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, 2003

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.)
|-------------------------------------------------------------------- | ----------------------------------------------

2411 West Sahara Avenue, Las Vegas, Nevada 89102(Address of principal executive offices, Zip Code)

Registrant's
telephone number, including area code: (702) 367-2411

Securities
registered pursuant to Section 12(b) of the Act:

Title of each class
Common Stock, $0.01 Par Value

Name of each exchange on which registered
New York Stock Exchange


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

---

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 an accelerated
filer. Yes ý    No o

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 30, 2003, based on the closing price per share of $25.25 as reported on the New York Stock Exchange was $1,001,689,720.

As
of March 1, 2004, the registrant has 62,838,829 shares of common stock outstanding.

Documents Incorporated by Reference

Portions of the Proxy Statement for the Registrant's 2004 Annual Meeting of Stockholders to be held May 19, 2004 (which has not been made publicly
available as of the date of this filing) are incorporated by reference
into Part III.



---



PART I

ITEM 1. BUSINESS

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

Forward-looking Statements

When used in this report and elsewhere by management from time to time, the words "believes," "anticipates," and "expects" and similar expressions are intended to
identify forward-looking statements with respect to our financial condition, results of operations and our business including our expansion, 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 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 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 eight major hotel/casino properties (one of which is 50% owned) and three smaller
casino properties (one of which is 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 expansion of
our existing gaming facilities in Nevada, the development of gaming facilities on certain real estate we own in the Las Vegas valley, 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"), Fiesta Rancho Casino Hotel ("Fiesta Rancho"), Fiesta Henderson Casino
Hotel ("Fiesta Henderson"), Wild Wild West Gambling Hall & Hotel ("Wild Wild West") and Wildfire Casino ("Wildfire"). We also own a 50% interest in Green Valley Ranch Station Casino ("Green
Valley Ranch Station") and Barley's Casino & Brewing Company ("Barley's"). Each of our casinos caters primarily to local Las Vegas area residents. We market the six "Station" casinos (including
Green Valley Ranch Station) 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.

2

---



Our operating strategy emphasizes attracting and retaining customers primarily from the local and repeat visitor markets. Our casino properties attract customers
through innovative, frequent and high-profile promotional programs directed towards the local market, focused marketing
efforts and convenient locations, aggressive marketing to the repeat visitor market and the development of strong relationships with specifically targeted travel wholesalers. 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 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 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 movie theaters, bowling centers, 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 theme and 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, including several games designed exclusively for Station Casinos.

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 such promotions as "Paycheck Bonanza" and "Great Giveaway," a
popular football season contest. These promotions have become a tradition in the locals' market and have had a positive impact upon our patronage during their respective promotion periods.

We
are heavily focused on using cutting edge technology to drive customer traffic with products such as our Jumbo Brand products, which include "Jumbo Jackpots", "Jumbo Bingo" and "Jumbo
Poker".

3

---

Other
products include "Xtra Play Cash" and "Sports Connection", among others. We believe that these products create sustainable competitive advantages and distinguish us from our competitive set.

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. These points can then be redeemed for food, entertainment and merchandise at any of our Station properties. We believe that this "single card", for which the technology was developed
in-house, sets us apart from our competition in the Las Vegas locals' market. 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, for hotel rooms, movie passes, show tickets or for merchandise in our gift shops.

Casino Properties

Set forth below is certain information as of December 31, 2003, concerning our properties, all of which we own and/or operate except as otherwise
indicated. The properties are more fully described following the table.

|Property          |                                        | Hotel
Rooms |       | Slots(1) |       | Gaming
Tables(2) |     | Parking
Spaces(3)
|----------------- | -------------------------------------- | ----------- | ----- | -------- | ----- | ---------------- | --- | -----------------
|Casino Properties |                                        |             |       |          |       |                  |     |                  
|                  | Palace Station                         |             | 1,012 |          | 1,926 |                  | 46  |                  
|                  | Boulder Station                        |             | 300   |          | 2,890 |                  | 42  |                  
|                  | Texas Station                          |             | 200   |          | 2,505 |                  | 38  |                  
|                  | Sunset Station                         |             | 457   |          | 2,762 |                  | 54  |                  
|                  | Santa Fe Station                       |             | 200   |          | 2,150 |                  | 29  |                  
|                  | Green Valley Ranch Station (50% owned) |             | 201   |          | 2,204 |                  | 48  |                  
|                  | Fiesta Rancho                          |             | 100   |          | 1,724 |                  | 18  |                  
|                  | Fiesta Henderson                       |             | 224   |          | 1,409 |                  | 23  |                  
|Other Properties  |                                        |             |       |          |       |                  |     |                  
|                  | Wild Wild West                         |             | 261   |          | 236   |                  | 6   |                  
|                  | Barley's (50% owned)                   |             |      |          | 199   |                  | 8   |                  
|                  | Wildfire (4)                           |             |      |          | 236   |                  |    |                  
|                  | Thunder Valley (5)                     |             |      |          | 1,906 |                  | 111 |                  

---

4

---



Palace Station is strategically located on approximately 38 acres 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 seven full-service restaurants, several
fast-food outlets, a 250-seat entertainment lounge, four 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.

Palace
Station's seven full-service restaurants have a total of approximately 1,230 seats. These restaurants offer a variety of high-quality food at reasonable
prices, including the 24-hour Palace Cafe (featuring American and Chinese fare), an all-you-can-eat buffet known as "The Feast," Broiler (a steak and
seafood restaurant), Pasta Palace (an Italian restaurant), Guadalajara Bar & Grille (a Mexican restaurant), Jack's Irish Pub and a 17-seat Oyster Bar. In addition to these
restaurants, Palace Station offers various fast-food outlets. Palace Station's guests may also enjoy the Laugh Trax Comedy Club.



Boulder Station, which opened in August 1994, is strategically located on approximately 46 acres on Boulder Highway and 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, several
fast-food outlets, a 750-seat entertainment lounge, seven 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.
Restaurant themes and menus are similar to Palace Station's, allowing Boulder Station to benefit from the market acceptance and awareness of this product. Restaurants include the 24-hour
Boulder Cafe (featuring American and Chinese fare), an all-you-can-eat buffet known as "The Feast," Broiler (a steak and seafood restaurant), Pasta Palace (an
Italian restaurant), and Guadalajara Bar & Grille (a Mexican restaurant). In addition to these restaurants, Boulder Station offers various fast-food outlets. Boulder Station's
restaurants and bars are located in open settings that are designed to intermingle the dining and gaming experience.



Texas Station, which opened in July 1995, is strategically located on approximately 47 acres at the corner of Lake Mead Boulevard and Rancho Road in North
Las Vegas. Texas Station features a friendly, "down-home" Texas atmosphere, highlighted by distinctive early Texas architecture with non-gaming amenities including five
full-service restaurants, several fast-food outlets, 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. The theater complex and adjacent food court provide a competitive advantage for the property and are additional attractions that draw a
significant number of patrons to Texas Station.

Texas
Station's five full-service restaurants have a total of approximately 1,230 seats. These restaurant facilities offer a variety of high-quality food at
reasonable prices, including the 24-hour Texas Cafe, Austin's Steakhouse, San Lorenzo (an Italian restaurant), The Feast Buffet (featuring seven different food stations) and Texas Star
Oyster Bar, which has 110 seats. In addition to the Texas Station-themed restaurants, guests

5

---

may
also enjoy the unique features of several bars and lounges including the Martini Ranch, the Whiskey Bar, the Garage Bar, or the Armadillo Honky Tonk. Texas Station also offers a variety of
fast-food outlets to enhance the customers' dining selection. The quality and variety of the restaurants offered at the facility are a major draw in the rapidly growing North Las Vegas
market.



Sunset Station, which opened in June 1997, is strategically located on approximately 82 acres 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 and a 4,000-seat outdoor amphitheater, seven additional bars, a gift
shop, a non-gaming video arcade, a 13-screen movie theater complex, a Kid's Quest child-care facility, and a swimming pool, as well as several fast-food
outlets and franchises.

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 Cafe (featuring American and Chinese fare), Sonoma Cellar (a
steakhouse), Costa Del Sol (a seafood restaurant), Capri (an Italian restaurant), Guadalajara Bar & Grille (a Mexican restaurant), The Feast Around the World, 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 and a water light display. Sunset Station also offers a variety of fast-food outlets to enhance the customers' dining selection.



On October 2, 2000, we purchased the Santa Fe Hotel & Casino and renamed the property "Santa Fe Station." Santa Fe Station is strategically located
on approximately 38 acres at the intersection of Highway 95 and Rancho Road, approximately five miles northwest of Texas Station. Santa Fe Station features a Southwestern theme with
non-gaming amenities including four full-service restaurants, several fast food outlets, a gift shop, a non-gaming video arcade, a swimming pool, a
250-seat entertainment lounge, five additional bars, a 60-lane bowling center, a regulation-sized ice skating arena and 10,000 square feet of meeting and banquet facilities.
Santa Fe Station is currently being expanded. See "Expansion Strategy" for the detail of the expansion plan.

Santa
Fe Station's four full-service restaurants have a total of approximately 850 seats, and include the 24-hour Santa Fe Cafe, Charcoal Room (a steakhouse),
Cabo Restaurant (a Mexican restaurant) and Memphis Championship Barbecue. Santa Fe Station also offers a variety of fast-food outlets to enhance the customers' dining selection.



Green Valley Ranch Station, located at the intersection of Interstate 215 and Green Valley Parkway in Henderson, Nevada, opened on December 18, 2001. Green
Valley Ranch Station 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 Station and

6

---

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 Station was designed to complement the Green Valley master-planned community. The resort features a Mediterranean-style villa theme with non-gaming
amenities including eight full-service restaurants, a fast-food court with six quick-serve outlets, a 4,200 square-foot non-gaming arcade, a
state-of-the-art spa with outdoor pools, a 10-screen movie theater, a gift shop and approximately 20,000 square feet of meeting and convention space.
Green Valley Ranch Station also offers "Whiskey Beach", an 8-acre complex featuring private poolside cabanas, luxurious open lawn areas, a contemporary poolside bar, three acres of
vineyards and an outdoor performance venue. Green Valley Ranch Station is currently being expanded. See "Expansion Strategy" for the detail of the expansion plan.

Green
Valley Ranch Station's eight full-service restaurants include China Spice (an Asian restaurant), Sushi Sake, Il Fornaio Cucina Italiano (an Italian restaurant),
BullShrimp (featuring steak and seafood), Trophy's (a sports bar/restaurant), Fado's Irish Pub, The Original Pancake House and The Feast Around the World, a live action buffet featuring Mexican,
Italian, barbecue, American and Chinese cuisine. Green Valley Ranch Station 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 the Whiskey Bar, a 5,300 square-foot nightspot.



On January 4, 2001, we purchased the Fiesta Casino Hotel and renamed the property Fiesta Rancho in December 2001. Fiesta Rancho is strategically
located on approximately 25 acres at the intersection of Lake Mead Boulevard and Rancho Road in North Las Vegas across from Texas Station. Fiesta Rancho features a Southwestern theme with
non-gaming amenities including five full-service restaurants, several fast-food outlets, a gift shop, a non-gaming video arcade, a swimming pool, a
970-seat entertainment lounge and five additional bars. Fiesta Rancho is currently being expanded. See "Expansion Strategy" for the detail of the expansion plan.

Fiesta
Rancho's five full-service restaurants have a total of over 1,100 seats, and include the 24-hour Cafe Fiesta (featuring American fare), Garduno's (a
Mexican restaurant), Fiesta Steakhouse, Festival Buffet and Blue Agave Oyster Bar. Fiesta Rancho also offers a variety of fast-food outlets to enhance the customers' dining selection.



On January 30, 2001, we purchased The Reserve Hotel & Casino. In December 2001, the property was renamed Fiesta Henderson and was
re-themed to our Fiesta brand. Fiesta Henderson is strategically located on approximately 46 acres at the intersection of Interstate 215 and Interstate 515. The property features four
full-service restaurants, 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 1,070 seats, and include the 24-hour Baja Beach Cafe (featuring American and
Chinese fare), Fuego Steakhouse, Garduno's (a Mexican restaurant) and the Festival Buffet.

Other Properties



Wild Wild West, which we acquired in July 1998, is strategically located on approximately 19 acres on Tropicana Avenue and immediately adjacent to
Interstate 15. Wild Wild West offers non-gaming amenities including a full-service restaurant, a bar, a gift shop and a truck plaza.

7

---



Barley's, which opened in January 1996, is a casino and brew pub located in Henderson, Nevada. We are the managing partner and own a 50% interest in
Barley's. Barley's offers non-gaming amenities including a full-service restaurant, a pizza kitchen and a bar.



We completed the purchase of the Wildfire in January 2003 for a total of $8.0 million. The Wildfire is located on Rancho Road in Las Vegas, across
from Texas Station. Wildfire offers non-gaming amenities including a lounge, outdoor patio and a full-service restaurant.



We have entered into a Development Services Agreement and a Management Agreement with the UAIC. Pursuant to those agreements, and in compliance with a Memorandum
of Understanding entered 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, in Placer County, California, near Sacramento, which opened on June 9, 2003. On September 17, 2002, the United States Department of the Interior accepted the land into
trust on behalf of the UAIC. The acceptance of the land into trust followed the decision of the United States District Court for the District of Washington, D.C., dismissing a lawsuit filed by the
cities of Roseville and Rocklin, California, and Citizens for Safer Communities, which challenged the United States Department of the Interior's decision to accept the land into trust. Immediately
following the District Court's decision, the plaintiffs appealed the decision to the United States Court of Appeals for the District of Columbia. On November 14, 2003, the Court of Appeals
affirmed the dismissal of the lawsuit by the District Court. On February 15, 2004, the Citizens for Safer Communities filed a petition for writ of certiorari with the United States Supreme
Court, seeking to appeal the decision of the Court of Appeals. The remaining plaintiffs did not seek to appeal that decision. Notwithstanding the Court of Appeals' decision and the acceptance of the
land into trust, there can be no assurances as to the ultimate outcome of the Citizens for Safer Communities' pending efforts to appeal that decision.

Thunder
Valley has 1,906 Class III slot machines, 111 table games, including a private VIP gaming area, a 500-seat bingo room, three specialty restaurants, a
500-seat buffet, a food court, a center pit bar and parking for over 4,500 vehicles. Our seven-year Management Agreement was approved by the National Indian Gaming Commission
and expires in June 2010. We receive a management fee equal to 24% of the facility's net income. We also received a development fee equal to 2% of the cost of the project upon the opening of
the facility.

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 Las Vegas, 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 the majority of these sites.

8

---



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 expansion to accommodate future growth and to allow us to develop dominant properties in each market place. A project's master-planned design typically allows the option of
adding hotel rooms, casino space, parking structures and non-gaming 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 currently have master plan expansions underway at Green Valley Ranch Station, Santa Fe Station and Fiesta Rancho.

In
the fourth quarter of 2003, we began a $110 million expansion at Green Valley Ranch Station. The expansion will include 296 hotel rooms, 25,500 square feet of additional
meeting space, approximately 200 slot machines and an expanded spa facility. Construction on the project is expected to be complete in the fourth quarter of 2004.

We
are currently expanding Santa Fe Station, which will add more than 20,000 square feet of additional casino space, 350 slot machines, a new 16-screen movie theater complex,
an upgrade of the property's bowling center, a new entertainment venue and bar, a new Kid's Quest facility and other amenities. The expansion project will also include the removal of the ice arena. We
believe that the expansion will cost approximately $50 million and is expected to be completed in the first quarter of 2005.

We
plan to begin a 31,000 square-foot expansion project at Fiesta Rancho in April 2004, which will bring a new ice arena to the property, complete with concession
area, pro shop, locker rooms and private special event rooms. We believe that the project will cost approximately $6.5 million and will be completed by September 2004.



We have acquired several parcels of land in the Las Vegas valley, which can be used for new development. 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.



We are developing Red Rock Station on Charleston Boulevard at the Interstate 215/Charleston interchange in Las Vegas. The initial phase of the property is
expected to include 60 table games and 2,700 slot machines. The property is expected to also include 400 hotel rooms, 45,000 square feet of meeting space, 16 movie theaters, a 20,000 square foot spa
facility and several restaurants, including a buffet. The cost of the project is expected to be approximately $450 million to $475 million, of which approximately $74 million has
been spent as of December 31, 2003. We believe the construction of the project will begin in mid- 2004 and be complete in late 2005 or early 2006.



In April 2003, we entered into Development and Management Agreements with the Federated Indians of Graton Rancheria (the "FIGR") pursuant to which we will
assist the FIGR in developing and

9

---

operating
a gaming and entertainment project to be located in Sonoma County, California. The FIGR selected us to assist it in designing, developing and financing the 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 22% 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
August 2003, the FIGR and we entered into an option to purchase 360 acres of land just west of Rohnert Park's city limits in Sonoma County, California. The proposed site of the
project is bordered by Stony Point Road, Wilfred Avenue and Rohnert Park Expressway, approximately one-half mile from Highway 101 and approximately 43 miles from San Francisco. In
October 2003, the FIGR entered into a Memorandum of Understanding with the City of Rohnert Park. 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 accepting the land into trust on behalf of
the FIGR and approval of the Management Agreement by the National Indian Gaming Commission ("NIGC"). No assurances can be given as to when, or if, the necessary government and regulatory approvals
will be received. Prior to the receipt of such government and regulatory approvals, we likely will contribute significant financial support to the project. As of December 31, 2003, we had
advanced approximately $16.2 million toward the development of this project, primarily to secure real estate for future development. In addition, we will make approximately $11.3 million
of payments upon achieving certain milestones, which will not be reimbursed. As of December 31, 2003, approximately $2.0 million of these payments have been made. The proposed project is
expected to be completed in approximately three to four years, but there can be no assurance that it will be completed within that timeframe or at all.



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 will assist Gun Lake in developing and
operating a gaming and entertainment project to be located in Allegan County, Michigan.

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. We may pay an additional
$12.0 million in total in years six and seven of the amended Management Agreement, subject to certain contingencies. Under the terms of the amended Development Agreement, we have agreed to
arrange financing for the ongoing development costs and construction of the project. Prior to obtaining financing for the project, we expect to advance $10 million to $15 million to Gun
Lake for the acquisition of land and other development costs. As of December 31, 2003, we had advanced approximately $5.2 million toward the development of this project, primarily to
secure real estate for future development. Although no firm construction budget has been established, we expect that the total cost of the development and construction of the project would be less
than $200 million. Funds advanced by us are expected to be repaid with the proceeds of the project financing or from Gun Lake's gaming revenues. The amended 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 145 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently
contemplated, the project would include up to 2,500 slot machines, 75 table games, a buffet, specialty restaurants and an entertainment venue. Construction of the project includes the conversion of an
existing 192,000 square foot building into

10

---

the
entertainment facility. Development of the entertainment project and operation of Class III gaming is subject to certain governmental and regulatory approvals, including, but not limited
to, negotiating a gaming compact with the State of Michigan, the United States Department of the Interior accepting the land into trust on behalf of Gun Lake and approval of the Management Agreement
by the NIGC. No assurances can be given as to when, or if, the necessary government and regulatory approvals will be received. Prior to the receipt of such governmental and regulatory approvals, we
will contribute significant financial support to the project. The proposed project is expected to be completed in 2005, but there can be no assurance that it will be completed at that time or at all.



In January 2004, we entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "MITCR"), a
federally recognized Native American tribe. We will assist the MITCR in developing and operating a gaming and entertainment project to be located 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. Prior to obtaining financing for the facility, we expect to advance $5 million to $10 million to
the MITCR for the acquisition of land and other development costs. Although no firm construction budget has been established, we expect the total cost of the development and construction of the
facility will be less than $80 million. Funds advanced by us are expected to be repaid from the proceeds of the facility financing or from the MITCR's gaming revenues. 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. The proposed facility will be located on approximately 650 acres on
State Route 149, at the intersection with Highway 99. As currently contemplated, the facility will include approximately 500 slot machines, 10 table games and dining and entertainment amenities. We
anticipate the gaming and entertainment facility will be open some time during 2005, but there can be no assurance that it will be completed at that time or at all.



In March 2004, we entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians ("Mono"), a federally recognized Native
American tribe located in central California. We will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County, California. We have secured for
the benefit of the Mono two parcels 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. Although no firm construction budget has been established, we expect the total cost of the development and construction of the facility will be less
than $225 million. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from the Mono's gaming revenues. 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, 70
table games and dining, 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 United States Department of the Interior accepting the land into trust on behalf of the Mono and approval of the Management Agreement
by the NIGC. We anticipate the gaming and entertainment facility will be open some time in late 2007, but there can be no assurance that it will be completed at that time or at all.

11

---

Competition

The gaming industry includes land-based casinos, dockside casinos, riverboat casinos, casinos located on Native American land and other forms of
legalized gaming. There is intense competition among companies in the gaming industry, many 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. 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. 61 Native American tribes entered into Tribal-State Gaming Compacts ("Compacts") with the State of California in 1999 and 2000
that are currently in effect. Each of these Native American tribes may operate up to two gaming facilities. Nine of these Native American tribes are presently not operating a casino. Two Native
American tribes entered into Compacts with the State of California in 2003 that are currently in effect. Both of these Native American tribes may operate one gaming facility; however, they are
presently not operating a casino. Currently there are 53 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. Certain compacts are currently being renegotiated with the state. While the outcome
of the negotiations is yet to be determined, the possibility exists that the current facilities operating in California will be allowed to expand. It is not certain how any expansion of Native
American gaming in California will affect our Nevada operations given that visitors from California make up Nevada's largest visitors market. Moreover, it is uncertain how soon expansion will effect
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.

Our
Nevada casino properties face more direct competition from 33 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.

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, 2003, there were 1,387 restricted gaming locations with a total of 14,003 slot machines. We compete with other locals oriented hotel/casinos 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 34
major gaming properties located on or near the Las Vegas Strip, 13 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 businesses 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.

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

12

---

In
1997, the Nevada legislature enacted Senate Bill 208. This legislation identified certain gaming enterprise districts and classifications of real property wherein gaming development
would be permitted throughout the Las Vegas valley. 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.

Regulation and Licensing



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 ("Nevada Commission"), the Nevada State Gaming Control Board ("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, the Nevada Board,
the City of Las Vegas, the Clark County Board, the City of North Las Vegas, the 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. Change 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"), Fiesta Station, Inc. ("FSI"), Rancho Station, LLC ("RSL") and Lake
Mead Station, Inc. ("LMSI") 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 Station Casino. The Company's 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"), a micro brewery and casino located in Henderson, Nevada. Station Casinos' ownership in TCAI is held through an intermediary company known as Green Valley
Station, Inc. ("GVSI"), which is licensed as a member and manager of TCAI. 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 Casinos 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, SSI, TRSI, GVSI, SFSI, GVRS, FSI, RSL and LMSI. We are also licensed as a manufacturer and distributor. PSHC, BSI, SSI, TRSI, GVSI, SFSI, GVRG, FSI and LMSI are each a
corporate gaming licensee and TCAI, TSL, GVRG, RSL and PSL 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 Casinos is required periodically to submit detailed financial and operating reports to the Nevada Commission and the Nevada Board and furnish
any

13

---

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 Casinos 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 Casinos or the
Gaming Subsidiaries, which hold a license, 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. Officers, directors and key employees of Station Casinos 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 Casinos or the
Gaming Subsidiaries, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require Station Casinos 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
Casinos 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 Casinos, the Gaming Subsidiaries and the persons involved could 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, Green Valley Ranch Station, Fiesta Rancho, Fiesta Henderson, Wild Wild West, Wildfire and Barley'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 Station Casinos, Inc. 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.

14

---

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 Station Casinos 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 Station Casinos 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 the Board of Directors of Station
Casinos, any change in our corporate charter, bylaws, management policies or operations of Station Casinos, or any of its 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 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 voting securities of Station Casinos, (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 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.

15

---

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. A 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 22, 2003, 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 Casinos (an "Affiliate"), which is a publicly traded corporation or would thereby become a publicly traded corporation pursuant to a public offering. The Shelf Approval 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
Casinos 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. The Shelf Approval also 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. Any representation to the contrary
is unlawful.

Changes
in control of Station Casinos 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 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.

16

---

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. The
sale of alcoholic beverages at Boulder Station and Wild Wild West is subject to licensing control and regulation by the Clark County Board. Texas Station and Fiesta Rancho are subject to licensing
control and regulation of the City of North Las Vegas. Sunset Station, Green Valley Ranch Station, Fiesta Henderson and Barley's are subject to the licensing control and regulation of the City of
Henderson and the Department of Treasury, Bureau of Alcohol, Tobacco and Firearms, as applicable. All 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.



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

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 contract relating to the Company's casino for the United Auburn Indian Community was approved by the NIGC. 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 Indian tribal government which owns the facility purchasing or leasing the games; (ii) has been or is convicted of a felony
gaming offense; (iii) has knowingly and willfully provided materially false information to the NIGC or the tribe; (iv) has refused to respond to questions from the

17

---

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 a trustee, exercising due diligence, would not approve such 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.

IGRA
established three separate classes of tribal gaming-Class I, Class II and Class III. Class I 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 Casino may provide Class II gaming and, as limited by the
tribal-state compact, Class III gaming.

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 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. The Company has been licensed by the relevant tribal gaming authorities to manage Thunder Valley
Casino.

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 thing 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 contracts
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 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 the Company, 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 IGRA. The NIGC may determine that some or all of the ordinances require amendment, and that

18

---

additional
requirements, including additional licensing requirements, may be imposed on us. We have received no such notification regarding Thunder Valley. The possession of valid licenses from the
United Auburn Indian Community are ongoing conditions of our agreements with the tribe.



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"). Station Casinos 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 Casinos 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 Casinos 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 Station Casinos 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. We may be required to submit detailed financial and operating reports to Regulatory Authorities.



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 during the last three years have and may continue to 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

19

---

corresponding
decrease in visitation and spending at our properties, which could negatively impact revenues.



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 recently enacted
various tax increases, which raised the tax on gross gaming revenue from 6.25% to 6.75%. In addition, a payroll tax was enacted as well as increases in the taxes on alcohol and cigarettes. The various
taxes went into affect at various points throughout the second half of 2003 and the Company anticipates that the annual impact of these new taxes and tax increases will be approximately
$5 million.

The
UAIC and a number of other Native American tribes in California are currently renegotiating certain provisions of the Tribal State Gaming Compacts ("Compacts") to which they are a
party. Although it is unclear what changes, if any, may ultimately be made to the Compacts, such renegotiation may result in an increase in the fees paid by the UAIC and other Native American tribes
to the State of California, an increase in the number of gaming devices that a Native American tribe may operate and other obligations that are not currently required by the existing Compacts. Changes
in applicable laws, regulations or Compact provisions could have a significant impact on our operations.

Employees

As of March 1, 2004, we had approximately 10,300 employees in Nevada, which includes Green Valley Ranch Station and Barley'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. In 1998, 12 of our employees voted to be represented
by a union. In 2004, these same employees voted to be and were decertified by the union. 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. We believe that we have good relationships with our employees.

Available Information

Station Casinos, Inc. is a reporting company under the Securities Exchange Act of 1934, as amended, and files annual reports, quarterly reports, proxy
statements and other documents with the SEC. The public may read and copy any of our filings at the SEC's Public Reference Room at 450 Fifth Street N.W., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Because we make 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, through our Internet
website (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.

ITEM 2. PROPERTIES

Substantially all of the property that we own and lease is subject to a lien to secure borrowings under our Revolving Facility.

Palace
Station is situated on approximately 38 acres that we own located on the west side of Las Vegas, Nevada.

20

---

Boulder
Station is situated on approximately 46 acres located on the east side of Las Vegas, Nevada. We own 19 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 the Company and Lorenzo J.
Fertitta, the President of the Company. 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. 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 maximum term of 65 years, ending in July 2060. The lease provides for monthly rental payments of $287,500 through June 2005. In July 2005,
and every ten years thereafter, the rent will be adjusted by a cost of living factor. 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 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 2005, 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 on the northwest side of Las Vegas, Nevada.

Green
Valley Ranch Station, a 50% owned joint venture, is situated on approximately 40 acres of a 170-acre multi-use commercial development and is located in
Henderson, Nevada approximately six miles southwest of Sunset Station.

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

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

We
currently own or lease six sites, which have been acquired for potential gaming projects, consisting of 201 acres in the Las Vegas valley and 188 acres near the Thunder Valley Casino
in Sacramento, California.

ITEM 3. LEGAL PROCEEDINGS

Station Casinos 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 Station Casinos and our
subsidiaries.



On April 26, 1994, a suit seeking status as a class action lawsuit was filed by plaintiff, William H. Poulos, et al., as class representative, in the
United States District Court, Middle District of Florida, naming 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including Station Casinos. On
May 10, 1994, a lawsuit alleging substantially identical claims was filed by

21

---

another
plaintiff, William Ahearn, et al., as class representative, in the United States District Court, Middle District of Florida, against 48 manufacturers, distributors and casino operators of
video poker and electronic slot machines, including the Company and most of the other major hotel/casino companies. The lawsuits allege that the defendants have engaged in a course of fraudulent and
misleading conduct intended to induce persons to play such games based on a false belief concerning how the gaming machines operate, as well as the extent to which there is an opportunity to win. The
two lawsuits have been consolidated into a single action, and have been transferred to the United States District Court for the District of Nevada (the "Nevada District Court"). On
September 26, 1995, a lawsuit alleging substantially identical claims was filed by plaintiff, Larry Schreier, et al., as class representative, in the Nevada District Court, naming 45
manufacturers, distributors, and casino operators of video poker and electronic slot machines, including the Company. Motions to dismiss the Poulos/Ahearn and Schreier cases were filed by defendants.
On April 17, 1996, the Poulos/Ahearn lawsuits were dismissed, but plaintiffs were given leave to file Amended Complaints on or before May 31, 1996. On May 31, 1996, an Amended
Complaint was filed, naming William H. Poulos, et al., as plaintiff. Defendants filed a motion to dismiss. On August 15, 1996, the Schreier lawsuit was dismissed with leave to amend. On
September 27, 1996, Schreier filed an Amended Complaint. Defendants filed motions to dismiss the Amended Complaint. In December 1996, the Court consolidated the Poulos/Ahearn, the
Schreier, and a third case not involving the Company and ordered all pending motions be deemed withdrawn without prejudice, including Defendants' Motions to Dismiss the Amended Complaints. The
plaintiffs filed a Consolidated Amended Complaint on February 13, 1997. On or about December 19, 1997, the Court issued formal opinions granting in part and denying in part the
defendants' motion to dismiss. In so doing, the Court ordered plaintiffs to file an amended complaint in accordance with the Court's orders in January of 1998. Accordingly, plaintiffs amended their
complaint and filed it with the Nevada District Court in February 1998. The Company and all other defendants continue to deny the allegations contained in the amended complaint filed on behalf
of plaintiffs. The plaintiffs are seeking compensatory, special, consequential, incidental, and punitive damages in unspecified amounts. On June 25, 2002, the Nevada District Court denied
plaintiffs' motion for class certification. On July 11, 2002, plaintiffs filed a petition for permission to appeal such class certification ruling with the United States Court of Appeals for
the Ninth Circuit. On August 15, 2002, the Ninth Circuit granted the plaintiffs' petition for permission to appeal such class certification ruling. The parties have filed briefs setting forth
their arguments, and rebutting the other party's arguments concerning the issue on appeal. On January 15, 2004, the Court of Appeals heard oral argument on this matter, but has yet to issue a
ruling. While no assurances can be made with respect to any litigation, the Company believes that the plaintiffs' claims are without merit and does not expect that the lawsuits will have a material
adverse effect on the Company's financial position or results of operations.



On December 20, 2000, the Company and Kansas City Station Corporation were named as defendants in an action styledFitzgerald Sugar
Creek, Inc. v. Kansas City Station Corp., et al.,No. 00CV230480 (Circuit Court of Jackson County, Missouri). The plaintiff alleged that the defendants were
liable for unspecified actual and punitive damages and other relief, based on alleged tortuous interference with the plaintiff's business expectancy of receiving a Missouri gaming license in the
Kansas City metropolitan area. The allegations of the petition appeared to be based on the same issues involved in the investigation by the Missouri Gaming Commission related to activities of Michael
Lazaroff, an attorney who formerly represented the Company in Missouri. The plaintiff also alleged claims based on fraudulent concealment and civil conspiracy. The Company and its subsidiary responded
to this lawsuit on January 19, 2001 and moved to remove the case to bankruptcy court in Nevada. On March 29, 2001, the United States Bankruptcy Court for the Western District of Missouri
remanded the case to the Circuit Court of Jackson County, Missouri. On April 19, 2001, defendants filed a motion to dismiss plaintiff's petition. On August 10, 2001, the Circuit Court
(1) granted that motion to dismiss as to the civil conspiracy claim, and (2) denied that motion to dismiss as to the tortuous interference with business expectancy and fraudulent

22

---

concealment
claims. On November 21, 2001, Philip Griffith and the City of Sugar Creek, Missouri (the "City") were added as plaintiffs in this case. The new plaintiffs also alleged claims for
tortuous interference with business expectancy and fraudulent concealment. On December 17, 2001, defendants filed a motion to dismiss all of Griffith's and the City's claims. On
March 15, 2002, the Circuit Court denied that motion to dismiss in its entirety.

On
February 9, 2004, the parties entered into a settlement agreement, pursuant to which the Company settled the litigation for $38 million ($24.7 million, net of the
related tax benefit), which was paid on February 24, 2004. The Company has asserted a claim against Mr. Lazaroff and his former law firm to recover all damages caused by
Mr. Lazaroff's conduct. As part of that claim, the Company intends to seek reimbursement for, among other things, the amount it was required to pay to settle the Fitzgerald's litigation, as
well as the attorneys' fees and costs incurred by the Company in defending that litigation. There can be no assurance that the Company will be successful in recovering all or any portion of costs or
damages.



On July 13, 2001, the Company and five of its major operating subsidiaries were named as defendants in a lawsuit brought by Harrah's
Entertainment, Inc. and Harrah's Operating Company, Inc. in the United States District Court, District of Nevada
(CV-S-01-0825-PMP-RJJ). The plaintiffs allege that the Company and its subsidiaries are liable for unspecified actual and punitive damages,
and they seek injunctive and other relief, based on allegations that the Company's "Boarding Pass Rewards Program" infringes on various patents held by the plaintiffs.

On
October 4, 2001, the Company and the subsidiaries filed their answer and counterclaim seeking declaratory judgment that Harrah's patents (1) are not infringed by the
Company's and the subsidiaries' actions, (2) are invalid under federal patent law and (3) are rendered unenforceable due to Harrah's inequitable conduct. On March 27, 2002,
Harrah's filed an amended complaint, which added an additional defendant, Green Valley Ranch Gaming, LLC, which is an affiliate of the Company. On April 22, 2002, the Company and its
subsidiaries and affiliate filed their amended answer and counterclaim denying infringement by Green Valley Ranch Gaming, LLC, and alleging Harrah's committed further acts of inequitable conduct.

On
January 17, 2003, the Company filed motions for summary judgment or partial summary judgment on several issues: (1) a Motion for Summary Judgment of Patent
Unenforceability Due To Inequitable Conduct, (2) a Motion for Summary Judgment of Patent Invalidity Under 35 U.S.C. ss 102 and 103 (lack of novelty and obviousness), (3) a Motion for
Partial Summary Judgment of Patent Invalidity Under 35 U.S.C. s 112 (indefiniteness, lack of written description and failure to disclose best mode), (4) a Motion for Partial Summary Judgment of
Non-Infringement of U.S. Patent No. 6,003,013, and (5) a Motion for Partial Summary Judgment of Non-Infringement of U.S. Patent No. 6,183,362. That same
day, Harrah's filed motions for partial summary judgment on several issues: (1) a Motion for Partial Summary Judgment of Infringement of Claims 15-18 of U.S. Patent
No. 5,761,647, (2) a Motion for Partial Summary Judgment of Infringement of Claims 1-2 and 49 of U.S. Patent No. 6,003,013, (3) a Motion for Partial Summary
Judgment on Defendants' Invalidity Defenses, and (4) a Motion for Partial Summary Judgment That Certain Third Party Systems Are Not Prior Art. During February and March of 2003, the parties
filed oppositions, reply briefs and various motions to strike in response to the summary judgment motions.

The
Company and its subsidiaries and affiliate have requested oral argument on the motions. A hearing on certain of the summary judgment motions and motions to strike has been set for
March 23, 2004. While no assurances can be made with respect to any litigation, the Company believes that the plaintiffs' claims are without merit and does not expect that the lawsuit will have
a material adverse effect on its financial position or results of operations.

23

---



On May 2, 2003, the Company and one of its operating subsidiaries, Palace Station Hotel & Casino, Inc. ("Palace Station"), were named as
defendants in a lawsuit seeking status as a class action brought by Dov Plattner in the Superior Court of Los Angeles County, California (Case No. CB295056).

The
lawsuit seeks to recover for alleged breach of contract, fraud, negligent misrepresentation, breach of covenant of good faith and fair dealing, promissory fraud, unjust enrichment
and violations of sections 17200 and 17500, et. seq. of the California Business and Professions Code, all in connection with energy and telephone surcharge fees imposed on Palace Station hotel guests.
The plaintiff is requesting unspecified actual and punitive damages, as well as injunctive and other relief.

On
November 10, 2003, the defendants filed a response to the complaint denying all liability. While no assurances can be made with respect to any litigation, the Company believes
that the plaintiff's claims are without merit and does not expect that the lawsuit will have a material adverse effect on the Company's financial position or results of operations.



On May 14, 2003, the Company (as a nominal defendant only) and all of its executive officers and directors were named as defendants in a derivative action
lawsuit, which also seeks status as a class action, brought by Bernard Castillo in the District Court of Clark County, Nevada (Case No. A467663).

The
lawsuit alleges that (1) the director defendants breached their fiduciary duties by failing to make certain disclosures in the Company's 2002 Proxy Statement regarding the
sale by the Company of its subsidiary, Southwest Gaming Services, Inc. ("SGSI"), and regarding a proposal seeking shareholder approval of an amendment to the Company's stock option plan;
(2) the director defendants breached their fiduciary duties in approving the sale of SGSI and in recommending approval of the option plan amendment; and (3) the purchasers of SGSI and
the recipients of certain benefits made possible by the option plan amendment were unjustly enriched. The plaintiff is requesting unspecified actual damages, as well as injunctive and other relief.

On
July 21, 2003, the defendants filed a motion to dismiss or, in the alternative, motion to stay all of the plaintiff's claims. On October 24, 2003, the District Court
granted the motion to stay all of plaintiff's claims pending the consideration of such claims by a special litigation committee to be formed by the Company in accordance with the Court's order
granting such motion. On February 27,
2004, the District Court entered another order extending the stay for another 120 days pending the special litigation committee investigation. While no assurances can be made with respect to any
litigation, the Company believes that the plaintiff's claims are without merit and does not expect that the lawsuit will have a material adverse effect on the Company's financial position or results
of operations.

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 2003.

24

---



PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Our common stock trades on the New York Stock Exchange under the symbol "STN". The following table sets forth, for the periods indicated, the high and low sale
price per share of our common stock as reported on the New York Stock Exchange.

High

LowYear Ending December 31, 2003First Quarter

$
21.67

$
16.55Second Quarter


25.87


20.49Third Quarter


32.96


24.85Fourth Quarter


33.50


27.80Year Ending December 31, 2002First Quarter

$
17.03

$
10.80Second Quarter


19.20


15.95Third Quarter


18.10


11.21Fourth Quarter


19.20


15.21


As
of March 1, 2004, there were 562 holders of record of our common stock and the closing price of our common stock was $38.81.

On
July 21, 2003 and October 1, 2003, our Board of Directors declared a quarterly cash dividend of $0.125 per share. On September 4, 2003, we paid a quarterly cash
dividend of approximately $7.4 million to shareholders of record on August 14, 2003. On December 4, 2003, we paid a quarterly cash dividend of approximately $7.5 million to
shareholders of record on November 13, 2003. 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").

The
following table lists all equity compensation plans that provide for the award of our securities or the grant of options as of December 31, 2003:

|Plan category                                              |  | Number of securities
to be issued upon
exercise of
outstanding options |  | Weighted-average exercise
price of outstanding
options |       | Number of securities
remaining available for
future issuance under
equity compensation
plans
|---------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------ | ----- | --------------------------------------------------------------------------------------------
|Equity compensation plans approved by shareholders         |  | 8,575,116                                                              |  | $                                                      | 10.95 |                                                                                             
|Equity compensation plans not approved by shareholders (a) |  | 1,044,700                                                              |  | $                                                      | 13.65 |                                                                                             
|                                                           |  |                                                                        |  |                                                        |       |                                                                                             
|Total                                                      |  | 9,619,816                                                              |  | $                                                      | 11.25 |                                                                                             
|                                                           |  |                                                                        |  |                                                        |       |                                                                                             

---

25

---

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data presented below as of and for our fiscal years ended December 31, 1999, 2000, 2001, 2002 and 2003 have been
derived from our consolidated financial statements which, except for 1999 and 2000, 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.

|                                                                                          |  | For the years ended December 31, |          
|----------------------------------------------------------------------------------------- |  | -------------------------------- | ---------
|
|
|Operating Results:                                                                        |  |                                  |          
|Net revenues                                                                              |  | $                                | 858,089  
|Operating costs and expenses, excluding the following items                               |  |                                  | 655,844  
|Impairment loss (d)                                                                       |  |                                  | 18,868   
|Litigation settlement (e)                                                                 |  |                                  | 38,000   
|Development expense (f)                                                                   |  |                                  | 4,306    
|Preopening expenses (g)                                                                   |  |                                  |         
|Gain on sale of properties (h)                                                            |  |                                  |         
|Missouri/Nevada investigations and fines (i)                                              |  |                                  |         
|                                                                                          |  |                                  |          
|Operating income                                                                          |  |                                  | 141,071  
|Earnings from joint ventures                                                              |  |                                  | 20,604   
|                                                                                          |  |                                  |          
|Operating income and earnings from joint ventures                                         |  |                                  | 161,675  
|Other expense                                                                             |  |                                  | (93,498  
|                                                                                          |  |                                  |          
|Income (loss) before income taxes and cumulative effect of change in accounting principle |  |                                  | 68,177   
|Income tax (provision) benefit                                                            |  |                                  | (23,834  
|Cumulative effect of change in accounting principle (j)                                   |  |                                  |         
|Preferred stock dividends                                                                 |  |                                  |         
|                                                                                          |  |                                  |          
|Net income (loss) applicable to common stock                                              |  | $                                | 44,343   
|                                                                                          |  |                                  |          
|Basic earning (loss) per common share                                                     |  | $                                | 0.76     
|Diluted earnings (loss) per common share                                                  |  | $                                | 0.72     
|Balance Sheet Data:                                                                       |  |                                  |          
|Total assets                                                                              |  | $                                | 1,745,972
|Long-term debt                                                                            |  |                                  | 1,168,957
|Stockholders' equity                                                                      |  |                                  | 339,939  

---

26

---

27

---



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

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

Results of Operations

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

|                                  |                                    | Year ended
December 31,
2003 |         | Percent
change |      | Year ended
December 31,
2002 |    | Percent
change |         | Year ended
December 31,
2001 |       
|--------------------------------- | ---------------------------------- | ---------------------------- | ------- | -------------- | ---- | ---------------------------- | -- | -------------- | ------- | ---------------------------- | ------
|Net revenuestotal                |                                    | $                            | 858,089 |                | 8.2  | %                            | $  | 792,865        |         | (5.3                         | )%    
|                                  | Major Las Vegas Operations (a)     |                              |         | 781,061        |      | 1.6                          | %  |                | 768,813 |                              | (3.6  
|                                  | Management fees (b)                |                              |         | 46,711         |      | 862.5                        | %  |                | 4,853   |                              | 616.8 
|                                  | Other Operations and Corporate (c) |                              |         | 30,317         |      | 57.9                         | %  |                | 19,199  |                              | (50.7 
|Operating income (loss)total     |                                    | $                            | 141,071 |                | (3.3 | )%                           | $  | 145,910        |         | 5.5                          | %     
|                                  | Major Las Vegas Operations (a)     |                              |         | 170,566        |      | (7.9                         | )% |                | 185,170 |                              | 7.3   
|                                  | Management fees (b)                |                              |         | 46,711         |      | 862.5                        | %  |                | 4,853   |                              | 616.8 
|                                  | Other Operations and Corporate (c) |                              |         | (76,206        | )    | (72.8                        | )% |                | (44,113 | )                            | (26.5 
|Cash flows provided by (used in): |                                    |                              |         |                |      |                              |    |                |         |                              |       
|                                  | Operating activities               |                              | $       | 196,451        |      | 47.8                         | %  | $              | 132,898 |                              | 12.8  
|                                  | Investing activities               |                              |         | (184,317       | )    | (205.2                       | )% |                | (60,393 | )                            | 87.6  
|                                  | Financing activities               |                              |         | (9,201         | )    | 88.4                         | %  |                | (79,283 | )                            | (144.6

---



Consolidated net revenues for the year ended December 31, 2003 increased 8.2% to $858.1 million as compared to $792.9 million for the year
ended December 31, 2002. The increase in consolidated net revenues was primarily due to management and development fees of approximately $40.3 million and $4.6 million,
respectively, from Thunder Valley, which opened on June 9, 2003. We manage Thunder Valley in Sacramento, California on behalf of the United Auburn Indian Community ("UAIC") and receive a
management fee of 24% of the facility's net income, as defined.

Combined
net revenues from our Major Las Vegas Operations increased 1.6% to $781.1 million for the year ended December 31, 2003 as compared to $768.8 million for the
year ended December 31, 2002. The increase in combined net revenues was primarily due to the overall population growth in the Las Vegas valley, as well as the introduction of Jumbo Jackpot in
April 2003. Jumbo Jackpot is an exclusive progressive slot jackpot that allows our Boarding Pass card members the opportunity to win between $50,000 and $150,000 just for playing slot machines
at the Station properties. The increase in revenues was partially offset by a short-term slowdown in our business during the first part of 2003, as our customers were distracted by the
events leading up to and including the war in Iraq.

28

---

Consolidated
net revenues for the year ended December 31, 2002 decreased 5.3% to $792.9 million as compared to $836.9 million for the year ended December 31,
2001. The decrease in consolidated net revenues was due in part to the prior year including the operations of Southwest Gaming, which was sold on September 30, 2001 and accounted for
approximately $22.9 million of net revenue in 2001. In addition, revenues at Sunset Station declined due to the impact from Green Valley Ranch Station, which opened on December 18, 2001,
and is accounted for under the equity method.

Combined
net revenues from our Major Las Vegas Operations decreased 3.6% to $768.8 million for the year ended December 31, 2002 as compared to $797.2 million for the
year ended December 31, 2001. The decline in combined net revenues was due in large part to a decline in revenues at Sunset Station due to the impact from Green Valley Ranch Station. Total net
revenues from all properties that we manage (including Green Valley Ranch Station) increased by 10.4% over the same period.



In analyzing year-to-year comparative operating results, management takes into consideration the effect of certain charges and credits on operating income. The
following table identifies these charges and credits and the resulting operating income and operating margins, excluding such charges and credits (dollars in thousands):

|                                                    |                                                     | Years ended December 31, |        
|--------------------------------------------------- | --------------------------------------------------- | ------------------------ | -------
|
|Operating income                                    |                                                     | $                        | 141,071
|                                                    | Operating margin                                    |                          |        
|Certain charges/credits:                            |                                                     |                          |        
|                                                    | Thunder Valley development fee                      |                          |        
|                                                    | Impairment loss                                     |                          |        
|                                                    | Litigation settlement                               |                          |        
|                                                    | Preopening expenses                                 |                          |        
|                                                    | Gain on sale of properties                          |                          |        
|Operating income, excluding certain charges/credits |                                                     | $                        | 193,344
|                                                    | Operating margin, excluding certain charges/credits |                          |        

Consolidated
operating income, excluding certain charges/credits, increased 25.0% in the year ended December 31, 2003 as compared to the year ended December 31, 2002. This
increase is primarily due to
management fees of approximately $40.3 million from Thunder Valley, which opened on June 9, 2003. As a result, our consolidated operating margin, excluding certain charges/credits,
improved 3.0 percentage points in the year ended December 31, 2003 as compared to the year ended December 31, 2002.

Consolidated
operating income, excluding certain charges/credits, increased 5.2% in the year ended December 31, 2002 as compared to the year ended December 31, 2001. This
increase is due to an aggressive cost containment program we implemented as part of our continued focus on operating efficiencies and realizing synergies from the acquisition of Santa Fe Station,
Fiesta Rancho and Fiesta Henderson and the opening of Green Valley Ranch Station. As a result, our consolidated operating margin, excluding certain charges/credits, improved 1.9 percentage
points in the year ended December 31, 2002 as compared to the year ended December 31, 2001.

29

---

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

|                                             |                         | Year ended
December 31,
2003 |         | Percent
change |       | Year ended
December 31,
2002 |   | Percent
change |      | Year ended
December 31,
2001 |   
|-------------------------------------------- | ----------------------- | ---------------------------- | ------- | -------------- | ----- | ---------------------------- | - | -------------- | ---- | ---------------------------- | --
|Casino revenues                              |                         | $                            | 648,664 |                | 1.7   | %                            | $ | 638,113        |      | (3.2                         | )%
|Casino expenses                              |                         |                              | 265,203 |                | 2.6   | %                            |   | 258,383        |      | (10.2                        | )%
|                                             | Margin                  |                              |         | 59.1           | %     |                              |   |                | 59.5 | %                            |   
|Food and beverage revenues                   |                         | $                            | 133,676 |                | (0.1  | )%                           | $ | 133,811        |      | (4.4                         | )%
|Food and beverage expenses                   |                         |                              | 87,783  |                | 11.5  | %                            |   | 78,738         |      | (8.1                         | )%
|                                             | Margin                  |                              |         | 34.3           | %     |                              |   |                | 41.2 | %                            |   
|Room revenues                                |                         | $                            | 50,460  |                | 3.9   | %                            | $ | 48,579         |      | 2.1                          | % 
|Room expenses                                |                         |                              | 19,580  |                | 3.1   | %                            |   | 19,000         |      | (1.5                         | )%
|                                             | Margin                  |                              |         | 61.2           | %     |                              |   |                | 60.9 | %                            |   
|Other revenues                               |                         | $                            | 45,943  |                | 12.6  | %                            | $ | 40,790         |      | (34.4                        | )%
|Other expenses                               |                         |                              | 15,452  |                | (5.1  | )%                           |   | 16,276         |      | (54.3                        | )%
|Management fees                              |                         | $                            | 46,711  |                | 862.5 | %                            | $ | 4,853          |      | 616.8                        | % 
|Selling, general and administrative expenses |                         | $                            | 161,643 |                | 0.4   | %                            | $ | 161,038        |      | (3.0                         | )%
|                                             | Percent of net revenues |                              |         | 18.8           | %     |                              |   |                | 20.3 | %                            |   
|Corporate expense                            |                         | $                            | 33,039  |                | 3.4   | %                            | $ | 31,946         |      | 23.1                         | % 
|                                             | Percent of net revenues |                              |         | 3.9            | %     |                              |   |                | 4.0  | %                            |   
|Earnings from joint ventures                 |                         | $                            | 20,604  |                | 82.4  | %                            | $ | 11,293         |      | 351.0                        | % 

Casino.Casino revenues increased 1.7% for the year ended December 31, 2003 as compared to the year ended
December 31, 2002 due to the same factors affecting the combined net revenues for our Major Las Vegas Operations. The casino profit margin decreased slightly by 0.4 percentage points for
the year ended December 31, 2003 as compared to the year ended December 31, 2002, as casino expenses increased 2.6% over the same periods due primarily to marketing expenses related to
the introduction of Jumbo Jackpot.

Casino
revenues decreased 3.2% for the year ended December 31, 2002 as compared to the year ended December 31, 2001, due to the same factors affecting the combined net
revenues for our Major Las Vegas Operations. The casino profit margin increased 3.1 percentage points for the year ended December 31, 2002 as compared to the year ended
December 31, 2001. We were able to increase our casino profit margin, despite the revenue decline, by taking advantage of our size and scale and due to aggressive cost containment efforts
throughout all areas of the casino, particularly marketing through
the use of technology with products such as the Boarding Pass Card, "Xtra Play Cash" and "Jumbo Bingo".

Food and Beverage.Food and beverage revenues were essentially flat for the year ended December 31, 2003 as compared
to the year ended December 31, 2002. Food covers increased 7.3% while the average guest check decreased 8.0% for the year ended December 31, 2003 as compared to the year ended
December 31, 2002. The decrease in the average guest check was a result of selected menu price reductions, primarily in the buffet, which were implemented as part of a new marketing program.
The lower prices, as well as an aggressive marketing campaign promoting the buffet, drove additional volume resulting in an increase in food covers. As a result of the additional volume, food and
beverage expenses increased over the same period. Food and beverage costs also increased due to increases in selected food cost items and marketing costs promoting the buffet.

30

---

Food
and beverage revenues decreased 4.4% for the year ended December 31, 2002 as compared to the year ended December 31, 2001. Notwithstanding the decrease in food and
beverage revenues, the food and beverage net profit margin increased 2.4 percentage points over the same period. We were able to increase our food and beverage net profit margin, despite the
decline in revenues, by taking advantage of economies of scale in terms of purchasing power as well as implementing additional cost cutting measures. Food covers declined by 1.4% for the year ended
December 31, 2002 as compared to the year ended December 31, 2001. The reduction in food covers was due to generally soft economic conditions, as well as additional competition in the
market from new restaurants. The average guest check decreased 3.9% over the same periods, which was due primarily to selected menu price reductions.

Room.Room revenues increased 3.9% for the year ended December 31, 2003 as compared to the year ended
December 31, 2002. Room occupancy increased to 94% from 91%, while the average daily room rate remained constant at $50 for the year ended December 31, 2003 as compared to the year ended
December 31, 2002. The increase in occupancy percentage was primarily due to a general increase in travel to Las Vegas during 2003.

Room
revenues increased 2.1% for the year ended December 31, 2002 as compared to the year ended December 31, 2001. Room occupancy increased to 91% from 88%, while the
average daily room rate decreased to $50 from $52 over the same periods.

Other.Other revenues primarily include income from the gift shops, bowling, entertainment, leased outlets and arcades. Other
revenues increased 12.6% for the year ended December 31, 2003 as compared to the year ended December 31, 2002 primarily due to development fees received from Thunder Valley of
approximately $4.6 million, net of certain expenses and approximately $1.5 million in rental income from an industrial business center, located adjacent to Wild Wild West, which we
purchased in the second quarter of 2003. The increase in other revenues was partially offset by insurance proceeds of approximately $1.6 million that we received in the first quarter of 2002.

Other
revenues decreased 34.4% for the year ended December 31, 2002 as compared to the year ended December 31, 2001. This decrease was due primarily to the sale of
Southwest Gaming on September 30, 2001, which provided slot route revenues of approximately $22.9 million for the year ended December 31, 2001. Also included in other revenues for
the year ended December 31, 2002, were insurance proceeds of approximately $1.6 million. Other operating expenses decreased 54.3% for the year ended December 31, 2002 as compared
to the same period in the prior year. The decrease in other operating expenses was due primarily to the sale of Southwest Gaming mentioned above.

Management Fees.We manage Thunder Valley on behalf of the UAIC and receive a management fee equal to 24% of net income, as
defined. In addition, we are the managing partner for both Green Valley Ranch Station and Barley'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 Station and 10% of EBITDA from Barley's. For the year ended December 31, 2003, management fees increased to
approximately $46.7 million as compared to $4.9 million for the year ended December 31, 2002. The increase is directly related to approximately $40.3 million of management
fees from Thunder Valley, as well as increased earnings at Green Valley Ranch Station.

For
the year ended December 31, 2002, management fees increased to approximately $4.9 million, as compared to $0.7 million for the year ended December 31,
2001. The increase in management fees is directly related to Green Valley Ranch Station, which opened on December 18, 2001.

Selling, General and Administrative ("SG&A").SG&A as a percentage of net revenues decreased to 18.8% in the year ended
December 31, 2003 as compared to 20.3% in the year ended December 31, 2002. A large portion of these costs are fixed and, as a result, as revenues increased the percentage of SG&A to net
revenues decreased. SG&A expenses increased slightly by 0.4% to $161.6 million for the year ended December 31, 2003, from $161.0 million for the year ended December 31,
2002.

31

---

SG&A
as a percentage of net revenues increased to 20.3% in the year ended December 31, 2002 as compared to 19.8% in the year ended December 31, 2001. A large portion of
these costs are fixed and, as a result, as revenues declined the percentage of SG&A to net revenues increased. SG&A expenses decreased 3.0% to $161.0 million for the year ended
December 31, 2002, from $166.0 million for the year ended December 31, 2001. The decrease in SG&A expenses is a result of an aggressive cost containment program in addition to
taking advantage of economies of scale in terms of marketing, purchasing power, advertising and promotions, which was offset somewhat by an increase in energy costs.

Corporate Expense.Corporate expense as a percentage of net revenues decreased slightly to 3.9% in the year ended
December 31, 2003 as compared to 4.0% in the year ended December 31, 2002. Corporate expenses increased to approximately $33.0 million for the year ended December 31, 2003
as compared to approximately $31.9 million for the year ended December 31, 2002. The increase is primarily due to additional employer taxes on stock option exercises in 2003 of
approximately $1.1 million.

Corporate
expense as a percentage of net revenues increased to 4.0% in the year ended December 31, 2002 as compared to 3.1% in the year ended December 31, 2001. A large
portion of these corporate expenses are fixed, which causes an increase in the percentage of net revenues as revenues decline. In addition, during the year ended December 31, 2002, we
experienced an increase in litigation costs, which included approximately $3.8 million related to the Harrah's patent litigation, as well as an increase in incentive compensation as compared to
the prior year.

Development Expense.Total development expenses for the year ended December 31, 2003 were approximately
$4.3 million. We have increased our development resources in an effort to identify potential gaming opportunities, with an emphasis on expanding our management of Native American casinos. We
expensed approximately $2.3 million of development costs, which will ultimately not be reimbursed, such as payroll, travel and legal expenses. Also included in development expense for the year
ended December 31, 2003, is approximately $2.0 million of costs related to the Graton Rancheria project, which were made after achieving certain milestones on the project and are also
not reimbursable (see "Future Development").

Depreciation and Amortization.Depreciation and amortization increased slightly by 0.5% to approximately $73.1 million
for the year ended December 31, 2003 as compared to $72.8 million for the year ended December 31, 2002. This increase was due primarily to capital spent in 2003 and the addition
of new restaurants at Santa Fe Station and Fiesta Henderson during 2003, which was partially offset by a portion of the original equipment at Texas Station and Sunset Station having been fully
depreciated during 2002.

Depreciation
and amortization increased 4.6% in the year ended December 31, 2002 to $72.8 million as compared to $69.6 million in the year ended December 31,
2001. The increase is due primarily to capital spent throughout 2001, which included the retheming of The Reserve to a Fiesta-branded property, the completion of the expansion project at Santa Fe
Station and the purchase of new slot machines and a new slot system. This increase was offset partially due to a portion of the original equipment at Texas Station and Sunset Station having been fully
depreciated during 2002.

Impairment Loss.We recorded an impairment loss of approximately $18.9 million, $8.8 million and
$4.0 million in the years ended December 31, 2003, 2002 and 2001, respectively, to adjust the carrying value of our goodwill and other assets to their estimated fair value. The
$18.9 million impairment loss in 2003 related to the write off of approximately $17.5 million in goodwill at Fiesta Rancho in accordance with SFAS No. 142 as a result of reduced
growth assumptions (seeChange in Accounting Principle). The remaining $1.4 million impairment loss in 2003 was primarily related to the write
off of our investment in a new slot product development. The impairment of this asset was based upon our decision to no longer pursue the development of certain slot products. As a result, all of the
development costs that we had incurred were written off, as they were deemed to have no value.

32

---

During
the year ended December 31, 2002, approximately $3.9 million of the impairment loss related to the write-down of certain assets related to our
investments in an Internet, intra-state gaming platform and related technology. In May 2002, the Nevada Gaming Commission communicated that it had general concerns regarding the security and
reliability of Internet gaming platforms. The impairment of these assets was based upon our decision to no longer pursue Nevada-based Internet gaming activities as a result of the uncertainty of
regulatory approval of these types of activities. As a result, all of the hardware, software and internal development costs that we had incurred were written off in 2002, as they were deemed to have
no value. In addition, approximately $4.9 million of the impairment loss was related to our option to invest in an Internet wagering business. In February 2002, we announced that we
intended to purchase a 50% interest in Kerzner Interactive Limited (formerly SunOnline Limited) ("Kerzner Interactive"), a wholly owned subsidiary of Kerzner International Limited (formerly Sun
International Hotels Limited) ("Kerzner"). Kerzner Interactive was to be the exclusive vehicle for both Kerzner and us to pursue the Internet wagering business. In July 2002, we converted our
agreement to acquire a 50% interest in Kerzner Interactive into an option to do so, and paid $4.5 million for such option. Kerzner decided to discontinue Kerzner Interactive, as it targeted
Internet wagering only from jurisdictions that permitted online gaming. As these jurisdictions became more restrictive in their acceptance of Internet gaming, the market size was reduced and
competition intensified, resulting in a substantial decrease in the probability of achieving profitability in the short-to-medium term. As a result, we have
written-off the option payment and other costs related to this investment.

During
the year ended December 31, 2001, we recorded an impairment loss with respect to a 34-acre parcel, near the intersection of Martin Luther King Jr. Drive and
Craig Road in North Las Vegas. This impairment loss was necessary because, after evaluating all of our options, we determined not to develop a casino on this site. The assets included capitalized rent
and design costs, which had no value after we made the decision not to develop a gaming facility on this parcel. As of December 31, 2002, gaming was not permitted on this site due to zoning
restrictions.

Litigation Settlement.On February 9, 2004, we entered into an agreement to settle a lawsuit brought in
December 2000 by Fitzgeralds Sugar Creek, Inc., the City of Sugar Creek, Missouri and Phillip Griffith for $38 million ($24.7 million, net of the related tax benefit), which was
paid on February 24, 2004. The lawsuit centered on allegations of improper conduct by our former Missouri legal counsel, Michael Lazaroff. We have asserted a claim against Mr. Lazaroff
and his former law firm to recover all damages
caused by Mr. Lazaroff's conduct. As part of that claim, we intend to seek reimbursement for, among other things, the amount we were required to pay to settle the Fitzgerald's litigation, as
well as the attorney's fees and costs we incurred in defending that litigation. There can be no assurance that we will be successful in recovering all or any portion of costs or damages.

Preopening Expenses.Preopening expenses for the year ended December 31, 2001 were approximately $6.4 million,
which included costs incurred prior to the acquisitions of Fiesta Rancho and Fiesta Henderson and costs incurred prior to the opening of Green Valley Ranch Station.

Gain On Sale of Properties.On September 30, 2001, we sold Southwest Gaming Services, Inc. ("Southwest
Gaming"), our wholly owned subsidiary, to Blake L. Sartini, our former executive vice president and chief operating officer. We transferred our stock in Southwest Gaming to Mr. Sartini in
exchange for our common stock valued at approximately $8.4 million. We recorded a gain on the sale of $1.7 million in the year ended December 31, 2001. The gain reflected the
difference between the carrying value of our investment in the Southwest Gaming assets to be distributed of $6.7 million and the fair value of our common stock of $8.4 million, which was
based on its average trading price for five days before September 30, 2001, the transaction closing date.

Earnings From Joint Ventures.We jointly own a 50% interest in Green Valley Ranch Station and Barley's, and a 6.7% interest
in the Palms Casino Resort. We recorded our share of the earnings from these joint ventures of $20.6 million, $11.3 million and $2.5 million for the years ended
December 31, 2003,

33

---

2002
and 2001, respectively. The increase in earnings from joint ventures for the year ended December 31, 2003 is primarily a result of increased earnings at Green Valley Ranch Station. The
increase in earnings from joint ventures in the year ended December 31, 2002 is a result of Green Valley Ranch Station opening on December 18, 2001.

Interest Expense.Interest expense, net of capitalized interest, decreased 4.0% to $92.9 million in the year ended
December 31, 2003 as compared to $96.8 million in the year ended December 31, 2002. Gross interest expense decreased approximately $2.4 million due to a decrease in our
average cost of debt to 8.1% from 8.9% for the years ended December 31, 2003 and 2002, respectively. This decrease was offset somewhat by the effect of our interest rate swaps, which resulted
in a reduction in interest expense of $3.6 million for the year ended December 31, 2003 as compared to a reduction of $10.7 million in the year ended December 31, 2002.
Capitalized interest increased approximately $1.4 million for the year ended December 31, 2003 primarily due to interest capitalized for the construction of Red Rock Station (see "Future
Development").

Interest
expense, net of capitalized interest, decreased 2.3% to $96.8 million in the year ended December 31, 2002 as compared to $99.1 million in the year ended
December 31, 2001. Gross interest
expense decreased approximately $11.1 million over the same periods due to a decrease of $80.6 million in total long-term debt from the prior year (excluding the interest
rate swap mark-to-market adjustment). The decrease in interest expense was also related to a decrease in the average cost of debt to 8.9% for the year ended December 31,
2002 from 9.4% for the year ended December 31, 2001, which was directly related to the interest rate swaps that converted a portion of our fixed-rate debt to a floating rate. The
net effect of the interest rate swaps resulted in a reduction in interest expense of $10.7 million for the year ended December 31, 2002 as compared to a reduction of $4.9 million
in the year ended December 31, 2001.

Interest and Other Expense from Joint Ventures.For the years ended December 31, 2003, 2002 and 2001, we recorded
$7.2 million, $6.3 million and $0.2 million, respectively, in interest and other expense related to our unconsolidated joint ventures. The increase in interest and other expense
from joint ventures during the year ended December 31, 2003, is due to our 50% share of a loss on early retirement of debt of approximately $0.8 million related to the
write-off of debt issuance costs at Green Valley Ranch Station (see "Description of Certain Indebtedness and Capital StockGreen Valley Ranch Station
Financing"). The increase in interest and other expense from joint ventures during the year ended December 31, 2002 is directly related to the opening of Green Valley
Ranch Station on December 18, 2001.

Interest Income.During the year ended December 31, 2003, we recorded $4.8 million in interest income on our
advances to the UAIC for development of Thunder Valley (see "Description of Certain Indebtedness and Capital StockUnited Auburn Indian Community
Financing").

Loss on Early Retirement of Debt.The FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4, 44 and
64, Amendment of FASB Statement No. 13, and Technical Corrections", in April 2002. SFAS No. 145 changed the criteria for reporting any gain or loss resulting from the
extinguishment of debt as an extraordinary item. Such gains and losses must be analyzed to determine if they meet the criteria for extraordinary item classification based on the event being both
unusual and infrequent. We adopted SFAS No. 145 in 2002, and have reclassified prior period losses on early retirement of debt as an item in other non-operating income (expense),
rather than classified as an extraordinary item shown net of the applicable tax benefit.

During
the year ended December 31, 2002, we recorded a loss on early retirement of debt of approximately $5.8 million, of which approximately $1.4 million relates to
the write-off of the unamortized loan costs on our previous revolving facility. The remaining $4.4 million relates to the redemption of our $150 million 93/4%
senior subordinated notes on October 18, 2002. We recorded a charge of approximately $10.1 million to reflect the write-off of the unamortized debt discount, unamortized loan
costs and the

34

---

premium
to redeem our $150 million 93/4% senior subordinated notes, which was partially offset by approximately $5.7 million from the adjusted basis of the debt as a
result of the fair value hedge termination that was tied directly to our $150 million 93/4% senior subordinated notes.

During
the year ended December 31, 2001, we recorded a loss on early retirement of debt of $12.7 million related to the write-off of the unamortized debt
discount, unamortized loan costs and the premium to redeem our $198.0 million 101/8% senior subordinated notes which were due in 2006.

In
the first quarter of 2004, we repurchased or redeemed our 87/8% senior subordinated notes due 2008 and repurchased a portion of our 97/8% senior
subordinated notes due 2010. As a result of the redemptions, we will record a loss on early retirement of debt of approximately $58 million in the first quarter of 2004. In addition, we have
issued a tender offer and consent solicitation for our 83/8% senior notes due 2008, which is expected to close on March 17, 2004. As a result, we will have an additional loss on
early retirement of debt in the first quarter of 2004 (see "Liquidity and Capital ResourcesSenior and Senior Subordinated Notes").

Change in Accounting Principle.The FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", in
June 2001. SFAS No. 142 changed the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded
in past business combinations, ceased upon the adoption of SFAS No. 142. We implemented SFAS No. 142 on January 1, 2002 and tested for impairment in accordance with the provisions
of SFAS No. 142 in the first quarter of 2002. As a result of an independent third party appraisal, we recorded an impairment loss of $13.3 million, net of the applicable tax benefit,
during 2002 related to the acquisition of Fiesta Rancho, which is shown as a cumulative effect of a change in accounting principle in our consolidated statements of operations.

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 Red Rock Station, the Green Valley Ranch Station expansion and the Santa Fe Station expansion
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.

During
the year ended December 31, 2003, we generated cash flows from operating activities of $196.5 million. In addition, we received approximately $39.3 million
from Thunder Valley for the repayment and interest on our advances to the UAIC, approximately $33.1 million from the exercise of stock options and approximately $6.7 million from the
sale of land, property and equipment. At December 31, 2003, we had total available borrowings of $365.0 million under the Revolving Facility, which is reduced by borrowings of
$177.0 million and various lines of credit totaling approximately $9.3 million, leaving approximately $178.7 million outstanding as of December 31, 2003. We had
$62.3 million in cash and cash equivalents as of December 31, 2003.

During
the year ended December 31, 2003, total capital expenditures were $179.7 million, of which approximately $57.9 million was for the remaining balance of the
purchase price for approximately 70 acres of land at Charleston Boulevard and Interstate 215 (see "Future Development"), approximately

35

---

$28.8 million
was for the purchase of approximately 17 acres of land near Wild Wild West, approximately $13.5 million was for the accelerated replacement of slot machines to take
advantage of ticket-in, ticket-out technology, approximately $7.1 million was related to the purchase of the Wildfire Casino, approximately $5.3 million was for
the purchase of approximately 13 acres of land, formerly leased, where Palace Station is located, approximately $7.4 million was related to the addition of new restaurants at Santa Fe Station
and Fiesta Henderson, approximately $37.4 million was for maintenance capital expenditures and approximately $22.3 million was for various other projects. In addition to capital
expenditures, we paid approximately $16.2 million in advances to the Federated Indians of Graton Rancheria ("FIGR") primarily to secure real estate for future development (see "Future
Development"), exercised an option to purchase 32 acres of land in Southwest Las Vegas, adjacent to 35 acres of land previously owned (the "Durango Site"), for approximately $10.7 million, paid
approximately $14.9 million in common stock dividends, paid approximately $6.4 million in conjunction with an agreement to purchase a 9-acre parcel of land adjacent to Wild
Wild West, paid approximately $5.2 million in advances to the Gun Lake Tribe primarily to secure real estate for future development (see "Future Development"), purchased approximately 90 acres
of land near Thunder Valley for approximately $4.2 million and purchased approximately 1.4 million shares of our common stock for approximately $25.1 million.

Our
primary cash requirements for 2004 are expected to include (i) approximately $30 million for the payment of common stock dividends, (ii) approximately
$35 million for maintenance and other capital expenditures, (iii) approximately $33 million for the accelerated purchase of ticket-in, ticket-out slot
machines (approximately $12.1 million of which relates to machines that were placed in service in 2003 but will not be paid for until 2004), (iv) approximately $70 million for the
development and construction of Red Rock Station (see "Future Development"), (v) approximately $30 million for the expansion at Santa Fe Station, which will include a new movie theater
complex, additional slot machines and other amenities, (vi) approximately $6.5 million for the construction of an ice skating rink at Fiesta Rancho, (vii) approximately
$38 million ($24.7 million, net of the related tax benefit) to settle the Fitzgerald's litigation (see "Results of OperationsLitigation
Settlement"), (viii) additional advances to the FIGR for development of the Graton Rancheria project, (ix) advances to the Gun Lake Tribe for the development of
their project, (x) advances to the Mechoopda Indian Tribe for the development of their project (see "Future Development"), (xi) payments related to other potential Native American
projects, (xii) principal and interest payments
on indebtedness, (xiii) other strategic land purchases throughout the Las Vegas area and (xiv) opportunistic repurchases of our common stock.

In
January 2004, we completed an offering of $400 million senior subordinated notes due in January 2014 that bear interest at a rate equal to 61/2%.
The proceeds from this offering were used to repay amounts outstanding on the Revolving Facility and to repurchase or redeem our $199.9 million 87/8% senior subordinated notes,
which were due in 2008. In February 2004, we completed an offering of $350 million senior subordinated notes due in March 2016 that bear interest at a rate equal to
67/8%. The proceeds of this offering were used to repurchase a portion of our $375 million 97/8% senior subordinated notes due in July 2010. In
March 2004, we completed an additional offering of $50 million of senior subordinated notes due in January 2014 and bear interest at a rate equal to 61/2%. This
offering was an add-on to the $400 million senior subordinated notes issued in January 2004.

In
March 2004, we issued a tender offer and consent solicitation for the $400 million 83/8% senior notes due 2008. In March 2004, we also agreed to issue
$450 million of 6% senior notes due in April 2012. The proceeds from this offering will be used to repurchase the $400 million of 83/8% senior notes. Subject to customary
conditions and the tender of a majority in principal amount of the 83/8% senior notes the transaction is expected to close on March 17, 2004.

We
believe that cash flows from operations, available borrowings under the Revolving Facility and existing cash balances will be adequate to satisfy our anticipated uses of capital
during 2004. However, we are continually evaluating our financing needs. If more attractive financing alternatives or expansion, development or acquisition opportunities become available to us, we may
amend our financing plans

36

---

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, 2003, we have certain off-balance sheet arrangements that affect our financial condition, liquidity and results of
operations, which include a limited make-well agreement for $42.0 million related to the financing at Green Valley Ranch Station (see "Description of Certain Indebtedness and
Capital StockGreen Valley Ranch Station Financing"), a make-well agreement for an undetermined amount and completion guaranty
related to the financing of Thunder Valley (see "Description of Certain Indebtedness and Capital StockUnited Auburn Indian Community
Financing") and interest rate swaps with a
combined notional amount of $250.0 million (see "Description of Certain Indebtedness and Capital StockSenior and Senior Subordinated Notes").

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

|                   |            | Contractual obligations
|------------------ | ---------- | -----------------------
|
|As of December 31, |            |                        
|                   | 2004       |                        
|                   | 2005       |                        
|                   | 2006       |                        
|                   | 2007       |                        
|                   | 2008       |                        
|                   | Thereafter |                        
|                   |            |                        
|                   |            | Total                  
|                   |            |                        

---

Future Development



In May 2003, we paid $57.9 million to complete the acquisition of approximately 70 acres of land in the Summerlin master-planned community in Las
Vegas, Nevada. The land is located on Charleston Boulevard at the Interstate 215/Charleston interchange, which is the future site of Red Rock Station. The total purchase price for the land was
approximately $64 million. The initial phase of the property is expected to include 60 table games and 2,700 slot machines. The property is expected to also include 400 hotel rooms, 45,000
square feet of meeting space, 16 movie theaters, a 20,000 square foot spa facility and several restaurants, including a buffet. The cost of the project is expected to be approximately
$450 million to $475 million, of which approximately $74 million has been spent as of December 31, 2003. We believe the construction of the project will begin in
mid- 2004 and be complete in late 2005 or early 2006.



We are currently expanding Santa Fe Station, which will add more than 20,000 square feet of additional casino space, 350 slot machines, a new
16-screen movie theater complex, an upgrade of the property's bowling center, a new entertainment venue and bar, a new Kid's Quest facility and other

37

---

amenities.
The expansion project will also include the removal of the ice arena. We believe that the expansion will cost approximately $50 million and is expected to be completed in the first
quarter of 2005.



We plan to begin a 31,000 square-foot expansion project at Fiesta Rancho in April 2004, which will bring a new ice arena to the property,
complete with concession area, pro shop, locker rooms and private special event rooms. We believe that the project will cost approximately $6.5 million and will be completed by
September 2004.



In the fourth quarter of 2003, we began a $110 million expansion at Green Valley Ranch Station. The expansion will include 296 hotel rooms, 25,500 square
feet of additional meeting space, approximately 200 slot machines and an expanded spa facility. Construction on the project is expected to be complete in the fourth quarter of 2004.



In April 2003, we entered into Development and Management Agreements with the FIGR pursuant to which 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 it in designing, developing and financing the 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 22% 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
August 2003, the FIGR and we entered into an option to purchase 360 acres of land just west of Rohnert Park's city limits in Sonoma County, California. The proposed site of the
project is bordered by Stony Point Road, Wilfred Avenue and Rohnert Park Expressway, approximately one-half mile from Highway 101 and approximately 43 miles from San Francisco. In
October 2003, the FIGR entered into a Memorandum of Understanding with the City of Rohnert Park. 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 accepting the land into trust on behalf of
the FIGR and approval of the Management Agreement by the National Indian Gaming Commission ("NIGC"). No assurances can be given as to when, or if, the necessary government and regulatory approvals
will be received. Prior to the receipt of such government and regulatory approvals, we likely will contribute significant financial support to the project. As of December 31, 2003, we had
advanced approximately $16.2 million toward the development of this project, primarily to secure real estate for future development. In addition, we will make approximately $11.3 million
of payments upon achieving certain milestones, which will not be reimbursed. As of December 31, 2003, approximately $2.0 million of these payments have been made. The proposed project is
expected to be completed in approximately three to four years, but there can be no assurance that it will be completed within that timeframe or at all.



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 will assist Gun Lake in developing and
operating a gaming and entertainment project to be located in Allegan County, Michigan.

38

---

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. We may pay an additional
$12.0 million in total in years six and seven of the amended Management Agreement, subject to certain contingencies. Under the terms of the amended Development Agreement, we have agreed to
arrange financing for the ongoing development costs and construction of the project. Prior to obtaining financing for the project, we expect to advance $10 million to $15 million to Gun
Lake for the acquisition of land and other development costs. As of December 31, 2003, we had advanced approximately $5.2 million toward the development of this project, primarily to
secure real estate for future development. Although no firm construction budget has been established, we expect that the total cost of the development and construction of the project would be less
than $200 million. Funds advanced by us are expected to be repaid with the proceeds of the project financing or from Gun Lake's gaming revenues. The amended 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 145 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently
contemplated, the project would include up to 2,500 slot machines, 75 table games, a buffet, specialty restaurants and an entertainment venue. Construction of the project includes the conversion of an
existing 192,000 square foot building into the entertainment facility. Development of the entertainment project and operation of Class III gaming is subject to certain governmental and
regulatory approvals, including, but not limited to, negotiating a gaming compact with the State of Michigan, the United States Department of the Interior accepting the land into trust on behalf of
Gun Lake and approval of the Management Agreement by the NIGC. No assurances can be given as to when, or if, the necessary government and regulatory approvals will be received. Prior to the receipt of
such governmental and regulatory approvals, we will contribute significant financial support to the project. The proposed project is expected to be completed in 2005, but there can be no assurance
that it will be completed at that time or at all.



In January 2004, we entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the "MITCR"), a
federally recognized Native American tribe. We will assist the MITCR in developing and operating a gaming and entertainment facility to be located 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. Prior to obtaining financing for the facility, we expect to advance $5 million to $10 million to
the MITCR for the acquisition of land and other development costs. Although no firm construction budget has been established, we expect the total cost of the development and construction of the
facility will be less than $80 million. Funds advanced by us are expected to be repaid from the proceeds of the facility financing or from the MITCR's gaming revenues. 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. The proposed facility will be located on approximately 650 acres on
State Route 149, at the intersection with Highway 99. As currently contemplated, the facility will include approximately 500 slot machines, 10 table games and dining and entertainment amenities. We
anticipate the gaming and entertainment facility will be open some time during 2005, but there can be no assurance that it will be completed at that time or at all.

39

---



In March 2004, we entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians ("Mono"), a federally recognized Native
American tribe located in central California. We will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County, California. We have secured for
the benefit of the Mono two parcels 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. Although no firm construction budget has been established, we expect the total cost of the development and construction of the facility will be less
than $225 million. Funds advanced by us are expected to be repaid from the proceeds of the project financing or from the Mono's gaming revenues. 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, 70
table games and dining, 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 United States Department of the Interior accepting the land
into trust on behalf of the Mono and approval of the Management Agreement by the NIGC. We anticipate the gaming and entertainment facility will be open some time in late 2007, but there can be no
assurance that it will be completed at that time or at all.



We have acquired certain parcels of land in the Las Vegas valley and in Sacramento, California as part of our 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, 2003, we had $119.2 million of land held for development that consists primarily of six sites that are owned or leased, which comprise 177 acres in the Las Vegas valley and
188 acres in the Sacramento area near Thunder Valley. In addition, we have options to purchase a total of 34 acres adjacent to one of the sites in the Las Vegas valley. The Durango site, located at
the intersection of Durango Road and the Southern Beltway/Interstate 215 in the southwest quadrant of Las Vegas, currently consists of 67 acres. In April 2003, we exercised our option to
purchase 32 acres of land adjacent to 35 acres of land previously owned at the Durango site for $10.7 million. The Boulder/Tropicana site is a 68-acre site consisting of two parcels
at the intersection of Boulder Highway and Tropicana Avenue in eastern Las Vegas. We are leasing (with an option to purchase) 34 acres of the site and own the adjacent 34-acre parcel. We
also own a 49-acre gaming-entitled parcel in southwest Las Vegas at the intersection of Flamingo Road and Interstate 215 and a 27-acre gaming-entitled parcel at the
intersection of Boulder Highway and Nellis Boulevard. We also purchased approximately 90 acres of land, which is adjacent to the 98 acres previously purchased near Thunder Valley for approximately
$4.2 million in September 2003.

We
exercised our option to purchase the 19-acre parcel of land on which Wild Wild West is located in 2003. Pursuant to the lease, the purchase will take place in
July 2005 at the fair market value of the land but not less than $27 million or not more than approximately $36 million. No amounts related to this purchase option have been
recorded on our consolidated balance sheets at December 31, 2003. In May 2003, we also purchased approximately 17 acres of land adjacent to Wild Wild West for approximately
$28.8 million. This property currently includes approximately 270,000 square feet of office and warehouse space in a number of low-rise buildings. Also in 2003, we paid
approximately $6.4 million in conjunction with an agreement to purchase a 9-acre parcel of land adjacent to Wild Wild West.

40

---

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 National Indian Gaming Commission and tribal gaming agency of the UAIC. The UAIC and a number of other
Native American tribes in California are currently renegotiating certain provisions of the Tribal State Gaming Compacts ("Compacts") to which they are a party. Although it is unclear what changes, if
any, may ultimately be made to the Compacts, such renegotiation may result in an increase in the fees paid by the UAIC and other Native American tribes to the State of California, an increase in the
number of gaming devices that a Native American tribe may operate and other obligations that are not currently required by the existing Compacts. Changes in applicable laws, regulations or Compact
provisions could have a significant impact on our operations.

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. In 2003, the Nevada legislature enacted various tax increases, which
raised the tax on gross gaming revenue from 6.25% to 6.75%. In addition, a payroll tax was enacted as well as increases in the taxes on alcohol and cigarettes. The various taxes went into affect at
various points throughout the second half of 2003 and the Company anticipates that the annual impact of these new taxes and tax increases will be approximately $5 million.

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. Such changes, if adopted, could have a material adverse effect on our operating results.



In April 2003, we became aware of violations of certain gaming regulations regarding the reporting of certain cash transactions. We
self-reported these violations to the Nevada State Gaming Control Board. We, along with the Nevada State Gaming Control Board, are investigating the violations. We are currently unable to
determine the amount of fines or extent of sanctions, if any, which may be levied by the Nevada State Gaming Control Board or the Federal Government. We believe the eventual outcome of this matter
will occur in 2004.

Description of Certain Indebtedness and Capital Stock



In September 2002, we completed our $365.0 million revolving credit facility (the "Revolving Facility"). The Revolving Facility contains no
principal amortization and matures in September 2007. The Borrowers are the major operating subsidiaries and the Revolving Facility is secured by substantially all of our assets. Borrowings
under the Revolving Facility bear interest at a margin above the Alternate Base Rate or the Eurodollar Rate (each, as defined in the Revolving Facility), as selected by us. The margin above such
rates, and the fee on the unfunded portions of the Revolving Facility, will vary quarterly based on our combined consolidated ratio of debt to Adjusted EBITDA (each, as defined in the Revolving
Facility). As of December 31, 2003, the Borrowers' margin above the Eurodollar Rate on borrowings under the Revolving Facility was 1.75%. The maximum margin for Eurodollar Rate borrowings is
2.50%. The maximum margin for Alternate Base Rate borrowings is 1.25%. As of December 31, 2003, the fee for the unfunded portion of the Revolving Facility was 0.375%. Pursuant to the terms of
the Revolving Facility, we have requested to increase the available borrowings to $500 million.

The
Revolving Facility contains certain financial and other covenants. These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers combined of 2.25 to 1.00 for each
quarter and a

41

---

minimum
fixed charge coverage ratio for the preceding four quarters for the Borrowers combined of 1.50 to 1.00 for each quarter. As of December 31, 2003, the Borrowers' funded debt to Adjusted
EBITDA ratio was 0.76 to 1.00 and the fixed charge coverage ratio was 2.62 to 1.00. In addition, the Revolving Facility has financial and other covenants, which state that the maximum consolidated
funded debt to Adjusted EBITDA ratio can be no more than 5.00 to 1.00 through June 30, 2005, which reduces to 4.75 to 1.00 on September 30, 2005 through December 31, 2005, to 4.50
to 1.00 on March 31, 2006 through June 30, 2006 and to 4.00 to 1.00 on September 30, 2006. Other covenants limit prepayments of indebtedness or rent (including subordinated debt
other than re-financings meeting certain criteria), limitations on asset dispositions, limitations on dividends, limitations on indebtedness, limitations on investments and limitations on
capital expenditures. As of December 31, 2003, our consolidated funded debt to Adjusted EBITDA ratio was 3.58 to 1.00. We have pledged the stock of all of our major subsidiaries.



In 2001, we completed offerings for a total of $400.0 million of senior notes due in February 2008 (the "Senior Notes"). The Senior Notes bear
interest at a rate equal to 83/8% per annum and were priced at par. The proceeds from the Senior Notes were used to repay amounts outstanding on the previous revolving facility and to
redeem the $198.0 million 101/8% senior subordinated notes, which were due in 2006. As a result of the redemption, we recorded a loss on early retirement of debt of approximately
$12.7 million in 2001.

In
January 2004, we completed an offering of $400 million senior subordinated notes due in January 2014 that bear interest at a rate equal to 61/2%.
The proceeds from this offering were used to repay amounts outstanding on the Revolving Facility and to repurchase or redeem the $199.9 million 87/8% senior subordinated notes,
which were due in 2008. In February 2004, we completed an offering of $350 million senior subordinated notes due in March 2016 that bear interest at a rate equal to
67/8%. The proceeds of this offering were used to repurchase a portion of the $375 million 97/8% senior subordinated notes due in July 2010. In
March 2004, we completed an additional offering of $50 million of senior subordinated notes due in January 2014 and bear interest at a rate equal to 61/2%. This
offering was an add-on to the $400 million senior subordinated notes issued in January 2004.

As
a result of the redemptions, we will record a loss on early retirement of debt of approximately $58 million in the first quarter of 2004. Approximately $147.6 million of
the $199.9 million 87/8% senior subordinated notes were redeemed pursuant to a tender offer and consent solicitation and the remaining $52.3 million were redeemed pursuant
to our call option. Approximately $357.5 million of the $375 million 97/8% senior subordinated notes were redeemed pursuant to a tender offer and consent solicitation and
the remaining $17.4 million will remain outstanding. The consent solicitations effectively eliminated all of the covenants from the remaining 97/8% senior subordinated notes.

In
March 2004, we issued a tender offer and consent solicitation for the $400 million 83/8% senior notes due 2008. In March 2004, we also agreed to issue
$450 million of 6% senior notes due in April 2012. The proceeds from this offering will be used to repurchase the $400 million of 83/8% senior notes. Subject to customary
conditions and the tender of a majority in principal amount of the 83/8% senior notes the transaction is expected to close on March 17, 2004.

42

---

The
following actual and unaudited pro forma information has been prepared assuming that the offerings and redemptions of our senior and senior subordinated notes mentioned above had
occurred as of December 31, 2003 (amounts in thousands):

|                                                                                                |                           | December 31, 2003 |        
|----------------------------------------------------------------------------------------------- | ------------------------- | ----------------- | -------
|
|
|Revolving Facility due September 30, 2007, weighted average interest rate of approximately 3.5% |                           | $                 | 177,000
|6% senior notes due April 1, 2012                                                               |                           |                   |       
|83/8% senior notes due February 15, 2008(a)                                                     |                           |                   | 400,000
|61/2% senior subordinated notes due February 1, 2014                                            |                           |                   |       
|67/8% senior subordinated notes due March 1, 2016                                               |                           |                   |       
|97/8% senior subordinated notes due July 1, 2010                                                |                           |                   | 373,886
|87/8% senior subordinated notes due December 1, 2008                                            |                           |                   | 199,900
|Other long-term debt, interest at 6.0% maturity dates ranging from 2004 to 2007                 |                           |                   | 6,082  
|                                                                                                |                           |                   |        
|                                                                                                | Total long-term debt      |                   |        
|Current portion of long-term debt                                                               |                           |                   | (22    
|Market value of interest rate swaps                                                             |                           |                   | 12,089 
|                                                                                                |                           |                   |        
|                                                                                                | Total long-term debt, net |                   |        
|                                                                                                |                           |                   |        

---

The
indentures (the "Indentures") governing our senior subordinated notes (the "Notes") contain certain customary financial and other covenants, which limit the Company and its
subsidiaries' ability to incur additional debt. At December 31, 2003, our Consolidated Coverage Ratio (as defined in the Indentures) was 2.92 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 Revolving Facility not to exceed the greater of $200 million or 1.5 times Operating Cash Flow
(as defined) for the four most recent quarters, plus $15 million. The 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. The covenants for the Senior Notes are essentially the same
as our Notes, except there are limitations on restricted payments and restricted investments, which limits payments of dividends and investments. In addition, the indenture governing the Senior Notes
contains a limitation on liens we can incur.

During
2001, we entered into various interest rate swaps with members of our bank group to manage interest expense. The interest rate swaps have converted a portion of our
fixed-rate debt to a floating rate. As of December 31, 2003, we had one remaining interest rate swap agreement with a total notional amount of $50.0 million in which we pay a
floating rate at December 31, 2003 of approximately 3.54% and receive a fixed rate at December 31, 2003 of approximately 8.38%. The interest rate swap terminates in 2008. The net effect
of all of the interest rate swaps resulted in a reduction in interest expense of $3.6 million, $10.7 million and $4.9 million for the years ended December 31, 2003, 2002
and 2001, respectively.

In
February 2004, we entered into two additional interest rate swaps with a combined notional amount of $200 million that is tied directly to our 61/2%
senior subordinated notes that we issued in January 2004. The interest rate swaps will convert a portion of our fixed-rate debt to a floating rate based upon the

43

---

six-month
LIBOR rate. At inception, we pay a floating rate of six-month LIBOR plus 1.80% and receive a fixed rate of 61/2%. The interest rate swaps terminate in
2014.

On
October 18, 2002, we redeemed the $150 million 93/4% senior subordinated notes. The redemption was funded with proceeds from the Revolving Facility. We
recorded a charge of approximately $10.1 million during the year ended December 31, 2002, to reflect the write-off of the unamortized
debt discount, unamortized loan costs and the premium to redeem the $150 million 93/4% senior subordinated notes. This charge was partially offset by approximately
$5.7 million from the adjusted basis of the debt as a result of the fair value hedge termination that was tied directly to the $150 million 93/4% senior subordinated
notes, as discussed below. In addition, we recorded a loss on early retirement of debt of approximately $1.4 million in 2002 to reflect the write-off of the unamortized loan costs
on the previous revolving facility.

In
September 2002, we terminated an interest rate swap with a notional amount of $150 million, which was due to terminate in 2007. The interest rate swap was terminated at
its market value and, as a result, we received approximately $5.8 million. This interest rate swap was tied directly to the $150 million 93/4% senior subordinated notes.
The mark-to-market adjustment was amortized as a reduction of interest expense over the original contract life of the interest rate swap. When the $150 million
93/4% senior subordinated notes were redeemed on October 18, 2002, the adjusted basis of the debt as a result of the fair value hedge termination of approximately
$5.7 million was included in the calculation of the net loss on the early retirement of the related debt.

The
interest rate swaps that we entered into qualify for the "shortcut" method allowed under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which
allows for an assumption of no ineffectiveness. As such, there is no income statement impact from changes in the fair value of the hedging instruments. 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. In accordance with SFAS No. 133, we recorded assets of
$3.9 million and $5.3 million as of December 31, 2003 and 2002, respectively, representing the fair value of the interest rate swaps and a corresponding increase in
long-term debt, as these interest rate swaps are considered highly effective under the criteria established by SFAS No. 133.

In
December 2002, we terminated an interest rate swap with a notional amount of $100 million, which was due to terminate in 2010. The interest rate swap was terminated at
its market value and, as a result, we received approximately $9.5 million. This interest rate swap was tied directly to the $375 million 93/4% senior subordinated notes.
The mark-to-market adjustment will be amortized as a reduction of interest expense over the original contract life of the interest rate swap and as of December 31, 2003
the remaining balance of $8.2 million is included in long-term debt. A majority of this mark-to-market adjustment will be included in the calculation of the
net loss on early retirement of debt in the first quarter of 2004 as a result of the redemption of a majority of the $375 million 97/8% senior subordinated notes in February
2004.



Green Valley Ranch Station is owned by a 50/50 joint venture between us and GCR Gaming. The joint venture financed Green Valley Ranch Station with a group of
banks, and originally provided for borrowings up to $165.0 million at a margin above the LIBOR rate of up to 250 basis points. In December 2003, Green Valley Ranch Station entered into
an Amended and Restated Loan Agreement, which replaced the original financing. The available borrowings have been increased to $250.0 million as of December 31, 2003. The proceeds from
the amended agreement were used to pay off secured equipment and other financing and to fund the expansion of the facility. Green Valley Ranch Station has entered into an agreement to swap the
majority of its floating rate to a fixed rate that will approximate 7.0% during the term of the loan. The loan requires a limited make-well of $42.0 million, if necessary (based on
operating results of the property). Pursuant to the make-well agreement, if Green Valley Ranch Station fails to

44

---

comply
with the Fixed Charge Coverage Ratio or the Leverage Ratio (both as defined in the Green Valley Ranch credit agreement), the partners will be required to make cash equity contributions in such
amounts as required, which will result in pro forma compliance with the covenants. The make-well is a joint and several obligation of each partner, with GCR Gaming's obligation
collateralized. The make-well agreement will terminate upon achieving a post expansion debt to Adjusted EBITDA (as defined) ratio of less than or equal to 3.00 to 1.00 and producing
Adjusted EBITDA before management fees of at least $42.0 million. As of December 31, 2003, the debt to Adjusted EBITDA ratio was 2.62 to 1.00. The outstanding balance of the Green Valley
Ranch Station revolving credit facility as of December 31, 2003, was approximately $150.0 million.

In
December 2001 and March 2002, Green Valley Ranch Station entered into interest rate swaps that have converted a portion of its floating rate debt to a fixed rate and are
matched to a portion of its revolving facility. At December 31, 2003, the combined notional amount of the interest rate swaps was $108.0 million, and decreases by varying amounts each
quarter. As of December 31, 2003, Green Valley Ranch Station was paying a weighted average fixed rate of 4.33% on the interest rate swaps and was receiving a weighted average floating rate
based on three-month LIBOR of 1.15%. These interest rate swaps were also priced to have no value at inception. As a result of the mark-to-market valuation of the interest rate
swaps, we recorded approximately $1.3 million and $1.7 million as of December 31, 2003 and December 31, 2002, respectively, for our share of the Green Valley Ranch Station
interest rate swaps in accumulated other comprehensive loss in our consolidated balance sheets.



We have entered into a Development Services Agreement and a Management Agreement with the UAIC. Pursuant to those agreements, and in compliance with a Memorandum
of Understanding entered 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, in Placer County, California, near Sacramento, which opened on June 9, 2003. On September 17, 2002, the United States Department of the Interior
accepted the land into trust on behalf of the UAIC. The acceptance of the land into trust followed the decision of the United States District Court for the District of Washington, D.C., dismissing a
lawsuit filed by the cities of Roseville and Rocklin, California, and Citizens for Safer Communities, which challenged the United States Department of the Interior's decision to accept the land into
trust. Immediately following the District Court's decision, the plaintiffs appealed the decision to the United States Court of Appeals for the District of Columbia. On November 14, 2003, the
Court of Appeals affirmed the dismissal of the lawsuit by the District Court. On February 15, 2004, the Citizens for Safer Communities filed a petition for writ of certiorari with the United
States Supreme Court, seeking to appeal the decision of the Court of Appeals. The remaining plaintiffs did not seek to appeal that decision. Notwithstanding the Court of Appeals' decision and the
acceptance of the land into trust, there can be no assurances as to the ultimate outcome of the Citizens for Safer Communities' pending efforts to appeal that decision. Our seven-year
Management Agreement was approved by the National Indian Gaming Commission and expires in June 2010. We receive a management fee equal to 24% of the facility's net income, as defined, which
totaled approximately $40.3 million for the year ended December 31, 2003. We also received a development fee equal to 2% of the cost of the project upon the opening of the facility,
which totaled approximately $4.6 million, net of certain expenses, for the year ended December 31, 2003, and is included in other operating revenues on our consolidated statements of
operations.

Thunder
Valley has 1,906 Class III slot machines, 111 table games, including a private VIP gaming area, a 500-seat bingo room, three specialty restaurants, a
500-seat buffet, a food court, a center pit bar and parking for over 4,500 vehicles. We assisted the UAIC in obtaining $215.0 million of financing for the project through a group of
lenders, and we provided an unlimited completion guaranty and credit support for all amounts outstanding under such financing. Based on the current level of operating results of Thunder Valley, we
expect the credit support to terminate in June 2004. We have evaluated our obligations

45

---

related
to the completion guaranty in accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of
Others" and have determined that the fair value of the obligation is not material. Prior to the completion of the financing, we advanced approximately $46.9 million to the UAIC for the
development of Thunder Valley. The entire balance was repaid in 2003. Our advances carried an interest rate of 10%. The interest on our advances to the UAIC was approximately $4.8 million and
is included in interest income in our consolidated statements of operations for the year ended December 31, 2003.



We are authorized to issue up to 135 million shares of our common stock, $0.01 par value per share, 70,912,227 shares of which were issued and 10,121,677
shares of which were held in treasury as of December 31, 2003. Each holder of our 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 common stock have no cumulative voting, conversion, redemption or preemptive rights or other rights to subscribe for additional shares other than pursuant to the Rights
Plan described below. Subject to any preferences that may be granted to the holders of our preferred stock, each holder of 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 liquidation, dissolution or winding up of the
Company, is entitled to share ratably in all of our assets that remain after payment of liabilities.

On
July 21, 2003 and October 1, 2003, our Board of Directors declared a quarterly cash dividend of $0.125 per share. On September 4, 2003, we paid a quarterly cash
dividend of approximately $7.4 million to shareholders of record on August 14, 2003. On December 4, 2003, we paid a quarterly cash dividend of approximately $7.5 million to
shareholders of record on November 13, 2003.



We are authorized to issue up to 5 million shares of our preferred stock, $0.01 par value per share of which none were 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 un-issued 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 the Company or other corporate action.



During the year ended December 31, 2003, we repurchased approximately 1.4 million shares of our common stock for approximately $25.1 million.
We are authorized to repurchase up to approximately 19.5 million shares of our common stock. As of December 31, 2003, we had acquired approximately 10.1 million shares at a cost
of approximately $134.5 million.



On October 6, 1997, we declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. The dividend was
paid on October 21, 1997. Each Right entitles the registered holder to purchase from us one one-hundredth of a share of Series A Preferred Stock, par value $0.01 per share
("Preferred Shares") at a price of $40.00 per one one-hundredth of a Preferred Share, subject to adjustment. The Rights are not exercisable until the earlier of 10 days following a
public

46

---

announcement
that a person or group of affiliated or associated persons have acquired beneficial ownership of 15% or more of our outstanding common stock ("Acquiring Person") or 10 business days (or
such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an Acquiring Person) following the commencement of, or
announcement of an intention to make a tender offer or exchange offer, the consummation of which would result in the beneficial ownership by a person or group of 15% or more of our outstanding common
stock.

The
Rights will expire on October 21, 2007. Acquiring Persons do not have the same rights to receive common stock as other holders upon exercise of the Rights. Because of the
nature of the Preferred Shares' dividend, liquidation and voting rights, the value of one one-hundredth interest in a Preferred Share purchasable upon exercise of each Right should
approximate the value of one common share. In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, the proper provisions will be made so that each holder
of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter become void), will thereafter have the right to receive upon exercise that number of shares of common
stock having a market value of two times the exercise price of the Right. In the event that the Company is acquired in a merger or other business combination transaction or 50% or more of our
consolidated assets or earning power are sold after a person or group has become an Acquiring Person, proper provision will be made so that each holder of a Right will thereafter have the right to
receive, upon exercise thereof, that number of shares of common stock of the acquiring company, which at the time of such transaction will have a market value of two times the exercise price of the
Right. Because of the characteristics of the Rights in
connection with a person or group of affiliated or associated persons becoming an Acquiring Person, the Rights may have the effect of making an acquisition of the Company more difficult and may
discourage such an acquisition.

Critical Accounting Policies



We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Certain of our
accounting policies, including the determination of bad debt reserves, the estimated useful lives assigned to our assets, asset impairment, insurance reserves, 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.



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. Revenues include the retail value of food, beverage, rooms, entertainment and merchandise provided on a complimentary basis to customers. Such amounts are then deducted from
revenues as promotional allowances on our consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in casino costs and expenses.

47

---



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 are 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.



We are self insured up to certain stop loss amounts for workers' compensation, major medical and general liability costs. 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.



In November 2002, the FASB issued FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
of Others". FIN 45 requires that future guarantee obligations be recognized as liabilities at inception of the guarantee contract and increases the disclosures required for current and future
guarantee obligations. We adopted the initial recognition provisions of FIN 45 beginning January 1, 2003 and have included the disclosures required in the accompanying notes to our consolidated
financial statements. The adoption of FIN 45 did not have a significant impact on our results of operations or financial position.



We enter into interest rate swaps from time to time in order to manage interest rate risks associated with our current and anticipated future borrowings. The
interest rate swaps that we have entered into qualify for the "shortcut" method allowed under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which allows for an
assumption of no ineffectiveness. As such, there is no income statement impact from changes in the fair value of the hedging instruments. 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 No. 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

48

---

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 value, with fair value typically based on a discounted cash flow model. Our consolidated financial statements reflect all adjustments required by SFAS No. 144 as of
December 31, 2003.



The FASB issued SFAS No. 142, "Goodwill and Other Intangible Assets", in June 2001. SFAS No. 142 changed the accounting for goodwill from an
amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, ceased upon the adoption of SFAS No. 142. We
implemented SFAS No. 142 on January 1, 2002 and tested for impairment in accordance with the provisions of SFAS No. 142 in the first quarter of 2002 and annually perform such
test. In order to test for impairment of goodwill, we use the Income Approach, which focuses on the income-producing capability of the respective property. 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 goodwill. If the fair value of the goodwill exceeds the carrying value, then impairment is measured based on the difference
between the calculated fair value and the carrying value. Our consolidated financial statements reflect all adjustments required by SFAS No. 142 as of December 31, 2003.



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 borrowed money.



We are subject to income taxes in the United States of America and file a consolidated federal income tax return. We account for income taxes according to
SFAS No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the recognition of deferred tax assets, net of applicable reserves, related to net operating loss carryforwards and
certain temporary differences. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not
be recognized.

Our
income tax returns are subject to examination by the Internal Revenue Service and other tax authorities. We regularly assess the potential outcomes of these examinations in
determining the adequacy of our provision for income taxes and our income tax liabilities. Inherent in our determination of any necessary reserves are assumptions based on past experiences and
judgments about potential actions by taxing authorities. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental. We believe that we have adequately provided for any
reasonable and foreseeable outcome related to uncertain tax matters.

49

---



In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities". The objective of FIN 46 is to
improve financial reporting by companies involved with variable interest entities. FIN 46 changes certain consolidation requirements by requiring a variable interest entity to be consolidated by a
company that is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. In October and
December 2003, the FASB agreed to defer the effective date of FIN 46 for variable interests held by public companies in all entities that were acquired prior to February 1, 2003 to the
quarter ending March 31, 2004. For entities acquired after February 1, 2003, we were required to adopt FIN 46 for the quarter ended September 30, 2003. Our acquisition of our 50%
interest in MPM, which we agreed to purchase in November 2003, was subject to the provisions of FIN 46 and as a result, we have consolidated MPM in our consolidated financial statements at
December 31, 2003, as this entity qualifies as a variable interest entity.

In
April 2003, the FASB issued SFAS No. 149, "Amendment to Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is applied
prospectively and is effective for contracts entered into or modified after June 30, 2003, except for SFAS No. 133 implementation issues that have been effective for fiscal quarters that
began prior to June 15, 2003 and certain provisions relating to forward purchases and sales on securities that do not yet exist. We have determined that SFAS No. 149 will not have a
significant impact on our results of operations or financial position.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period beginning after
June 15, 2003. On October 29, 2003, the FASB voted to defer for an indefinite period the application of the guidance in SFAS No. 150 to non-controlling interests that
are classified as equity in the financial statements of the subsidiary but would be classified as a liability in the parent's financial statements under SFAS No. 150. The FASB decided to defer
the application of FASB No. 150 to these non-controlling interests until it could consider some of the resulting implementation issues associated with the measurement and
recognition guidance for these non-controlling interests. We currently have no instruments impacted by the adoption of this statement and therefore the adoption did not have a significant
impact on our results of operations or financial position.

50

---



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 fixed-rate borrowings and short-term borrowings under the Revolving Facility. Borrowings under the Revolving Facility bear interest at a margin above the
Alternate Base Rate or the Eurodollar Rate (each, as defined in the Revolving Facility) as selected by us. However, the amount of outstanding borrowings is expected to fluctuate and may be reduced
from time to time. The Revolving Facility matures in September 2007.

The
following table provides information about our long-term debt at December 31, 2003 (see also "Description of Certain Indebtedness and Capital Stock") (amounts in
thousands):

|                                                                             |       | Maturity
date  |  | Face
amount |         | Carrying
value |   | Estimated
fair value
|---------------------------------------------------------------------------- | ----- | -------------- |  | ----------- | ------- | -------------- | - | --------------------
|Revolving Facility at a weighted average interest rate of approximately 3.5% |       | September 2007 |  | $           | 365,000 |                | $ | 177,000             
|83/8% senior notes                                                           |       | February 2008  |  |             | 400,000 |                |   | 400,000             
|97/8% senior subordinated notes                                              |       | July 2010      |  |             | 375,000 |                |   | 373,886             
|87/8% senior subordinated notes                                              |       | December 2008  |  |             | 199,900 |                |   | 199,900             
|Other debt, interest at 6.0%                                                 |       | 2004-2007      |  |             | 6,103   |                |   | 6,082               
|Market value of interest rate swaps                                          |       |                |  |             | 12,089  |                |   | 12,089              
|                                                                             |       |                |  |             |         |                |   |                     
|                                                                             | Total |                |  |             | $       | 1,358,092      |   | $                   
|                                                                             |       |                |  |             |         |                |   |                     

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 fixed-rate debt obligations.

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

|                                            |                         | As of 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 |                    |  

51

---



ITEM 8. FINANCIAL STATEMENTS

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                   |  | Page
|-------------------------------------------------- |  | ----
|Report of Independent AuditorsErnst & Young LLP   |  | 53  
|Independent Auditors' ReportDeloitte & Touche LLP |  | 54  
|Consolidated Balance Sheets                        |  | 55  
|Consolidated Statements of Operations              |  | 56  
|Consolidated Statements of Stockholders' Equity    |  | 57  
|Consolidated Statements of Cash Flows              |  | 58  
|Notes to Consolidated Financial Statements         |  | 59  

52

---



REPORT OF INDEPENDENT AUDITORS

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

We
have audited the accompanying consolidated balance sheet of Station Casinos, Inc. and subsidiaries (a Nevada corporation) as of December 31, 2003, and the related
consolidated statements of operations, stockholders' equity and cash flows for the year then ended. 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 audit.

We
conducted our audit in accordance with auditing standards generally accepted in the 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 audit provides 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 Station Casinos, Inc. and subsidiaries
as of December 31, 2003, and the consolidated results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United
States.

As
discussed in Note 1 to the consolidated financial statements, in 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to
Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangibles", and recorded a cumulative effect of a change in accounting principle in the first quarter of 2002.

Ernst &
Young LLP

Las
Vegas, Nevada
February 6, 2004, except for Note 15, as to which the date is March 5, 2004

53

---

INDEPENDENT AUDITORS' REPORT

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

We
have audited the accompanying consolidated balance sheet of Station Casinos, Inc. and subsidiaries (the "Company") (a Nevada corporation) as of December 31, 2002, and the related
consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. 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, such consolidated financial statements present fairly, in all material respects, the financial position of Station Casinos, Inc. and subsidiaries as of December 31, 2002,
and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the
United States of America.

As
discussed in Note 1 to the consolidated financial statements, in 2002, the Company changed its method of accounting for goodwill and other intangible assets to conform to Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangibles", and recorded a cumulative effect of a change in accounting principle in the first quarter of 2002.

Deloitte &
Touche LLP

Las
Vegas, Nevada
January 29, 2003

54

---



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

|                                     |                                                                                                       | December 31,                               |          
|------------------------------------ | ----------------------------------------------------------------------------------------------------- | ------------------------------------------ | ---------
|
|ASSETS                               |                                                                                                       |                                            |          
|Current assets:                      |                                                                                                       |                                            |          
|                                     | Cash and cash equivalents                                                                             |                                            | $        
|                                     | Receivables, net                                                                                      |                                            |          
|                                     | Inventories                                                                                           |                                            |          
|                                     | Prepaid gaming tax                                                                                    |                                            |          
|                                     | Prepaid expenses                                                                                      |                                            |          
|                                     | Deferred income tax                                                                                   |                                            |          
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total current assets                       |          
|Property and equipment, net          |                                                                                                       |                                            | 1,158,299
|Goodwill and other intangibles, net  |                                                                                                       |                                            | 148,717  
|Land held for development            |                                                                                                       |                                            | 119,197  
|Investments in joint ventures        |                                                                                                       |                                            | 86,425   
|Note receivable                      |                                                                                                       |                                            |         
|Other assets, net                    |                                                                                                       |                                            | 98,870   
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total assets                               |          
|                                     |                                                                                                       |                                            |          
|LIABILITIES AND STOCKHOLDERS' EQUITY |                                                                                                       |                                            |          
|Current liabilities:                 |                                                                                                       |                                            |          
|                                     | Current portion of long-term debt                                                                     |                                            | $        
|                                     | Accounts payable                                                                                      |                                            |          
|                                     | Accrued expenses and other current liabilities                                                        |                                            |          
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total current liabilities                  |          
|Long-term debt, less current portion |                                                                                                       |                                            | 1,168,935
|Deferred income tax, net             |                                                                                                       |                                            | 65,285   
|Other long-term liabilities, net     |                                                                                                       |                                            | 29,497   
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total liabilities                          |          
|                                     |                                                                                                       |                                            |          
|Commitments and contingencies        |                                                                                                       |                                            |          
|Stockholders' equity:                |                                                                                                       |                                            |          
|                                     | Common stock, par value $0.01; authorized 135,000,000 shares; 70,912,227 and 66,689,773 shares issued |                                            |          
|                                     | Treasury stock, 10,121,677 and 8,730,872 shares, at cost                                              |                                            |          
|                                     | Additional paid-in capital                                                                            |                                            |          
|                                     | Deferred compensationrestricted stock                                                                |                                            |          
|                                     | Accumulated other comprehensive loss                                                                  |                                            |          
|                                     | Retained earnings                                                                                     |                                            |          
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total stockholders' equity                 |          
|                                     |                                                                                                       |                                            |          
|                                     |                                                                                                       | Total liabilities and stockholders' equity |          
|                                     |                                                                                                       |                                            |          

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

55

---



STATION CASINOS, INC.        CONSOLIDATED STATEMENTS OF OPERATIONS        (amounts in thousands, except per share data)

|                                                                                                    |                                                                    | For the years ended December 31, |        
|--------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | -------------------------------- | -------
|
|Operating revenues:                                                                                 |                                                                    |                                  |        
|                                                                                                    | Casino                                                             |                                  | $      
|                                                                                                    | Food and beverage                                                  |                                  |        
|                                                                                                    | Room                                                               |                                  |        
|                                                                                                    | Other                                                              |                                  |        
|                                                                                                    | Management fees                                                    |                                  |        
|                                                                                                    |                                                                    |                                  |        
|                                                                                                    |                                                                    | Gross revenues                   |        
|                                                                                                    | Promotional allowances                                             |                                  |        
|                                                                                                    |                                                                    |                                  |        
|                                                                                                    |                                                                    | Net revenues                     |        
|                                                                                                    |                                                                    |                                  |        
|Operating costs and expenses:                                                                       |                                                                    |                                  |        
|                                                                                                    | Casino                                                             |                                  |        
|                                                                                                    | Food and beverage                                                  |                                  |        
|                                                                                                    | Room                                                               |                                  |        
|                                                                                                    | Other                                                              |                                  |        
|                                                                                                    | Selling, general and administrative                                |                                  |        
|                                                                                                    | Corporate expense                                                  |                                  |        
|                                                                                                    | Development expense                                                |                                  |        
|                                                                                                    | Depreciation and amortization                                      |                                  |        
|                                                                                                    | Impairment loss                                                    |                                  |        
|                                                                                                    | Litigation settlement                                              |                                  |        
|                                                                                                    | Preopening expenses                                                |                                  |        
|                                                                                                    | Gain on sale of properties                                         |                                  |        
|                                                                                                    |                                                                    |                                  |        
|                                                                                                    |                                                                    |                                  | 717,018
|                                                                                                    |                                                                    |                                  |        
|Operating income                                                                                    |                                                                    |                                  | 141,071
|                                                                                                    | Earnings from joint ventures                                       |                                  |        
|                                                                                                    |                                                                    |                                  |        
|Operating income and earnings from joint ventures                                                   |                                                                    |                                  | 161,675
|                                                                                                    |                                                                    |                                  |        
|Other income (expense):                                                                             |                                                                    |                                  |        
|                                                                                                    | Interest expense                                                   |                                  |        
|                                                                                                    | Interest and other expense from joint ventures                     |                                  |        
|                                                                                                    | Interest income                                                    |                                  |        
|                                                                                                    | Loss on early retirement of debt                                   |                                  |        
|                                                                                                    | Other                                                              |                                  |        
|                                                                                                    |                                                                    |                                  |        
|                                                                                                    |                                                                    |                                  | (93,498
|                                                                                                    |                                                                    |                                  |        
|Income before income taxes and cumulative effect of change in accounting principle                  |                                                                    |                                  | 68,177 
|Income tax provision                                                                                |                                                                    |                                  | (23,834
|                                                                                                    |                                                                    |                                  |        
|Income before cumulative effect of change in accounting principle                                   |                                                                    |                                  | 44,343 
|Cumulative effect of change in accounting principle, net of applicable income tax benefit of $7,170 |                                                                    |                                  |       
|                                                                                                    |                                                                    |                                  |        
|Net income                                                                                          |                                                                    | $                                | 44,343 
|                                                                                                    |                                                                    |                                  |        
|Basic and diluted earnings per common share:                                                        |                                                                    |                                  |        
|                                                                                                    | Income before cumulative effect of change in accounting principle: |                                  |        
|                                                                                                    |                                                                    | Basic                            |        
|                                                                                                    |                                                                    | Diluted                          |        
|                                                                                                    | Net income:                                                        |                                  |        
|                                                                                                    |                                                                    | Basic                            |        
|                                                                                                    |                                                                    | Diluted                          |        
|                                                                                                    | Weighted average common shares outstanding:                        |                                  |        
|                                                                                                    |                                                                    | Basic                            |        
|                                                                                                    |                                                                    | Diluted                          |        
|Dividends paid per common share                                                                     |                                                                    | $                                | 0.25   

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

56

---



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

|                                                                                               |  | Common
stock |     | Treasury
stock |   | Additional
paid-in
capital |   | Deferred
compensation-
restricted
stock |         | Accumulated
other
comprehensive
loss |   | Retained
earnings |   | Total
stockholders'
equity |       
|---------------------------------------------------------------------------------------------- |  | ------------ | --- | -------------- | - | -------------------------- | - | --------------------------------------- | ------- | ------------------------------------ | - | ----------------- | - | -------------------------- | ------
|Balances, December 31, 2000                                                                    |  | $            | 427 |                | $ | (41,882                    | ) | $                                       | 288,794 |                                      | $ | (6,050            | ) | $                          |      
|Exercise of stock options                                                                      |  |              | 1   |                |   |                           |   |                                         | 1,431   |                                      |   |                  |   |                            |      
|Issuance of restricted stock                                                                   |  |              | 13  |                |   |                           |   |                                         | 15,116  |                                      |   | (15,129           | ) |                            |      
|Cancellation of restricted stock                                                               |  |              |    |                |   |                           |   |                                         | (189    | )                                    |   | 189               |   |                            |      
|Amortization of deferred compensation                                                          |  |              |    |                |   |                           |   |                                         |        |                                      |   | 1,480             |   |                            |      
|Purchase of treasury stock, at cost (3,470 shares)                                             |  |              |    |                |   | (49,145                    | ) |                                         |        |                                      |   |                  |   |                            |      
|Sale of Southwest Gaming                                                                       |  |              |    |                |   | (8,440                     | ) |                                         |        |                                      |   |                  |   |                            |      
|Other                                                                                          |  |              |    |                |   | 219                        |   |                                         | (4,898  | )                                    |   |                  |   |                            |      
|Net income                                                                                     |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            |      
|                                                                                               |  |              |     |                |   |                            |   |                                         |         |                                      |   |                   |   |                            |       
|Balances, December 31, 2001                                                                    |  |              | 441 |                |   | (99,248                    | ) |                                         | 300,254 |                                      |   | (19,510           | ) |                            |      
|Exercise of stock options                                                                      |  |              | 11  |                |   |                           |   |                                         | 12,322  |                                      |   |                  |   |                            |      
|Issuance of restricted stock                                                                   |  |              | 2   |                |   |                           |   |                                         | 3,693   |                                      |   | (3,695            | ) |                            |      
|Amortization of deferred compensation                                                          |  |              |    |                |   |                           |   |                                         |        |                                      |   | 2,973             |   |                            |      
|Purchase of treasury stock, at cost (743 shares)                                               |  |              |    |                |   | (10,214                    | ) |                                         |        |                                      |   |                  |   |                            |      
|Green Valley Ranch Station interest rate swap market valuation adjustment, net of income
taxes |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            | (1,695
|Other                                                                                          |  |              |    |                |   |                           |   |                                         | 445     |                                      |   |                  |   |                            |      
|Net income                                                                                     |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            |      
|                                                                                               |  |              |     |                |   |                            |   |                                         |         |                                      |   |                   |   |                            |       
|Balances, December 31, 2002                                                                    |  |              | 454 |                |   | (109,462                   | ) |                                         | 316,714 |                                      |   | (20,232           | ) |                            | (1,695
|Exercise of stock options                                                                      |  |              | 39  |                |   |                           |   |                                         | 58,724  |                                      |   |                  |   |                            |      
|Issuance of restricted stock                                                                   |  |              | 4   |                |   |                           |   |                                         | 11,468  |                                      |   | (11,472           | ) |                            |      
|Amortization of deferred compensation                                                          |  |              |    |                |   |                           |   |                                         |        |                                      |   | 3,201             |   |                            |      
|Purchase of treasury stock, at cost (1,391 shares)                                             |  |              |    |                |   | (25,072                    | ) |                                         |        |                                      |   |                  |   |                            |      
|Green Valley Ranch Station interest rate swap market valuation adjustment, net of income
taxes |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            | 361   
|Dividends paid                                                                                 |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            |      
|Other                                                                                          |  |              |    |                |   |                           |   |                                         | 1,067   |                                      |   | 1,500             |   |                            |      
|Net income                                                                                     |  |              |    |                |   |                           |   |                                         |        |                                      |   |                  |   |                            |      
|                                                                                               |  |              |     |                |   |                            |   |                                         |         |                                      |   |                   |   |                            |       
|Balances, December 31, 2003                                                                    |  | $            | 497 |                | $ | (134,534                   | ) | $                                       | 387,973 |                                      | $ | (27,003           | ) | $                          | (1,334
|                                                                                               |  |              |     |                |   |                            |   |                                         |         |                                      |   |                   |   |                            |       

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

57

---



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

|                                                                                  |                                                                                           | For the years ended December 31,               |                                                    
|--------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------- | ---------------------------------------------- | ---------------------------------------------------
|
|Cash flows from operating activities:                                             |                                                                                           |                                                |                                                    
|Net income                                                                        |                                                                                           | $                                              | 44,343                                             
|                                                                                  |                                                                                           |                                                |                                                    
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                                                           |                                                |                                                    
|                                                                                  | Depreciation and amortization                                                             |                                                |                                                    
|                                                                                  | Tax benefit from exercise of stock options                                                |                                                |                                                    
|                                                                                  | Impairment loss                                                                           |                                                |                                                    
|                                                                                  | Earnings from joint ventures, net                                                         |                                                |                                                    
|                                                                                  | Amortization of debt discount and issuance costs                                          |                                                |                                                    
|                                                                                  | Loss on early retirement of debt                                                          |                                                |                                                    
|                                                                                  | Cumulative effect of change in accounting principle                                       |                                                |                                                    
|                                                                                  | Gain on sale of properties                                                                |                                                |                                                    
|                                                                                  | Changes in assets and liabilities:                                                        |                                                |                                                    
|                                                                                  |                                                                                           | Receivables, net                               |                                                    
|                                                                                  |                                                                                           | Inventories and prepaid expenses               |                                                    
|                                                                                  |                                                                                           | Deferred income tax                            |                                                    
|                                                                                  |                                                                                           | Accounts payable                               |                                                    
|                                                                                  |                                                                                           | Accrued expenses and other current liabilities |                                                    
|                                                                                  | Other, net                                                                                |                                                |                                                    
|                                                                                  |                                                                                           |                                                |                                                    
|                                                                                  |                                                                                           |                                                | Total adjustments                                  
|                                                                                  |                                                                                           |                                                |                                                    
|                                                                                  |                                                                                           |                                                | Net cash provided by operating activities          
|                                                                                  |                                                                                           |                                                |                                                    
|Cash flows from investing activities:                                             |                                                                                           |                                                |                                                    
|                                                                                  | Capital expenditures                                                                      |                                                |                                                    
|                                                                                  | Note receivable                                                                           |                                                |                                                    
|                                                                                  | Purchase of land held for development                                                     |                                                |                                                    
|                                                                                  | Proceeds from sale of land, property and equipment                                        |                                                |                                                    
|                                                                                  | Investments in joint ventures                                                             |                                                |                                                    
|                                                                                  | Accrued construction contacts payable                                                     |                                                |                                                    
|                                                                                  | Payments on construction contracts                                                        |                                                |                                                    
|                                                                                  | Other, net                                                                                |                                                |                                                    
|                                                                                  |                                                                                           |                                                |                                                    
|                                                                                  |                                                                                           |                                                | Net cash used in investing activities              
|                                                                                  |                                                                                           |                                                |                                                    
|Cash flows from financing activities:                                             |                                                                                           |                                                |                                                    
|                                                                                  | Borrowings (payments) under bank facility with maturity dates less than three months, net |                                                |                                                    
|                                                                                  | Borrowings under bank facility, maturity dates greater than three months                  |                                                |                                                    
|                                                                                  | Payments under bank facility, maturity dates greater than three months                    |                                                |                                                    
|                                                                                  | Principal payments on notes payable, net                                                  |                                                |                                                    
|                                                                                  | Purchase of treasury stock                                                                |                                                |                                                    
|                                                                                  | Exercise of stock options                                                                 |                                                |                                                    
|                                                                                  | Proceeds from interest rate swap termination                                              |                                                |                                                    
|                                                                                  | Redemption of senior subordinated notes                                                   |                                                |                                                    
|                                                                                  | Proceeds from the issuance of senior notes                                                |                                                |                                                    
|                                                                                  | Payment of dividends                                                                      |                                                |                                                    
|                                                                                  | Debt issuance costs                                                                       |                                                |                                                    
|                                                                                  | Other, net                                                                                |                                                |                                                    
|                                                                                  |                                                                                           |                                                |                                                    
|                                                                                  |                                                                                           |                                                | Net cash (used in) provided by financing activities
|                                                                                  |                                                                                           |                                                |                                                    
|Cash and cash equivalents:                                                        |                                                                                           |                                                |                                                    
|                                                                                  | Increase (decrease) in cash and cash equivalents                                          |                                                |                                                    
|                                                                                  | Balance, beginning of year                                                                |                                                |                                                    
|                                                                                  |                                                                                           |                                                |                                                    
|                                                                                  | Balance, end of year                                                                      |                                                | $                                                  
|                                                                                  |                                                                                           |                                                |                                                    
|Supplemental cash flow disclosures:                                               |                                                                                           |                                                |                                                    
|                                                                                  | Cash paid for interest, net of $3,496, $2,065 and $10,918 capitalized                     |                                                | $                                                  
|                                                                                  | Cash paid (received) for income taxes, net                                                |                                                | $                                                  
|Supplemental disclosure of non-cash items:                                        |                                                                                           |                                                |                                                    
|                                                                                  | Equipment purchase financed by debt                                                       |                                                | $                                                  
|                                                                                  | Sale of Southwest Gaming                                                                  |                                                | $                                                  
|                                                                                  | Investment in MPM                                                                         |                                                | $                                                  

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

58

---



STATION CASINOS, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies and Basis of Presentation



Station Casinos, Inc. (the "Company"), a Nevada corporation, is a gaming and entertainment company that currently owns and operates eight major
hotel/casino properties (one of which is 50% owned) and three smaller casino properties (one of which is 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 the Company and its wholly owned subsidiaries, Palace Station Hotel & Casino, Inc. ("Palace
Station"), Boulder Station, Inc. ("Boulder Station"), Texas Station, LLC ("Texas Station"), Sunset Station, Inc. ("Sunset Station"), Santa Fe Station, Inc. ("Santa Fe Station"),
Fiesta Station, Inc. ("Fiesta Rancho"), Lake Mead Station, Inc. ("Fiesta Henderson"), Wild Wild West Gambling Hall & Hotel ("Wild Wild West") and Wildfire Casino ("Wildfire"). The
Company also consolidates MPM Enterprises, LLC ("MPM"), in which it owns a 50% interest and is required to be consolidated. The Company also owns a 50% interest in Barley's Casino & Brewing
Company ("Barley's") and Green Valley Ranch Gaming, LLC ("Green Valley Ranch Station") and a 6.7% interest in the Palms Casino Resort, which are accounted for under the equity method. The Company is
the managing partner for both Barley's and Green Valley Ranch Station. In addition, the Company manages Thunder Valley Casino ("Thunder Valley") in Sacramento, California on behalf of the United
Auburn Indian Community ("UAIC"), which opened on June 9, 2003. All significant intercompany accounts and transactions have been eliminated.



The preparation of 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 fixed 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 includes cash on hand at our properties, as well as investments purchased with an original maturity of 90 days or less.



Inventories are stated at the lower of cost or market; cost being determined on a first-in, first-out basis.



The carrying value of the Company's cash and cash equivalents, receivables and accounts payable approximates fair value primarily because of the short maturities
of these instruments. The fair value of the Revolving Facility approximates the carrying amount of the debt due to the short-term nature of the underlying borrowings. The fair value of the
Company's other long-term debt is estimated based on the quoted market prices for the same or similar issues (see Note 8).

59

---



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.

The
Company evaluates its property and equipment and other long-lived assets for impairment in accordance with Statement of Financial Accounting Standards ("SFAS")
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." For assets to be disposed of, the Company recognizes 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, the Company reviews fixed assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company compares 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. The consolidated
financial statements reflect all adjustments required by SFAS No. 144 as of December 31, 2003.



The Company capitalizes 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, the Company capitalizes interest on amounts expended on the project at the Company's weighted average cost of borrowed money. Interest capitalized was approximately
$3.5 million, $2.1 million and $10.9 million for the years ended December 31, 2003, 2002 and 2001, respectively.



The Financial Accounting Standards Board ("FASB") issued SFAS No. 142, "Goodwill and Other Intangible Assets", in June 2001. SFAS No. 142
changed the accounting for goodwill from an amortization method to an impairment-only approach. Amortization of goodwill, including goodwill recorded in past business combinations, ceased
upon the adoption of SFAS No. 142. The Company implemented SFAS No. 142 on January 1, 2002 and tested for impairment in accordance with the provisions of SFAS No. 142 in
the first quarter of 2002 and will annually perform such test in the fourth quarter of each subsequent year. As a result of an independent third party appraisal, the Company recorded an impairment
loss of $13.3 million, net of the applicable tax benefit, during 2002 related to the acquisition of Fiesta Rancho, which is shown as a cumulative effect of a change in accounting principle in
the Company's consolidated statements of operations. Fiesta Rancho was purchased in early 2001, and there were no events or changes in circumstances ("triggering events") during the course of 2001
that would have indicated the recoverability of the carrying amount of the property should be assessed. As a result, there was no requirement to test for impairment under the provisions of SFAS
No. 121, which was the primary literature regarding the impairment of an asset prior to the adoption of SFAS No. 142. The Company tested for

60

---

impairment
of goodwill in the fourth quarter of 2002 and determined that there was no impairment. The Company tested for impairment of goodwill in the fourth quarter of 2003 and recorded an impairment
loss of $17.5 million at Fiesta Rancho as a result of reduced growth assumptions.

Also,
in connection with the acquisition of Fiesta Rancho, the Company acquired the customer list and is amortizing it over five years. The customer list was valued at
$5.0 million at the time of the purchase and as of December 31, 2003, had a net book value of approximately $2.4 million. The amortization expense related to the customer list for
the years ended December 31, 2003 and 2002 was approximately $1.2 million and is expected to remain the same in future periods until fully amortized.

The
following tables illustrates what the effect of adopting SFAS No. 142 would have had on net income and earnings per common share for the year ended December 31, 2001,
adjusted to exclude amortization expense related to goodwill that is no longer being amortized (amounts in thousands):

|                                                            |  | December 31,
2001
|----------------------------------------------------------- |  | -----------------
|Net income as reported                                      |  | $                
|Goodwill amortization, net of applicable income tax benefit |  |                  
|                                                            |  |                  
|Adjusted net income                                         |  | $                
|                                                            |  |                  
|                                                            |  |                  
|Basic earnings per common share as reported                 |  | $                
|Goodwill amortization, net of applicable income tax benefit |  |                  
|                                                            |  |                  
|Adjusted basic earnings per common share                    |  | $                
|                                                            |  |                  
|                                                            |  |                  
|Diluted earnings per common share reported                  |  | $                
|Goodwill amortization, net of applicable income tax benefit |  |                  
|                                                            |  |                  
|Adjusted diluted earnings per common share                  |  | $                
|                                                            |  |                  



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 on the Company's consolidated balance sheets.



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. During the year ended December 31, 2001, the Company incurred preopening expenses of $6.4 million, which included
costs incurred prior to the acquisitions of Fiesta Rancho and Fiesta Henderson and costs incurred prior to the opening of Green Valley Ranch Station.



From time to time, the Company uses interest rate swaps and similar financial instruments to assist in managing interest incurred on its long-term
debt. The difference between amounts received and amounts

61

---

paid
under such agreements, as well as any costs or fees, is recorded as a reduction of, or addition to, interest expense as incurred over the life of the swap or similar financial instrument (see
Notes 8 and 9).



The Company recognizes 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. Revenues include the retail value of food, beverage, rooms, entertainment and merchandise provided on a complimentary basis to customers. Such amounts are then
deducted from revenues as promotional allowances on the Company's consolidated statements of operations. The estimated departmental costs of providing such promotional allowances are included in
casino costs and expenses and consist of the following (amounts in thousands):

For the years ended December 31,2003

2002

2001Food and beverage

$
57,985

$
59,781

$
59,398Room


3,119


3,023


3,482Other


3,057


2,899


2,634Total

$
64,161

$
65,703

$
65,514


The
Company's 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 are 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 Company also records a liability for the estimated cost of the outstanding points under the Programs.



The Company has 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 the Wildfire. On January 27, 2003, the Company purchased substantially all of the assets of the Wildfire for $8.0 million from Bauchman Gaming Ventures, LLC,
a company owned by the two brothers-in-law of Scott M Nielson, the Company's Executive Vice President and Chief Legal Officer. The expenses related to these related party
transactions were approximately $13.4 million, $5.1 million and $5.1 million for the years ended December 31, 2003, 2002 and 2001, respectively.

In
addition, during the year ended December 31, 2001, the Company recorded a related party gain of approximately $1.7 million. Until September 30, 2001, the Company
owned and provided slot route management services in southern Nevada. On September 30, 2001, the Company sold Southwest Gaming Services, Inc. ("Southwest Gaming") to Blake L. Sartini,
its former executive vice president and chief operating officer. The Company transferred its stock in Southwest Gaming to Mr. Sartini in exchange for Station Casinos' common stock valued at
approximately $8.4 million. The gain reflected the difference between the carrying value of the Company's investment in the Southwest Gaming assets to be distributed

62

---

of
$6.7 million and the fair value of Station Casinos' common stock of $8.4 million, which was based on its average trading price for five days before September 30, 2001, the
transaction closing date. Net revenues and operating income for Southwest Gaming for the nine months ended September 30, 2001 were approximately $22.9 million and $1.6 million,
respectively.



In accordance with the provisions of SFAS No. 128, "Earnings Per Share", basic EPS is computed by dividing net income applicable to common stock by the
weighted average common shares outstanding during the period. Diluted EPS reflects the additional dilution for all potentially dilutive securities such as stock options.

The
weighted average number of common shares used in the calculation of basic and diluted earnings per share consisted of the following (amounts in thousands):

For the years ended December 31,2003

2002

2001Weighted average common shares outstanding (used in calculation of basic earnings per share)

58,371

57,845

57,693Potential dilution from the assumed exercise of stock options

3,479

2,885

2,344Weighted average common and common equivalent shares outstanding (used in calculation of diluted earnings per share)

61,850

60,730

60,037


The
number of antidilutive stock options as of December 31, 2003, 2002 and 2001 was 28,000, 0.2 million and 5.5 million, respectively.



The Company applies APB Opinion No. 25 and related interpretations in accounting for its stock-based employee compensation programs. Accordingly,
compensation expense recognized was different than what would have been otherwise recognized under the fair value based method defined in SFAS No. 123, "Accounting for Stock-Based
Compensation". Had compensation expense for the plans been determined in accordance with SFAS No. 123, the effect on the Company's net income and basic and

63

---

diluted
earnings per common share would have been as follows (amounts in thousands, except per share data):

For the years ended December 31,2003

2002

2001Net income:As reported

$
44,343

$
17,932

$
19,369Stock-based compensation expense reported in net income


694


289


Stock-based compensation expense under fair value method


(8,175
)

(7,022
)

(5,219
)Pro forma net income

$
36,862

$
11,199

$
14,150Earnings per common share:Basicas reported

$
0.76

$
0.31

$
0.34Basicpro forma


0.63


0.19


0.25Dilutedas reported

$
0.72

$
0.30

$
0.32Dilutedpro forma


0.60


0.18


0.24


The
fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing method with the following assumptions:

For the years ended December 31,2003

2002

2001Expected dividend yield


1.63
%




Expected stock price volatility


54.30
%

56.34
%

52.00
%Risk-free interest rate


2.97
%

3.82
%

4.03
%Expected average life of options (years)


3.42


4.42


3.83Weighted average fair value per option granted

$
7.53

$
6.69

$
4.73


Because
the SFAS No. 123 method of accounting has not been applied to options granted prior to April 1, 1995, the resulting pro forma net income may not be representative
of that to be expected in future years.



SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information", requires separate financial information be disclosed for all operating
segments of a business. The Company believes that it meets the "economic similarity" criteria established by SFAS No. 131, and as a result, the Company aggregates all of its 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.

64

---



In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"), "Consolidation of Variable Interest Entities". The objective of FIN 46 is to
improve financial reporting by companies involved with variable interest entities. FIN 46 changes certain consolidation requirements by requiring a variable interest entity to be consolidated by a
company that is subject to a majority of the risk of loss from the variable interest entity's activities or entitled to receive a majority of the entity's residual returns or both. In October and
December 2003, the FASB agreed to defer the effective date of FIN 46 for variable interests held by public companies in all entities that were acquired prior to February 1, 2003 to the
quarter ending March 31, 2004. For entities acquired after February 1, 2003, the Company was required to adopt FIN 46 for the quarter ended September 30, 2003. The Company's
acquisition of its 50% interest in MPM, which it agreed to purchase in November 2003, was subject to the provisions of FIN 46 and as a result, the Company has consolidated MPM in its
consolidated financial statements at December 31, 2003, as this entity qualifies as a variable interest entity.

In
April 2003, the FASB issued SFAS No. 149, "Amendment to Statement 133 on Derivative Instruments and Hedging Activities". SFAS No. 149 amends and clarifies
accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133. SFAS No. 149 is applied
prospectively and is effective for contracts entered into or modified after June 30, 2003, except for SFAS No. 133 implementation issues that have been effective for fiscal quarters that
began prior to June 15, 2003 and certain provisions relating to forward purchases and sales on securities that do not yet exist. The Company has determined that SFAS No. 149 will not
have a significant impact on its results of operations or financial position.

In
May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments With Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some circumstances). SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003,
and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. On October 29, 2003, the FASB voted to defer for an indefinite period the
application of the guidance in SFAS No. 150 to non-controlling interests that are classified as equity in the financial statements of the subsidiary but would be classified as a
liability in the parent's financial statements under SFAS No. 150. The FASB decided to defer the application of FASB No. 150 to these non-controlling interests until it could
consider some of the resulting implementation issues associated with the measurement and recognition guidance for these non-controlling interests. The Company currently has no instruments
impacted by the adoption of this statement and therefore the adoption did not have a significant impact on its results of operations or financial position.



Certain amounts in the December 31, 2002 and 2001 consolidated financial statements have been reclassified to conform to the December 31, 2003
presentation. These reclassifications had no effect on the previously reported net income.

65

---

2. Receivables

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

December 31,2003

2002Casino

$
7,166

$
7,280Hotel


2,428


2,417Income tax


7,181


4,431Other


14,335


3,97731,110


18,105Allowance for doubtful accounts


(2,886
)

(2,682
)Receivables, net

$
28,224

$
15,423


3. Property and Equipment

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

December 31,Estimated life (years)2003

2002Land



$
140,043

$
109,652Land leases







4,995Buildings and improvements

10-45


901,347


872,094Furniture, fixtures and equipment

3-7


392,818


353,694Construction in progress




99,455


14,8611,533,663


1,355,296Accumulated depreciation and amortization




(375,364
)

(309,245
)Property and equipment, net



$
1,158,299

$
1,046,051


At
December 31, 2003 and 2002, substantially all property and equipment of the Company is pledged as collateral for long-term debt.

4. Land Held for Development

The Company has acquired certain parcels of land in the Las Vegas valley and in Sacramento, California as part of its development activities. The Company's
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 the Company's control, no assurances can be made that it will be able to secure additional, acceptable financing in order to proceed with any
particular project. As of December 31, 2003, the Company had $119.2 million of land held for development that consists primarily of six sites that are owned or leased, which comprise 177
acres in the Las Vegas valley and 188 acres in the Sacramento area near Thunder Valley. In addition, the Company has options to purchase a total of 34 acres adjacent to one of the sites in the Las
Vegas valley. The Durango site, located at the intersection of Durango Road and the Southern Beltway/Interstate 215 in the southwest quadrant of Las Vegas, currently consists of 67 acres. In
April 2003, the Company exercised its option to purchase 32 acres of land adjacent to 35 acres of land

66

---

previously
owned at the Durango site for $10.7 million. The Boulder/Tropicana site is a 68-acre site consisting of two parcels at the intersection of Boulder Highway and Tropicana
Avenue in eastern Las Vegas. The Company is leasing (with an option to purchase) 34 acres of the site and owns the adjacent 34-acre parcel. The Company also owns a 49-acre
gaming-entitled parcel in southwest Las Vegas at the intersection of Flamingo Road and Interstate 215 and a 27-acre gaming-entitled parcel at the intersection of Boulder Highway and Nellis
Boulevard. The Company also purchased approximately 90 acres of land, which is adjacent to the 98 acres previously purchased near Thunder Valley for approximately $4.2 million in
September 2003.

The
Company exercised its option to purchase the 19-acre parcel of land on which Wild Wild West is located in 2003. Pursuant to the lease, the purchase will take place in
July 2005 at the fair market value of the land but not less than $27 million or not more than approximately $36 million. No amounts related to this purchase option have been
recorded on the Company's consolidated balance sheets at December 31, 2003. In May 2003, the Company also purchased approximately 17 acres of land adjacent
to Wild Wild West for approximately $28.8 million. This property currently includes approximately 270,000 square feet of office and warehouse space in a number of low-rise
buildings. Also in 2003, the Company paid approximately $6.4 million in conjunction with an agreement to purchase a 9-acre parcel adjacent to Wild Wild West.

5. Investments in Joint Ventures

The Company has investments in two 50% owned joint ventures, Green Valley Ranch Station and Barley's, and a 6.7% investment in a joint venture that operates the
Palms Casino Resort in Las Vegas, Nevada, that are accounted for under the equity method. Under the equity method, original investments are recorded at cost and adjusted by the Company's share of
earnings, losses and distributions of the joint ventures. The investment balance also includes interest capitalized during the construction period, which is amortized against the earnings of the joint
venture. Investments in joint ventures consist of the following (amounts in thousands):

December 31,2003

2002Green Valley Ranch Station (50.0%)

$
66,484

$
55,685Barley's (50.0%)


2,899


2,740Palms Casino Resort (6.7%)


17,042


16,784Investments in joint ventures

$
86,425

$
75,209


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

December 31,2003

2002Current assets

$
51,551

$
45,607Property and equipment and other assets, net


525,515


534,302Current liabilities


37,977


58,380Long-term debt and other liabilities


196,399


208,264Stockholders' equity


342,690


313,265


67

---

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

For the years ended December 31,2003

2002

2001Net revenues

$
327,190

$
276,051

$
36,277Operating costs and expenses


263,481


236,817


56,837Operating income (loss)


63,709


39,234


(20,560
)Interest and other expense, net


12,734


19,450


1,081Net income (loss)

$
50,975

$
19,784

$
(21,641
)


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

For the years ended December 31,2003

2002

2001Operating earnings from joint ventures

$
20,604

$
11,293

$
2,504Interest and other expense from joint ventures


(7,233
)

(6,272
)

(199
)Net earnings from joint ventures

$
13,371

$
5,021

$
2,305


6. Asset Impairment

The Company recorded an impairment loss of approximately $18.9 million, $8.8 million and $4.0 million in the years ended December 31,
2003, 2002 and 2001, respectively, to adjust the carrying value of its goodwill and other assets to their estimated fair value. The $18.9 million impairment loss in 2003 related to the write
off of approximately $17.5 million in goodwill at Fiesta Rancho in accordance with SFAS No. 142 as a result of reduced growth assumptions. The remaining $1.4 million impairment
loss in 2003 was primarily related to the write off of the Company's investment in a new slot product development. The impairment of this asset was based upon a decision by the Company to no longer
pursue the development of certain slot products. As a result, all of the development costs that the Company had incurred were written off, as they were deemed to have no value.

During
the year ended December 31, 2002, approximately $3.9 million of the impairment loss related to the write-down of certain assets related to the Company's
investments in an Internet, intra-state gaming platform and related technology. In May 2002, the Nevada Gaming Commission communicated that it had general concerns regarding the security and
reliability of Internet gaming platforms. The impairment of these assets was based upon a decision by the Company to no longer pursue Nevada-based Internet gaming activities as a result of the
uncertainty of regulatory approval of these types of activities. As a result, all of the hardware, software and internal development costs that the Company had incurred were written off in 2002, as
they were deemed to have no value. In addition, approximately $4.9 million of the impairment loss was related to the Company's option to invest in an Internet wagering business. In
February 2002, the Company announced that it intended to purchase a 50% interest in Kerzner Interactive Limited (formerly

68

---

SunOnline
Limited) ("Kerzner Interactive"), a wholly owned subsidiary of Kerzner International Limited (formerly Sun International Hotels Limited) ("Kerzner"). Kerzner Interactive was to be the
exclusive vehicle for both Kerzner and the Company to pursue the Internet wagering business. In July 2002, the Company converted its agreement to acquire a 50% interest in Kerzner Interactive
into an option to do so, and paid $4.5 million for such option. Kerzner decided to discontinue Kerzner Interactive, as it targeted Internet wagering only from jurisdictions that permitted
online gaming. As these jurisdictions became more restrictive in their acceptance of Internet gaming, the market size was reduced and competition intensified, resulting in a substantial decrease in
the probability of achieving profitability in the short-to-medium term. As a result, the Company has written off the option payment and other costs related to this investment.

During
the year ended December 31, 2001, the Company recorded an impairment loss with respect to a 34-acre parcel, near the intersection of Martin Luther King Jr.
Drive and Craig Road in North Las Vegas. This impairment loss was necessary because, after evaluating all of its options, the Company determined not to develop a casino on this site. The assets
included capitalized rent and design costs, which had no value after the Company made the decision not to develop a gaming facility on this parcel. As of December 31, 2002, gaming was not
permitted on this site due to zoning restrictions.

7. Accrued Expenses and Other Current Liabilities

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

December 31,2003

2002Accrued payroll and related

$
24,774

$
25,666Accrued interest payable


14,655


15,356Accrued progressives


4,459


6,098Accrued group insurance


2,921


6,761Litigation settlement


38,000


Other accrued expenses and current liabilities


37,047


26,262Total accrued expenses and other current liabilities

$
121,856

$
80,143


69

---

8. Long-term Debt

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

|                                                                                                                                                                                                      |                           | December 31, |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | ------------ | -------
|
|Revolving credit facility, $365.0 million limit at December 31, 2003, due September 30, 2007, interest at a margin above the Alternate Base Rate or the Eurodollar Rate (3.5% at December 31,
2003)   |                           | $            | 177,000
|83/8% senior notes, interest payable semi-annually, principal due February 15, 2008                                                                                                                   |                           |              | 400,000
|97/8% senior subordinated notes, interest payable semi-annually, principal due July 1, 2010, net of unamortized discount of $1.1 million and $1.2 million at
December 31, 2003 and 2002, respectively |                           |              | 373,886
|87/8% senior subordinated notes, interest payable semi-annually, principal due December 1, 2008                                                                                                       |                           |              | 199,900
|Other long-term debt, interest at 6.0% at December 31, 2003, maturity dates ranging from 2004 to 2007                                                                                                 |                           |              | 6,082  
|                                                                                                                                                                                                      |                           |              |        
|                                                                                                                                                                                                      | Total long-term debt      |              |        
|Current portion of long-term debt                                                                                                                                                                     |                           |              | (22    
|Market value of interest rate swaps                                                                                                                                                                   |                           |              | 12,089 
|                                                                                                                                                                                                      |                           |              |        
|                                                                                                                                                                                                      | Total long-term debt, net |              | $      
|                                                                                                                                                                                                      |                           |              |        



In September 2002, the Company completed its $365.0 million revolving credit facility (the "Revolving Facility"). The Revolving Facility contains no
principal amortization and matures in September 2007. The Borrowers are the major operating subsidiaries and the Revolving Facility is secured by substantially all of the Company's assets.
Borrowings under the Revolving Facility bear interest at a margin above the Alternate Base Rate or the Eurodollar Rate (each, as defined in the Revolving Facility), as selected by the Company. The
margin above such rates, and the fee on the unfunded portions of the Revolving Facility, will vary quarterly based on the Company's combined consolidated ratio of debt to Adjusted EBITDA (each, as
defined in the Revolving Facility). As of December 31, 2003, the Borrowers' margin above the Eurodollar Rate on borrowings under the Revolving Facility was 1.75%. The maximum margin for
Eurodollar Rate borrowings is 2.50%. The maximum margin for Alternate Base Rate borrowings is 1.25%. As of December 31, 2003, the fee for the unfunded portion of the Revolving Facility was
0.375%. Pursuant to the terms of the Revolving Facility, the Company has requested to increase the available borrowings to $500 million.

The
Revolving Facility contains certain financial and other covenants. These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers combined of 2.25 to 1.00 for each
quarter and a minimum fixed charge coverage ratio for the preceding four quarters for the Borrowers combined of 1.50 to 1.00 for each quarter. As of December 31, 2003, the Borrowers' funded
debt to Adjusted EBITDA ratio was 0.76 to 1.00 and the fixed charge coverage ratio was 2.62 to 1.00. In addition, the Revolving Facility has financial and other covenants, which state that the maximum
consolidated funded debt to Adjusted EBITDA ratio can be no more than 5.00 to 1.00 through June 30, 2005, which reduces to 4.75 to 1.00 on September 30, 2005 through December 31,
2005, to 4.50 to 1.00 on March 31, 2006 through June 30, 2006 and to 4.00 to 1.00 on September 30, 2006. Other covenants limit prepayments of indebtedness or rent

70

---

(including
subordinated debt other than re-financings meeting certain criteria), limitations on asset dispositions, limitations on dividends, limitations on indebtedness, limitations on
investments and limitations on capital expenditures. As of December 31, 2003, the Company's consolidated funded debt to Adjusted EBITDA ratio was 3.58 to 1.00. The Company has pledged the stock
of all of its major subsidiaries.



In 2001, the Company completed offerings for a total of $400.0 million of senior notes due in February 2008 (the "Senior Notes"). The Senior Notes
bear interest at a rate equal to 83/8% per annum and were priced at par. The proceeds from the Senior Notes were used to repay amounts outstanding on the previous revolving facility and
to redeem the $198.0 million 101/8% senior subordinated notes, which were due in 2006. As a result of the redemption, the Company recorded a loss on early retirement of debt of
approximately $12.7 million in 2001.

In
the first quarter of 2004, the Company repurchased or redeemed its 87/8% senior subordinated notes due 2008 and repurchased a portion of its 97/8% senior
subordinated notes due July 2010. In addition, the Company has issued a tender offer and consent solicitation for its 83/8% senior notes due 2008, which is expected to close on
March 17, 2004 (see Note 15 "Subsequent Events").

The
indentures (the "Indentures") governing the Company's senior subordinated notes (the "Notes") contain certain customary financial and other covenants, which limit the Company and its
subsidiaries' ability to incur additional debt. At December 31, 2003, the Company's Consolidated Coverage Ratio (as defined in the Indentures) was 2.92 to 1.00. The Indentures provide that the
Company may not incur additional indebtedness, other than specified types of indebtedness, unless the Consolidated Coverage Ratio is at least 2.00 to 1.00. In the event the Company's Consolidated
Coverage Ratio is below 2.00 to 1.00, the covenant limits the Company's ability to incur additional indebtedness for borrowings under the Revolving Facility not to exceed the greater of
$200 million or 1.5 times Operating Cash Flow (as defined) for the four most recent quarters, plus $15 million. The Indentures also give the holders of the Notes the right to require the
Company to purchase the Notes at 101% of the principal amount of the Notes plus accrued interest thereon upon a Change of Control and Rating Decline (each as defined in the Indentures) of the Company.
The covenants for the Senior Notes are essentially the same as the Notes, except there are limitations on restricted payments and restricted investments, which limits payments of dividends and
investments. In addition, the indenture governing the Senior Notes contains a limitation on liens the Company can incur.

During
2001, the Company entered into various interest rate swaps with members of its bank group to manage interest expense. The interest rate swaps have converted a portion of the
Company's fixed-rate debt to a floating rate. As of December 31, 2003, the Company had one remaining interest rate swap agreement with a total notional amount of
$50.0 million in which it pays a floating rate at December 31, 2003 of approximately 3.54% and receives a fixed rate at December 31, 2003 of approximately 8.38%. The interest rate
swap terminates in 2008. The net effect of all of the interest rate swaps resulted in a reduction in interest expense of $3.6 million, $10.7 million and $4.9 million for the years
ended December 31, 2003, 2002 and 2001, respectively.

On
October 18, 2002, the Company redeemed the $150 million 93/4% senior subordinated notes. The redemption was funded with proceeds from the Revolving
Facility. The Company recorded a charge of approximately $10.1 million during the year ended December 31, 2002, to reflect the write-off of the

71

---

unamortized
debt discount, unamortized loan costs and the premium to redeem the $150 million 93/4% senior subordinated notes. This charge was partially offset by approximately
$5.7 million from the adjusted basis of the debt as a result of the fair value hedge termination that was tied directly to the $150 million 93/4% senior subordinated
notes, as discussed below. In addition, the Company recorded a loss on early retirement of debt of approximately $1.4 million in 2002 to reflect the write-off of the unamortized
loan costs on the previous revolving facility.

In
September 2002, the Company terminated an interest rate swap with a notional amount of $150 million, which was due to terminate in 2007. The interest rate swap was
terminated at its market value and, as a result, the Company received approximately $5.8 million. This interest rate swap was tied directly to the $150 million 93/4%
senior subordinated notes. The mark-to-market adjustment was amortized as a reduction of interest expense over the original contract life of the interest rate swap. When the
$150 million 93/4% senior subordinated notes were redeemed on October 18, 2002, the adjusted basis of the debt as a result of the fair value hedge termination of
approximately $5.7 million was included in the calculation of the net loss on the early retirement of the related debt.

The
interest rate swaps that the Company entered into qualify for the "shortcut" method allowed under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities",
which allows for an assumption of no ineffectiveness. As such, there is no income statement impact from changes in the fair value of the hedging instruments. Instead, the fair value of the instrument
is recorded as an asset or liability on the Company's balance sheet with an offsetting adjustment to the carrying value of the related debt. In accordance with SFAS No. 133, the Company
recorded assets of $3.9 million and $5.3 million as of December 31, 2003 and 2002, respectively, representing the fair value of the interest rate swaps and a corresponding
increase in long-term debt, as these interest rate swaps are considered highly effective under the criteria established by SFAS No. 133.

In
December 2002, the Company terminated an interest rate swap with a notional amount of $100 million, which was due to terminate in 2010. The interest rate swap was
terminated at its market value and, as a result, the Company received approximately $9.5 million. This interest rate swap was tied directly to the $375 million 93/4%
senior subordinated notes. The mark-to-market adjustment will be amortized as a reduction of interest expense over the original contract life of the interest rate swap and as
of December 31, 2003 the remaining balance of $8.2 million is included in long-term debt.

The
estimated fair value of the Company's long-term debt at December 31, 2003 was approximately $1.24 billion, compared to its book value of approximately
$1.16 billion. The estimated fair value amounts were based on quoted market prices on or about December 31, 2003, for the Company's debt securities that are publicly traded. For the
Revolving Facility, the fair value approximates the carrying amount of the debt due to the short-term maturities of the individual components of the debt.

72

---

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

Years ending December 31,2004

$
222005


5,3582006


262007


177,0222008


600,554Thereafter


373,886Total

$
1,156,868


9. Commitments and Contingencies



In May 2003, the Company paid $57.9 million to complete the acquisition of approximately 70 acres of land in the Summerlin master-planned community
in Las Vegas, Nevada. The land is located on Charleston Boulevard at the Interstate 215/Charleston interchange, which is the future site of Red Rock Station. The total purchase price for the land was
approximately $64 million. The initial phase of the property is expected to include 60 table games and 2,700 slot machines. The property is expected to also include 400 hotel rooms, 45,000
square feet of meeting space, 16 movie theaters, a 20,000 square foot spa facility and several restaurants, including a buffet. The cost of the project is expected to be approximately
$450 million to $475 million, of which approximately $74 million has been spent as of December 31, 2003. The Company believes the construction of the project will begin in
mid- 2004 and be complete in late 2005 or early 2006.



The Company is currently expanding Santa Fe Station, which will add more than 20,000 square feet of additional casino space, 350 slot machines, a new
16-screen movie theater complex, an upgrade of the property's bowling center, a new entertainment venue and bar, a new Kid's Quest facility and other amenities. The expansion project will
also include the removal of the ice arena. The Company believes that the expansion will cost approximately $50 million and is expected to be completed in the first quarter of 2005.



The Company entered into a ground lease for 27 acres of land on which Boulder Station is located. The Company leases 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 the Company
and Lorenzo J. Fertitta, President of the Company. 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, the Company has an option, exercisable at five-year

73

---

intervals
with the next option in June 2008, to purchase the land at fair market value. The Company's leasehold interest in the property is subject to a lien to secure borrowings under the
Revolving Facility.



The Company entered into a ground lease for 47 acres of land on which Texas Station is located. The Company leases 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 $287,500
through June 2005. In July 2005, and every ten years thereafter, the rent will be adjusted by a cost of living factor. 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 no event will the rent for any period be less than the immediately preceding period. Pursuant to the ground lease, the Company has an option, exercisable at
five-year intervals with the next option in May 2005, to purchase the land at fair market value. The Company's leasehold interest in the property is subject to a lien to secure
borrowings under the Revolving Facility.



The Company exercised its option to purchase the 19-acre parcel of land on which Wild Wild West is located in 2003. Pursuant to the lease, the purchase will take
place in July 2005 at the fair market value of the land but not less than $27 million or not more than approximately $36 million. No amounts related to this purchase option have
been recorded on the Company's consolidated balance sheets at December 31, 2003.



The Company leases several parcels of land, buildings and equipment used in its operations. Leases on various parcels ranging from 19 acres to 47 acres have terms
expiring between February 2004 and March 2099. Future minimum lease payments required under these operating leases and other noncancelable operating leases are as follows (amounts in
thousands):

Years ending December 31,2004

$
13,5862005


10,8052006


9,2442007


9,2332008


9,211Thereafter


490,886Total

$
542,965


Rent
expense totaled approximately $13.6 million, $12.7 million and $11.8 million for the years ended December 31, 2003, 2002 and 2001, respectively.

74

---



Green Valley Ranch Station is owned by a 50/50 joint venture between the Company and GCR Gaming. The joint venture financed Green Valley Ranch Station with a
group of banks, and originally provided for borrowings up to $165.0 million at a margin above the LIBOR rate of up to 250 basis points. In December 2003, Green Valley Ranch Station
entered into an Amended and Restated Loan Agreement, which replaced the original financing. The available borrowings have been increased to $250.0 million as of December 31, 2003. The
proceeds from the amended agreement were used to pay off secured equipment and other financing and to fund the expansion of the facility. Green Valley Ranch Station has entered into an agreement to
swap the majority of its floating rate to a fixed rate that will approximate 7.0% during the term of the loan. The loan requires a limited make-well of $42.0 million, if necessary
(based on operating results of the property). Pursuant to the make-well agreement, if Green Valley Ranch Station fails to comply with the Fixed Charge Coverage Ratio or the Leverage Ratio
(both as defined in the Green Valley Ranch credit agreement), the partners will be required to make cash equity contributions in such amounts as required, which will result in pro forma compliance
with the covenants. The make-well is a joint and several obligation of each partner, with GCR Gaming's obligation collateralized. The make-well agreement will terminate upon
achieving a post expansion debt to Adjusted EBITDA (as defined) ratio of less than or equal to 3.00 to 1.00 and producing Adjusted EBITDA before management fees of at least $42.0 million. As of
December 31, 2003, the debt to Adjusted EBITDA ratio was 2.62 to 1.00. The outstanding balance of the Green Valley Ranch Station revolving credit facility as of December 31, 2003, was
approximately $150.0 million.

In
the fourth quarter of 2003, the Company began a $110 million expansion at Green Valley Ranch Station. The expansion will include 296 hotel rooms, 25,500 square feet of
additional meeting space, approximately 200 slot machines and an expanded spa facility. Construction on the project is expected to be complete in the fourth quarter of 2004.

In
December 2001 and March 2002, Green Valley Ranch Station entered into interest rate swaps that have converted a portion of its floating rate debt to a fixed rate and are
matched to a portion of its revolving facility. At December 31, 2003, the combined notional amount of the interest rate swaps was $108.0 million, and decreases by varying amounts each
quarter. As of December 31, 2003, Green Valley Ranch Station was paying a weighted average fixed rate of 4.33% on the interest rate swaps and was receiving a weighted average floating rate
based on three-month LIBOR of 1.15%. These interest rate
swaps were also priced to have no value at inception. As a result of the mark-to-market valuation of the interest rate swaps, the Company recorded approximately
$1.3 million and $1.7 million as of December 31, 2003 and December 31, 2002, respectively, for its share of the Green Valley Ranch Station interest rate swaps in
accumulated other comprehensive loss in the Company's consolidated balance sheets.



The Company has entered into a Development Services Agreement and a Management Agreement with the UAIC. Pursuant to those agreements, and in compliance with a
Memorandum of Understanding entered by the UAIC and Placer County, California, the Company and the UAIC developed Thunder Valley, a gaming and entertainment facility on approximately 49 acres located
approximately seven miles north of Interstate 80, in Placer County, California, near Sacramento, which opened on June 9, 2003. On September 17, 2002, the United States Department of the
Interior accepted the land into trust on behalf of the UAIC. The acceptance of the land into trust followed the decision of the United States District Court

75

---

for
the District of Washington, D.C., dismissing a lawsuit filed by the cities of Roseville and Rocklin, California, and Citizens for Safer Communities, which challenged the U.S. Department of the
Interior's decision to accept the land into trust. Immediately following the District Court's decision, the plaintiffs appealed the decision to the United States Court of Appeals for the District of
Columbia. On November 14, 2003, the Court of Appeals affirmed the dismissal of the lawsuit by the District Court. On February 15, 2004, the Citizens for Safer Communities filed a
petition for writ of certiorari with the United States Supreme Court, seeking to appeal the decision of the Court of Appeals. The remaining plaintiffs did not seek to appeal the decision.
Notwithstanding the Court of Appeals' decision and the acceptance of the land into trust, there can be no assurances as to the ultimate outcome of the Citizens for Safer Communities' pending efforts
to appeal that decision. The Company's seven-year Management Agreement was approved by the National Indian Gaming Commission ("NIGC") and expires in June 2010. The Company receives
a management fee equal to 24% of the facility's net income, as defined, which totaled approximately $40.3 million for the year ended December 31, 2003. The Company also received a
development fee equal to 2% of the cost of the project upon the opening of the facility, which totaled approximately $4.6 million, net of certain expenses, for the year ended
December 31, 2003, and is included in other operating revenues on the Company's consolidated statements of operations.

Thunder
Valley has 1,906 Class III slot machines and 111 table games, including a private VIP gaming area, a 500-seat bingo room, three specialty restaurants, a
500-seat buffet, a food court, a center pit bar and parking for over 4,500 vehicles. The Company assisted the UAIC in obtaining $215.0 million of financing for the project through a
group of lenders, with the Company providing an unlimited completion guaranty and credit support for all amounts outstanding under such financing. Based on the current level of operating results of
Thunder Valley, the Company expects the credit support to terminate in June 2004. The Company has evaluated its obligations related to the
completion guaranty in accordance with FASB Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Guarantees of Indebtedness of Others" and has
determined that the fair value of the obligation is not material. Prior to the completion of the financing, the Company advanced approximately $46.9 million to the UAIC for the development of
Thunder Valley. The entire balance was repaid in 2003. The Company's advances carried an interest rate of 10%. The interest on the Company's advances to the UAIC was approximately $4.8 million
and is included in interest income on the Company's consolidated statements of operations for the year ended December 31, 2003.



In April 2003, the Company entered into Development and Management Agreements with the Federated Indians of Graton Rancheria (the "FIGR") pursuant to which
the Company will assist the FIGR in developing and operating a gaming and entertainment project to be located in Sonoma County, California. The FIGR selected the Company to assist it in designing,
developing and financing the project and, upon opening, the Company 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 the Company will receive a management fee equal to 22% of the facility's net income. The Company will also receive a development fee equal to 2% of the cost of the project upon the opening of the
facility.

In
August 2003, the Company and the FIGR entered into an option to purchase 360 acres of land just west of Rohnert Park's city limits in Sonoma County, California. The proposed
site of the project is bordered by Stony Point Road, Wilfred Avenue and Rohnert Park Expressway, approximately one-half mile from Highway 101 and approximately 43 miles from San Francisco.
In October 2003, the FIGR

76

---

entered
into a Memorandum of Understanding with the City of Rohnert Park. 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 accepting the land into trust on behalf of the FIGR and approval of the
Management Agreement by the NIGC. No assurances can be given as to when, or if, the necessary government and regulatory approvals will be received. Prior to the receipt of such government and
regulatory approvals, the Company likely will contribute significant financial support to this project. As of December 31, 2003, the Company had advanced approximately $16.2 million
toward the development of this project, primarily to secure real estate for future development. In addition, the Company will make approximately $11.3 million of payments upon achieving certain
milestones, which will not be reimbursed. As of December 31, 2003, approximately $2.0 million of these payments have been made. The proposed project is expected to be completed in
approximately three to four years, but there can be no assurance that it will be completed within that timeframe or at all.



On November 13, 2003, the Company agreed to purchase a 50% interest in MPM Enterprises, LLC, a Michigan limited liability company ("MPM"). Concurrently
with the Company's 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 will assist Gun Lake in
developing and operating a gaming and entertainment project to be located in Allegan County, Michigan.

The
Company has agreed to pay $6.0 million for its 50% interest in MPM, which is payable upon achieving certain milestones and are not reimbursable. An additional
$12.0 million in total may be paid by the Company in years six and seven of the amended Management Agreement, subject to certain contingencies. Under the terms of the amended Development
Agreement, the Company has agreed to arrange financing for the ongoing development costs and construction of the project. Prior to obtaining financing for the project, the Company expects to advance
$10 million to $15 million to Gun Lake for the acquisition of land and other development costs. As of December 31, 2003, the Company had advanced approximately $5.2 million
toward the development of this project, primarily to secure real estate for future development. Although no firm construction budget has been established, the Company expects that the total cost of
the development and construction of the project would be less than $200 million. Funds advanced by the Company are expected to be repaid with the proceeds of the project financing or from Gun
Lake's gaming revenues. The amended 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, the Company's 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 145 acres on Highway 131 near 129th Avenue, approximately 25 miles north of Kalamazoo, Michigan. As currently
contemplated, the project would include up to 2,500 slot machines, 75 table games, a buffet, specialty restaurants and an entertainment venue. Construction of the project includes the conversion of an
existing 192,000 square foot building into the entertainment facility. Development of the entertainment project and operation of Class III gaming is subject to certain governmental and
regulatory approvals, including, but not limited to, negotiating a

77

---

gaming
compact with the State of Michigan, the United States Department of the Interior accepting the land into trust on behalf of Gun Lake and approval of the Management Agreement by the NIGC. No
assurances can be given as to when, or if, the necessary government and regulatory approvals will be received. Prior to the receipt of such governmental and regulatory approvals, the Company will
contribute significant financial support to the project. The proposed project is expected to be completed in 2005, but there can be no assurance that it will be completed at that time or at all.



In January 2004, the Company entered into Development and Management Agreements with the Mechoopda Indian Tribe of Chico Rancheria, California (the
"MITCR"), a federally recognized Native American tribe. The Company will assist the MITCR in developing and operating a gaming and entertainment facility to be located in Butte County, California (the
"Project"), 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, the Company has agreed to arrange the financing for the ongoing development costs and construction of the facility. Prior to obtaining financing for the facility, the Company
expects to advance $5 million to $10 million to the MITCR for the acquisition of land and other development costs. Although no firm construction budget has been established, the Company
expects the total cost of the development and construction of the facility will be less than $80 million. Funds advanced by the Company are expected to be repaid from the proceeds of the
facility financing or from the MITCR's gaming revenues. 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. The proposed facility will be located on approximately 650 acres on State Route 149, at the intersection with Highway 99. As currently contemplated, the facility will include approximately
500 slot machines, 10 table games and dining and entertainment amenities. The Company anticipates the gaming and entertainment facility will be open some time during 2005, but there can be no
assurance that it will be completed at that time or at all.



In April 2003, the Company became aware of violations of certain gaming regulations regarding the reporting of certain cash transactions. The Company
self-reported these violations to the Nevada State Gaming Control Board. The Company, along with the Nevada State Gaming Control Board, are investigating the violations. The Company is
currently unable to determine the amount of fines or extent of sanctions, if any, which may be levied by the Nevada State Gaming Control Board or the Federal Government. The Company believes the
eventual outcome of this matter will occur in 2004.

10. Stockholders' Equity



The Company is authorized to issue up to 135 million shares of its common stock, $0.01 par value per share, 70,912,227 shares of which were issued and
10,121,677 shares were held in treasury as of December 31, 2003. Each holder of the common stock is entitled to one vote for each share held of record on each matter submitted to a vote of
stockholders. Holders of the common stock have no cumulative voting, conversion, redemption or preemptive rights or other rights to subscribe for additional shares other than pursuant to the Rights
Plan described below. Subject to any preferences that may be granted to the

78

---

holders
of the Company's preferred stock, each holder of common stock is entitled to receive ratably, such dividends as may be declared by the Board of Directors out of funds legally available
therefore, as well as any distributions to the stockholders and, in the event of liquidation, dissolution or winding up of the Company, is entitled to share ratably in all assets of the Company
remaining after payment of liabilities.

On
July 21, 2003 and October 1, 2003, the Company's Board of Directors declared a quarterly cash dividend of $0.125 per share. On September 4, 2003, the Company paid
a quarterly cash dividend of approximately $7.4 million to shareholders of record on August 14, 2003. On December 4, 2003, the
Company paid a quarterly cash dividend of approximately $7.5 million to shareholders of record on November 13, 2003.



The Company is authorized to issue up to 5 million shares of its preferred stock, $0.01 par value per share of which none were issued. The Board of
Directors, without further action by the holders of common stock, may issue shares of preferred stock in one or more series and may fix or alter the rights, preferences, privileges and restrictions,
including the voting rights, redemption provisions (including sinking fund provisions), dividend rights, dividend rates, liquidation rates, liquidation preferences, conversion rights and the
description and number of shares constituting any wholly unissued series of preferred stock. Except as described above, the Board of Directors, without further stockholder approval, may issue shares
of preferred stock with rights that could adversely affect the rights of the holders of common stock. The issuance of shares of preferred stock under certain circumstances could have the effect of
delaying or preventing a change of control of the Company or other corporate action.



During the year ended December 31, 2003, the Company repurchased approximately 1.4 million shares of its common stock for approximately
$25.1 million. The Company is authorized to repurchase up to approximately 19.5 million shares of its common stock. As of December 31, 2003, the Company had acquired approximately
10.1 million shares at a cost of approximately $134.5 million.



SFAS No. 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 year ended December 31, 2003, the Company recorded its 50% interest in the
mark-to-market valuation of the interest rate swaps at Green Valley Ranch Station as other comprehensive loss. Comprehensive income was computed as follows (amounts in
thousands):

For the years ended December 31,2003

2002

2001Net income

$
44,343

$
17,932

$
19,369Mark-to-market valuation of interest rate swaps, net of tax


361


(1,695
)

Comprehensive income

$
44,704

$
16,237

$
19,369


79

---



On October 6, 1997, the Company declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. The
dividend was paid on October 21, 1997. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share of Series A Preferred Stock, par
value $0.01 per share ("Preferred Shares") of the Company at a price of $40.00 per one one-hundredth of a Preferred Share, subject to adjustment. The Rights are not exercisable until the
earlier of 10 days following a public announcement that a person or group of affiliated or associated persons have acquired beneficial ownership of 15% or more of the outstanding common stock
("Acquiring Person") or 10 business days (or such later date as may be determined by action of the Board of Directors prior to such time as any person or group of affiliated persons becomes an
Acquiring Person) following the commencement of, or announcement of an intention to make, a tender offer or exchange offer, the consummation of which would result in the beneficial ownership by a
person or group of 15% or more of the outstanding common stock.

The
Rights will expire on October 21, 2007. Acquiring Persons do not have the same rights to receive common stock as other holders upon exercise of the Rights. Because of the
nature of the Preferred Shares' dividend, liquidation and voting rights, the value of one one-hundredth interest
in a Preferred Share purchasable upon exercise of each Right should approximate the value of one common share. In the event that any person or group of affiliated or associated persons becomes an
Acquiring Person, the proper provisions will be made so that each holder of a Right, other than Rights beneficially owned by the Acquiring Person (which will thereafter become void), will thereafter
have the right to receive upon exercise that number of shares of common stock having a market value of two times the exercise price of the Right. In the event that the Company is acquired in a merger
or other business combination transaction or 50% or more of its consolidated assets or earning power are sold after a person or group has become an Acquiring Person, proper provision will be made so
that each holder of a Right will thereafter have the right to receive, upon exercise thereof, that number of shares of common stock of the acquiring company, which at the time of such transaction will
have a market value of two times the exercise price of the Right. Because of the characteristics of the Rights in connection with a person or group of affiliated or associated persons becoming an
Acquiring Person, the Rights may have the effect of making an acquisition of the Company more difficult and may discourage such an acquisition.

11. Benefit Plans



The Company has adopted a Stock Compensation Program which includes (i) an Incentive Stock Option Plan for the grant of incentive stock options,
(ii) a Compensatory Stock Option Plan providing for the grant of nonqualified stock options, (iii) a Restricted Shares Plan providing for the grant of restricted shares of common stock
and (iv) a Nonemployee Director Stock Option Plan, providing for the grant of nonqualified stock options. The Company has also adopted the 1999 Stock Compensation Program (combined with the
Stock Compensation Program "the Programs"), which includes (i) the 1999 Compensatory Stock Option Plan providing for the majority of the grants of nonqualified stock options to employees who
are not officers or directors of the Company and (ii) the 1999 Share Plan which grants shares of common stock to employees based on their length of service with the Company. Officers, key
employees, directors (whether employee or non-employee) and independent contractors or consultants of

80

---

the
Company and its subsidiaries are eligible to participate in the Programs. However, only employees of the Company and its subsidiaries are eligible to receive incentive stock options.

A
maximum of 18,710,500 shares of common stock has been reserved for issuance under the Programs. Options are granted at the current market price at the date of grant. The plan provides
for a variety of
vesting schedules, including immediate, 20% per year for five years, 10% per year for 10 years, and a cliff vest at the vesting date, to be determined at the time of grant. Generally, all
options expire 10 years from the date of grant.

The
Programs will terminate 10 years from the date of adoption or extension, unless terminated earlier by the Board of Directors, and no options or restricted shares may be
granted under the Programs after such date. Summarized information for the Programs is as follows:

|                                     |           | For the years ended December 31,
|------------------------------------ | --------- | --------------------------------
|
|
|Outstanding at beginning of the year |           | 13,533,544                      
|                                     | Granted   |                                 
|                                     | Exercised |                                 
|                                     | Canceled  |                                 
|                                     |           |                                 
|Outstanding at end of the year       |           | 9,619,816                       
|                                     |           |                                 
|Exercisable at end of year           |           | 5,383,469                       
|                                     |           |                                 
|Options available for grant          |           | 1,182,455                       
|                                     |           |                                 

The
following table summarizes information about the options outstanding at December 31, 2003:

Options outstanding

Options exercisableRange of
exercise
prices

Number
outstanding
at
December 31, 2003

Weighted
average
remaining
contractual
life

Weighted
average
exercise
price

Number
exercisable
at
December 31, 2003

Weighted
average
exercise
price$  3.29$  7.91

1,107,445

4.6

$
5.31

1,044,750

$
5.17$  7.92$15.82

8,222,921

6.5

$
11.79

4,281,969

$
11.54$15.83$22.15

261,450

8.5

$
17.52

56,750

$
17.12$22.16$31.65

28,000

9.7

$
28.97



$
9,619,816

6.3

$
11.25

5,383,469

$
10.36


Restricted
stock grants of 383,468, 50,000, and 1,297,800 shares were issued under the Programs during the years ended December 31, 2003, 2002 and 2001, respectively. The effect
of these grants is to increase the issued and outstanding shares of the Company's common stock and decrease the number of shares available for grant in the plan. Deferred compensation is recorded for
the restricted stock grants equal to the market value of the Company's common stock on the date of grant. The deferred

81

---

compensation
is amortized over the period the restricted stock vests and is recorded as compensation expense in the accompanying consolidated statements of operations. In addition, the Company issued
219,138 shares of restricted stock in 2001 to three of its executive officers in accordance with a Long-Term Stay-On Performance Incentive Plan.

The
fair value on the grant date of the restricted shares and the amount of compensation expense recognized in connection with the restricted shares is as follows (amounts in thousands):

For the years ended December 31,2003

2002

2001Fair value on grant date

$
11,472

$
695

$
18,044Compensation expense


3,201


2,973


1,480




The Company has 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. The Company's matching contribution was approximately $1.8 million, $1.7 million and $1.7 million for the years
ended December 31, 2003, 2002 and 2001, respectively.

12. Executive Compensation Plans

The Company has employment agreements with certain of its 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 the Company's normal coverage for employees. In addition, the Company has adopted a Supplemental Executive
Retirement Plan for its Chief Executive Officer and a Supplemental Management Retirement Plan for certain key executives as selected by the Human Resources Committee of the Company's Board of
Directors. Other executive plans include a Deferred Compensation Plan and a Long-Term Stay-On Performance Incentive Plan.

13. Income Taxes

The Company files a consolidated federal income tax return. The provision for income taxes for financial reporting purposes consists of the following (amounts in
thousands):

For the years ended December 31,2003

2002

2001Income tax provision from continuing operations

$
(23,834
)
$
(18,508
)
$
(11,094
)Tax benefit from change in accounting principle





7,170


Total income taxes.

$
(23,834
)
$
(11,338
)
$
(11,094
)


82

---

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

For the years ended December 31,2003

2002

2001Current

$
(1,826
)
$
372

$
108Deferred


(22,008
)

(18,880
)

(11,202
)Total income taxes

$
(23,834
)
$
(18,508
)
$
(11,094
)


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

For the years ended
December 31,2003

2002

2001Federal statutory rate

35.0
%
35.0
%
35.0
%Lobbying and political

0.2

0.7

0.7Meals and entertainment

0.1

0.6

2.2Credits earned, net

(0.9
)
(1.7
)
(1.8
)Sale of subsidiary





(1.5
)Nondeductible officers compensation

2.6

2.8

0.2Reduction in liability based on conclusion of an IRS examination

(2.2
)


Other, net

0.2

1.3

1.6Effective tax rate

35.0
%
38.7
%
36.4
%


83

---

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

December 31,2003

2002Deferred tax assets:Current:Accrued vacation, bonuses and group insurance

$
3,880

$
4,120Prepaid gaming taxes


(5,100
)

(4,484
)Other


18,024


4,211Total current


16,804


3,847Long-term:Preopening and other costs, net of amortization


4,434


4,736Accrued benefits


11,614


8,367FICA credits


1,179


1,268Alternative minimum tax credits


19,999


22,638Other





1,720Total long-term


37,226


38,729Total deferred tax assets


54,030


42,576Deferred tax liabilities:Long-term:Temporary differences related to property and
equipment


(101,177
)

(87,637
)Other


(1,334
)

(3,869
)Total deferred tax liabilities


(102,511
)

(91,506
)Net

$
(48,481
)
$
(48,930
)


The
excess of the alternative minimum tax over the regular federal income tax is a tax credit, which can be carried forward indefinitely to reduce future regular federal income tax
liabilities. The Company did not record a valuation allowance at December 31, 2003 or 2002 relating to recorded tax benefits because all benefits are more likely than not to be realized.

During
2003, the Internal Revenue Service ("IRS") completed their examination related to the years March 31, 1994 through March 31, 1998. Based on the favorable conclusion
of their examination, the Company recorded a reduction in its tax contingency reserve of approximately $1.5 million. The Company is also under IRS examination for years December 31, 1998
through December 31, 2002. Management does not believe that the outcome of these examinations will have a material effect on the Company's financial statements.

14. Legal Matters

The Company 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

84

---

following
matters and litigation inherently involves significant costs. Following is a summary of key litigation impacting the Company.



On April 26, 1994, a suit seeking status as a class action lawsuit was filed by plaintiff, William H. Poulos, et al., as class representative, in the
United States District Court, Middle District of Florida, naming 41 manufacturers, distributors and casino operators of video poker and electronic slot machines, including Station Casinos. On
May 10, 1994, a lawsuit alleging substantially identical claims was filed by another plaintiff, William Ahearn, et al., as class representative, in the United States District Court, Middle
District of Florida, against 48 manufacturers, distributors and casino operators of video poker and electronic slot machines, including the Company and most of the other major hotel/casino companies.
The lawsuits allege that the defendants have engaged in a course of fraudulent and misleading conduct intended to induce persons to play such games based on a false belief concerning how the gaming
machines operate, as well as the extent to which there is an opportunity to win. The two lawsuits have been consolidated into a single action, and have been transferred to the United States District
Court for the District of Nevada (the "Nevada District Court"). On September 26, 1995, a lawsuit alleging substantially identical claims was filed by plaintiff, Larry Schreier, et al., as class
representative, in the Nevada District Court, naming 45 manufacturers, distributors, and casino operators of video poker and electronic slot machines, including the Company. Motions to dismiss the
Poulos/Ahearn and Schreier cases were filed by defendants. On April 17, 1996, the Poulos/Ahearn lawsuits were dismissed, but plaintiffs were given leave to file Amended Complaints on or before
May 31, 1996. On May 31, 1996, an Amended Complaint was filed, naming William H. Poulos, et al., as plaintiff. Defendants filed a motion to dismiss. On August 15, 1996, the
Schreier lawsuit was dismissed with leave to amend. On September 27, 1996, Schreier filed an Amended Complaint. Defendants filed motions to dismiss the Amended Complaint. In
December 1996, the Court consolidated the Poulos/Ahearn, the Schreier, and a third case not involving the Company and ordered all pending motions be deemed withdrawn without prejudice,
including Defendants' Motions to Dismiss the Amended Complaints. The plaintiffs filed a Consolidated Amended Complaint on February 13, 1997. On or about December 19, 1997, the Court
issued formal opinions granting in part and denying in part the defendants' motion to dismiss. In so doing, the Court ordered plaintiffs to file an amended complaint in accordance with the Court's
orders in January of 1998. Accordingly, plaintiffs amended their complaint and filed it with the Nevada District Court in February 1998. The Company and all other defendants continue to deny
the allegations contained in the amended complaint filed on behalf of plaintiffs. The plaintiffs are seeking compensatory, special, consequential, incidental, and punitive damages in unspecified
amounts. On June 25, 2002, the Nevada District Court denied plaintiffs' motion for class certification. On July 11, 2002, plaintiffs filed a petition for permission to appeal such class
certification ruling with the United States Court of Appeals for the Ninth Circuit. On August 15, 2002, the Ninth Circuit granted the plaintiffs' petition for permission to appeal such class
certification ruling. The parties have filed briefs setting forth their arguments, and rebutting the other party's arguments concerning the issue on appeal. On January 15, 2004, the Court of
Appeals heard oral argument on this matter, but has yet to issue a ruling. While no assurances can be made with respect to any litigation, the Company believes that the plaintiffs' claims are without
merit and does not expect that the lawsuits will have a material adverse effect on the Company's financial position or results of operations.

85

---



On December 20, 2000, the Company and Kansas City Station Corporation were named as defendants in an action styledFitzgerald Sugar
Creek, Inc. v. Kansas City Station Corp., et al.,No. 00CV230480 (Circuit Court of Jackson County, Missouri). The plaintiff alleged that the defendants were
liable for unspecified actual and punitive damages and other relief, based on alleged tortuous interference with the plaintiff's business expectancy of receiving a Missouri gaming license in the
Kansas City metropolitan area. The allegations of the petition appeared to be based on the same issues involved in the investigation by the Missouri Gaming Commission related to activities of Michael
Lazaroff, an attorney who formerly represented the Company in Missouri. The plaintiff also alleged claims based on fraudulent concealment and civil conspiracy. The Company and its subsidiary responded
to this lawsuit on January 19, 2001 and moved to remove the case to bankruptcy court in Nevada. On March 29, 2001, the United States Bankruptcy Court for the Western District of Missouri
remanded the case to the Circuit Court of Jackson County, Missouri. On April 19, 2001, defendants filed a motion to dismiss plaintiff's petition. On August 10, 2001, the Circuit Court
(1) granted that motion to dismiss as to the civil conspiracy claim, and (2) denied that motion to dismiss as to the tortuous interference with business expectancy and fraudulent
concealment claims. On November 21, 2001, Philip Griffith and the City of Sugar Creek, Missouri (the "City") were added as plaintiffs in this case. The new plaintiffs also alleged claims for
tortuous interference with business expectancy and fraudulent concealment. On December 17, 2001, defendants filed a motion to dismiss all of Griffith's and the City's claims. On
March 15, 2002, the Circuit Court denied that motion to dismiss in its entirety. This litigation was settled in February 2004 (see Note 15 "Subsequent
EventsLitigation Settlement").



On July 13, 2001, the Company and five of its major operating subsidiaries were named as defendants in a lawsuit brought by Harrah's
Entertainment, Inc. and Harrah's Operating Company, Inc. in the United States District Court, District of Nevada
(CV-S-01-0825-PMP-RJJ). The plaintiffs allege that the Company and its subsidiaries are liable for unspecified actual and punitive damages,
and they seek injunctive and other relief, based on allegations that the Company's "Boarding Pass Rewards Program" infringes on various patents held by the plaintiffs.

On
October 4, 2001, the Company and the subsidiaries filed their answer and counterclaim seeking declaratory judgment that Harrah's patents, (1) are not infringed by the
Company's and the subsidiaries' actions, (2) are invalid under federal patent law and (3) are rendered unenforceable due to Harrah's inequitable conduct. On March 27, 2002,
Harrah's filed an amended complaint, which added an additional defendant, Green Valley Ranch Gaming, LLC, which is an affiliate of the Company. On April 22, 2002, the Company and its
subsidiaries and affiliate filed their amended answer and counterclaim denying infringement by Green Valley Ranch Gaming, LLC, and alleging Harrah's committed further acts of inequitable conduct.

On
January 17, 2003, the Company filed motions for summary judgment or partial summary judgment on several issues: (1) a Motion for Summary Judgment of Patent
Unenforceability Due To Inequitable Conduct, (2) a Motion for Summary Judgment of Patent Invalidity Under 35 U.S.C. ss 102 and 103 (lack of novelty and obviousness), (3) a Motion for
Partial Summary Judgment of Patent Invalidity Under 35 U.S.C. s 112 (indefiniteness, lack of written description and failure to disclose best mode), (4) a Motion for Partial Summary Judgment of
Non-Infringement of U.S. Patent No. 6,003,013, and (5) a Motion for Partial

86

---

Summary
Judgment of Non-Infringement of U.S. Patent No. 6,183,362. That same day, Harrah's filed motions for partial summary judgment on several issues: (1) a Motion for
Partial Summary Judgment of Infringement of Claims 15-18 of U.S. Patent No. 5,761,647, (2) a Motion for Partial Summary Judgment of Infringement of Claims 1-2 and
49 of U.S. Patent No. 6,003,013, (3) a Motion for Partial Summary Judgment on Defendants' Invalidity Defenses, and (4) a Motion for Partial Summary Judgment That Certain Third
Party Systems Are Not Prior Art. During February and March of 2003, the parties filed oppositions, reply briefs and various motions to strike in response to the summary judgment motions.

The
Company and its subsidiaries and affiliate have requested oral argument on the motions. A hearing on certain of the summary judgment motions and motions to strike has been set for
March 23, 2004. While no assurances can be made with respect to any litigation, the Company believes that the plaintiffs' claims are without merit and does not expect that the lawsuit will have
a material adverse effect on its financial position or results of operations.



On May 2, 2003, the Company and one of its operating subsidiaries, Palace Station Hotel & Casino, Inc. ("Palace Station"), were named as
defendants in a lawsuit seeking status as a class action brought by Dov Plattner in the Superior Court of Los Angeles County, California (Case No. CB295056).

The
lawsuit seeks to recover for alleged breach of contract, fraud, negligent misrepresentation, breach of covenant of good faith and fair dealing, promissory fraud, unjust enrichment
and violations of sections 17200 and 17500, et. seq. of the California Business and Professions Code, all in connection with energy and telephone surcharge fees imposed on Palace Station hotel guests.
The plaintiff is requesting unspecified actual and punitive damages, as well as injunctive and other relief.

On
November 10, 2003, the defendants filed a response to the complaint denying all liability. While no assurances can be made with respect to any litigation, the Company believes
that the plaintiff's claims
are without merit and does not expect that the lawsuit will have a material adverse effect on the Company's financial position or results of operations.



On May 14, 2003, the Company (as a nominal defendant only) and all of its executive officers and directors were named as defendants in a derivative action
lawsuit, which also seeks status as a class action, brought by Bernard Castillo in the District Court of Clark County, Nevada (Case No. A467663).

The
lawsuit alleges that (1) the director defendants breached their fiduciary duties by failing to make certain disclosures in the Company's 2002 Proxy Statement regarding the
sale by the Company of its subsidiary, Southwest Gaming Services, Inc. ("SGSI"), and regarding a proposal seeking shareholder approval of an amendment to the Company's stock option plan;
(2) the director defendants breached their fiduciary duties in approving the sale of SGSI and in recommending approval of the option plan amendment; and (3) the purchasers of SGSI and
the recipients of certain benefits made possible by the option plan amendment were unjustly enriched. The plaintiff is requesting unspecified actual damages, as well as injunctive and other relief.

On
July 21, 2003, the defendants filed a motion to dismiss or, in the alternative, motion to stay all of the plaintiff's claims. On October 24, 2003, the District Court
granted the motion to stay all of plaintiff's claims pending the consideration of such claims by a special litigation committee to be formed by the

87

---

Company
in accordance with the Court's order granting such motion. On February 27, 2004, the District Court entered another order extending the stay for another 120 days pending the
special litigation committee investigation. While no assurances can be made with respect to any litigation, the Company believes that the plaintiff's claims are without merit and does not expect that
the lawsuit will have a material adverse effect on the Company's financial position or results of operations.

15. Subsequent Events



In January 2004, the Company completed an offering of $400 million senior subordinated notes due in January 2014 that bear interest at a rate
equal to 61/2%. The proceeds from this offering were used to repay amounts outstanding on the Revolving Facility and to repurchase or redeem the $199.9 million
87/8% senior subordinated notes, which were due in 2008. In February 2004, the Company completed an offering of $350 million senior subordinated notes due in
March 2016 that bear interest at a rate equal to 67/8%. The proceeds of this offering were used to repurchase a portion of the $375 million 97/8% senior
subordinated notes, which were due in July 2010. In March 2004, the Company completed an additional offering of $50 million of senior subordinated notes due in January 2014
and bear interest at a rate equal to 61/2%. This offering was an add-on to the $400 million senior subordinated notes issued in January 2004.

As
a result of the redemptions, the Company will record a loss on early retirement of debt of approximately $58 million in the first quarter of 2004. Approximately
$147.6 million of the $199.9 million 87/8% senior subordinated notes were redeemed pursuant to a tender offer and consent solicitation and the remaining
$52.3 million were redeemed pursuant to our call option. Approximately $357.5 million of the $375 million 97/8% senior subordinated notes were redeemed pursuant to
a tender offer and consent solicitation and the remaining $17.4 million will remain outstanding. The consent solicitations effectively eliminated all of the covenants from the remaining
97/8% senior subordinated notes.

In
March 2004, the Company issued a tender offer and consent solicitation for the $400 million 83/8% senior notes due 2008. In March 2004, the Company also
agreed to issue $450 million of 6% senior notes due in April 2012. The proceeds from this offering will be used to repurchase the $400 million of 83/8% senior notes. Subject to
customary conditions and the tender of a majority in principal amount of the 83/8% senior notes the transaction is expected to close on March 17, 2004.

In
February 2004, the Company entered into two additional interest rate swaps with a combined notional amount of $200 million that is tied directly to the Company's
61/2% senior subordinated notes that it issued in January 2004. The interest rate swaps will convert a portion of the Company's fixed-rate debt to a floating rate
based upon six-month LIBOR rates. At inception, the Company pays a floating rate of six-month LIBOR plus 1.80% and receives a fixed rate of 61/2%. The interest
rate swaps terminate in 2014.



In March 2004, the Company entered into Development and Management Agreements with the North Fork Rancheria of Mono Indians ("Mono"), a federally
recognized Native American tribe located in central California. The Company will assist the Mono in developing and operating a gaming and entertainment facility to be located in Madera County,
California. The Company has secured for the benefit of the Mono two parcels of land located on Highway 99 north of the city of Madera. Under the terms of the Development Agreement, the Company has
agreed to arrange the financing for the ongoing

88

---

development
costs and construction of the facility. Although no firm construction budget has been established, the Company expects the total cost of the development and construction of the facility
will be less than $225 million. Funds advanced by the Company are expected to be repaid from the proceeds of the project financing or from the Mono's gaming revenues. 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, 70 table games and dining, 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 United States Department of the Interior accepting the land into trust on behalf of the Mono and approval
of the Management Agreement by the NIGC. The Company anticipates the gaming and entertainment facility will be open some time in late 2007, but there can be no assurance that it will be completed at
that time or at all.



On February 9, 2004, the Company reached an agreement to settle a lawsuit brought in December 2000 by Fitzgeralds Sugar Creek, Inc., the City
of Sugar Creek, Missouri and Phillip Griffith for $38 million ($24.7 million, net of the related tax benefit), which was paid on February 24, 2004. The lawsuit centered on
allegations of improper conduct by the Company's former Missouri legal counsel, Michael Lazaroff. The Company has asserted a claim against Mr. Lazaroff and his former law firm to recover all
damages caused by Mr. Lazaroff's conduct. As part of that claim, the Company intends to seek reimbursement for, among other things, the amount it was required to pay to settle the Fitzgerald's
litigation, as well as the attorney's fees and costs incurred by the Company in defending that litigation. There can be no assurance that the Company will be successful in recovering all or any
portion of costs or damages.

89

---

16. Quarterly Financial Information (Unaudited)

|                             |  | Net
revenues |         | Operating
income |   | Income (loss)
before
income
taxes and
change in
accounting
principle |  | Net
income
(loss)
applicable
to
common
stock |         | Diluted
earnings
(loss)
per
common
share |  
|---------------------------- |  | ------------ | ------- | ---------------- | - | -------------------------------------------------------------------- |  | -------------------------------------------- | ------- | ---------------------------------------- | -
|
|Year ended December 31, 2003 |  |              |         |                  |   |                                                                      |  |                                              |         |                                          |  
|First quarter (a)            |  | $            | 199,561 |                  | $ | 40,550                                                               |  | $                                            | 19,938  |                                          | $
|Second quarter (b)           |  |              | 210,005 |                  |   | 48,002                                                               |  |                                              | 32,743  |                                          |  
|Third quarter (c)            |  |              | 218,670 |                  |   | 49,880                                                               |  |                                              | 31,431  |                                          |  
|Fourth quarter (d)           |  |              | 229,853 |                  |   | 2,639                                                                |  |                                              | (15,935 | )                                        |  
|Year ended December 31, 2002 |  |              |         |                  |   |                                                                      |  |                                              |         |                                          |  
|First quarter (e)            |  | $            | 202,067 |                  | $ | 43,285                                                               |  | $                                            | 20,728  |                                          | $
|Second quarter (f)           |  |              | 197,481 |                  |   | 35,420                                                               |  |                                              | 12,664  |                                          |  
|Third quarter (g)            |  |              | 191,710 |                  |   | 33,586                                                               |  |                                              | 9,001   |                                          |  
|Fourth quarter (h)           |  |              | 201,607 |                  |   | 33,619                                                               |  |                                              | 7,363   |                                          |  

---

90

---



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

As we previously discussed in our current report on Form 8-K dated September 29, 2003, which we filed with the SEC on October 6,
2003, we dismissed Deloitte & Touche LLP as our independent public accountants and appointed Ernst & Young LLP to serve as our independent auditors for 2003. The dismissal of
Deloitte & Touche LLP and the appointment of Ernst & Young LLP were both approved by our audit committee.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal
executive officer and principal financial officer, of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934 (the "Exchange Act")). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures
are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company's internal control over financial reporting during the Company's most recently
completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

There is incorporated by reference the information appearing in the section entitled "Directors and Executive Officers" in the Registrant's definitive Proxy
Statement to be made publicly available with the Securities and Exchange Commission.

ITEM 11. EXECUTIVE COMPENSATION

There is incorporated by reference the information appearing in the section entitled "Executive Compensation" in the Registrant's definitive Proxy Statement to be
made publicly available with the Securities and Exchange Commission.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

There is incorporated by reference the information appearing in the section entitled "Security Ownership of Certain Beneficial Owners and Management" in the
Registrant's definitive Proxy Statement to be made publicly available with the Securities and Exchange Commission.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

There is incorporated by reference the information appearing in the sections entitled "Certain Relationships and Related Transactions" in the Registrant's
definitive Proxy Statement to be made publicly available with the Securities and Exchange Commission.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

There is incorporated by reference the information appearing in the section entitled "Fees Paid to Independent Auditors" in the Registrant's definitive Proxy
Statement to be made publicly available with the Securities and Exchange Commission.

91

---



PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Independent
Auditors' ReportErnst & Young LLP

Independent
Auditors' ReportDeloitte & Touche LLP

Consolidated
Balance Sheets as of December 31, 2003 and 2002

Years
Ended December 31, 2003, 2002 and 2001



Notes
to Consolidated Financial Statements



|Exhibit
Number |  | Description                                                                                                                                                                                                      
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1            |  | Amended and Restated Articles of Incorporation of the Registrant. (Incorporated herein by reference to Registration Statement No. 33-76156)                                                                      
|3.2            |  | Restated Bylaws of the Registrant. (Incorporated herein by reference to Registration Statement No. 33-76156)                                                                                                     
|4.1            |  | Form of Subordinated Notes of the Registrant (January 2004 Issue). (Included in Exhibit 4.2)                                                                                                                     
|4.2            |  | Indenture dated as of January 29, 2004 between the Registrant and Law Debenture Trust Company of New York as Trustee.                                                                                            
|4.3            |  | Form of Subordinated Notes of the Registrant (February 2004 Issue). (Included in Exhibit 4.4)                                                                                                                    
|4.4            |  | Indenture dated as of February 27, 2004 between the Registrant and Law Debenture Trust Company of New York as Trustee.                                                                                           
|4.5            |  | Form of Senior Notes of the Registrant (2001 Issue). (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2000)                                       
|4.6            |  | Indenture dated as of February 13, 2001 between Registrant and Bank of New York as Trustee. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2000)
|4.7            |  | First Supplemental Indenture dated as of September 17, 2003 between the Registrant and Bank of New York as Trustee, with respect to the Indenture dated as of February 13, 2001.                                 
|4.8            |  | Form of Subordinated Note of the Registrant (2000 issue). (Incorporated herein by reference to the Company's Registration Statement on Form S-4 dated October 30, 2000)                                          
|4.9            |  | Indenture dated as of July 7, 2000 between the Registrant and First Union National Bank as Trustee. (Incorporated herein by reference to the Company's Registration Statement on Form S-4 dated October 30, 2000)
|4.10           |  | Amended and Restated Loan Agreement dated as of September 18, 2002. (Incorporated herein by reference to the Company's Form 8-K dated September 18, 2002)                                                        
|               |  |                                                                                                                                                                                                                  

92

---

|4.11 |  | Amendment No. 1 to Amended and Restated Loan Agreement dated as of January 24, 2003. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2002)                                                                                                                                                                                                                                                                   
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4.12 |  | Amendment No. 2 to Amended and Restated Loan Agreement dated as of July 14, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                                                                                                                                                                                                                                                       
|4.13 |  | Amendment No. 3 to Amended and Restated Loan Agreement dated as of December 18, 2003.                                                                                                                                                                                                                                                                                                                                                                                        
|4.14 |  | Rights Agreement dated October 6, 1997 between the Company and Continental Stock Transfer and Trust Company, as Rights Agent. (Incorporated herein by reference to the Company's Form 8-K dated October 9, 1997)                                                                                                                                                                                                                                                             
|4.15 |  | Amendment to Rights Agreement, dated as of January 16, 1998, between Station Casinos, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent. (Incorporated herein by reference to the Company's Form 8-K dated January 27,
1998)                                                                                                                                                                                                                              
|4.16 |  | Amendment No. 2 to Rights Agreement, dated as of December 1, 1998, between Station Casinos, Inc. and Continental Stock Transfer & Trust Company, as Rights Agent. (Incorporated herein by reference to the Company's Form 8-K dated November 6,
1998)                                                                                                                                                                                                                        
|4.17 |  | Amended and Restated Loan Agreement, dated as of December 22, 2003, among Green Valley Ranch Gaming, LLC, Bank of America, N.A., as Administrative Agent, Banc of America Securities LLC and Wells Fargo Bank, N.A.                                                                                                                                                                                                                                                          
|4.18 |  | Completion Guaranty by Station Casinos, Inc., GCR Gaming, LLC, and GV Ranch Station, Inc., a wholly owned subsidiary of the Registrant, and Bank of America, N.A., as Administrative Agent, dated as of December 22, 2003.                                                                                                                                                                                                                                                   
|4.19 |  | Make-Well Agreement by Station Casinos, Inc., GCR Gaming, LLC, and GV Ranch Station, Inc., a wholly owned subsidiary of the Registrant, and Bank of America, N.A., as Administrative Agent, dated as of December 22, 2003.                                                                                                                                                                                                                                                   
|4.20 |  | Loan Agreement among the United Auburn Indian Community, as Borrower, Bank of America, N.A., as Administrative Agent and Wells Fargo Bank, N.A., as Syndication Agent, dated as of January 24, 2003. (Incorporated herein by reference to the Company's
Annual Report on Form 10-K for the period ended December 31, 2002)                                                                                                                                                   
|4.21 |  | Amendment No. 1 to Loan Agreement among the United Auburn Indian Community, as Borrower, Bank of America, N.A., as Administrative Agent and Wells Fargo Bank, N.A., as Syndication Agent, dated as of July 23, 2003. (Incorporated herein by reference to
the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                                                                                                                    
|4.22 |  | Amendment No. 2 to Loan Agreement among the United Auburn Indian Community, as Borrower, Bank of America, N.A., as Administrative Agent and Wells Fargo Bank, N.A., as Syndication Agent, dated as of December 17, 2003.                                                                                                                                                                                                                                                     
|4.23 |  | Completion Guaranty by Station Casinos, Inc. in favor of Bank of America, N.A., as Administrative Agent for the benefit of the Creditors under the Loan Agreement among the United Auburn Indian Community, as Borrower, Bank of America, N.A., as
Administrative Agent and Wells Fargo Bank, N.A., as Syndication Agent, dated as of January 24, 2003. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2002)
|4.24 |  | Make-Well Agreement by Station Casinos, Inc. in favor of Bank of America, N.A., as Administrative Agent for the benefit of the Creditors under the Loan Agreement among the United Auburn Indian Community, as Borrower, Bank of America, N.A., as
Administrative Agent and Wells Fargo Bank, N.A., as Syndication Agent, dated as of January 24, 2003. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December 31, 2002)
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

93

---

|10.1  |  | Ground Lease between Boulder Station, Inc. and KB Enterprises dated as of June 1, 1993. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1993)                                                               
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.2  |  | 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)                                                
|10.3  |  | 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)                         
|10.4  |  | First Amendment to Ground Lease and Sublease, dated as of June 30, 1995, by and between KB Enterprises, as landlord and Boulder Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                              
|10.5  |  | Rent Agreement to the First Amendment to Ground Lease and Sublease, dated as of March 30, 2003, by and between KB Enterprises, as landlord and Boulder Station, Inc. (Incorporated herein by reference to the Company's Quarterly Report on
Form 10-Q dated March 31, 2003)
|10.6  |  | Ground Lease between Registrant and Texas Gambling Hall & Hotel, Inc. dated as of June 1, 1995. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                                                            
|10.7  |  | First Amendment to Ground Lease dated as of June 30, 1995 between Registrant and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                                         
|10.8  |  | Rent Agreement to the First Amendment to Ground Lease, dated as of May 12, 2000 between Registrant and Texas Gambling Hall & Hotel, Inc. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q dated March 31,
2003)                            
|10.9  |  | Assignment, Assumption and Consent Agreement (Ground Lease) dated as of July 6, 1995 between Registrant and Texas Station, Inc. (Incorporated herein by reference to the Company's Form 8-K dated July 5, 1995)                                                            
|10.10 |  | Executive Employment Agreement between Frank J. Fertitta III and the Registrant dated as of May 20, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                             
|10.11 |  | Executive Employment Agreement between Glenn C. Christenson and the Registrant dated as of May 20, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                              
|10.12 |  | Executive Employment Agreement between Scott M Nielson and the Registrant dated as of May 20, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                                   
|10.13 |  | Executive Employment Agreement between Lorenzo J. Fertitta and the Registrant dated as of May 20, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 2003)                                               
|10.14 |  | Executive Employment Agreement between Stephen L. Cavallaro and the Registrant dated as of May 20, 2003. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q dated June 30, 2003)                                                             
|10.15 |  | Executive Employment Agreement between William W. Warner and the Registrant dated as of May 20, 2003.                                                                                                                                                                      
|10.16 |  | Amended and Restated Stock Compensation Program of the Registrant dated as of May 24, 1999. (Incorporated herein by reference to the Company's Form S-8 filed as of June 17, 1999)                                                                                         
|10.17 |  | 1999 Stock Compensation Program of the Registrant dated as of December 7, 1999. (Incorporated herein by reference to the Company's Form S-8 filed as of June 30, 2000)                                                                                                     
|      |  |                                                                                                                                                                                                                                                                            

94

---

|10.18 |  | Supplemental Executive Retirement Plan of the Registrant 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)                                                                                                                                     
|----- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.19 |  | Supplemental Management Retirement Plan of the Registrant 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)                                                                                                                                    
|10.20 |  | Long-Term Stay-On Performance Incentive Payment between the Registrant 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)                                                                                                     
|10.21 |  | Long-Term Stay-On Performance Incentive Payment between the Registrant and Stephen L. Cavallaro 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)                                                                                                    
|10.22 |  | Long-Term Stay-On Performance Incentive Payment between the Registrant and William W. Warner dated April 1, 2002.                                                                                                                                                                                                                                    
|10.23 |  | Long-Term Stay-On Performance Incentive Plan between the Registrant and Glenn C. Christenson, Scott M Nielson and Blake L. Sartini. (Incorporated herein by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31,
1994)                                                                                         
|10.24 |  | Amended and Restated Deferred Compensation Plan of the Registrant 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)                                                                                                                          
|10.25 |  | First Amendment to the Amended and Restated Deferred Compensation Plan 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)                                                                                                                           
|10.26 |  | Special Long-Term Disability Plan of the Registrant 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)                                                                                                                                          
|10.27 |  | Form of Indemnification Agreement for Directors and Executive Officers. (Incorporated herein by reference to the Company's Registration Statement No. 33-59302)                                                                                                                                                                                      
|10.28 |  | Form of Indemnification Agreement between the Registrant and Frank Fertitta, Jr. (Incorporated herein by reference to the Company's Registration Statement No. 33-59302)                                                                                                                                                                             
|10.29 |  | Operating Agreement dated March 10, 2000, among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Registrant. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for
the period ended December 31, 1999)                                                       
|10.30 |  | First Amendment to Operating Agreement dated March 10, 2000, among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Registrant, dated as of September 17, 2001. (Incorporated herein by
reference to the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2001)
|10.31 |  | Second Amendment to Operating Agreement dated December 19, 2003, among Green Valley Ranch Gaming, LLC, GCR Gaming, LLC and GV Ranch Station, Inc., a wholly owned subsidiary of the Registrant.                                                                                                                                                      
|10.32 |  | Second Amended and Restated Management Agreement between the Registrant and the United Auburn Indian Community dated as of November 1, 2002. (Incorporated herein by reference to the Company's Annual Report on Form 10-K for the period ended December
31, 2002)                                                                                   
|21.1  |  | Subsidiaries of the Registrant                                                                                                                                                                                                                                                                                                                       
|23.1  |  | Consent of Ernst & Young LLP                                                                                                                                                                                                                                                                                                                         
|      |  |                                                                                                                                                                                                                                                                                                                                                      

95

---

|23.2 |  | Consent of Deloitte & Touche LLP                                        
|---- |  | ------------------------------------------------------------------------
|31.1 |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|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.

On
December 10, 2003, the Company filed a Current Report on Form 8-K dated December 5, 2003, reporting items listed under Items 5 and 7.

On
January 15, 2004, the Company filed a Current Report on Form 8-K dated January 15, 2004, reporting items listed under Items 5 and 7.

On
January 20, 2004, the Company filed a Current Report on Form 8-K dated January 16, 2004, reporting items listed under Items 5 and 7.

On
January 29, 2004, the Company filed a Current Report on Form 8-K dated January 29, 2004, reporting items listed under Items 5 and 12.

On
February 2, 2004, the Company filed a Current Report on Form 8-K dated February 2, 2004, reporting items listed under Item 5.

On
February 17, 2004, the Company filed a Current Report on Form 8-K dated February 13, 2004, reporting items listed under Item 5.

96

---



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: March 11, 2004 |  | 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)                                                            |  | March 11, 2004
|/s/LORENZO J. FERTITTALorenzo J. Fertitta           |  | President and Director                                                                                                                     |  | March 11, 2004
|/s/GLENN C. CHRISTENSONGlenn C. Christenson         |  | Executive Vice President, Chief Financial Officer, Chief Administrative Officer and Treasurer (Principal Financial and Accounting Officer) |  | March 11, 2004
|/s/BLAKE L. SARTINIBlake L. Sartini                 |  | Director                                                                                                                                   |  | March 11, 2004
|/s/LOWELL H. LEBERMANN, JR.Lowell H. Lebermann, Jr. |  | Director                                                                                                                                   |  | March 11, 2004
|/s/JAMES E. NAVEJames E. Nave                       |  | Director                                                                                                                                   |  | March 11, 2004
|/s/LYNETTE BOGGS MCDONALDLynette Boggs McDonald     |  | Director                                                                                                                                   |  | March 11, 2004
|/s/LEE S. ISGURLee S. Isgur                         |  | Director                                                                                                                                   |  | March 11, 2004

97

---

QuickLinks