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Howard Stutz

Macau Boosts LV Sands

3 August 2006

LAS VEGAS -- Results at The Venetian hit a road bump during the spring, but Las Vegas Sands Corp. had China to fall back on.

Booming revenue at the company's casino in Macau helped rescue the second-quarter earnings for Las Vegas Sands Corp.

"One quarter or one month does not concern us," Las Vegas Sands Chairman Sheldon Adelson said during a conference call Wednesday afternoon with analysts and investors announcing the company's results for the quarter that ended June 30.

"Las Vegas has been here for decades and will be here for decades more," Adelson said. "There are always going to be peaks and valleys."

Company revenue in the three-month period was $517 million, a 29.6 percent increase from $398.8 million in the second quarter last year.

Las Vegas Sands earned 31 cents a share, compared with 24 cents a share a year ago. Analysts polled by Thomson First Call estimated the company would earn 34 cents a share in the quarter.

The company's net income for the quarter was $109.3 million, an increase of 26.5 percent from $86.4 million a year ago.

The Venetian's casino revenue was affected by lower win percentages. Despite increases in the money gambled by customers on slot machines and table games, revenue fell 3 percent in the quarter to $71.3 million compared with $73.7 million a year ago.

The Venetian reported operating income of $42.8 million, a decrease of 17 percent compared with $51.6 million in the second quarter of 2005. Adjusted property cash flow was $63.2 million, a decrease of 10.3 percent compared with $70.4 million for the same period a year ago.

Las Vegas Sands executives blamed the decreases on the negative effect of lower win percentages coupled with higher payroll and related benefit costs. The Venetian hired more employees during the quarter to staff three areas -- a new poker room, 450,000 square feet of convention space and two new showrooms.

"We will now focus on fine-tuning our efforts to enhance the profitability of these business activities as well as look for opportunities for near-term operational efficiencies," Las Vegas Sands President Bill Weidner said.

Meanwhile, Las Vegas Sands said construction continued on the $1.8 billion Palazzo next to The Venetian, scheduled to open next year. Much of the enhancements at The Venetian, such as the added meeting space, will be integrated into the Palazzo.

The Sands Macau, however, pulled the company through.

Second-quarter casino revenue in Macau was $307.1 million, a 52.7 increase from $201.1 million in the second quarter last year.

Cash flow at the Sands Macau was $116.9 million, a 44.3 percent increase compared with $81 million a year ago. The casino's operating income in Macau was $101.6 million, an increase of 35.9 percent compared to $74.8 million last year.

"Despite significant increases in Macau mass market capacity overall, as well as increases in mass market table capacity at the Sands Macau itself, our mass table drop per unit, per day, has remained steady, and our win per unit, per day has increased," Weidner said.

He added that money wagered on slot machines in Macau grew while the casino's high-end business doubled.

Gaming analyst Matthew Jacob of Majestic Research said a weakening market in Las Vegas during the quarter affected the company's earnings. But the Sands Macau and its growing dominance in the Asian market will continue to carry the company.

"Macau was helped by being lucky at the tables; in Las Vegas, Sands was unlucky at the tables," Jacob said. "We'll have to see how business rebounds over the next few quarters."

The company announced earnings after the close of trading on the New York Stock Exchange. Shares of Las Vegas Sands traded up Wednesday, finishing at $65.28, a jump of $3.86 or 6.28 percent.

But in after-hours trading, shares in Las Vegas Sands dropped almost 4 percent.

Company executives spent much of the conference call touting the growing presence in Asia.

Weidner said the $2.4 billion Venetian Macau on the Cotai Strip was topped off. He said six other sites in the area that will include brand-name hotels and casinos operated by Las Vegas Sands are under construction or the land is being prepared for development. The Venetian Macau is expected to open next summer.

Las Vegas Sands spent about $2.3 million in development expenses for its project in Singapore, which was awarded in April. The company plans to build the $3.6 billion Marina Bay Sands with an opening planned for 2009. Overall, Las Vegas Sands spent $7.9 million in development expenses during the quarter.