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                                STATION CASINOS

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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 for the fiscal year ended DECEMBER 31, 1999.

                                       OR

[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 for the transition period from _____________ to
       ____________.

Commission file number 000-21640

                              STATION CASINOS, INC.
             (Exact name of registrant as specified in its charter)

                  NEVADA                                 88-0136443

     (State or other jurisdiction of                  (I.R.S. Employer
      incorporation or organization)                 Identification No.)

                2411 WEST SAHARA AVENUE, LAS VEGAS, NEVADA 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: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01
Par Value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
 Yes    X       No
       ---          ---

Indicate 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. [ ]

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
March 3, 2000, based on the closing price per share as reported on the New York
Stock Exchange was $486,817,981.

As of March 3, 2000, the registrant has 40,345,672 shares of common stock
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the Registrant's 1999 Annual Meeting of
Stockholders to be held May 23, 2000 (which has not been made publicly available
as of the date of this filing) are incorporated by reference into Part III.


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                                     PART I

ITEM 1. BUSINESS

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 the financial
condition, results of operations and the business of Station Casinos, Inc. (the
"Company") and its subsidiaries including the expansion, development and
acquisition projects, legal proceedings and employee matters of the Company and
its subsidiaries. Certain important factors, including but not limited to,
competition from other gaming operations, leverage, construction risks, the
inherent uncertainty and costs associated with litigation, and licensing and
other regulatory risks, could cause the Company's actual results to differ
materially from those expressed in the Company's forward-looking statements.
Further information on potential factors which could affect the financial
condition, results of operations and business of the Company and its
subsidiaries including, without limitation, the expansion, development and
acquisition projects, legal proceedings and employee matters of the Company and
its subsidiaries are included in the filings of the Company 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. The
Company undertakes no obligation to publicly release any revisions to such
forward-looking statements to reflect events or circumstances after the date
hereof.

GENERAL

         Station Casinos, Inc. is an established multi-jurisdictional gaming and
entertainment enterprise that currently owns and operates four major
hotel/casino properties and two smaller casino properties in the Las Vegas
Metropolitan area, and gaming and entertainment complexes in St. Charles and
Kansas City, Missouri. The Company also owns and provides slot route management
services in southern Nevada. Management's growth strategy includes the
master-planned expansion of the Company's existing gaming facilities in Nevada
and Missouri, as well as the evaluation and pursuit of additional acquisition or
development opportunities in Nevada and other gaming markets.

         In Las Vegas, the Company owns and operates 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") and Tropicana Station, Inc., the
operator of Wild Wild West Gambling Hall & Hotel ("Wild Wild West") and,
together with Palace Station, Boulder Station, Texas Station, and Sunset
Station, the "Las Vegas Casino Properties". The Company also owns a 50%
interest in Town Center Amusements, Inc. d.b.a. Barley's Casino & Brewing
Company ("Barley's"). Palace Station is situated on 39 acres on Sahara Avenue
adjacent to Interstate 15, and is near major attractions on the Las Vegas
Strip and downtown Las Vegas. Boulder Station is situated on 46 acres along
Boulder Highway, immediately adjacent to Interstate 515, and is located
on the opposite side of Las Vegas from Palace Station. Texas Station is
located on 47 acres at the corner of Lake Mead Boulevard and Tonopah Highway
in North Las Vegas. Sunset Station is located on 105 acres on Sunset Road
immediately adjacent to Interstate 515 and features a
Spanish/Mediterranean-themed hotel/casino. Each of the Company's Las Vegas
casinos caters primarily to local Las Vegas residents. The Company markets
the casinos together under the Station Casinos' brand, offering convenience
to residents throughout the Las Vegas Valley with its strategically located
properties.

         In Missouri, the Company owns and operates Station Casino Kansas City
and Station Casino St. Charles. Station Casino Kansas City, is situated on 183
acres immediately east of the heavily traveled Interstate 435 bridge, seven
miles east of downtown Kansas City. Station Casino Kansas City caters to local
customers within the greater Kansas City area, as well as tourists from outside
the region. Station Casino St. Charles is located on 52 acres situated
immediately north of the Interstate 70 bridge in St. Charles, and is
strategically located to attract customers from the St. Charles and greater St.
Louis areas, as well as tourists from outside the region. Management employs the
same operating strategies that have been successful at the Company's properties
in the competitive Las Vegas market in order to secure a strong presence in the
Missouri markets.


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OPERATING STRATEGY

         Management believes that the following key principles have been
integral to its success as a gaming operator and intends to continue to employ
these strategies at each of its various operations.

         TARGETED CUSTOMER BASE

         The Company's operating strategy emphasizes attracting and retaining
customers primarily from the local and repeat visitor markets. The Las Vegas
Casino Properties and Station Casino Kansas City and Station Casino St. Charles
(collectively the "Casino Properties") attract customers from their local
markets through innovative, frequent and high-profile promotional programs,
focused marketing efforts and convenient locations, and from the repeat visitor
market through aggressive marketing and the development of strong relationships
with specifically targeted travel wholesalers. Although perceived value
initially attracts a customer to the Casino Properties, actual value generates
customer satisfaction and loyalty. Management believes 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 strong
economy and demographics which include an increasing number of retirees and
other active gaming customers. This strategy applies as well to the Missouri
markets. The Company believes that its out-of-town patrons are also discerning
customers who enjoy the Company's value-oriented, high-quality approach. This is
particularly true in Las Vegas where patrons view the Company's hotel and casino
product as a preferable alternative to attractions located on the Las Vegas
Strip and downtown Las Vegas.

         PROVIDE A HIGH-VALUE EXPERIENCE

         Because the Company targets the repeat customer, management is
committed to providing a high-value entertainment experience for its customers
in its restaurants, hotels, casinos, and other entertainment amenities.
Management believes that the value offered by restaurants at each of the Casino
Properties is a major factor in attracting its 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, the
Company's Casino Properties offer generous portions of high-quality food at
reasonable prices. In addition, the Company's operating strategy focuses on slot
and video poker machine play. The Company's 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, the Casino
Properties offer the latest in slot and video poker technology, including
several games designed exclusively for the Company.

         As part of its commitment to providing a quality entertainment
experience for its patrons, the Company is dedicated to ensuring a high level of
customer satisfaction and loyalty by providing attentive customer service in a
friendly, casual atmosphere. Management recognizes that consistent quality and a
comfortable atmosphere stem from the collective care and friendliness of each
employee. The Company, which began as a family-run business, has maintained
close-knit relationships among its management and endeavors to instill among its
employees this same sense of loyalty. Toward this end, management takes a
hands-on approach through active and direct involvement with employees at all
levels.

         MARKETING AND PROMOTION

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

         In April 1999, the Company introduced its unified Boarding Pass
player rewards program at the Las Vegas Casino 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 the Las Vegas Casino Properties. This "single card", for which the
technology was developed in-house, sets the Company apart from its
competition in the Las Vegas locals market.

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CASINO PROPERTIES

          Set forth below is certain information concerning the properties that
are owned and operated by the Company. The properties are more fully described
in the following table.

<TABLE>
<CAPTION>

                              CASINO PROPERTIES (1)

                                             CASINO
                                             SQUARE             HOTEL                            GAMING          PARKING
               PROPERTY                      FOOTAGE            ROOMS          SLOTS (2)        TABLES (3)      SPACES (4)
-----------------------------------          -------            -----          ---------        ----------      ----------
<S>                                          <C>                <C>            <C>              <C>             <C>
Las Vegas Casino Properties
     Palace Station ...............           84,000            1,028            2,244               47            3,700
     Boulder Station ..............           89,000              300            3,108               47            4,350
     Texas Station ................           95,000              200            2,795               43            5,300
     Sunset Station ...............          110,000              467            3,000               56            5,700
Missouri Casino Properties
     Station Casino St. Charles ...           45,000                -            1,875               40            5,400
     Station Casino Kansas City ...          140,000              200            3,188              144            5,000
Other
     Wild Wild West ...............           12,500              260              250                7              500
     Barley's .....................           10,000                -              199                9                -
     Southwest Gaming .............                -                -              797                -                -
</TABLE>

(1)  The information with respect to each property other than Station Casino St.
     Charles is as of December 31, 1999. Information for Station Casino St.
     Charles is as of March 30, 2000, after the change from moving all gaming
     operations from the riverboat to the barge.

(2)  Includes slot and video poker machines and other coin-operated devices.

(3)  Generally includes blackjack ("21"), craps, roulette, pai gow poker, mini
     baccarat, Caribbean stud poker, let it ride, big six, three card and
     double down stud. The Las Vegas Casino Properties also offer a keno lounge,
     poker room, bingo parlor and a race and sports book. The Missouri Casino
     Properties also offer a poker room. Wild Wild West and Barley's also offer
     a sports book.

(4)  Includes covered parking spaces of 1,900 for Palace Station, 1,900 for
     Boulder Station, 3,500 for Texas Station, 2,000 for Sunset Station and
     4,000 for Station Casino St. Charles.

LAS VEGAS CASINO PROPERTIES

         PALACE STATION

         Palace Station is situated on approximately 39 acres strategically
located at the intersection of Sahara Avenue and Interstate 15, one of Las
Vegas' most heavily traveled areas, and a short distance from McCarran
International Airport and from major attractions on the Las Vegas Strip and
downtown Las Vegas. With Palace Station's ample parking and its convenient
location, customers are assured easy access to the hotel and casino, a factor
that management believes is particularly important in attracting and retaining
its customers. The Palace Station complex has approximately 287,000 square feet
of main facility area and features a turn-of-the-century railroad station theme.
The complex also includes two swimming pools, an approximately 20,000-square
foot banquet and convention center, five full-service restaurants, several
fast-food outlets, a 24-hour gift shop and a non-gaming video arcade.

         Palace Station's five full-service restaurants have a total of over
1,225 seats. These restaurants offer a variety of high-quality food at
reasonable prices, including the 24-hour Iron Horse Cafe (featuring a Chinese
menu in addition to American fare), an all-you-can-eat buffet known as "The
Feast," the Broiler (a steak and seafood restaurant), the Pasta Palace (an
Italian restaurant) and the Guadalajara Bar & Grille (a Mexican restaurant).
Palace Station guests also may take advantage of the Palace Saloon Piano Bar and
the Trax Lounge, which provide music, dancing and entertainment.


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         BOULDER STATION

         Boulder Station, which opened in August 1994, is situated on
approximately 46 acres strategically located on the opposite side of Las
Vegas from Palace Station. Patrons enjoy convenient access to this facility
which is located on Boulder Highway and immediately adjacent to the
Interstate 515 interchange. Management believes that its 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. The
Boulder Station complex has approximately 337,000 square feet of main
facility area and, like Palace Station, features a turn-of-the-century
railroad station theme. The complex also includes five full-service
restaurants, several fast-food outlets, a 280-seat entertainment lounge,
eight additional bars, a high-quality 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 food 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 Iron Horse Cafe (featuring a
Chinese menu in addition to American fare), an all-you-can-eat buffet known as
"The Feast," the Broiler (a steak and seafood restaurant), the Pasta Palace (an
Italian restaurant), and the Guadalajara Bar & Grille (a Mexican restaurant). In
addition to these restaurants which are similar to the offerings at Palace
Station, 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

         Texas Station, which opened in July 1995, is situated on
approximately 47 acres located at the corner of Lake Mead Boulevard and
Tonopah Highway in North Las Vegas. The facility features a friendly,
"down-home" Texas atmosphere, highlighted by its distinctive early-Texas
architecture. In February 1999, the Company completed a $55 million
master-planned expansion of Texas Station. Upon completing this expansion,
Texas Station has approximately 390,000 square feet of main facility area
which also includes five full-service restaurants, several fast-food outlets,
a 10,000-square foot Kid's Quest child-care facility, a 132-seat
entertainment lounge, seven additional bars, a high-quality 18-screen movie
theater complex, a swimming pool, a non-gaming video arcade and a gift shop.
Management believes that the theater complex provides a competitive advantage
for the property and is an additional attraction that draws a significant
number of patrons to the facility (see "Expansion Strategy" in this Item 1
for discussion of an additional master-planned expansion of Texas Station).

         Texas Station's five full-service restaurants have a total of over
1,300 seats. These restaurant facilities offer a variety of high-quality food at
reasonable prices, including the 24-hour Yellow Rose Cafe (a 24-hour coffee
shop), the Stockyard Steakhouse, the Guadalajara Bar & Grille (a Mexican
restaurant), the San Lorenzo (an Italian restaurant) and the Market Street
Buffet (featuring seven different food stations). In addition to the Texas
Station-themed restaurants, guests may also take advantage of the unique
features of the Martini Ranch, the Whiskey Bar with a seven-foot high bronco
rider, which rotates on a pedestal and may be viewed by patrons on all sides,
the Garage Bar which features a 1976, fire engine red Cadillac Eldorado with
seven-foot Texas long-horns on the hood, or the Armadillo Honky Tonk where a
3,000 piece cut glass armadillo is the centerpiece of a dance hall. The facility
also offers a variety of fast-food outlets to enhance the customers' dining
selection. Management believes that the quality and variety of the restaurants
offered at the facility are a major draw in the rapidly growing North Las Vegas
and Summerlin markets.

         SUNSET STATION

         Sunset Station, which opened in June 1997, is located on an
approximately 105-acre parcel 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 eight miles southeast of Boulder Station. In November 1998, the
Company completed a $34 million master-planned expansion of Sunset Station.

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         Sunset Station is distinguished from the Company's other properties by
its interior and exterior Spanish/Mediterranean-style architecture. The facility
features approximately 428,000 square feet of main facility area, plus seven
full-service restaurants, themed to capitalize on the restaurants at the
Company's other properties, an entertainment lounge, additional bars, a
microbrewery, a gift shop, a non-gaming video arcade, tenant lease space for
additional restaurants, a high-quality 13-screen movie theater complex, a Kid's
Quest child-care facility, an outdoor swimming pool and an amphitheater, as well
as several fast-food outlets and franchises.

         Sunset Station's seven full-service restaurants have a total of over
2,100 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 (a 24-hour coffee shop), the Sonoma Cellar (a
steakhouse), the Casa Del Sol (a seafood restaurant), the Capri (an Italian
restaurant), Guadalajara Bar & Grille (a Mexican restaurant), Sunset Brewing
Company (a microbrewery) and The Feast Around the World, a live action buffet
featuring Mexican, Italian, barbecue, American and Chinese cuisine. Guests may
also take advantage of the Gaudi Bar, a centerpiece of the casino featuring over
8,000 square feet of stained-glass and a water light display. The facility also
offers fast-food outlets to enhance the customers' dining selection.

         Sunset Station is located on approximately 105 acres, approximately 70
acres of which have been developed. The Company is currently evaluating
potential development plans for the undeveloped property. Uses for the land
could include a lifestyle entertainment retail center, as well as the
development of several pads for various build-to-suit retail, restaurant and
entertainment concepts. Timing and definitive plans have not yet been determined
for such a development.

MISSOURI CASINO PROPERTIES

         STATION CASINO KANSAS CITY

         Station Casino Kansas City opened in January 1997. This facility is
a master-planned gaming and entertainment destination facility featuring a
historic Missouri riverboat theme and is strategically located to attract
customers from the greater Kansas City area, as well as tourists from outside
the region. The facility is located on an approximately 183-acre site
immediately east of the heavily traveled Interstate 435 bridge, seven miles
east of downtown Kansas City. Station Casino Kansas City's marketing programs
are specifically designed to effectively target and capture repeat customer
demand from the local customer base and also capture the strong visitor and
overnight markets. Management believes that Station Casino Kansas City has
specific advantages relative to other riverboat facilities in the region and
that it is the premier facility in the Kansas City market. The site is
adjacent to the Interstate 435 bridge, which supports traffic flow of
approximately 90,000 cars per day. Interstate 435 is a six-lane, north-south
expressway offering quick and easy accessibility and direct visibility of the
site.

         The Station Casino Kansas City facility features two continuously
docked gaming vessels situated in a man-made protective basin. The Company
believes the Station Casino Kansas City facility offers the first Las
Vegas-style gaming experience in the Midwest. The gaming facilities are docked
adjacent to a land-based entertainment facility with approximately 526,000
square feet of main facility area which includes six full-service restaurants,
several fast-food outlets, 11 bars and lounges, a 1,400-seat Grand Pavillion
featuring headline entertainment, a Kid's Quest child-care facility, a
high-quality 18-screen movie theater complex, a 5,700-square foot non-gaming
video arcade and midway operated by Sega GameWorks and a gift shop.

         Station Casino Kansas City's restaurants offer a variety of
high-quality food at reasonable prices. Restaurants include an all-you-can-eat
live action buffet "Feast Around the World," featuring Italian, Mexican,
Chinese, barbecue, and traditional American fare, Bugatti's Little Italy Cafe,
featuring fine Italian cuisine and a wine bar with an extensive selection,
Pancho Villa's Cantina, featuring southwestern foods, the Orleans Seafood Co.
and Oyster Bar, featuring fresh Louisiana style seafood, and the Hafbrauhaus
Brewery & Biergarten featuring a wide selection of micro-brewed lagers, an
assortment of American and Bavarian cuisine and live entertainment. In addition,
Station Casino Kansas City leases space to a well-known Kansas City favorite,
Arthur Bryant's Barbeque.

         STATION CASINO ST. CHARLES

         Station Casino St. Charles opened in May 1994. Station Casino St.
Charles is situated immediately north of the Interstate 70 bridge in St. Charles
on approximately 52 acres owned by the Company. The Station Casino St. Charles


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complex is strategically located to attract customers from the St. Charles and
greater St. Louis area, as well as tourists from outside the region. The site is
adjacent to the Interstate 70 bridge. Interstate 70 is a 10-lane, east-west
expressway offering quick and easy accessibility to and direct visibility of the
Station Casino St. Charles site.

         In March 2000, the Company completed a reconfiguration of the two
gaming vessels at Station Casino St. Charles. In response to the new "open
boarding" rules that went into effect in the St. Louis market in September 1999,
the Company has moved all of the gaming operations to the existing barge which
contains 45,000 square feet of gaming and entertainment space. Station Casino
St. Charles features a 250-seat all-you-can-eat buffet known as "The Feast," as
well as an 80-seat specialty steakhouse known as "The Broiler." In addition to
the casinos and restaurants, the facility offers three bars, an entertainment
lounge, a lobby, a ticketing facility and a gift shop.

         In May 1996, the Company completed construction of an elevated
roadway and a 4,000-space five-story parking structure. The parking facility
is constructed above the existing flood plain. The elevated roadway and
parking structure provide improved access to the gaming facilities and
significantly diminish Station Casino St. Charles' susceptibility to closure
during the spring flooding season.

         In the fall of 1996, the Company commenced an expansion project at
Station Casino St. Charles which included the building of a backwater basin
containing two new gaming vessels and a new retail and entertainment complex.
Since December 31, 1997, construction on the Station Casino St. Charles
expansion project has been halted.

         The Company currently believes the Station Casino St. Charles expansion
project as originally contemplated fulfills a strategic need in the St. Louis,
Missouri market. While the Company desires to complete and operate these new
facilities, circumstances may arise in the future, including the lack of
available financing, a downturn in the demand for gaming facilities or increased
regulatory requirements unique to the state of Missouri and more attractive uses
of available capital, which may prevent the expansion project from being
completed as originally designed, if at all. As a result of the uncertainty
surrounding the expansion project, the Company evaluated the carrying values of
the assets in St. Charles as of December 31, 1999 and concluded that a
write-down of the assets was appropriate.

         As of December 31, 1999, the existing operating assets and $169.0
million the Company had invested in the expansion project were written down by
approximately $125.2 million. The Company does not anticipate that any major
construction activity on the expansion project will resume in the near term.

THE SOUTHWEST COMPANIES

         The Company provides slot route management services to numerous food
and beverage establishments and commercial businesses in Southern Nevada through
its subsidiary, Southwest Gaming Services, Inc. ("SGSI"). SGSI commenced its
slot route business in southern Nevada in December 1990. Management combined its
gaming experience with its route management abilities to capitalize on the
rapidly expanding slot route business.

EXPANSION STRATEGY

         SELECTION CRITERIA

         Management believes that a highly visible central 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. The Company selects sites that are centrally
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. Management believes that
each of its casino properties' locations has provided the Company with a
significant competitive advantage to attract its targeted customer base.

         MASTER-PLANNED DEVELOPMENT

         Management's expansion strategy includes the master-planned expansion
of its existing and future gaming locations. In designing project sites, the
Company plans and engineers for multi-phased facility expansion to accommodate
future growth and to allow the Company to develop dominant properties in each
market place. A project's


                                       7

<PAGE>

master-planned design typically allows the option of adding hotel rooms, casino
space and non-gaming entertainment such as movie theaters, additional
restaurants, retail shops, and various other entertainment venues.

         The Company has commenced another phase of master-planned
construction at Texas Station. Construction has begun on the $55 million
project, which is expected to be completed in the first quarter of 2001. The
next phase of the master plan is designed to further position Texas Station
as an all-inclusive entertainment destination for Las Vegas residents. The
project will include the addition of 350 gaming devices, a 60-lane bowling
alley and approximately 40,000 square feet of meeting and banquet space.

        EXPANSION, DEVELOPMENT AND ACQUISITION OPPORTUNITIES

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

         The Company also evaluates other development and acquisition
opportunities in current and emerging gaming markets, including land-based,
dockside, riverboat and Indian gaming opportunities. The Company's 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
the Company's control.

         GREEN VALLEY PROJECT

         A 50/50 joint venture between the Company and GCR Gaming, LLC (a
subsidiary of American Nevada Corporation) has proposed to build a new
resort/casino on the south side of Interstate 215 at Green Valley Parkway in
Henderson, Nevada. The 40-acre resort site is part of a 170-acre mixed-use
commercial, retail and office project. The resort site has been designated a
gaming enterprise district under Nevada Senate Bill 208 and local ordinances
since 1996. Construction is expected to commence during the third quarter of
2000 and is expected to be completed in the fourth quarter of 2001. The
estimated construction cost of this project is $270 to $280 million. The
yet-to-be named project will be managed by a subsidiary of the Company. The
Company and American Nevada Corporation have co-owned Barley's since January
1996.

         The new project is planned to complement the Green Valley Ranch
master-planned community. The plans for the project include over 330,000
square feet of public space and 200 hotel rooms. Planned entertainment
amenities include a state-of-the-art spa with outdoor pools; a 10-screen
movie theater; six full-service restaurants; a fast-food court with six
quick-serve outlets and a non-gaming arcade. It is anticipated that the
casino will have 95,000 square feet of gaming with over 2,400 slot machines
and 40 table games. The planned facility also includes a race and sports
book, a poker room and parking for approximately 3,200 vehicles in a low-rise
garage and on surface parking.

         UNITED AUBURN INDIAN COMMUNITY

         On October 12, 1999, the Company announced that it has entered into
a Development Services Agreement and a Management Agreement with the United
Auburn Indian Community (the "UAIC"). Subject to the receipt of certain
governmental approvals, as well as voter approval of a proposed amendment to
the California constitution, the Company and the UAIC intends to develop a
gaming and entertainment facility on 49 acres, approximately seven miles
north of Interstate 80, in Placer County, California, near Sacramento. The
scope and the timing of this project has yet to be determined.

COMPETITION

         The gaming industry includes land-based casinos, dockside casinos,
riverboat casinos, casinos located on Indian reservations and other forms of
legalized gaming. There is intense competition among companies in the gaming
industry, many of which have significantly greater resources than the Company.
Certain states have recently legalized, and several other states are currently
considering legalizing, casino gaming in designated areas. Legalized casino
gaming in such states and on Indian reservations will provide strong competition
to the Company and could adversely affect the Company's operations, particularly
to the extent that such gaming is conducted in areas close to the Company's
operations. Indian gaming in California, as it currently exists, has had little,
if any impact on the Company's operations to date, although there are no
assurances as to future impact. Proposition 5, a California ballot initiative
passed by voters in California on November 3, 1998, would have permitted Indian
tribes who enter into agreements with the State of California to conduct certain
gaming activities including horse race wagering, gaming devices (including slot
machines), banked card games and lotteries. In August 1999 Proposition 5 was
ruled unconstitutional by the California Supreme Court on the basis that the
initiative would permit the operation of Nevada and New Jersey type casinos,
which is prohibited by the California Constitution. Proposition 1A is an
amendment to the California Constitution, passed by the voters of California


                                       8

<PAGE>

on March 7, 2000, designed to modify the Constitution to authorize the Governor
to negotiate compacts with federally recognized Indian tribes, subject to
Legislative ratification, for the operation of slot machines, lottery games, and
banking and percentage games on Indian lands. In September 1999 the Governor
negotiated, and the Legislature ratified, compacts with 57 Indian tribes that
became effective with the passage of Proposition 1A. It is not certain how
Proposition 1A will affect the Company; however, because visitors from
California make up Nevada's largest visitors market, with Proposition 1A,
increased competition from Indian gaming may result in a decline in the
Company's revenues and may have a material adverse effect on the Company's
business.

         The Las Vegas Casino Properties face competition from all other
casinos and hotels in the Las Vegas area, including to some degree, from each
other. Such competition includes at least 11 hotel/casinos targeted primarily
towards local residents and repeat visitors, as well as numerous non-hotel
gaming facilities targeted towards local residents. The Company competes with
other locals oriented hotel/casinos by focusing on repeat customers and
attracting these customers through innovative marketing programs. The
Company's value-oriented, high-quality approach is designed to generate
repeat business. Additionally, the 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 30 major gaming properties located on or near the Las
Vegas Strip, 12 located in the downtown area and several located in other
areas of Las Vegas. In addition, two new hotel/casinos are under construction
which will add approximately 2,800 rooms to the Las Vegas area. One of the
new hotel/casinos is located on the Las Vegas Strip and is expected to draw
significant numbers of visitors. This new facility could have a positive
effect on the Las Vegas Casino Properties through increased local employment
and increased visitor traffic to Las Vegas. However, 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 the Las Vegas Casino Properties. The additional capacity has
had little, if any, impact on the Las Vegas Casino Properties' hotel
occupancy or casino volume to date, although there can be no assurance that
hotel occupancy or casino volume will not be adversely affected in the future.

         The Las Vegas Casino Properties face more direct competition from 11
hotel/casinos 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. Other gaming operators own undeveloped
properties on which they could develop gaming facilities in the immediate
vicinity of Texas Station. In July 1999, The Regent Las Vegas Hotel and
Casino ("the Regent") opened in northwest Las Vegas approximately five miles
from Texas Station. The Regent competes indirectly with Texas Station because
of its close proximity to Texas Station. Another new hotel/casino will be
opening near the Regent in the second half of 2000 and will compete directly
with Palace Station and Texas Station. Also, a smaller competitor on Boulder
Highway is anticipated to open in the first half of 2000. Although the
Company has competed strongly in these marketplaces, there can be no
assurance that additional capacity will not have a negative impact on the
Company.

         The Missouri Gaming Commission has been empowered to determine the
number of gaming licenses supportable by the region's economic situation. As
of December 31, 1999, 41 applications for gaming licenses had been filed with
the State of Missouri, including ten applications to operate in the St. Louis
marketplace. Ten licensees are currently licensed in Missouri, in St. Louis,
Kansas City, St. Joseph and Caruthersville, Missouri. Station Casino St.
Charles competes primarily with other gaming operations in and around St.
Louis, Missouri. Currently, in addition to Station Casino St. Charles, there
are four competitors operating in the St. Louis market. In particular,
Station Casino St. Charles directly competes with a facility located in
Maryland Heights which opened in 1997. Such direct competition is due to the
Maryland Heights facility's size, quality and close proximity. The Company
has experienced a decline in revenues at Station Casino St. Charles since the
opening of the Maryland Heights facility. The Company has taken steps that
management believes will mitigate the effects of such competition and the
decline in revenues has stabilized. However, in light of ever increasing
competition, there can be no assurance as to the future performance of
Station Casino St. Charles. Additionally, two of the four competitors
operating in the St. Louis market are located in Illinois, which does not
impose the $500 loss limit imposed in Missouri. Gaming also has been approved
by local voters in jurisdictions near St. Louis, including St. Charles,
Jefferson City and other cities and counties along the Mississippi and
Missouri Rivers. The Missouri Gaming Commission is currently considering
applicants for a gaming license in the St. Louis area. It is not known at
this time if a new license will be granted, or, if granted, when the licensee
could open a new facility. Any new gaming operations developed near St. Louis
would likely provide significant competition to Station Casino St. Charles.
Gaming laws in surrounding states and in other areas may be amended in ways
that would increase the competition to Station Casino St. Charles. This
increasing competition could have a material adverse effect on the Company's
business.

         On March 21, 1997, Davis Gaming was selected for investigation for
licensure for a riverboat gaming operation which it intends to develop in
Boonville, Missouri, a city in central Missouri near Jefferson City and
Columbia. Davis Gaming recently sold its rights to build and operate the Isle of
Capri which has until March 31, 2000, to obtain approval


                                       9

<PAGE>

from the Boonville City Council. In addition, Mark Twain Casino L.L.C. was
selected for investigation for licensure for a riverboat gaming operation which
it intends to develop in LaGrange, Missouri, a city in northeastern Missouri.
Neither area is currently served by a Missouri gaming facility. The Isle of
Capri Project has proceeded and has received preliminary site and development
approval from the Missouri Gaming Commission. On February 23, 2000, the Mark
Twain Casino Project received approval from the Missouri Gaming Commission to
operate its proposed riverboat gaming operation in a continuously docked manner.

         Station Casino Kansas City competes primarily with other gaming
operations in and around Kansas City, Missouri. In addition to Station Casino
Kansas City, there are three other gaming facilities currently operating in
the Kansas City market. Gaming has been approved by local voters in
jurisdictions near Kansas City, including St. Joseph (which currently has one
riverboat gaming operation), Jefferson City and other cities and counties
along the Missouri River. Since the opening of Station Casino Kansas City,
Sam's Town, the closest gaming development to Station Casino Kansas City,
closed and Boyd Gaming, the owner of Sam's Town, sold most of Sam's Town's
assets to Harrah's, the operator of Harrah's-North Kansas City, the next
closest gaming operator in the area. The Kansas state senate is currently
considering a bill to allow games of chance at the Woodlands race track which
is approximately 15 miles from Station Casino Kansas City. Although this has
been proposed in the past and failed, there are no assurances it will fail
again. Any new gaming operations developed near Kansas City would likely
provide significant competition to Station Casino Kansas City.

         Several companies are engaging in riverboat gaming in states
neighboring Missouri. Illinois sites, including Alton, East St. Louis, and
Metropolis, enjoy certain competitive advantages over Station Casino St. Charles
because Illinois, unlike Missouri, does not impose limits on the size of losses
and places fewer restrictions on the extension of credit to customers. In
contrast, Missouri gaming law provides for a maximum loss of $500 per player on
each cruise and prohibits the extension of credit (except credit cards and
checks). Unlike Illinois gaming law, the Missouri gaming law places no limits on
the number of gaming positions allowed at each site. As of December 31, 1999,
Illinois had approved a total of ten licenses; however, only nine licensees are
operating riverboat gaming facilities. While riverboats currently are the only
licensed form of casino-style gaming in Illinois and the number of licenses is
restricted to ten, possible future competition may arise if gaming is legalized
in or around Chicago, which was specifically excluded from the legislation
permitting gaming in Illinois.

         The Company's Missouri gaming operations also compete to a lesser
extent with the riverboat and floating gaming facilities in Mississippi,
Louisiana, Iowa and Indiana. Like Illinois, neither Mississippi nor Louisiana
gaming legislation imposes limits on wagers or losses. Gaming laws in these
states and in other areas may be amended in ways that would increase the
competition to the Company's Missouri gaming operations.

         To a lesser extent, the Company's operations compete with gaming
operations in other parts of the state of Nevada, such as Reno, Laughlin and
Lake Tahoe, with facilities in Atlantic City, New Jersey 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.

REGULATION AND LICENSING

         NEVADA GAMING REGULATIONS

         The ownership and operation of casino gaming facilities, the operation
of gaming device routes 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. The Company's gaming operations 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


                                       10

<PAGE>

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 the Company's gaming operations.

         The Company's 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. SGSI is licensed as a distributor and as an operator
of a slot machine route. Palace Station Hotel & Casino, Inc. ("PSHC"), Boulder
Station, Inc. ("BSI"), Texas Station, Inc. ("TSI"), Sunset Station, Inc.
("SSI"), and Tropicana Station, Inc. ("TRSI") have received licenses to conduct
nonrestricted gaming operations. Town Center Amusements, Inc. ("TCAI") has been
licensed to conduct nonrestricted gaming operations at Barley's Casino & Brewing
Company ("Barley's Casino"), a micro brewery and casino located in Southeast Las
Vegas. The Company's 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. The Company 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, TSI, SSI, TRSI, GVSI, and SGSI. The
Company is also licensed as a manufacturer and distributor. PSHC, BSI, TSI, SSI,
TRSI, GVSI, and SGSI are each a corporate gaming licensee and TCAI is 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, the Company is required periodically to submit detailed financial
and operating reports to the Nevada Commission and the Nevada Board and furnish
any other information which the Nevada Commission or the Nevada Board may
require. No person may become a stockholder or holder of an interest of, or
receive any percentage of profits from the Gaming Subsidiaries without first
obtaining licenses and approvals from the Nevada Gaming Authorities. The Company
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 the Company 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 the Company 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 the Company or the Gaming Subsidiaries, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require the Company 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.

         The Company 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 the Company and the 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, the Company, 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


                                       11

<PAGE>

appointed by the Nevada Commission to operate Palace Station, Boulder Station,
Texas Station, Sunset Station, Wild Wild West and Barley's Casino 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) materially adversely affect the
Company's gaming operations.

         Any beneficial owner of the Company's 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 the Company's
voting securities determined if the Nevada Commission has reason to believe that
such ownership would otherwise be inconsistent with the declared policies of the
state of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.

         The Nevada Act provides that persons who acquire beneficial ownership
of more than 5% of the voting securities of a Registered Corporation must report
the acquisition to the Nevada Commission. The Nevada Act also requires that
beneficial owners of more than 10% of the voting securities of a Registered
Corporation must apply to the Nevada Commission for a finding of suitability
within thirty days after the Chairman of the Nevada Board mails the written
notice requiring such filing. An "institutional investor," as defined in the
Nevada Commission's regulations, which acquires beneficial ownership of more
than 10%, but not more than 15% of the Company's 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 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 the Company, any change in the Company's
corporate charter, bylaws, management policies or operations of the Company, or
any of its gaming affiliates, or any other action which the Nevada Commission
finds to be inconsistent with holding the Company's 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 its 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. The
Company is subject to disciplinary action if, after it receives notice that a
person is unsuitable to be a stockholder or to have any other relationship with
the Company or the Gaming Subsidiaries, the Company (i) pays that person any
dividend or interest upon voting securities of the Company, (ii) allows 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) fails 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 license.

         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.


                                       12

<PAGE>

         The Company is 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. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Nevada
Commission has the power to require the Company's 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 the Company.

         The Company may not make a public offering of its 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 27, 1999, the Nevada Commission granted the Company prior
approval to make public offerings for a period of two years, subject to certain
conditions ("Shelf Approval"). However, 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 the Company (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, the Company or an Affiliate in a public offering under the Shelf
Approval. The Shelf Approval does not constitute a finding, recommendation or
approval by the Nevada Commission or the Nevada Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities offered.
Any representation to the contrary is unlawful.

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

         The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada corporate gaming licensees, and Registered Corporations
that are affiliated with those operations, may be injurious to stable and
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 recapitalization proposed by the Registered
Corporation's Board of Directors in response to a tender offer made directly to
the Registered Corporation's stockholders for the purpose of acquiring control
of the Registered Corporation.

         License fees and taxes, computed in various ways depending on the type
of gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with 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


                                       13

<PAGE>

subject to increase or decrease in 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 the
Company's gaming licenses in Nevada would have a material adverse effect on its
business and could require the Company to cease gaming operations in Nevada.

         NEVADA LIQUOR REGULATIONS

         The sale of alcoholic beverages at Palace 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 is
subject to licensing control and regulation of the City of North Las Vegas.
Sunset Station and Barley's Casino are subject to the licensing control and
regulation of the City of Henderson and the Department of Treasury, Bureau of
Alcohol, Tobacco and Firearms. 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.

         MISSOURI GAMING REGULATIONS

         Gaming was originally authorized in the State of Missouri and the City
of St. Charles on November 3, 1992, by referendum, although no governmental
action was taken to enforce or implement the original law. On April 29, 1993,
Missouri enacted the Missouri Gaming Law which replaced the original law and
established the Missouri Gaming Commission, which is responsible for the
licensing and regulation of riverboat gaming in Missouri. The Missouri Gaming
Commission has discretion to approve gaming license applications for both
permanently moored ("dockside") riverboat casinos and powered ("excursion")
riverboat casinos. On September 20, 1993, the Company filed its initial
application with the Missouri Gaming Commission for either a dockside or a
cruising gaming license in St. Charles, Missouri, which license was issued on
May 27, 1994, thereby making the Company one of the first two entrants in the
Missouri riverboat gaming market.

         Opponents of gaming in Missouri have brought several legal challenges
to gaming in the past and may possibly bring similar challenges in the future.
There can be no assurances that any future challenges, if brought, would not
further interfere with full-scale gaming operations in Missouri, including the
operations of the Company and its subsidiaries.

         On January 25, 1994, as a result of a cause of action brought by
anti-gaming interests, the Missouri Supreme Court held that games of chance,
including certain games authorized under the Missouri Gaming Law such as bingo
and keno, constitute "lotteries" and were therefore prohibited under the
Missouri Constitution. A statewide election on April 5, 1994, failed to adopt a
constitutional amendment that would have exempted excursion boats and floating
facilities from such constitutional prohibition on lotteries. Therefore, in May
1994, the Company commenced operations only with those games which involve some
element of skill ("limited gaming"), such as poker and blackjack, that would be
constitutionally permissible. The authorization of both games of skill and games
of chance ("full-scale gaming") occurred on November 8, 1994 with passage by
Missouri voters of a constitutional amendment virtually identical to the measure
which was defeated on April 5, 1994. Full-scale gaming became effective on
December 9, 1994, and by the end of December 1994, the Company was conducting
full-scale gaming on both its excursion and dockside casinos in St. Charles,
Missouri.

         On January 16, 1997, the Missouri Gaming Commission granted Kansas City
Station Corporation two (2) Class A licenses to own and operate the River King
and River Queen floating gaming facilities.

         On November 25, 1997, the Supreme Court ruled, in a case brought by
anti-gaming interests involving certain operators who compete with Station
Casino St. Charles in Maryland Heights, Missouri, that gaming may occur only in
artificial spaces that are contiguous to the surface stream of the Missouri and
Mississippi rivers. On November 3, 1998, the citizens of the State of Missouri
approved a Constitutional amendment which was proposed by initiative petition,
that retroactively legalized lotteries, gift enterprises and games of chance
aboard excursion gambling boats and floating


                                       14

<PAGE>

facilities located within artificial spaces containing water that are within
1,000 feet of the closest edge of the main channel of the Mississippi or
Missouri Rivers. This amendment to the Constitution was certified on November
23, 1998.

         Under the Missouri Gaming Law, the ownership and operation of riverboat
gaming facilities in Missouri are subject to extensive state and local
regulation. By virtue of its gaming license in Missouri, the Company, any
subsidiaries it has or it may form and certain of its officers and employees are
subject to the Missouri Gaming Law and the regulations of the Missouri Gaming
Commission.

         As part of the application and licensing process for a gaming license,
the applicant must submit detailed financial, operating and other reports to the
Missouri Gaming Commission. Each applicant has an ongoing duty to update the
information provided to the Missouri Gaming Commission in the application. In
addition to the information required of the applicant, directors, officers and
other key persons must submit Personal Disclosure Forms which include detailed
personal financial information and are subject to thorough investigations. All
gaming employees must obtain an occupational license issued by the Missouri
Gaming Commission. Operators' licenses are issued through application to the
Missouri Gaming Commission, which requires, among other things, (a)
investigations into an applicant's character, financial responsibility and
experience qualifications and (b) that applicants furnish (i) an affirmative
action plan for the hiring and training of minorities and women and (ii) an
economic development or impact report. License fees are a minimum of $50,000 for
the initial application and $25,000 annually thereafter.

         The Missouri Gaming Commission may revoke or suspend gaming licenses
and impose other penalties for violation of the Missouri Gaming Law and the
rules and regulations which may be promulgated thereunder, including, without
limitation, forfeiture of all gaming equipment used for improper gaming and
fines of up to three times an operator's highest daily amount of gross receipts
from wagering on the gambling games conducted during the preceding twelve
months. No gaming licensee or occupational licensee may pledge, hypothecate or
transfer in any way any license, or any interest in a license, issued by the
Missouri Gaming Commission. An ownership interest in a gaming licensee that is
not a publicly held entity or a holding company that is not a publicly held
entity may not be pledged or hypothecated in any way to, or otherwise be subject
to any type of security interest held by, any entity or person other than a
regulated bank or saving and loan association without prior approval of the
Missouri Gaming Commission. Missouri Gaming Commission regulations prohibit a
licensee from consummating any of the following transactions without at least 60
days' prior notice to the Missouri Gaming Commission, and during such period,
the Missouri Gaming Commission may disapprove the transaction or require the
transaction be delayed pending further investigation; (i) any transfer or
issuance of an ownership interest in a gaming licensee that is not a publicly
held entity or a holding company that is not a publicly held entity; and (ii)
any pledge or hypothecation or grant of any type of security interest in an
ownership interest in a gaming licensee that is not a publicly held entity or a
holding company that is not a publicly held entity to a regulated bank or saving
and loan association; provided that no ownership interest may be transferred in
any way pursuant to any pledge, hypothecation or security interest without
separate notice to the Missouri Gaming Commission at least thirty days prior to
such transfer, which restriction must be specifically included in the grant of
pledge, hypothecation or security interest.

         Missouri Gaming Commission regulations require a licensee to notify the
Missouri Gaming Commission of its intention to consummate any of the following
transactions at least fifteen days prior to such consummation, and the Missouri
Gaming Commission may reopen the licensing hearing prior to or following the
consummation date to consider the effect of the transaction on the licensee's
suitability; (i) any issuance of ownership interest in a publicly held gaming
licensee or a publicly held holding company, if such issuance would involve,
directly or indirectly, an amount of ownership interest equaling five percent or
greater of the ownership interest in the gaming licensee or holding company
after the issuance is complete; (ii) any private incurrence of debt equal to or
exceeding one million dollars by a gaming licensee or holding company that is
affiliated with the holder of a license; (iii) any public issuance of debt by a
gaming licensee or holding company that is affiliated with the holder of a
license; and (iv) any significant related party transaction as defined in the
regulations.

         The Missouri Gaming Law imposes operational requirements on riverboat
operators, including a charge of two dollars per gaming customer that licensees
must pay to the Missouri Gaming Commission, certain minimum payout requirements,
a 20% tax on adjusted gross receipts, prohibitions against providing credit to
gaming customers (except for the use of credit cards and cashing checks) and a
requirement that each licensee reimburse the Missouri Gaming Commission for all
costs of any Missouri Gaming Commission staff necessary to protect the public on
the licensee's riverboat. Licensees must also submit audited quarterly financial
reports to the Commission and pay the associated auditing fees. Other areas of
operation which are subject to regulation under Missouri rules are the size,
denomination


                                       15

<PAGE>

and handling of chips and tokens; the surveillance methods and computer
monitoring of electronic games; accounting and audit methods and procedures; and
approval of an extensive internal control system. The Missouri rules also
require that all of an operator's purchases of chips, tokens, dice, playing
cards and electronic gaming devices must be acquired from suppliers licensed by
the Missouri Gaming Commission. The Missouri Gaming Law provides for a loss
limit of $500 per person per excursion and requires licensees to maintain
scheduled excursions with boarding and disembarking times regardless of whether
the riverboat cruises. Although the Missouri Gaming Law provides no limit on the
amount of riverboat space that may be used for gaming, the Missouri Gaming
Commission is empowered to impose such space limitations through the adoption of
rules and regulations. Additionally, United States Coast Guard safety
regulations could affect the amount of riverboat space that may be devoted to
gaming. The Missouri Gaming Law also includes requirements as to the form of
riverboats, which must resemble Missouri's riverboat history to the extent
practicable and include certain non-gaming amenities. All ten licensees
currently operating riverboat gaming operations in Missouri are authorized to
conduct all or a portion of their operations on a dockside basis.

         With respect to the availability of dockside gaming, which may be more
profitable than excursion gaming, the Missouri Gaming Commission is empowered to
determine on a site-by-site basis where such gaming is appropriate and shall be
permitted. On December 27, 1994, Station Casino St. Charles was granted a
dockside gaming license for its floating gaming facility by the Missouri Gaming
Commission. On April 16, 1996, Station Casino St. Charles, subsequently received
approval from the Missouri Gaming Commission to conduct its operations on its
excursion gaming riverboat on a continuously docked basis. The U.S. Coast Guard
has recommended to the Missouri Gaming Commission that all gaming vessels on the
Missouri River be required to remain dockside because certain characteristics of
the Missouri River, including turbulence, lack of emergency response
infrastructure and potential congestion, create substantially elevated risks for
the operation of large capacity passenger vessels. Dockside gaming in Missouri
may differ from dockside gaming in other states, such as Mississippi, because
the Missouri Gaming Commission has the ability to require "simulated cruising."
The simulated cruises are required to be a minimum of two hours and a maximum of
four hours. Dockside gaming in Missouri may not be as profitable as dockside
gaming in other states because of the admission fee paid for each patron that
enters the excursion gambling boat.

         The Company understands that the Missouri Gaming Commission and
offices of the United States Attorney in Missouri are conducting
investigations regarding the actions of an attorney who worked on certain
Company legal matters in Missouri. The Company believes that the
investigations relate to, among other things, certain bonus payments made by
the Company to such attorney. The Company has received requests for
information and documents from these agencies and is cooperating fully. The
Company is unaware of any improprieties on its part. However, due to the
uncertainty inherent in any investigation, the Company cannot predict the
ultimate outcome of these investigations. If the Company were to be
implicated in any wrongdoing, this could lead to further proceedings against
the Company, and could result in significant fines and/or other penalties
imposed on the Company, which, if imposed, could have a material adverse
effect on the Company's business and gaming licenses.

         GENERAL GAMING REGULATIONS IN OTHER JURISDICTIONS

         If the Company becomes involved in gaming operations in any other
jurisdictions, such gaming operations will subject the Company and certain of
its 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"). The Company and the Regulated Persons will need to satisfy the
licensing, approval and suitability requirements of each jurisdiction in which
the Company seeks 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 the Company 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,
the Company 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


                                       16

<PAGE>

time revoke, suspend, condition, limit or restrict a license, approval or
finding of suitability for any cause 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 the Company will obtain
all of the necessary licenses, approvals and findings of suitability or that its
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 the Company to obtain, or the loss or suspension of, any
necessary licenses, approval or findings of suitability would prevent the
Company from conducting gaming operations in such jurisdiction and possibly in
other jurisdictions. The Company may be required to submit detailed financial
and operating reports to Regulatory Authorities.

         The laws, regulations and procedures pertaining to gaming are subject
to the interpretation of the Regulatory Authorities and may be amended. Any
changes in such laws, regulations, or their interpretations could have a
material adverse effect on the Company.

EMPLOYEES

         As of December 31, 1999, the Company and its subsidiaries had
approximately 10,700 employees. From time to time, certain employees of the
Company are contacted by unions and the Company engages in discussions with such
employees regarding establishment of collective bargaining agreements. In 1998,
approximately 12 of the Company's employees have voted to be represented by a
union. While the Company is from time to time faced with such movements by
employees, the Company does not believe that such movements will have any
broad-based impact on its employees; however there can be no assurances to that
effect. Management believes that it has good relationships with its employees.

ITEM 2.  PROPERTIES

         Palace Station is situated on approximately 39 acres located on the
west side of Las Vegas, Nevada. The Company owns 26 acres and leases the
remaining 13 acres pursuant to five long-term ground leases with unaffiliated
third parties. The property is subject to a lien to secure borrowings under the
Amended Bank Facility.

         Boulder Station is situated on approximately 46 acres located on the
east side of Las Vegas, Nevada. The Company owns 19 acres and leases the
remaining 27 acres from a trust pursuant to a long-term ground lease. The
trustee of such trust is Bank of America National Trust and Savings Association
("Bank of America NT&SA") and the beneficiary of which is KB Enterprises, an
affiliated 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. The lease has a maximum term of 65
years, ending in June 2058. The lease provides for monthly payments of $135,525
through June 2008. In July 2008, and every ten years thereafter, the rent will
be adjusted by a cost of living factor. In July 2003, 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 intervals beginning
in June 1998, to purchase the land at fair market value. The Company did not
exercise its June 1998 option. The Company believes that the terms of the ground
lease are as fair to the Company as could be obtained from an independent third
party. The Company's leasehold interest in the property and the acreage it owns
directly are subject to a lien to secure borrowings under the Amended Bank
Facility.

         Texas Station is situated on approximately 47 acres located in North
Las Vegas, Nevada. The Company leases this land from a trust pursuant to a
long-term ground lease. The trustee of this trust is Bank of America NT&SA, the
beneficiary of which is Texas Gambling Hall & Hotel, Inc., an affiliate company
of the Related Lessor. The lease has a maximum term of 65 years, ending in July
2060. The lease provides for monthly rental payments of $150,000 through June
2000. In July 2000, 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. The rent will be further adjusted by a cost of
living factor after the first ten years and every ten years thereafter. 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 beginning in May 2000, to purchase the land at fair market
value. Pursuant to the ground lease, the lessor will have a right to put the
land to the Company, exercisable


                                       17

<PAGE>

no later than one year after the first to occur of (a) a change of control (as
defined in the lease), or (b) delivery of written notice that such a change of
control is anticipated, at a purchase price equal to fair market value as
determined by negotiation. The Company believes that the terms of the ground
lease are as fair to the Company as could be obtained from an independent third
party. The Company's leasehold interest in the property is subject to a lien to
secure borrowings under the Amended Bank Facility.

         Sunset Station is situated on approximately 105 acres located in the
Green Valley/Henderson area of Las Vegas, Nevada. The Company leases
approximately 48 acres pursuant to a long-term ground lease with an unaffiliated
third party. The lease was entered into in June 1994, and has a term of 65 years
with monthly rental payments of $120,000, adjusted on each subsequent five-year
anniversary by a cost of living factor. In June 2001, the Company has an option
to purchase this land for $23.8 million. Additionally, in June 2001, the lessor
has an option to sell this land to the Company for $21.8 million. Of the
remaining land, approximately 52 acres were purchased by the Company in
September 1995, for approximately $11.0 million.

         Station Casino St. Charles is situated on approximately 52 acres
located immediately north of Interstate 70 on the edge of the Missouri River in
St. Charles, Missouri. The Company owns the entire 52 acres. The Company's
ownership interest in the St. Charles property is subject to liens to secure
borrowings under the Amended Bank Facility.

         Station Casino Kansas City is situated on approximately 183 acres in
Kansas City, Missouri. The Company entered into a joint venture with an
unaffiliated third party to acquire the property. Station Casino Kansas City
leases 171 acres of the site from the joint venture with current monthly
payments of $93,636. Commencing April 1, 1998, and every anniversary
thereafter, the rent shall be adjusted by a cost of living factor of not more
than 5% or less than 2% per annum. The lease expires March 31, 2006, with an
option to extend the lease for up to eight renewal periods of ten years each,
plus one additional seven year period. In connection with the joint venture
agreement, the Company received an option providing for the right to acquire
the joint venture partner's interest in this joint venture. The Company has
the option to acquire this interest at any time after April 1, 2002 through
April 1, 2011, for $11.7 million, however, commencing April 1, 1998, the
purchase price will be adjusted by a cost of living factor of not more than
5% or less than 2% per annum. The Company paid $2.6 million for this option.
The Company's leasehold interest in the property is subject to a lien to
secure borrowings under the Amended Bank Facility, and under certain
circumstances the Amended Bank Facility permits the lenders to force the
exercise of such option.

         The Company has acquired or leased several parcels of land in
various jurisdictions as part of the Company's development activities.
Included in land for held development at December 31, 1999 is approximately
$18.8 million related to land which had been acquired for potential gaming
projects in jurisdictions where gaming has been approved. Subsequent to
December 31, 1999, the Company acquired additional parcels of land for
potential gaming projects. The cost of these new parcels was approximately
$30.2 million.

ITEM 3.  LEGAL PROCEEDINGS

         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 following
matters and litigation inherently involves significant costs.

         SETTLEMENT OF CRESCENT LITIGATION

         On January 16, 1998, the Company entered into an Agreement and Plan of
Merger, as amended (the "Merger") with Crescent Real Estate Equities Company, a
Texas real estate investment trust ("Crescent"). The Company wrote off $2.9
million of costs incurred related to the Merger. The Merger became subject to
litigation between the two companies. On April 14, 1999, the Company announced
that it had settled its lawsuits with Crescent arising out of the failed Merger.
Under the terms of the settlement agreement, Crescent paid the Company $15
million, and the parties have released each other from all claims.


                                       18

<PAGE>

         LOW WATER LEVEL AT STATION CASINO ST. CHARLES; EPA INVESTIGATION

         During December 1998 and January 1999, the water level of the Missouri
River was well below normal. In addition, over time silt and debris flowing
downstream have built up under the gaming barges and other ancillary barges at
Station Casino St. Charles. These circumstances have caused a portion of these
barges, at times, to touch the river bottom. Because these barges have touched
the river bottom, the American Bureau of Shipping ("ABS") decertified the barges
on January 8, 1999. As a result of the decertification, the Missouri Gaming
Commission expressed concern regarding the effect of the low water level on the
barges. However, based upon improvement in the water level and the Company's
agreement to work with ABS to re-certify all of the barges at a time when the
river levels permit, the Missouri Gaming Commission allowed the gaming facility
to remain open. On November 11, 1999, ABS recertified the barges. The Company
continues to monitor the situation very carefully and believes that the facility
should remain in operation. However, there can be no assurance that the
Company's assessment will not change or that the relevant authorities will
continue to permit the operation of the facility. A prolonged closure of the
facility as a result of the low water level would have a material adverse effect
on the Company's business, financial position and results of operations.

         The Company has taken steps and intends to take further steps to remedy
the problems caused by the low water level. These further steps include dredging
material from under the barges. The Company does not expect the cost of these
remedial activities to be material, although there can be no assurance that such
costs will not exceed the Company's expectations. Dredging and construction
activities generally require permits from the United States Army Corps of
Engineers (the "Corps of Engineers"). The Company has received certain permits
to continue dredging activities. The Company is in the process of applying for
additional permits which will allow it to dredge more efficiently than the
current permit. There can be no assurance that the Corps of Engineers will grant
such permits or that they will be granted on a timely basis. In the event that
low water levels return, the Company could be forced to close the facility. The
Company's ability to receive the required permits could be adversely affected by
the investigation described below.

         On February 3, 1999, the Company received a subpoena issued by the
EPA requesting that documentation relating to the Company's dredging
activities at the facility be furnished to the Grand Jury in the United
States District Court for the Eastern District of Missouri. Several employees
and persons who contracted to work for the Company received similar
subpoenas. The Company believes that the EPA is investigating allegations
that the Company or the Company's contractors dredged and disposed of silt
and debris from the area of the facility either without proper permits or
without complying with such permits. The Company has completed the
investigation of the substance of the allegations and continues to cooperate
fully with the EPA. The investigation could lead to further proceedings
against the Company which could result in significant fines and other
penalties imposed on the Company. On December 9, 1999, the Company and the
United States, on behalf of the Corps of Engineers, tentatively entered into
a "Consent Decree" regarding the alleged dredging activities. On February 15,
2000, the United States District Court for the Eastern District of Missouri,
after public notice and passage of the comment period, approved the Consent
Decree. Subsequently, the Consent Decree was published in the National
Register without comment or objection. As a result, the approval of the
Consent Decree and the expiration of the notice period now brings resolution
to this matter.

         POULOS/AHEARN CASE

         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 the Company. On May 10, 1994, a lawsuit alleging
substantially identical claims was filed by another plaintiff, William Ahearn,
et al., as class representative, in the United States District Court, Middle
District of Florida, against 48 manufacturers, distributors and casino operators
of video poker and electronic slot machines, including the Company and most of
the other major hotel/casino companies. The lawsuits allege that the defendants
have engaged in a course of fraudulent and misleading conduct intended to induce
persons to play such games based on a false belief concerning how the gaming
machines operate, as well as the extent to which there is an opportunity to win.
The two lawsuits have been consolidated into a single action, and have been
transferred to the United States District Court for the District of Nevada. On
September 26, 1995, a lawsuit alleging substantially identical claims was filed
by plaintiff, Larry Schreier, et. al, as class representative, in the United
States District Court for the District of Nevada, naming 45 manufacturers,
distributors, and casino operators of video poker and electronic slot machines,
including the Company. Motions to dismiss the Poulos/Ahearn and Schreier cases
were filed by defendants. On April 17, 1996, the Poulos/Ahearn lawsuits were
dismissed, but plaintiffs were given leave to file Amended Complaints on or
before May 31, 1996. On May 31, 1996, an Amended 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


                                       19

<PAGE>

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 United Stated District
Court for the District of Nevada 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. The
defendants have committed to vigorously defend all claims and allegations
contained in the consolidated action. The parties have fully briefed the issues
regarding class certification, which are currently pending before the court. The
Company does not expect that the lawsuits will have a material adverse effect on
the Company's financial position or results of operations.

         NICOLE ANDERSON CASE

         A suit seeking status as a class action lawsuit was filed by plaintiff
Nicole Anderson, et. al., as class representative, on September 24, 1997, in the
United States District Court for the Eastern District of Missouri, Eastern
Division. The lawsuit alleges certain racially based discriminatory action at
Station Casino St. Charles and seeks injunctive relief and compensatory,
special, consequential, incidental and punitive damages in unspecified amounts.
On or about October 24, 1997, plaintiff filed her first amended complaint. On
November 24, 1997, the Company filed its answer to plaintiff's first amended
complaint which denied the allegations contained therein.

         On August 25, 1998, a hearing was held to determine whether this
lawsuit could be certified as a class action. The Court conditionally certified
a subclass of dealers in the table game department; the other plaintiffs may
proceed individually with their claims. The parties have entered into a
settlement agreement which has been submitted to the United States District
Court for the Eastern District of Missouri, Eastern Division, to determine the
fairness, reasonableness and adequacy of the terms of settlement and whether an
order and final judgment should be entered approving the proposed settlement
agreement. On October 18, 1999, the order and final judgment was issued by the
United States District Court for the Eastern District of Missouri.

         STEPHEN B. SMALL CASE

         A class action lawsuit was filed by plaintiff Stephen B. Small, et al.,
as class representative, on November 28, 1997, in the United States District
Court for the Western District of Missouri, naming four gaming operators in
Kansas City, Missouri, including Kansas City Station Corporation. The lawsuit
alleged that the defendants are conducting gaming operations that are not
located on the Missouri River in violation of certain state and federal
statutes. The plaintiff also sought compensatory, special, consequential, and
incidental damages in unspecified amounts. On September 1, 1998, the United
States District Court granted Kansas City Station Corporation's motion to
dismiss the lawsuit. On February 16, 1999, the plaintiff served the defendants
with a notice of appeal of the federal court dismissal. On October 30, 1998, the
plaintiff filed a similar lawsuit in the Circuit Court of Cole County, Missouri.
The lawsuit alleged that the operators were conducting illegal games of chance
prior to December 3, 1998, the effective date of a Constitutional amendment
passed by Missouri voters on November 3, 1998, legalizing gaming facilities
within 1,000 feet of the main channel of the Mississippi and Missouri Rivers. On
February 9, 1999, the Cole County Circuit Court granted Kansas City Station
Corporation's motion to dismiss the lawsuit. On February 19, 1999, the plaintiff
served the defendants with a notice of appeal of the state court dismissal.
Management 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 fiscal year 1999.


                                       20

<PAGE>

                                     PART II

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

         The Common Stock trades on the New York Stock Exchange under the symbol
"STN". Prior to September 5, 1996, the common stock traded on the Nasdaq Stock
Market under the symbol "STCI". The following table sets forth, for the periods
indicated, the high and low sale price per share of the Common Stock as reported
on the New York Stock Exchange.

<TABLE>
<CAPTION>

                                                                         HIGH         LOW
                                                                         ----         ---
                FISCAL YEAR ENDING DECEMBER 31, 1999
                ------------------------------------
<S>                                                                   <C>          <C>
                         First Quarter                                $  14.88     $  7.94
                         Second Quarter                                  20.38       12.25
                         Third Quarter                                   24.63       17.00
                         Fourth Quarter                                  27.38       16.50

                TRANSITION PERIOD ENDING DECEMBER 31, 1998
                ------------------------------------------
                         First Quarter                                $  15.88     $ 13.19
                         Second Quarter                                  15.31        5.06
                         Third Quarter                                    8.50        4.00
</TABLE>

         As of March 3, 2000, there were 653 holders of record of the Company's
common stock.

         The Company has never paid cash dividends on any shares of Common
Stock. The Company does not intend to pay cash dividends in the foreseeable
future so that it may reinvest its earnings in the development of its
business. The payment of dividends in the future will be at the discretion of
the Board of Directors of the Company. Restrictions imposed by the Company's
debt instruments and other agreements, limit the payment of dividends by the
Company (see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Description of Certain Indebtedness and Capital
Stock").

                                       21

<PAGE>

ITEM 6.   SELECTED CONSOLIDATED FINANCIAL DATA

     On November 6, 1998 the Company filed a Form 8-K announcing its change
in fiscal year end from March 31 of each year to December 31 of each year.
This change is effective for the nine month period ended December 31, 1998
(the "Transition Period 1998").

     The selected consolidated financial data presented below as of and for the
Company's fiscal years ended March 31, 1996, 1997 and 1998, for the Transition
Period 1998, and for the fiscal year ended December 31, 1999 have been derived
from consolidated financial statements which, except for 1996 and 1997, 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.

<TABLE>
<CAPTION>

                                                           FOR THE YEAR
                                                                ENDED        TRANSITION
                                                             DECEMBER 31,      PERIOD          FOR THE YEARS ENDED MARCH 31,
                                                                                          ---------------------------------------
                                                                 1999            1998         1998           1997        1996
                                                             -------------  ------------- ------------  ------------ ------------
                                                                       (amounts in thousands, except per share amounts)
<S>                                                           <C>           <C>           <C>           <C>           <C>
OPERATING RESULTS:
Net revenues ...............................................  $   942,469   $   642,214   $   769,610   $   583,515   $   466,857
Operating income ...........................................       28,871        64,696        84,186        58,123        69,464
Income (loss) before income taxes and  extraordinary item ..      (47,223)       (9,864)       (4,120)       21,378        40,051
Extraordinary item-loss on early retirement of debt,
    net of applicable income tax benefit ...................      (10,653)       (3,104)       (2,042)            -             -
Net income (loss) applicable to common stock ...............      (44,758)      (17,531)      (12,441)        6,518        25,419
Basic and diluted earnings (loss) per common share .........  $     (1.14)  $     (0.50)  $     (0.35)  $      0.18   $      0.75

BALANCE SHEET DATA:
Total assets ...............................................  $ 1,276,273   $ 1,531,925   $ 1,300,216   $ 1,234,118   $   827,314
Long-term debt .............................................      942,480     1,147,266       900,226       760,963       464,998
Stockholders' equity .......................................      216,801       269,406       286,887       298,848       278,470
</TABLE>


                                       22

<PAGE>


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 operations for the Company
(dollars in thousands):

<TABLE>
<CAPTION>

                                        Fiscal                Twelve                                  Nine              Fiscal
                                         Year                 Months                                 Months              Year
                                         Ended                Ended            Transition            Ended               Ended
                                      December 31,         December 31,          Period           December 31,          March 31,
                                          1999                 1998               1998                1997                1998
                                      ------------         ------------        ----------         ------------          ---------
                                                               (unaudited)                         (unaudited)
<S>                                    <C>                 <C>                 <C>                 <C>                 <C>
NET REVENUES - TOTAL                   $ 942,469           $ 847,015           $ 642,214           $ 564,809           $ 769,610
     Nevada Operations (a)               584,852             526,854             397,908             341,447             470,393
     Missouri Operations (a)             313,439             290,160             219,734             203,374             273,800
     Other (a)                            44,178              30,001              24,572              19,988              25,417

OPERATING INCOME (LOSS) - TOTAL        $  28,871           $  92,380           $  64,696           $  56,502           $  84,186
     Nevada Operations (a)               147,217             111,902              83,669              60,028              88,261
     Missouri Operations (a)             (85,269)             (1,528)             (5,056)              6,358               9,886
     Other (a)                           (33,077)            (17,994)            (13,917)             (9,884)            (13,961)

CASH FLOWS FROM:
     Operating activities              $ 173,058           $ 108,321           $  76,692           $  73,326           $ 104,955

EBITDA, AS ADJUSTED (b) - TOTAL        $ 236,970           $ 192,384           $ 147,682           $ 117,764           $ 162,466
     Nevada Operations (a)               186,677             150,413             113,284              96,029             133,158
     Missouri Operations (a)              69,223              54,314              43,163              29,640              40,791
     Other (a)                           (18,930)            (12,343)             (8,765)             (7,905)            (11,483)

EBITDA, AS ADJUSTED (b),
ADJUSTED FOR THE SUNSET
EQUIPMENT LEASE - TOTAL                $ 242,890           $ 200,952           $ 154,186           $ 121,942           $ 168,708
     Nevada Operations (a)               192,597             158,981             119,788             100,207             139,400
</TABLE>

(a)  The Nevada Operations include the accounts of: Palace Station, Boulder
     Station, Texas Station and Sunset Station. The Missouri Operations include
     the accounts of: Station Casino St. Charles and Station Casino Kansas City.
     Other includes the operations of Wild Wild West, which opened in July 1998,
     the Company's investment in Barley's, Southwest Gaming and Corporate
     expense.

(b)  "EBITDA, As Adjusted" consists of operating income plus depreciation,
     amortization, preopening expenses and impairment loss. The Company believes
     that in addition to cash flows and net income, EBITDA, As Adjusted is a
     useful financial performance measurement for assessing the operating
     performance of the Company. Together with net income and cash flows,
     EBITDA, As Adjusted provides investors with an additional basis to evaluate
     the ability of the Company to incur and service debt and incur capital
     expenditures. To evaluate EBITDA, As Adjusted and the trends it depicts,
     the components should be considered. The impact of interest, taxes,
     depreciation and amortization, preopening expenses and impairment loss,
     each of which can significantly affect the Company's results of operations
     and liquidity and should be considered in evaluating the Company's
     operating performance, cannot be determined from EBITDA, As Adjusted.
     Further, EBITDA, As Adjusted does not represent net income or cash flows
     from operating, financing and investing activities as defined by generally
     accepted accounting principles ("GAAP") and does not necessarily indicate
     cash flows will be sufficient to fund cash needs. It should not be
     considered as an alternative to net income, as an indicator of the
     Company's operating performance or to cash flows as a measure of liquidity.
     In addition, it should be noted that not all gaming companies that report
     EBITDA or adjustments to such measures may calculate EBITDA, or such
     adjustments in the same manner as the Company, and therefore, the Company's
     measure of EBITDA, As Adjusted may not be comparable to similarly titled
     measures used by other gaming companies.


                                       23

<PAGE>

         Consolidated net revenues, cash flows from operating activities, and
EBITDA, As Adjusted for the fiscal year ended December 31, 1999 increased as
compared to the Transition Period 1998. These increases are due to the
Transition Period 1998 consisting of nine months as compared to the fiscal year
ended December 31, 1999, which is twelve months. The above table presents
certain results of operations from the unaudited twelve month period ended
December 31, 1998 for comparison purposes.

         Consolidated net revenues, operating income, cash flows from operating
activities and EBITDA, As Adjusted for the Transition Period 1998 decreased as
compared to the fiscal year ended March 31, 1998. These decreases are due to the
Transition Period 1998 consisting of nine months as compared to the fiscal year
ended March 31, 1998, which is twelve months. The above table presents certain
results of operations from the unaudited nine month period ended December 31,
1997 for comparison purposes.

         CONSOLIDATED NET REVENUES

         The increase in consolidated net revenues for the fiscal year ended
December 31, 1999 as compared to the twelve months ended December 31, 1998 is
due to increased revenues at all of the Company's properties. Increased revenues
at the Nevada Operations are partially a result of the completed master-planned
expansions at Texas Station and Sunset Station, which were completed in February
1999 and November 1998, respectively. In addition, revenues at the Nevada
Operations increased due to the introduction of the Boarding Pass player rewards
program in April 1999, which makes it more convenient for customers to redeem
points earned from gaming activity at any of the Nevada properties. Net revenues
at the Missouri Operations increased 8% primarily due to Station Casino Kansas
City which generated a 13% increase in net revenues.

         Consolidated net revenues increased for the Transition Period 1998 as
compared to the nine months ended December 31, 1997 due to increased revenues
from the Nevada properties generally, and results from Sunset Station, which
opened in June 1997, are included for only seven months in the nine months ended
December 31, 1997. Also, revenues from the Station Casino Kansas City facility
continued to steadily improve. Net revenues at Station Casino St. Charles
declined 5% as a result of significant competition in the St. Louis market.

         OPERATING INCOME/OPERATING MARGIN

         The Company's operating income was impacted by certain charges in each
of the above periods that affect the ability to analyze year to year
comparisons. The following table identifies these charges (dollars in
thousands):

<TABLE>
<CAPTION>

                                                                    Fiscal        Twelve                    Nine          Fiscal
                                                                     Year         Months                   Months          Year
                                                                     Ended        Ended     Transition     Ended          Ended
                                                                  December 31, December 31,   Period     December 31,   March 31,
                                                                      1999         1998        1998          1997         1998
                                                                  ------------ -----------  ----------  ------------   -----------
                                                                               (unaudited)              (unaudited)
<S>                                                                 <C>         <C>          <C>          <C>           <C>
         Operating income ......................................    $ 28,871    $ 92,380     $ 64,696     $ 56,502      $ 84,186
                 OPERATING MARGIN ..............................        3.1%       10.9%        10.1%        10.0%         10.9%

         Certain charges:
                 Impairment loss ...............................    $137,435    $ 30,011     $ 30,011         ----          ----
                 Preopening expenses ...........................        ----        ----         ----     $ 10,866      $ 10,866

         Operating income, excluding certain charges ...........    $166,306    $122,391     $ 94,707     $ 67,368      $ 95,052
                OPERATING MARGIN, EXCLUDING CERTAIN CHARGES ....       17.6%       14.4%        14.7%        11.9%         12.4%
</TABLE>

         Consolidated operating income, excluding certain charges, improved by
$43.9 million in the fiscal year ended December 31, 1999 as compared to the
twelve months ended December 31, 1998 with operating income at all of the
Company's properties increasing. The increases at the Nevada properties are
attributed to the same factors affecting consolidated net revenues discussed
above and the increases at the Missouri properties are primarily attributed to a
95.2% increase in operating income, excluding certain charges, at Station Casino
Kansas City due to a significant


                                       24

<PAGE>

improvement in operations at this property. In addition, the decline in the
prior year at Station Casino St. Charles was reversed as the property posted a
$1.6 million increase in operating income, excluding certain charges.

         The consolidated operating margin, excluding certain charges, improved
in the fiscal year ended December 31, 1999 as compared to the twelve months
ended December 31, 1998, due to the operating margins at Sunset Station and
Station Casino Kansas City improving over 600 basis points and smaller increases
at all of the other properties.

         Operating margin, excluding certain charges, improved in the Transition
Period 1998 as compared to the fiscal year ended March 31, 1998 primarily as a
result of significantly improved operations at Station Casino Kansas City.
Operating income, excluding certain charges at Station Casino Kansas City,
improved by $17.8 million in the Transition Period 1998 as compared to the nine
months ended December 31, 1997. The only casino property experiencing a decline
in operating income, excluding certain charges, was Station Casino St. Charles,
which experienced a $4.4 million decline due to the increased competition
discussed above.

         The following table highlights the various sources of revenues and
expenses for the Company as compared to prior periods (dollars in thousands):

<TABLE>
<CAPTION>

                                              Fiscal            Twelve                             Nine            Fiscal
                                               Year             Months                            Months            Year
                                               Ended            Ended           Transition        Ended            Ended
                                           December 31,      December 31,        Period        December 31,       March 31,
                                               1999              1998             1998             1997             1998
                                           ------------      ------------     -----------      ------------     -----------
                                                             (unaudited)                       (unaudited)
<S>                                         <C>              <C>              <C>              <C>              <C>
Casino revenues                             $  764,089       $  673,124       $  509,149       $  436,872       $  600,847
Casino expenses                                356,365          328,953          249,353          211,502          291,102
     MARGIN                                       53.4%            51.1%            51.0%            51.6%            51.6%

Food and beverage revenues                  $  141,116       $  138,044       $  104,538       $   97,859       $  131,365
Food and beverage expenses                      88,898           88,423           66,121           67,626           89,928
     MARGIN                                      37.0%            35.9%            36.7%            30.9%            31.5%

Room revenues                               $   42,870       $   39,678       $   30,040       $   27,692       $   37,330
Room expenses                                   15,860           14,975           11,515           10,001           13,461
     MARGIN                                      63.0%            62.3%            61.7%            63.9%            63.9%

Other revenues                              $   62,286       $   59,924       $   47,663       $   41,233       $   53,494

Selling, general and administrative         $  190,753       $  181,723       $  136,649       $  128,196       $  173,270
     PERCENT OF NET REVENUES                     20.2%            21.5%            21.3%            22.7%            22.5%

Corporate expenses                          $   23,007       $   15,661       $   11,431       $   10,391       $   14,621
     PERCENT OF NET REVENUES                      2.4%             1.8%             1.8%             1.8%             1.9%
</TABLE>

         CASINO. Casino revenues increased for the fiscal year ended December
31, 1999 as compared to the twelve months ended December 31, 1998 as a result of
the same factors affecting consolidated net revenues discussed above. The casino
profit margin increased to 53.4% for the fiscal year ended December 31, 1999
from 51.1% for the twelve months ended December 31, 1998 with all properties
improving their margin with the exception of Boulder Station which decreased
slightly.

         Casino profit margin for the Transition Period 1998 remained relatively
consistent with results for the nine months ended December 31, 1997.

         FOOD AND BEVERAGE. Food and beverage revenues for the fiscal year ended
December 31, 1999 increased 2.2% over food and beverage revenues for the twelve
months ended December 31, 1998. This increase is primarily due to the completion
of the expansion projects at Sunset Station and Texas Station. These increases
in food and beverage revenues in Nevada were offset by decreases at the Missouri
properties. Also, food and beverage revenues increased due to selected menu
price increases, which were offset by a decrease in food covers at all of the
properties. Food and


                                       25

<PAGE>

beverage net profit margins increased to 37.0% for the fiscal year ended
December 31, 1999 from 35.9% for the twelve months ended December 31, 1998.

         Food and beverage revenues for the Transition Period 1998 increased
6.8% over food and beverage revenues for the nine months ended December 31,
1997. The primary reason for this increase is the results from Sunset Station,
which opened in June 1997, are included for only seven months in the nine months
ended December 31, 1997. The increase in food and beverage revenues is less than
the overall increase in revenues. This is primarily due to a decline in food and
beverage revenues at Station Casino Kansas City. In the prior year's period, the
Company was very aggressive in promoting Station Casino Kansas City's food
operations.

         Food and beverage net profit margins improved to 36.7% for the
Transition Period 1998, from 30.9% in the nine months ended December 31, 1997.
This increase in margin is due to improvement at the Company's Nevada
Operations, primarily as a result of continued focus on cost control, as well as
selected menu price increases.

         ROOM. Room revenues for the fiscal year ended December 31, 1999
increased 8.0% over room revenues for the twelve months ended December 31, 1998.
The primary reason for this increase is the opening of the Wild Wild West
Gambling Hall & Hotel in July 1998, which contributed $2.3 million of room
revenues in the fiscal year ended December 31, 1999 as compared to $1.1 million
of room revenues in the twelve months ended December 31, 1998.

         The company-wide room occupancy decreased to 89% in the fiscal year
ended December 31, 1999 as compared to 90% in the twelve months ended December
31, 1998 due to the Company increasing room rates at the properties. The average
daily room rate increased to $54 in the fiscal year ended December 31, 1999 as
compared to $51 in the twelve months ended December 31, 1998.

         Room revenues for the Transition Period 1998 increased 8.5% over room
revenues for the nine months ended December 31, 1997. The primary reason for
this increase is the results from Sunset Station, which opened in June 1997, are
included for only seven months in the nine months ended December 31, 1997.
Additionally, the Company opened the Wild Wild West Gambling Hall & Hotel in
July 1998, which contributed $1.1 million of room revenues in the Transition
Period 1998. Offsetting these increases was a decline in room revenues at Palace
Station and Boulder Station. These declines were primarily a result of a lower
average daily room rate.

         SELLING, GENERAL AND ADMINISTRATIVE ("SG&A"). As a percent of net
revenues, SG&A decreased to 20.2% in the fiscal year ended December 31, 1999 as
compared to 21.5% in the twelve months ended December 31, 1998. As a percent of
net revenues, SG&A decreased to 21.3% in the Transition Period 1998 as compared
to 22.7% in the nine months ended December 31, 1997. These decreases are due
primarily to the fine tuning of operations at Sunset Station and Station Casino
Kansas City. In the Company's experience, when a new property opens, SG&A as a
percent of net revenues is higher than normal, and reduces as the property's
operations mature. Also, due to the fixed cost nature of some of these expenses,
they decrease on a percentage basis as the Company continues to increase
revenue.

         CORPORATE EXPENSES. Corporate expenses as a percent of net revenues
increased to 2.4% in the fiscal year ended December 31, 1999 as compared to 1.8%
in the twelve months ended December 31, 1998. The Company has increased its
corporate infrastructure as it continues to lay the foundation for future
growth. Corporate expenses as a percent of net revenues for the Transition
Period 1998 were consistent with the nine months ended December 31, 1997.

         DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$0.7 million in the fiscal year ended December 31, 1999 to $70.7 million as
compared to $70.0 million in the twelve months ended December 31, 1998. This
increase is due to the completion of the expansion projects at Sunset Station
and Texas Station which were completed in November 1998 and February 1999,
respectively. This increase was offset by decreases at Boulder Station and
Station Casino St. Charles as a portion of the original equipment became fully
depreciated during the fiscal year ended December 31, 1999, as both properties
have been open for five years. In addition, Palace Station had a large purchase
of slot machines in 1994 that became fully depreciated during the fiscal year
ended December 31, 1999. Depreciation at Station Casino St. Charles should also
decline going forward, due to the write-off of assets noted below, while
depreciation at Sunset Station should increase due to the purchase of various
equipment leases in 1999.


                                       26

<PAGE>

         Depreciation and amortization increased $2.6 million in the Transition
Period 1998 to $53.0 million as compared to $50.4 million in the nine months
ended December 31, 1997. This increase is due to the results of Sunset Station
being included for only seven months in the nine months ended December 31, 1997.

         IMPAIRMENT LOSS. In accordance with SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of",
the Company recorded an impairment loss of $137.4 million in the fiscal year
ended December 31, 1999 and $30.0 million in the Transition Period 1998 to
adjust the carrying value of its fixed assets and land held for development to
their estimated fair value. In the fiscal year ended December 31, 1999,
approximately $125.2 million of the impairment loss was related to Station
Casino St. Charles. In the fourth quarter of 1999, the Company made a decision
to reconfigure the existing Station Casino St. Charles facility to a more
efficient layout in response to the new open boarding rules promulgated by the
Missouri Gaming Commission that began in September 1999 in the St. Louis market.
All gaming operations will be moved to the existing barge by the end of the
first quarter of 2000. The existing riverboat is expected to be sold after the
reconfiguration is complete. In accordance with SFAS No. 121, the riverboat and
miscellaneous other fixed assets were written down by approximately $15 million
to their net realizable value.

         In addition, the Company performed an evaluation of the carrying values
of the remaining assets in St. Charles and determined a $110 million write-down
of the asset values was necessary. The write-down was deemed appropriate after a
review of the property's asset valuations relative to the Company's near-term
investment objectives. The balance of the impairment loss in the fiscal year
ended December 31, 1999, resulted primarily from the Company's determination
that it will sell a 40-acre parcel of land in Henderson, Nevada, that it
recently acquired. Future development of the property will be limited to
non-gaming purposes. The resulting write-down of the parcel was necessary to
reflect the value of the land as a non-gaming site.

         In the Transition Period 1998, the impairment loss principally involves
assets at the Station Casino St. Charles facility, including a riverboat
formerly used in the Missouri operations, capitalized project costs associated
with various parcels of land determined to have no value, and several parcels of
land within close proximity to the St. Charles, Missouri site that were being
held for future development. The fair value of the impaired assets was primarily
determined through the market's interest in riverboats and barges, and on the
comparable sales prices on parcels of land in the St. Charles area. The total
amount of the impairment loss in the Transition Period 1998 related to this
category of assets was approximately $23.4 million. In addition to the assets
described above, the most significant portion of the remaining impairment loss
in the Transition Period 1998 relates to several parcels of land in Nevada and
Texas that the Company had acquired in the past for either defensive or
expansion purposes. The value of these parcels was determined based on sales
prices for comparable parcels of land on the market. The following two
circumstances led to the Company's decision to write-down these assets to their
fair market value: (1) the passage, in Nevada, of legislation which places
significantly higher requirements on land to be zoned for gaming purposes, and
(2) the termination of the Plan of Merger with Crescent Real Estate Equities
Company (see "Part I. Item 3. Legal Proceedings - Settlement of Crescent
Litigation").

         Included in other assets, net on the accompanying consolidated balance
sheet as of December 31, 1999, is $26.1 million related primarily to parcels of
land. The Company is actively attempting to dispose of these non-strategic
assets and expects to complete the sale of certain of these assets in the first
half of calendar year 2000.

         PREOPENING EXPENSES. Prior to December 31, 1998, the Company
capitalized preopening expenses associated with its construction projects,
including Sunset Station, which opened in June 1997. Such amounts were expensed
upon the opening of the related project. During the fiscal year ended March 31,
1998, the Company expensed preopening expenses of $10.9 million related
primarily to this project. Preopening expenses incurred after January 1, 1999
will be expensed as incurred.

         INTEREST EXPENSE, NET. Interest costs incurred (expensed and
capitalized) decreased 6.2% to $85.4 million for the fiscal year ended December
31, 1999 as compared to $91.0 million in the twelve months ended December 31,
1998. This decrease is due to a decline of $17.2 million in total long-term debt
from the prior year and to a reduction in average interest rates on long-term
debt to 9.0% from 9.6% in the prior year.

         Interest costs incurred (expensed and capitalized) for the Transition
Period 1998 of $67.6 million remained consistent with interest costs incurred
for the nine months ended December 31, 1997 of $68.9 million.


                                       27

<PAGE>

         OTHER INCOME/EXPENSE. During the fourth quarter of the fiscal year
ended December 31, 1999, the Company wrote off $2.4 million of costs incurred
related to the termination of the Flamingo Hilton Kansas City acquisition.
The acquisition was terminated when the Missouri Gaming Commission (the
"Commission") informed the Company that it would not be able to complete its
licensing investigation on or before the termination date set forth in the
acquisition agreement. The Company believes the Commission was unable to
complete its licensing investigation in the required time frame because of
the investigation of the actions of an attorney who worked on the Company's
legal matters in Missouri (see "Regulation and Licensing - Missouri Gaming
Regulations").

         In April 1999, the Company received a $15.0 million settlement payment
from Crescent Real Estate Equities, Inc., which is included in the "Merger
settlement, net of related legal costs" line on the accompanying Consolidated
Statements of Operations (see "Part I. Item 3. Legal Proceedings - Settlement
of Crescent Litigation").

         In 1999, the Company recorded an extraordinary charge of $10.4 million
(net of applicable tax benefit) to reflect the write-off of the unamortized debt
discount, unamortized loan costs and the premium to redeem the 95/8% senior
subordinated notes, which were repaid on January 4, 1999. In addition, the
Company also recorded an extraordinary charge of $0.3 million (net of applicable
tax benefit) related to the write-off of unamortized loan costs on the Company's
$75.0 million secured term loan facility.

LIQUIDITY AND CAPITAL RESOURCES

         During the fiscal year ended December 31, 1999, the Company
generated cash flows from operating activities of $173.1 million. At December
31, 1999, the Company had total available borrowings of $530.8 million under
the Amended Bank Facility, of which $377.3 million was directly outstanding
and $4.8 million was reserved for the potential payment of an outstanding
letter of credit. Total available borrowings will reduce beginning March 31,
2000 and each quarter thereafter in accordance with the terms of the Amended
Bank Facility (see "Description of Certain Indebtedness and Capital
Stock-Amended Bank Facility"). The Company also had $73.1 million in cash and
cash equivalents.

         During the year ended December 31, 1999, total capital expenditures
were approximately $76.4 million, of which approximately (i) $30.3 million was
associated with the purchase of equipment previously under operating leases at
Sunset Station, (ii) $16.2 million was associated with the expansion project at
Texas Station, (iii) $22.3 million was for maintenance capital expenditures, and
(iv) $7.6 million was associated with various other projects.

         The Company's primary capital requirements during fiscal year 2000 are
expected to include (i) another expansion project at Texas Station, estimated to
cost approximately $55 million, (ii) equity contributions to the proposed Green
Valley Ranch project expected to be approximately $40 million, (iii) strategic
land purchases throughout the Las Vegas area, (iv) opportunistic repurchases of
the Company's Common Stock, (v) maintenance capital expenditures, and (vi)
principal and interest payments on indebtedness.

         The Company believes that cash flows from operations, borrowings under
the Amended Bank Facility, vendor and lease financing of equipment, and existing
cash balances will be adequate to satisfy the Company's anticipated uses of
capital during fiscal year 2000. The Company, however, continually is evaluating
its financing needs. If more attractive financing alternatives or expansion,
development or acquisition opportunities become available to the Company, the
Company may amend its financing plans assuming such financing would be permitted
under its existing debt agreements (See "Description of Certain Indebtedness and
Capital Stock") and other applicable agreements.

FUTURE DEVELOPMENT

         GREEN VALLEY PROJECT

         A 50/50 joint venture between the Company and GCR Gaming, LLC has
proposed to build a new resort/casino in Henderson, Nevada. Construction is
expected to commence during the third quarter of 2000 and is expected to be
completed in the fourth quarter of 2001. The estimated construction cost of this
project is $270 to $280 million. The project is expected to be funded with total
equity contributions from the partners of approximately $80 million and third
party financing for the remainder. If third party financing cannot be obtained
or is insufficient to fund the construction costs, the Company and GCR Gaming,
LLC would be obligated to contribute amounts necessary to finance the
construction and opening of the project.


                                       28

<PAGE>

         LAND ACQUISITION

         In addition to the Green Valley Project, the Company has purchased
or has options to purchase an additional 151 acres of land for two additional
gaming sites in the Las Vegas Valley which will be used for future
development. The Rhodes Ranch site consists of two parcels totaling 83 acres,
located at the intersection of Durango Road and the Southern Beltway/I-215
located in the southwest quadrant of Las Vegas. 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 has entered into an
option to purchase the adjacent 34-acre parcel. The Company paid $30.2
million for the land mentioned above and will make combined lease and option
payments of $1.6 million per year. The Company has no immediate plans to
develop these sites.

         The Company's capital requirements in 2000 could also include
amounts necessary to fund the proposed development of the project with the
United Auburn Indian Community to the extent development of such project is
commenced in 2000. In addition, the Company has in the past, and may in the
future, make acquisitions and enter into joint ventures on an opportunistic
basis. While the Company has not entered into any agreement with respect to
any such future acquisition or joint venture other than as disclosed in this
report, the Company's capital requirements in 2000 may include amounts
necessary to permit the Company to pursue such expansion activities.

YEAR 2000 READINESS

         The Company did not encounter any Year 2000 problems. The total cost to
the Company of making the Company's systems Year 2000 compliant was
approximately $3.0 million. The majority of this cost related to the acquisition
of new computer hardware to replace the systems which were not Year 2000
compliant and the purchase of new software to replace non-compliant software.
These costs were capitalized and will be depreciated over their expected useful
life. To the extent existing hardware or software was replaced, the Company
recognized a loss currently for the undepreciated balance. This loss is included
in the above cost.

LOW WATER LEVEL AT STATION CASINO ST. CHARLES

         During December 1998 and January 1999, the water level of the Missouri
River was well below normal. In addition, over time silt and debris flowing
downstream have built up under the gaming barges and other ancillary barges at
Station Casino St. Charles. These circumstances have caused a portion of these
barges, at times, to touch the river bottom. Because these barges have touched
the river bottom, the American Bureau of Shipping decertified the barges on
January 8, 1999. As a result of the decertification, the Missouri Gaming
Commission expressed concern regarding the effect of the low water level on the
barges. However, based upon improvement in the water level and the Company's
agreement to work with the American Bureau of Shipping to re-certify all of the
barges at a time when the river levels permit, the Missouri Gaming Commission
allowed the gaming facility to remain open. On November 11, 1999, the American
Bureau of Shipping recertified the barges. The Company continues to monitor the
situation very carefully and believes that the facility should remain in
operation. However, there can be no assurance that the Company's assessment will
not change or that the relevant authorities will continue to permit the
operation of the facility. A prolonged closure of the facility as a result of
the low water level would have a material adverse effect on the Company's
business, financial position and results of operations.

REGULATION AND TAXES

         The Company is subject to extensive regulation by the Nevada and
Missouri 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 it may
conduct gaming activities in the future. Changes in applicable laws or
regulations could have a significant impact on the Company's operations.
Pursuant to legislation enacted in 1996, a federal commission conducted a
two-year study of the gaming industry in the United States and reported its
findings and recommendations to Congress. To date there have been no changes to
existing laws or regulations as a result of this report.

         The gaming industry represents a significant source of tax revenues,
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. Proposals in recent years that have not been


                                       29

<PAGE>

enacted included a federal gaming tax and increases in state or local taxes,
however, we have no assurances that future proposals, including a recent
proposal in Nevada, will not be enacted. This recent proposal in Nevada would
increase the tax on gaming revenue from 6 1/4% to 11 1/4%. If enacted, this
proposal would have a material impact on the results of operations for the
Company.

         Management believes that the Company's 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 the Company's
operating results.

DESCRIPTION OF CERTAIN INDEBTEDNESS AND CAPITAL STOCK

         AMENDED BANK FACILITY

         In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new $200.0 million secured term
loan facility (the "Term Loan") (collectively, "the Amended Bank Facility"). The
Amended Bank Facility is secured by substantially all of the assets of Palace
Station, Boulder Station, Texas Station, Sunset Station, Station Casino St.
Charles and Station Casino Kansas City (the "Borrowers"). The proceeds from the
Term Loan were used to repay the Company's existing $75.0 million secured term
loan facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
matures on December 31, 2005 and amortizes in installments of $0.5 million on
each fiscal quarter end from March 31, 2000 until and including December 31,
2004 and of $47.5 million on each fiscal quarter end thereafter. The interest
rate on the Term Loan is 2.50% above the Eurodollar Rate. The Term Loan contains
financial covenants substantially identical to the covenants in the indentures
governing the Company's senior subordinated notes.

         The Revolving Facility provides for borrowings up to an aggregate
principal amount of $330.8 million at December 31, 1999. The Revolving Facility
matures on September 30, 2003. The availability under the Revolving Facility
will reduce by $14.0 million on March 31, 2001 and June 30, 2001; by $17.5
million on September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002
and September 30, 2002; and by $30.6 million on each fiscal quarter end
thereafter. 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 EBITDA
(each, as defined in the Revolving Facility). As of December 31, 1999, the
Borrower's margin above the Eurodollar Rate on borrowings under the Revolving
Facility was 1.63%. The maximum margin for Eurodollar Rate borrowings is 2.75%.
The maximum margin for Alternate Base Rate borrowings is 1.50%. As of December
31, 1999, the fee for the unfunded portion of the Revolving Facility was 40
basis points.

         The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of December
31, 1999, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.52
to 1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended December 31, 1999 was 2.55 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of December 31, 1999, Palace Station's tangible net worth exceeded
the requirement by approximately $9.3 million. These covenants limit Palace
Station's ability to make payments to the Company, a significant source of
anticipated cash for the Company.

         In addition, the Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 5.00 to 1.00 on December 31, 1999 and reducing quarterly to 4.00 to
1.00 on September 30, 2001. Other covenants limit prepayments of indebtedness or
rent (including, subordinated debt other than refinancings meeting certain
criteria), limitations on asset dispositions, limitation on dividends,
limitations on indebtedness, limitations on investments and limitations on
capital expenditures. The Revolving Facility also prohibits the Company from
holding excess cash and cash equivalents. As of December 31, 1999, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.93 to


                                       30

<PAGE>

1.00. The Company has pledged the stock of all of its subsidiaries except Kansas
City Station Corporation and St. Charles Riverfront Station, Inc. and has agreed
to pledge the stock of the latter two subsidiaries upon regulatory approval
(which is expected to be obtained).

         SENIOR SUBORDINATED NOTES

         The Company has $542.3 million, net of unamortized discount of $5.6
million, of senior subordinated notes outstanding as of December 31, 1999, $198
million of these notes bear interest, payable semi-annually, at a rate of 101/8%
per year, $150 million of these notes bear interest, payable semi-annually, at a
rate of 93/4% per year and $199.9 million of these notes bear interest, payable
semi-annually, at a rate of 87/8% per year (collectively the "Notes"). The
indentures governing the Notes (the "Indentures") contain certain customary
financial and other covenants which limit the Company and its subsidiaries'
ability to incur additional debt and to pay dividends. At December 31, 1999, the
Company's Consolidated Coverage Ratio (as defined) was 1.32 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. As a result, the covenant limits the Company's ability to
incur additional indebtedness for borrowings under the Amended Bank Facility not
to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined) for the four most recent quarters, plus $15 million. The limitation on
the incurrence of additional indebtedness and dividend restrictions in the
Indentures significantly restrict the Company's ability to pay dividends on its
capital stock. 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.

         SUNSET OPERATING LEASE

         The Company entered into an operating lease for furniture, fixtures and
equipment (the "Equipment") with a cost of up to $40.0 million, dated as of
September 25, 1996 (the "Sunset Operating Lease") with First Security Trust
Company of Nevada. A total of $35.7 million of this facility had been drawn. The
Company incurred approximately $2.0 million of rent expense per quarter related
to the Sunset Operating Lease. In October 1999, the Company exercised its option
to purchase the equipment for approximately $27.0 million. The purchase price
was funded with borrowings from the Company's Revolving Facility.

         COMMON STOCK

         The Company is authorized to issue up to 90,000,000 shares of its
common stock, $0.01 par value per share (the "Common Stock"), 42,455,999 shares
of which were issued and 778,329 shares were held in treasury as of December 31,
1999. 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 holders of the Company's preferred stock, each holder of Common Stock is
entitled to receive ratably such dividends as may be declared by the Board of
Directors out of funds legally available therefor as well as any distributions
to the stockholders 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.

         RIGHTS PLAN

         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.


                                       31

<PAGE>

         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.

         PREFERRED STOCK

         The Company is authorized to issue up to 5,000,000 shares of its
preferred stock, $0.01 par value per share (the "Preferred Stock"). As of June
14, 1999, the Company redeemed all 2,070,000 shares of its $3.50 Convertible
Preferred Stock in exchange for 6,741,632 shares of the Company's Common Stock.
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.

         TREASURY STOCK

         The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of December 31, 1999, the Company had purchased
0.8 million shares at a cost of $11.9 million.

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. The Company's primary exposure to market risk is interest rate
risk associated with its long-term debt. The Company attempts to limit its
exposure to interest rate risk by managing the mix of its long-term fixed-rate
borrowings and short-term borrowings under the Amended Bank Facility. Borrowings
under the Amended Bank Facility bear interest, at the Company's option, at a
specified premium over the prime rate or at a specified premium over the one-,
two-, three-, or six-month London Interbank Offered Rate ("LIBOR"). However, the
amount of outstanding borrowings is expected to fluctuate and may be reduced
from time to time. The Revolving Facility matures in September 2003 and the
Amended Bank Facility matures in December 2005.

         The following table provides information about the Company's long-term
debt at December 31, 1999 (see also "Description of Certain Indebtedness and
Capital Stock") (amounts in thousands):

<TABLE>
<CAPTION>

                                                                  Maturity                   Face        Carrying      Estimated
                                                                    Date                    Amount         Value      Fair Value
                                                            ----------------------      -----------      ---------    ----------
<S>                                                         <C>                         <C>              <C>          <C>
Revolving Facility at a weighted average
     interest rate of approximately 7.94%............       September 2003                 $177,300       $177,300      $177,300
Term Loan, interest at 8.69%.........................       December 2005                   200,000        200,000       200,000
8 7/8% senior subordinated notes.....................       December 2008                   199,900        199,900       192,863
9 3/4% senior subordinated notes.....................       April 2007                      150,000        145,326       150,405
10 1/8% senior subordinated notes....................       March 2006                      198,000        197,087       203,267
Other notes, interest ranging from 7.83% to 9.00%....       Various to June 2007             22,867         22,867        22,867
                                                                                        -----------      ---------     ---------
     Total                                                                                 $948,067       $942,480      $946,702
                                                                                        ===========      ========     ==========
</TABLE>


                                       32

<PAGE>

<TABLE>
<CAPTION>

ITEM 8.  FINANCIAL STATEMENTS

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                                                                                        PAGE
<S>                                                                                                                     <C>
Report of Independent Public Accountants............................................................................     34
Consolidated Balance Sheets.........................................................................................     35
Consolidated Statements of Operations...............................................................................     36
Consolidated Statements of Stockholders' Equity.....................................................................     37
Consolidated Statements of Cash Flows...............................................................................     38
Notes to Consolidated Financial Statements..........................................................................     39
</TABLE>


                                       33

<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

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

         We have audited the accompanying consolidated balance sheets of Station
Casinos, Inc. (a Nevada corporation) and subsidiaries as of December 31, 1999
and 1998, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year ended December 31, 1999, for the nine months
ended December 31, 1998 and for the year ended March 31, 1998. 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. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Station Casinos,
Inc. and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the year ended December 31, 1999, for the
nine months ended December 31, 1998 and for the year ended March 31, 1998, in
conformity with accounting principles generally accepted in the United States.

Arthur Andersen LLP

Las Vegas, Nevada
January 24, 2000


                                       34

<PAGE>

<TABLE>
<CAPTION>

                              STATION CASINOS, INC.
                           CONSOLIDATED BALANCE SHEETS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

                                                                                              DECEMBER 31,         DECEMBER 31,
                                                                                                 1999                  1998
                                                                                             -------------         -------------
                                     ASSETS
<S>                                                                                          <C>                   <C>
Current assets:
      Cash and cash equivalents .....................................................        $      73,072         $      59,040
      Cash - restricted for payment of long-term debt - defeased January 4, 1999  ...                    -               202,383
      Accounts and notes receivable, net ............................................               12,346                18,372
      Inventories ...................................................................                6,013                 5,466
      Prepaid gaming tax ............................................................               10,035                 8,908
      Prepaid expenses ..............................................................                8,219                 6,786
      Deferred income tax ...........................................................               10,519                 4,981
                                                                                             -------------         -------------
          Total current assets ......................................................              120,204               305,936

      Property and equipment, net ...................................................            1,025,753             1,147,890
      Land held for development .....................................................               18,839                17,009
      Deferred income tax, net ......................................................               21,823                     -
      Other assets, net .............................................................               89,654                61,090
                                                                                             =============         =============
          Total assets ..............................................................        $   1,276,273         $   1,531,925
                                                                                             =============         =============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
      Current portion of long-term debt .............................................        $       8,647         $      13,323
      Accounts payable ..............................................................               11,998                18,636
      Accrued payroll and related ...................................................               25,065                18,162
      Construction contracts payable ................................................                  750                10,399
      Accrued interest payable ......................................................               12,341                15,306
      Accrued progressives ..........................................................                8,877                 7,438
      Accrued expenses and other current liabilities ................................               50,011                34,672
                                                                                             -------------         -------------
          Total current liabilities .................................................              117,689               117,936

      Long-term debt, less current portion ..........................................              933,833               946,308
      9 5/8% Senior subordinated notes - defeased January 4, 1999 ...................                    -               187,635
      Other long-term liabilities, net ..............................................                7,950                10,640
                                                                                             -------------         -------------
          Total liabilities .........................................................            1,059,472             1,262,519
                                                                                             -------------         -------------

Commitments and contingencies (Note 6)

Stockholders' equity:
      Preferred stock, par value $.01; authorized 5,000,000 shares; 0 and
         2,070,000 convertible preferred shares issued and outstanding ..............                    -               103,500
      Common stock, par value $.01; authorized 90,000,000 shares;
         42,455,999 and 35,312,192 shares issued ....................................                  424                   353
      Treasury stock, 778,329 and 213,008 shares, at cost ...........................              (11,862)               (2,006)
      Additional paid-in capital ....................................................              282,294               168,867
      Deferred compensation - restricted stock ......................................               (7,432)                 (159)
      Accumulated  deficit ..........................................................              (45,907)               (1,149)
      Accumulated other comprehensive income ........................................                 (716)                    -
                                                                                             -------------         -------------
          Total stockholders' equity ................................................              216,801               269,406
                                                                                             -------------         -------------
          Total liabilities and stockholders' equity ................................        $   1,276,273         $   1,531,925
                                                                                             =============         =============
</TABLE>

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


                                       35

<PAGE>

                              STATION CASINOS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)

<TABLE>
<CAPTION>

                                                                     FOR THE YEAR            FOR THE NINE         FOR THE YEAR
                                                                        ENDED                MONTHS ENDED            ENDED
                                                                  DECEMBER 31, 1999       DECEMBER 31, 1998      MARCH 31, 1998
                                                                ---------------------   --------------------  --------------------
                                                                                            (SEE NOTE 1)
<S>                                                             <C>                     <C>                   <C>
Operating revenues:
      Casino ................................................       $      764,089        $      509,149        $      600,847
      Food and beverage .....................................              141,116               104,538               131,365
      Room ..................................................               42,870                30,040                37,330
      Other .................................................               62,286                47,663                53,494
                                                                    --------------        --------------        --------------
           Gross revenues ...................................            1,010,361               691,390               823,036
      Promotional allowances ................................              (67,892)              (49,176)              (53,426)
                                                                    --------------        --------------        --------------
           Net revenues .....................................              942,469               642,214               769,610
                                                                    --------------        --------------        --------------

Operating costs and expenses:
      Casino ................................................              356,365               249,353               291,102
      Food and beverage .....................................               88,898                66,121                89,928
      Room ..................................................               15,860                11,515                13,461
      Other .................................................               30,616                19,463                24,762
      Selling, general and administrative ...................              190,753               136,649               173,270
      Corporate expense .....................................               23,007                11,431                14,621
      Depreciation and amortization .........................               70,664                52,975                67,414
      Impairment loss .......................................              137,435                30,011                     -
      Preopening expenses ...................................                    -                     -                10,866
                                                                    --------------        --------------        --------------
                                                                           913,598               577,518               685,424
                                                                    --------------        --------------        --------------

Operating income ............................................               28,871                64,696                84,186
                                                                    --------------        --------------        --------------

Other income (expense):
      Interest expense, net .................................              (84,618)              (66,127)              (78,826)
      Interest expense - defeasance, net ....................                    -                  (835)                    -
      Abandoned acquisition costs ...........................               (2,409)                    -                     -
      Merger settlement, net of related legal costs .........               12,824                (2,943)                    -
      Write-off of costs to elect REIT status ...............                    -                     -                (2,914)
      Other .................................................               (1,891)               (4,655)               (6,566)
                                                                    --------------        --------------        --------------
                                                                           (76,094)              (74,560)              (88,306)
                                                                    --------------        --------------        --------------

Loss before income taxes and extraordinary item .............              (47,223)               (9,864)               (4,120)
Income tax benefit ..........................................               14,929                   871                   966
                                                                    --------------        --------------        --------------
Loss before extraordinary item ..............................              (32,294)               (8,993)               (3,154)

Extraordinary item - loss on early retirement of debt, net
    of applicable income tax benefit ........................              (10,653)               (3,104)               (2,042)
                                                                    --------------        --------------        --------------
Net loss ....................................................              (42,947)              (12,097)               (5,196)
Preferred stock dividends ...................................               (1,811)               (5,434)               (7,245)
                                                                    --------------        --------------        --------------
Net loss applicable to common stock .........................       $      (44,758)       $      (17,531)       $      (12,441)
                                                                    ==============        ==============        ==============
Weighted average common shares outstanding ..................           39,128,094            35,311,715            35,309,189
                                                                    ==============        ==============        ==============

Basic and diluted loss per common share:
   Loss applicable to common stock, before
           extraordinary item ...............................       $        (0.87)       $        (0.41)       $        (0.29)
   Extraordinary item .......................................       $        (0.27)       $        (0.09)       $        (0.06)
   Loss applicable to common stock ..........................       $        (1.14)       $        (0.50)       $        (0.35)
</TABLE>




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


                                       36

<PAGE>

                              STATION CASINOS, INC.
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                                                                       DEFERRED
                                                                                                   ADDITIONAL        COMPENSATION-
                                         PREFERRED           COMMON             TREASURY            PAID - IN          RESTRICTED
                                           STOCK              STOCK               STOCK              CAPITAL             STOCK
                                       ------------        ------------        ------------       -------------      -------------
<S>                                    <C>                 <C>                 <C>                <C>                <C>
Balances, March 31,1997 ...........    $    103,500        $        353        $       --         $     167,397      $      (1,225)
Exercise of stock options .........            --                  --                  --                    26                --
Cancellation of restricted
  stock ...........................            --                  --                  --                  (243)               243
Amortization of deferred
  compensation ....................            --                  --                  --                  --                  454
Preferred stock dividends .........            --                  --                  --                  --                  --
Net loss ..........................            --                  --                  --                  --                  --
                                       ------------        ------------        ------------        ------------      -------------
Balances, March 31, 1998 ..........         103,500                 353                --               167,180               (528)
Exercise of stock options .........            --                  --                  --                    36                --
Amortization of deferred
  compensation ....................            --                  --                  --                  --                  369
Preferred stock dividends .........            --                  --                  --                  --                  --
Purchase of treasury stock, at
  cost (213 shares) ...............            --                  --                (2,006)               --                  --
Other .............................            --                  --                  --                 1,651                --
Net loss ..........................            --                  --                  --                  --                  --
                                       ------------        ------------        ------------        ------------      -------------
Balances, December 31, 1998,
  (see Note 1) ....................         103,500                 353              (2,006)            168,867               (159)
Exercise of stock options .........            --                     1                --                   827                --
Issuance of restricted stock ......            --                     3                --                 7,510             (7,513)
Amortization of deferred
  compensation ....................            --                  --                  --                  --                  240
Preferred stock dividends..........            --                  --                  --                  --                  --
Preferred stock conversion ........        (103,500)                 67                --               103,746                --
Purchase of treasury stock, at
  cost (565 shares) ...............            --                  --                (9,856)               --                  --
Other .............................            --                  --                  --                 1,344                --
Asset held for sale market
  valuation adjustment ............            --                  --                  --                  --                  --
Net loss ..........................            --                  --                  --                  --                  --
                                       ------------        ------------        ------------        ------------      -------------
Balances, December 31, 1999 .......    $       --          $        424        $    (11,862)       $    282,294      $      (7,432)
                                       ============        ============        ============        ============      =============

<CAPTION>

                                           RETAINED         ACCUMULATED
                                           EARNINGS             OTHER               TOTAL
                                       (ACCUMULATED        COMPREHENSIVE       STOCKHOLDERS'
                                          DEFICIT)             INCOME              EQUITY
                                        ------------        ------------        ------------
<S>                                    <C>                 <C>                 <C>
Balances, March 31,1997 ...........    $     28,823        $        --          $    298,848
Exercise of stock options .........             --                  --                    26
Cancellation of restricted
  stock ...........................             --                  --                  --
Amortization of deferred
  compensation ....................             --                  --                   454
Preferred stock dividends .........           (7,245)               --                (7,245)
Net loss ..........................           (5,196)               --                (5,196)
                                        ------------        ------------        ------------
Balances, March 31, 1998 ..........           16,382                --               286,887
Exercise of stock options .........             --                  --                    36
Amortization of deferred
  compensation ....................             --                  --                   369
Preferred stock dividends .........           (5,434)               --                (5,434)
Purchase of treasury stock, at
  cost (213 shares) ...............             --                  --                (2,006)
Other .............................             --                  --                 1,651
Net loss ..........................          (12,097)               --               (12,097)
                                        ------------        ------------        ------------
Balances, December 31, 1998,
  (see Note 1) ....................           (1,149)               --               269,406
Exercise of stock options .........             --                  --                   828
Issuance of restricted stock ......             --                  --                  --
Amortization of deferred
  compensation ....................             --                  --                   240
Preferred stock dividends..........           (1,811)               --                (1,811)
Preferred stock conversion ........             --                  --                   313
Purchase of treasury stock, at
  cost (565 shares) ...............             --                  --                (9,856)
Other .............................             --                  --                 1,344
Asset held for sale market
  valuation adjustment ............             --                  (716)               (716)
Net loss ..........................          (42,947)               --               (42,947)
                                        ------------        ------------        ------------
Balances, December 31, 1999 .......     $    (45,907)       $       (716)       $    216,801
                                        ============        ============        ============
</TABLE>

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


                                       37

<PAGE>

                              STATION CASINOS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                             (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                          FOR THE YEAR          FOR THE NINE         FOR THE YEAR
                                                                              ENDED             MONTHS ENDED            ENDED
                                                                        DECEMBER 31, 1999     DECEMBER 31, 1998     MARCH 31,1998
                                                                       -------------------   -------------------   ---------------
                                                                                                (SEE NOTE 1)
<S>                                                                    <C>                   <C>                   <C>
Cash flows from operating activities:
Net loss ...........................................................      $      (42,947)      $      (12,097)      $       (5,196)
                                                                          --------------       --------------       --------------
Adjustments to reconcile net loss to net cash provided by
 operating activities:
    Depreciation and amortization ..................................              70,664               52,975               67,414
    Amortization of debt discount and issuance costs ...............               2,659                4,254                6,443
    Loss on early retirement of debt ...............................              16,389                4,775                2,668
    Merger and related legal costs .................................                   -                2,943                    -
    Impairment loss ................................................             137,435               30,011                    -
    Write-off of costs to elect REIT status ........................                   -                    -                2,914
    Preopening expenses ............................................                   -                    -               10,866
    (Decrease) increase in deferred income tax .....................             (32,733)              (6,410)               2,854
    Changes in assets and liabilities:
      Decrease (increase) in accounts and notes receivable, net ....               6,026               (5,598)              (4,845)
      Increase in inventories and prepaid expenses and other .......              (3,113)              (2,839)              (3,228)
      (Decrease) increase in accounts payable ......................              (6,893)               2,138               (4,608)
      Increase in accrued expenses and other current liabilities ...              25,170                9,531               23,160
    Other, net .....................................................                 401               (2,991)               6,513
                                                                          --------------       --------------       --------------
              Total adjustments ....................................             216,005               88,789              110,151
                                                                          --------------       --------------       --------------
              Net cash provided by operating activities ............             173,058               76,692              104,955
                                                                          --------------       --------------       --------------
Cash flows from investing activities:
    Capital expenditures ...........................................             (76,344)             (96,482)            (130,853)
    Proceeds from sale of property and equipment ...................               5,025                5,998                4,925
    Assets held for sale ...........................................             (37,468)                   -                    -
    Decrease in construction contracts payable .....................              (9,649)                (135)             (84,301)
    Preopening expenses ............................................                   -                    -               (8,551)
    Other, net .....................................................             (13,217)              (3,152)                (627)
                                                                          --------------       --------------       --------------
              Net cash used in investing activities ................            (131,653)             (93,771)            (219,407)
                                                                          --------------       --------------       --------------
Cash flows from financing activities:
    (Payments) borrowings under bank facility, net .................              (1,700)              55,000               47,000
    Payments under the Sunset loan agreement .......................                   -                    -              (46,000)
    Proceeds from notes payable ....................................                   -                    -               16,239
    Principal payments on notes payable ............................             (16,004)             (11,780)             (27,030)
    Proceeds from the issuance of senior subordinated notes ........                   -              199,900              144,287
    Defeasance of 9 5/8% senior subordinated notes .................            (201,670)                   -                    -
    Purchase of treasury stock .....................................              (9,856)              (2,006)                   -
    Dividends paid on preferred stock ..............................              (1,811)              (5,434)              (7,245)
    Exercise of stock options ......................................                 828                   36                   26
    Debt issuance costs and other, net .............................                 457               (7,372)              (5,189)
                                                                          --------------       --------------       --------------
              Net cash (used in) provided by financing activities ..            (229,756)             228,344              122,088
                                                                          --------------       --------------       --------------
Cash and cash equivalents:
    (Decrease) increase in cash and cash equivalents ...............            (188,351)             211,265                7,636
    Balance, beginning of year .....................................             261,423               50,158               42,522
                                                                          --------------       --------------       --------------
    Balance, end of year ...........................................      $       73,072       $      261,423       $       50,158
                                                                          ==============       ==============       ==============
Supplemental cash flow disclosures:
    Cash paid for interest, net of amounts capitalized .............      $       85,176       $       65,275       $       66,691
    Cash paid for income taxes, net ................................      $       15,202       $          519       $           92
    Property and equipment purchases financed by debt ..............      $           35       $        2,978       $        3,532
    Preferred stock converted to common stock and additional
      paid-in capital ..............................................      $      100,131       $            -       $            -
    Market valuation adjustment for asset held for sale ............      $          716       $            -       $            -
</TABLE>


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


                                       38

<PAGE>

                              STATION CASINOS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

         BASIS OF PRESENTATION AND ORGANIZATION

         Station Casinos, Inc. (the "Company"), a Nevada Corporation, is an
established multi-jurisdictional gaming and entertainment enterprise that
currently owns and operates four major hotel/casino properties and two smaller
casino properties in Las Vegas, Nevada, and gaming and entertainment complexes
in St. Charles and Kansas City, Missouri. The Company also owns and provides
slot route management services in southern Nevada.

         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, Inc. ("Texas Station"), Sunset Station, Inc. ("Sunset Station"), St.
Charles Riverfront Station, Inc. ("Station Casino St. Charles"), Kansas City
Station Corporation ("Station Casino Kansas City"), Southwest Gaming Services,
Inc. ("SGSI") and Tropicana Station, Inc., the operator of the Wild Wild West
Gambling Hall & Hotel ("Wild Wild West"), which opened in July 1998. The Company
also owns a 50% interest in Town Center Amusements, Inc. d.b.a. Barley's Casino
& Brewing Company ("Barley's"). All significant intercompany accounts and
transactions have been eliminated.

         CHANGE IN FISCAL YEAR

         On November 6, 1998, the Company filed a Form 8-K announcing its change
in fiscal year end from March 31 of each year to December 31 of each year. This
change is effective for the nine month period ended December 31, 1998 (the
"Transition Period 1998"). Selected consolidated financial data for the twelve
months ended December 31, 1998 is presented below, for comparison purposes only
(amounts in thousands, unaudited).

<TABLE>

<S>                                                                                          <C>
                          Net revenues..................................................     $     847,015
                          Operating income..............................................            92,380
                          Loss before income taxes and extraordinary item...............           (10,092)
                          Income tax benefit............................................               453
                          Extraordinary item, net of applicable income tax benefit......            (5,146)
                          Net loss......................................................           (14,785)
                          Net loss applicable to common stock...........................           (22,030)
                          Loss per common share applicable to common stock..............             (0.62)
</TABLE>

         USE OF ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions 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

         Cash and cash equivalents include investments purchased with an
original maturity of 90 days or less.

         INVENTORIES

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


                                       39

<PAGE>

                              STATION CASINOS, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         PROPERTY AND EQUIPMENT

         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.

         CAPITALIZATION OF INTEREST

         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 for the fiscal
year ended December 31, 1999 was approximately $0.4 million, for the Transition
Period 1998 was approximately $1.2 million and for the fiscal year ended March
31, 1998 was approximately $12.8 million.

         DEBT ISSUANCE COSTS

         Debt issuance costs incurred in connection with the issuance of
long-term debt are capitalized and amortized to interest expense over the terms
of the related debt agreements.

         PREOPENING EXPENSES

         During the construction of and prior to the opening of a facility, all
operating expenses, including incremental salaries and wages directly related
thereto, were capitalized as preopening expenses. The construction phase
typically covers a period of 12 to 24 months. The majority of preopening costs
are incurred in the three months prior to opening. The Company expensed
preopening expenses immediately upon the opening of the related facility. During
the fiscal year ended March 31, 1998, the Company incurred preopening expenses
of $10.9 million, substantially related to the opening of Sunset Station. During
the fiscal year ended December 31, 1999 and the Transition Period 1998, the
Company had no preopening expenses. Effective January 1, 1999, Statement of
Position 98-5, "Reporting on the Costs of Start-up Activities", changed the
manner in which the Company accounts for preopening expenses. Preopening
expenses incurred after January 1, 1999 will be expensed as incurred.

         REVENUES AND PROMOTIONAL ALLOWANCES

         In accordance with industry practice, 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 accommodations and food and
beverage provided on a complimentary basis to customers. The estimated
departmental costs of providing such promotional allowances are included in
casino costs and expenses and consist of the following (amounts in thousands):

<TABLE>
<CAPTION>

                                                                                   FOR THE                              FOR THE
                                                                                 YEAR ENDED        TRANSITION         YEAR ENDED
                                                                               DECEMBER 31,           PERIOD           MARCH 31,
                                                                                    1999               1998               1998
                                                                              ----------------   ---------------    --------------
<S>                                                                           <C>                <C>                <C>
       Food and beverage...............................................         $      51,916    $        38,816    $       40,573
       Room............................................................                 2,527              1,877             3,027
       Other...........................................................                 3,106              1,932             2,828
                                                                              ---------------    ---------------    --------------
         Total.........................................................       $        57,549    $        42,625    $       46,428
                                                                              ===============    ===============    ==============
</TABLE>


                                       40

<PAGE>

         EARNINGS (LOSS) APPLICABLE TO COMMON STOCK

         In the fiscal year ended March 31, 1998, the Company adopted Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share." This
statement replaces previously reported earnings per share ("EPS") with basic EPS
and diluted EPS. Basic EPS is computed by dividing net income (loss) 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 and convertible preferred stock.
Diluted EPS is not presented separately because the exercise of stock options
and the conversion of the convertible preferred stock does not have a dilutive
effect on the per share amounts.

         RECENTLY ISSUED ACCOUNTING STANDARDS

         In June 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 130, "Reporting Comprehensive Income." SFAS No. 130 requires companies
to classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings, and is effective for financial statements
issued for fiscal years beginning after December 15, 1997. The Company has
adopted SFAS No. 130 as reflected in the accompanying consolidated financial
statements.

         In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes additional
standards for segment reporting in financial statements and is effective for
fiscal years beginning after December 15, 1997. The Company currently operates
in only one segment.

         RECLASSIFICATIONS

         Certain amounts in the Transition Period 1998 and the March 31, 1998
consolidated financial statements have been reclassified to conform to the
December 31, 1999 presentation. These reclassifications had no effect on the
Company's net loss.

2.  ACCOUNTS AND NOTES RECEIVABLE

         Components of accounts and notes receivable are as follows (amounts in
thousands):

<TABLE>
<CAPTION>

                                                                                                  DECEMBER 31,
                                                                                      ----------------------------------
                                                                                           1999                 1998
                                                                                      ---------------       ------------
<S>                                                                                   <C>                   <C>
         Casino.................................................................      $      7,496          $      6,238
         Hotel..................................................................             2,546                 1,743
         Insurance Proceeds (see Note 3)........................................                 -                 7,239
         Other..................................................................             5,263                 5,187
                                                                                      ------------          ------------
                                                                                            15,305                20,407
         Allowance for doubtful accounts........................................            (2,959)               (2,035)
                                                                                      -------------         -------------
              Accounts and notes receivable, net................................      $     12,346          $     18,372
                                                                                      =============         =============
</TABLE>


                                       41

<PAGE>

3.  PROPERTY AND EQUIPMENT

         Property and equipment consists of the following as of December 31,
1999 and 1998 (amounts in thousands):

<TABLE>
<CAPTION>

                                                                                                        DECEMBER 31,
                                                                                             ---------------------------------
                                                                ESTIMATED LIFE (YEARS)            1999               1998
                                                                ----------------------       ---------------   ---------------
<S>                                                             <C>                          <C>               <C>
         Land ................................................               -               $       36,737    $        37,864
         Land leases acquired.................................             48-52                      4,995              4,685
         Buildings and leasehold improvements.................             31-45                    765,042            728,642
         Boats and barges.....................................             20-45                     67,009            100,086
         Furniture, fixtures and equipment....................              3-7                     284,167            251,681
         Construction in progress.............................               -                      119,353            224,572
                                                                                             ---------------   ---------------
                                                                                                  1,277,303          1,347,530
         Accumulated depreciation and amortization............                                     (251,550)         (199,640)
                                                                                             ---------------   ---------------
              Property and equipment, net.....................                               $    1,025,753    $     1,147,890
                                                                                             ===============   ===============
</TABLE>

         At December 31, 1999 and 1998, substantially all property and equipment
of the Company is pledged as collateral for long-term debt.

         CONSTRUCTION IN PROGRESS

         In the fall of 1996, the Company commenced an expansion project at
Station Casino St. Charles which included the building of a backwater basin
containing two new gaming vessels and a new retail and entertainment complex.
Since December 31, 1997, construction on the Station Casino St. Charles
expansion project has been halted. Included in construction in progress at
December 31, 1999 is approximately $101.0 million related to the Station Casino
St. Charles expansion project (see Asset Impairment discussion below).

         ASSET IMPAIRMENT

         In accordance with SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Company
recorded an impairment loss of $137.4 million in the fiscal year ended December
31, 1999 and $30.0 million in the Transition Period 1998 to adjust the carrying
value of its fixed assets and land held for development to their estimated fair
value. In the fiscal year ended December 31, 1999, approximately $125.2 million
of the impairment loss was related to Station Casino St. Charles. In the fourth
quarter of 1999, the Company made a decision to reconfigure the existing Station
Casino St. Charles facility to a more efficient layout in response to the new
open boarding rules promulgated by the Missouri Gaming Commission that began in
September 1999 in the St. Louis market. All gaming operations will be moved to
the existing barge by the end of the first quarter of 2000. The existing
riverboat is expected to be sold after the reconfiguration is complete. In
accordance with SFAS No. 121, the riverboat and miscellaneous other fixed assets
were written down by approximately $15 million to their net realizable value.

         In addition, the Company performed an evaluation of the carrying values
of the remaining assets in St. Charles and determined a $110 million write-down
of the asset values was necessary. The write-down was deemed appropriate after a
review of the property's asset valuations relative to the Company's near-term
investment objectives. The balance of the impairment loss in the fiscal year
ended December 31, 1999, resulted primarily from the Company's determination
that it will sell a 40-acre parcel of land in Henderson, Nevada, that it
recently acquired. Future development of the property will be limited to
non-gaming purposes. The resulting write-down of the parcel was necessary to
reflect the value of the land as a non-gaming site.

         In the Transition Period 1998, the impairment loss principally involves
assets at the Station Casino St. Charles facility, including a riverboat
formerly used in the Missouri operations, capitalized project costs associated
with various parcels of land determined to have no value, and several parcels of
land within close proximity to the St. Charles, Missouri site that were being
held for future development. The fair value of the impaired assets was primarily
determined through the market's interest in riverboats and barges, and on the
comparable sales prices on parcels of land in the St. Charles area.


                                       42

<PAGE>

The total amount of the impairment loss in the Transition Period 1998 related to
this category of assets was approximately $23.4 million. In addition to the
assets described above, the most significant portion of the remaining impairment
loss in the Transition Period 1998 relates to several parcels of land in Nevada
and Texas that the Company had acquired in the past for either defensive or
expansion purposes. The value of these parcels was determined based on sales
prices for comparable parcels of land on the market. The following two
circumstances led to the Company's decision to write-down these assets to their
fair market value: (1) the passage, in Nevada, of legislation which places
significantly higher requirements on land to be zoned for gaming purposes, and
(2) the termination of the Plan of Merger with Crescent Real Estate Equities
Company (see Note 11).

         Included in other assets, net on the accompanying consolidated balance
sheet as of December 31, 1999, is $26.1 million related primarily to parcels of
land. The Company is actively attempting to dispose of these non-strategic
assets and expects to complete the sale of certain of these assets in the first
half of calendar year 2000.

         PALACE STATION FIRE AND FLOOD

         On July 20, 1998, Palace Station suffered damage to its casino and
hotel tower as a result of a thunderstorm in the Las Vegas Valley. In November
1998, repairs were completed to the casino and all of the rooms in the 21-story
hotel tower became fully functional. Losses associated with the property damage
and business interruption were covered under the Company's insurance policies.
As of December 31, 1998, the Company had recorded $6.8 million in other revenues
in the Consolidated Statements of Operations for the Transition Period 1998
related to the business interruption claim. During the quarter ended March 31,
1999, the Company received its final payment from its insurance company on these
claims.

4.  LAND HELD FOR DEVELOPMENT

         The Company has acquired several parcels of land in various
jurisdictions as part of the Company's development activities. The Company's
decision on whether to proceed with any new gaming 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 the Company will be
able to obtain appropriate licensing or be able to secure additional, acceptable
financing in order to proceed with any particular project. Included in land held
for development at December 31, 1999 and 1998 is approximately $18.8 million and
$17.0 million, respectively, related to land which had been acquired for
potential gaming projects in jurisdictions where gaming has been approved. In
June 1997, $5.0 million of certain expired option payments to lease or acquire
land for future development, which had previously been capitalized, were
expensed in other expense on the accompanying Consolidated Statements of
Operations.


                                       43

<PAGE>

5.  LONG-TERM DEBT

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

<TABLE>
<CAPTION>

                                                                                                           DECEMBER 31,
                                                                                                ----------------------------------
                                                                                                      1999              1998
                                                                                                ---------------    ---------------
<S>                                                                                             <C>                 <C>
Amended and restated reducing revolving credit facility, $330.8 million limit at
   December 31, 1999, due September 30, 2003, interest at a margin above the
   bank's prime rate or the Eurodollar Rate (7.94% at December 31, 1999) ...................    $    177,300        $    304,000
Secured term loan facility, $200.0 million limit at December 31, 1999, due
    December 31, 2005, interest at 2.50% above the Eurodollar Rate (8.69% at
    December 31, 1999) .....................................................................         200,000              75,000
8 7/8% senior subordinated notes, interest payable semi-annually, principal due
    December 1, 2008 .......................................................................         199,900             199,900
9 3/4% senior subordinated notes, interest payable semi-annually, principal due April 15,
   2007, net of unamortized discount of $4.7 million at December 31, 1999 ..................         145,326             144,914
10 1/8% senior subordinated notes, interest payable semi-annually, principal due March 15,
   2006, net of unamortized discount of $0.9 million at December 31, 1999 ..................         197,087             196,981
Other long-term debt, collateralized by various assets, including slot machines, furniture
   and equipment, and land, monthly installments including interest ranging from 7.83% to
   9.00% at December 31, 1999 ..............................................................          22,867              38,836
                                                                                                ------------        ------------
        Total long-term debt ...............................................................         942,480             959,631
Current portion of long-term debt ..........................................................          (8,647)            (13,323)
                                                                                                ------------        ------------
        Total long-term debt, less current portion .........................................         933,833             946,308


9 5/8% senior subordinated notes, net of unamortized discount of $5.4 million at
   December 31, 1998, defeased January 4, 1999 .............................................               -             187,635
                                                                                                ------------        ------------
        Total ..............................................................................    $    933,833        $  1,133,943
                                                                                                ============        ============
</TABLE>

         In December 1998, the Company completed an offering of $199.9
million of senior subordinated notes due in December 2008, that have equal
priority with the Company's other senior subordinated notes. The $199.9
million senior subordinated notes bear interest payable semi-annually, at a
rate of 8 7/8% per year (the "8 7/8% Notes"). At December 31, 1998, the
Company had deposited the net proceeds from the sale of the 8 7/8% Notes and
a portion of the funds borrowed under the Amended Bank Facility in a separate
trust account with the trustee under the indenture relating to the 9 5/8%
senior subordinated notes (the "9 5/8% Notes") to redeem and to pay accrued
interest and redemption premiums related to the 9 5/8% Notes on the
redemption date. The redemption occurred on January 4, 1999. The Company
recorded an extraordinary charge of $10.4 million (net of applicable tax
benefit) to reflect the write-off of the unamortized debt discount,
unamortized loan costs and the premium to redeem the 9 5/8% Notes.

         In April 1997, the Company completed an offering of $150 million of
senior subordinated notes due in April 2007, that have equal priority with
the other senior subordinated notes. The $150 million senior subordinated
notes have a coupon rate of 9 3/4% and were priced to yield 10.37% to
maturity. The discount on the $150 million senior subordinated notes has been
recorded as a reduction to long-term debt in the accompanying consolidated
balance sheets.

         In March 1996, the Company completed an offering of $198 million of
senior subordinated notes due in March 2006, that have equal priority with
the other senior subordinated notes. The $198 million senior subordinated
notes have a coupon rate of 10 1/8% and were priced to yield 10.24% to
maturity. The discount on the $198 million senior subordinated notes has been
recorded as a reduction to long-term debt in the accompanying consolidated
balance sheets.

         The indentures governing the Company's senior subordinated notes (the
"Indentures") contain certain customary financial and other covenants which
limit the Company and its subsidiaries' ability to incur additional debt and to
pay dividends. At December 31, 1999, the Company's Consolidated Coverage Ratio
(as defined in the Indentures) was 1.32 to 1.00. The


                                       44

<PAGE>

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. As a result, the covenant limits the Company's ability to
incur additional indebtedness for borrowings under the Amended Bank Facility not
to exceed the greater of $200 million or 1.5 times Operating Cash Flow (as
defined) for the four most recent quarters, plus $15 million. The limitation on
the incurrence of additional indebtedness and dividend restrictions in the
Indentures significantly restrict the Company's ability to pay dividends on its
capital stock. 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.

         In August 1999, the Company amended its existing bank credit facility
(the "Revolving Facility") and entered into a new $200.0 million secured term
loan facility (the "Term Loan") (collectively, "the Amended Bank Facility"). The
Amended Bank Facility is secured by substantially all of the assets of Palace
Station, Boulder Station, Texas Station, Sunset Station, Station Casino St.
Charles and Station Casino Kansas City (the "Borrowers"). The proceeds from the
Term Loan were used to repay the Company's existing $75.0 million secured term
loan facility and to reduce outstanding borrowings under the Company's Revolving
Facility. The Company recorded an extraordinary charge of $0.3 million (net of
applicable tax benefit) to reflect the write-off of the unamortized loan costs
on the refinanced $75.0 million secured term loan facility. The Term Loan
matures on December 31, 2005 and amortizes in installments of $0.5 million on
each fiscal quarter end from March 31, 2000 until and including December 31,
2004 and of $47.5 million on each fiscal quarter end thereafter. The interest
rate on the Term Loan is 2.50% above the Eurodollar Rate. The Term Loan contains
financial covenants substantially identical to the covenants in the indentures
governing the Company's senior subordinated notes.

         The Revolving Facility provides for borrowings up to an aggregate
principal amount of $330.8 million at December 31, 1999. The Revolving Facility
matures on September 30, 2003. The availability under the Revolving Facility
will reduce by $14.0 million on March 31, 2001 and June 30, 2001; by $17.5
million on September 30, 2001, December 31, 2001, March 31, 2002, June 30, 2002
and September 30, 2002; and by $30.6 million on each fiscal quarter end
thereafter. 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 EBITDA
(each, as defined in the Revolving Facility). As of December 31, 1999, the
Borrower's margin above the Eurodollar Rate on borrowings under the Revolving
Facility was 1.63%. The maximum margin for Eurodollar Rate borrowings is 2.75%.
The maximum margin for Alternate Base Rate borrowings is 1.50%. As of December
31, 1999, the fee for the unfunded portion of the Revolving Facility was 40
basis points.

         The Revolving Facility contains certain financial and other covenants.
These include a maximum funded debt to Adjusted EBITDA ratio for the Borrowers
combined of 2.50 to 1.00 for each fiscal quarter, a minimum fixed charge
coverage ratio for the preceding four quarters for the Borrowers combined of
1.50 to 1.00 for each fiscal quarter, limitations on indebtedness, limitations
on asset dispositions, limitations on investments, limitations on prepayments of
indebtedness and rent and limitations on capital expenditures. As of December
31, 1999, the Borrowers combined funded debt to Adjusted EBITDA ratio was 1.52
to 1.00 and their combined fixed charge coverage ratio for the preceding four
quarters ended December 31, 1999 was 2.55 to 1.00. A tranche of the Revolving
Facility contains a minimum tangible net worth requirement for Palace Station
and certain restrictions on distributions of cash from Palace Station to the
Company. As of December 31, 1999, Palace Station's tangible net worth exceeded
the requirement by approximately $9.3 million. These covenants limit Palace
Station's ability to make payments to the Company, a significant source of
anticipated cash for the Company.

         In addition, the Revolving Facility has financial and other covenants
relating to the Company. These include a tangible net worth covenant and a
covenant limiting the consolidated funded debt to Adjusted EBITDA ratio to no
more than 5.00 to 1.00 on December 31, 1999 and reducing quarterly to 4.00 to
1.00 on September 30, 2001. Other covenants limit prepayments of indebtedness or
rent (including, subordinated debt other than refinancings meeting certain
criteria), limitations on asset dispositions, limitation on dividends,
limitations on indebtedness, limitations on investments and limitations on
capital expenditures. The Revolving Facility also prohibits the Company from
holding excess cash and cash equivalents. As of December 31, 1999, the Company's
consolidated funded debt to Adjusted EBITDA ratio was 3.93 to 1.00. The Company
has pledged the stock of all of its subsidiaries except Kansas City Station
Corporation and St. Charles Riverfront Station, Inc. and has agreed to pledge
the stock of the latter two subsidiaries upon regulatory approval (which is


                                       45

<PAGE>

expected to be obtained).

         On September 25, 1996, Sunset Station, a wholly-owned subsidiary of the
Company, entered into a Construction/Term Loan Agreement (the "Sunset Loan
Agreement") with a group of lenders, pursuant to which Sunset Station received a
commitment for $110 million to finance the remaining development and
construction costs of Sunset Station. The Company also entered into an operating
lease for certain furniture, fixtures and equipment with a cost of up to $40
million to be subleased to Sunset Station as part of the Sunset Station project
(see Note 6).

         The Sunset Loan Agreement included a first mortgage term note in the
amount of $110 million (the "Sunset Note") which was non-recourse to the
Company, except as to certain construction matters pursuant to a completion
guarantee dated as of September 25, 1996, executed by the Company on behalf of
Sunset Station and except that the Company had pledged all of the stock of
Sunset Station as security for the Sunset Loan Agreement. As of March 31, 1998,
the Sunset Note had been repaid. The early retirement resulted in an
extraordinary loss of $2.0 million, net of the applicable income tax benefit.

         In order to manage the interest rate risk associated with the Sunset
Note, Sunset Station entered into an interest rate swap agreement. This
agreement swapped the variable rate interest pursuant to the Sunset Note to a
fixed rate of 9.58% (5.83% fixed plus the Sunset Note margin), on $35 million
notional amount as of January 1997 increasing to $60 million at March 1997, $90
million at June 1997, $100 million at September 1997 and then decreasing to $95
million at June 1998. The agreement expired in December 1998. The difference
paid or received pursuant to the swap agreement was accrued as interest rates
changed and recognized as an adjustment to interest expense on the Sunset Note.
At the time of the early retirement of the Sunset Note, the Borrowers under the
Bank Facility accepted the interest rate swap on substantially identical terms
to those of the Sunset Note.

         The estimated fair value of the Company's long-term debt at December
31, 1999, was approximately $946.7 million, compared to its book value of
approximately $942.5 million. The estimated fair value amounts were based on
quoted market prices on or about December 31, 1999, for the Company's debt
securities that are publicly traded. For the Amended Bank Facility, the fair
value approximates the carrying amount of the debt due to the short-term
maturities of the individual components of the debt.

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

<TABLE>
<CAPTION>

         YEAR ENDING DECEMBER 31,
         ------------------------
<S>                                                                        <C>
         2000 .......................................................      $    8,647
         2001 .......................................................           9,920
         2002 .......................................................           1,052
         2003 .......................................................         188,210
         2004 .......................................................           2,130
         Thereafter .................................................         732,521
                                                                           ----------
         Total ......................................................      $  942,480
                                                                           ==========
</TABLE>

6.  COMMITMENTS AND CONTINGENCIES

         BOULDER STATION LEASE

         The Company entered into a ground lease for 27 acres of land on which
Boulder Station is located. The Company leases this land from a trust pursuant
to a long-term ground lease. The trustee of this trust is Bank of America NT&SA,
the beneficiary of which is KB Enterprises, an affiliated 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. The lease has a maximum term of 65 years, ending in June 2058. The
lease provides for monthly payments of $135,525 through June 2008. In July 2008,
and every ten years thereafter, the rent will be adjusted by a cost of living
factor. In July 2003, 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


                                       46

<PAGE>

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 intervals beginning in June 1998, to purchase the land at fair market
value. The Company did not exercise its June 1998 option. The Company's
leasehold interest in the property is subject to a lien to secure borrowings
under the Amended Bank Facility.

         TEXAS STATION LEASE

         The Company entered into a ground lease for 47 acres of land on which
Texas Station is located. The Company leases this land from a trust pursuant to
a long-term ground lease. The trustee of this trust is Bank of America NT&SA,
the beneficiary of which is Texas Gambling Hall & Hotel, Inc. an affiliate
company of the Related Lessor. The lease has a maximum term of 65 years, ending
in July 2060. The lease provides for monthly rental payments of $150,000 through
June 2000. In July 2000, 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. The rent will be further
adjusted by a cost of living factor after the first ten years and every ten
years thereafter. 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 beginning in May 2000, 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 Amended Bank Facility.

         SUNSET STATION LEASE

         In June 1994, the Company entered into a lease agreement for
approximately 48 acres of land on which Sunset Station is located. The lease
has a term of 65 years with monthly rental payments of $120,000, adjusted on
each subsequent five-year anniversary by a cost of living factor. In June
2001, the Company has an option to purchase this land for $23.8 million.
Additionally, in June 2001, the lessor has an option to sell this land to the
Company for $21.8 million.

         STATION CASINO KANSAS CITY LEASE

         The Company has entered into a joint venture which owns the land on
which Station Casino Kansas City is located. At December 31, 1999, $3.0 million
related to this investment is included in other assets, net in the accompanying
consolidated balance sheets.

         In April 1994, Station Casino Kansas City entered into an agreement
with the joint venture to lease this land. Currently, the agreement requires
monthly payments of $93,636. Commencing April 1, 1998 and every anniversary
thereafter, the rent shall be adjusted by a cost of living factor of not more
than 5% or less than 2% per annum. The lease expires March 31, 2006, with an
option to extend the lease for up to eight renewal periods of ten years each,
plus one additional seven year period.  In connection with the joint venture
agreement, the Company received an option providing for the right to acquire
the joint venture partner's interest in this joint venture. The Company has
the option to acquire this interest at any time after April 1, 2002 through
April 1, 2011, for $11.7 million, however, commencing April 1, 1998, the
purchase price will be adjusted by a cost of living factor of not more than
5% or less than 2% per annum. At December 31, 1999, $2.6 million paid by the
Company in consideration for this option is included in other assets, net in
the accompanying consolidated balance sheets. The Company's leasehold
interest in the property is subject to a lien to secure borrowings under the
Amended Bank Facility.

         UNITED AUBURN INDIAN COMMUNITY

         On October 12, 1999, the Company announced that it has entered into a
Development Services Agreement and a Management Agreement with the United Auburn
Indian Community (the "UAIC"). Subject to the receipt of certain governmental
approvals, as well as voter approval of a proposed amendment to the California
constitution, the Company and the UAIC intends to develop a gaming and
entertainment facility on 49 acres, approximately seven miles north of
Interstate 80, in Placer County, California, near Sacramento. The scope and the
timing of this project has yet to be determined.


                                       47

<PAGE>

         EQUIPMENT LEASE

         In connection with the Sunset Loan Agreement, the Company entered into
an operating lease for furniture, fixtures and equipment (the "Equipment") with
a cost of up to $40 million, dated as of September 25, 1996, (the "Sunset
Operating Lease") with First Security Trust Company of Nevada. A total of $35.7
million of this facility had been drawn. The Company incurred approximately $2.0
million of rent expense per quarter related to the Sunset Operating Lease. In
October 1999, the Company exercised its option to purchase the equipment for
approximately $27.0 million. The purchase price was funded with borrowings from
the Company's Revolving Facility.

         OPERATING LEASES

         The Company leases several parcels of land and equipment used in its
operations at Palace Station, Boulder Station, Texas Station, Sunset Station,
Station Casino Kansas City and Wild Wild West. Leases on various parcels ranging
from 13 acres to 171 acres have terms expiring between March 2006 and July 2063.
Future minimum lease payments required under these operating leases and other
noncancelable operating leases are as follows (amounts in thousands):

<TABLE>
<CAPTION>

         YEAR ENDING DECEMBER 31,
         ------------------------
<S>                                                                                                              <C>
         2000.................................................................................................    $   9,663
         2001.................................................................................................       10,484
         2002.................................................................................................       11,376
         2003.................................................................................................       11,410
         2004.................................................................................................       11,332
         Thereafter...........................................................................................      437,023
                                                                                                                -----------
              Total...........................................................................................    $ 491,288
                                                                                                                ===========
</TABLE>

         Rent expense totaled approximately $14.6 million, $12.1 million and
$12.6 million for the fiscal year ended December 31, 1999, the Transition Period
1998 and the fiscal year ended March 31,1998, respectively. Rent of $0.3 million
was capitalized in connection with the construction of Sunset Station for the
fiscal year ended March 31, 1998.

7.  STOCKHOLDERS' EQUITY

         PREFERRED STOCK

         The Company is authorized to issue up to 5,000,000 shares of its
preferred stock, $0.01 par value per share (the "Preferred Stock"). As of June
14, 1999, the Company redeemed all 2,070,000 shares of its $3.50 Convertible
Preferred Stock in exchange for 6,741,632 shares of the Company's Common Stock.
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.

         TREASURY STOCK

         The Company is authorized to repurchase up to approximately 6.3 million
shares of its Common Stock. As of December 31, 1999, the Company had purchased
0.8 million shares at a cost of $11.9 million.


                                       48

<PAGE>

         RIGHTS PLAN

         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.

8.  BENEFIT PLANS

         STOCK COMPENSATION PROGRAM

         The Company has adopted a Stock Compensation Program (the "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. Officers, key employees, directors (whether employee directors or
nonemployee directors) and independent contractors or agents of the Company
and its subsidiaries are eligible to participate in the program. However,
only employees of the Company and its subsidiaries are eligible to receive
incentive stock options.

         A maximum of 10,807,000 shares of common stock have been reserved for
issuance under the Program. Options are granted at the current market price at
the date of grant. The plan provides for a variety of vesting schedules, ranging
from immediate to twenty percent a year for five years, to be determined at the
time of grant. All options have an exercise period of ten years from the date of
grant.


                                       49

<PAGE>

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

<TABLE>
<CAPTION>

                                                    FOR THE YEAR                                                FOR THE YEAR
                                                  ENDED DECEMBER 31,           TRANSITION PERIOD               ENDED MARCH 31,
                                                         1999                        1998                           1998
                                            ---------------------------      ----------------------         ----------------------
                                                                WEIGHTED                   WEIGHTED                     WEIGHTED
                                                                AVERAGE                    AVERAGE                      AVERAGE
                                                                EXERCISE                   EXERCISE                     EXERCISE
                                                  OPTIONS         PRICE       OPTIONS       PRICE          OPTIONS       PRICE
                                                 -----------------------     -----------------------   ---------------------------
<S>                                              <C>          <C>            <C>           <C>          <C>           <C>
         Outstanding at beginning of the year    6,003,330    $    12.43     5,067,452     $   13.30    4,432,182     $      15.22
           Granted                                 750,766    $    21.55     1,038,306     $    7.69    1,799,742     $       7.50
           Exercised                               (71,483)   $    11.58        (1,123)    $   12.00       (4,012)    $      12.24
           Canceled                                (76,951)   $     8.62      (101,305)    $    7.91   (1,160,460)    $      11.59
                                                 ---------                   ---------                 ----------
         Outstanding at end of the year          6,605,662    $    13.51     6,003,330     $   12.43    5,067,452     $      13.30
                                                 =========                   =========                 ==========
         Exercisable at end of year              3,768,443    $    15.13     1,951,594     $   16.60    1,485,971     $      17.28
                                                 =========                   =========                 ==========
         Options available for grant             3,609,463                     113,278                  1,050,279
                                                 =========                   =========                 ==========
</TABLE>

The following table summarizes information about the options outstanding at
December 31, 1999:

<TABLE>
<CAPTION>

                                                     OPTIONS OUTSTANDING                         OPTIONS EXERCISABLE
                                       ------------------------------------------         --------------------------------
                                                          WEIGHTED
                                            NUMBER         AVERAGE       WEIGHTED              NUMBER            WEIGHTED
                       RANGE OF           OUTSTANDING     REMAINING       AVERAGE            EXERCISABLE         AVERAGE
                       EXERCISE               AT         CONTRACTUAL     EXERCISE                AT              EXERCISE
                        PRICES         DECEMBER 31, 1999    LIFE          PRICE            DECEMBER 31, 1999       PRICE
                 -----------------------------------------------------------------         -------------------------------
<S>                <C>                 <C>               <C>             <C>               <C>                   <C>
                   $ 4.94 - $  5.38          81,500          8.7          $ 5.36               13,500            $  5.29
                   $ 7.50 - $ 11.00       2,390,702          8.2          $ 7.67              433,122            $  7.70
                   $11.63 - $17.31        2,366,960          6.3          $14.20            2,140,321            $ 14.04
                   $18.00 - $24.75        1,766,500          5.7          $20.87            1,181,500            $ 19.95
                                          ---------                                         ---------
                                          6,605,662          6.8          $13.51            3,768,443            $ 15.13
                                          =========                                         =========
</TABLE>

         Restricted stock grants of 330,000 and 170,500 shares were issued
during the fiscal years ended December 31, 1999 and March 31, 1995,
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 compensation is amortized over the
period the restricted stock vests and is recorded as compensation expense in the
accompanying consolidated statements of operations.


                                       50

<PAGE>

         The Company applies APB Opinion No. 25 and related interpretations in
accounting for the Program. 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 loss applicable to common stock and
basic loss per common share would have been as follows (amounts in thousands,
except per share data):

<TABLE>
<CAPTION>

                                                                                FOR THE                               FOR THE
                                                                               YEAR ENDED          TRANSITION        YEAR ENDED
                                                                              DECEMBER 31,           PERIOD           MARCH 31,
                                                                                  1999                 1998              1998
                                                                            ----------------     ---------------    --------------
<S>                                                                         <C>                  <C>                <C>
    Net loss applicable to common stock:
       As reported.....................................................     $       (44,758)     $      (17,531)    $    (12,441)
       Proforma........................................................     $       (48,526)     $      (19,201)    $    (14,455)

    Basic and diluted loss per common share:
       As reported.....................................................     $         (1.14)     $        (0.50)    $      (0.35)
       Proforma........................................................     $         (1.24)     $        (0.54)    $      (0.41)
</TABLE>


         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:

<TABLE>
<CAPTION>

                                                                                FOR THE                                FOR THE
                                                                               YEAR ENDED          TRANSITION         YEAR ENDED
                                                                              DECEMBER 31,            PERIOD           MARCH 31,
                                                                                  1999                 1998               1998
                                                                            ----------------     ---------------    --------------
<S>                                                                         <C>                  <C>                <C>
    Expected dividend yield............................................           ---                  ---               ---
    Expected stock price volatility....................................          50.00%               51.90%           46.20%
    Risk-free interest rate............................................           5.90%                4.51%            6.03%
    Expected average life of options (years)...........................           3.91                 3.87             4.84
    Expected fair value of options granted.............................          $9.46                $3.34            $3.38
</TABLE>

         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.

         401(K) PLANS

         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 percent of the first four percent of each
participating employee's compensation. Effective October 1, 1998, the employer
contribution was increased from 25 percent of the first four percent 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 $2,103,000, $678,000 and $499,000 for
the fiscal year ended December 31, 1999, the Transition Period 1998 and the
fiscal year ended March 31, 1998, respectively.

9.  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.


                                       51

<PAGE>

10.  INCOME TAXES

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

<TABLE>
<CAPTION>

                                                                                FOR THE                                 FOR THE
                                                                               YEAR ENDED        TRANSITION            YEAR ENDED
                                                                              DECEMBER 31,         PERIOD               MARCH 31,
                                                                                  1999              1998                  1998
                                                                            ----------------     ----------          -------------
<S>                                                                         <C>                  <C>                <C>
    Income tax benefit from continuing operations......................     $         14,929     $        871       $          966
    Tax benefit from extraordinary loss on early retirement of debt....                5,736            1,671                  626
                                                                            ----------------     ------------       --------------
              Total income taxes.......................................     $         20,665     $      2,542       $        1,592
                                                                            ================     ============       ==============
</TABLE>

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

<TABLE>
<CAPTION>

                                                                               FOR THE                                 FOR THE
                                                                              YEAR ENDED           TRANSITION         YEAR ENDED
                                                                             DECEMBER 31,            PERIOD            MARCH 31,
                                                                                 1999                 1998               1998
                                                                            --------------       -------------      --------------
<S>                                                                         <C>                  <C>                <C>
Current................................................................     $      (14,960)      $       3,953      $       18,083
Deferred...............................................................             35,625              (1,411)            (16,491)
                                                                            --------------       -------------      --------------
       Total income taxes..............................................     $       20,665       $       2,542      $        1,592
                                                                            ==============       =============      ==============
</TABLE>


                                       52

<PAGE>

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

<TABLE>
<CAPTION>

                                                                                 FOR THE                               FOR THE
                                                                               YEAR ENDED         TRANSITION         YEAR ENDED
                                                                               DECEMBER 31,         PERIOD            MARCH 31,
                                                                                  1999                 1998              1998
                                                                            ----------------     ---------------    --------------
<S>                                                                         <C>                  <C>                <C>
Federal statutory rate.................................................              35.0%                35.0%             35.0%
Lobbying and political.................................................              (1.2)               (16.8)             (7.0)
Meals and entertainment................................................              (0.9)                (1.2)             (3.7)
Credits earned, net....................................................               0.8                  2.5               3.6
Other, net.............................................................              (1.2)                (2.1)             (4.5)
                                                                            ----------------     ---------------    --------------
Effective tax rate.....................................................              32.5%                17.4%             23.4%
                                                                            ================     ===============    =============
</TABLE>

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

<TABLE>
<CAPTION>

                                                                                                      DECEMBER 31,
                                                                                         --------------------------------------
                                                                                               1999                  1998
                                                                                         ----------------      ----------------
<S>                                                                                      <C>                   <C>
     Deferred tax assets:
         Current:
             Accrued vacation, bonuses and group insurance..........................     $          9,854      $          5,691
             Prepaid gaming taxes...................................................               (2,880)               (1,910)
             Other..................................................................                3,545                 1,200
                                                                                         ----------------      ----------------
         Total current..............................................................               10,519                 4,981
                                                                                         ----------------      ----------------
         Long-term:
             Preopening and other costs, net of amortization........................                7,135                10,632
             FICA credits...........................................................                2,947                 2,127
             State deferred taxes...................................................                2,023                 2,023
             Net operating loss.....................................................                2,690                14,208
             Alternative minimum tax credits........................................               27,725                18,891
                                                                                         ----------------      ----------------
         Total long-term............................................................               42,520                47,881
                                                                                         ----------------      ----------------
         Total deferred tax assets..................................................               53,039                52,862
                                                                                         ----------------      ----------------
     Deferred tax liabilities:
         Long-term:
             Temporary differences related to property and equipment................              (19,963)              (52,149)
             Other..................................................................                 (734)               (1,104)
                                                                                         ----------------      ----------------
         Total deferred tax liabilities.............................................              (20,697)              (53,253)
                                                                                         ----------------      ----------------
         Net ......................................................................      $         32,342      $           (391)
                                                                                         ================      ================
</TABLE>


         The Company currently has a net operating loss carryforward of $7.7
million which expires in 2018. 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, 1999 or 1998
relating to recorded tax benefits because all benefits are more likely than not
to be realized.

11.  LEGAL MATTERS

         On January 16, 1998, the Company entered into an Agreement and Plan of
Merger, as amended (the "Merger") with Crescent Real Estate Equities Company, a
Texas real estate investment trust ("Crescent"). The Company wrote off $2.9
million of costs incurred related to the Merger (which are included in other
expense in the accompanying consolidated statements of operations for the
Transition Period 1998). The Merger became subject to litigation between the two
companies. On April 14,


                                       53

<PAGE>

1999, the Company announced that it had settled its lawsuits with Crescent
arising out of the failed Merger. Under the terms of the settlement agreement,
Crescent paid the Company $15 million, and the parties have released each other
from all claims.

         In addition, the Company is a litigant in legal matters arising in the
normal course of business. In the opinion of management, all pending legal
matters are either adequately covered by insurance or, if not insured, will not
have a material adverse effect on the financial position or the results of
operations of the Company.

12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                          INCOME
                                                                                           (LOSS)          NET
                                                                                           BEFORE         INCOME       BASIC
                                                                                           INCOME         (LOSS)      EARNINGS
                                                                                           TAXES        APPLICABLE      (LOSS)
                                                                        OPERATING           AND             TO           PER
                                                             NET          INCOME      EXTRAORDINARY       COMMON       COMMON
                                                          REVENUES        (LOSS)           ITEM           STOCK         SHARE
                                                       -----------    ------------   ---------------    ---------    ---------
                                                                    (amounts in thousands, except per share amounts)
<S>                                                    <C>            <C>            <C>                <C>          <C>
YEAR ENDED DECEMBER 31, 1999
First quarter....................................      $   229,931    $     35,776   $        12,997    $   (4,045)  $   (0.11)
Second quarter...................................          235,371          41,552            34,525        21,592        0.58
Third quarter....................................          237,531          42,235            20,976        13,143        0.31
Fourth quarter...................................          239,636         (90,692)         (115,721)      (75,448)      (1.80)
TRANSITION PERIOD 1998
First quarter....................................      $   206,250    $     29,179   $         5,528    $    1,488   $    0.04
Second quarter...................................          213,448          31,622             5,090         1,033        0.03
Third quarter....................................          222,516           3,895           (20,482)      (20,052)      (0.57)
YEAR ENDED MARCH 31, 1998
First quarter....................................      $   173,516    $      8,178   $       (12,846)   $  (10,101)  $   (0.29)
Second quarter...................................          194,097          23,340             3,655           546        0.02
Third quarter....................................          197,196          24,984             5,299         1,613        0.05
Fourth quarter...................................          204,801          27,684              (228)       (4,499)      (0.13)
</TABLE>


                                       54

<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE
         None.

                                    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.


                                       55

<PAGE>

                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

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

         Report of Independent Public Accountants

         Consolidated Balance Sheets as of December 31, 1999 and 1998

         Year Ended December 31, 1999, Nine Months Ended December 31, 1998 and
         Year Ended March 31, 1998

                 Consolidated Statements of Operations

                 Consolidated Statements of Stockholders' Equity

                 Consolidated Statements of Cash Flows

         Notes to Consolidated Financial Statements

(a)  2. None
(a)  3. Exhibits

<TABLE>
<CAPTION>

Exhibit
Number                                    Description
------                                    -----------
<S>               <C>
2.1               Agreement and Plan of Reorganization dated as of February 1,
                  1993 among Frank J. Fertitta, Jr., as Trustee of the Frank J.
                  Fertitta and Victoria K. Fertitta Revocable Family Trust dated
                  June 17, 1989, Frank J. Fertitta III, Blake L. Sartini, Delise
                  F. Sartini and Lorenzo J. Fertitta. (Incorporated herein by
                  reference to Registration Statement No. 33-59302)

2.2               Agreement and Plan of Merger, dated as of January 16, 1998
                  among Crescent Real Estate Equities Company and Station
                  Casinos, Inc. (Incorporated herein by reference to the
                  Company's Form 8-K dated January 27, 1998)

2.3               Amendment No. 1 dated as of February 17, 1998 to Agreement
                  and Plan of Merger. (Incorporated herein by reference to the
                  Company's Form 10-K for the fiscal year ended March 31, 1998)

2.4               Amendment No. 2 dated as of June 14, 1998, to Agreement and
                  Plan of Merger. (Incorporated herein by reference to the
                  Company's Form 8-K dated June 17, 1998)

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 Note of the Registrant (1998 Issue).
                  (included in Exhibit 4.5)

4.2               Form of Subordinated Note of the Registrant (1997 Issue).
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated April 3, 1997)


                                       56

<PAGE>

4.3               Form of Subordinated Note of the Registrant (1996 Issue).
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated March 25, 1996)

4.4               Form of Subordinated Note of the Registrant (1994 Issue).
                  (Incorporated herein by reference to Registration Statement
                  No. 33-76156)

4.5               Indenture dated as of December 3, 1998 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 January 27, 1999)

4.6               Indenture dated as of April 3, 1997 between Registrant and
                  First Union National Bank as Trustee. (Incorporated by
                  reference to the Company's Form 8-K dated April 3, 1997)

4.7               Indenture dated as of March 29, 1996 between the Registrant
                  and First Union National Bank, as Trustee. (Incorporated
                  herein by reference to the Company's Form 8-K dated March 25,
                  1996)

4.8               Indenture dated as of May 11, 1994 between the Registrant and
                  First Union National Bank (f.k.a. First Fidelity Bank,
                  National Association) as Trustee. (Incorporated herein by
                  reference to the Company's Annual Report on Form 10-K for the
                  period ended March 31, 1994)

4.9               First Supplemental Indenture dated as of March 25, 1996
                  between Registrant and First Union National Bank, (f.k.a.
                  First Fidelity Bank, National Association), as Trustee with
                  respect to the Indenture dated as of May 11, 1994.
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated March 25, 1996)

4.10              Certificate of Resolutions of Convertible Preferred Stock of
                  the Registrant. (Incorporated herein by reference to the
                  Company's Form 8-K dated March 25, 1996)

4.11              Form of Convertible Preferred Stock of the Registrant.
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated March 25, 1996)

4.12              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)

4.13              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)

4.14              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)

4.15              Certificate of Resolutions of $100 Redeemable Preferred Stock.
                  (Incorporated herein by reference to the Company's Form 10-K
                  for the fiscal year ended March 31, 1998)

4.16              Third Amended and Restated Reducing Revolving Loan Agreement
                  dated as of August 25, 1999. (Incorporated herein by reference
                  to the Company's Quarterly Report on Form 10-Q for the period
                  ended September 30, 1999)

4.17              Amendment No. 1 to Third Amended and Restated Reducing
                  Revolving Loan Agreement dated as of September 24, 1999.
                  (Incorporated herein by reference to the Company's Quarterly
                  Report on Form 10-Q for the period ended September 30, 1999)


                                       57

<PAGE>

4.18              Amendment No. 2 to Third Amended and Restated Reducing
                  Revolving Loan Agreement dated as of January 25, 2000

4.19              Term Loan Agreement dated as of August 25, 1999.
                  (Incorporated herein by reference to the Company's Quarterly
                  Report on Form 10-Q for the period ended September 30, 1999)

4.20              Amendment No. 1 to Term Loan Agreement dated September 24,
                  1999. (Incorporated herein by reference to the Company's
                  Quarterly Report on Form 10-Q for the period ended September
                  30, 1999)

10.1              Lease dated as of December 17, 1974 between Teddy Rich
                  Enterprises and Townefood, Inc. (Incorporated herein by
                  reference to Registration Statement No. 33-59302)

10.2              Lease dated as of May 8, 1973 between Teddy Rich Enterprises
                  and Mini-Price Motor Inn., including Addendum dated May 8,
                  1973; Lease Addendum dated June 10, 1974 amending lease dated
                  May 8, 1973 between Teddy Rich Enterprises and Mini-Price
                  Motor Inn, Inc. (Incorporated herein by reference to
                  Registration Statement No. 33-59302)

10.3              First Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel & Casino, Inc. and Flamingo
                  Associates, Inc. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  September 30, 1999)

10.4              Second Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel Casino, Inc. and Flamingo
                  Associates, Inc. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  September 30, 1999)

10.5              Lease dated as of February 16, 1976 between Richfield
                  Development Co. and Mini-Price Motor Inn. (Incorporated herein
                  by reference to Registration Statement No. 33-59302)

10.6              First Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel & Casino, Inc. and Richfield
                  Development Co. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  September 30, 1999)

10.7              Second Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel & Casino, Inc. and Richfield
                  Development Co. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  September 30, 1999)

10.8              Lease dated as of September 6, 1977 between Richard Tam and
                  Mini-Price Motor Inn Joint Venture (Parcel B1). (Incorporated
                  herein by reference to Registration Statement No. 33-59302)

10.9              Lease dated as of September 6, 1977 between Richard Tam and
                  Mini-Price Motor Inn Joint Venture (Parcel B2). (Incorporated
                  herein by reference to Registration Statement No. 33-59302)

10.10             First Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel & Casino, Inc. and Richard
                  Tam. (Incorporated herein by reference to the Company's
                  Quarterly Report on Form 10-Q for the period ended September
                  30, 1999)

10.11             Second Amendment to Lease (With Option) dated as of April 1,
                  1999 between Palace Station Hotel & Casino, Inc. and Richard
                  Tam. (Incorporated herein by reference to the Company's
                  Quarterly Report on Form 10-Q for the period ended September
                  30, 1999)

10.12             Executive Employment Agreement between Frank J. Fertitta III
                  and the Registrant dated as of December 1, 1999


                                       58

<PAGE>

10.13             Executive Employment Agreement between Glenn C. Christenson
                  and the Registrant dated as of December 1, 1999

10.14             Executive Employment Agreement between Scott M Nielson and
                  the Registrant dated as of December 1, 1999

10.15             Executive Employment Agreement between Blake L. Sartini and
                  the Registrant dated as of December 1, 1999

10.16             Executive Employment Agreement between William W. Warner and
                  the Registrant dated as of December 1, 1999

10.17             Executive Employment Agreement between Mark E. Brown and the
                  Registrant dated as of August 2, 1999

10.18             Stock Compensation Program of the Registrant. (Incorporated
                  herein by reference to the Company's Quarterly Report on Form
                  10-Q for the period ended June 30, 1993)

10.19             Amendment dated as of August 22, 1995 to the Stock
                  Compensation Program. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  September 30, 1995)

10.20             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)

10.21             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)

10.22             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)

10.23             Long-Term Stay-On Performance Incentive Plan between the
                  Registrant and William W. Warner

10.24             Long-Term Stay-On Performance Incentive Plan between the
                  Registrant and Mark E. Brown

10.25             Amended and Restated Deferred Compensation Plan of the
                  Registrant effective as of September 30, 1999

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             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)

10.28             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)

10.29             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)


                                       59

<PAGE>

10.30             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)

10.31             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)

10.32             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)

10.33             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)

10.34             Sublease Agreement dated as of November 30, 1992 between the
                  City of St. Charles and St. Charles Riverfront Station, Inc.
                  (Incorporated herein by reference to Registrant Statement No.
                  33-59302)

10.35             Lease between Navillus Investment Co.; Jerome D. Mack as
                  trustee of the Center Trust; Peter Trust Limited Partnership;
                  and Third Generation Limited Partnership and Registrant.
                  (Incorporated herein by reference to the Company's Annual
                  Report on Form 10-K for the period ended March 31, 1994)

10.36             Joint Venture Agreement dated as of September 25, 1993,
                  between First Holdings Company and the Registrant.
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated July 5, 1995)

10.37             Assignment and Assumption Agreement (Joint Venture Agreement)
                  dated as of March 25, 1996 between the Registrant and Kansas
                  City Station Corporation. (Incorporated herein by reference to
                  the Company's Annual Report on Form 10-K for the period ended
                  March 31, 1996)

10.38             Amendment to Joint Venture Agreement dated as of November 15,
                  1993, between First Holdings Company and the Registrant.
                  (Incorporated herein by reference to the Company's Annual
                  Report on Form 10-K for the period ended March 31, 1996)

10.39             Second Amendment to Joint Venture Agreement, dated as of April
                  22, 1996, between First Holdings Company and Kansas City
                  Station Corporation. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  June 30, 1996)

10.40             Development Agreement dated as of April 24, 1995, between
                  Kansas City Station Corporation and the Port Authority of
                  Kansas City. (Incorporated herein by reference to the
                  Company's Form 8-K dated July 5, 1995)

10.41             Lease Agreement, dated as of April 1, 1994 between
                  Station/First Joint Venture and Kansas City Station
                  Corporation. (Incorporated herein by reference to the
                  Company's Form 8-K dated July 5, 1995)

10.42             First Amendment to Lease Agreement dated as of March 19, 1996
                  between Station/First Joint Venture and Kansas City Station
                  Corporation. (Incorporated herein by reference to the
                  Company's Annual Report on Form 10-K for the period ended
                  March 31, 1996)

10.43             Second Amendment to Lease Agreement, dated as of April 22,
                  1996, between Station/First Joint Venture and Kansas City
                  Station Corporation. (Incorporated herein by reference to the
                  Company's Quarterly Report on Form 10-Q for the period ended
                  June 30, 1996)

10.44             Form of Indemnification Agreement for Directors and Executive
                  Officers. (Incorporated herein by reference to Registration
                  Statement No. 33-59302)


                                       60

<PAGE>

10.45             Form of Indemnification Agreement between the Registrant and
                  Frank Fertitta, Jr. (Incorporated herein by reference to
                  Registration Statement No. 33-59302)

10.46             Participation Agreement dated as of September 25, 1996 among
                  the Registrant, as Lessee, and First Security Trust Company of
                  Nevada, as Lessor and Trustee, and the other Persons that are
                  parties to such agreement. (Incorporated herein by reference
                  to the Company's Form 8-K dated October 29, 1996)

10.47             Lease Agreement dated as of September 25, 1996 between First
                  Security Trust Company of Nevada as Trustee and Lessor and the
                  Registrant, as Lessee. (Incorporated herein by reference to
                  the Company's Form 8-K dated October 29, 1996)

10.48             Sublease Agreement dated as of September 25, 1996 between the
                  Registrant, as Sublessor and Sunset Station as Sublessee.
                  (Incorporated herein by reference to the Company's Form 8-K
                  dated October 29, 1996)

10.49             Sunset Station 1996 Trust Agreement dated as of September 25,
                  1996 between the Registrant, as Grantor, and First Security
                  Trust Company of Nevada, as Trustee. (Incorporated herein by
                  reference to the Company's Form 8-K dated October 29, 1996)

10.50             Master Certificate Purchase Agreement dated October 22, 1999
                  among Sunset Station Leasing Company, LLC as Purchaser, First
                  Security Trust Company of Nevada as Trustee, each of the
                  parties to the Participation Agreement, as Sellers, Sunset
                  Station, Inc. as Sublessee and the Registrant as Lessee.
                  (Incorporated herein by reference to the Company's Quarterly
                  Report on Form 10-Q for the period ended September 30, 1999)

10.51             Consulting Agreement between Lorenzo Fertitta and the
                  Registrant dated February 1, 1999. (Incorporated herein by
                  reference to the Company's Annual Report on Form 10-K for the
                  Transition Period from April 1, 1998 to December 31, 1998)

10.52             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

21.1              Subsidiaries of the Registrant

23.1              Consent of Arthur Andersen LLP

27                Financial Data Schedule
</TABLE>

(b)  Reports on Form 8K - None

(c)  None

(d)  None


                                       61

<PAGE>

                                   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 28, 2000      By: /s/  Frank J. Fertitta III
                               -----------------------------------------------
                               Frank J. Fertitta III
                               Chairman of the Board, President and Chief
                               Executive Officer (Principal Executive Officer)


         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.

<TABLE>
<CAPTION>

            Signature                                          Title                                           Date
            ---------                                          -----                                           ----
<S>                                             <C>                                                         <C>
/s/  Frank J. Fertitta III                      Chairman of the Board, President and Chief                  March 28, 2000
-------------------------------                 Executive Officer (Principal Executive
Frank J. Fertitta III                           Officer)

/s/  Glenn C. Christenson                       Executive Vice President, Chief Financial                   March 28, 2000
-------------------------------                 Officer, Chief Administrative Officer,
Glenn C. Christenson                            Treasurer and Director (Principal
                                                Financial and Accounting Officer)

/s/  Blake L. Sartini                           Executive Vice President, Chief Operating                   March 28, 2000
-------------------------------                 Officer and Director
Blake L. Sartini

/s/  R. Hal Dean                                Director                                                    March 28, 2000
-------------------------------
R. Hal Dean

/s/  Lorenzo J. Fertitta                        Director                                                    March 28, 2000
-------------------------------
Lorenzo J. Fertitta

/s/  Lowell H. Lebermann, Jr.                   Director                                                    March 28, 2000
-------------------------------
Lowell H. Lebermann, Jr.

/s/  Delise F. Sartini                          Director                                                    March 28, 2000
-------------------------------
Delise F. Sartini

/s/  Richard J. Heckmann                        Director                                                    March 28, 2000
-------------------------------
Richard J. Heckmann
</TABLE>


                                       62