拉斯維加斯金沙集團 (LVS) 2005 Q1 法說會逐字稿

Good day and welcome to the first quarter 2005 Las Vegas Sands Corp. earnings conference call.

(OPERATOR INSTRUCTIONS)

I would now like to turn the conference over to your host for today's presentation, Mr. Bill Weidner, president and chief operating officer.

Please proceed, sir.

Thank you, Bill, and good morning, everyone, and thank you for joining us.

Our speakers today besides myself, are Brad Stone, the executive vice president of Las Vegas Sands, and Scott Henry, our chief financial officer., Others are here for the question and answer session but, as I say, these are our speakers for this morning.

Before we begin, I need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor provisions of the federal securities laws.

I would also like to caution you that the company's actual results could differ materially from the anticipated results in those forward-looking statements.

Please see today's press release under the caption of "Forward-Looking Statements" for the discussion of risks that may affect our results.

In addition, we may discuss adjusted EBITDA and adjusted EBITDAR, which are non-GAAP measures.

A reconciliation of those measures to the most comparable GAAP financial measure is included in the press release.

Please also note that this conference call is being recorded.

We turned in a solid first quarter from both a financial and operational perspective.

Adjusted EBITDAR was up 49% to 166 million.

We delivered record revenues of 404 million and record gaming metrics at both our Las Vegas and Macao properties.

We also strengthened our financial position during the quarter, completing a series of strategic transactions that provide us with greater financial flexibility to pursue our growth plans.

These transactions consisted of the amendment of our credit facility, the issuance of our 6 3/8 senior notes, and the retirement of our 11% mortgage note, transactions that Scott will elaborate on later in the call.

On the operating front, we continued to make progress in a series of initiatives that we expect will further enhance our competitive position in both Las Vegas and Macao.

In Las Vegas we completed the renovation of our high-end suite offerings and just last week we opened the high-end Paiza Club, our Asian-themed club and private gaming salon.

These two initiatives in particular will play an important role in our continuing cross-marketing efforts with our Macao property.

Macao opened its Paiza club in the fall and began its high-end marketing in earnest in March.

We'll talk about that a little later.

We're in the final stages of phase 1 of the complete rebuilding of the Venetian's pool deck to improve our competitive position against the FIT and the high-end market, particularly the Cabana product there.

Construction of two live stage production theaters is on track with the Blue Man Group slated for completion in September and Phantom of the Opera scheduled for mid 2006.

And looking further ahead, construction of Palazzo remains on schedule for opening in the second quarter of '07.

Brad Stone will discuss that particular project later on in the call.

We're very enthusiastic as we look at what's happening in Las Vegas from an overall market perspective as it relates to our own performance and as to how we're positioned for the future.

We're coming off a terrific year and a considerably strong first quarter.

Forward bookings are strong, the convention calendar is robust and we have a clear roadmap for continued growth with the efforts I just described, ranging from strengthening the high-end and FIT businesses to the opening of our world-class Palazzo two years out.

In terms of the Wynn (ph) opening, we're experiencing an increased level of activity at our end of the strip as the center of gravity shifts further north.

We believe our strong base of group business, our superior all-suite room product, priced under Wynn's pricing umbrella, bodes well for future performance.

Demand trends and convention business continue to be robust into the future and our presence in Macao is driving more high-end visitation to our Las Vegas property.

Turning now to our operations in Macao, the picture is equally strong.

Gaming volumes in the first quarter were the highest we've seen and we wrapped up the quarter with our strongest month yet in March.

We're making great strides in developing our VIP business, which we formally launched in March.

We're beginning to now develop an important part of the market we were unable to fully address in the past until we began to build the beginnings of our own rep network in Macao.

In only our third month of serious high-end play development, Rolling Chip volume was up fourfold from January to March.

Brad will talk to you a bit about that as we look into the future.

Looking at the overall market, we see the mass segment growing more rapidly than the whole.

We don't anticipate a great deal of additional supply coming out over the next 12 months or so and while we did not expect the flood of tables aimed at the mass market, we held our position well and actually increased mass drop through the quarter.

We're now planning an aggressive marketing campaign to be launched in June to help us to improve our competitive position at that mass market.

Again, Brad will talk in a little more detail both the high-end and the mass marketing in Macao overall.

There's no question that Macao market trends have been challenging to predict, but as we wrap up our first full year this month, we'll have better information on a go forward basis to help us identify trends and better frame expectations.

Many of you have heard me say this before, we are earning while we learn and we're happy to be doing that.

With each month that passes we understand the market better and we're able to tailor our products to meet the needs of the customer, especially at the high end.

Our expectation -- or pardon me, our experiences in the competitive U.S. casino markets and our early mover status in Macao gives us the advantage of knowing how to efficiently and effectively market better than anyone else.

So as additional supply comes on, we expect to maintain more than our fair share of revenues and particularly of profitability.

Construction of our Macao Venetian Casino Resort remains on track with an expected completion date of early 2007.

We're also moving ahead with our plans to develop the Cotai Strip with international hotel brands like Marriott, Hilton, Intercontinental, Holiday Inn, Four Seasons and the like, a branded complete Las Vegas strip type of destination anchored by a full-fledged Venetian destination resort complete with 1.2 million square feet of exhibition and convention space, a Grand Canal Shoppes mall, 15,000 seat arena, 2,000 seat showroom, a shopping, dining and entertainment mix like none other in Asia.

At the same time, we're continuing our efforts to secure new growth projects.

We think the opportunity in Singapore is significant.

We're pleased to be on a short list there and believe our plans are very compelling in terms of providing a world-class convention center-anchored destination with the luxury and scale that you see in our existing properties, while at the same time incorporating Singapore's own history and culture.

We have joined with the Solomon R. Guggenheim Foundation of New York to propose a major Guggenheim Hermitage Museum on the scale of that of Guggenheim Bilbao as part of our development there and we expect to be in ongoing discussions over the next several months as the Singapore government goes through their decision making process.

We believe in the Asian domino theory; after Singapore falls, so goes Thailand, Japan, Taiwan and perhaps Korea and we're well positioned in that part of the world.

In the U.S. we're working actively on Pennsylvania and doing missionary work in Massachusetts and New York.

The UK holds elections on May 5th and if Tony Blair's Labor Party wins with a majority of 60 to 80 seats, we may see more than one large casino being developed there in the near future.

We look to develop a robust development pipeline both in the UK and Europe and other parts of the world as opportunities arise.

With that, I'll turn it over to Brad Stone to discuss the operating results of our Las Vegas and Macao properties.

Brad?

Thank you, Bill, and hello, everyone.

As you heard from Bill, we had a considerably strong first quarter at the Venetian.

I'm going to take you through a few of the operating metrics.

First, let's talk about rooms.

Overall the rooms business remains brisk.

The quarter got off to a slow start in January when record rainfalls in both Southern California and Las Vegas affected Las Vegas demand.

This is in sharp contrast to the month of March where the Venetian set records for both revenue and average daily rate.

Transient demand has been particularly strong as we utilize our yield management systems to achieve optimized mixes of group and FIT room nights in order to maximize our revenues.

March occupancy was 100% and the average daily rate reached $250.

This is a RevPAR increase year over year of 11%.

April results were also impressive and bookings for May and June post the winter opening looked strong both in terms of occupancy and rate.

Despite the slow start in January, table game volume also set a new record in the first quarter, reflecting a particularly successful Chinese New Year.

This is a direct result of our ability to leverage our presence in Macao as we target across marketing efforts.

In February, as Bill mentioned, we opened our new Chairman's Suites and these are tailored towards the high-end Asian customer.

During the first quarter the table drop grew 19% and we had a strong hold of 23.8%.

Of course, that's 24.2% (ph) below the record setting hold of 28 we experienced in Q? of last year but, as you know, 23.8 is an excellent number.

Importantly, table business into the second quarter continues to show positive results.

Slot handle also set a record for the first quarter, while slot (inaudible) was flat due to a slightly (inaudible) hold percentage.

So we started 2005 with an excellent first quarter in Las Vegas, surpassing the year ago period when we adjusted the sale of the Grand Canal Shoppes and accounted for the normalization of hold percentages.

Turning our attention to our operations in Macao, we're approaching our one-year anniversary there and continue to show growth.

We talked on the last conference call that we'd earmarked the month of March to begin a significant ramp-up of our premium business.

We're doing this by utilizing the market's superior asset of the Paiza Club at the Sands, along with greater utilization of our in-house premium host and the bringing on of additional outside junket reps.

As you heard from Bill, the majority of high-end business in Macao conducts its wagering through what we call a Rolling Chip program.

While rare in this country, it is a predominant method in Macao, Asia and Australia.

It is highly accurate; it's used to determine both commissions and customers' incentives.

In order to be consistent with the norms in Macao, we'll begin measuring and discussing our gaming volumes for our premium customers through this Rolling Chip and their primary betting system and for non-VIP customers through the traditional volume measurement of drop.

The anticipated hold percentage on the Rolling Chip program is 2.5% of chips wagered and lost, while the hold percent on traditional (inaudible), or drop as we refer to it here, has been between 16 and 17% since opening.

During the first quarter we showed growth across all measures in both types of play.

In the mass, or non-Rolling play, daily drop increased each month during the quarter.

January drop per day in the mass side was 9.2 million per day.

In February/March the drop per day grew to 9.7 million per day and the preliminary number for April is even stronger at 9.8 million per day.

Our VIP Rolling Chip turnover demonstrates significant growth with wagering increasing each month through the quarter.

VIP Rolling volume was 124 million in March -- I'm sorry, in January and increased to 223 million in February.

It then increased to 509 million in March, the month we really launched the programs, and preliminary numbers for April show a growth at 698 million of roll, an increase of 37% from the month of March.

First quarter hold against a non-Rolling Chip program was 17.1%, we believe that's at the norm, and 2.1% on the Rolling Chip program, which is below the anticipated norm of 2.5%.

As you can see, the ramp of the VIP play is compelling.

Clearly, four months does not make a long-term trend, but that said, we believe these results demonstrate the potential of the market and our ability to solidify our competitive position in the VIP segment.

Looking at the mass business, the property has shown the ability to rebound and get significant increase in capacity that has come on line since we opened.

Beginning in July when mass gaming seasonality increases, we'll be rolling out a series of marketing programs designed to capture additional market share.

We're expanding our overland coach bus program from Mainland China, our shuttle bus services from the ferry terminals in the main gate of immigration from (inaudible), and we'll also be launching a series of consumer marketing campaigns of promotional events on the main casino floor and also instituting customer loyalty programs.

So in summary, both Las Vegas and Macao regained momentum as we moved through the first quarter and heading into the current second quarter.

Bill mentioned some of the capital projects that are going on.

We're very active in this area.

We completed the 18 penthouses and five Chairman Suites.

The private club, as Bill mentioned, opened just this last week and it targets the high-end Asian customer.

So we combine these suites, the Paiza Club, along with our updated baccarat pit, it gives us the ability to cross-market our Macao Paiza brand with our Las Vegas property and bodes well for us in terms of delivering additional gaming drop, particularly out of that segment.

The pool deck, which Bill mentioned, will be opening its first phase in the middle of this month.

We believe that the renovation of the pool deck was one of the product weaknesses and that, particularity in supporting the FIT business, its an important capital investment.

The Blue Man Theater is on line to be opened in the month of September and the Phantom Theater continues under construction for next year.

The Palazzo project here in Las Vegas is continuing.

We're beginning -- foundations are scheduled to begin this month and the Congress Center, which is above the current space we developed and opened with Venetzia, is scheduled to be ready to be opened at the beginning of 2006 next January.

In Macao, we're proceeding with some renovations at our Sands property.

We're currently renovating and developing four new Presidential Suites and three magnificent spa suites.

Some of you who've been to the property were able to see those facilities and they're very impressive and will add more power to our growth in the premium segment in Macao.

The theater is under construction and will be completed this summer.

Again, that supports our mass product and we'4re currently under development of plans to expand our Sands Podium.

This expansion would allow us to add 203 table games and 250 slots.

We could commence this project this summer and complete that project by next spring and we're currently going under the evaluation of that project.

The Venetian Macao is progressing extremely well.

We now have tower cranes in place.

Most of the -- a good part of the piling work is done.

The most intense piling, that under the main tower, which supports the most weight on the building, was completed just this week and we're going to start coming out on the tower superstructure later this month.

So we look forward as we continue to develop that property.

That's kind of a summary on the operations and some of the capital projects.

And with that, I'll turn it over to Scott Henry to discuss in more detail the financials.

Scott?

Thank you, Brad.

First quarter operating results were strong across the board.

On a consolidated basis we achieved record revenues, adjusted net income and adjusted EBITDAR, while gaming and hotel metrics were strong in both Las Vegas and Macao.

On a consolidated basis we reported revenues of 404 million for the first quarter '05, nearly a 69% increase over the comparable period last year.

We generated consolidated EBITDAR before corporate and development expenses of 166.2 million in the quarter, nearly a 49% increase when compared to the 111.4 million reported in the first quarter of '04.

The increases in Q1 '05 were driven primarily from the opening of the Sands Macao in mid 2004, offset by reductions associated with the sale of the Grand Canal Shoppes.

Corporate expense in the quarter totaled 10.9 million versus 2.5 in the year ago quarter and included a 5 million charitable donation to the Solomon R. Guggenheim Museum.

During the past 12 months we have evolved from a one-property company into a multi-property company and, as such, certain expenses previously captured as corporate expense at the Venetian are now shared among multiple entities and are captured as development or pre-opening expense.

Pre-opening expense was 0 in Q1 '05 versus 7.8 million in 2004.

Development expenses increased to 5.2 million in the first quarter from 0.5 million in the prior year period.

Development expenses in the 2005 period relate to continued development expenses in Macao, as well as heightened development efforts in other jurisdictions such as Singapore and Pennsylvania and include 2 million related to our efforts in the UK.

Depreciation expense is 20 million in the first quarter of '05 versus 15.5 million in the 2004 period.

The increase is primarily related to the opening of the Sands Macao in 2004, offset by the sale of the Grand Canal Shoppes.

Net interest expense was 19.7 million in Q1 '05 as compared to 32.4 million for Q1 '04.

The decrease in interest expense is related to our refinancing transactions, which were completed midway through the quarter, partly offset by increased borrowings related to the construction of the Palazzo and the Sands Macao, and also because of additional cash that we had on hand in the wake of our IPO.

Capitalized interest in the quarter was 4.1 million this year versus 1.2 million last year.

Our corporate tax rate on our U.S. operations is 35%.

In Macao we've been granted an income tax waiver on all gaming income through 2008.

Since virtually all of our generated income in Macao is from gaming operations, our corporate tax rate in Macao is essentially 0.

Adjusted net income for the first quarter was 103.1 million, or $0.29 per diluted share, as compared to 40.5 million, or $0.12 per diluted share for the prior year period.

Adjusted net income in 2005 excludes an $86.3 million after-tax charge associated with the early retirement of debt which was in connection with our February refinancing transactions, a $3.6 million after-tax charge for a charitable donation to the Solomon R. Guggenheim Museum, a $4.9 million after-tax charge related to development expenses and a $1.2 million tax affected loss resulting from the disposal of assets.

Adjusted net income for Q1 '04 excluded pre-opening and development expenses and is reflected as if the company were a taxpaying entity in 2004.

Shifting to the capital side for a moment, in February '05, as Bill mentioned, we completed a series of transactions designed to streamline and further strengthen our capital structure.

We exercised the equity (inaudible) option in our 11% mortgage notes, redeeming a third of the issue, including related premiums and accrued interest with $327 million of proceeds from our IPO.

We amended and expanded our senior secured credit facility, lowering our borrowing rate by 75 basis points to LIBOR plus 175 and increasing the total size of the facility by 610 million to $1.62 billion.

We presently have approximately 400 million of availability under the revolver component of the bank facility.

We issued 250 million of 10-year 6 3/8% senior notes at the (inaudible) level and we used 100% of the proceeds from that note offering, along with proceeds from the expanded bank facility and cash on hand, to fund the redemption of the balance of our 11% mortgage notes.

At today's rates, these transactions result in pro forma pretax annualized interest expense savings of approximately $70 million.

However, because these transactions were not completed until midway through the first quarter, the full effect of the refinancing will not be seen until the second quarter of this year.

As of March 31, 2005 we had unrestricted cash balances of approximately $800 million and restricted cash balances of 382 million.

Of the restricted amount, 359.2 million is restricted for the construction of the Palazzo Casino here in Las Vegas.

Total debt outstanding at March 31, 2005, including the current portion, was approximately 1.5 billion, of which 170 million is related to our Macao operations.

Capital expenditures during the quarter totaled 152 million.

Of this amount, 26.1 million was related to enhancement projects and maintenance CapEx at the Venetian here in Las Vegas, 48.6 million was related to construction and development activities in Macao, and 77.5 million was related to development activities and construction of the Palazzo resort in Las Vegas.

This ends our prepared remarks for the call.

We'd now like to open the lines for Q&A.

Thank you very much, sir.

(OPERATOR INSTRUCTIONS)

And our first question comes from the line of Ms. Felicia Hendricks of Lehman Brothers.

Please proceed.

Just a couple of questions for you.

First, on your VIP business in Macao, I was just wondering if you could help us just understand how you're defining those VIP players now in terms of where they're coming from?

And also, do you think you've taken any share at all from Galaxy or from Stanley Ho?

And then my next question is just on the competitive landscape with like a more mass market business coming on line than you may have originally expected.

I was wondering if you could help us think about what kind of market share you're thinking about for the mass market and then also in the VIP market?

And then, Brad, if you could just explain a little bit more in detail maybe a little more slowly the differences between Rolling Chip and non-Rolling Chip, just to help us understand that business as well?

First of all, we're defining the VIP business as that business which participates in the Rolling Chip program.

Almost all of the high-end business, with few exceptions, in Macao wagers by that means.

So as far as definition of VIP, we're basically saying that non-Rolling Chip business will be what we consider mass, Rolling Chip business is what we'll consider VIP because that's what we believe is consistent with the Macao market.

Okay, and then so -- but as far as before you started talking about Rolling Chip and non-Rolling Chip, is there anything that we might have thought about as being mass market that is actually being defined as VIP (inaudible) play now?

I think what we've seen is numbers that were perhaps in the mass market in the past have migrated -- as we opened the Paiza Club and started using the Rolling Chip program have migrated out of what was considered the main gaming win, or what we considered more mass, into the Paiza Club and VIP program.

So some of the pressure perhaps on the growth in the mass market at our property has not only been in terms of some of the capacity that's come on line, but some of it moving from one category at our property into another category at our property.

Okay.

That was the crux of my question.

Okay.

Thank you very much, ma'am.

Ladies and gentlemen...

No...

...your next question comes from the line of Mr. Lawrence Klatzkin of Jefferies.

Please proceed.

I'm not number one, wow.

Larry, hang on one second.

We want to finish up that question there...

With Felicia.

Particularly for Felicia on -- she was asking about the mass market and our share of the mass market.

And competitive dynamics.

Okay.

So if you can bear with us a moment, Larry.

As far as the mix of business in Macao, the mass market, as we talked about on the road show and as we've continued to talk about, has been the greater growth in terms of the market itself.

And we continue to see that growth as more provinces open up immigration and as the amount of money that's allowed to take across the border has expanded.

The VIP market growth, to our knowledge, has not grown as aggressively by any means.

And I think at this point it's fair to say one of the questions is that we have taken some share out of the existing market in Macao as we've ramped up pretty aggressively in terms of the competitive facility we have.

It's always our belief that we can compete very well on an apples to apples basis because of our facility and because of our ability to market.

The challenge has simply been entering that market on a conservative basis, making sure that we did everything properly.

And so we've taken our time and we feel very comfortable now as we grow into that market segment.

The other question was about the Rolling Chip program.

The Rolling Chip program again is something that we feel if we're going to be seeing substantial increases in that portion of our business that we really have to start talking about the metrics that's used in that part of the world.

And again, the Rolling Chip program is used throughout Southeast Asia.

What it basically is is people come and they buy in for nonnegotiable chips.

Those nonnegotiable chips are wagered.

When they're lost, it's lost.

When it's won, we replace it with a negotiable chip.

The fact of the matter is that what we are able to do is look at the amount of lost chips and that is an indication of volume.

We expect to hold 2.5% against those lost chips.

And that would be our theoretical hold percentage.

And we use this to pay commissions and discounts, so to speak, to our customers.

So, at the end of the day, we expect to have about a 2.5% hold percentage against that market.

It's more akin to like a slot -- the way we track slots is more on an actual basis.

The Rolling Chip program would be the ideal thing to use across an entire casino floor except you can only do it with 30 or 40 people because it's a more complicated program.

So we're using that program.

When you look at our volumes, our reporting volumes as far as what we consider to be the roll and the roll is something, for example, we said it was 698 million in the month of April and you'd use a metric of 2.5% hold in order to establish what would be the normalized win.

Just like any game, then we have the actual win, win or loss against the game, and that will determine our actual hold percentage against that amount.

And, as I said, we would have expected on the roll in the first quarter to hold about 2.5%.

We held 2.1%.

So, we didn't hold as strongly as we would.

That'd be like saying in Las Vegas we expect to hold 20% and we only held about 15 or 16%.

So that's a -- it's a very complicated process.

We'll be happy to send information to anybody who requests it and we'll do a detailed explanation of the Rolling Chip program.

Probably don't have the time on the conference call to do that.

So you need someone like me to gamble.

I'd just lose everything and then you don't have to give any kind of Rolling Chip.

Solomon Guggenheim, so the reason for the donation is that now they're part of your presentation in Singapore and you guys are full partners in what's going on there?

Would you repeat that again, Larry?

The donation to the museum is related to your participation in Singapore and them joining you in that project?

Partially.

I mean the donation to the Guggenheim was a support for the Guggenheim organization overall out of New York.

They obviously have been very successful in their global expansion, particularly as it relates to Bilbao and what they've done in Germany and other places.

We've had a very good relationship with them.

They have helped us here in positioning our product.

We approached them and, as I mentioned in my opening that we have jointly proposed to develop a very large tourist destination style museum as part of our project in Singapore.

But that donation was partially related to direct activities in Singapore, but mostly related to supporting the foundation overall.

Okay.

Bill, can you talk about the trends in the first quarter, maybe monthly trends first quarter as far as room rate and occupancy rate in Las Vegas and what's been going on looking at April?

I think what you -- I think Brad has the detailed numbers there, but it's interesting to look at the differences between, for example, January and March.

One of the things that we had done as we looked at last year's first quarter, we booked a huge number -- or pre-booked a huge number of convention room nights and our thought was we didn't really optimize the opportunity last year.

So our decision this year was to book fewer base of group room nights and book higher rated FIT business.

We took a bit of a gamble, I guess you would say, on that in terms that without as much pre-booked business, we were gambling on being able to maximize the total rate even though we (inaudible) effectively sold out because we couldn't figure out how to increase our volume all that much.

If we sold out first quarter last year, how do we increase our total rooms revenue this year.

So we decided to book fewer group rooms and then look at the higher rated FIT market to be able to top it out.

That worked very well in March.

We took the gamble in January because of the rains and we were affected.

So Brad has the numbers on that that can support that statement.

I think the issue at the Venetian is usually not occupancy.

We ran a little over 96 in January up to 97 in February and 100% in March.

It really comes down to rate and the mix of business we fill in.

And, as Bill said, the transient business in particular in January was off because of the weekends.

It was off in particular in terms of commanding a rate because it just wasn't a desirable location.

So for example, though, in the month of March last year we -- just to give you some flavor on what Bill said -- we had 28,800 transient room nights.

This March we had almost 54,000.

And we did that taking the rate on the -- let me see if I've got the transient rate here.

We saw really no dilution in the rate and were able to move that overall occupancy up.

Last March we ran at 227 average rate.

This March we ran 250, so we picked up $23 per room.

So again, we're always looking and, as much of the group business is our foundation, we're always wise to the fact that there are months and periods of time of demand where we can adjust that mix again to continue to maximize the rooms revenue opportunity.

All right.

As far as you said something about more money coming -- being allowed across the border in China.

Have they recently increased the amount of money brought across?

Are they going to continue to increase what they allow people to bring across?

Yes, as of the first of the year they increased the amount of remembi that can be legally brought across the border and cashed or turned over into hard currency per day.

Okay.

that was somewhat -- let's say it was somewhat mitigated, I guess you would say, by a crackdown in the central government on gambling in general.

The central government closed down several illegal casino operations, closed down several casinos at the border where some of the local Chinese officials had allowed people from China to go across the border to places like North Korea and to Russia to play, and a general crackdown overall on those who are government officials and those who operate SOE, state owned enterprises, bringing government cash across the border to play in Macao.

So, for example, looking at the first quarter results of VIP business in Macao was up only 2% year on year.

Mass business and slot (inaudible) business was up about a 60% basis and slots were up about 167%.

So slots and mass business relative to VIP, when you blend it together, first quarter results were up only about 17%.

Now, according to government sources and according to Star Online, April represented a 40% increase in year on year growth.

So, the first quarter may have been affected by some of those government crackdowns.

Looks like April has recovered to a certain extent.

So that 17% is cash betting versus the 19% they showed for increased visitors?

Yes. 17% is the amount of total gaming win for the market for the first quarter increase year on year.

Okay.

...April was up 40%.

It's interesting to look at those numbers.

If you take year on year and you look at our results compared to the market, in other words, we weren't there in the market last year, so if you look at our results and you compare it to last year's income, we explain all of the increase in VIP business as far as the 2% increase and maybe a little more than that 2% overall.

We represented 54 percentage points of the 60-point increase in mass, so that means that we took 90% of the incremental increase in mass market.

And we represented 109 points of the 167% increase in slot business, so that means 66% of the incremental mass slot business.

So the 17% in the market, we represented 16% of that, or 95% of that increase in incremental business.

So we were talking to a certain extent there about our relative effectiveness, for example against the mass market, even though a lot more mass market tables -- as a matter of fact, year on year at 11 times the number of mass tables in the market as you had from the year before.

So, as I mentioned in my opening remarks, I think we're doing quite well against an onslaught of mass tables, partially because we're used to a competitive environment.

Also partially because we've built, I think, the better mousetrap in terms of the physical product located correctly next to the ferry terminal.

As Brad mentioned that we'll be focusing more and more on our mass play and turn on some of the programs that we actually have developed here, in our experience in a very competitive market, I think we'll see some effects this summer of even a larger share of the mass business.

And then as Brad mentioned, too, as we get into the higher end business I think you'll see us be more effective against that market.

One thing I would mention also is we're always mindful of margin.

The whole organization last year had a casino gross win of somewhere in the area of 4.3 billion ballpark.

But they took only about 500 million to the (inaudible).

So their margin is only in the 10, 11, 12% range.

We expect our margins to be in the high 30s on an ongoing basis.

And as we ramp-up our VIP business, there may be some margin pressure because the cost of the VIP business is higher than the margin -- the costs of the mass business.

But we still would expect to maintain a good strong gross margin against a growing VIP mix and a more competitive mass mix as we go forward in Macao.

Sir, does that answer your question?

No, no, I have one more question here.

Bill, could you talk about CapEx for the year and what you may end the year in cash and debt at year-end of '05?

I think Scott and Brad can address themselves to that.

To date we haven't really given CapEx forecasts, Larry, and a cash projection on where we are expecting to be going forward.

I know it's important in terms of determining what our interest expense is likely to be and our interest income, but we're -- at this point we're not prepared to give that data.

All right, that's fine.

And how about quarter ending slot and table count both in Macao and in Las Vegas?

I'm sorry?

Quarter ending front (ph) and table count at each property.

In Las Vegas we currently have about 118 tables, 1,984 slots.

And then when you add the baccarat pit in we have -- we actually have 134 tables including the baccarat -- 135 and 1,900 slots in Venetian.

We currently have 352 tables at the Sands and 795 slots.

Thank you very much, sir.

Ladies and gentlemen, your next question comes from the line of Mr. Harry Curtis, JP Morgan.

Please proceed.

A couple of questions.

The first is what are you learning about the seasonality in Macao and specifically how long does it take for the new provinces, so for example, when we had two new provinces open in March, how long would you expect those openings to take to translate into increased visitation to Macao?

That's my first question.

The second question relates to the amount of high-end revenues and cash flow that were generated in the first quarter.

It looks to me like at a 2.1%, if you will, hold on the 856 million of high-end revenues, that should translate into about $18 million of high-end revenue.

And would I be correct in saying that that would translate into about 3 to 4 million of incremental EBITDA in the quarter on the high end in Macao?

Well, to answer your first question, you're a good mathematician.

First two questions.

Second question, I guess.

I answered the second question first.

You're a good mathematician, Harry.

So yes, the win in the high end was approximately $18 million during the first quarter.

And again, we would apply typically about a 17 to 20% margin on that.

The commissions in Macao vary, whether there's -- some business that's rolling does not have a junket rep involved, so there's less commission.

And then the commission is kind of a moving target in terms of the more business somebody plays and the higher commission we pay.

So to say it's 1.1%, 1.1 is the max.

But it's blended somewhat below that.

So let's say it's roughly 18 to 20% margin on that business at this point.

So that would roughly be 3.6 to $4 million.

And the seasonality issue, please?

Yes, the first question I guess, as I mentioned in my opening remarks there, we're trying to -- we're now lapping (ph) ourselves and we'll get a better idea of seasonality overall.

Generally, seasonality, as far as mass traffic, foot traffic during the traditional times, the July, August, into September time periods, we would anticipate that foot traffic would return to where they were when we kind of first opened our doors last year, maybe slightly higher.

We do find the interesting things, observations, are things like Chinese New Year.

Chinese New Year is different there than what we find it here.

I think I mentioned on the last conference call is that in China, Chinese New Years, the first three or four years are very family-oriented.

So people, when they're at home or when they're in China tend to stay at home.

So we had the lowest foot traffic in the first -- recorded in those first few days of Chinese New Year.

And then right after the first three or four days where family is important, when everybody then got of the house, we had the highest foot traffic counts.

So it was an interesting pattern that we had not observed before.

We also found that some of the high-end play avoided Macao at that time; they stayed home generally because of how busy that it became after the end of Chinese New year.

So instead of February being one of our higher months, it was our lowest month.

Of course, we did not hold well against the high-end at that time either.

We got kind of shellacked in that particular month.

Then March the traffic recovered and then April the traffic has been strong, so we think we see more foot traffic now ramping up as we get more into the summer season.

Our assumption as far as pure mass business would be is that our, call it our third quarter would be our highest foot traffic month.

Then you'd probably see shoulder on either side on first and third -- or pardon me, first, second and then third quarter being the kind of stabilized as we're into the winter months.

So there is seasonality.

We'll get a better sense of seasonality.

But fortunately, the increases in traffic across the border with the opening of the borders has really kind of hidden from us what those seasonality's might be.

As far as new provinces overall, only 2% of the total 175 million people who were allowed last year to come to the border, only 2% of those 175 million people actually took advantage of the cross border.

The increase in March of the other 2 that represented 53 or 54 million more people, we haven't really had a chance to even measure as yet.

So we'll get a sense of that as the government produces their figures about who actually came to the border.

There are now 200 million, 220 million people that are allowed to come to the border without a visa.

It represents a huge potential future pool of visitation that we've just scratched the surface of and I'm sure as more attractions come on line there in Macao, as we develop more capacity, as Brad talked about earlier, we'll just see a lot more of that visitation pouring across the border.

When do you expect Fisherman's Wharf to open?

I think the last date that was then moved back further was sometime in the fall, September, October.

Thank you very much, sir.

Ladies and gentlemen, your next question comes from the line of Mr. Steven Kent of Goldman Sachs.

Please proceed.

Just to go through a little bit more on the detail of Macao, Bill, can you give us actually what sort of the variability of that hold percentage was month to month?

It sounds like you alluded to it a couple of times, but what kind of range are you really seeing there?

And also, just so we understand, as you move more -- or try to go after a little bit more of the high-end market, this is a lower margin but high volume game.

Is that the way to start to think about it, that the fact that you're seeing four and five times fold (ph) increases, that's a good forward indicator of where we're going, even though it might be lower margin?

And then I guess my third question is the variability of the hold, sort of how the high-end lower margin business works, but also finally, on the marketing programs, which I think you started to explain, did that put you on par with the other players in that market or are these new initiatives, your card program and your shuttle program, or is this basically just gets you on par with everybody else?

Well, I think there are a mix of things.

Brad can take you through some of those -- some of those metrics.

Let's start first with the variability of hold.

Variability of hold, yes.

Again, Steve, what we're seeing here is a ramp-up of the business and the more business we have, the more normalized we'll see our hold.

So if you look through the quarter against that 2.5% theoretical, in January we held 5.9% on a very low base.

We actually were breakeven in February, we had 0 house advantage, as Bill alluded to, and in March we were at 2.2%.

And then we were above the norm in the month of April.

That's on rolling?

On rolling.

As far as the mass play...

So the variability there was from 0 to 5.8.

Right.

So the reality is that through the first four months of this year, we're at 2.5, which is roughly where our theoretical should be.

But we're going to see variations.

I think those variations will get less as we get more volume, so it's not one or two players that can affect it.

And I think you're starting to see that in the months of March and April.

With regards to the mass business, we've been pretty consistent in the 16% range.

We're roughly, I believe -- I looked the other day; we were roughly a little over 16% since opening.

If you look at the -- again, the first quarter we were about 17.1 and so I think that again, I think it's a fairly decent predictor, somewhere between 16 and 17%, again based on the knowledge we have at this point in time, based on really about 10 months of operation.

With regards to the marketing programs, some of them are unique.

The bus programs are not unique.

What we're going to be doing is increasing our presence at the borders.

As Bill said, we're the closest to the borders and to the ferry.

We just need -- we're going to expand our presence there; shuttles, help get people right to your front door.

And we have not seen our fair share of the shuttles at this point, so we've entered into some new contracts to get more presence at the border.

Overland buses are something that are done in Macao, but not to the scale we intend to do them.

These are more akin to the line run and charter business that you see in Atlantic City, for example, and we'll start expanding that business.

We've entered into that this quarter, but we'll be much more aggressive as we hit the seasonally strong, for this type of business, during the third quarter.

And then what we're going to be doing as far as promotional programs, there'll be promotional programs on the floors, giveaways, things to keep people at the building so when you're coming to Macao for eight hours, we want to capture a higher percentage of the play.

It's akin to things that you see in Atlantic City as far as promotional type items.

Additionally, we will be doing a lot more -- be more aggressive in terms of database marketing where available to us.

Again, you have to be careful in China.

You have to be -- you're very restricted in terms of the messages you can send into Mainland China, so we're conscious of that.

But those types of programs we believe are going to be a little more unique.

Certainly there are people that give away cars and have contests.

I think the Macao right now, the other operators are where we were in Atlantic City in 1980 before we got smart and utilized our databases and our tracking of customers and our promotional programs.

We won't be just give us your name and we'll put you in a drawing.

Ours will be based upon your play and the more you play and we'll incent people to give us a higher proportion.

So I think the programs you'll be seeing us launch in Macao are far more sophisticated than, at least I'm aware of that exist currently at the other Macao operations.

When you talked about -- they also asked a question about what we anticipate the margin to be at a 2.5% (inaudible) hold percentage against the high-end.

Again, that's where I think it comes in at somewhere in the area of 18 to 20%.

The math is pretty simple.

Of the 2.5% hold, 40% of that goes away to the government in terms -- it's roughly 40% in terms of taxes.

So that's one point.

And then anywhere from -- maybe we'll set a limit on overall commission rate of between 0.9 and 1.

So you're going to have roughly a 5-percentage point from 2.5 -- 5 points -- 0.5 and 2.5 is a 20% margin.

It may be slightly under that.

That's how we think about it.

And then as you go through your math on the blended margin, if the mass business is 40-plus percent and the high-end business is 18 to 20%, depending upon your mix of play, that's where you would expect overall margins to be.

The interesting thing is that margins here in this town on gaming do hover around a 20% overall table game margin here in Las Vegas, 20, 25%.

So it's really not that different on the VIP side and the blended business here in Las Vegas with a 6%, with a 7% tax rate.

Thank you very much, sir.

Your next question comes from the line of Mr. Jay Coggin (ph) of Banc of America Securities.

Please proceed.

A lot of my questions about Macao have been asked.

I maybe have a few clarification questions here.

With respect to the seasonality you were talking about before, Bill, I was just wondering, just so I'm hearing clearly, you think the first quarter's the lightest quarter, 2Q and 4Q are comparable, and 3Q should be the strongest seasonal quarter.

Is that how we should think about it?

I think that's the way we would think of general mass business, mass business volumes.

So obviously what can affect any one month or any one quarter might be a particularly good junket quarter, for example let's say if you have a large Thai group that might come in or you might have several groups coming in or individual players from Hong Kong or Shanghai or (inaudible) or something of that nature.

But generally, that would be if you just -- if you take away the high-end business and simply say, "What would my business look like in terms of foot traffic in through the door", that would be a general benchmark, I guess you'd say.

And then thinking about that some more, does that mean that the month of April, then, was somewhat of an anomaly given the low base that the comp was against?

As we move through May and June I was wondering what your thoughts are about the market and maybe how you guys do as you start into anniversary.

Well, I just think that we'll see as things -- although the winter over there isn't particularly cold, it does get cloudier and it does rain more and so forth.

And as you get into the spring, as it warms up, I think we'll see more foot traffic.

And then as we get into the summer, traditionally we'll just see a lot of mass traffic coming.

And then your VIP market share given the numbers you put out, you're about what, 5% roughly in terms of VIP market share at the end of the first quarter, kind of your run rate in March.

And sounds like that in April, too, if I'm thinking about it correctly.

Where do you think you guys can get from a VIP market share base and if the VIP market is barely growing right now, is that just a temporary issue or do you think that's a longer term or, say, a year or two phenomena possibly?

I think our March, it appears our March VIP share was about 4%.

Is that correct?

So we were something in the area of 1.5% or something like that prior to March.

April I think we improved on that share somewhat, did we not?

I'm not sure absolutely yet.

We're not sure.

We don't have the comparative number.

I mean we did quite well in April in terms of ramping up our volume.

Don't know what the market-wide volume was, so we don't really have a denominator to try to figure out what that percentage is.

And did the VIP market -- again, your thoughts on why the VIP market has kind of slowed to the 2% or so level and what should we expect going forward over the next year or so?

Is it going to continue those growth rates or accelerate with the Chinese economy?

Any thoughts on why it's slowed as much as it has?

Well, with about, I guess you'd call it about 70% of the win in the market coming out of the VIP rooms and with literally hundreds of VIP rooms that are individually owned by the junket reps themselves and with the thousands of reps scrambling around in the field to drive business in the door, it's hard to determine.

As I mentioned in my comments, the speculation there, at least for the first quarter, was the crackdown, if you will, on gambling overall.

That probably either made legitimate individuals delay their visits to Macao or illegitimate individuals not come at all to Macao.

I think that's probably the primary effect of what the government was broadcasting to everyone, at least for the first quarter.

Now, it's possible as much as folks felt, "Perhaps I'll hold back my trip for the first quarter", it's possible they said, "I can't wait any longer" and they came back and poured back in in March.

I'm not sure.

That's speculation.

Pardon me, in April.

That's speculation on my part.

But in a culture like the Chinese culture, it really doesn't matter what the government says or doesn't say, quite frankly.

Over time, this is something that they really enjoy doing and that's no matter what.

So I would assume that we would see continuing increased volumes overall as more people are allowed to come to the border, increasing amounts of money, both as they're allowed to bring more money across the border and as the middle class wealth grows at a 36, 37% rate year on year, and increasing high-end volume as more and more Chinese legitimately arrive at wealthy status.

So we don't see any fundamental change.

There may have been a little wrinkle in the first quarter, but obviously we look at what the results are of April and we would anticipate just getting stronger.

Thank you very much, sir.

And ladies and gentlemen, our final question today in our Q&A session comes from the line of Mr. David Anders (ph) of Merrill Lynch.

Please proceed, sir.

Scott, just clarification.

Did the hold in Las Vegas add about $0.02?

Is that a good guess to the earnings per share?

It added about...

Yes, that's close, on a rounded basis.

It's probably at about -- I think it's 6 million (ph) of EBITDA.

...EBITDA and 350, it's just under $0.02.

It rounds up to $0.02.

And just to be clear, you said that you are going to be expanding Macao with another 200 tables, is that correct?

Actually it's more like $0.01 on a tax effective basis, David.

Sorry.

About a penny, wouldn't you -- ?

Yes.

So what was your question, David?

Just to be clear, you are going to be expanding Sands Macao with another 203 tables, is that correct?

That's our plan, yes.

And do you have the land and all that?

David, if you're familiar with the property, in the southwest corner we have a podium platform there.

And what you'll see is on three levels, the casino expanding off the main floor, the buffet, we'll readjust that buffet so the buffet seating area where you can look over the casino floor becomes gaming with an escalator from the main floor up to there, and then another escalator up to another level, which connects into our theater and to our restaurants.

So we'll energize the second and third floor of the Sands with gaming and integrate those restaurants, the theater, the buffet and more dim sung type restaurants to serve the mass market in that facility.

And there'll be -- the design is outstanding.

It kind of creates a couple of different new types of environments there.

Each floor is themed differently and we think we'll be, again, an attractive other thing to see at the Sands facility.

We'll take what we learned in terms of if we had it to do over again, we'd make our noodle (ph) -- our night market noodle larger and what we'll be doing is adding a lot of that kind of feeding (ph) capacity in conjunction with more mass table capability.

What we're seeing is that on our shifts, on our Fridays, Saturdays, Sunday shifts, again, there we're pretty well sold out of tables.

So there's a lot of opportunity at the margin there to be able to add more capacity.

And then as we add more feeding capacity in terms of what it is we learned, I think we have more competitive, I guess you would say, mass market type of product to be able to address that market more effectively.

And just to clarify, that's the first half '06 you said?

That is -- yes, sometime in the first half of '06.

Also what we find is that at our peak times, as our table limits are high, we turn away a lot more mass type business that's still very profitable business.

So we think it's an important project for us.

thank you very much, sir, and thank you, ladies and gentlemen, for participating in our Q&A session for today.

I'd like to turn the call back over to our speakers for any closing remarks they may have.

Please proceed, gentlemen.

I think we've done a reasonably thorough job of exploring our quarterly results.

We appreciate your attention.

We appreciate your questions.

We look forward again further to a robust calendar in our quarter that we're in now, our second quarter.

We look forward again to developing better our techniques of marketing in Macao so that we can cross-market more effectively here with the new product that we're putting on line, particularly at the high end for the Chinese customer overall.

And I think things are very well and we see Wynn's opening as something that has already had an effect on our foot traffic, that we can feel every day in the building.

And again, as he creates another level of pricing umbrella, I think our all-suites product and the physical building that we've developed here is set up nicely to be able to move forward under that pricing umbrella, offering a better, call it high quality price value relationship.

And so, as I say, we look very -- we're very much looking forward to the future and we think we're in very good shape.

So we appreciate your attention today and look forward to our next quarterly conference call.

Thank you.

thank you very much, sir, and thank you, ladies and gentlemen, for your participation in today's conference call.

This concludes the presentation and you may now disconnect.

Have a good day.