Las Vegas Sands Reports Strong Q2 Results

Las Vegas Sands Corp. (NYSE: LVS), today reported financial results for the second quarter ended June 30, 2006.

Company-Wide Operating Results

Net revenue for the second quarter of 2006 increased 29.6% to $517.0 million compared to $398.8 million in the prior year's quarter. Adjusted net income (excluding loss on disposal of assets, pre-opening expense, and development expense) increased 27.0% for the second quarter of 2006, improving to $121.3 million, or adjusted earnings per diluted share of $0.34, versus adjusted net income (excluding pre-opening expense, development expense, gain on disposal of assets, and a loss on early retirement of debt) of $95.5 million, or adjusted earnings per diluted share of $0.27, in the second quarter of 2005. On a GAAP (Generally Accepted Accounting Principles) basis, net income in the second quarter of 2006 was $109.3 million, or $0.31 per diluted share, compared to $86.4 million, or $0.24 per diluted share, in the second quarter of 2005.

Consolidated adjusted property EBITDAR in the second quarter of 2006 came in at $180.1 million, an increase of 18.9% compared to $151.5 million in the year-ago quarter. Operating income improved to $125.4 million versus $114.1 million in the second quarter of 2005.

Second Quarter Highlights

"The second quarter of 2006 was another outstanding quarter for our company," began William P. Weidner, president and COO. "In Asia, we delivered another record quarter at The Sands Macao. Through June 30, 2006, our year-over-year gross revenue growth continues to outpace the broader Macao gaming market. For example, in sharp contrast to the decline in win per table per day in Macao overall, The Sands delivered an all-time record win per table per day, despite significant table capacity increases at both The Sands and in the Macao market overall. These trends serve to validate the market's acceptance of the company's strategy and clearly provide positive momentum as we prepare to expand our gaming capacity by over 30% at The Sands Macao next month. Additionally, we expanded our future footprint in Asia by winning the highly coveted right to develop Singapore's first Integrated Resort, The Marina Bay Sands in Singapore. We are honored to be able to bring to Singapore the significant economic benefits of our convention-based Integrated Resort model, and look forward to many years of future success and partnership with Singapore. The development of The Marina Bay Sands, in combination with Singapore's ideal location and world-class existing commercial and transportation infrastructure, will both solidify Singapore's position as a hub of commerce in South Asia, and provide Las Vegas Sands the opportunity to serve the important South Asian marketplace, including India, in the years ahead."

Weidner added, "We continued to execute our development plans for The Venetian Macao and The Cotai Strip(TM), where we have now topped off The Venetian and are currently under construction or performing preconstruction work on each of the other six sites, as we lead the historic effort to create Asia's Las Vegas(TM). In May, we completed a $2.5 billion credit facility to support our development plans in Macao. In Las Vegas, we delivered solid top line growth at The Venetian, and progressed on both the construction of The Palazzo and our numerous targeted capital improvements designed to enhance our long-term strategic positioning."

Las Vegas Second Quarter Operating Results

In the second quarter of 2006 in Las Vegas, table games drop increased modestly to $254.2 million versus $253.2 million during the second quarter of 2005. Slot machine handle (volume) increased 5.4% to $522.7 million versus $496.0 million during the second quarter of 2005. Casino revenues were $71.3 million in the second quarter of 2006 compared to $73.7 million a year ago. Table games win percentage (calculated before discounts) was 17.6% in the 2006 quarter compared to 18.6% in the second quarter of last year. This compares to our expected range of 20% to 22%. Slot win percentage (calculated before discounts) was 6.2% in the 2006 quarter compared to 6.8% in the second quarter last year.

The Venetian's average daily rate (ADR) was $242 during the second quarter of 2006, compared to $231 in the second quarter of 2005. The Venetian's occupancy of available guestrooms was 99.5% during the second quarter of 2006, which compares to 98.7% during the prior year period, generating revenue per available room (REVPAR) of $241 in the 2006 period, an increase of 5.7% versus $228 in the 2005 period. Hotel revenues were up 6.0% to $88.0 million during the second quarter of 2006 versus $83.0 million in the second quarter of 2005.

Food and beverage revenues were $35.2 million in the second quarter of 2006 compared to $27.8 million in the 2005 period, an increase of 26.6%. Retail and other operating revenues were $28.3 million in the quarter compared to $22.9 million in the quarter last year, an increase of 23.6%.

On a GAAP basis, operating income for our Las Vegas operations was $42.8 million versus $51.6 million in the 2005 period. Adjusted property EBITDAR from our Las Vegas operations was $63.2 million. This compares to $70.4 million of adjusted property EBITDAR from Las Vegas operations for the second quarter of 2005, a decrease of 10.3%. In addition to the net negative impact of the lower win percentages, these decreases were principally driven by higher payroll and related benefit costs, resulting from increased headcount associated with our targeted investments at the property, a spike in high dollar medical claims during the quarter and non-cash compensation expense relating to stock options which we were not required to recognize last year.

"We are clearly seeing the benefits of our targeted capital investments on the revenue line as we continue to remerchandise and broaden our product offering at The Venetian," noted Weidner. "The addition of 450,000 square feet of carpeted meeting space continues to fuel increases in group business and related food and beverage revenues. Our focus to date has been on driving additional group business to fill this additional meeting room capacity. In addition to the incremental meeting room space, our Blue Man Group Theater, Tao restaurant/night club, recently opened Poker Room, and new production of Phantom of the Opera -- The Las Vegas Spectacular, which opened in June, are clearly driving incremental visitation to the property. We will now focus on fine tuning our efforts to enhance the profitability of these business activities as well as look for opportunities for near-term operational efficiencies.

"Looking further ahead, construction of The Palazzo remains on track. Upon completion, The Venetian and Palazzo together will encompass the largest integrated destination convention resort in the world, with over 7,000 hotel rooms, 1.1 million square feet of carpeted meeting space, and 1.15 million square feet of convention space. We believe this property will provide an excellent platform for profitable growth in Las Vegas for years to come."

Macao Second Quarter Operating Results

In Macao, second quarter casino revenues increased 52.7% to a record $307.1 million versus $201.1 million in the 2005 period. The Sands Macao reported record adjusted property EBITDAR of $116.9 million for the second quarter of 2006, compared to $81.0 million in the second quarter of last year, an increase of 44.3%. On a GAAP basis, operating income in Macao was $101.6 million for the second quarter of 2006, an increase of 35.9% compared to $74.8 million in last year's second quarter. Table games drop (the Non-Rolling Chip segment) was $1.04 billion in the second quarter of 2006, reflecting a year-over-year increase of 12.7% versus $923.0 million in the second quarter of 2005. Second quarter 2006 Rolling Chip volume more than doubled to $4.26 billion, compared to $1.99 billion in the second quarter of 2005.

Non-Rolling Chip table games win percentage (calculated before discounts and incentives) came in at 18.6% in the second quarter of 2006, while Rolling Chip table games win percentage (calculated before discounts and commissions) was 3.0%. These results compare to our expected Non-Rolling Chip table games win percentage (calculated before discounts and commissions) of 17% to 19% and Rolling Chip table games win percentage (calculated before discounts and commissions) of 2.5% to 2.8%.

Slot handle (volume) for the second quarter of 2006 was a record $263.2 million, representing a 57.3% increase versus $167.3 million in the second quarter of 2005.

The substantial increases in revenues and operating income in Macao reflect robust market demand and gaming capacity increases at The Sands.

Weidner stated, "We are continuing to make progress in Macao at all levels. We are particularly pleased with the continued strength of our mass market business. Despite significant increases in Macao mass market capacity overall, as well as increases in mass market table capacity at the Sands Macao itself, our mass table drop per unit per day has remained steady, and our win per unit per day has increased. Slot handle per unit also continues to trend upward. Our VIP business more than doubled, with the expansion of our Sands' Paiza Club in May increasing our VIP gaming capacity. The combination of these results produced record win per unit per day results despite an increase of approximately 28% in table capacity and approximately 9% in slot capacity at The Sands Macao. Looking ahead, we remain on track for the completion and opening of the remainder of our Sands Macao expansion next month. When the expansion is complete, The Sands Macao will be one of the largest gaming facilities in the world, with over 700 tables and 1,200 slot machines."

Other Factors Affecting Earnings

Interest expense, net of amounts capitalized, was $23.7 million for the second quarter of 2006 compared to $18.0 million during the second quarter of 2005. The increase is primarily the result of the completion of the $2.5 billion credit facility to support our development plans in Macao. Capitalized interest was $20.9 million during the second quarter of 2006 compared to $5.0 million during the second quarter of 2005.

Interest income was $15.0 million for the second quarter of 2006, compared to $7.1 million for the second quarter of 2005.

Depreciation and amortization expense was $24.4 million for the second quarter of 2006, compared to $21.1 million for the second quarter of 2005.

Stock-based compensation expense was $2.9 million in the second quarter of 2006. We recognized no stock-based compensation expense in the second quarter of 2005.

Development expenses relating to our efforts in Singapore, Macao, Pennsylvania, Europe and elsewhere were $7.9 million in the second quarter of 2006, compared to $5.6 million in the second quarter of 2005. The increase of $2.3 million was principally related to our successful efforts in Singapore.

The effective tax rate for the second quarter of 2006 of 6.3% is lower than the United States Federal statutory rate due primarily to a zero effective tax rate on our Macao gaming income as a result of an income tax holiday on gaming operations which is currently set to expire at the end of 2008.

Balance Sheet Items

Unrestricted cash balances at June 30, 2006 stood at $282.0 million while restricted cash balances were $1.68 billion. Of the restricted cash balances, $984.2 million is restricted for Macao related construction, $584.3 million is restricted for construction of The Palazzo Resort Hotel Casino, the company's second resort hotel casino property in Las Vegas.

As of June 30, 2006, total debt outstanding, including the current portion, was $3.16 billion.

Capital Expenditures

Capital expenditures during the second quarter of 2006 totaled $435.0 million. This includes $270.8 million for construction and development activities in Macao, $128.2 million for construction and development activities at The Palazzo, and $36.0 million for improvements and maintenance capital expenditures at The Venetian and The Sands Expo and Convention Center in Las Vegas.

Concluding Comments

Weidner concluded, "While we continue to deliver solid financial and operating results, the opportunities that lie ahead are significant and broad- based. Our proven capabilities in the development and operation of integrated destination resorts position us to build and execute on a robust pipeline of growth opportunities worldwide.

"We remain particularly pleased with the progress we are making in developing 'Asia's Las Vegas' on the Cotai Strip. We have now reached agreement with all hotel partners that will participate with us in this historic opportunity, adding in the second quarter our final partner, Fairmont Raffles Holdings International, which will operate both a Fairmont and Raffles hotel. Our hotel operating partners also include The Four Seasons Hotels and Resorts, Starwood Hotels and Resorts Worldwide, which will operate both a Sheraton and a St. Regis hotel, Shangri-La Hotels and Resorts, which will operate both a Shangri-La and a Traders hotel, and Hilton Hotels, which will operate both a Hilton and a Conrad hotel. We are actively negotiating the definitive agreements under which these leading operators will manage hotels and related vacation suites for us on the Cotai Strip.

"Construction or preconstruction activity is now progressing on all seven sites on the Cotai Strip, and The Venetian Macao remains on track for a summer 2007 opening. We have made additional progress in the leasing of our Macao shopping malls, and now have reached agreement on commercial terms with over 315 retailers for 699,000 square feet of retail space on the Cotai Strip, and have now completed and executed definitive documentation with a number of these retailers. We continue to make good progress in the documentation process with the remaining retailers. In addition, ten multi-year tradeshows, representing more than 26 separate events, have signed binding contracts to host their events at The Venetian Macao. Our first convention on the Cotai Strip is currently scheduled for September 2007, and our first trade show is currently scheduled for October, 2007.

"Looking further ahead in the Macao region, we remain enthusiastic about our strategy to master plan a leisure and convention destination resort on Hengqin Island, which will complement our entertainment developments just a few hundred yards from the Cotai Strip. We continue to work with Guangdong Province officials as they work with representatives of the Central Government of the People's Republic of China to refine their master plan for the redevelopment of all of Hengqin Island. We look forward to bringing another important dimension of travel and tourism to the region over the long-term. As a complement to our Hengqin Island development plans, we have begun master planning on an additional leisure destination, Shang Chuan Island, in the crystal clear waters of the South China Sea. This island will provide an idyllic setting for leisure less than one hour by high-speed ferry from Hengqin Island. Our Hengqin Island plans remain subject to numerous conditions, including further government approvals.

"As previously mentioned, we were selected by the Singapore Government to develop The Marina Bay Sands. Our construction and development teams have been on the ground in Singapore and have significantly advanced our pre-construction activities. We expect to break ground on The Marina Bay Sands in early 2007. The property will feature 2,500 hotel rooms, 1.2 million square feet of flexible meetings, incentive, convention, food and beverage, and exhibition space, one million square feet of retail space, three large entertainment venues, and gaming space which will include our high end Paiza Club. We have also begun pre marketing activities related to filling our convention space and pre-leasing activities relating to our Mall at the Marina Bay Sands.

"Additionally, we are advancing our proposal to develop an integrated destination resort in Bethlehem, Pennsylvania, on the site of the Bethlehem Steel Works, about a 90 minute drive away from Midtown Manhattan, and only one hour from the lucrative Northern New Jersey Corridor.

2006-08-03