拉斯維加斯金沙集團 (LVS) 2009 Q1 法說會逐字稿

Good afternoon.

My name is Ashley, and I will be your conference operator today.

At this time, I would like to welcome everyone to the Las Vegas Sands Corp.'s Q1 earnings conference call.

All lines have been placed on mute to prevent any background noise.

After the speakers' remarks, there will be a question-and-answer session.

(Operator Instructions).

I will now turn the conference call over to Daniel Briggs, Vice President, Investor Relations.

Thank you, Ashley.

Good afternoon, everyone, and thank you for joining us today.

On the call with me today are Mr.

Sheldon G.

Adelson, our Chairman and Chief Executive Officer; Michael Leven, our President and Chief Operating Officer; Rob Goldstein, President of the Venetian Las Vegas and the Palazzo; and Ken Kay, our Chief Financial Officer.

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 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 forward-looking statements for a discussion of risks that may affect our results.

In addition, we may discuss adjusted EBITDA, adjusted net income, adjusted diluted EPS, and adjusted property EBITDAR, which are non-GAAP measures.

A definition and a reconciliation of each of these measures to the most comparable GAAP financial measures are included in the press release.

Please note that this presentation is being recorded.

With that, I'll turn the call over to Mr.

Adelson.

Thank you, Dan, and thank all of you for joining us today.

I want to make a couple of opening remarks before I turn the call over to Mike Levin.

Let me start by saying that we are very pleased with our first-quarter results.

In Las Vegas, where the Venetian and Palazzo benefit from having a greater emphasis on convention and group meeting business during mid-week periods, we outpaced the market, according to our comparative analysis in RevPAR.

In addition, we have witnessed recent positive trends in gaming volumes, and an improving environment for future group business bookings, especially into later 2009 and early 2010, which, together with the full implementation of our cost-savings program, should benefit our Las Vegas performance going forward.

In Macao, the Venetian Macao continues to enjoy marketing leaning visitation, healthy mass play, retail and hotel revenues, and has become less reliant on rolling play for its cash flow generation than is the market overall.

So clearly, our properties in both Las Vegas and Macao each possess a broad diversification of sources for both revenue and cash flow.

The diversification relative stability of our revenues and cash flow streams are serving us quite well in the current environment, and will serve as equally well as the environment improves in the future.

Finally, I want to acknowledge that, as we sit here today, we do so as a disciplined, united management team.

And I am confident in our ability to manage through the current operating environment.

Mike has really hit the ground running, and it's clear to me that the Company will benefit greatly from his decades of experience running large, multinational enterprises and driving efficiencies across global operations.

I am also pleased with the financial leadership Ken Kay has brought to the Company, as we work to implement our $470 million cost-saving program, and to increase our cash flow and maximize our financial flexibility.

Now, for those of you who have not had an opportunity to meet him yet, I would like to turn the call over to our new President and Chief Operating Officer, Mike Levin.

Thank you, Sheldon, and thank you all for joining us.

It's a pleasure for me to be with you today and to provide a quarterly update on the Company for the first time.

I look forward to working with you all in the future.

While I have only been serving as President of the Company for approximately two months, and thus it's still very early days for me, I think a few things are very clear.

First, the level of talent, commitment, dedication, and enthusiasm of Las Vegas Sands team members is excellent.

It's an honor for me to join this management team to lead such an accomplished group of employees.

Second, the business plan that the Company implemented in November of 2008 is working very effectively.

I am pleased to report that we have made very notable progress.

That plan has three basic components.

First, to maximize cash flow from our current operating properties in Las Vegas and Macao, predominantly by the implication of cost control and efficiency measures.

Those cost-savings initiatives will deliver approximately $470 million of annual savings once they are fully implemented later this year.

Additionally, we will continue working to exceed that number.

Second, to deliver our two ongoing developments, Marina Bay Sands in Singapore and Sands Bethlehem in Bethlehem, Pennsylvania, on time and on budget.

And third, to reduce our leverage and generate additional liquidity through the sale of non-core assets or the monetization of certain of our existing operational activities.

We have made progress on each of these three components of our plan during this first quarter.

With respect to the first component, maximizing cash flow from current operations, we have identified and are targeting approximately $470 million of annual cost savings across our Company, the majority of which will be permanent in nature.

Our ability to control our costs across the entire organization is a critical component in our plan, and we will continue to seek opportunities to run our business more efficiently in today's environment.

We expect to achieve greater operating leverage companywide, and as the Company continues its growth into new markets, there will naturally be opportunities for additional synergies in operations and management.

Stepping back, the change in the operating environment has provided us with a unique opportunity to right-size our business for the long term.

We expect to operate our business more efficiently, both in today's environment and in tomorrow's.

These permanent efforts will require the complete commitment and dedication of our executives and employees, and I am pleased to say we are getting that commitment in spades.

Turning to the second element of our plan, the delivery of our Singapore and Bethlehem developments on time and on budget, we are making steady progress and both developments are tracking according to schedule.

At Sands Bethlehem, we are progressing steadily towards a planned opening on May 22, less than three weeks from today, with a grand opening celebration planned for June 9.

In Singapore, we continue to target a December 9/January 10 opening for the Marina Bay Sands, while working with the Singapore tourism board to finalize a progressive opening schedule.

I will provide some additional detail on our Singapore and Bethlehem developments in a few moments.

Finally, with respect to the third component of our plan, deleveraging through the sale of non-core assets, or the monetization of certain of our operational activities, we are continuing our efforts to sell both units at the Four Seasons [a part] hotel in Macao, and our retail malls.

While we realize the market conditions for the sale of these assets are less than ideal, the monetization of these assets remains one of the alternatives potentially available to us as we evaluate the full set of deleveraging strategies available.

We will continue to pursue these sales, and Ken will provide an update on these processes and other opportunities later in the call.

Moving now to our first-quarter operating results, I will give a brief overview, and then turn it over to Rob to provide some color and perspective on our Las Vegas operations.

Overall, and as Sheldon mentioned in his opening comments, our properties continue to generate significant cash flow.

People are continuing to visit in great numbers.

Although they are spending less, particularly in room rate, the implementation of our cost-savings programs in all our properties is a critical lever we are using to protect cash flow in this environment and to create operating leverage for the future.

We believe that the quality of our assets, together with a differentiation of our operating strategies, particularly our focus on group business in Las Vegas and the mass gaming and non-gaming market segments in Macao, are important factors as we manage our business in the current environment.

With that, I'll turn the call over to Rob to discuss our Las Vegas operations.

Despite the environment in Las Vegas, our operations delivered adjusted property EBITDAR of approximately $90 million in the first quarter.

Last year in the first quarter, we generated $122 million in adjusted property EBITDAR.

Last year's results reflect a higher table games [hold] percentage, approximately 25.3%, versus this year's 20.6% in the first quarter of '09.

EBITDAR margin was down from first quarter 2008, but improved 90 basis points on a sequential basis.

As we implement additional cost savings at the two properties, we expect to further improve our operating leverage in Las Vegas.

Room revenue declined by $13 million, driven principally by ADR decline.

Year-on-year table games [hold] percentage is what resulted in $21 million less revenue when comparing Q1 '09 to Q1 '08.

Visitation at both properties remains healthy.

Our occupancy for both properties is [really] 90%.

The Palazzo achieved occupancy of 92.7% and a first-quarter ADR of 221.

The Palazzo just completed its first-year anniversary and has continued to blossom and has been very well received by our guests.

Its ADR and occupancy is growing healthy; gaming volumes reflects its growing appeal to the consumer.

While we have enjoyed solid visitation and healthy hotel occupancy, the economic environment has resulted in decreases in both ADR and revenue per visitor.

Our strategy to maximize cash in this environment is to maintain high levels of occupancy at both hotels, expand our room-block for gaming customers, pursue additional group business in segments where meetings' decisions can be less impacted by the softer economy, and to aggressively manage our cost structure.

The properties will benefit from these efforts on an ongoing basis and it appears that April was the best month of the year for adjusted property EBITDAR.

From the hotel perspective, we've traditionally benefitted from the strong foundation of convention and group business, which has allowed us to enjoy a higher mid-week ADRs than the market, and benefit from the strong and profitable ancillary group rated revenues.

While we are naturally not expecting group business to be as strong this year as it has been in the past, we do believe our group business base has insulated us somewhat from the softer conditions in the other segments.

In the first quarter, our group room ADR carried a healthy 24% premium over our FIT ADR.

Our group business in 2010 and 2011 is now starting to improve as future bookings come in, and groups who have previously canceled for 2009 are booking future years.

So the group segment, while facing challenges, certainly, in this environment, is very much alive and well and remains a cornerstone of our business strategy here in Las Vegas.

First-quarter gaming volumes across our Las Vegas properties were down when compared to last year's first quarter.

Combined, the Venetian and Palazzo table drop was $444 million; slot [handed] was $706 million.

Our table-games business held up well, compared to the Las Vegas market overall, with volumes down less than 3% compared to last year's first quarter.

While gaming volumes were down in the first two months of the quarter, compared to the first two months of 2008, we gained some momentum in March and those positive trends continued into April.

Our combined slot [use] was higher in Q1 2009, as opposed to Q1 2008.

Our volume, however, was down.

We have revised our game mix and marketing strategy to increase whole percentage of our slot product.

Despite the relative stability in our business overall, we are cognitive of the current challenging operating environment.

We have thus expanded our plans to reduce our cost structure.

We are now targeting approximately $200 million in annualized cost savings across our Vegas operations.

We expect to fully implement those cost savings this year, and we will continue to seek additional opportunities to remove costs.

Some of the initiatives implemented thus far include labor efficiencies, which includes a 17% overall payroll savings from our peak payroll period in 2008; reductions in marketing and advertising; and the implementation of a more streamlined procurement process.

Our objective remains to pursue these initiatives while not sacrificing guest experience.

So, in summary, people are certainly still visiting our Las Vegas properties in large numbers for both business and leisure purposes.

Bless you.

We believe our asset base, with its luxury and approachable appeal, offers the diversified product mix in both a content and price perspective as it relates to retail, restaurants, and entertainment products.

With that, I'll hand it back to Mike and look forward to addressing your questions at the completion of prepared remarks.

Let's turn for a moment to Macao and start with the Venetian Macao, which generated more than $120 million of adjusted property EBITDAR for the first quarter of 2009, versus $110 million in the first quarter of 2008.

This favorable result was accomplished in an environment where gaming revenues and visitation are both down in the Macao market overall.

Visitation has remained strong with the Venetian Macao, enjoying more than 6 million visits to the property during the first quarter.

That visitation drove healthy mass play and hotel occupancy for the quarter.

Our CotaiJet ferry service also carried 1.4 million passengers in the first quarter and maintained its 30% market share of customers traveling from Hong Kong to Macao.

Our convention and group business accounted for over 150,000 visitors and approximately 13% of our room nights sold.

The three-pronged operating strategy for the Venetian Macao that we implemented in 2008 has been effective, and will continue through 2009, albeit with a heightened focus on right-sizing.

The first initiative is to manage our VIP business.

We expect that Macao's markets overall VIP rolling volumes will decline somewhat in 2009 after the unsustainable growth driven by excess liquidity in the market in 2008.

However, we have bucked that trend so far.

The Macao market's increasingly competitive commission structure significantly reduced the profitability of this business for gaming concessionaires through 2008.

While the VIP business remains a contributor to our adjusted EBITDAR, it is important to recognize that it contributed only about 18% of our adjusted property EBITDAR at the Venetian Macao in the first quarter.

That is down from approximately 22% during the first quarter of 2008, when we made $110 million in EBITDAR versus $121 million this year.

So our ability to generate more EBITDAR on roughly consistent rolling volume illustrates the diversified nature of our cash flows, with about 30% coming from non-gaming sources, principally hotel rooms, entertainment and retail, and over 50% coming from mass gaming play and slots in the first quarter of 2009.

Given that backdrop, our principal objectives for the VIP rolling business remain careful management of the business and the control of credit risk.

While we focus on the development of more profitable direct play, particularly for markets outside of mainland China, including Japan, Korea, Indonesia, Thailand, and Singapore.

During the first quarter, our non-junket VIP play at the Venetian Macao grew to 17.3% of our total rolling volume, compared to only 13% in the first quarter of 2008.

The second strategy is to grow our mass table and slot business.

Our Cotai ferry service remains a key tool in support of visitation to the Cotai Strip and the Venetian Macao.

And the direct correlation between increasing visitation and increasing slot play is an important development in the Macao market's maturation as an integrated resort destination.

We expect the addition of City of Dreams to add important critical mass to the Cotai Strip, increase our ferry occupancy, and further solidify Macao's growing presence as the destination resort of Asia.

The promotional offerings of the CotaiJet are being targeted to casino customers, and the service continues to drive traffic to the property.

After increasing the frequency of its sailings in July last year, CotaiJet has now established itself with a market share of about 30% on the Hong Kong-Macao loop.

That direct service to the Cotai Strip is one important contributor to strong slot play for the quarter, which was up nearly 50% compared to the first quarter of 2008 and to healthy, non-rolling chip table games played.

Our third initiative is to control our cost structure.

Our cost-reduction program targets approximately $270 million in annualized cost savings across our Macao operations.

This program is -- to be designed to reduce our operating costs, while preserving as many local jobs as possible and maintaining a world-class customer experience for our guests.

The effects on EBITDAR margin at the property have already been felt with both year-over-year and sequential improvements in margin.

We will continue to align our headcount with the current, rather than future, needs of our business.

In January, we reduced the normal hours worked per week for dealers in Macao from 48 hours to 40.

This change allowed us to both save approximately 1,000 jobs of Macao residents while reducing our dealer payroll by approximately 13%.

In addition, we reduced our overall labor force of non-resident employees by over 1,000 through a combination of layoffs and attrition.

Our important areas of the cost-reduction program include transportation, utilities, and general hotel operating costs.

Although we have done a lot of work, our work here continues and we will update you on our progress as the year continues.

Although we made some significant progress, there is much work to be done.

We will update you on our additional efforts in the future quarters.

So we think those three strategies have contributed to a solid performance for the Venetian Macao during the quarter.

The full implementation of our cost-savings program will contribute additional EBITDAR in the coming quarters and in the years to come.

Let me spend a moment on the Sands Macao.

The Sands delivered over $50 million in adjusted property EBITDAR for the quarter.

Rolling volume of $5.1 billion was down 8%, compared to the quarter one year ago, and while mass drop was down, the Sands remains a leader in mass play on the Macao peninsula, recording $613 million of mass drop in the quarter.

Our additional cost-savings initiatives will further improve the Sands' cost structure and, we believe, can increase the property's cash-flow generation and capability.

Now a moment on the Four Seasons Hotel.

This new property generated approximately $4 million in adjusted property EBITDAR during the first quarter.

We have clearly experienced a slower ramp at the property than we would've liked.

The property has, however, experienced a steady increase in both visitation and mass play in each month since its opening, as awareness of the property has grown, particularly in the Hong Kong market.

The Four Seasons Hotel has maintained a very healthy ADR of $295 during the first quarter, and the Four Seasons management has now begun to promote the property to increase occupancy with a -- various bundled packages that include spa treatments and special events.

Importantly, later this quarter, we will open two floors of VIP gaming space and premiere our 19 Paiza mansions.

These exclusive suites, among the most luxurious in our portfolio, will each have their own private gaming salon and will be marketed directly to VIP customers residing throughout the region.

So that covers our Macao operations.

Let's now move to our development activities and address our two ongoing development projects, Sands Bethlehem in Bethlehem, Pennsylvania, and Marina Bay Sands in Singapore.

As I mentioned previously, bringing both of these projects to market on time and on budget is fundamental to our growth and deleveraging strategies.

We have firmly dedicated to these objectives.

Sands Bethlehem will open on May 22, less than three weeks from today, with a grand opening planned for June 9.

We have completed the installation of 3,000 slot machines on the gaming floor, initiated our marketing activities, and are finalizing our preparations for the related events commemorating the opening of the property.

We'll also be adding an additional 2,000 machines in November.

In Singapore, the Marina Bay Sands construction process continues at pace.

To date, we have completed more than 55% of the construction and the hotel towers are currently at floor 42 of the 55-floor structure.

We remain on track to top out the three towers at floor 55 in July.

Greater than 95% of the construction costs have been contracted and are subject to firm pricing.

Naturally, a project of this scope and scale will retain a level of uncertainty until it nears completion.

But at this time, we remain comfortable with both the construction budget and timeline.

We are cooperating, working with the Singapore tourism board, towards a targeted opening in December or January of 2009 and 2010.

With that, let me turn the call over to Ken to provide an update on our ongoing asset sales processes in Macao, some more data on our cost reductions, as well as our liquidity and capital resources overall.

As Mike mentioned previously, a deleveraging of our balance sheet is the third aspect of our plan, and the successful monetization of non-core assets is an important element of that deleveraging strategy.

As you know, we are currently marketing shares in a cooperative structure that will provide the holders of the shares the exclusive use of a unit in the Four Seasons apartment hotel in Macao.

In addition, we have been marketing our two retail malls in Macao to prospective buyers.

With respect to the Four Seasons at Park hotel tower, while it is clear that residential property prices in the region have been negatively impacted by the weakness in the global economy, and progress has been slower than we might have hoped, our marketing and sales efforts are continuing.

With respect to the monetization of our retail assets, both the Grand Canal shops at the Venetian Macao and the shops at the Four Seasons Macau, we received bids in the last two weeks and are continuing to negotiate with several parties that have submitted the most attractive of the bids.

Until that process is concluded, there is not much more that we can add at the present time.

Lastly, we are also pursuing alternatives to monetize a minority interest in certain of our assets in Macao.

As Sheldon mentioned, earlier this year, several parties have expressed interest in engaging in such a transaction with us and we are continuing discussions with those interested parties, as well as considering other attractive alternatives that may be available.

Cost savings is obviously a critical component of our operating strategy.

In February 2009, we discussed that we had targeted approximately $250 million of annualized cost savings, and that we had realized about $100 million of savings in the year ended December 31, 2008.

During the first quarter of 2009, we identified additional savings opportunities throughout the organization, and we are now targeting approximately $470 million of annualized savings in the program.

We expect to realize approximately $340 million of that amount in calendar 2009, including $80 million that we realized in the quarter ended March 31, 2009, and another approximately $30 million in 2010 calendar year.

Of the $80 million in savings realized in the first quarter of 2009, approximately $30 million was realized in Las Vegas, while approximately $50 million was realized throughout our Macao operations.

In evaluating our cost-savings progress in Las Vegas, it is important to recognize that the first quarter of 2008 had steadily increasing costs as we brought the amenities of the Palazzo online throughout the first quarter.

So the $30 million of savings in the first quarter of 2009 were partially offset by increases in operating costs in the Palazzo that peaked in the second quarter of 2008.

The impact of our realized savings will be more transparent in our year-over-year operating results as we move through 2009.

Turning to our cost-savings progress in Macao, the $50 million in [end] savings realized this quarter is partially offset by the ramp-up of costs related to the opening of the Four Seasons Hotel Macao and the Palazzo Casino.

Our operating leverage should become more pronounced as we move through the remainder of the year.

An important point with all these cost-savings measures, as Mike pointed out previously, is that we view them as a permanent right-sizing program that will allow us to realize strong cash flow generation and significantly improve EBITDAR margins when room rates eventually improve.

As of March 31, we have approximately $2.9 billion of cash and cash equivalents on the balance sheet.

In addition, we have approximately $1.6 billion of availability under our undrawn credit facilities at current exchange rates, principally through our Singapore credit facility.

So together, we have approximately $4.5 billion of cash, cash equivalents, and sources of liquidity.

The uses for that $4.5 billion include approximately $1.9 million of capital expenditures, pre-opening, FF&E, and construction-period interest to get to the opening of our Marina Bay Sands, Sands Bethlehem, and the Four Seasons apartment hotel projects, and approximately $475 million for the suspension of sites five and six in the St.

Regis condo tower.

Total debt is $10.4 billion, of which no significant maturities occur until May 2011, when approximately $570 million related to our Macao revolver comes due, and then in May 2012, when our U.S.

revolver is due.

Scheduled principal payments required for the remainder of 2009 and in 2010 total $95.3 million and $198.4 million, respectively.

In addition to not having near-term maturities on our outstanding debt, the cost of borrowing is quite low, with a current weighted average rate of approximately 3.25%, which reflects a healthy reduction from the weighted average first-quarter rate of 7.19% in 2008.

So it's important not to lose sight of the advantages of our debt.

It's long-dated, has very narrow spreads, and provides us flexibility to allocate cash to our various developments.

With respect to our debt covenants, for a domestic credit facility, our trailing 12-month EBITDAR at March 31, 2009, for compliance purposes was $479 million.

At March 31, 2009, our total gross domestic debt for compliance purposes was $5.2 billion.

Our cash balances within the U.S.

restricted group were $2.2 billion, and our calculated net debt for covenant compliance calculation purposes was $3.1 billion.

Our leverage ratio for covenant compliance calculation purposes was 6.42 times, compared to a maximum leverage covenant in our U.S.

credit facility of seven times.

For the Venetian Macao restricted group, our trailing 12-month EBITDAR at March 31, 2009, for compliance purposes was $823 million.

At March 31, 2009, the Venetian Macao restricted group total gross debt for compliance purposes was $3.18 billion, and our cash balances within the Venetian Macao restricted group were $485 million.

Our leverage ratio for covenant compliance calculation purposes was 3.87 times, compared to a maximum leverage covenant in the Venetian Macao restricted group of 4.0 times.

We did pay down $125 million on the revolver portion of the credit facility in the quarter.

Finally, we recently completed an amendment to our U.S.

credit facility that allows us to buy back and retire up to $800 million in face value of our bank debt through a tender process.

While we have no present intention to tender for our bank debt, the amendment does provide us with additional flexibility, should we choose to do so in the future.

With that, I'll turn the call back over to Sheldon.

Thanks, Ken.

Before we go to Q&A, let me make a couple of final points.

First, we have an excellent, united management team here today.

Mike and Ken and Al Gonzalez, our new General Counsel, have really hit the ground running, particularly on the expansion and implementation of our cost-savings initiatives and are excellent additions to Rob Goldstein and me in the executive suite.

I'm convinced that this management team is the right group to guide our Company through to its next period of growth.

Second, we have singularly focused on the successful execution of our business plan with no disagreements.

That plan is fairly straightforward -- maximizing cash flow from current operations, delivering Bethlehem and Singapore on time and on budget, and deleveraging our balance sheet by generating additional liquidity through the monetization of our -- non-core assets from a non-recoursing of our operating properties in Macao.

So to sum it up, we clearly enjoy an advantage competitive position today.

We present both very high-quality assets and differentiated operating strategies in each of our line [pits].

Our assets have broad appeal across varied customer segments, and our focus on group business in Las Vegas and the mass business in Macao leaves us less vulnerable to the weakest segments of these markets than are our competitors.

We remain dedicated to managing our way through the current economic conditions, successfully delevering our balance sheet, and preserving the long-term value inherent in the successful execution of that plan.

That having been said, we'll move on to your questions.

(Operator Instructions).

Joe Greff, JPMorgan.

Ken, Sheldon, your comments about asset sales, just a clarification there, in terms of those entities looking to pursue minority interest investments in Macao.

Are you talking about -- maybe you can give some color on this -- are you talking about existing cash-flowing assets or are you looking at -- are you talking about sites five and six?

We're talking about all the sites.

Okay.

We're talking about existing cash flow assets, and five and six, and some formula to include seven, eight, and three, as we get those done.

I say that with the clear -- with the obvious intention that we are very hopeful of moving forward with both five and six, before the end of the year, to restart five and six, and then, hopefully, to go into the other three [loves].

After that.

Great, thank you.

That was all.

Great job.

Janet Brashear, Sanford C.

Bernstein & Company Inc..

I wonder if you could give us a little more idea of how Singapore is going to transpire from a spending perspective.

We have $5.4 billion in total project costs, and some of that is going to open in December or January, and then the rest needs to be phased out.

Could you tell us how that flows throughout 2009 and 2010?

What flows through?

The opening or the cash flow?

The cash flow.

Cash flow goes right through 2010.

And even some of it goes into 2011.

That's correct.

So in terms of (multiple speakers)

I'll let Ken answer that.

Sure.

So, for instance, for the balance of this year, for Singapore, we've got about $1.4 billion to spend for the remaining portion of this year.

And then, in 2010, it's about $1 billion, and then, in 2011, it's about -- a little bit less than $400,000.

So it's phased out over that period of time.

A little less than $400 million.

$400 million, sorry.

Yes.

$400 million.

Could you just comment also on the tourism environment in Singapore now, and if you're seeing any rebounds there?

What was the question?

I'm sorry (multiple speakers)

It's too early.

There hasn't been any STB proclamations about that.

I would say, for the first couple of months of the first quarter, that things appear to be slowing down continuously.

I haven't seen any notice of any significant upturn in Singapore, but it's -- in that part of the world, things happen kind of fast.

And faster than they do here in the United States.

So we are hoping that by the time we open, that Marina Bay Sands will be a massive contributor to the attractiveness and the appeal for people to come to Singapore.

Great.

Thanks.

Larry Klatzkin, Klatzkin Research.

I thought you'd like that, Sheldon.

I love it, Larry.

But you didn't get on first.

Joe Greff got on first.

He deserves it.

A couple questions.

One, you've spent a bunch of money sealing five and six, but then you're saying you're hoping to restart construction this year.

Any chance you don't have to spend that $400 million on five and six, sealing it up?

A substantial part of that five and six is for pre-ordered and delivered materials.

So that will cut down on the amount of money.

If we started within the next six months, that will cut down about $472 million that's indicated that we have left to spend.

So that number would go down.

No.

A lot of that number is saved anyway.

It's for heavy equipment, like centrifuges and cooling equipment, etc., etc..

For elevators, for vertical-lift elevators, escalators, a curtain wall for the buildings, etc..

Ken, do you have anything particular on that?

I could add something.

(multiple speakers) Larry, we are dealing with a number of about $650-some odd million now, in five and six, of which the greater part of that -- let me go to a lesser part first.

Somewhat over $100 million, $120 million, something like that, is now in what is considered the close-down money.

The rest is money that would go in and will not be -- will be used when we start up the building.

So it's not a waste of that capital.

And even that $120 million number that we are now dealing with is -- a considerable amount of that we don't expect to spend before we start.

So those -- that cash number is coming down rather significantly.

Good, good.

As far as the covenant for the September quarter, how -- Ken, how is that looking for meeting that, and where's the covenant drop down to by the end of the year?

Just one thing -- I want to clarify one of the things that Mike said is that I think his number didn't incorporate the money that was already spent for the first quarter.

So just to clarify that, in terms of the -- the amount should be closer to about $450 million.

That we have left to spend on five and six to fully shut it down.

Good.

As far as the covenants go, how have they dropped throughout the rest of this year and beginning of next year?

The covenant steps down to 6.5, in the U.S.

restricted group.

And then, from 7 in the September quarter, and then down to 3.5 from 4 in the September quarter in Macao.

With regard to talking about the future, we typically don't give guidance on the numbers.

But we think we've got sufficient levers with regard to being able to achieve covenant compliance going forward.

All right, all right, good.

Sheldon, the new chief administrator is going to be chosen and come in.

We are talking about trying to get the visa restrictions and the three-province triumvirate all working to try to get that release.

What are you seeing as far as the politics in Macao, and what effect it should have?

I'm not sure that I understand your question.

Is your question about the new chief executive?

New chief executive, and also the prospects of getting some of the visa restrictions lifted with Hong Kong and yourself and the local province trying to work together.

I can only tell you that the new chief executive, there are still several, multiple names that have been thrown around as to good possibilities.

And -- or the leading possibilities.

So we have no definitive interpretation of who is most likely to get it now.

Clearly, the central government of Beijing, although they don't interfere with anything in Macao, I think they have -- they endorse, shall we say, somebody.

But that hasn't been done yet.

And I would be out of line to suggest that we know whether or not the government is going to loosen up the restrictions.

All we can say is that there's a lot of rumors about that, and there is nothing definitive.

We are very hopeful.

Thanks.

Last thing, just the chip commission limit, is that -- do you see that, Sheldon, happening in the next couple of weeks?

I don't know.

Mike and I are going over again in a couple of weeks.

It's difficult to say.

The government has been rather close-mouthed on what they intend to do here.

But I think, as a new -- as the current chief executive is starting to turn over responsibilities to others, I don't know out fast it will be done.

But I attended the last gaming association meeting myself, with Mike and with Stephen Weaver, and it was very interesting.

But we all signed a letter, recommending to the chief executive in the government.

We all agreed upon a limitation of 1.25, relative to -- excuse me, including comps, relating to the highest junket rev commission.

Now, in the event that the government did -- didn't do it, I proposed the owner system.

I don't know if it will be accepted.

I think other syndicated they would do that, but they didn't want to propose it as an alternative to the government embedding it into law.

Good luck with that.

Thank you, Sheldon.

Steve Kent, Goldman Sachs.

Good afternoon.

A couple questions.

First off, on the costs saved, the $470 million, Rob mentioned that some of it would include marketing and also dropping down some of the employment.

In particular on marketing, if you could just explain to us how you plan on facing off against 12% more supply over the next 12 months from some of your competitors, and at the same time reduce your marketing and potentially your service levels.

Just walk us through what the real initiatives are that we wouldn't see that impact.

Second, can you just talk about the Macao retail role.

When some of those leases roll off in 2010 and 2011, what percentage will roll off, and then what your expectations are for renewals and at what rates?

And then finally, just looking out, where are you taking pricing for conference convention booking levels into 2010?

Obviously, people, I'm sure, are negotiating very hard right now, but I wanted to see how hard you're holding on and what your expectations are as you move further out.

Thanks.

Where to begin?

You're talking about 12% more capacity here in Las Vegas, is that your comment?

Yes.

(multiple speakers)

That, and Cosmopolitan, and potentially a couple of room towers.

In the near term, we obviously [bought] into those challenges, which we are all aware of, and we are, obviously -- I don't see Cosmopolitan happening for quite some time.

But obviously, [Cityspan] is on the horizon.

Our cost containment is not related to marketing to the hotel, but it's more about marketing to the casino.

But I will tell you that I think our inherent advantage in the group segment enables us to be very favorably, as that segment returns.

We are seeing bookings for 2010, 2011 and beyond picking up nicely.

A lot of the folks who canceled in 2009 are coming back to the table.

The first quarter of 2010 is very strong; the end of 2009 looks good.

I think the inherent advantage of running 40%-plus of our business -- group segment gives us just huge advantages over anybody else in town.

I think that has always been the cornerstone of our business strategy, and honestly, as that comes back, that, coupled with our cost savings, just gives a great platform to make money here.

I think our cost savings -- they're across the board.

I think on reduction in headcount -- mentioned 17% reduction in headcount.

We are reducing our -- some of our benefits to our employees.

Very diversified -- procurement.

The one place that is not focused on is on the hotel marketing side.

None, not whatsoever.

As far as -- Sheldon, do you want to address the pricing and '10 groups, etc., as we move forward?

Clearly, the current conditions are that the groups, I'd say, for the next couple of months have come back and we've had to reprice some of the groups.

We rate them to bring it down, and people asked for waivers of attrition guarantees.

However, that only goes for the next couple of months.

I see that, starting in September, maybe October, more appropriately, we are going to have an accelerated booking pace.

And going into 2010, I hesitate to use the word getting back to normal, but I think take we are getting close to getting back to normal in 2010.

The only impact that we've had with the president's comments about Las Vegas and the TARP recipients have been in the financial and auto industries.

The financial industry doesn't hurt us that bad, although there are a lot of small -- there are a lot of groups.

It's relatively small.

You know, they are under 500 or 1,000.

So we have a lot of conferences of 200 or 300 people.

It doesn't create a big impact.

The high-tech market is still going very strong.

The pharmaceuticals are going very strong.

(multiple speakers) Insurance, fast food, high-tech, going very well.

And I happen to have a call scheduled for tomorrow with a former acquaintance, a former friend in the high-tech industry.

They are negotiating now because the rates are down low.

I think what's happening is is MGM's comments about they think the bottom is leveling out.

The bottom -- they think we've already hit the bottom.

Frankly, I think that we've -- we've had a sequential increase, and the trend upwards has been established already to a smaller degree, but we hope it accelerates starting after the summertime.

The summertime is still a little -- still an unknown.

However, the summertime is usually a low-quality visitor, and they're usually a lower-paying visitor.

Every summer, anyway.

But I think that, looking at the fall, it looks -- the rates look pretty good.

I don't see people asking for a lot of rate reduction, substantial rate reduction, or re-rating starting in the fall.

(multiple speakers) I mean, everybody's liable to come back and ask us for some benefits.

There was one other question on the retail in Macao.

I think -- I don't have all that information in terms of releasing it in front here, but I will tell you that the retail business, strangely enough, in Macao over the last couple of months has been good.

And so, I think that you can understand that if business continues to improve there on the retail level, we shouldn't have any problem with the re-leasing of those facilities, particularly if five and six and these other facilities get constructed or are about to open.

There's a -- new properties are going to be opening there shortly on the strip, which will bring more visitors, which will essentially help the retail as well.

So I think we could look optimistically at our retail business in those locations.

I think the original plan, I think, when you opened was that you'd have two- or three-year leases.

So -- in part, because you expected retail to really pick up dramatically and capture that on a go-forward basis.

That seems to be now not as secure, so does the whole mall turn over in 2010, 2011, or (multiple speakers)

No.

I think what you're looking at is the interruption of the economic tsunami that occurred.

It has nothing to do specifically with our retail.

It has to do with the global macro economic picture.

We have no indication that the retailers are going to churn over.

In any substantive numbers.

When the leases start to expire.

But there is a mixture of leases.

There's three-year, five-year, 10-year, with three-year adjustments, rent adjustments.

There are a lot of stores that are doing very well, and there are stores that are not doing as well.

But I think one thing that's going to make a difference.

If we can get five and six open, the pedestrian connector to that property -- and we are going to allow City of Dreams to connect to us -- we think will significantly increase the traffic flow into the malls.

Because the pedestrian bridge goes directly into the top floor of the mall at the Four Seasons -- the shops at Four Seasons that will connect directly with the Venetian mall.

Okay, thank you.

Robin Farley, UBS.

Thanks.

Just a couple questions on Macao.

First, can you just remind us, or is it planned now, if you re-started construction by the end of the year on sites five and six, when that could open?

And then, also in Macao, can you talk about any adjustments in your credit practices in Macao, given everything that's gone on with credit levels there?

And then lastly, the potential minority stake in Macao operations that you referred to.

Is the Macao government involved in those discussions as well?

I assume it would have to be with their approval any kind of change in the ownership make-up.

You're referencing casino credit in Macao, correct?

Yes.

We just came back and reviewed all of our outstanding, and we feel very comfortable our direct credit, that we -- if anything, we feel very comfortable we've given the right people credit.

Of course, there's reserves for those who we are concerned about.

But there doesn't appear to be any issues over there -- I was there two weeks ago -- that we're the least bit concerned about on direct credit.

Junket credit, as you know, rolls over every 30 days.

We don't, at this point, have any issues that we are concerned about with junket credit.

There's always outstanding liability until the end of the month, but historically, it's covered very well and we've never had any of the reps really causing a problem.

So we don't feel any real vulnerability at this point, either in direct or junket credit in Macao.

On the question on opening, it's hard to say -- I would say 12 to 16 months, 15 months from the time we actually get going again.

So much of that building has been done that we could very well do that within a 12- to 18-month period, at the most, I would say.

And -- but we can give you a better number than that as we get closer, but I think that would take that amount of time.

It certainly wouldn't be any longer than that, I would think.

On the minority interest, I can comment on that.

We've had these discussions with the government of Macao, with our contacts there.

And there is no problem whatsoever.

In fact, they're encouraging any -- any of the activities that we're working on in that marketplace that we have discussed with them, and it's a very open discussion, and they have been very supportive in every one of them.

Thanks very much.

There are no further questions at this time.

I will now turn today's call over to management for closing remarks.

I think that's all the questions.

I want to say that we -- this is the first time we've started -- first time in a long time we've started exactly on time.

And we are finishing before we expected.

I want to thank all of you for coming in.

Thank you for your questions, and for your continued support.

This concludes the earnings call.

Thank you.

This concludes today's Las Vegas Sands Corp.

Q1 earnings conference call.

You may now disconnect.