The parent company of The Venetian reported increased cash flow this morning, making The Venetian only the third Las Vegas Strip-area resort so far to report better earnings for the first quarter of 2002.
Las Vegas Sands Inc. reported cash flow of $51.2 million for the quarter ended March 31, up 8 percent from the year-ago quarter. This increase came despite a 4 percent drop in revenues, to $136.4 million.
The company reported net income of $5.1 million, compared to a net loss of $400,000 in the year-ago period. As Las Vegas Sands is privately held, cash flow is a more widely followed indicator of its financial performance.
“These are dramatically improved results,” said Andrew Zarnett, gaming analyst with Deutsche Banc Alex. Brown. “They’ve shown they’re a formidable competitor on the Strip, and in light of the incidents of Sept. 11, shown they had a very good battle plan to get back on a strong footing quickly.”
Earnings season has been very favorable so far for gaming situs poker online companies, with operators universally able to beat earnings expectations. But The Venetian, Rio and MGM Grand have been the only two individual Strip properties so far to report cash flow increases during the quarter.
Cash flow at The Venetian hotel-casino rose 8 percent to $46.4 million, while cash flow from the Grand Canal Shops was up 4 percent to $4.8 million.
One of the big factors behind the growth in the quarter was cost-cutting measures in the casino. The Venetian said it began an effort to control promotional expenses targeted at table game players, which the company called a “lower margin” business. This led to a 14 percent drop in casino revenues, to $50.5 million.
William Weidner, president of Las Vegas Sands, said “heightened selectivity of casino customers in a competitive market” was behind this decline, but noted the company was able to cut its marketing and incentive expenses as a result.
“Those incentives reduce the margin you can generate on table game business,” Zarnett said.
The company reduced expenses by 8 percent in the quarter, and its cash flow profit margin rose to 36 percent of revenues, up from 32 percent in the year-ago quarter.
“Our margins have improved as our high margin room and associated banquet business has grown, allowing for less reliance on the lower margin table games business,” Weidner said.
Room revenues were still down, falling 5 percent in the quarter to $56.4 million. However, food and beverage revenues rose 16 percent to $21.9 million, and Grand Canal Shops revenue increased 7 percent to $8.3 million.
The Venetian did not hold a conference call with investors this morning to discuss the results, as the company said it is now in “active discussions to consider refinancing all or a portion of its outstanding indebtedness,” including its bank debt and junk bonds.
An issue being considered in refinancing talks is whether it would enable the company to raise funds for a new 1,000-room hotel tower — which was suspended last September — and a proposed casino in the Chinese coastal city of Macau.
“Given where they are now, compared to where they were when they originally negotiated their debt, it’s smart to look at alternatives,” Zarnett said.
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