Finances improve at Venetian

Gary Thompson

Monday, Oct. 18, 1999 | 11:01 a.m.

The Venetian will report cash flow of $18 million to $19 million for the three months ended Sept. 30, the resort's parent company said Friday.

Las Vegas Sands Inc., solely owned by Sheldon Adelson, said the Italian-themed Strip resort also made all its debt payments during the third quarter, cutting its total obligations to $928 million from $934 million.

LVSI said it expects revenue at the 3,000-room hotel casino to total about $100 million for the quarter. Its anticipated earnings before interest, taxes, depreciation and amortization (EBITDA) would give it a cash flow margin of 18 to 19 percent.

LVSI said the resort experienced a win percentage of 16 percent on its 122 table games during the quarter, down from the 19 percent it had forecast. Had it attained the higher number, LVSI said, the Venetian's cash flow would have totaled $23 million to $24 million for the quarter.

The company said its table-game drop averaged $2 million a day for the quarter's 92 days, indicating drop of $184 million for the three months. A 16 percent win percentage equates to $29,440,000, meaning each of the casino's table games won an average $2,623 a day. That's substantially above the average $2,463 table-game win the resort had projected.

Slot handle rose to $141 million in September from $126 million in August and $116 million in July, LVSI said. While the company didn't disclose win amounts, major Strip casinos posted average daily win per slot of $112 in the latest month for which State Gaming Control Board numbers are available. Assuming a similar 6 percent win percentage of total handle, the Venetian's 2,300 slots won an average $110 a day.

The company also said promotions and expenses incurred in building a casino database also affected casino margins, while hotel room margins improved to 67 percent in September.

The Venetian's average daily room rate rose to $162 in September from $145 in August and $127 in July, LVSI said. The occupancy rate increased to 92 percent in August and September from 85 percent in July. For the first two weeks of October, room rates have averaged $188 and occupancy 90 percent.

The Venetian said it has 53 shops open in its Grand Canal retail area, with another 12 tenants building outlets there, bringing occupancy to 95 percent. The shops are reporting retail sales are running at a $1,000 per square foot rate.

The Venetian receives monthly lease payments from the tenants, though such payments contributed only $300,000 to cash flow during the third quarter due to staggered openings of the shops, LVSI said.

The results reflect substantial improvements from earlier figures released by the Venetian, whose opening was marred by widespread construction delays. But they don't erase lingering doubts about the Venetian's ability to generate the cash flow needed to service its debt on a long-term basis.

Assuming a more normalized casino win percentage, higher average room rates and increased foot traffic in the retail shops, most analysts expect the Venetian to post about $100 million in cash flow next year. That's below the $130 million in debt payments that will be due, and don't allow for any maintenance capital spending, which runs from $30 million to $60 million annually for a typical Strip resort.

In a Friday conference call with high-yield bond analysts, Venetian executives were quizzed about the company's liquidity, or ability to pay its debts. They said the company paid nearly $18 million to service debt during the third quarter.

LVSI currently has construction payables of $44 million and a $31 million bond payment due Nov. 15, with just $19 million of restricted cash and $9 million left on its revolving line of bank credit.

Despite analysts questions, Adelson didn't repeat his previous pledge to fund any shortfall on the Nov. 15 payment.

Adding to the uncertainties are more than $300 million of liens filed against the Venetian and Lehrer McGovern Bovis Inc., general contractor for the resort. LVSI and Bovis are suing each other over who is responsible.