Wednesday, February 12, 2003
Copyright © Las Vegas Review-Journal

CASINO EARNINGS: Venetian parent has big quarter

Officials: Result bucks slowdown

Hotel patrons wander through The Venetian on Tuesday. The Venetian's parent company, Las Vegas Sands Inc., reported a record profit in the fourth quarter of 2002, reversing a year-earlier loss. Photo by Clint Karlsen.

The Venetian's parent company, Las Vegas Sands Inc., reported a record profit in the fourth quarter of 2002, marking a full recovery from the Sept. 11 terrorist attacks and its aftermath, company officials said Tuesday.

"The other properties around town are crying poor-mouth. We don't fit in that category. We're very pleased with how we are doing," Sands owner and Chairman Sheldon Adelson said Tuesday in a conference call.

The Sands posted a record profit of $6 million in the fourth quarter, reversing a loss of $6.5 million in the fourth quarter of 2001.

Despite recording earnings in the last quarter, the company lost $38.4 million overall in 2002, compared with losing $24.2 million the year before.

Record fourth-quarter revenues were $154 million, up from $121.8 million in the previous year. For the year ended Dec. 31 they were $571.4 million, up from $523.9 million in 2001.

Record fourth-quarter cash flow, or earnings before interest, taxes, depreciation, amortization and rental expenses, was $58.3 million, up from $42.5 million the year before. Total cash flow for the year ending Dec. 31 increased to $215 million, up from $164.9 million in 2001.

Sands President Bill Weidner said the strong performance bucked the overall market slowdown in the Las Vegas market.

"We believe that the midweek room strategy (booking conventions) again has proven resilient during difficult economic times," he said.

He cited record annual average daily room rates at The Venetian of $196 and occupancy of 95.6 percent in 2002.

Deutsche Bank Securities analyst Andrew Zarnett said The Venetian strategy is working.

"You have to look at it on an EBIDTAR basis. They did very well," Zarnett said.

The analyst also said the company was able to capture its proportionate share of the market in terms of independent travelers and casino customers to generate high volume for high-end table play.

"Overall, that helped them beat the trend and post a very strong fourth quarter and beat their competitors," Zarnett said.

He also said 2003 is shaping up to be a strong year for The Venetian.

"They're going to open their new tower in June and will be able to generate significantly larger productivity for the casino floor with very little cost increase," Zarnett said.

The Venetian's $250 million, 1,013-suite second tower will cut the average cost per room of the resort by an estimated 15 percent and increase cash flow at the same time.

The Sands is also building an "urban facility with gambling capacity" of 1 million square feet in Macau, Weidner said.

The design work on Macau casino has been completed and construction is "in the mud and soup there," he said. The company is having 1,200 piles driven to support the foundation and other construction is about to be started, Weidner said.

David Mitchell has been hired to oversee the Sands project in Macau.

Weidner said the company is optimistic about the prospects for operating in Macau and the boost that operations there will give The Venetian.

"In 2002 in Macau, visitation from the People's Republic of China led (the economic growth), up 41 percent to 4.3 million," he said. "People from the People's Republic of China are coming in and they are coming in with money. The income per table is 10 times Las Vegas averages."

Within five years, Macau will be attached to the mainland and Hong Kong by bridges, further driving the visitor industry.

"(Our intention) is to be there as quickly as we can, and add capacity," Weidner said