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Best of Liz Benston

Gaming Guru

Liz Benston

Venetian Owner Reports Loss

16 November 2004

Incentive payments to executives worth about $62 million and about $49 million in grants of executive stock options helped drive down third quarter profit at the owner of the Venetian resort in Las Vegas.

Las Vegas Sands Inc. posted an $85.9 million loss in the third quarter compared with a $21 million profit for the same quarter of last year, according to the company's quarterly Securities and Exchange Commission report, filed Monday.

Revenue, including promotional expenses, jumped 88 percent to $343.6 million. But corporate expenses ballooned to $118.2 million compared with $2.2 million a year ago.

Of the corporate expenses, $62.2 million in incentive payments were made to Las Vegas Sands executives, payouts related to the construction of a Phase II mall at the company's upcoming Palazzo resort next to the Venetian. The company intends to sell the multi-level mall, once it is built, for at least $250 million or more depending on the Palazzo's operating performance.

The $49.2 million relates to stock options granted in July at an estimated IPO value of $5,791 per share of common stock.

Officials declined comment on the company's earnings performance and did not host a conference call to discuss results, citing a Securities and Exchange Commission-imposed "quiet period" related to the company's pending initial public offering of stock. The SEC prohibits companies from seeking promotional publicity that could influence the outcome of the IPO.

Casino revenue more than doubled to $240.2 million and hotel revenue rose 6 percent to $71.6 million. Food and beverage revenue rose 24 percent to $26.9 million. Retail and "other" revenue fell 42 percent to $20.9 million.

But casino expenses also more than doubled during the quarter, rising to $115.7 million from $32.2 million a year earlier primarily related to the opening of the Sands Macau casino in China as well as higher table games marketing and slot machine volume at the Venetian. Expenses are expected to grow in Macau because of a 39 percent tax on gaming revenue there, the company said.

Las Vegas Sands also reported about $30.6 million in losses relating to the demolition of space to accommodate a new showroom and the renovation of 48 suites at the Venetian.

Revenue at its Venetian resort was virtually flat with last year at $167.3 million. Revenue at the Venetian's Sands Expo Center fell 68 percent to $10.7 million.

Las Vegas Sands in May sold its Grand Canal Shoppes at the Venetian for $766 million to General Growth Properties Inc. of Chicago. Also in May, the company opened its Sands Macau casino in Macau. That casino reported revenue of $57.6 million in the second quarter and $165.7 million in the third quarter.

Las Vegas Sands Corp., the name of the future public company, in September filed an IPO to sell up to $350 million in common stock. The proceeds will be used to fund the company's proposed 3,000-room Palazzo resort in addition to general corporate purposes and development projects in Macau and the United Kingdom.

The company is developing a version of its Venetian resort in Macau with 3,000 rooms and has proposed two casino projects in conjunction with British soccer teams contingent upon Britain's legalization of Las Vegas-style resorts and slot machines.