    
|Deferred income tax, net                       |                                                |                                                                                                   | 789,644                                              |             |    
|Due to unconsolidated affiliate                |                                                |                                                                                                   | 100,000                                              |             |    
|Other long-term liabilities, net               |                                                |                                                                                                   | 65,413                                               |             |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total liabilities                                    |             |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|Commitments and contingencies                  |                                                |                                                                                                   |                                                      |             |    
|Stockholders' equity (deficit):                |                                                |                                                                                                   |                                                      |             |    
|                                               | Successor:                                     |                                                                                                   |                                                      |             |    
|                                               |                                                | Common stock, par value $0.01; authorized 10,000 shares; 41.7 shares issued                       |                                                      |             |   
|                                               |                                                | Non-voting common stock, par value $0.01; authorized 100,000,000 shares; 41,674,838 shares issued |                                                      |             | 417
|                                               | Predecessor:                                   |                                                                                                   |                                                      |             |    
|                                               |                                                | Common stock, par value $0.01; authorized 135,000,000 shares; 80,507,427 shares issued            |                                                      |             |   
|                                               |                                                | Treasury stock, 23,245,751 shares, at cost                                                        |                                                      |             |   
|                                               | Additional paid-in capital                     |                                                                                                   |                                                      | 2,948,265   |    
|                                               | Accumulated other comprehensive loss           |                                                                                                   |                                                      | (59,666     | )  
|                                               | Retained (deficit) earnings                    |                                                                                                   |                                                      | (317,954    | )  
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total stockholders' equity (deficit)                 |             |    
|                                               |                                                |                                                                                                   |                                                      |             |    
|                                               |                                                |                                                                                                   | Total liabilities and stockholders' equity (deficit) |             | $  
|                                               |                                                |                                                                                                   |                                                      |             |    

The accompanying notes are an integral part of these consolidated financial statements.

59

---





STATION CASINOS, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (amounts in thousands)

|                                                         |                                                | Successor      |          | Predecessor |        
|-------------------------------------------------------- | ---------------------------------------------- | -------------- | -------- | ----------- | -------
|
|Operating revenues:                                      |                                                |                |          |             |        
|                                                         | Casino                                         |                | $        | 151,867     |        
|                                                         | Food and beverage                              |                |          | 37,885      |        
|                                                         | Room                                           |                |          | 14,926      |        
|                                                         | Other                                          |                |          | 12,543      |        
|                                                         | Management fees                                |                |          | 9,708       |        
|                                                         |                                                |                |          |             |        
|                                                         |                                                | Gross revenues |          |             | 226,929
|                                                         | Promotional allowances                         |                |          | (17,218     | )      
|                                                         |                                                |                |          |             |        
|                                                         |                                                | Net revenues   |          |             | 209,711
|                                                         |                                                |                |          |             |        
|Operating costs and expenses:                            |                                                |                |          |             |        
|                                                         | Casino                                         |                |          | 60,946      |        
|                                                         | Food and beverage                              |                |          | 27,236      |        
|                                                         | Room                                           |                |          | 5,548       |        
|                                                         | Other                                          |                |          | 4,363       |        
|                                                         | Selling, general and administrative            |                |          | 37,567      |        
|                                                         | Corporate                                      |                |          | 292,955     |        
|                                                         | Development                                    |                |          | 1,294       |        
|                                                         | Depreciation and amortization                  |                |          | 32,292      |        
|                                                         | Loss (gain) on asset disposals, net            |                |          | 754         |        
|                                                         | Preopening                                     |                |          | 251         |        
|                                                         | Merger transaction costs                       |                |          |            |        
|                                                         | Impairment loss                                |                |          |            |        
|                                                         | Management agreement/lease terminations        |                |          |            |        
|                                                         |                                                |                |          |             |        
|                                                         |                                                |                | 463,206  |             |        
|                                                         |                                                |                |          |             |        
|Operating (loss) income                                  |                                                |                | (253,495 | )           |        
|                                                         | Earnings from joint ventures                   |                |          | 5,875       |        
|                                                         |                                                |                |          |             |        
|Operating (loss) income and earnings from joint ventures |                                                |                | (247,620 | )           |        
|                                                         |                                                |                |          |             |        
|Other expense:                                           |                                                |                |          |             |        
|                                                         | Interest expense, net                          |                |          | (61,276     | )      
|                                                         | Interest and other expense from joint ventures |                |          | (4,743      | )      
|                                                         | Loss on early retirement of debt               |                |          | (20,311     | )      
|                                                         |                                                |                |          |             |        
|                                                         |                                                |                | (86,330  | )           |        
|                                                         |                                                |                |          |             |        
|(Loss) income before income taxes                        |                                                |                | (333,950 | )           |        
|                                                         | Income tax benefit (provision)                 |                |          | 15,996      |        
|                                                         |                                                |                |          |             |        
|Net (loss) income                                        |                                                | $              | (317,954 | )           | $      
|                                                         |                                                |                |          |             |        

The accompanying notes are an integral part of these consolidated financial statements.

60

---





STATION CASINOS, INC.        CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)        (amounts in thousands)

|                                                                                             |                             | Common
stock |     | Non-voting
common
stock |   | Treasury
stock |   | Additional
paid-in
capital |            | Deferred
compensation-
restricted
stock |   | Accumulated
other
comprehensive
income (loss) |   | Retained
earnings
(deficit) |         | Total
stockholders'
(deficit) equity |  
|-------------------------------------------------------------------------------------------- | --------------------------- | ------------ | --- | ----------------------- | - | -------------- | - | -------------------------- | ---------- | --------------------------------------- | - | --------------------------------------------- | - | --------------------------- | ------- | ------------------------------------ | -
|Predecessor:                                                                                 |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, December 31, 2004                                                                  |                             | $            | 561 |                         | $ |               |   | $                          | (137,714   | )                                       | $ | 567,939                                       |   | $                           | (77,598 | )                                    | $
|Exercise of stock options                                                                    |                             |              | 16  |                         |   |               |   |                            |           |                                         |   | 50,744                                        |   |                             |        |                                      |  
|Issuance of restricted stock, net                                                            |                             |              | 1   |                         |   |               |   |                            |           |                                         |   | 8,669                                         |   |                             | (8,670  | )                                    |  
|Amortization of deferred compensation                                                        |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             | 12,669  |                                      |  
|Purchase of treasury stock, at cost (0.3 million shares)                                     |                             |              |    |                         |   |               |   |                            | (21,414    | )                                       |   |                                              |   |                             |        |                                      |  
|Interest rate swap market value adjustment,
net of tax                                       |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Dividends paid                                                                               |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Net income                                                                                   |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, December 31, 2005                                                                  |                             |              | 578 |                         |   |               |   |                            | (159,128   | )                                       |   | 627,352                                       |   |                             | (73,599 | )                                    |  
|SFAS 123R adoption reclass                                                                   |                             |              |    |                         |   |               |   |                            |           |                                         |   | (73,599                                       | ) |                             | 73,599  |                                      |  
|Exercise of stock options                                                                    |                             |              | 1   |                         |   |               |   |                            |           |                                         |   | 4,706                                         |   |                             |        |                                      |  
|Issuance of restricted stock, net                                                            |                             |              | 14  |                         |   |               |   |                            |           |                                         |   | (14                                           | ) |                             |        |                                      |  
|Share-based compensation expense                                                             |                             |              |    |                         |   |               |   |                            |           |                                         |   | 24,294                                        |   |                             |        |                                      |  
|Purchase of treasury stock, at cost (12.7 million shares)                                    |                             |              |    |                         |   |               |   |                            | (880,676   | )                                       |   |                                              |   |                             |        |                                      |  
|Interest rate swap market value adjustment,
net of tax                                       |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Adoption of SFAS 158, net of tax                                                             |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Dividends paid                                                                               |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Net income                                                                                   |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, December 31, 2006                                                                  |                             |              | 593 |                         |   |               |   |                            | (1,039,804 | )                                       |   | 582,739                                       |   |                             |        |                                      |  
|Adoption of FIN 48                                                                           |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Exercise of stock options                                                                    |                             |              |    |                         |   |               |   |                            |           |                                         |   | 2,366                                         |   |                             |        |                                      |  
|Share-based compensation expense                                                             |                             |              |    |                         |   |               |   |                            |           |                                         |   | 143,714                                       |   |                             |        |                                      |  
|Purchase of treasury stock, at                                                               |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|                                                                                             | cost (1.3 million shares)   |              |     |                        |   |                |  |                            |            | (110,164                                | ) |                                               |  |                             |         |                                     |  
|Interest rate swap market value adjustment,
net of tax                                       |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Unrealized gain on available-for-                                                            |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|                                                                                             | sale securities, net of tax |              |     |                        |   |                |  |                            |            |                                        |   |                                               |  |                             |         |                                     |  
|Amortization of unrecognized pension and postretirement benefit plan liabilities, net of tax |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Dividends paid                                                                               |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Net loss                                                                                     |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, November 7, 2007                                                                   |                             | $            | 593 |                         | $ |               |   | $                          | (1,149,968 | )                                       | $ | 728,819                                       |   | $                           |        |                                      | $
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Successor:                                                                                   |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, November 8, 2007                                                                   |                             | $            |    |                         | $ | 97             |   | $                          |           |                                         | $ | (68,993                                       | ) | $                           |        |                                      | $
|Cash investment by FCP                                                                       |                             |              |    |                         |   | 317            |   |                            |           |                                         |   | 2,703,984                                     |   |                             |        |                                      |  
|Cash investment by management                                                                |                             |              |    |                         |   | 3              |   |                            |           |                                         |   | 1,841                                         |   |                             |        |                                      |  
|Share-based compensation expense                                                             |                             |              |    |                         |   |               |   |                            |           |                                         |   | 288,130                                       |   |                             |        |                                      |  
|Excess tax benefit from exercise of stock options                                            |                             |              |    |                         |   |               |   |                            |           |                                         |   | 23,303                                        |   |                             |        |                                      |  
|Interest rate swap market value adjustment,
net of tax                                       |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Unrealized gain on available-for-sale securities, net of tax                                 |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Amortization of unrecognized pension and postretirement benefit plan liabilities, net of tax |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|Net loss                                                                                     |                             |              |    |                         |   |               |   |                            |           |                                         |   |                                              |   |                             |        |                                      |  
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  
|Balances, December 31, 2007                                                                  |                             | $            |    |                         | $ | 417            |   | $                          |           |                                         | $ | 2,948,265                                     |   | $                           |        |                                      | $
|                                                                                             |                             |              |     |                         |   |                |   |                            |            |                                         |   |                                               |   |                             |         |                                      |  

The accompanying notes are an integral part of these consolidated financial statements.

61

---





STATION CASINOS, INC.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (amounts in thousands)

|                                                                                         |                                                                                                | Successor                                      |                                           | Predecessor |        
|---------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ---------------------------------------------- | ----------------------------------------- | ----------- | -------
|
|Cash flows from operating activities:                                                    |                                                                                                |                                                |                                           |             |        
|                                                                                         | Net (loss) income                                                                              |                                                | $                                         | (317,954    | )      
|                                                                                         |                                                                                                |                                                |                                           |             |        
|Adjustments to reconcile net (loss) income to net cash provided by operating activities: |                                                                                                |                                                |                                           |             |        
|                                                                                         | Depreciation and amortization                                                                  |                                                |                                           | 32,292      |        
|                                                                                         | Tax benefit from exercise of stock options                                                     |                                                |                                           |            |        
|                                                                                         | Excess tax benefit from exercise of stock options                                              |                                                |                                           | (23,303     | )      
|                                                                                         | Share-based compensation                                                                       |                                                |                                           | 288,130     |        
|                                                                                         | Earnings from joint ventures                                                                   |                                                |                                           | (1,132      | )      
|                                                                                         | Distributions of earnings from joint ventures                                                  |                                                |                                           |            |        
|                                                                                         | Amortization of debt discount and issuance costs                                               |                                                |                                           | 5,907       |        
|                                                                                         | Loss on early retirement of debt                                                               |                                                |                                           | 20,311      |        
|                                                                                         | Impairment loss                                                                                |                                                |                                           |            |        
|                                                                                         | Changes in assets and liabilities:                                                             |                                                |                                           |             |        
|                                                                                         |                                                                                                | Receivables, net                               |                                           |             | 2,786  
|                                                                                         |                                                                                                | Inventories and prepaid expenses               |                                           |             | 1,439  
|                                                                                         |                                                                                                | Deferred income tax                            |                                           |             | 7,392  
|                                                                                         |                                                                                                | Accounts payable                               |                                           |             | (10,422
|                                                                                         |                                                                                                | Accrued expenses and other current liabilities |                                           |             | 18,454 
|                                                                                         | Other, net                                                                                     |                                                |                                           | (5,211      | )      
|                                                                                         |                                                                                                |                                                |                                           |             |        
|                                                                                         |                                                                                                |                                                | Total adjustments                         |             |        
|                                                                                         |                                                                                                |                                                |                                           |             |        
|                                                                                         |                                                                                                |                                                | Net cash provided by operating activities |             |        
|                                                                                         |                                                                                                |                                                |                                           |             |        
|Cash flows from investing activities:                                                    |                                                                                                |                                                |                                           |             |        
|                                                                                         | Acquisition of Station Casinos, Inc. including direct Merger costs                             |                                                |                                           | (4,217,469  | )      
|                                                                                         | Capital expenditures                                                                           |                                                |                                           | (55,510     | )      
|                                                                                         | Proceeds from sale of land, property and equipment                                             |                                                |                                           | 105         |        
|                                                                                         | Investments in joint ventures, net                                                             |                                                |                                           | (27,983     | )      
|                                                                                         | Distributions in excess of earnings from joint ventures                                        |                                                |                                           | 488         |        
|                                                                                         | Construction contracts payable                                                                 |                                                |                                           | (19,619     | )      
|                                                                                         | Native American development costs                                                              |                                                |                                           | (2,454      | )      
|                                                                                         | Other, net                                                                                     |                                                |                                           | (1,523      | )      
|                                                                                         |                                                                                                |                                                |                                           |             |        
|                                                                                         |                                                                                                |                                                | Net cash used in investing activities     |             |        
|                                                                                         |                                                                                                |                                                |                                           |             |        
|Cash flows from financing activities:                                                    |                                                                                                |                                                |                                           |             |        
|                                                                                         | Cash equity contributions                                                                      |                                                |                                           | 2,706,145   |        
|                                                                                         | Proceeds from issuance of CMBS loans                                                           |                                                |                                           | 2,475,000   |        
|                                                                                         | Borrowings under the Revolver with maturity dates less than three months, net                  |                                                |                                           | 293,100     |        
|                                                                                         | Borrowings under the Term Loan with maturity dates greater than three months                   |                                                |                                           | 250,000     |        
|                                                                                         | (Payments) borrowings under Revolving Facility with maturity dates less than three months, net |                                                |                                           | (1,383,300  | )      
|                                                                                         | Proceeds from issuance of related party promissory note                                        |                                                |                                           |            |        
|                                                                                         | Proceeds from financing transaction                                                            |                                                |                                           |            |        
|                                                                                         | Proceeds from the issuance of senior and senior subordinated notes, net                        |                                                |                                           |            |        
|                                                                                         | Redemption of senior and senior subordinated notes                                             |                                                |                                           |            |        
|                                                                                         | Purchase of treasury stock                                                                     |                                                |                                           |            |        
|                                                                                         | Payment of dividends                                                                           |                                                |                                           |            |        
|                                                                                         | Debt issuance costs                                                                            |                                                |                                           | (60,086     | )      
|                                                                                         | Exercise of stock options                                                                      |                                                |                                           |            |        
|                                                                                         | Excess tax benefit from exercise of stock options                                              |                                                |                                           | 23,303      |        
|                                                                                         | Other, net                                                                                     |                                                |                                           | (1,229      | )      
|                                                                                         |                                                                                                |                                                |                                           |             |        
|                                                                                         |                                                                                                |                                                | Net cash provided by financing activities |             |        
|                                                                                         |                                                                                                |                                                |                                           |             |        
|Cash and cash equivalents:                                                               |                                                                                                |                                                |                                           |             |        
|                                                                                         | (Decrease) increase in cash and cash equivalents                                               |                                                |                                           | (2,343      | )      
|                                                                                         | Balance, beginning of period                                                                   |                                                |                                           | 98,735      |        
|                                                                                         |                                                                                                |                                                |                                           |             |        
|                                                                                         | Balance, end of period                                                                         |                                                | $                                         | 96,392      |        
|                                                                                         |                                                                                                |                                                |                                           |             |        

62

---



STATION CASINOS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(amounts in thousands)

|                                           |                                                                                 | Successor |   | Predecessor
|------------------------------------------ | ------------------------------------------------------------------------------- | --------- | - | -----------
|
|Supplemental cash flow disclosures:        |                                                                                 |           |   |            
|                                           | Cash paid for interest, net of $3,083, $16,309, $29,638 and $22,287 capitalized |           | $ | 21,446     
|                                           | Cash (received) paid for income taxes, net                                      |           | $ |           
|Supplemental disclosure of non-cash items: |                                                                                 |           |   |            
|                                           | Rollover equity                                                                 |           | $ | 1,044,590  
|                                           | Assets assumed in Merger                                                        |           | $ | 7,759      
|                                           | Liabilities assumed in Merger                                                   |           | $ | (3,542     
|                                           | Capital expenditures financed by debt                                           |           | $ |           
|                                           | Land contributed to joint ventures, net                                         |           | $ |           
|                                           | Investment in MPM                                                               |           | $ |           

The accompanying notes are an integral part of these consolidated financial statements.

63

---





STATION CASINOS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies and Basis of Presentation



Station Casinos, Inc. (the "Company", "Station", "we", "our", "ours" or "us"), a Nevada corporation, is a gaming and entertainment company that currently
owns and operates nine major hotel/casino properties (one of which is 50% owned) under the Station and Fiesta brand names and eight smaller casino properties (three of which are 50% owned), in the Las
Vegas metropolitan area, as well as manages a casino for a Native American tribe. The accompanying consolidated financial statements include the accounts of Station and its wholly owned subsidiaries
and MPM Enterprises, LLC (which is 50% owned by Station and required to be consolidated). Investments in all other 50% or less owned affiliated companies are accounted for under the equity
method. All significant intercompany accounts and transactions have been eliminated.

On
November 7, 2007, the Company completed its merger (the "Merger") with FCP Acquisition Sub, a Nevada corporation ("Merger Sub"), pursuant to which Merger Sub merged with and
into the Company with the Company continuing as the surviving corporation. The Merger was completed pursuant to the Agreement and Plan of Merger (the "Merger Agreement"), dated as of
February 23, 2007 and amended as of May 4, 2007, among the Company, Fertitta Colony Partners LLC, a Nevada limited liability company ("FCP"), and Merger Sub, as amended.

As
a result of the Merger, 24.1% of the issued and outstanding shares of non-voting common stock of the Company are owned by Fertitta Partners LLC, a Nevada limited
liability company ("Fertitta Partners"), which is owned by affiliates of Frank J. Fertitta III, Chairman and Chief Executive Officer of Station, affiliates of Lorenzo J. Fertitta, Vice Chairman and
President of Station, affiliates of Blake L. Sartini and Delise F. Sartini, and certain officers and other members of management of the Company. The remaining 75.9% of the issued and outstanding
shares of non-voting common stock of the Company are owned by FCP Holding, Inc., a Nevada corporation ("FCP HoldCo") and a wholly-owned subsidiary of FCP. FCP is owned by an
affiliate of Colony Capital, LLC ("Colony") and affiliates of Frank J. Fertitta III and Lorenzo J. Fertitta. Substantially simultaneously with the consummation of the Merger,
shares of voting common stock of Station were issued for nominal consideration to FCP VoteCo LLC, a Nevada limited liability company ("FCP VoteCo"), which is owned equally by Frank J. Fertitta
III, Lorenzo J. Fertitta and Thomas J. Barrack, Jr., Chairman and Chief Executive Officer of Colony.

At
the effective time of the Merger, each outstanding share of our common stock, including any rights associated therewith (other than shares of our common stock owned by FCP, Merger
Sub, FCP HoldCo, Fertitta Partners or any wholly-owned subsidiary of the Company or shares of our common stock held in treasury by us) was cancelled and converted into the right to receive $90 in
cash, without interest. Following the consummation of the Merger, the Company is privately owned through FCP HoldCo, Fertitta Partners and FCP VoteCo. Station common stock ceased trading on the New
York Stock Exchange at market close on November 7, 2007, and will no longer be listed on any exchange or quotation system. The Company's voting common stock is registered pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended.

The
Merger resulted in a greater than 50% control of the Company and was a "business combination" for accounting purposes, requiring that FCP, Fertitta Partners, FCP VoteCo and their
respective owners (the "Investors"), pursuant to Statement of Financial Accounting Standards ("SFAS") No. 141, "Business Combinations", record the acquired assets and assumed liabilities at
their fair market values as of the acquisition date, resulting in a new basis of accounting. As a result of the Securities and Exchange Commission's rules and guidance regarding
"push-down" accounting, the Investors' new accounting basis

64

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

in
our assets and liabilities is reflected in our consolidated financial statements to the extent that the Investors paid cash for the non-voting stock of the Company as of the
consummation of the Merger. Management has deemed it impracticable to determine the individual investors' carryover basis in the shares and has accordingly computed the carryover basis based on the
pro rata portion of book value of Station prior to the Merger. The accompanying consolidated statements of operations, stockholders' equity (deficit) and cash flows for 2007 are presented for two
periods: January 1, 2007 through November 7, 2007 (the "Predecessor Period") and November 8, 2007 through December 31, 2007 (the "Successor Period"). The Predecessor Period
reflects the historical accounting basis in our assets and liabilities, while the Successor Period reflects the push down of the Investors' new basis to our consolidated financial statements.



The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make
estimates and assumptions for items such as slot club program liability, self-insurance reserves, bad debt reserves, estimated useful lives assigned to our assets, asset impairment,
purchase price allocations made in connection with acquisitions and the calculation of the income tax liabilities, that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates.



Cash and cash equivalents include cash on hand at our properties, as well as investments purchased with an original maturity of 90 days or less.



Restricted cash relates primarily to cash reserves as a requirement of our debt agreements.



Inventories are stated at the lower of cost or market; cost being determined on a weighted-average basis.



The carrying value of our cash and cash equivalents, restricted cash, receivables and accounts payable approximates fair value primarily because of the short
maturities of these instruments. The estimated fair value of our long-term debt is based on quoted market prices on or about December 31, 2007, for our debt securities that are
publicly traded. For debt with short-term maturities, the fair value approximates the carrying amount.



Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives
of the assets or the terms of the capitalized lease, whichever is less. Costs of major improvements are capitalized, while costs of normal repairs and maintenance are charged to expense as incurred.

65

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

We
evaluate our property and equipment and other long-lived assets for impairment in accordance with SFAS 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets". For assets to be disposed of, we recognize the asset to be sold at the lower of carrying value or fair market value less costs of disposal. Fair market value for assets
to be disposed of is generally estimated based on comparable asset sales, solicited offers or a discounted cash flow model. For assets to be held and used, we review fixed assets for impairment
whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If
the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value
compared to carrying value, with fair value typically based on a discounted cash flow model. Our consolidated financial statements reflect all adjustments required by SFAS 144 as of
December 31, 2007 and 2006.



We capitalize interest costs associated with debt incurred in connection with major construction projects. Interest capitalization ceases once the project is
substantially complete or no longer undergoing construction activities to prepare it for its intended use. When no debt is specifically identified as being incurred in connection with such
construction projects, we capitalize interest on amounts expended on the project at our weighted average cost of borrowings. Interest capitalized was approximately $3.1 million,
$16.3 million, $29.6 million and $22.3 million for the Successor Period, the Predecessor Period and the years ended December 31, 2006 and 2005, respectively.



In accordance with SFAS 142, "Goodwill and Other Intangible Assets", we test for impairment of goodwill and indefinite-lived intangible assets annually.
For the Predecessor Period, we utilized fair values established through a third-party business valuation to determine any possible impairment. For the years ending December 31, 2006 and 2005,
we utilized the Income Approach, which focuses on the income-producing capability of the respective property during the fourth quarter of each fiscal year. The underlying premise of this approach is
that the value of an asset can be measured by the present worth of the net economic benefit (cash receipts less cash outlays) to be received over the life of the subject asset. The steps followed in
applying this approach include estimating the expected after-tax cash flows attributable to the respective property and converting these after-tax cash flows to present value
through discounting. The discounting process uses a rate of return, which accounts for both the time value of money and investment risk factors. The present value of the after-tax cash
flows is then totaled to arrive at an indication of the fair value of the assets. Under both methods, if the fair value of the assets exceeds the carrying value, then impairment is measured based on
the difference between the calculated fair value and the carrying value. For the Predecessor Period, we determined that an impairment of goodwill at Magic Star and Gold Rush totaling approximately
$8.0 million existed which we expensed accordingly. We determined that there was no impairment during 2006 or 2005.



We incur certain costs associated with development and management agreements entered into with Native American Tribes (the "Tribe"). In accordance with
SFAS 67, "Accounting for Costs and Initial Rental Operations of Real Estate Projects", costs for the acquisition and related development of the land

66

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

and
the casino facilities are capitalized as long-term assets until such time as the assets are transferred to the Tribe at which time a long term receivable is recognized.

In
accordance with SFAS 34, "Capitalization of Interest Costs", we capitalize interest to the project once a "Notice of Intent" (or the equivalent) to transfer the land into
trust, signifying that activities are in progress to prepare the asset for its intended use, has been issued by the United States Department of the Interior ("DOI").

We
earn a return on the costs incurred for the acquisition and development of the projects based upon the costs incurred over the development period of the project. In accordance with
SFAS 66, "Accounting for Sales of Real Estate", we recognize the return when the facility is complete and collectability of the receivable is assured. Due to the uncertainty surrounding the
estimated cost to complete and the collectability of the stated return, we defer the return until the gaming facility is complete and transferred to the Tribe and the resulting receivable has been
repaid. Repayment of the resulting advances would be from a refinancing by the Tribe, from the cash flow from the gaming facility or both.

On
a quarterly basis, we evaluate the Native American Development Costs for impairment in accordance with SFAS 144. We review the Native American Development Costs for impairment
whenever indicators of impairment exist. If an indicator of impairment exists, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying amount of the asset.
If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured based on fair value
compared to carrying amount, with fair value typically based on a discounted cash flow model. The consolidated financial statements reflect all adjustments required by SFAS 144 as of
December 31, 2007 and 2006.



Debt issuance costs incurred in connection with the issuance of long-term debt are capitalized and amortized to interest expense over the expected
terms of the related debt agreements and are included in other assets, net on our consolidated balance sheets.



We expense advertising costs the first time the advertising takes place. Advertising expense, which is generally included in selling, general and administrative
expenses on the accompanying consolidated statement of operations was approximately $3.6 million, $17.7 million, $19.1 million and $13.5 million for the Successor Period,
the Predecessor Period and the years ended December 31, 2006 and 2005, respectively.



Preopening expenses have been expensed as incurred. The construction phase of a project typically covers a period of 12 to 24 months. The majority of
preopening costs are incurred in the three months prior to opening. We incurred preopening expenses of approximately $0.3 million and $1.9 million during the Successor Period and the
Predecessor Period, respectively, primarily related to projects under development. During the years ended December 31, 2006 and 2005, we incurred preopening expenses of approximately
$29.5 million and $6.6 million, respectively, primarily related to the development of Red Rock which opened on April 18, 2006.

67

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)



From time to time we enter into interest rate swaps in order to manage interest rate risks associated with our current and future borrowings. As such, we have
adopted SFAS 133, "Accounting for Derivative Instruments and Hedging Activities", and as amended by SFAS 138 and 149, to account for interest rate swaps. The pronouncements require us to
recognize the interest rate swaps as either assets or liabilities in the consolidated balance sheets at fair value. The accounting for changes in fair value (i.e. gains or losses) of the
interest rate swap agreements depends on whether it has been designated and qualifies as part of a hedging relationship and further, on the type of hedging relationship. Additionally, the difference
between amounts received and paid under such agreements, as well as any costs or fees, is recorded as a reduction of, or an addition to, interest expense as incurred over the life of the swap.

For
derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is reported as a component of
other comprehensive income (loss) and the ineffective portion, if any, is recorded in the consolidated statement of operations.

Derivative
instruments that are designated as fair value hedges and qualify for the "shortcut" method under SFAS 133, and as amended by SFAS 138 and 149, allow for an
assumption of no ineffectiveness. As such, there is no impact on the consolidated statement of operations from the changes in the fair value of the hedging instrument. Instead, the fair value of the
instrument is recorded as an asset or liability on our balance sheet with an offsetting adjustment to the carrying value of the related debt (see Note 10).



We recognize as casino revenues the net win from gaming activities, which is the difference between gaming wins and losses. All other revenues are recognized as
the service is provided. Additionally, our Boarding Pass and Amigo Club player rewards programs (the "Programs") allow customers to redeem points earned from their gaming activity at all Station and
Fiesta properties for complimentary food, beverage, rooms, entertainment and merchandise. At the time redeemed, the retail value of complimentaries under the Programs is recorded as revenue with a
corresponding offsetting amount included in promotional allowances. The cost associated with complimentary food, beverage, rooms, entertainment and merchandise redeemed under the Programs is recorded
in casino costs and expenses. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses and consist of the following (amounts in thousands):

Successor

PredecessorPeriod from
November 8, 2007
Through
December 31, 2007

Period from
January 1, 2007
Through
November 7, 2007

Year Ended
December 31,
2006

Year Ended
December 31,
2005Food and beverage

$
15,524

$
82,591

$
82,270

$
62,424Room


1,126


5,588


5,794


3,786Other


816


3,948


3,832


3,414Total

$
17,466

$
92,127

$
91,896

$
69,624


We
also record a liability for the estimated cost of the outstanding points under the Programs that we believe will ultimately be redeemed.

68

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)



We have entered into various related party transactions, which consist primarily of lease payments related to ground leases at Boulder Station and Texas Station
and the purchase of certain assets. The expenses related to these related party ground lease transactions were approximately $0.9 million, $5.3 million, $6.2 million and
$5.9 million for the Successor Period, the Predecessor Period and the years ended December 31, 2006 and 2005, respectively. In February 2005, we purchased approximately 96 acres of
gaming-entitled property in Reno, Nevada for $15.1 million from Blake L. Sartini, the brother-in-law of Frank J. Fertitta III, Chief Executive Officer, and Lorenzo J.
Fertitta, President. Additionally, we have purchased tickets to events held by Zuffa, LLC which is the parent company of the Ultimate Fighting Championship and is owned by Frank J. Fertitta III
and Lorenzo J. Fertitta. For the Successor Period, the Predecessor Period and the year ended December 31, 2006, ticket purchases totaled approximately $0.1 million, $0.2 million
and $0.3 million, respectively. No tickets were purchased for the year ended December 31, 2005.



Effective January 1, 2006, we adopted SFAS 123R, "Share-Based Payment", utilizing the modified prospective application. Under the modified
prospective application, SFAS 123R applies to new awards and awards that were outstanding on December 31, 2005 that are subsequently modified, repurchased or cancelled. Under the
modified prospective application, compensation cost recognized in the year ended December 31, 2006 and subsequent periods includes compensation cost of all share-based payments granted prior
to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of SFAS 123 and compensation cost for
all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS 123R. Accordingly,
prior period amounts are not restated to reflect the impact of adopting SFAS 123R under the modified prospective application.

Prior
to adopting SFAS 123R, we accounted for share-based awards under APB Opinion 25, "Accounting for Stock Issued to Employees", which resulted in compensation expense recorded
only for restricted share awards and for modification of outstanding unvested options. Upon adoption of SFAS 123R, we began recognizing compensation expense related to stock option awards that
were previously disclosed as pro forma information regarding net income. Compensation expense related to restricted stock awards continued to be expensed as under APB Opinion 25, with the addition of
estimated forfeitures.



Equity Awards.Upon consummation of the Merger, FCP and Fertitta Partners issued Class B Units to an affiliate of
Frank J. Fertitta III, Lorenzo J. Fertitta and certain officers of the Company. Pursuant to SFAS 123R, the unearned share-based compensation related to the Class B Units is amortized to
compensation expense over the requisite service period (immediate to five years). The share-based expense for these awards was based on the estimated fair market value of the Class B Units at
the date of the Merger applied to the total number of Class B Units that were anticipated to fully vest and then amortized over the vesting period.

Also
upon consummation of the Merger, FCP and Fertitta Partners issued Class C Units to certain officers and management of the Company. Pursuant to SFAS 123R, the unearned
share-based

69

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

compensation
related to the Class C Units is amortized to compensation expense over the requisite service period (five years). The share-based expense for these awards was based on the estimated fair
market value of the Class C Units at the date of the Merger, applied to the total number of Class C Units that were anticipated to fully vest and then amortized over the vesting period.



As a result of the consummation of the Merger described above, all outstanding stock options and unvested restricted stock awards under the 2005 Plan and Prior
Plans vested and $124.9 million in previously unrecognized compensation expense was recognized during the Predecessor Period and is included in merger transaction costs on the consolidated
statement of operations.

Stock Options.The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing
model and expensed using the straight-line approach. Option valuation models require the input of highly subjective assumptions and changes in the assumptions used can materially affect
the fair value estimate. Expected volatility and dividends were based on implied and historical factors related to our common stock. The expected term represented the weighted-average time between
grant date and exercise date and the risk-free interest rate was based on U.S. Treasury rates appropriate for the expected term. We used historical data and projections to estimate
expected employee behaviors related to option exercises and forfeitures.
SFAS 123R requires that forfeitures be included as part of the grant date estimate. The effect of forfeitures related to previous SFAS 123 pro forma expense was not material.

We
receive a tax deduction for certain stock option exercises during the period the options are exercised, generally for the excess of the market price of the option exercised over the
exercise price of such options. In accordance with SFAS 123R, for the year ended December 31, 2006, we reported the tax benefit from the exercise of stock options as financing cash flows
rather than operating cash flows as reported prior to the adoption of SFAS 123R. For the year ended December 31, 2006, we reported $3.1 million of excess tax benefit.

Restricted Stock.The unearned share-based compensation related to restricted stock was amortized to compensation expense
over the period the restrictions lapse (generally five to ten years). The share-based expense for these awards was determined based on the market price of our stock at the date of grant applied to the
total number of shares that were anticipated to fully vest and then amortized over the vesting period. Upon adoption of SFAS 123R, we recognize compensation expense based on our expectation of
which restricted stock awards will vest over the requisite service period for such awards. Prior to implementing SFAS 123R, we recognized deferred compensation as a contra-equity account
representing the amount of unrecognized restricted stock expense that was reduced as the expense was recognized. Under the provisions of SFAS 123R, the previously recorded deferred compensation
was recorded against additional paid-in capital.

The
recognition of compensation expense related to the issuance of restricted stock has not changed with the adoption of SFAS 123R, except for the addition of the estimate of
forfeitures, and such compensation expense continues to be expensed in the statements of operations. During the year ended December 31, 2006, income before income tax and net income were
reduced by approximately $2.2 million and $1.4 million, respectively reflecting compensation expense related to stock option awards that were

70

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

previously
not recognized in the consolidated financial statements due to our prior application of APB Opinion 25.



SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", requires separate financial information be disclosed for all operating
segments of a business. We believe we meet the "economic similarity" criteria established by SFAS 131, and as a result, we aggregate all of our properties into one operating segment. All of our
properties offer the same products, cater to the same customer base, are all located in the greater Las Vegas, Nevada area, have the same regulatory and tax
structure, share the same marketing techniques and are all directed by a centralized management structure.



In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS 141R, "Business Combinations". Under SFAS 141R, an acquiring entity
will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value, with limited exceptions, replacing SFAS 141's
cost-allocation process. SFAS 141R also includes a substantial number of new disclosure requirements. SFAS 141R is to be applied prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. We will adopt
SFAS 141R in the first quarter of 2009 and we expect SFAS 141R will have an impact on our accounting for future business combinations once adopted; however, the effect is dependent upon
acquisitions that are made in the future.

In
December 2007, the FASB issued SFAS 160, "Noncontrolling Interests in Consolidated Financial StatementsAn Amendment of ARB No. 51". SFAS 160
establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Specifically, this statement requires the recognition of
a noncontrolling interest as equity in the consolidated financial statements and separate from the parent's equity. In addition, the amount of net income attributable to the noncontrolling interest
should be included in consolidated net income on the face of the income statement. SFAS 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Early adoption is prohibited. We are evaluating SFAS 160 and have not yet determined the impact the adoption will have on the consolidated financial statements.

In
February 2007, the FASB issued SFAS 159, "The Fair Value Option for Financial Assets and Financial Liabilitiesincluding an amendment of FASB Statement 115" that
provides companies with an option to report certain financial assets and liabilities in their entirety at fair value. This statement is effective for fiscal years beginning after November 15,
2007. The fair value option may be applied instrument by instrument, and may be applied only to entire instruments. A business entity would report unrealized gains and losses on items for which the
fair value option has been elected in earnings at each subsequent reporting date. We are evaluating our options provided for under this statement and their potential impact on the consolidated
financial statements when implemented. SFAS 159 is being reviewed in conjunction with the requirements of SFAS 157 discussed below.

In
September 2006, the FASB issued SFAS 157, "Fair Value Measurements". This statement defines fair value, establishes a framework for measuring fair value for both assets and
liabilities through a fair value hierarchy and expands disclosure requirements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years. In

71

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. Summary of Significant Accounting Policies and Basis of Presentation (Continued)

February
2008, FASB issued FASB Staff Position ("FSP") FAS 157-2, which defers the effective date of SFAS 157 to fiscal years beginning November 15, 2008, and interim
periods within those fiscal years, for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in an entity's financial statements on a recurring basis. We are
evaluating SFAS 157 and have not yet determined the impact the adoption will have on the consolidated financial statements.



Certain amounts in the December 31, 2006 and 2005 consolidated financial statements have been reclassified to conform to the 2007 presentation. These
reclassifications had no effect on the previously reported net income.

2. Acquisition of Station Casinos, Inc.

On November 7, 2007, pursuant to the Merger Agreement described in Note 1, approximately 72.2% of the outstanding shares of the Company were
acquired for $4.17 billion. In addition, we incurred approximately $52.0 million of direct Merger costs and approximately $60.1 million in capitalized debt issuance costs related
to new financings under a new senior secured credit agreement and a mortgage loan and related mezzanine financings. By going private, the Merger provides the Company with greater operating
flexibility, allowing management to concentrate on long-term growth, reduce its focus on the quarter-to-quarter performance often emphasized by the public markets
and pursue alternatives.

We
valued the assets acquired and liabilities assumed based on an initial third-party business valuation at the date of the Merger. In accordance with the provisions of SFAS 141,
to the extent that the purchase price exceeded the fair value of the net identifiable tangible and intangible assets acquired, such excess was allocated to goodwill. We believe that the goodwill arose
from the our dominance in the local Las Vegas gaming market, the value of the existing workforce and existing management and operating infrastructure. The purchase price allocation is preliminary and
will be completed within one year of the Merger as provided under SFAS 141; thus the allocation of the purchase price is subject to refinement.

November 7,
2007(in millions)Current assets

$
120Property and equipment, net


2,753Intangible assets


1,014Goodwill


2,924Other assets


948Current liabilities assumed


(151
)Debt assumed


(2,539
)Other long-term liabilities assumed


(852
)$
4,217




The following unaudited pro forma results of operations assume that the Merger occurred at the beginning of the respective fiscal years. This unaudited pro forma
information should not be relied upon as

72

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Acquisition of Station Casinos, Inc. (Continued)

necessarily
being indicative of the results that would have been obtained if the Merger had actually occurred on those dates, nor of the results that may be reported in the future. The pro forma
financial information for each year presented contains an adjustment of $286.3 million for the immediate vesting of Class B Units.

For the Year Ended December 31,2007

2006(amounts in thousands)Net revenue

$
1,446,995

$
1,339,024Operating loss


(32,102
)

(191,800
)Interest expense, net


366,995


355,149Net loss


(520,003
)

(382,168
)




During the Predecessor Period, the Company recorded approximately $156.5 million in costs related to the Merger. These costs, presented as "Merger
Transaction Costs" on the face of the consolidated statement of operations, include approximately $31.6 million of accounting, investment banking, legal and other costs associated with the
Merger and $124.9 million of expense related to the accelerated vesting and buyout of employee stock options and restricted stock awards upon consummation of the Merger.

3. Receivables

Components of receivables are as follows (amounts in thousands):

Successor

PredecessorDecember 31,
2007

December 31,
2006Casino

$
18,385

$
12,882Hotel


7,923


6,475Management fees


4,721


9,459Income tax


17,167


7,100Due from unconsolidated joint ventures


3,122


1,988Other


4,587


6,19055,905


44,094Allowance for doubtful accounts


(7,225
)

(3,332
)Receivables, net

$
48,680

$
40,762


73

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Property and Equipment

Property and equipment consists of the following (amounts in thousands):

Successor

PredecessorEstimated life
(years)

December 31,
2007

December 31,
2006Land



$
1,010,913

$
312,714Buildings and improvements

10-45


2,123,501


2,034,613Furniture, fixtures and equipment

3-7


498,429


745,457Construction in progress




161,733


148,2963,794,576


3,241,080Accumulated depreciation and amortization




(231,079
)

(654,607
)Property and equipment, net



$
3,563,497

$
2,586,473


As
a result of the Merger discussed in Note 1 and pursuant to the provisions of SFAS 141, property and equipment balances at December 31, 2007 reflect the push down
of the Investors' new basis to our consolidated financial statements, while the December 31, 2006 balances reflect our historical accounting basis. At December 31, 2007 and 2006,
substantially all of our property and equipment is pledged as collateral for our long-term debt.

5. Goodwill and Other Intangible Assets

As discussed in Note 2, in connection with the Merger completed on November 7, 2007, we recorded $2.92 billion of goodwill and
$1.01 billion of intangible assets during the Successor Period. Intangible assets as of December 31, 2007 are shown on the table below. There was $154.5 million of goodwill and no
intangible assets recorded on the consolidated balance sheet at December 31, 2006.

SuccessorDecember 31, 2007(amounts in thousands)Estimated life
(years)

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
AmountBrands

Indefinite

$
214,791

$


$
214,791Customer relationships

25


268,961


(2,473
)

266,488Management contracts

3-20


521,464


(7,506
)

513,958Other

1


8,654


(1,274
)

7,380$
1,013,870

$
(11,253
)
$
1,002,617


The
aggregate amortization expense for the Successor Period for those assets that are amortized under the provisions of SFAS 142 was $11.3 million. There was no intangible
amortization expense recorded for the prior periods presented. Estimated annual amortization expense for intangible assets for the years ended December 31, 2008, 2009, 2010, 2011 and 2012 is
anticipated to be $75.2 million, $65.7 million, $42.0 million, $18.5 million and $21.2 million, respectively. The amount of amortization to be recorded in future
periods is subject to change as the purchase price allocations are refined and finalized.

74

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Land Held for Development

As of December 31, 2007, we had $516.2 million of land held for development that consists primarily of seven sites that are owned or leased, which
comprise 263 acres in the Las Vegas valley, 147 acres in the northern California and 203 acres in Reno, Nevada. The primary gaming-entitled land that we own in the Las Vegas valley consists of 68
acres located at the intersection of Durango Road and the Southern Beltway/Interstate 215 in the southwest area of Las Vegas, 49 acres also located in southwest Las Vegas at the intersection of
Flamingo Road and Interstate 215, 45 acres in Henderson, Nevada, 61 acres located on the southern end of Las Vegas Boulevard at Cactus Avenue of which we lease and have an option to purchase 2.5 acres
and 30 acres on Boulder Highway at the site formerly known as the Castaways Hotel Casino and Bowling Center.

We
also have acquired or are under contract to acquire approximately 106 acres of land on which Wild Wild West is located and the surrounding area, of which approximately 72 acres have
been acquired as of December 31, 2007. During the Predecessor Period and the years ended December 31, 2006 and 2005 we incurred and expensed approximately $25,000, $1.1 million
and $11.7 million respectively, to terminate various leases related to this land. No such expense was incurred during the Successor Period. In 2003, we exercised our option to purchase the
19-acre parcel of leased land on which Wild Wild West is located which was to occur in July 2005 at a purchase price of approximately $36 million. We have extended the date for the
close of escrow to no later than January 2009. Additionally, the lease expense was reduced from $2.9 million to $1.6 million per year beginning in July 2005. No amounts related to this
purchase option have been recorded on our consolidated balance sheets at December 31, 2007 and 2006.

Our
decision whether to proceed with any new gaming or development opportunity is dependent upon future economic and regulatory factors, the availability of acceptable financing and
competitive and strategic considerations. As many of these considerations are beyond our control, no assurances can be made that we will be able to proceed with any particular project.

7. Investments in Joint Ventures

We have various investments in 50% owned joint ventures, and a 6.7% investment in a joint venture that owns the Palms Casino Resort in Las Vegas, Nevada, which
are accounted for under the equity method. Under the equity method, original investments are recorded at cost and adjusted by our share of earnings, losses and distributions of the joint ventures. The
investment balance also includes interest capitalized during the construction period and any fair value adjustments recorded in conjunction with the Merger described in Note 1. Investments in
joint ventures consist of the following (amounts in thousands):

Successor

PredecessorDecember 31,
2007

December 31,
2006Green Valley Ranch (50.0%)

$
143,599

$
135,271Aliante Station (50.0%)


134,949


56,812Rancho Road (50.0%)


49,958


28,285Palms Casino Resort (6.7%)


25,921


18,089Barley's (50.0%)


22,482


3,580Renata's (50.0%)


11,832


8,029The Greens (50.0%)


3,212


3,511Investments in joint ventures

$
391,953

$
253,577


75

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. Investments in Joint Ventures (Continued)

Summarized
balance sheet information for the joint ventures is as follows (amounts in thousands):

Successor

PredecessorDecember 31,
2007

December 31,
2006Current assets

$
115,919

$
90,581Property and equipment and other assets, net


1,894,425


1,394,021Current liabilities


123,298


103,551Long-term debt and other liabilities


1,318,904


628,788Shareholders' equity


568,142


752,263


Summarized
results of operations for the joint ventures are as follows (amounts in thousands):

Successor

PredecessorPeriod from
November 8, 2007
Through
December 31, 2007

Period from
January 1, 2007
Through
November 7, 2007

Year Ended
December 31,
2006

Year Ended
December 31,
2005Net revenues

$
81,609

$
479,017

$
499,111

$
437,618Operating costs and expenses


69,613


386,920


392,689


341,021Operating income


11,996


92,097


106,422


96,597Interest and other expense, net


15,744


66,191


22,931


14,368Net (loss) income

$
(3,748
)
$
25,906

$
83,491

$
82,229


The
operating earnings from these joint ventures are shown as a separate line item on our consolidated statements of operations after operating income. In addition, interest and other
expense from these joint ventures are shown as a separate component under other expense in our consolidated statements of operations. The following table identifies the total equity earnings from
joint ventures (amounts in thousands):

Successor

PredecessorPeriod from
November 8, 2007
Through
December 31, 2007

Period from
January 1, 2007
Through
November 7, 2007

Year Ended
December 31,
2006

Year Ended
December 31,
2005Operating earnings from joint ventures

$
5,875

$
34,247

$
41,854

$
38,281Interest and other expense from joint ventures


(4,743
)

(23,503
)

(6,808
)

(6,343
)Net earnings from joint ventures

$
1,132

$
10,744

$
35,046

$
31,938


As
a result of the Merger, our investment account differs from our ownership equity in these investments by $217.3 million due to the allocation of the purchase price to these
investment accounts. As the purchase price allocation is preliminary, the amounts allocated to our investments in joint ventures are subject to change as the purchase price allocations are refined and
finalized.

76

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. Management Fees

We manage Thunder Valley on behalf of the United Auburn Indian Community ("UAIC") and receive a management fee equal to 24% of net income (as defined in the
management agreement). In addition, we are the managing partner for Green Valley Ranch, Barley's, The Greens and Renata's and receive a management fee equal to 2% of revenues and approximately 5% of
Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") from Green Valley Ranch and 10% of EBITDA from Barley's, The Greens, and Renata's. Our management fees are included in net
revenues on our consolidated statements of operations.



We have entered into a Development Services Agreement and a Management Agreement with the UAIC. Our seven-year Management Agreement was approved by
the National Indian
Gaming Commission (the "NIGC") and expires in June 2010. Pursuant to those agreements, and in compliance with a Memorandum of Understanding entered into by the UAIC and Placer County, California, we
developed, with the UAIC, Thunder Valley, a gaming and entertainment facility on approximately 49 acres located approximately seven miles north of Interstate 80 on Highway 65, in Placer County,
California, near Sacramento, which opened on June 9, 2003.

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following (amounts in thousands):

Successor

PredecessorDecember 31,
2007

December 31,
2006Accrued payroll and related

$
41,634

$
47,210Accrued interest payable


69,690


66,466Accrued gaming and related


33,945


32,645Other accrued expenses and current liabilities


32,749


27,368Total accrued expenses and other current liabilities

$
178,018

$
173,689


77

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Long-term Debt

Long-term debt consists of the following (amounts in thousands):

|                                                                                                                                                                                                                                       |                           | Successor |           | Predecessor |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------- | --------- | ----------- | -
|
|CMBS mortgage loan and related mezzanine financings, due November 12, 2009, interest at a margin above LIBOR (7.8% at December 31, 2007)                                                                                               |                           | $         | 2,475,000 |             | $
|Revolver, $650 million limit at December 31, 2007, due August 7, 2012, interest at a margin above the Alternate Base Rate or the Eurodollar Rate (8.2% at December 31, 2007)                                                           |                           |           | 293,100   |             |  
|Term Loan, $250 million December 31, 2007, due August 7, 2012, interest at a margin above the Alternate Base Rate or the Eurodollar Rate (8.0% at December 31, 2007)                                                                   |                           |           | 250,000   |             |  
|6% senior notes, interest payable semi-annually, principal due April 1, 2012, callable April 1, 2008, net of unamortized discount of $25.4 million and $1.3 million at December 31, 2007 and 2006,
respectively                        |                           |           | 424,608   |             |  
|73/4% senior notes, interest payable semi-annually, principal due August 15, 2016, callable August 15, 2011, net of unamortized discount of $8.5 million at December 31,
2007                                                          |                           |           | 391,455   |             |  
|61/2% senior subordinated notes, interest payable semi-annually, principal due February 1, 2014, callable February 1, 2009, net of unamortized discount of $54.9 million at
December 31, 2007                                          |                           |           | 395,093   |             |  
|67/8% senior subordinated notes, interest payable semi-annually, principal due March 1, 2016, callable March 1, 2009, net of unamortized discount of $92.8 million at December 31,
 2007 and premium of $7.4 million December 31, 2006 |                           |           | 607,214   |             |  
|65/8% senior subordinated notes, interest payable semi-annually, principal due March 15, 2018, callable March 15, 2011, net of unamortized discount of $48.1 million and
$1.4 million at December 31, 2007 and 2006, respectively      |                           |           | 251,937   |             |  
|Other long-term debt, weighted-average interest of 8.0% and 7.1% at December 31, 2007 and 2006, respectively, maturity dates ranging from 2009 to 2026                                                                                 |                           |           | 82,742    |             |  
|Revolving Facility, $2.0 billion limit at December 31, 2006, terminated in November 2007, interest was at a margin above the Alternate Base Rate or the Eurodollar Rate (7.6% at December 31, 2006)                                    |                           |           |          |             |  
|                                                                                                                                                                                                                                       |                           |           |           |             |  
|                                                                                                                                                                                                                                       | Total long-term debt      |           |           | 5,171,149   |  
|Current portion of long-term debt                                                                                                                                                                                                      |                           |           | (2,610    | )           |  
|Market value of interest rate swaps                                                                                                                                                                                                    |                           |           | 73,275    |             |  
|                                                                                                                                                                                                                                       |                           |           |           |             |  
|                                                                                                                                                                                                                                       | Total long-term debt, net |           | $         | 5,241,814   |  
|                                                                                                                                                                                                                                       |                           |           |           |             |  

In
connection with the Merger discussed in Note 1, the assumption of our liabilities required long-term debt to be adjusted to reflect the push down of the Investors'
new basis as required by SFAS 141. As a result, we recorded a reduction in the net book value of our senior and senior subordinated notes of approximately $236.8 million during the
Successor Period.

78

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Long-term Debt (Continued)



In conjunction with the Merger on November 7, 2007, we terminated our $2.0 billion revolving credit facility (the "Revolving Facility") due December
2010. As a result, we recorded a loss on early retirement of debt of approximately $8.1 million during the Successor Period to reflect the write off of the unamortized loan costs. In addition,
we terminated two cash flow hedge interest rate swaps with a notional amount of $500 million, which were due to terminate in December 2010 and tied directly to the Revolving Facility.
These cash flow hedge interest rate swaps were terminated at market value, and as a result, we paid approximately $12.2 million which is included in our loss on early retirement of debt in the
Successor Period.



In connection with the Merger, Station, as borrower, entered into a new $900 million senior secured credit agreement (the "Credit Agreement") consisting of
a $650 million revolving facility (the "Revolver") and a $250 million term loan (the "Term Loan"). The maturity date for both the Term Loan and the Revolver is August 7, 2012
subject to a single 15-month extension (as
further defined in the Credit Agreement). The Term Loan requires quarterly principal payments of $625,000 beginning March 31, 2008. The Revolver contains no principal amortization. Initial
borrowings, including full funding of the Term Loan and $260 million drawn on the Revolver for an aggregate amount of $510 million, were used to repay a portion of the outstanding
amounts under the Revolving Facility. Borrowings under the Credit Agreement bear interest at a margin above the Alternate Base Rate or the Eurodollar Rate (each as defined in the Credit Agreement), as
selected by us. The margin above such rates, and the fee on the unfunded portions of the Revolver will vary quarterly based on our combined consolidated ratio of debt to Adjusted EBITDA (as defined in
the Credit Agreement). As of December 31, 2007, the borrower's margin above the Eurodollar Rate on borrowings under the Credit Agreement was 2.50%. The maximum margin for Eurodollar Rate
borrowings is 2.50%. The maximum margin for Alternate Base Rate borrowings is 1.50%. As of December 31, 2007, the fee for the unfunded portion of the Revolver was 0.375%.

The
Credit Agreement contains certain financial and other covenants. These include a minimum interest coverage ratio of 1.50 to 1.00 beginning March 31, 2008 through
June 30, 2008 which increases to 1.75 to 1.00 on September 30, 2008 through December 31, 2008, to 2.00 to 1.00 on March 31, 2009 through December 31, 2009, to 2.25
to 1.00 on March 31, 2010 through December 31, 2010, and to 2.50 to 1.00 on March 31, 2011. The Credit Agreement has financial covenants that require that the maximum total debt
to Adjusted EBITDA (as defined in the Credit Agreement) ratio can be no more than 8.50 to 1.00 beginning March 31, 2008, which reduces to 8.25 to 1.00 on June 30, 2008, to 8.00 to 1.00
on September 30, 2008, to 7.75 to 1.00 on December 31, 2008, to 7.50 to 1.00 on March 31, 2009, to 7.25 to 1.00 on June 30, 2009, to 7.00 to 1.00 on September 30,
2009, to 6.75 to 1.00 on December 31, 2009, to 6.25 to 1.00 on March 31, 2010, to 6.00 to 1.00 on June 30, 2010 through December 31, 2010, to 5.75 on March 31, 2011,
to 5.5 to 1.00 on June 30, 2011 through September 30, 2011, and to 5.00 to 1.00 on December 31, 2011. In addition, total senior secured debt to Adjusted EBITDA (as defined in the
Credit Agreement) can be no more than 2.25 to 1.00 beginning March 31, 2008 through June, 30, 2008 and reduces to 2.00 to 1.00 on September 30, 2008. The covenants limit our ability to
incur additional indebtedness; issue preferred stock or provide guarantees; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends, make distributions or repurchase
our own capital stock; make investments, loans or advances; make certain acquisitions; engage in certain transactions with affiliates; capital expenditures and fundamentally change our business. All
obligations under the Credit Agreement are secured by

79

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Long-term Debt (Continued)

substantially
all of our assets with the exception of the collateral securing the CMBS Loans, the Land Loan and other excluded items as described in the Credit Agreement.



In connection with the Merger, on November 7, 2007, a number of wholly-owned unrestricted direct and indirect subsidiaries of Station (collectively, the
"CMBS Borrower") entered into a mortgage loan and related mezzanine financings in an aggregate principal amount of $2.475 billion (the "CMBS Loans"), for the purpose of financing the Merger
consideration payable to the Company's stockholders upon consummation of the Merger and paying fees and expenses incurred in connection with the Merger.

The
CMBS Loans are collateralized by substantially all fee and leasehold real property comprising Palace Station, Boulder Station, Sunset Station and Red Rock (collectively, the "CMBS
Property") and will mature in November 2009, subject to three one-year extensions as defined in the CMBS Loans. Interest on the CMBS Loans is equal to one-month LIBOR plus 2.3%
per annum. The CMBS Borrower is required to hedge the LIBOR interest rate such that it will not exceed 5.5% on a blended basis. As a result, the CMBS Borrower purchased an interest rate cap with a
$1.11 billion notional amount and a strike price of 5.77% for an initial premium of $3.6 million. This premium is being amortized to interest expense ratably over the term of the
interest rate cap. In addition, the CMBS Borrower entered into a cash flow hedge interest rate swap with a notional amount of $1.36 billion terminating in November 2012. As of
December 31, 2007, we paid a fixed rate of 5.3% and received one-month LIBOR which approximated 5.0%. This interest rate swap is designated and qualifies as a cash flow hedge
resulting in the effective portion of the gain or loss reported as a component of other comprehensive income (loss) with an offsetting adjustment to the carrying value of the related debt. For the
year ended December 31, 2007, we recorded other comprehensive loss of $73.4 million, related to the change in market value of this interest rate swap and a corresponding increase in
long-term debt.

The
loan documents for the CMBS Loans (the "CMBS Loan Documents") contain a number of covenants that, among other things, restrict, subject to certain exceptions, each wholly-owned
unrestricted direct and indirect subsidiary's ability to incur additional indebtedness; create liens on assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions;
make investments, loans or advances; make certain acquisitions; engage in certain transactions with affiliates; and fundamentally change its business. In addition, the CMBS Loan Documents require the
CMBS Borrower to maintain a minimum lease coverage ratio and also contain certain customary affirmative covenants and certain events of default. The CMBS Loan Documents also require the CMBS Borrower
to fund specific reserves (as defined in the CMBS Loan Documents).



On August 15, 2006, we issued $400.0 million of 73/4% senior notes due August 15, 2016. On March 13, 2006, we issued
$300.0 million of 65/8% senior subordinated notes due March 2018. Proceeds from the sale of the notes were used to reduce a portion of the amount outstanding on our Revolving
Facility.

During
2005, we redeemed the remaining $16.9 million of outstanding 83/8% senior notes due 2008 and $17.4 million of outstanding 97/8% senior
subordinated notes due 2010. As a result of these redemptions, we recorded a loss on early retirement of debt of approximately $1.3 million in the year ended December 31, 2005 to reflect
the write-off of the unamortized loan costs, discounts and call premium.

80

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Long-term Debt (Continued)

The
indentures (the "Indentures") governing our senior and senior subordinated notes (the "Notes") contain certain customary financial and other covenants, which limit our and our
subsidiaries' ability to incur additional debt. At December 31, 2007, our Consolidated Coverage Ratio (as defined in the Indentures) was 2.11 to 1.00. The Indentures provide that we may not
incur additional indebtedness, other than specified types of indebtedness, unless the Consolidated Coverage Ratio is at least 2.00 to 1.00. In the event our Consolidated Coverage Ratio is below 2.00
to 1.00, the covenant limits our ability to incur additional indebtedness for borrowings under the Revolver not to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined in the Indentures) for the four most recent quarters, plus $15 million. The Indentures also give the holders of the Notes the right to require us 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. In addition, the indenture governing the
senior notes contains a limitation on liens we can incur.



In November 2007, we entered into a sale-leaseback agreement related to our corporate office building with a third party real estate investment firm.
We sold the corporate office building for approximately $70 million and subsequently entered into a lease with the purchaser for an initial period of 20 years with four options to extend
the lease, each option for an extension of five years. Annual lease payments for the first year will be approximately $5.3 million and will increase approximately 1.2% annually to approximately
$6.7 million in the final year of the original term. In conjunction with the sale, we recorded an impairment loss of approximately $8.6 million which is included on our consolidated
statement of operations. The lease also contains two options for us to repurchase the corporate office building, one option at the end of the fifth year of the lease term and a second option at the
end of the tenth year of the lease term, which is considered continuing involvement under SFAS 98, "Accounting for Leases; Sale-Leaseback Transactions Involving Real Estate;
Sales-Type Leases of Real Estate; Definition of Lease Term; Initial Direct Costs of Direct Financing Leases". Because of this continuing involvement, the sale-leaseback
transaction is being accounted for as a financing transaction, with the sales proceeds recorded as a liability and the lease payments recorded as interest expense. In addition, we continue to include
the corporate office building within property and equipment, net on our consolidated balance sheet and it continues to be depreciated. During the Successor Period and the Predecessor Period, we
recorded approximately $0.8 million and $0.1 million, respectively, of interest expense related to this lease. Future minimum lease payments related to this lease are approximately
$5.3 million, $5.3 million, $5.4 million, $5.5 million and $5.5 million for the years ended December 31, 2008, 2009, 2010, 2011 and 2012, respectively.

The
estimated fair value of our long-term debt at December 31, 2007 was approximately $5.0 billion, compared to the book value of approximately
$5.2 billion. At December 31, 2006, the
estimated fair value of our long-term debt was approximately $3.3 billion, compared to the book value of $3.5 billion. The estimated fair value amounts were based on quoted
market prices on or about December 31, for our debt securities that are publicly traded. For the Revolver, the Term Loan and the CMBS Loans, the fair value approximates the carrying amount of
the debt due to short-term maturities of the individual components of the debt.

81

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. Long-term Debt (Continued)

Scheduled
maturities of long-term debt are as follows (amounts in thousands):

Years ending December 31,2008

$
2,6102009


12,0712010


2,6202011


2,6292012


3,432,846Thereafter


1,718,373Total

$
5,171,149




In November 2007, we terminated a fair value hedge interest rate swap with a notional amount of $50.0 million, which was due to terminate in April 2012.
The fair value hedge interest rate swap was terminated at market value and, as a result, we paid approximately $1.2 million. This fair value hedge interest rate swap was tied directly to our
$450 million 6.0% senior notes. The mark-to-market adjustment is being amortized as interest expense over the remaining contract life of the interest rate swap.

The
difference between amounts received and paid under such agreements, as well as any costs or fees, is recorded as a reduction of, or an addition to, interest expense as incurred over
the life of the swaps. The net effect of the interest rate swaps resulted in an increase in interest expense of approximately $1.1 million for the Successor Period and a reduction of interest
expense of approximately $0.7 million, $0.2 million and $2.1 million for the Predecessor Period and the years ended December 31, 2006 and 2005, respectively.

11. Due to Unconsolidated Affiliate

On February 16, 2007, Green Valley Ranch entered into a new $830 million credit facility (the "Green Valley Facility"). Proceeds from the Green
Valley Facility were used to repay outstanding borrowings under the previous revolving facility and term loan, as well as fund an equal distribution to the members which was comprised of approximately
$185 million in distributions to each member and a $100 million promissory note from each member for a total of approximately $570 million. The $100 million promissory note
is at an interest rate of 7% and matures on February 15, 2012. (See Note 19Subsequent EventsGreen Valley Ranch Notes).

12. Commitments and Contingencies



We entered into a ground lease for 27 acres of land on which Boulder Station is located. We lease this land from KB Enterprises, a company owned by Frank J.
Fertitta, Jr. and Victoria K. Fertitta (the "Related Lessor"), the parents of Frank J. Fertitta III, Chairman of the Board and Chief Executive Officer of Station and Lorenzo J. Fertitta, Vice Chairman
and President of Station. The lease has a maximum term of 65 years, ending in June 2058. The lease provides for monthly payments of $183,333 through June 2008. In July 2008, and every ten years
thereafter, the rent will be adjusted by a cost of living factor. In July 2013,

82

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)

and
every ten years thereafter, the rent will be adjusted to the product of the fair market value of the land and the greater of (i) the then prevailing annual rate of return for comparably
situated property or (ii) 8% per year. In no event will the rent for any period be less than the immediately preceding period. Pursuant to the ground lease, we have an option, exercisable at
five-year intervals with the next option in June 2008, to purchase the land at fair market value. Our leasehold interest in the property is subject to a lien to secure borrowings under the
CMBS Loan Documents.



We entered into a ground lease for 47 acres of land on which Texas Station is located. We lease this land from Texas Gambling Hall & Hotel, Inc., a
company owned by the Related Lessor. The lease has a maximum term of 65 years, ending in July 2060. The lease provides for monthly rental payments of $337,417 through June 2010. In July 2010,
and every ten years thereafter, the rent will be adjusted to the product of the fair market value of the land and the greater of (i) the then prevailing annual rate of return being realized for
owners of comparable land in Clark County or (ii) 8% per year. In July 2015, and every ten years thereafter, the rent will be adjusted by a cost of living factor. In no event will the rent for
any period be less than the immediately preceding period. Pursuant to the ground lease, we have an option, exercisable at five-year intervals with the next option in May 2010, to purchase
the land at fair market value. Our leasehold interest in the property is subject to a lien to secure borrowings under the Credit Agreement.



We exercised our option to purchase the 19-acre parcel of land on which Wild Wild West is located in 2003 which was to occur in July 2005 at a
purchase price of $36 million. We have extended the date for the close of escrow to no later than January 2009. Additionally, the lease expense was reduced from $2.9 million to
$1.6 million per year beginning in July 2005. No amounts related to this purchase option have been recorded on our consolidated balance sheets at December 31, 2007 and 2006.



In connection with the financing of the CMBS Loans, certain Station subsidiaries (the "Operating Subsidiaries") entered into an amended and restated purchase and
sale agreement with a wholly-owned subsidiary of Station, which immediately prior to the closing of the CMBS Loans, assigned its rights and obligations under the amended and restated purchase and sale
agreement to a newly created subsidiary of the Company, the CMBS Borrower. Pursuant this purchase and sale agreement, the CMBS Property was sold to the CMBS Borrower. Immediately following the sale,
such CMBS Property was leased back to the Company pursuant to a master lease with an initial term of fifteen years and extension terms for an aggregate of ten additional years. The Company in turn
subleased each parcel of the CMBS Property back to the Operating Subsidiaries, with each such sublease having the same term as the master lease. All transactions related to this lease are intercompany
in nature and as such eliminate upon consolidation.

83

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)



We lease several parcels of land, buildings and equipment used in our operations. Leases on various parcels ranging from 2.5 acres to 47 acres have terms expiring
between February 2008 and August 2103. Future minimum lease payments required under these operating leases and other non-cancelable operating leases are as follows (amounts in thousands):

Years ending December 31,2008

$
10,4662009


8,9682010


8,9682011


8,4102012


7,316Thereafter


313,618Total

$
357,746


Rent
expense totaled approximately $1.2 million and $8.5 million for the Successor Period and Predecessor Period, respectively, and $12.4 million and
$12.8 million for the years ended December 31, 2006 and 2005, respectively.



In December 2005, we entered into an agreement with the Greenspun Corporation to develop Aliante Station, a hotel and casino in the Aliante master-planned
community located in North Las Vegas, Nevada. We are developing and will manage the facility, to be located on a gaming-entitled 40-acre site on the northeast corner of Interstate 215 and
Aliante Parkway, which was contributed by the Greenspun Corporation for their 50% ownership in the joint venture. We will receive a management fee equal to 2% of the property's revenues and
approximately 5% of EBITDA. The first phase of Aliante Station is expected to include a hotel, casino, multiple full-service restaurants and a multi-screen movie theater complex.
Construction on Aliante Station began in February 2007. Pursuant to the terms of the agreement, in January 2006, we contributed a 54 acre site located on Losee Road in North Las Vegas, Nevada, as well
as approximately $2.2 million, for our 50% ownership in the joint venture. As of December 31, 2007, we have contributed an additional $79.5 million to fund design and development
costs.

In
October 2007, we completed financing for Aliante Station (the "Aliante Financing"). The Aliante Financing was completed with a group of banks and provides for borrowings up to
$430 million at a margin above the LIBOR rate of up to 325 basis points. The loan requires initial equity contributions from each partner, Station and G.C. Investments, LLC (G.C.
Investments, LLC being principally owned by members of the Greenspun family) of $105 million and equity contributions for a completion guarantee, if necessary, for project costs that
exceed $618 million exclusive of land acquisition costs and financing costs. The completion guarantee is a joint and several obligation of each partner, with G.C. Investment, LLC's
obligation collateralized.

84

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)



In December 2006, we entered into an amended and restated operating agreement with FBLV Holding Company LLC ("FBLV"). Pursuant to the amended and restated
operating agreement, the parties contributed approximately 52 acres (with approximately 20 acres contributed by us for our 50% ownership and approximately 32 acres contributed by FBLV for their 50%
ownership) of improved and unimproved real property located along Rancho Road south of Palace Station in Las Vegas, Nevada into a joint venture. It is anticipated that the joint venture will develop,
construct and manage, pursuant to a master development plan, a mixed-use residential, retail and entertainment project on all or a portion of such property. The timing, cost and scope of
the project have yet to be determined. As of December 31, 2007, we have contributed an additional $24.7 million to fund the acquisition of additional property and design and development
costs.



We have entered into Development and Management Agreements with the Federated Indians of Graton Rancheria (the "FIGR"), a federally recognized Native American
tribe. Pursuant to those agreements, we will assist the FIGR in developing and operating a gaming and entertainment project to be located in Sonoma County, California. The FIGR selected us to assist
them in designing, developing and financing their project and, upon opening, we will manage the facility on behalf of the FIGR. The Management Agreement has a term of seven years from the opening of
the facility and we will receive a management fee equal to 24% of the facility's net income. We will also receive a development fee equal to 2% of the cost of the project upon the opening of the
facility.

In
October 2003, the FIGR entered into a Memorandum of Understanding with the City of Rohnert Park. In August 2005, we purchased 270 acres of land just west of the Rohnert Park city
limits in Sonoma County, California. In March 2006, we purchased an additional 4.7 acres adjacent to the previously acquired property. The property purchased is approximately one-quarter
mile from Highway 101 and approximately 43 miles from downtown San Francisco. Development of the gaming and entertainment project is subject to certain governmental and regulatory approvals,
including, but not limited to, negotiating a gaming compact with the State of California, the DOI accepting a portion of the land into trust on behalf of the FIGR and approval of the Management
Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant
financial support to the project. As of December 31, 2007, we have advanced approximately $140.3 million toward the development of this project, primarily to complete the environmental
impact study and secure real estate for the project, which is included on our consolidated balance sheets. Funds advanced by us are expected to be repaid from the proceeds of the project financing or
from the FIGR's gaming revenues. In addition, we have agreed to pay approximately $11.3 million upon achieving certain milestones, which will not be reimbursed. As of December 31, 2007,
approximately $2.0 million of these payments had been made and were expensed in development expense as incurred. The timing of this type of project is difficult to predict and is dependent upon
the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.

85

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)



On November 13, 2003, we agreed to purchase a 50% interest in MPM Enterprises, LLC, a Michigan limited liability company ("MPM"). Concurrently with
our agreement to purchase that interest, MPM and the Match-E-Be-Nash-She-Wish Band of Pottawatomi Indians, a federally recognized Native
American tribe commonly referred to as the Gun Lake Tribe ("Gun Lake"), entered into amended Development and Management Agreements, pursuant to which MPM agreed to assist Gun Lake in developing and
operating a gaming and entertainment project to be located in Allegan County, Michigan. On July 29, 2005, MPM and Gun Lake entered into amended and restated Development and Management
Agreements. We have agreed to pay $6.0 million for our 50% interest in MPM, which is payable upon achieving certain milestones and is not reimbursable. As of December 31, 2007,
approximately $2.0 million of these payments had been made and were expensed in development expense as incurred. An additional $12.0 million in total may be paid by us in years six and
seven of the amended and restated Management Agreement, subject to certain contingencies. Under the terms of the amended and restated Development Agreement, we have agreed to arrange financing for the
ongoing development costs and construction of the project. As of December 31, 2007, we have advanced approximately $38.3 million toward the development of this project, primarily to
complete the environmental assessment and secure real estate for the project, which is included on our consolidated balance sheets. Funds advanced by us are expected to be repaid from the proceeds of
the project financing or from Gun Lake's gaming revenues. The amended and restated Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of
30% of the project's net income to be paid to MPM. Pursuant to the terms of the MPM Operating Agreement, our portion of the management fee is 50% of the first $24 million of management fees
earned, 83% of the next $24 million of management fees and 93% of any management fees in excess of $48 million.

The
proposed project will be located on approximately 146 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently contemplated,
the project will include slot machines, table games, a buffet and specialty restaurants. Construction of the project includes the conversion of an existing 192,000 square-foot building
into the casino and entertainment facility. Development of the gaming and entertainment project and operation of Class III gaming is subject to certain governmental and regulatory approvals,
including, but not limited to, the Michigan legislature's ratification of a gaming compact signed by the Governor of the State of Michigan, the DOI taking the land into trust on behalf of Gun Lake and
approval of the Management Agreement by the NIGC. On February 27, 2004, the DOI issued a Finding Of No Significant Impact with respect to the proposed project. On May 13, 2005, the DOI
published in the Federal Register a Notice of Final Agency Determination (the "Determination") to take certain land into trust for the benefit of Gun Lake. The publication commenced a
thirty-day period in which interested parties could seek judicial review of the Determination. On June 13, 2005, Michigan Gambling Opposition filed a complaint (the "Complaint") in
the United States District Court, District of Columbia, seeking declaratory and injunctive relief against the DOI and officials of the DOI. The Complaint seeks judicial review of the Determination. On
July 27, 2005, Gun Lake filed a motion to intervene in that lawsuit. On September 1, 2005, the District Court granted Gun Lake's motion to intervene. On January 6, 2006, Gun Lake
filed a motion for judgment on the pleadings or, in the alternative, for summary judgment. Also on January 6, 2006, the DOI filed a motion to dismiss or, in the alternative, for summary
judgment. By May 2006, all responsive pleadings had been filed and the case was ready for consideration by the District Court. On October 27, 2006, the Department of Justice filed a Notice with
the District Court indicating that the DOI planned to take the 146-acre site into

86

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)

trust
on January 5, 2007, if the plaintiffs did not seek injunctive relief or failed to persuade the court to issue any relief precluding the DOI from doing so. The DOI subsequently amended
that date to March 5, 2007, in order to provide the Court sufficient time to render its decision. The Court set oral arguments on the parties' motions to dismiss or, in the alternative, for
summary judgment for November 29, 2006. Oral arguments were heard on that date. On February 23, 2007, the District Court issued its decision in favor of the DOI and Gun Lake, finding
that there were no facts which would entitle plaintiffs to any relief on the four issues raised in the Complaint, and granted the parties' motion to dismiss or, in the alternative for summary judgment
(the "Dispositive Motions"). On March 1, 2007, the plaintiffs filed a motion for stay pending appeal with the District Court. On March 5, 2007, the District Court granted the plaintiffs'
motion for stay pending appeal, thereby precluding the DOI from taking the site into trust for the benefit of Gun Lake until the District Court's decision granting the Dispositive Motions has been
reviewed on appeal. On March 22, 2007, plaintiffs filed a notice of appeal of the District Court's decision granting the Dispositive Motions with the United States Court of Appeals for the
District of Columbia Circuit. On May 21, 2007, the plaintiffs filed their appellate brief. On July 6, 2007, the DOI and Gun Lake filed their responsive briefs. On July 30, 2007,
the plaintiffs filed their reply brief. Oral arguments were heard on October 19, 2007. The parties are currently waiting for the appellate court to render its decision. As with all litigation,
no assurances can be provided as to the outcome of this lawsuit.

On
March 9, 2007, Gun Lake and the State of Michigan entered into a tribal-state Class III gaming compact. The compact is subject to approval by the Michigan Legislature
and, if approved, will regulate gaming at Gun Lake's proposed gaming and entertainment project to be developed on the site. On August 8, 2007, the Michigan House of Representatives ratified the
compact. No assurances can be provided as to whether the Michigan Senate will approve the compact. Prior to obtaining third-party financing, we will contribute significant financial support to the
project. The timing of this type of
project is difficult to predict and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.



We have entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "MITCR"), a federally recognized
Native American tribe. Pursuant to those agreements, we will assist the MITCR in developing and operating a gaming and entertainment facility to be located on a portion of an approximately
650-acre site in Butte County, California, at the intersection of State Route 149 and Highway 99, approximately 10 miles southeast of Chico, California and 80 miles north of Sacramento,
California. Under the terms of the Development Agreement, we have agreed to arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are expected
to be repaid from the proceeds of the project financing or from the MITCR's gaming revenues. As of December 31, 2007, we have advanced approximately $9.8 million toward the development
of this project, primarily to complete the environmental assessment and secure real estate for the project, which is included on our consolidated balance sheets. In addition, we have agreed to pay
approximately $2.2 million of payments upon achieving certain milestones, which will not be reimbursed. As of December 31, 2007, $50,000 of these payments had been made and were expensed
in development expense as incurred. The Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 24% of the facility's net income. As
currently contemplated, the facility will include slot machines, table games and dining and entertainment amenities. Development of the facility is subject to certain governmental and regulatory
approvals, including, but not limited to,

87

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Commitments and Contingencies (Continued)

negotiating
a gaming compact with the State of California, the DOI accepting land into trust on behalf of the MITCR and approval of the Management Agreement by the NIGC. Prior to obtaining third-
party financing, we will contribute significant financial support to the project. The timing of this type of project is difficult to predict and is dependent upon the receipt of the necessary
governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.



We have entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians (the "Mono"), a federally recognized Native American
tribe located near Fresno, California. Pursuant to those agreements, we will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County, California.
We have purchased, for the benefit of the Mono, a 305-acre parcel of land located on Highway 99 north of the city of Madera. Under the terms of the Development Agreement, we have agreed to
arrange the financing for the ongoing development costs and construction of the facility. Funds advanced by us are
expected to be repaid from the proceeds of the project financing or from the Mono's gaming revenues. As of December 31, 2007, we have advanced approximately $12.4 million toward the
development of this project, primarily to complete the environmental impact study and secure real estate for the project, which is included on our consolidated balance sheets. In addition, we have
agreed to pay approximately $1.3 million of payments upon achieving certain milestones, which will not be reimbursed and will be expensed as incurred. As of December 31, 2007, none of
these payments had been made. The Management Agreement has a term of seven years from the opening of the facility and provides for a management fee of 24% of the facility's net income. As currently
contemplated, the facility will include slot machines, table games, restaurants, a hotel and entertainment amenities. Development of the gaming and entertainment project is subject to certain
governmental and regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of California, the DOI accepting the land into trust on behalf of the Mono and
approval of the Management Agreement by the NIGC. Prior to obtaining third-party financing, we will contribute significant financial support to the project. The timing of this type of project is
difficult to predict, and is dependent upon the receipt of the necessary governmental and regulatory approvals. There can be no assurances when or if these approvals will be obtained.

13. Stockholders' Equity



We are authorized to issue up to 10,000 shares of voting common stock, $0.01 par value per share. At December 31, 2007, there were 41.7 shares of voting
common stock issued and outstanding. Each holder of issued and outstanding shares of voting common stock is entitled to one vote for each share held of record on each matter submitted to a vote of
stockholders. Holders of our voting common stock have no cumulative voting, conversion or redemption rights. Under the Equityholders Agreement of Station, FCP and Fertitta Partners, as amended, in
certain circumstances, FCP VoteCo, as the holder of Station's voting common stock, shall have the preemptive right to purchase or subscribe to any voting stock to be sold or issued by Station on the
terms and conditions as such voting stock is being offered and sold or issued. Certain actions defined as Major Actions in the Equityholders Agreement of Station, FCP and Fertitta Partners, as
amended, require the approval of Thomas J. Barrack, Jr. and at least one of Frank J.

88

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stockholders' Equity (Continued)

Fertitta III
or Lorenzo J. Fertitta. Subject to any preferences that may be granted to the holders of our preferred stock, each holder of voting common stock is entitled to receive
ratably, such dividends as may be declared by our Board of Directors out of funds legally available therefore, as well as any distributions to the stockholders and, in the event of our liquidation,
dissolution or winding up is entitled to share ratably in all our assets remaining after payment of liabilities.



We are authorized to issue up to 100,000,000 shares of non-voting common stock, $0.01 par value per share. At December 31, 2007, there were
41,674,838 shares of non-voting common stock issued and outstanding. Holders of issued and outstanding shares of non-voting common stock are not entitled to vote on any matters
to be voted on by the stockholders of the Company and are not to be included in determining the number of shares voting or entitled to vote. Holders of our non-voting common stock have no cumulative
voting, conversion or redemption rights. Under the Equityholders Agreement of Station, FCP and Fertitta Partners, as amended, in certain circumstances, holders of non-voting common stock shall have
the preemptive right to purchase or subscribe to any equity interests (other than voting stock) to be sold or issued by Station on the same terms and conditions as such equity interests are being
offered and sold or issued. Subject to any preferences that may be granted to the holders of our preferred stock, each holder of non-voting common stock is entitled to receive ratably,
such dividends as may be declared by our Board of Directors out of funds legally available therefor, as well as any distributions to the stockholders and, in the event of our liquidation, dissolution
or winding up is entitled to share ratably in all our assets remaining after payment of liabilities.



We are authorized to issue up to 10,000 shares of preferred stock, $0.01 par value per share of which none are issued. The Board of Directors, without further
action by the holders of our 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, our 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 our 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 Station or other corporate action.



During the Predecessor Period, we paid a quarterly cash dividend of $0.2875 per share to stockholders of record on February 26, 2007, May 21, 2007
and October 5, 2007 for approximately $49.1 million.

During
the year ended December 31, 2006, we paid a quarterly cash dividend of $0.25 per share to stockholders of record on February 10, 2006, May 12, 2006 and
$0.2875 per share to stockholders of record on August 11, 2006 and November 13, 2006 for a total of $65.4 million.

89

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. Stockholders' Equity (Continued)



During the Predecessor Period, we repurchased approximately 1.3 million shares of our common stock for approximately $110.2 million, primarily
through open market purchases. As of November 7, 2007, upon consummation of the Merger, all of our treasury stock was cancelled and retired.



SFAS 130, "Reporting Comprehensive Income", requires companies to disclose other comprehensive income and the components of such income. Comprehensive
income is the total of net income and all other non stockholder changes in equity. For the Successor Period, Predecessor Period and the years ended December 31, 2006 and 2005, we recorded the
mark-to-market valuation of our interest rate swaps and our 50% interest in the mark-to-market valuation of the interest rate swaps at Green Valley
Ranch and Aliante Station, as well as the unrealized gain on available-for-sale securities and the amortization of the unrecognized pension and postretirement benefit plan
liabilities as other comprehensive (loss) income. Comprehensive (loss) income was computed as follows (amounts in thousands):

|                                                                                             |                             | Successor |          | Predecessor
|-------------------------------------------------------------------------------------------- | --------------------------- | --------- | -------- | -----------
|
|Net (loss) income                                                                            |                             | $         | (317,954 | )          
|Mark-to-market valuation of interest rate swaps, net of tax                                  |                             |           | (46,371  | )          
|Unrealized (loss) gain on available-for-sale securities, net of tax                          |                             |           | (119     | )          
|Amortization of unrecognized pension and postretirement benefit plan liabilities, net of tax |                             |           | 3,665    |            
|                                                                                             |                             |           |          |            
|                                                                                             | Comprehensive (loss) income |           | $        | (360,779   
|                                                                                             |                             |           |          |            

The
components of accumulated other comprehensive loss are as follows (amounts in thousands):

|                                                                                             |                                      | Successor |         | Predecessor |  
|-------------------------------------------------------------------------------------------- | ------------------------------------ | --------- | ------- | ----------- | -
|
|Mark-to-market valuation of interest rate swaps, net of tax                                  |                                      | $         | (54,162 | )           | $
|Unrealized gain on available-for-sale securities, net of tax                                 |                                      |           | 488     |             |  
|Amortization of unrecognized pension and postretirement benefit plan liabilities, net of tax |                                      |           | (5,992  | )           |  
|Adoption of SFAS 158, net                                                                    |                                      |           |        |             |  
|                                                                                             |                                      |           |         |             |  
|                                                                                             | Accumulated other comprehensive loss |           | $       | (59,666     | )
|                                                                                             |                                      |           |         |             |  

90

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Share-Based Compensation



Long-term incentive compensation is provided in the form of non-voting limited liability company membership interests in FCP and Fertitta
Partners pursuant to the Second Amended and Restated Operating Agreement of Fertitta Colony Partners and the Amended and Restated Operating Agreement of Fertitta Partners, respectively (collectively
"the Operating Agreements"). The Operating Agreements allow certain officers and members of management of the Company to participate in the long-term growth and financial success of the
Company through indirect ownership of Class B Units and direct ownership of Class C Units in FCP and Fertitta Partners. The purpose is to promote the Company's long-term
growth and profitability by aligning the interests of the Company's management with the interests of the owners of the Company and by encouraging retention. Upon the consummation of the Merger,
certain members of management were awarded indirect ownership of Class B Units and direct ownership of Class C Units in each of FCP and Fertitta Partners. The Class C Units
include certain call and put provisions as defined in the Operating Agreements, such that under certain circumstances, within ninety days after termination, in certain cases, of the Class C
Unit holder's employment with Station, FCP and Fertitta Partners can call the Class C Units and the employee that holds the Class C Units can put the Class C Units back to FCP and
Fertitta Partners. The conditions that could result in the employee putting the Class C Units back to FCP and Fertitta Partners are either contingent or within the control of the issuer.

At
December 31, 2007, we had unearned share-based compensation of approximately $60.0 million associated with Class B and Class C Units which is expected to
be recognized over a period of approximately 4.8 years. During the Successor Period, approximately 6.9 million Class B Units were granted with a weighted-average grant-date fair value of
$44.92. Of the Class B Units granted, approximately 6.4 million units vested immediately and the remaining units vest equally over five years. In addition, approximately
1.4 million Class C Units were granted in the Successor Period with a weighted-average grant-date fair value of $28.54. The Class C Units vest equally over five years.

The
Company determined the fair value associated with these units based on a third-party valuation taking into account the estimated enterprise value of the Company, expected term of the
units of six years, expected volatility of 30% based on expected volatility of equity instruments of comparable companies and a risk free rate of 4.01%. The estimated fair value of the units, less an
assumed forfeiture rate, will be recognized in expense on a straight-line basis over the requisite service periods of the awards.



Prior to the Merger, the stockholders approved and we adopted the 2005 Stock Compensation Plan (the "2005 Plan") which provided for grants of stock options, stock
appreciation rights, restricted stock,
restricted stock units, and other stock awards (collectively, the "Awards"). Individuals eligible to receive Awards under the 2005 Plan included employees, directors and independent contractors of the
Company and its subsidiaries and other entities controlled by us. However, incentive stock options could be granted only to an employee of ours or a subsidiary of ours. Upon adoption of the 2005 Plan,
no additional grants of awards could be made under the following plans of Station (the "Prior Plans"): (i) the Incentive Stock Option Plan, (ii) the Compensatory Stock Option Plan,
(iii) the Restricted Share Plan, (vi) the Non-employee Director Stock Option Plan, (v) the 1999 Compensatory Stock Option Plan, and (vi) the 1999 Share Plan.

Pursuant
to the Merger discussed in Note 1, each share of Station restricted stock vested and was cancelled and converted into the right to receive $90.00 in cash, without interest and
less any applicable

91

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Share-Based Compensation (Continued)

payroll
withholding taxes, while each stock option outstanding under Station's stock plans was cancelled and extinguished, and the holder of any such stock option was entitled to receive an amount in
cash equal to the product of (i) the number of shares of Station common stock subject to such stock option and (ii) the excess, if any, of $90.00 over the exercise price per share of such stock
option, without interest and less any applicable payroll withholding taxes. As a result, $124.9 million in previously unrecognized compensation expense was recognized during the Predecessor
Period and is included in merger transaction costs on the consolidated statement of operations. The Predecessor share-based compensation plans were discontinued in connection with the Merger.

Summarized
information for the 2005 Plan and Prior Plans, collectively, is as follows:

|                                        |                  | Options   |            | Weighted average exercise price |       | Restricted Shares |           | Weighted average grant date fair value |   | Total |      
|--------------------------------------- | ---------------- | --------- | ---------- | ------------------------------- | ----- | ----------------- | --------- | -------------------------------------- | - | ----- | -----
|Outstanding at December 31, 2005        |                  | 2,314,182 |            | $                               | 12.12 |                   | 2,124,594 |                                        | $ | 37.24 |      
|                                        | Granted          |           |           |                                 |       |                  |           | 1,374,100                              |   | $     | 68.21
|                                        | Exercised/Lapsed |           | (120,325   | )                               | $     | 12.99             |           | (436,740                               | ) | $     | 30.13
|                                        | Canceled         |           | (6,750     | )                               | $     | 15.26             |           | (34,600                                | ) | $     | 55.17
|                                        |                  |           |            |                                 |       |                   |           |                                        |   |       |      
|Outstanding at December 31, 2006        |                  | 2,187,107 |            | $                               | 12.07 |                   | 3,027,354 |                                        | $ | 52.12 |      
|                                        | Granted          |           |           |                                 |       |                  |           |                                       |   |       |     
|                                        | Exercised/Lapsed |           | (46,050    | )                               | $     | 12.17             |           | (419,223                               | ) | $     | 46.67
|                                        | Canceled         |           | (400       | )                               | $     | 16.81             |           | (400                                   | ) | $     | 64.67
|                                        | Accelerated vest |           | (2,140,657 | )                               | $     | 12.06             |           | (2,607,731                             | ) | $     | 52.99
|                                        |                  |           |            |                                 |       |                   |           |                                        |   |       |      
|Outstanding at November 7, 2007         |                  |          |            | $                               |      |                   |          |                                        | $ |      |      
|                                        |                  |           |            |                                 |       |                   |           |                                        |   |       |      
|Exercisable at November 7, 2007         |                  |          |            | $                               |      |                   |           |                                        |   |       |      
|                                        |                  |           |            |                                 |       |                   |           |                                        |   |       |      
|Available for grant at November 7, 2007 |                  |           |            |                                 |       |                   |           |                                        |   |       |      
|                                        |                  |           |            |                                 |       |                   |           |                                        |   |       |      

As
of December 31, 2006, 2,069,407 of the options were vested and exercisable with a weighted average exercise price of $11.81 and 1,108,632 were available for grant.



No stock options have been issued since 2003 resulting in no assumptions for dividend yield, expected volatility, risk-free interest rate or expected
term of option for 2007, 2006 or 2005.

The
intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the stock option. Total intrinsic value of stock
options exercised was $3.3 million, $6.9 million and $87.4 million for the Predecessor Period and the years ended December 31, 2006 and 2005, respectively.

Net
cash proceeds from the exercise of stock options were $0.6 million, $1.6 million and $19.0 million for the Predecessor Period and the years ended
December 31, 2006 and 2005, respectively. The actual income tax benefit realized from stock option exercises was $0, $3.1 million and $31.8 million for the same periods,
respectively.

92

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Share-Based Compensation (Continued)



During the years ended December 31, 2006 and 2005, we granted 1,374,100 and 137,000, respectively, of restricted stock awards at a weighted-average grant
date fair value of $68.21 and $66.33 for the same periods. There were no restricted stock grants in 2007. The total fair value of restricted shares that
vested for the Predecessor Period and the years ended December 31, 2006 and 2005 was $35.7 million, $32.4 million and $30.5 million, respectively. In addition, the fair
value of restricted shares that vested due to the Merger on November 7, 2007 was $234.7 million for the Predecessor Period.

The
following table represents where recorded share-based compensation expense was classified in the accompanying consolidated statements of operations (amounts in thousands):

Successor

PredecessorPeriod from November 8, 2007 Through December 31, 2007

Period from January 1, 2007 Through November 7, 2007

Year Ended December 31, 2006

Year Ended December 31, 2005Casino expense

$


$
311

$
359

$
229Food & beverage expense








44


56Room expense








12


1Selling, general & administrative


542


2,236


2,567


1,787Corporate


287,145


13,384


18,163


8,534Merger transaction costs





124,850





Development


443


1,842


2,327


1,485Preopening





492


223


367Total share-based compensation


288,130


143,115


23,695


12,459Tax benefit


(100,846
)

(50,090
)

(8,293
)

(4,361
)Total share-based compensation, net of tax

$
187,284

$
93,025

$
15,402

$
8,098


Had
compensation expense for the 2005 Plan and Prior Plans been determined in accordance with SFAS 123, the effect on our net income would have been as follows (amounts in
thousands):

For the year ended December 31,
2005Net income:As reported

$
161,886Share-based compensation expense reported in net income


Additional share-based compensation expense under fair value method


(2,646
)Pro forma net income

$
159,240


93

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. Executive Compensation Plans

We have employment agreements with certain of our executive officers. These contracts provide for, among other things, an annual base salary, supplemental
long-term disability and supplemental life insurance benefits in excess of our normal coverage for employees. In addition, we have adopted a Supplemental Executive Retirement Plan for our
Chief Executive Officer and President and a Supplemental Management Retirement Plan for certain key executives as selected by our Board of Directors. Other executive plans include a Deferred
Compensation Plan and a Long-Term Stay-On Performance Incentive Plan.

16. Retirement Plans

Effective as of November 30, 1994, we adopted the Supplemental Executive Retirement Plan (the "SERP"), which is an unfunded defined benefit plan for the
Chief Executive Officer and President as sole participants. On January 21, 2005, Station amended the SERP (the "First SERP Amendment"). The purpose of the First SERP Amendment was to
(i) increase the Early Retirement Date (as defined
in the SERP) for participants from age 45 to age 50, (ii) increase the Normal Retirement Date (as defined in the SERP) for the participants from age 55 to age 60, (iii) add the President
of the Company as a participant, and (iv) include the average annual bonus (in addition to base salary) earned by participants for the three most recent fiscal years in determining Final Annual
Compensation (as defined in the SERP). On November 7, 2007, Station further amended the SERP for the purpose of updating the "Change of Control" definition and confirming that the Merger would
not constitute a "Change of Control" for purposes of the plan.

Effective
as of November 30, 1994, we adopted the Supplemental Management Retirement Plan (the "SMRP"), which is an unfunded defined benefit plan. Certain key executives (other
than the Chief Executive Officer and President) as selected by the Board of Directors are able to participate in the SMRP. On November 7, 2007, Station amended the SMRP for the purpose of
updating the "Change of Control" definition under the plan and confirming that the Merger would not constitute a "Change of Control" for purposes of the plan.

94

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Retirement Plans (Continued)

A
reconciliation of the beginning and ending balances of the pension benefit obligation and fair value of the plan assets and the funded status is as follows (in thousands):

|                                                                 |                                         | Successor                                |                    | Predecessor |        
|---------------------------------------------------------------- | --------------------------------------- | ---------------------------------------- | ------------------ | ----------- | -------
|
|Change in pension benefit obligation:                            |                                         |                                          |                    |             |        
|                                                                 | Benefit obligation at beginning of year |                                          | $                  | 30,390      |        
|                                                                 |                                         |                                          | Service cost       |             |        
|                                                                 |                                         |                                          | Interest cost      |             |        
|                                                                 |                                         |                                          | Net actuarial gain |             |        
|                                                                 |                                         |                                          | Benefits paid      |             |        
|                                                                 |                                         |                                          | Curtailment        |             |        
|                                                                 |                                         |                                          |                    |             |        
|                                                                 | Benefit obligation at end of year       |                                          | $                  | 28,580      |        
|                                                                 |                                         |                                          |                    |             |        
|Change in plan assets:                                           |                                         |                                          |                    |             |        
|                                                                 | Contribution by Station                 |                                          | $                  | 223         |        
|                                                                 | Benefits paid                           |                                          |                    | (223        | )      
|                                                                 |                                         |                                          |                    |             |        
|                                                                 |                                         | Fair value of plan assets at end of year |                    | $           |       
|                                                                 |                                         |                                          |                    |             |        
|Funded status of the plan (underfunded)                          |                                         | $                                        | (28,580            | )           | $      
|                                                                 | Unrecognized net actuarial loss         |                                          |                    |            |        
|                                                                 | Unrecognized actuarial loss             |                                          |                    |            |        
|                                                                 |                                         |                                          |                    |             |        
|                                                                 |                                         | Net amount recognized                    |                    | $           | (28,580
|                                                                 |                                         |                                          |                    |             |        
|Amounts recognized in the consolidated balance sheet consist of: |                                         |                                          |                    |             |        
|Current liabilities                                              |                                         | $                                        | (293               | )           | $      
|Accrued pension costs                                            |                                         |                                          | (19,069            | )           |        
|Accumulated other comprehensive loss                             |                                         |                                          | (9,218             | )           |        
|                                                                 |                                         |                                          |                    |             |        
|                                                                 |                                         | Net amount recognized                    |                    | $           | (28,580
|                                                                 |                                         |                                          |                    |             |        
|Weighted average assumptions:                                    |                                         |                                          |                    |             |        
|                                                                 |                                         | Discount rate                            |                    |             | 5.75   
|                                                                 |                                         | Salary rate increase                     |                    |             | 5.00   

95

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. Retirement Plans (Continued)

The
components of the net periodic pension benefit cost consist of the following (in thousands):

|                                   |                           | Successor          |     | Predecessor
|---------------------------------- | ------------------------- | ------------------ | --- | -----------
|
|Service cost                       |                           | $                  | 303 |            
|Interest cost                      |                           |                    | 276 |            
|Amortization of prior service cost |                           |                    | 46  |            
|Amortization actuarial losses      |                           |                    | 94  |            
|                                   |                           |                    |     |            
|                                   | Net periodic pension cost |                    |     | 719        
|                                   | Curtailment charge        |                    |     | (20        
|                                   |                           |                    |     |            
|                                   |                           | Total pension cost |     | $          
|                                   |                           |                    |     |            

We
expect benefits of approximately $0.3 million to be paid in each of the next five years and approximately $1.5 million to be paid in aggregate for the five years
thereafter. These estimates are based on assumptions about future events and as such, actual payments may vary significantly from these estimates.



We have a defined contribution 401(k) plan, which covers all employees who meet certain age and length of service requirements and allows an employer contribution
up to 50% of the first 4% of each participating employee's compensation. Plan participants can elect to defer before tax compensation through payroll deductions. These deferrals are regulated under
Section 401(k) of the Internal Revenue Code. Our matching contribution was approximately $0.4 million, $3.2 million, $2.8 million and $2.2 million for the Successor
Period, the Predecessor Period and the years ended December 31, 2006 and 2005, respectively.

17. Income Taxes

We file a consolidated federal income tax return. For financial reporting purposes, we recorded an income tax benefit of $16.0 million and
$15.3 million for the Successor Period and Predecessor Period, respectfully, and a provision for income taxes of $69.2 million and $94.3 million for the years ended
December 31, 2006 and 2005, respectively.

96

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Income Taxes (Continued)

The (benefit) provision for income taxes attributable to net income consists of the following (amounts in thousands):

|         |                    | Successor |        | Predecessor
|-------- | ------------------ | --------- | ------ | -----------
|
|Current  |                    | $         | (8,768 | )          
|Deferred |                    |           | (7,228 | )          
|         |                    |           |        |            
|         | Total income taxes |           | $      | (15,996    
|         |                    |           |        |            

The
income tax provision differs from that computed at the federal statutory corporate tax rate as follows:

|                                     |                    | Successor |     | Predecessor |     
|------------------------------------ | ------------------ | --------- | --- | ----------- | ----
|
|Federal statutory rate               |                    | 35.0      | %   | 35.0        | %   
|Lobbying and political               |                    |          |     | (0.3        | )   
|Fines and penalties                  |                    |          |     |            |     
|Meals and entertainment              |                    |          |     |            |     
|Credits earned, net                  |                    |          |     | 1.2         |     
|Nondeductible officers compensation  |                    |          |     | 1.8         |     
|Non-deductible transaction costs     |                    |          |     | (10.8       | )   
|Vesting of Class B and Class C Units |                    | (30.2     | )   |            |     
|Golden parachute                     |                    |          |     | (5.3        | )   
|Other, net                           |                    |          |     | (0.6        | )   
|                                     |                    |           |     |             |     
|                                     | Effective tax rate |           | 4.8 | %           | 21.0
|                                     |                    |           |     |             |     

We recorded $23.3 million, $0, $3.1 million and $31.8 million as an increase to contributed capital for certain tax benefits
from employee share-based compensation for the Successor Period, the Predecessor Period and the years ended December 31, 2006 and 2005, respectively. As part of the purchase accounting
adjustment, $71.1 million of tax benefits from employee share-based compensation were recorded as a deferred tax asset related to net operating losses.

97

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Income Taxes (Continued)

The
tax effects of significant temporary differences representing net deferred tax assets and liabilities are as follows (amounts in thousands):

Successor

PredecessorDecember 31,
2007

December 31,
2006Deferred tax assets:Accrued vacation, bonuses and group insurance

$
5,818

$
5,187Preopening and other costs, net of amortization


9,048


700Accrued benefits


21,075


26,305Comprehensive income adjustments


28,765


Net operating loss carryover


109,746


FICA credits


5,513


Minimum tax credit carryover


26,795


Other deferred tax assets


8,040


8,295Total deferred tax assets

$
214,800

$
40,487Deferred tax liabilities:Prepaid expenses and other

$
(17,802
)
$
(16,573
)Temporary differences related to property and equipment


(532,743
)

(122,295
)Goodwill


(9,104
)

Long term debt (fair market value adjustment)


(81,536
)

Intangibles


(367,253
)

(14,670
)Total deferred tax liabilities

$
(1,008,438
)
$
(153,538
)Net

$
(793,638
)
$
(113,051
)


At
December 31, 2007, the Company had an Alternative Minimum Tax ("AMT") credit carryforward of approximately $26.8 million. AMT credits are available to be carried forward
indefinitely and may be utilized against regular U.S. corporate tax to the extent that they do not exceed computed AMT calculations. The Company expects to utilize all of its AMT credits.

At
December 31, 2007, the Company had a general business credit carryforward for U.S. federal income tax purposes of approximately $5.5 million. The general business credit
carryforward expires in 2026. Based on the Company's projections of taxable income, the Company expects to utilize all of its general business credit carryforward.

As
of December 31, 2007, the Company has a tax net operating loss carryover of approximately $313.5 million that expires in 2027. SFAS 109 requires that the tax
benefit of a net operating loss be recorded as an asset. Management believes that the realization of this deferred tax asset is more likely than not based on expectations of future taxable income. We
did not record a valuation allowance at December 31, 2007 or 2006 relating to recorded tax benefits because all benefits are more likely than not to be realized. At December 31, 2007,
the Company has an income tax receivable of $17.2 million as a result of net operating loss carryback to the prior year.

98

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

17. Income Taxes (Continued)

Station
or our subsidiaries file income tax returns as prescribed by the laws of the jurisdictions in which we operate. We are no longer subject to U.S. federal tax examination, the only
major tax jurisdiction in which we file tax returns, for years before 2004.

We
adopted FIN 48 as of January 1, 2007. As a result of the adoption, we recognized a $3.0 million increase in our tax liabilities. The cumulative effect upon
adoption was accounted for as a reduction to the January 1, 2007 balance of retained earnings in an amount of $0.5 million, while interest upon adoption totaled $0.2 million.

Our
total unrecognized tax benefits that, if recognized, would affect our effective tax rate were approximately $0.3 million as of both January 1, 2007 and
December 31, 2007. The liability for unrecognized tax benefits increased to $3.3 million for the year ended December 31, 2007.

We
recognize accrued interest related to our unrecognized tax benefits in income tax expense. As of January 1, 2007, we had $0.2 million accrued for the payment of
interest. Our liability for the payment of interest on our unrecognized tax benefits increased to $0.4 million as of December 31, 2007. We do not anticipate any penalty assessments
associated with our FIN 48 liability. No significant increases or decreases to unrecognized tax benefits are expected within the next twelve months.

A
summary of the changes in the gross amount of unrecognized tax benefits for the year ended December 31, 2007, is shown below (in millions):

Balance as of January 1, 2007

$
3.0Additions based on tax positions related to the prior year


0.5Reductions based on tax positions related to prior years


(0.1
)Statute expirations


(0.1
)Balance as of December 31, 2007

$
3.3


18. Legal Matters

Station and its subsidiaries are defendants in various lawsuits relating to routine matters incidental to their business. As with all litigation, no assurance can
be provided as to the outcome of the following matters and litigation inherently involves significant costs. Following is a summary of key litigation impacting Station. Station believes that the
plaintiffs' claims are without merit and does not expect that the lawsuits will have a material adverse effect on the financial position or results of operations.



On February 4, 2008, Josh Luckevich, Cathy Scott and Julie St. Cyr filed a purported class action complaint in the United States District Court for
the District of Nevada, Case No. CV-00141, against the Company. The plaintiffs are all former employees of the Company. The complaint alleges that the Company (i) failed to
pay its employees for all hours worked, (ii) failed to pay overtime, (iii) failed to timely pay wages and (iv) unlawfully converted certain earned wages. The complaint seeks,
among other relief, class certification of the lawsuit, compensatory damages in excess of $5,000,000, punitive damages and an award of attorneys' fees and expenses to plaintiffs' counsel. The Company
has yet to file a response to the complaint. The Company believes that the allegations in the complaint are without merit and intends to vigorously defend the same.

99

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Legal Matters (Continued)



As previously disclosed, on December 4, 2006, the Company announced that it had received a proposal from FCP to acquire all of the Company's outstanding
common stock for $82 per share in cash. Six cases (the "Actions") were brought in the District Court for Clark County, Nevada (the "District Court"), alleging that the actions of Frank J. Fertitta III
and Lorenzo J. Fertitta in participating with FCP in making the proposal and entering into the Merger Agreement and the actions of the members of a special committee of Station's Board of Directors
composed entirely of independent directors (the "Special Committee") in responding to the proposal, and entering into the Merger Agreement were breaches of fiduciary duty:

Roessler v. Station Casinos, Inc., et al., Case No. A532637;

Filhaber v. Station Casinos Inc., et al., Case No. A532499;

Traynor v. Station Casinos, Inc., et al,Case No. A532407;

Goldmann v. Station Casinos, Inc., et al., Case No. A532395;

Griffiths v. Station Casinos, Inc., et al., Case No. A533806; and

West Palm Beach Firefighters' Pension Fund v. Station Casinos, Inc., et al., Case No. 07-A536211.

The
Company was a defendant in the Actions and others were named as defendants in one or more of the Actions. No specific monetary relief was sought against the Company in the Actions.
On January 4, 2007 the Actions were consolidated under the headingIn re Station Casinos Shareholder Litigation, Master Case
No. A-532367 (the "Consolidated Action").

On
June 1, 2007, the plaintiffs filed an amended consolidated class action complaint (the "Amended Complaint") in the District Court against Station, Station's directors, Frank J.
Fertitta III, Lorenzo J. Fertitta, Blake L. Sartini and Delise F. Sartini, Colony, Colony Capital Acquisitions, LLC ("Colony Acquisitions") and FCP. The Amended Complaint alleges that Station's
directors breached their fiduciary duties to Station and its stockholders as follows:

A.    The
defendants failed to engage in a fair process that would maximize value to Station's stockholders because the defendants put into place covenants in Station's bond
indentures that could, under certain circumstances, require a purchaser of Station not affiliated with Frank J. Fertitta III and Lorenzo J. Fertitta to redeem those bonds, put into place a stockholder
rights plan and a staggered board, adopted a supermajority voting requirement in connection with any merger transaction and imposed a $160 million termination fee on Station.

B.    The
process being used to sell Station is wrongful, unfair and harmful and is an attempt by the defendants to aggrandize their personal and financial positions. It does
not reflect the true inherent value of Station that was known only to the defendants. This value, which far exceeds the $90.00 per share Merger consideration, includes the returns from Red Rock, the
Company's Native American casino-management contracts and the expected returns from Aliante Station and other expansion projects.

C.    The
directors have not and are not exercising independent business judgment and have acted and are acting to the detriment of the plaintiff class. In particular, the
members of the Special Committee are not independent of Frank J. Fertitta III and Lorenzo J. Fertitta, were handpicked for Station's Board of Directors by Frank J. Fertitta III and Lorenzo J.
Fertitta, are loyal and beholden to them and will do what

100

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

18. Legal Matters (Continued)

Frank
J. Fertitta III and Lorenzo J. Fertitta tell them to do. The Special Committee failed to properly shop Station, artificially depressing the value of Station's stock, thereby depriving plaintiffs
of the right to receive the maximum value for their shares. They are taking steps to avoid competitive bidding, to cap the price of Station stock and to give FCP and other members of the buying group
an unfair advantage by, among other things, failing to solicit other potential acquirers or alternative transactions.

D.    The
Company's preliminary proxy statement filed with the SEC on May 7, 2007 (the "Preliminary Proxy Statement") misrepresented material facts and omits material
information necessary for stockholders to make an informed decision concerning the transaction because, in part, it did not discuss whether the defendants considered alternative transaction forms, nor
did it properly detail the sale process.

E.    The
Preliminary Proxy Statement did not detail whether Bear, Stearns & Co., Inc. ("Bear Stearns"), financial advisor to the Special Committee,
performed any sensitivity studies or whether it valued Station assuming Station would be split into separate operating and holding companies. The Preliminary Proxy Statement also failed to detail the
proper valuation for Station, or the basis for the valuation. In addition, Bear Stearns is in a conflict position because it owns 36,639 shares of Station common stock.

The
Amended Complaint also alleges that Frank J. Fertitta III, Lorenzo J. Fertitta, Blake L. Sartini, Delise F. Sartini, FCP, Colony and Colony Acquisitions knowingly aided and abetted
the Company's directors in breaching their fiduciary duties to the Company's public stockholders.

The
Amended Complaint sought an injunction preliminarily and permanently enjoining the defendants from proceeding with, consummating or closing the Merger transaction, and demanded that
the plaintiffs be awarded their costs and disbursements incurred in connection with this action, including reasonable attorneys' fees and reimbursement of expenses.

In
November 2007, in order to resolve the litigation and avoid further cost and delay, the Company and the individual defendants, without admitting any wrongdoing, entered into a global
stipulation of settlement with plaintiffs ("Proposed Settlement"). Pursuant to the Proposed Settlement, the Company made supplemental disclosures in its Definitive Proxy Statement filed with the SEC
on July 9, 2007, to address certain of the disclosure claims raised in the Consolidated Action. As part of the Proposed Settlement, plaintiffs' counsel applied to the Court for an award of
attorneys' fees in the amount of $1.9 million, inclusive of costs and expenses. The Company agreed to pay the fees and expenses on behalf of all plaintiffs as awarded by the court in an amount
up to $1.9 million.

On
December 11, 2007, the District Court preliminarily approved the Proposed Settlement. Thereafter, notice of the Proposed Settlement was disseminated to more than 31,000 former
shareholders of Station and published in theWall Street Journal(national edition), theLos Angeles
Timesand theLas Vegas Review Journal.

None
of the former shareholders objected to the terms of the Proposed Settlement. Consequently, at a hearing on February 11, 2008, Judge Mark R. Denton of the District Court
approved the Proposed Settlement of the Consolidated Action. Given that there were no objections to the settlement, we do not expect an appeal and regard the litigation as concluded.

101

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

19. Subsequent Events



On February 7, 2008, a wholly-owned, indirect subsidiary of Station, as borrower, entered into a $250 million delay-draw term loan which
is collateralized by land located on the southern end of Las Vegas Boulevard at Cactus Avenue and land surrounding Wild Wild West in Las Vegas, Nevada (the "Land Loan"). The Land Loan contains no
principal amortization and matures on February 7, 2011. At closing, $200 million was drawn and the proceeds were used to fund a distribution to Station, establish an interest reserve and
pay transaction expenses. The borrower has the option to request an additional $50 million under the Land Loan to purchase certain real property. Borrowings under the Land Loan bear interest at
LIBOR plus 3.5% per annum or at the Alternate Base Rate (as defined in the Land Loan) plus 2.5% per annum, at the borrower's request. The borrower is required to hedge the interest rate such that it
will not exceed 6.5%. As a result, the borrower entered into a cash flow hedge interest rate swap with a notional amount of $200 million in which the borrower pays a fixed rate of 2.97% and
receives one-month LIBOR, terminating in February 2011.

The
Land Loan contains a number of covenants that, among other things, restrict, subject to certain exceptions, the borrower's ability to incur additional indebtedness; create liens on
assets; engage in mergers or consolidations; sell assets; pay dividends or make distributions; make investments, loans or advances; make certain acquisitions; engage in certain transactions with
affiliates; and fundamentally change its business. In addition, the Land Loan requires the borrower to maintain a loan-to-value ratio of no more than 40% and also contains
customary affirmative covenants and certain events of default.



In January 2008, we entered into cash flow hedge interest rate swap with a notional amount of $250 million that converts a portion of our
floating-rate debt to a fixed rate based on one-month LIBOR rates, terminating in January 2011.



Effective January 1, 2008, Green Valley Ranch agreed to effectively forgive $200 million in notes receivable and the related interest from its
members. As a result, the $100 million due to unconsolidated affiliate and related accrued interest recorded on our consolidated balance sheet at December 31, 2007 will be forgiven
during the three months ended March 31, 2008 with a corresponding reduction in our investments in joint ventures.

102

---



STATION CASINOS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

20. Quarterly Financial Information (Unaudited)

|                                  |  | Year ended December 31, 2007 |        
|--------------------------------- |  | ---------------------------- | -------
|
|
|Net revenues                      |  | $                            | 372,438
|Operating income (loss)           |  |                              | 92,756 
|Income (loss) before income taxes |  |                              | 41,844 
|Net income (loss)                 |  |                              | 23,050 

|                           |  | Year ended December 31, 2006
|-------------------------- |  | ----------------------------
|
|Net revenues               |  | $                           
|Operating income           |  |                             
|Income before income taxes |  |                             
|Net income                 |  |                             

---

103

---





ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A.    CONTROLS AND PROCEDURES

As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out by the Company's management, with the
participation of its Chief Executive Officer and Chief Accounting Officer, of the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e)
under the Securities Exchange Act of 1934). Based upon the evaluation, the Chief Executive Officer and Chief Accounting Officer concluded that the disclosure controls and procedures were effective as
of the end of the period covered by this report. No changes were made to the Company's internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities
Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.



The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company's internal control
system was designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements.

All
internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls.
Accordingly, even effective internal controls can provide only reasonable assurances with respect to financial statement preparation. Further because of changes in conditions, the effectiveness of
internal controls may vary over time.

Management
assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007. In making this assessment, it used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inInternal ControlIntegrated Framework. Based on our
assessment we believe that, as of December 31, 2007, the Company's internal control over financial reporting is effective based on those criteria.

The
Company's independent auditors have issued an audit report on our assessment of the company's internal control over financial reporting. This report appears on page 58.

ITEM 9B.    OTHER INFORMATION

None.

104

---



PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

There is incorporated by reference the information appearing in an amendment to this Annual Report on Form 10-K to be filed with the Commission
not later than 120 days after the end of the fiscal year.

ITEM 11.    EXECUTIVE COMPENSATION

There is incorporated by reference the information appearing in an amendment to this Annual Report on Form 10-K to be filed with the Commission
not later than 120 days after the end of the fiscal year.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

There is incorporated by reference the information appearing in an amendment to this Annual Report on Form 10-K to be filed with the Commission
not later than 120 days after the end of the fiscal year.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

There is incorporated by reference the information appearing in an amendment to this Annual Report on Form 10-K to be filed with the Commission
not later than 120 days after the end of the fiscal year.

ITEM 14.    PRINCIPAL ACCOUNTING FEES AND SERVICES

There is incorporated by reference the information appearing in an amendment to this Annual Report on Form 10-K to be filed with the Commission
not later than 120 days after the end of the fiscal year.

105

---



PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)    1.    Consolidated
Financial Statements (including related notes to Consolidated Financial Statements) filed in Part II of this report are listed below:



|Exhibit Number |     | Description
|-------------- | --- | -----------
|               | 2.1 |            
|               | 3.1 |            
|               | 3.2 |            
|               | 4.1 |            
|               | 4.2 |            
|               | 4.3 |            
|               | 4.4 |            
|               | 4.5 |            
|               | 4.6 |            

106

---



|     | 4.7  |                                                                                                                                                                                                                                                                                                                   | Form of 65/8% Subordinated Notes of the Company (March 2006 Issue). (Included in Exhibit 4.8 which is incorporated herein by reference to the Company's Quarterly Report of Form 10-Q for the period ended
March 31, 2006)                                                                                                                              
|---- | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 4.8  |                                                                                                                                                                                                                                                                                                                   | Indenture dated as of March 13, 2006 between the Company and Law Debenture Trust Company of New York as Trustee. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended March 31,
2006)                                                                                                                  
|     | 4.9  |                                                                                                                                                                                                                                                                                                                   | Form of 73/4% Senior Notes of the Company (August 2006 Issue). (Included in Exhibit 4.10 which is incorporated herein by reference to the Company's Form 8-K dated August 2, 2006)                                                                                                                                                                      
|     | 4.10 |                                                                                                                                                                                                                                                                                                                   | Indenture dated as of August 1, 2006 between the Company and Law Debenture Trust Company of New York as Trustee. (Included in Exhibit 4.10 which is incorporated herein by reference to the Company's Form 8-K dated August 2,
2006)                                                                                                                    
|     | 4.11 |                                                                                                                                                                                                                                                                                                                   | Credit Agreement dated as of November 7, 2007 among the Company, Deutsche Bank Trust Company Americas, the lenders party thereto, Deutsche Bank Securities Inc., J.P. Morgan Securities Inc. and JPMorgan Chase Bank, N.A. (Incorporated
herein by reference to the Company's Form 8-K dated November 7, 2007)                                          
|     | 4.12 |                                                                                                                                                                                                                                                                                                                   | Loan and Security Agreement dated as of November 7, 2007 among German American Capital Corporation, JPMorgan Chase Bank, N.A., and FCP PropCo, LLC. (Incorporated herein by reference to the Company's Form 8-K dated November 7,
2007)                                                                                                                 
|     | 4.13 |                                                                                                                                                                                                                                                                                                                   | Mezzanine Loan and Security Agreement (First Mezzanine) dated as of November 7, 2007 by and among FCP Mezzco Borrower I, LLC, German American Capital Corporation and JPMorgan Chase Bank, N.A. (Incorporated herein by reference to the
Company's Form 8-K dated November 7, 2007)                                                                     
|     | 4.14 |                                                                                                                                                                                                                                                                                                                   | Mezzanine Loan and Security Agreement (Second Mezzanine) dated as of November 7, 2007 by and among FCP Mezzco Borrower II, LLC, German American Capital Corporation and JPMorgan Chase Bank, N.A. (Incorporated herein by reference to the
Company's Form 8-K dated November 7, 2007)                                                                   
|     | 4.15 |                                                                                                                                                                                                                                                                                                                   | Mezzanine Loan and Security Agreement (Third Mezzanine) dated as of November 7, 2007 by and among FCP Mezzco Borrower III, LLC, German American Capital Corporation and JPMorgan Chase Bank, N.A. (Incorporated herein by reference to the
Company's Form 8-K dated November 7, 2007)                                                                   
|     | 4.16 |                                                                                                                                                                                                                                                                                                                   | Credit Agreement dated as of October 5, 2007 among Aliante Gaming, LLC, the lenders party thereto, Wachovia Bank, National Association, Bank of Scotland PLC, Wells Fargo Bank, National Association and Bank of America, N.A.
(Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2007)
|     | 4.17 |                                                                                                                                                                                                                                                                                                                   | Completion Guarantee dated as of October 5, 2007 by the Company and G.C. Investments, LLC in favor of Bank of America, N.A. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended
September 30, 2007)                                                                                                   
|4.18 |      | Credit Agreement dated as of February 7, 2008 among CV PropCo, LLC, the lenders party thereto, Deutsche Bank Trust Company Americas, JPMorgan Chase Bank, N.A., Deutsche Bank Securities Inc. and J.P. Morgan Securities Inc.
(Incorporated herein by reference to the Company's Form 8-K dated February 7, 2008)

107

---



|10.1  |  | Amended and Restated Purchase and Sale Agreement dated as of October 31, 2007 among FCP NewCo, LLC, Boulder Station, Inc., Charleston Station, LLC, Palace Station Hotel & Casino, Inc., Sunset Station, Inc. and
the other parties thereto. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | Master Lease Agreement dated as of November 7, 2007 between FCP PropCo, LLC and the Company. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                                
|10.3  |  | Sublease (Boulder Station) dated as of November 7, 2007 between the Company and Boulder Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                       
|10.4  |  | Sublease (Red Rock) dated as of November 7, 2007 between the Company and Charleston Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                           
|10.5  |  | Sublease (Sunset Station) dated as of November 7, 2007 between the Company and Sunset Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                         
|10.6  |  | Sublease (Palace Station) dated as of November 7, 2007 between the Company and Palace Station Hotel & Casino, Inc. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                          
|10.7  |  | Ground Lease dated as of June 1, 1993 between Boulder Station, Inc. and KB Enterprises. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1993)                                                                                                                    
|10.8  |  | Option to Lease or Purchase dated as of June 1, 1993 between Boulder Station, Inc. and KB Enterprises. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1993)                                                                                                     
|10.9  |  | Option to Acquire Interest Under Purchase Contract dated as of June 1, 1993 between Boulder Station, Inc. and KB Enterprises. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 1993)                                                                              
|10.10 |  | First Amendment to Ground Lease and Sublease dated as of June 30, 1995 between KB Enterprises and Boulder Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                                                                                         
|10.11 |  | Lease Amendment No. 1, dated December 23, 1996 between Boulder Station, Inc. and KB Enterprises. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2005)                                                                                                          
|10.12 |  | Second Amendment to Ground Lease and Sublease dated as of January 7, 1997 between KB Enterprises and Boulder Station, Inc. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2005)                                                                                
|10.13 |  | Rent Agreement to the First Amendment to Ground Lease and Sublease dated as of March 30, 2003 between KB Enterprises and Boulder Station, Inc. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q dated
March 31, 2003)                                                                           
|10.14 |  | Ground Lease dated as of June 1, 1995 between Registrant and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                                                                                                                  

108

---



|10.15 |  | First Amendment to Ground Lease dated as of June 30, 1995 between the Company and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                           
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.16 |  | Lease Amendment No. 1 dated as of December 23, 1996 between the Company and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2005)                           
|10.17 |  | Second Amendment to Ground Lease dated as of January 7, 1997 between Texas Gambling Hall & Hotel, Inc. and the Company. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2005)                 
|10.18 |  | Rent Agreement to the First Amendment to Ground Lease dated as of May 12, 2000 between the Company and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the
period ended March 31, 2003)
|10.19 |  | Assignment, Assumption and Consent Agreement (Ground Lease) dated as of July 6, 1995 between the Company and Texas Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                              
|10.20 |  | Executive Employment Agreement between Frank J. Fertitta III and the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                
|10.21 |  | Executive Employment Agreement between Thomas M. Friel and the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                      
|10.22 |  | Executive Employment Agreement between Scott M Nielson and the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                      
|10.23 |  | Executive Employment Agreement between Lorenzo J. Fertitta and the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                  
|10.24 |  | Executive Employment Agreement between Richard J. Haskins and the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                   
|10.25 |  | Executive Employment Agreement between Kevin L. Kelley and the Company dated as of December 14, 2007. (Incorporated herein by reference to the Company's Form 8-K dated December 13, 2007)                                                                    
|10.26 |  | Equityholders Agreement of the Company, Fertitta Colony Partners LLC and Fertitta Partners LLC dated as of November 7, 2007 (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                               
|10.27 |  | Amendment to Equityholders Agreement of the Company, Fertitta Colony Partners LLC and Fertitta Partners LLC dated as of February 27, 2008.                                                                                                                    

109

---



|10.28 |  | Transfer Restriction Agreement dated as of November 7, 2007 among Frank J. Fertitta, III, Lorenzo J. Fertitta, Thomas J. Barrack, Jr., FCP Holding, Inc. and Fertitta Partners LLC. (Incorporated herein by reference to
Exhibit 7.29 of Amendment No. 34 and 35 to Schedule 13D filed by Frank J. Fertitta III, Lorenzo J. Fertitta, Thomas J. Barrack, Jr. and FCP VoteCo, LLC with respect to the Company with the SEC on November 13,
2007)
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29 |  | Supplemental Executive Retirement Plan of the Company dated as of November 30, 1994. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1994)                                                                                                                                                                                                                                  
|10.30 |  | First Amendment to the Supplemental Executive Retirement Plan of the Company dated as of February 4, 2005. (Incorporated herein by reference to the Company's Form 8-K dated February 7, 2005)                                                                                                                                                                                                                                                 
|10.31 |  | Second Amendment to Supplemental Executive Retirement Program of the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                                                                                                                                 
|10.32 |  | Supplemental Management Retirement Plan of the Company dated as of November 30, 1994. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1994)                                                                                                                                                                                                                                 
|10.33 |  | First Amendment to Supplemental Management Retirement Program of the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                                                                                                                                 
|10.34 |  | Long-Term Stay-On Performance Incentive Payment Agreement between the Company and Lorenzo J. Fertitta dated as of March 15, 2002. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2001)                                                                                                                                                                                        
|10.35 |  | Long-Term Stay-On Performance Incentive Payment Agreement between the Company and Thomas M. Friel dated June 1, 2004. (Incorporated herein by reference to the Company's Form 8-K dated March 30, 2007)                                                                                                                                                                                                                                        
|10.36 |  | Long-Term Stay-On Performance Incentive Payment Agreement between the Company and Richard J. Haskins dated as of April 1, 2002. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended
June 30, 2004)                                                                                                                                                                                           
|10.37 |  | Amended and Restated Deferred Compensation Plan for Executives of the Company dated as of September 12, 2001. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30,
2001)                                                                                                                                                                                                        
|10.38 |  | First Amendment to the Amended and Restated Deferred Compensation Plan for Executives of the Company dated as of December 4, 2002. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2002)                                                                                                                                                                                       
|10.39 |  | Second Amendment to Deferred Compensation Plan for Executives of the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                                                                                                                                 
|10.40 |  | Amended and Restated Deferred Compensation Plan of the Company dated as of January 1, 2001.                                                                                                                                                                                                                                                                                                                                                    
|10.41 |  | First Amendment to Amended and Restated Deferred Compensation Plan of the Company dated as of August 13, 2007.                                                                                                                                                                                                                                                                                                                                 

110

---



|10.42 |  | Second Amendment to Amended and Restated Deferred Compensation Plan of the Company dated as of November 7, 2007. (Incorporated herein by reference to the Company's Form 8-K dated November 7, 2007)                                                                                                                                              
|----- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.43 |  | Special Long-Term Disability Plan of the Company dated as of November 30, 1994. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 1994)                                                                                                                                          
|10.44 |  | Form of Indemnification Agreement for Directors and Executive Officers. (Incorporated herein by reference to the Company's Registration Statement No. 33-59302)                                                                                                                                                                                   
|10.45 |  | Form of Indemnification Agreement between the Company and Frank Fertitta, Jr. (Incorporated herein by reference to the Company's Registration Statement No. 33-59302)                                                                                                                                                                             
|10.46 |  | Operating Agreement dated as of March 10, 2000 among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Company. (Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the period ended December 31, 1999)                                                  
|10.47 |  | First Amendment to Operating Agreement dated as of September 17, 2001 among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Company. (Incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2001)                       
|10.48 |  | Second Amendment to Operating Agreement dated as of December 19, 2003 among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Company. (Incorporated herein by reference to
the Company's Annual Report on Form 10-K for the period ended December 31, 2003)                           
|10.49 |  | Third Amendment to Operating Agreement dated as of December 17, 2004 among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Company. (Incorporated herein by reference to
the Company's Annual Report on Form 10-K for the period ended December 31, 2004)                            
|10.50 |  | Second Amended and Restated Management Agreement dated as of November 1, 2002 between the Company and the United Auburn Indian Community. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended
December 31, 2002)                                                                                   
|10.51 |  | Operating Agreement of Aliante Holding, LLC dated as of December 16, 2005 among Aliante Holding, LLC, G.C. Aliante, LLC and Aliante Station, LLC, a wholly-owned subsidiary of the Company. (Incorporated herein by reference to the
Company's Annual Report on Form 10-K, as amended, for the period ended December 31, 2006)                    
|10.52 |  | Amended and Restated Operating Agreement of Aliante Gaming, LLC dated as of January 6, 2006 among Aliante Gaming, LLC, a wholly-owned subsidiary of the Company, Aliante Holding, LLC and Aliante Station, LLC. (Incorporated
herein by reference to the Company's Annual Report on Form 10-K, as amended, for the period ended December 31, 2006)
|21.1  |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                    
|23.1  |  | Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                                                                                                                                                                                                                                       
|31.1  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                          

111

---



|31.2 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|---- |  | ------------------------------------------------------------------------
|32.1 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2 |  | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(b)    None

(c)    None

112

---





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
|------------------------ |  | ---------------------
|Dated: February 28, 2008 |  | By:                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

|Signature                                       |  | Title                                                                                                         |  | Date             
|----------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------- |  | -----------------
|                                                |  |                                                                                                               |  |                  
|/s/FRANK J. FERTITTA IIIFrank J. Fertitta III   |  | Chairman of the Board and Chief Executive Officer (Principal Executive Officer)                               |  | February 28, 2008
|/s/LORENZO J. FERTITTALorenzo J. Fertitta       |  | Vice Chairman, President and Director                                                                         |  | February 28, 2008
|/s/THOMAS M. FRIELThomas M. Friel               |  | Executive Vice President, Chief Accounting Officer and Treasurer (Principal Financial and Accounting Officer) |  | February 28, 2008
|/s/THOMAS J. BARRACK, JR.Thomas J. Barrack, Jr. |  | Director                                                                                                      |  | February 28, 2008
|/s/JAMES E. NAVEJames E. Nave                   |  | Director                                                                                                      |  | February 28, 2008
|/s/JONATHAN H. GRUNZWEIGJonathan H. Grunzweig   |  | Director                                                                                                      |  | February 28, 2008

113

---



QuickLinks