FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

 

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-32373

 

 

LAS VEGAS SANDS CORP.

(Exact name of registration as specified in its charter)

 

 

 

Nevada   27-0099920

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3355 Las Vegas Boulevard South  
Las Vegas, Nevada   89109
(Address of principal executive offices)   (Zip Code)

(702) 414-1000

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.

 

Class

   Outstanding at October 31, 2013

Common Stock ($0.001 par value)

   819,548,648 shares

 

 

 


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

Table of Contents

 

   PART I
FINANCIAL INFORMATION
  

Item 1.

  

Financial Statements (unaudited)

     3   
  

Condensed Consolidated Balance Sheets at September 30, 2013 and December 31, 2012

     3   
  

Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2013 and 2012

     4   
  

Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012

     5   
  

Condensed Consolidated Statements of Equity for the Nine Months Ended September 30, 2013 and 2012

     6   
  

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012

     7   
  

Notes to Condensed Consolidated Financial Statements

     8   

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     41   

Item 3.

  

Quantitative and Qualitative Disclosures about Market Risk

     64   

Item 4.

  

Controls and Procedures

     65   
   PART II
OTHER INFORMATION
  

Item 1.

  

Legal Proceedings

     66   

Item 1A.

  

Risk Factors

     66   

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

     66   

Item 6.

  

Exhibits

     67   

Signatures 

     68   

 

2


Table of Contents

PART 1 FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     September 30,
2013
    December 31,
2012
 
    

(In thousands, except share
and per share data)

(Unaudited)

 
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 3,209,120      $ 2,512,766   

Restricted cash and cash equivalents

     5,750        4,521   

Accounts receivable, net

     1,848,522        1,819,260   

Inventories

     41,683        43,875   

Deferred income taxes, net

     2,500        2,299   

Prepaid expenses and other

     99,693        94,793   
  

 

 

   

 

 

 

Total current assets

     5,207,268        4,477,514   

Property and equipment, net

     15,413,209        15,766,748   

Deferred financing costs, net

     169,417        214,465   

Restricted cash and cash equivalents

     1,584        1,938   

Deferred income taxes, net

     40,982        43,280   

Leasehold interests in land, net

     1,426,696        1,458,741   

Intangible assets, net

     106,234        70,618   

Other assets, net

     119,705        130,348   
  

 

 

   

 

 

 

Total assets

   $ 22,485,095      $ 22,163,652   
  

 

 

   

 

 

 
LIABILITIES AND EQUITY   

Current liabilities:

    

Accounts payable

   $ 114,741      $ 106,498   

Construction payables

     265,031        343,372   

Accrued interest payable

     1,427        15,542   

Other accrued liabilities

     2,222,047        1,895,483   

Income taxes payable

     140,248        164,126   

Current maturities of long-term debt

     1,301,624        97,802   
  

 

 

   

 

 

 

Total current liabilities

     4,045,118        2,622,823   

Other long-term liabilities

     146,824        133,936   

Deferred income taxes

     173,166        185,945   

Deferred proceeds from sale of The Shoppes at The Palazzo

     268,392        267,956   

Deferred gain on sale of The Grand Canal Shoppes

     41,282        43,880   

Deferred rent from mall transactions

     117,325        118,435   

Long-term debt

     8,461,992        10,132,265   
  

 

 

   

 

 

 

Total liabilities

     13,254,099        13,505,240   
  

 

 

   

 

 

 

Commitments and contingencies (Note 9)

    

Equity:

    

Common stock, $0.001 par value, 1,000,000,000 shares authorized, 825,994,377 and 824,297,756 shares issued, 820,514,776 and 824,297,756 shares outstanding

     826        824   

Capital in excess of par value

     6,314,916        6,237,488   

Treasury stock, at cost, 5,479,601 and zero shares

     (346,253     —     

Accumulated other comprehensive income

     194,212        263,078   

Retained earnings

     1,422,519        560,452   
  

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

     7,586,220        7,061,842   

Noncontrolling interests

     1,644,776        1,596,570   
  

 

 

   

 

 

 

Total equity

     9,230,996        8,658,412   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 22,485,095      $ 22,163,652   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
    

(In thousands, except share and per share data)

(Unaudited)

 

Revenues:

        

Casino

   $ 2,984,538      $ 2,201,030      $ 8,394,721      $ 6,534,947   

Rooms

     349,001        287,849        998,646        830,887   

Food and beverage

     174,260        142,685        534,361        455,884   

Mall

     128,068        103,232        321,522        268,390   

Convention, retail and other

     123,259        117,129        372,370        363,680   
  

 

 

   

 

 

   

 

 

   

 

 

 
     3,759,126        2,851,925        10,621,620        8,453,788   

Less — promotional allowances

     (190,586     (142,443     (507,420     (399,658
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     3,568,540        2,709,482        10,114,200        8,054,130   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Casino

     1,668,107        1,278,162        4,714,107        3,673,171   

Rooms

     69,511        58,911        203,886        172,210   

Food and beverage

     88,020        77,748        274,045        238,022   

Mall

     17,319        16,666        52,724        50,765   

Convention, retail and other

     69,102        66,867        228,045        224,794   

Provision for doubtful accounts

     55,371        72,805        182,108        183,397   

General and administrative

     380,865        268,832        979,148        746,587   

Corporate

     38,468        54,617        141,221        162,164   

Pre-opening

     1,778        39,872        9,646        134,803   

Development

     3,487        4,201        14,840        12,196   

Depreciation and amortization

     248,925        226,538        752,530        641,725   

Amortization of leasehold interests in land

     10,022        10,014        30,297        30,016   

Impairment loss

     —          —          —          143,674   

Loss on disposal of assets

     2,739        154        9,433        1,229   
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,653,714        2,175,387        7,592,030        6,414,753   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     914,826        534,095        2,522,170        1,639,377   

Other income (expense):

        

Interest income

     3,819        4,176        10,848        16,716   

Interest expense, net of amounts capitalized

     (66,917     (62,292     (204,125     (191,497

Other income

     3,207        2,352        4,992        715   

Loss on modification or early retirement of debt

     —          —          —          (19,234
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     854,935        478,331        2,333,885        1,446,077   

Income tax expense

     (45,637     (33,351     (148,940     (135,607
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     809,298        444,980        2,184,945        1,310,470   

Net income attributable to noncontrolling interests

     (182,554     (95,198     (456,487     (221,159
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 626,744      $ 349,782      $ 1,728,458      $ 1,089,311   
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.76      $ 0.43      $ 2.10      $ 1.36   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.76      $ 0.42      $ 2.09      $ 1.32   
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     823,200,515        821,482,154        823,512,889        801,084,165   
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     826,965,340        825,606,248        827,543,510        823,361,035   
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.35      $ 0.25      $ 1.05      $ 0.75   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  
    

(In thousands)

(Unaudited)

 

Net income

   $ 809,298      $ 444,980      $ 2,184,945      $ 1,310,470   

Currency translation adjustment, net of tax

     19,865        94,294        (69,672     165,214   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     829,163        539,274        2,115,273        1,475,684   

Comprehensive income attributable to noncontrolling interests

     (183,314     (95,799     (455,681     (224,255
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

   $ 645,849      $ 443,475      $ 1,659,592      $ 1,251,429   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

 

     Las Vegas Sands Corp. Stockholders’ Equity              
     Common
Stock
     Capital in
Excess of
Par Value
    Treasury
Stock
    Accumulated
Other
Comprehensive
Income
    Retained
Earnings
    Noncontrolling
Interests
    Total  
     (In thousands)  
     (Unaudited)  

Balance at January 1, 2012

   $ 733       $ 5,610,160      $ —        $ 94,104      $ 2,145,692      $ 1,588,463      $ 9,439,152   

Net income

     —           —          —          —          1,089,311        221,159        1,310,470   

Currency translation adjustment

     —           —          —          162,118        —          3,096        165,214   

Exercise of stock options

     1         27,253        —          —          —          3,116        30,370   

Stock-based compensation

     —           48,258        —          —          —          2,381        50,639   

Issuance of restricted stock

     1         (1     —          —          —          —          —     

Exercise of warrants

     88         528,820        —          —          —          —          528,908   

Acquisition of remaining shares of noncontrolling interest

     —           (2,323     —          —          —          2,323        —     

Deemed distribution to Principal Stockholder

     —           —          —          —          (18,576     —          (18,576

Dividends declared

     —           —          —          —          (617,443     (357,056     (974,499

Distributions to noncontrolling interests

     —           —          —          —          —          (7,624     (7,624
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2012

   $ 823       $ 6,212,167      $ —        $ 256,222      $ 2,598,984      $ 1,455,858      $ 10,524,054   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2013

   $ 824       $ 6,237,488      $ —        $ 263,078      $ 560,452      $ 1,596,570      $ 8,658,412   

Net income

     —           —          —          —          1,728,458        456,487        2,184,945   

Currency translation adjustment

     —           —          —          (68,866     —          (806     (69,672

Exercise of stock options

     2         37,729        —          —          —          8,702        46,433   

Tax benefit from stock-based compensation

     —           2,394        —          —          —          —          2,394   

Stock-based compensation

     —           37,305        —          —          —          2,990        40,295   

Repurchase of common stock

     —           —          (346,253     —          —          —          (346,253

Dividends declared

     —           —          —          —          (866,391     (411,359     (1,277,750

Distributions to noncontrolling interests

     —           —          —          —          —          (7,808     (7,808
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at September 30, 2013

   $ 826       $ 6,314,916      $ (346,253   $ 194,212      $ 1,422,519      $ 1,644,776      $ 9,230,996   
  

 

 

    

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Nine Months Ended
September 30,
 
     2013     2012  
    

(In thousands)

(Unaudited)

 

Cash flows from operating activities:

    

Net income

   $ 2,184,945      $ 1,310,470   

Adjustments to reconcile net income to net cash generated from operating activities:

    

Depreciation and amortization

     752,530        641,725   

Amortization of leasehold interests in land

     30,297        30,016   

Amortization of deferred financing costs and original issue discount

     42,617        36,401   

Amortization of deferred gain and rent

     (3,708     (3,708

Non-cash change in deferred proceeds from sale of The Shoppes at The Palazzo

     1,030        1,295   

Loss on modification or early retirement of debt

     —          16,313   

Impairment and loss on disposal of assets

     9,433        144,903   

Stock-based compensation expense

     39,802        50,268   

Provision for doubtful accounts

     182,108        183,397   

Foreign exchange (gain) loss

     (9,802     3,081   

Excess tax benefits from stock-based compensation

     (2,394     —     

Deferred income taxes

     (5,762     (20,671

Changes in operating assets and liabilities:

    

Accounts receivable

     (233,379     (509,089

Inventories

     1,974        (7,026

Prepaid expenses and other

     3,473        (41,303

Leasehold interests in land

     (25,387     (24,163

Accounts payable

     9,006        44,560   

Accrued interest payable

     (13,866     (21,969

Income taxes payable

     (17,282     46,328   

Other accrued liabilities

     215,148        292,005   
  

 

 

   

 

 

 

Net cash generated from operating activities

     3,160,783        2,172,833   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Change in restricted cash and cash equivalents

     (877     (717

Capital expenditures

     (599,482     (1,062,778

Proceeds from disposal of property and equipment

     713        2,266   

Acquisition of intangible assets

     (45,857     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (645,503     (1,061,229
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from exercise of stock options

     46,433        30,370   

Excess tax benefits from stock-based compensation

     2,394        —     

Repurchase of common stock

     (211,241     —     

Proceeds from exercise of warrants

     —          528,908   

Dividends paid

     (1,277,360     (973,108

Distributions to noncontrolling interests

     (7,808     (7,624

Deemed distribution to Principal Stockholder

     —          (18,576

Proceeds from long-term debt (Note 3)

     354,357        3,625,516   

Repayments on long-term debt (Note 3)

     (720,177     (4,391,311

Payments of deferred financing costs

     —          (100,190
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,813,402     (1,306,015
  

 

 

   

 

 

 

Effect of exchange rate on cash

     (5,524     37,108   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     696,354        (157,303

Cash and cash equivalents at beginning of period

     2,512,766        3,902,718   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 3,209,120      $ 3,745,415   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash payments for interest, net of amounts capitalized

   $ 164,250      $ 165,178   
  

 

 

   

 

 

 

Cash payments for taxes, net of refunds

   $ 175,059      $ 100,397   
  

 

 

   

 

 

 

Change in construction payables

   $ (78,341   $ 12,411   
  

 

 

   

 

 

 

Non-cash investing and financing activities:

    

Capitalized stock-based compensation costs

   $ 493      $ 371   
  

 

 

   

 

 

 

Change in dividends payable on unvested restricted stock and stock units included in other accrued liabilities

   $ 390      $ 1,391   
  

 

 

   

 

 

 

Property and equipment acquired under capital lease

   $ 2,668      $ 10,097   
  

 

 

   

 

 

 

Acquisition of remaining shares of noncontrolling interest

   $ —        $ 2,323   
  

 

 

   

 

 

 

Repurchase of common stock included in other accrued liabilities

   $ 135,012      $ —     
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — ORGANIZATION AND BUSINESS OF COMPANY

The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Las Vegas Sands Corp. (“LVSC”), a Nevada corporation, and its subsidiaries (collectively the “Company”) for the year ended December 31, 2012. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the interim period have been included. The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of expected results for the full year. The Company’s common stock is traded on the New York Stock Exchange under the symbol “LVS.”

The shares of the Company’s subsidiary, Sands China Ltd. (“SCL,” the indirect owner and operator of the majority of the Company’s operations in the Macao Special Administrative Region (“Macao”) of the People’s Republic of China) are listed on The Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”) and are not, and will not, be registered under the Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent a registration under the Securities Act of 1933, as amended, or an applicable exception from such registration requirements.

Operations

Macao

The Company currently owns 70.2% of SCL, which includes the operations of The Venetian Macao, Sands Cotai Central, Four Seasons Macao, Sands Macao and other ancillary operations that support these properties, as further discussed below. The Company operates the gaming areas within these properties pursuant to a 20-year gaming subconcession.

The Company owns and operates The Venetian Macao Resort Hotel (“The Venetian Macao”), which anchors the Cotai Strip, the Company’s master-planned development of integrated resort properties on an area of approximately 140 acres in Macao (consisting of parcels referred to as 1, 2, 3 and 5 and 6). The Venetian Macao (located on parcel 1) includes a 39-floor luxury hotel with over 2,900 suites; approximately 374,000 square feet of gaming space; a 15,000-seat arena; an 1,800-seat theater; retail and dining space of approximately 1.0 million square feet; and a convention center and meeting room complex of approximately 1.2 million square feet.

In April and September 2012 and January 2013, the Company opened phases I, IIA and IIB, respectively, of its Sands Cotai Central integrated resort (located on parcels 5 and 6), which is situated across the street from The Venetian Macao and Four Seasons Macao. Phase I consists of a hotel tower on parcel 5, which includes approximately 600 five-star rooms and suites under the Conrad brand and approximately 1,200 four-star rooms and suites under the Holiday Inn brand; more than 350,000 square feet of meeting space; several food and beverage establishments; along with the 230,000-square-foot casino and VIP gaming areas. Phase IIA includes the first hotel tower on parcel 6, which features approximately 1,800 rooms and suites managed by Starwood Asia Pacific Hotels and Resorts Pte Ltd. and Sheraton Overseas Management Co. (collectively “Starwood”) under the Sheraton brand, along with the second casino and additional retail, entertainment, dining and meeting facilities. Phase IIB consists of the second hotel tower on parcel 6 and features approximately 2,100 rooms and suites managed by Starwood under the Sheraton brand. With the completion of phases I and II of the project, the integrated resort features approximately 300,000 square feet of gaming space, approximately 800,000 square feet of retail, dining and entertainment space, over 550,000 square feet of meeting facilities and a multipurpose theater (to open in 2014). The Company has commenced pre-construction activities on phase III of the project, which is expected to include a fourth hotel and mixed-use tower, located on parcel 5, to be managed by Starwood under the St. Regis brand and the total cost to complete is expected to be in excess of $450 million. As of September 30, 2013, the Company has capitalized costs of $4.09 billion for the entire project, including the land premium (net of amortization) and $129.5 million in outstanding construction payables.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The Company owns the Four Seasons Hotel Macao, Cotai Strip (the “Four Seasons Hotel Macao”), which features 360 rooms and suites managed and operated by Four Seasons Hotels Inc. and is located adjacent and connected to The Venetian Macao. Connected to the Four Seasons Hotel Macao, the Company owns and operates the Plaza Casino (together with the Four Seasons Hotel Macao and located on parcel 2, the “Four Seasons Macao”), which features approximately 108,000 square feet of gaming space; 19 Paiza mansions; retail space of approximately 260,000 square feet, which is connected to the mall at The Venetian Macao; several food and beverage offerings; and conference, banquet and other facilities. This integrated resort will also feature the Four Seasons Apartment Hotel Macao, Cotai Strip (the “Four Seasons Apartments”), an apart-hotel tower that consists of approximately 1.0 million square feet of Four Seasons-serviced and -branded luxury apart-hotel units and common areas. The Company has completed the structural work of the tower and is advancing its plans to monetize units within the Four Seasons Apartments.

The Company owns and operates the Sands Macao, the first Las Vegas-style casino in Macao. The Sands Macao offers approximately 249,000 square feet of gaming space and a 289-suite hotel tower, as well as several restaurants, VIP facilities, a theater and other high-end services and amenities.

Singapore

The Company owns and operates the Marina Bay Sands in Singapore, which features three 55-story hotel towers (totaling approximately 2,600 rooms and suites), the Sands SkyPark (which sits atop the hotel towers and features an infinity swimming pool and several dining options), approximately 160,000 square feet of gaming space, an enclosed retail, dining and entertainment complex of approximately 800,000 net leasable square feet, a convention center and meeting room complex of approximately 1.2 million square feet, theaters and a landmark iconic structure at the bay-front promenade that contains an art/science museum. In April 2013, the Company paid 57.0 million Singapore dollars (“SGD,” approximately $45.4 million at exchange rates in effect on September 30, 2013) to the Casino Regulatory Authority in Singapore as part of the process to renew its gaming license, which now expires in April 2016.

United States

Las Vegas

The Company owns and operates The Venetian Resort Hotel Casino (“The Venetian Las Vegas”), a Renaissance Venice-themed resort; The Palazzo Resort Hotel Casino (“The Palazzo”), a resort featuring modern European ambience and design; and an expo and convention center of approximately 1.2 million square feet (the “Sands Expo Center”). These Las Vegas properties, situated on or near the Las Vegas Strip, form an integrated resort with approximately 7,100 suites; approximately 225,000 square feet of gaming space; a meeting and conference facility of approximately 1.1 million square feet; and two enclosed retail, dining and entertainment complexes, currently referred to as the Grand Canal Shoppes. The complex located within The Venetian Las Vegas (previously known as “The Grand Canal Shoppes”) and the complex located within The Palazzo (previously known as “The Shoppes at The Palazzo”) were sold to GGP Limited Partnership (“GGP,” see “— Note 2 — Property and Equipment, Net” regarding the sale of The Shoppes at The Palazzo).

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Pennsylvania

The Company owns and operates the Sands Casino Resort Bethlehem (the “Sands Bethlehem”), a gaming, hotel, retail and dining complex located on the site of the historic Bethlehem Steel Works in Bethlehem, Pennsylvania. Sands Bethlehem features approximately 145,000 square feet of gaming space; a 300-room hotel tower; a 150,000-square-foot retail facility; an arts and cultural center; and a 50,000-square-foot multipurpose event center, which opened in May 2012. The Company owns 86% of the economic interest in the gaming, hotel and entertainment portion of the property through its ownership interest in Sands Bethworks Gaming LLC and more than 35% of the economic interest in the retail portion of the property through its ownership interest in Sands Bethworks Retail LLC.

Development Projects

Macao

The Company submitted plans to the Macao government for The Parisian Macao (located on parcel 3), an integrated resort that will be connected to The Venetian Macao and Four Seasons Macao. The Parisian Macao, which is currently expected to open in late 2015, is intended to include a gaming area (to be operated under the Company’s gaming subconcession), hotel and shopping mall. The Company expects the cost to design, develop and construct The Parisian Macao will be approximately $2.7 billion, inclusive of payments made for the land premium. The Company has commenced construction activities and has capitalized costs of $284.6 million, including the land premium (net of amortization), as of September 30, 2013. In addition, the Company will be completing the development of some public areas surrounding its Cotai Strip properties on behalf of the Macao government.

Under the Company’s land concession for Sands Cotai Central, the Company is required to complete the development by May 2014. The Company will be applying for an extension from the Macao government to complete Sands Cotai Central, as the Company will be unable to meet the May 2014 deadline. The land concession for The Parisian Macao contains a similar requirement, which was extended by the Macao government in July 2012, that the development be completed by April 2016. Should the Company determine that it is unable to complete The Parisian Macao by April 2016, the Company would then also expect to apply for another extension from the Macao government. If the Company is unable to meet The Parisian Macao deadline and the deadlines for either development are not extended, the Company could lose its land concessions for Sands Cotai Central or The Parisian Macao, which would prohibit the Company from operating any facilities developed under the respective land concessions. As a result, the Company could record a charge for all or some portion of its $4.09 billion or $284.6 million in capitalized construction costs and land premiums (net of amortization), as of September 30, 2013, related to Sands Cotai Central and The Parisian Macao, respectively.

United States

The Company was constructing a high-rise residential condominium tower (the “Las Vegas Condo Tower”), located on the Las Vegas Strip between The Palazzo and The Venetian Las Vegas. The Company suspended construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. The Company intends to recommence construction when demand and conditions improve. As of September 30, 2013, the Company has capitalized construction costs of $178.8 million for this project. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty. Should demand and conditions fail to improve or management decide to abandon the project, the Company could record a charge for all or some portion of the $178.8 million in capitalized construction costs as of September 30, 2013.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Other

The Company continues to aggressively pursue a variety of new development opportunities around the world.

Development Financing Strategy

Through September 30, 2013, the Company has funded its development projects primarily through borrowings under its credit facilities, operating cash flows, proceeds from its equity offerings and proceeds from the disposition of non-core assets.

The U.S. credit facility requires the Company’s Las Vegas operations to comply with certain financial covenants at the end of each quarter, including maintaining a maximum leverage ratio of net debt, as defined, to trailing twelve-month adjusted earnings before interest, income taxes, depreciation and amortization, as defined (“Adjusted EBITDA”). The maximum leverage ratio is 5.0x for all quarterly periods through maturity. The Company can elect to contribute up to $50 million of cash on hand to its Las Vegas operations on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio. The Company’s Macao facility also requires the Company’s Macao operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.0x for the quarterly periods ending September 30, 2013 through December 31, 2014, decreases to 3.5x for the quarterly periods ending March 31 through December 31, 2015, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. The Company’s Singapore credit facility (the “2012 Singapore Credit Facility”) requires operations of Marina Bay Sands to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.0x for the quarterly period ended September 30, 2013, decreases to 3.5x for the quarterly periods ending December 31, 2013 through December 31, 2014, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. If the Company is unable to maintain compliance with the financial covenants under these credit facilities, it would be in default under the respective credit facilities. A default under the U.S. credit facility would trigger a cross-default under the Company’s airplane financings. Any defaults or cross-defaults under these agreements would allow the lenders, in each case, to exercise their rights and remedies as defined under their respective agreements. If the lenders were to exercise their rights to accelerate the due dates of the indebtedness outstanding, there can be no assurance that the Company would be able to repay or refinance any amounts that may become due and payable under such agreements, which could force the Company to restructure or alter its operations or debt obligations.

The Company held unrestricted cash and cash equivalents of $3.21 billion and restricted cash and cash equivalents of $7.3 million as of September 30, 2013. The Company believes the cash on hand and cash flow generated from operations will be sufficient to maintain compliance with the financial covenants of its credit facilities. The Company may need to arrange additional financing to fund the balance of its Cotai Strip developments. In the normal course of its activities, the Company will continue to evaluate its capital structure and opportunities for enhancements thereof, including evaluating strategic alternatives related to the Company’s Pennsylvania operations.

Recent Accounting Pronouncements

In February 2013, the FASB issued authoritative guidance on the reporting of reclassifications out of accumulated other comprehensive income. The guidance requires an entity to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income if the amount is reclassified to net income in its entirety in the same reporting period. The guidance is effective for fiscal years beginning after December 15, 2012, with early adoption permitted. The adoption of this guidance did not have a material effect on the Company’s financial condition, results of operations or cash flows.

In July 2013, the FASB issued authoritative guidance on the presentation of an unrecognized tax benefit when a loss or tax credit carryforward exists. The guidance requires the netting of unrecognized tax benefits against a deferred tax asset for a loss or tax credit carryforward that would apply in settlement of the uncertain tax positions. The guidance is effective for annual and interim periods beginning after December 15, 2013, with early adoption permitted. The adoption of this guidance will not have a material effect on the Company’s financial condition, results of operations or cash flows.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 2 — PROPERTY AND EQUIPMENT, NET

Property and equipment consists of the following (in thousands):

 

     September 30,
2013
    December 31,
2012
 

Land and improvements

   $ 556,001      $ 515,538   

Building and improvements

     15,271,904        14,414,026   

Furniture, fixtures, equipment and leasehold improvements

     2,780,095        2,557,071   

Transportation

     442,104        411,671   

Construction in progress

     1,023,021        1,824,531   
  

 

 

   

 

 

 
     20,073,125        19,722,837   

Less — accumulated depreciation and amortization

     (4,659,916     (3,956,089
  

 

 

   

 

 

 
   $ 15,413,209      $ 15,766,748   
  

 

 

   

 

 

 

Construction in progress consists of the following (in thousands):

 

 

     September 30,
2013
     December 31,
2012
 

Four Seasons Macao (principally the Four Seasons Apartments)

   $ 402,354       $ 415,367   

The Parisian Macao

     226,932         59,510   

Sands Cotai Central

     77,697         913,432   

Other

     316,038         436,222   
  

 

 

    

 

 

 
   $ 1,023,021       $ 1,824,531   
  

 

 

    

 

 

 

The $316.0 million in other construction in progress as of September 30, 2013, consists primarily of construction of the Las Vegas Condo Tower and various projects at The Venetian Macao.

Under generally accepted accounting principles, the sale of The Shoppes at The Palazzo has not been accounted for as a sale because the Company’s participation in certain potential future revenues constitutes continuing involvement. Therefore, $266.2 million of the proceeds allocated to the mall sale transaction has been recorded as deferred proceeds (a long-term financing obligation), which will accrue interest at an imputed rate and will be offset by (i) imputed rental income and (ii) rent payments made to GGP related to spaces leased back from GGP by the Company. The property and equipment legally sold to GGP totaling $242.1 million (net of $69.2 million of accumulated depreciation) as of September 30, 2013, will continue to be recorded on the Company’s condensed consolidated balance sheet and will continue to be depreciated in the Company’s condensed consolidated income statement.

During the three and nine months ended September 30, 2013, and the three and nine months ended September 30, 2012, the Company capitalized interest expense of $0.9 million, $3.3 million, $9.9 million and $44.3 million, respectively. During the three and nine months ended September 30, 2013, and the three and nine months ended September 30, 2012, the Company capitalized approximately $5.9 million, $16.9 million, $4.8 million and $13.2 million, respectively, of internal costs, consisting primarily of compensation expense for individuals directly involved with the development and construction of property.

In May 2012, the Company withdrew its appeal regarding the Company’s application not being approved by the Macao government for a land concession related to its Cotai Strip development (formerly referred to as parcels 7 and 8) and recorded an impairment loss of $100.7 million during the nine months ended September 30, 2012, related to the capitalized construction costs of its development on parcels 7 and 8. The Company also recorded a one-time impairment loss of $42.9 million related to the termination of the ZAiA show at The Venetian Macao during the nine months ended September 30, 2012.

The Company suspended portions of its development projects. As described in “— Note 1 — Organization and Business of Company,” the Company may be required to record an impairment charge related to these developments in the future.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 3 — LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

 

     September 30,
2013
    December 31,
2012
 

Corporate and U.S. Related:

    

Senior Secured Credit Facility — Term B

   $ 1,802,741      $ 1,816,477   

Senior Secured Credit Facility — Delayed Draws I and II

     537,873        606,561   

Senior Secured Credit Facility — Revolving

     450,000        400,000   

Airplane Financings

     68,281        71,047   

HVAC Equipment Lease

     18,524        19,714   

Other

     2,766        3,689   

Macao Related:

    

2011 VML Credit Facility

     3,208,923        3,209,839   

Other

     8,319        7,313   

Singapore Related:

    

2012 Singapore Credit Facility — Term

     3,666,189        3,767,141   

2012 Singapore Credit Facility — Revolving

     —          327,578   

Other

     —          708   
  

 

 

   

 

 

 
     9,763,616        10,230,067   

Less — current maturities

     (1,301,624     (97,802
  

 

 

   

 

 

 

Total long-term debt

   $ 8,461,992      $ 10,132,265   
  

 

 

   

 

 

 

As of September 30, 2013, $1.22 billion of long-term debt classified as current related to the Senior Secured Credit Facility.

Senior Secured Credit Facility

As of September 30, 2013, the Company had $45.5 million of available borrowing capacity under the Senior Secured Credit Facility, net of outstanding letters of credit.

2011 VML Credit Facility

As of September 30, 2013, the Company had $500.0 million of available borrowing capacity under the 2011 VML Credit Facility.

2012 Singapore Credit Facility

As of September 30, 2013, the Company had SGD 492.7 million (approximately $392.7 million at exchange rates in effect on September 30, 2013) of available borrowing capacity under the 2012 Singapore Credit Facility, net of outstanding banker’s guarantees.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Cash Flows from Financing Activities

Cash flows from financing activities related to long-term debt and capital lease obligations are as follows (in thousands):

 

 

     Nine Months Ended
September 30,
 
     2013     2012  

Proceeds from Senior Secured Credit Facility

   $ 250,000      $ —     

Proceeds from 2012 Singapore Credit Facility

     104,357        3,625,516   
  

 

 

   

 

 

 
   $ 354,357      $ 3,625,516   
  

 

 

   

 

 

 

Repayments on 2012 Singapore Credit Facility

   $ (430,504   $ —     

Repayments on Senior Secured Credit Facility

     (282,424     (419,448

Repayments on Singapore Credit Facility

     —          (3,635,676

Redemption of Senior Notes

     —          (189,712

Repayments on Airplane Financings

     (2,766     (2,766

Repayments on Ferry Financing

     —          (140,337

Repayments on HVAC Equipment Lease and Other Long-Term Debt

     (4,483     (3,372
  

 

 

   

 

 

 
   $ (720,177   $ (4,391,311
  

 

 

   

 

 

 

Fair Value of Long-Term Debt

The estimated fair value of the Company’s long-term debt as of September 30, 2013 and December 31, 2012, was approximately $9.68 billion and $10.12 billion, respectively, compared to its carrying value of $9.73 billion and $10.20 billion, respectively. The estimated fair value of the Company’s long-term debt is based on level 2 inputs (quoted prices in markets that are not active).

NOTE 4 — EQUITY AND EARNINGS PER SHARE

Common Stock

Dividends

On March 29, June 28 and September 27, 2013, the Company paid a dividend of $0.35 per common share as part of a regular cash dividend program. During the nine months ended September 30, 2013, the Company recorded $866.4 million as a distribution against retained earnings (of which $453.1 million related to the Principal Stockholder’s family).

On March 30, June 29 and September 28, 2012, the Company paid a dividend of $0.25 per common share as part of a regular cash dividend program. During the nine months ended September 30, 2012, the Company recorded $617.4 million as a distribution against retained earnings (of which $323.5 million related to the Principal Stockholder’s family).

In October 2013, the Company’s Board of Directors declared a quarterly dividend of $0.35 per common share (a total estimated to be approximately $287 million) to be paid on December 31, 2013, to shareholders of record on December 20, 2013.

Repurchase Program

In June 2013, the Company’s Board of Directors approved a share repurchase program, which expires in June 2015, with an initial authorization of $2.0 billion. Repurchases of the Company’s common stock are made at the Company’s discretion in accordance with applicable federal securities laws in the open market or otherwise. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, legal requirements, other investment opportunities and market conditions. During the nine months ended September 30, 2013, the Company repurchased 5,479,601 shares of its common stock for $346.3 million (including commissions) under this program. All share repurchases of the Company’s common stock have been recorded as treasury shares.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Warrants

On March 2, 2012, the Principal Stockholder’s family exercised all of their outstanding warrants to purchase 87,500,175 shares of the Company’s common stock for $6.00 per share and paid $525.0 million in cash as settlement of the warrant exercise price. Additionally, during the nine months ended September 30, 2012, 39,070 warrants were exercised to purchase an aggregate of 655,496 shares of the Company’s common stock at $6.00 per share and $3.9 million in cash was received as settlement of the warrant exercise price. No warrants were exercised during the nine months ended September 30, 2013.

Other Equity Transactions

In July 2012, the Company purchased a Boeing 747 airplane from an entity controlled by the Principal Stockholder for $34.0 million, based on independent third party appraisals. In accordance with accounting standards regarding transactions between entities under common control, the Company recorded the cost of the airplane at the Principal Stockholder’s book value at the date of the transaction, which was $15.4 million. The $18.6 million difference between the amount paid and the book value of the airplane (a gain to the Principal Stockholder) was recorded as a deemed distribution to the Principal Stockholder during the nine months ended September 30, 2012.

The Company believes that the purchase of the airplane allows it to meet the increased demand for high-end premium direct customer travel driven from the Company’s expanding global gaming operations and is an important component in creating the ultimate trans-Pacific transportation experience for its customers. The Company believes it would have been more costly to acquire the airplane in the open market due to the limited supply of similar aircraft with luxury features.

Noncontrolling Interests

On February 28 and June 21, 2013, SCL paid a dividend of 0.67 Hong Kong dollars (“HKD”) and HKD 0.66 per share, respectively (a total of $1.38 billion), to SCL shareholders (of which the Company retained $970.2 million). On February 28 and June 22, 2012, SCL paid a dividend of HKD 0.58 per share (a total of $1.2 billion) to SCL shareholders (of which the Company retained $844.4 million).

During the nine months ended September 30, 2013 and 2012, the Company distributed $7.8 million and $7.6 million, respectively, to certain of its noncontrolling interests.

Earnings Per Share

The weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:

 

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  

Weighted-average common shares outstanding (used in the calculation of basic earnings per share)

     823,200,515         821,482,154         823,512,889         801,084,165   

Potential dilution from stock options, warrants and restricted stock and stock units

     3,764,825         4,124,094         4,030,621         22,276,870   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted-average common and common equivalent shares (used in the calculation of diluted earnings per share)

     826,965,340         825,606,248         827,543,510         823,361,035   
  

 

 

    

 

 

    

 

 

    

 

 

 

Antidilutive stock options excluded from the calculation of diluted earnings per share

     4,573,059         5,549,521         4,547,759         5,395,158   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Accumulated Other Comprehensive Income

As of September 30, 2013 and December 31, 2012, accumulated other comprehensive income consisted solely of foreign currency translation adjustments.

NOTE 5 — VARIABLE INTEREST ENTITIES

The Company consolidates any variable interest entities (“VIEs”) in which it is the primary beneficiary and discloses significant variable interests in VIEs of which it is not the primary beneficiary, if any, which management determines such designation based on accounting standards for VIEs.

The Company has entered into various joint venture agreements with independent third parties. The operations of these joint ventures have been consolidated by the Company due to the Company’s significant investment in these joint ventures, its power to direct the activities of the joint ventures that would significantly impact their economic performance and the obligation to absorb potentially significant losses or the rights to receive potentially significant benefits from these joint ventures. The Company evaluates its primary beneficiary designation on an ongoing basis and assesses the appropriateness of the VIE’s status when events have occurred that would trigger such an analysis.

As of September 30, 2013 and December 31, 2012, the Company’s joint ventures had total assets of $105.5 million and $94.5 million, respectively, and total liabilities of $121.9 million and $95.8 million, respectively.

NOTE 6 — INCOME TAXES

The Company’s major tax jurisdictions are the U.S., Macao and Singapore. In January 2013, the Internal Revenue Service (“IRS”) completed its examination of tax years 2005 through 2009. The Company decreased its unrecognized tax benefits by $9.3 million due to the conclusion of the IRS audit. The Inland Revenue Authority of Singapore is performing a compliance review of the Marina Bay Sands tax return for tax years 2010 and 2011. The Company is subject to examination for tax years after 2007 in Macao and Singapore and for tax years after 2009 in the U.S. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company’s expected outcome, which would impact the provision for income taxes.

Since January 1, 2012, the Company no longer considers the current portion of the tax earnings and profits of certain of its foreign subsidiaries to be permanently reinvested. The Company has not provided a deferred tax provision for these foreign earnings as the Company expects there will be sufficient U.S. foreign tax credits to offset the U.S. income tax that would result from the repatriation of foreign earnings. The Company recorded valuation allowances on the net deferred tax assets of its U.S. operations and certain foreign jurisdictions. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period and to the extent it becomes “more-likely-than-not” that the deferred tax assets are realizable, the Company will reduce the valuation allowance as appropriate.

In October 2013, the Company received a third 5-year income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through the end of 2018. In February 2011, the Company entered into an agreement with the Macao government, effective through the end of 2013, that provides for an annual payment of 14.4 million patacas (approximately $1.8 million at exchange rates in effect on September 30, 2013) as a substitution for a 12% tax otherwise due from Venetian Macau Limited (“VML”) shareholders on dividend distributions paid from VML gaming profits. The Company will request an extension of the agreement with the Macao government through 2018 to correspond to the income tax exemption for gaming operations; however, there is no assurance that the Company will receive the extension.

In September 2013, the Company and the IRS entered into a Pre-Filing Agreement providing that the Macao special gaming tax (35% of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 7 — STOCK-BASED EMPLOYEE COMPENSATION

Stock-based compensation activity under the LVSC 2004 and SCL Equity Plans is as follows (in thousands, except weighted average grant date fair values):

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  

Compensation expense:

           

Stock options

   $ 8,391       $ 9,137       $ 24,481       $ 27,182   

Restricted stock and stock units

     4,903         8,264         15,321         23,086   
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 13,294       $ 17,401       $ 39,802       $ 50,268   
  

 

 

    

 

 

    

 

 

    

 

 

 

Compensation cost capitalized as part of property and equipment

   $ 129       $ 76       $ 493       $ 371   
  

 

 

    

 

 

    

 

 

    

 

 

 

LVSC 2004 Plan:

           

Stock options granted

     70         45         288         512   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 38.11       $ 25.97       $ 35.76       $ 36.57   
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock granted

     4         4         47         517   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 56.84       $ 38.39       $ 54.72       $ 52.97   
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock units granted

     89         20         123         333   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 59.83       $ 41.59       $ 58.82       $ 25.98   
  

 

 

    

 

 

    

 

 

    

 

 

 

SCL Equity Plan:

           

Stock options granted

     1,058         2,383         3,787         6,865   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 2.97       $ 1.58       $ 2.48       $ 1.61   
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock units granted

     —           —           1,000         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ —         $ —         $ 5.26       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

LVSC 2004 Plan:

        

Weighted average volatility

     94.6     95.1     94.8     95.2

Expected term (in years)

     5.5        5.5        5.5        5.5   

Risk-free rate

     1.4     0.9     1.3     1.1

Expected dividends

     2.4     2.4     2.5     1.8

SCL Equity Plan:

        

Weighted average volatility

     67.2     69.7     67.9     70.1

Expected term (in years)

     6.3        6.3        6.3        6.2   

Risk-free rate

     1.3     0.3     0.6     0.5

Expected dividends

     2.8     4.1     3.3     4.1

 

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(UNAUDITED)

 

NOTE 8 — FAIR VALUE MEASUREMENTS

Under applicable accounting guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance also establishes a valuation hierarchy for inputs in measuring fair value that maximizes the use of observable inputs (inputs market participants would use based on market data obtained from sources independent of the Company) and minimizes the use of unobservable inputs (inputs that reflect the Company’s assumptions based upon the best information available in the circumstances) by requiring that the most observable inputs be used when available. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the assets or liabilities, either directly or indirectly. Level 3 inputs are unobservable inputs for the assets or liabilities. Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The following table provides the assets carried at fair value (in thousands):

 

            Fair Value Measurements Using:  
     Total Carrying
Value
     Quoted Market
Prices in Active
Markets (Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant
Unobservable
Inputs (Level 3)
 

As of September 30, 2013

           

Cash equivalents(1)

   $ 1,826,658       $ 1,826,658       $ —         $ —     

Interest rate caps(2)

   $ 242       $ —         $ 242       $ —     

As of December 31, 2012

           

Cash equivalents(1)

   $ 1,377,330       $ 1,377,330       $ —         $ —     

Interest rate caps(2)

   $ 218       $ —         $ 218       $ —     

 

(1)

The Company has short-term investments classified as cash equivalents as the original maturities are less than 90 days.

(2)

As of September 30, 2013 and December 31, 2012, the Company had 22 and 30 interest rate cap agreements, respectively, with an aggregate fair value of approximately $0.2 million, based on quoted market values from the institutions holding the agreements.

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Litigation

The Company is involved in other litigation in addition to those noted below, arising in the normal course of business. Management has made certain estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material effect on the Company’s financial condition, results of operations or cash flows.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

On October 15, 2004, Richard Suen and Round Square Company Limited (“RSC”) filed an action against LVSC, Las Vegas Sands, Inc. (“LVSI”), Sheldon G. Adelson and William P. Weidner in the District Court of Clark County, Nevada (the “District Court of Clark County”), asserting a breach of an alleged agreement to pay a success fee of $5.0 million and 2.0% of the net profit from the Company’s Macao resort operations to the plaintiffs as well as other related claims. In March 2005, LVSC was dismissed as a party without prejudice based on a stipulation to do so between the parties. Pursuant to an order filed March 16, 2006, plaintiffs’ fraud claims set forth in the first amended complaint were dismissed with prejudice against all defendants. The order also dismissed with prejudice the first amended complaint against defendants Sheldon G. Adelson and William P. Weidner. On May 24, 2008, the jury returned a verdict for the plaintiffs in the amount of $43.8 million. On June 30, 2008, a judgment was entered in this matter in the amount of $58.6 million (including pre-judgment interest). The Company appealed the verdict to the Nevada Supreme Court. On November 17, 2010, the Nevada Supreme Court reversed the judgment and remanded the case to the District Court of Clark County for a new trial. In its decision reversing the monetary judgment against the Company, the Nevada Supreme Court also made several other rulings which may affect the outcome of the new trial, including overturning the pre-trial dismissal of the plaintiffs’ breach of contract claim and deciding several evidentiary matters, some of which confirmed and some of which overturned rulings made by the District Court of Clark County. On February 27, 2012, the District Court of Clark County set a date of March 25, 2013, for the new trial. On June 22, 2012, the defendants filed a request to add experts and plaintiffs filed a motion seeking additional financial data as part of their discovery. The District Court of Clark County granted both requests. The retrial began on March 27 and on May 14, 2013, the jury returned a verdict in favor of RSC in the amount of $70.0 million. On May 28, 2013, a judgment was entered in the matter in the amount of $101.6 million (including pre-judgment interest). On June 7, 2013, the Company filed a motion with the District Court of Clark County requesting that the judgment be set aside as a matter of law or in the alternative that a new trial be granted. On July 30, 2013, the District Court of Clark County denied the Company’s motion. On October 17, 2013, the Court entered an order granting plaintiff’s request for certain costs and fees associated with the litigation in the amount of approximately $1.0 million. The Company intends to appeal the jury verdict and the award of the costs and fees. The Company believes that it has valid bases in law and fact to appeal these verdicts. As a result, the Company believes that the likelihood that the amount of the judgments will be affirmed is not probable, and, accordingly, that the amount of any loss cannot be reasonably estimated at this time. Because the Company believes that this potential loss is not probable or estimable, it has not recorded any reserves or contingencies related to this legal matter. In the event that the Company’s assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.

On October 20, 2010, Steven C. Jacobs, the former Chief Executive Officer of SCL, filed an action against LVSC and SCL in the District Court of Clark County alleging breach of contract against LVSC and SCL and breach of the implied covenant of good faith and fair dealing and tortious discharge in violation of public policy against LVSC. On March 16, 2011, an amended complaint was filed, which added Sheldon G. Adelson as a defendant and alleged a claim of defamation per se against him, LVSC and SCL. On June 9, 2011, the District Court of Clark County dismissed the defamation claim and certified the decision as to Sheldon G. Adelson as a final judgment. On July 1, 2011, the plaintiff filed a notice of appeal regarding the final judgment as to Sheldon G. Adelson. On August 26, 2011, the Nevada Supreme Court issued a writ of mandamus instructing the District Court of Clark County to hold an evidentiary hearing on whether personal jurisdiction exists over SCL and stayed the case until after the district court’s decision. On January 17, 2012, Mr. Jacobs filed his opening brief with the Nevada Supreme Court regarding his appeal of the defamation claim against Mr. Adelson. On January 30, 2012, Mr. Adelson filed his reply to Mr. Jacobs’ opening brief. On March 8, 2012, the District Court of Clark County set a hearing date for the week of June 25-29, 2012, for the evidentiary hearing on personal jurisdiction over SCL. On May 24, 2012, the District Court of Clark County vacated the hearing date previously set for June 25-29 and set a status conference for June 28, 2012. At the June 28 status hearing, the District Court of Clark County set out a hearing schedule to resolve a discovery dispute and did not reset a date for the jurisdictional hearing. From September 10 to September 12, 2012, the District Court of Clark County held a hearing to determine the outcome of certain discovery disputes and issued an Order on September 14, 2012. In its Order, the District Court of Clark County fined LVSC $25,000 and, for the purposes of the jurisdictional discovery and evidentiary hearing, precluded the Defendants from relying on the Macao Data Privacy Act as an objection or defense under its discovery obligations. On December 21, 2012, the District Court of Clark County ordered the defendants to produce documents from a former counsel to LVSC containing attorney client privileged information. On January 23, 2013, the defendants filed a writ with the Nevada

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Supreme Court challenging this order (the “January Writ”). On January 29, 2013, the District Court of Clark County granted defendants motion for a stay of the order. On February 15, 2013, the Nevada Supreme Court ordered the plaintiff to answer the January Writ. On February 28, 2013, the District Court of Clark County ordered a hearing on plaintiff’s request for sanctions and additional discovery (the “February 28th Order”). On April 8, 2013, the defendants filed a writ with the Nevada Supreme Court challenging the February 28th Order (the “April Writ”); and the Nevada Supreme Court ordered the plaintiff to answer the April Writ by May 20, 2013. The defendants also filed and were granted a stay of the February 28th Order by the District Court of Clark County until such time as the Nevada Supreme Court decides the April Writ. On June 18, 2013, the District Court of Clark County scheduled the jurisdictional hearing for July 16-22, 2013 and issued an order allowing the plaintiff access to privileged communications of counsel to the Company (the “June 18th Order”). On June 21, 2013, the Company filed another writ with the Nevada Supreme Court challenging the June 18th Order (the “June Writ”). The Nevada Supreme Court accepted the June Writ on June 28, 2013, and issued a stay of the June 18th Order. On June 28, 2013, the District Court of Clark County vacated the jurisdictional hearing. On July 3, 2013, the Company filed a motion with the Nevada Supreme Court to consolidate the pending writs (each of which have now been fully briefed to the Nevada Supreme Court). On October 9, 2013, the Nevada Supreme Court heard arguments on the January Writ and plaintiff’s appeal of the District Court of Clark County’s dismissal of plaintiff’s defamation claim against Mr. Adelson. The Nevada Supreme Court has taken both matters under advisement pending a decision. Mr. Jacobs is seeking unspecified damages in this matter. This action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

On February 9, 2011, LVSC received a subpoena from the Securities and Exchange Commission (the “SEC”) requesting that the Company produce documents relating to its compliance with the Foreign Corrupt Practices Act (the “FCPA”). The Company has also been advised by the Department of Justice (the “DOJ”) that it is conducting a similar investigation. It is the Company’s belief that the subpoena may have emanated from the lawsuit filed by Steven C. Jacobs described above.

After the Company’s receipt of the subpoena from the SEC on February 9, 2011, the Board of Directors delegated to the Audit Committee, comprised of three independent members of the Board of Directors, the authority to investigate the matters raised in the SEC subpoena and related inquiry of the DOJ.

As part of the 2012 annual audit of the Company’s financial statements, the Audit Committee advised the Company and its independent accountants that it had reached certain preliminary findings, including that there were likely violations of the books and records and internal controls provisions of the FCPA and that in recent years, the Company has improved its practices with respect to books and records and internal controls.

Based on the information provided to management by the Audit Committee and its counsel, the Company believes, and the Audit Committee concurs, that the preliminary findings:

 

 

 

do not have a material impact on the financial statements of the Company;

 

 

 

do not warrant any restatement of the Company’s past financial statements; and

 

 

 

do not represent a material weakness in the Company’s internal controls over financial reporting as of September 30, 2013.

The investigation by the Audit Committee is now completed. The Company is cooperating with all investigations. Based on proceedings to date, management is currently unable to determine the probability of the outcome of this matter, the extent of materiality, or the range of reasonably possible loss, if any.

 

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(UNAUDITED)

 

On May 24, 2010, Frank J. Fosbre, Jr. filed a purported class action complaint in the United States District Court for the District of Nevada (the “U.S. District Court”), against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 1, 2007 through November 6, 2008. The complaint sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On July 21, 2010, Wendell and Shirley Combs filed a purported class action complaint in the U.S. District Court, against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from June 13, 2007 through November 11, 2008. The complaint, which was substantially similar to the Fosbre complaint, discussed above, sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On August 31, 2010, the U.S. District Court entered an order consolidating the Fosbre and Combs cases, and appointed lead plaintiffs and lead counsel. As such, the Fosbre and Combs cases are reported as one consolidated matter. On November 1, 2010, a purported class action amended complaint was filed in the consolidated action against LVSC, Sheldon G. Adelson and William P. Weidner. The amended complaint alleges that LVSC, through the individual defendants, disseminated or approved materially false and misleading information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 2, 2007 through November 6, 2008. The amended complaint seeks, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On January 10, 2011, the defendants filed a motion to dismiss the amended complaint, which, on August 24, 2011, was granted in part, and denied in part, with the dismissal of certain allegations. On November 7, 2011, the defendants filed their answer to the allegations remaining in the amended complaint. On July 11, 2012, the U.S. District Court issued an order allowing Defendants’ Motion for Partial Reconsideration of the Court’s Order dated August 24, 2011, striking additional portions of the plaintiff’s complaint and reducing the class period to a period of February 4 to November 6, 2008. On August 7, 2012, the plaintiff filed a purported class action second amended complaint (the “Second Amended Complaint”) seeking to expand their allegations back to a time period of 2007 (having previously been cut back to 2008 by the U.S. District Court) essentially alleging very similar matters that had been previously stricken by the U.S. District Court. On October 16, 2012, the defendants filed a new motion to dismiss the Second Amended Complaint. The plaintiffs responded to the motion to dismiss on November 1, 2012, and defendants filed their reply on November 12, 2012. On November 20, 2012, the U.S. District Court granted a stay of discovery under the Private Securities Litigation Reform Act pending a decision on the new motion to dismiss and therefore, the discovery process has been suspended. On April 16, 2013, the case was reassigned to a new judge. On July 30, 2013, the U.S. District Court heard the motion to dismiss and took the matter under advisement. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

On March 9, 2011, Benyamin Kohanim filed a shareholder derivative action (the “Kohanim action”) on behalf of the Company in the District Court of Clark County against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint alleges, among other things, breach of fiduciary duties in failing to properly implement, oversee and maintain internal controls to ensure compliance with the FCPA. The complaint seeks to recover for the Company unspecified damages, including restitution and disgorgement of profits, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On April 18, 2011, Ira J. Gaines, Sunshine Wire and Cable Defined Benefit Pension Plan Trust dated 1/1/92 and Peachtree Mortgage Ltd. filed a shareholder derivative action (the “Gaines action”) on behalf of the Company in the District Court of Clark County against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint raises substantially similar claims as alleged in the Kohanim action. The complaint seeks to recover for the Company unspecified damages, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiffs. The Kohanim and Gaines actions have been consolidated and are reported as one consolidated matter. On July 25, 2011, the plaintiffs filed a first verified amended consolidated complaint. The plaintiffs have twice agreed to stay the proceedings. A 120-day stay was entered by the Court in October 2011. It was extended for another 90 days in February 2012 and expired in May 2012. The parties agreed to an extension of the May 2012 deadline that expired on October 30, 2012. The defendants filed a motion to dismiss on November 1, 2012, based on the fact that the plaintiffs have suffered no damages. On January 23, 2013, the Court denied the motion to dismiss in part, deferred the remainder of the motion to dismiss and stayed the proceedings until a July 22, 2013 status hearing. On July 22, 2013, the Court extended the stay until December 2, 2013. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

 

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(UNAUDITED)

 

On April 1, 2011, Nasser Moradi, Richard Buckman, Douglas Tomlinson and Matt Abbeduto filed a shareholder derivative action (the “Moradi action”), as amended on April 15, 2011, on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint raises substantially similar claims as alleged in the Kohanim and Gaines actions. The complaint seeks to recover for the Company unspecified damages, including exemplary damages and restitution, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiffs. On April 18, 2011, the Louisiana Municipal Police Employees Retirement System filed a shareholder derivative action (the “LAMPERS action”) on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time, and Wing T. Chao, a former member of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim, Moradi and Gaines actions. The complaint seeks to recover for the Company unspecified damages, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On April 22, 2011, John Zaremba filed a shareholder derivative action (the “Zaremba action”) on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time, and Wing T. Chao, a former member of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim, Moradi, Gaines and LAMPERS actions. The complaint seeks to recover for the Company unspecified damages, including restitution, disgorgement of profits and injunctive relief, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On August 25, 2011, the U.S. District Court consolidated the Moradi, LAMPERS and Zaremba actions and such actions are reported as one consolidated matter. On November 17, 2011, the defendants filed a motion to dismiss or alternatively to stay the federal action due to the parallel state court action described above. On May 25, 2012, the case was transferred to a new judge. On August 27, 2012, the U.S. District Court granted the motion to stay pending a further update of the Special Litigation Committee due on October 30, 2012. On October 30, 2012, the defendants filed the update asking the judge to determine whether to continue the stay until January 31, 2013, or to address motions to dismiss. On November 7, 2012, the U.S. District Court denied defendants request for an extension of the stay but asked the parties to brief the motion to dismiss. On November 21, 2012, defendants filed their motion to dismiss. On December 21, 2012, plaintiffs filed their opposition and on January 18, 2013, defendants filed their reply. On May 31, 2013, the case was reassigned to a new judge. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

 

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(UNAUDITED)

 

On March 23, 2012, Ernest Kleinschmidt filed a shareholder derivative action (the “Kleinschmidt action”) on behalf of the Company in the District Court of Clark County against Sheldon G. Adelson, Michael A. Leven, Irwin A. Siegel, Jeffrey H. Schwartz, Jason N. Ader, Charles D. Forman, Irwin Chafetz and George P. Koo, who are currently members of the Board of Directors, and Wing T. Chao, Andrew R. Heyer, James Purcell, Bradley H. Stone and William P. Weidner, who are former members of the Board of Directors and/or executives of the Company. The complaint alleges, among other things, breach of fiduciary duties for disseminating false and misleading information, failure to maintain internal controls and failing to properly oversee and manage the Company, and unjust enrichment. The complaint seeks, among other relief, unspecified damages, direction to LVSC to take unspecified actions to improve its corporate governance and internal procedures, restitution and disgorgement of profits, and attorneys’ fees, costs and related expenses for the plaintiff. On June 29, 2012, the defendants who had been served at that time including nominal defendant LVSC and defendants Michael A. Leven, Irwin A. Siegel, Jason N. Ader, Charles D. Forman, Irwin Chafetz, George P. Koo, James Purcell, Bradley H. Stone and William P. Weidner filed a motion to dismiss. On July 20 and July 25, 2012, defendants Jeffery H. Schwartz and Wing T. Chao, respectively, each filed a substantially similar motion to dismiss. On October 10, 2012, the case was transferred to business court within the District Court of Clark County. On October 12, 2012, the case was reassigned to a new judge. On January 14, 2013, the District Court of Clark County filed its order dismissing the entire case for failure to make a demand on the Board of Directors of LVSC with 5 of 6 claims dismissed with prejudice as being time barred under applicable statutes of limitations. The sixth claim for unjust enrichment was allowed to be re-filed, but only after demand on the Board of Directors of LVSC is made. The Company received a letter from the plaintiffs lawyers dated February 9, 2013, making their demand on the Board of Directors of LVSC for the unjust enrichment claim that the District Court of Clark County previously dismissed without prejudice. In addition, on February 19, 2013, the plaintiffs filed a notice of appeal with the Nevada Supreme Court appealing the dismissal of the case. Plaintiff’s opening brief in the Nevada Supreme Court was due on August 12, 2013, and the response briefs were due per the court’s calendar. On September 4, 2013, the appeal to the Nevada Supreme Court was dismissed. Based on proceedings to date, management is unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

On January 19, 2012, Asian American Entertainment Corporation, Limited (“AAEC”) filed a claim (the “Macao action”) with the Macao Judicial Court (Tribunal Judicial de Base) against VML, LVS (Nevada) International Holdings, Inc. (“LVS (Nevada)”), Las Vegas Sands, LLC (“LVSLLC”) and Venetian Casino Resort, LLC (“VCR” and collectively, the “Defendants”). The claim is for 3.0 billion patacas (approximately $375.6 million at exchange rates in effect on September 30, 2013) as compensation for damages resulting from the alleged breach of agreements entered into between AAEC and the Defendants for their joint presentation of a bid in response to the public tender held by the Macao government for the award of gaming concessions at the end of 2001. On July 4, 2012, the Defendants filed their defense to the Macao action with the Macao Judicial Court. AAEC then filed a reply that included several amendments to the original claim, although the amount of the claim was not amended. On January 4, 2013, the Defendants filed an amended defense to the amended claim with the Macao Judicial Court. The Macao action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

As previously disclosed by the Company, on February 5, 2007, AAEC brought a similar claim (the “Prior Action”) in the U.S. District Court, against LVSI (now known as LVSLLC), VCR and Venetian Venture Development, LLC, which are subsidiaries of the Company, and William P. Weidner and David Friedman, who are former executives of the Company. The U.S. District Court entered an order on April 16, 2010, dismissing the Prior Action. On April 20, 2012, LVSLLC, VCR and LVS (Nevada) filed an injunctive action (the “Nevada Action”) against AAEC in the U.S. District Court seeking to enjoin AAEC from proceeding with the Macao Action based on AAEC’s filing, and the U.S. District Court’s dismissal, of the Prior Action. On June 14, 2012, the U.S. District Court issued an order that denied the motions requesting the Nevada Action, thereby effectively dismissing the Nevada Action.

On August 1, 2012, SCL filed an announcement with the SEHK stating that SCL’s subsidiary, VML, has received a notification from the Office for Personal Data Protection of the Macao government (the “OPDP”) indicating that the OPDP has launched an official investigation procedure in relation to the alleged transfer from Macao by VML to the United States of certain data contrary to the Personal Data Protection Act (Macau). On April 13, 2013, the OPDP presented its findings and VML received a cumulative fine of 40,000 patacas (approximately $5,008 at exchange rates in effect on September 30, 2013). VML paid the fine as levied by the OPDP.

The Company has received subpoenas from the U.S. Attorney’s Office (the “USAO”) requesting the production of documents relating to two prior customers of the Company’s properties. In August 2013, the USAO completed its investigation and entered into an agreement with the Company, whereby the Company agreed to voluntarily return $47.4 million to the U.S. Treasury, which represented funds received from or on behalf of one of its customers, and provide written reports to the USAO regarding certain of its casino-related activities. The amount has been paid during the quarter ended September 30, 2013, and the matter has been closed.

 

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(UNAUDITED)

 

NOTE 10 — SEGMENT INFORMATION

The Company’s principal operating and developmental activities occur in three geographic areas: Macao, Singapore and the United States. The Company reviews the results of operations for each of its operating segments: The Venetian Macao; Sands Cotai Central; Four Seasons Macao; Sands Macao; Other Asia (comprised primarily of the Company’s ferry operations and various other operations that are ancillary to the Company’s properties in Macao); Marina Bay Sands; The Venetian Las Vegas, which includes the Sands Expo Center; The Palazzo; and Sands Bethlehem. The Venetian Las Vegas and The Palazzo operating segments are managed as a single integrated resort and have been aggregated as one reportable segment (the “Las Vegas Operating Properties”), considering their similar economic characteristics, types of customers, types of services and products, the regulatory business environment of the operations within each segment and the Company’s organizational and management reporting structure. The Company also reviews construction and development activities for each of its primary projects under development, some of which have been suspended, in addition to its reportable segments noted above. The Company’s primary projects under development are The Parisian Macao and phase III of Sands Cotai Central in Macao, and the Las Vegas Condo Tower (included in Corporate and Other) in the U.S. The corporate activities of the Company are also included in Corporate and Other. The information for the nine months ended September 30, 2012, has been reclassified to conform to the current presentation. The Company’s segment information as of September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012, is as follows (in thousands):

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

Net Revenues:

        

Macao:

        

The Venetian Macao

   $ 935,233      $ 772,769      $ 2,702,151      $ 2,194,975   

Sands Cotai Central

     736,599        295,855        1,907,780        561,456   

Four Seasons Macao

     330,027        224,478        827,336        790,219   

Sands Macao

     305,329        315,280        910,269        935,966   

Other Asia

     35,385        37,289        105,666        110,792   
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,342,573        1,645,671        6,453,202        4,593,408   

Marina Bay Sands

     774,199        625,548        2,308,553        2,168,979   

United States:

        

Las Vegas Operating Properties

     375,041        364,426        1,132,312        1,076,342   

Sands Bethlehem

     122,922        121,966        372,597        352,624   
  

 

 

   

 

 

   

 

 

   

 

 

 
     497,963        486,392        1,504,909        1,428,966   

Intersegment eliminations

     (46,195     (48,129     (152,464     (137,223
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

   $ 3,568,540      $ 2,709,482      $ 10,114,200      $ 8,054,130   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

Adjusted Property EBITDA(1)

        

Macao:

        

The Venetian Macao

   $ 357,197      $ 299,001      $ 1,066,543      $ 810,175   

Sands Cotai Central

     224,272        53,654        501,940        105,492   

Four Seasons Macao

     112,922        54,386        228,283        198,492   

Sands Macao

     89,947        80,869        274,887        259,129   

Other Asia

     1,177        (2,124     (4,547     (13,801
  

 

 

   

 

 

   

 

 

   

 

 

 
     785,515        485,786        2,067,106        1,359,487   

Marina Bay Sands

     373,612        260,788        1,125,742        1,063,712   

United States:

        

Las Vegas Operating Properties

     87,135        98,206        263,532        278,362   

Sands Bethlehem

     29,553        32,118        92,988        86,537   
  

 

 

   

 

 

   

 

 

   

 

 

 
     116,688        130,324        356,520        364,899   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjusted property EBITDA

     1,275,815        876,898        3,549,368        2,788,098   

Other Operating Costs and Expenses

        

Stock-based compensation

     (8,170     (7,407     (21,831     (22,914

Legal settlement

     (47,400     —          (47,400     —     

Corporate

     (38,468     (54,617     (141,221     (162,164

Pre-opening

     (1,778     (39,872     (9,646     (134,803

Development

     (3,487     (4,201     (14,840     (12,196

Depreciation and amortization

     (248,925     (226,538     (752,530     (641,725

Amortization of leasehold interests in land

     (10,022     (10,014     (30,297     (30,016

Impairment loss

     —          —          —          (143,674

Loss on disposal of assets

     (2,739     (154     (9,433     (1,229
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     914,826        534,095        2,522,170        1,639,377   

Other Non-Operating Costs and Expenses

        

Interest income

     3,819        4,176        10,848        16,716   

Interest expense, net of amounts capitalized

     (66,917     (62,292     (204,125     (191,497

Other income

     3,207        2,352        4,992        715   

Loss on modification or early retirement of debt

     —          —          —          (19,234

Income tax expense

     (45,637     (33,351     (148,940     (135,607
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 809,298      $ 444,980      $ 2,184,945      $ 1,310,470   
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)

Adjusted property EBITDA is net income before royalty fees, stock-based compensation expense, legal settlement expense (see “— Note 9 — Commitments and Contingencies — Litigation”), corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, impairment loss, loss on disposal of assets, interest, other income (expense), loss on modification or early retirement of debt and income taxes. Adjusted property EBITDA is used by management as the primary measure of operating performance of the Company’s properties and to compare the operating performance of the Company’s properties with that of its competitors.

 

25


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2013      2012      2013      2012  

Intersegment Revenues

           

Macao:

           

The Venetian Macao

   $ 1,094       $ 1,177       $ 3,582       $ 3,249   

Sands Cotai Central

     89         88         267         164   

Other Asia

     5,270         8,954         24,131         23,166   
  

 

 

    

 

 

    

 

 

    

 

 

 
     6,453         10,219         27,980         26,579   

Marina Bay Sands

     2,327         958         7,079         2,057   

Las Vegas Operating Properties

     37,415         36,952         117,405         108,587   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total intersegment revenues

   $ 46,195       $ 48,129       $ 152,464       $ 137,223   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Nine Months Ended
September 30,
 
     2013      2012  

Capital Expenditures

     

Corporate and Other

   $ 33,464       $ 49,321   

Macao:

     

The Venetian Macao

     61,580         55,118   

Sands Cotai Central

     176,330         700,442   

Four Seasons Macao

     8,648         22,145   

Sands Macao

     15,930         16,844   

Other Asia

     386         953   

The Parisian Macao

     133,697         10,922   
  

 

 

    

 

 

 
     396,571         806,424   

Marina Bay Sands

     122,931         98,382   

United States:

     

Las Vegas Operating Properties

     40,824         90,340   

Sands Bethlehem

     5,692         18,311   
  

 

 

    

 

 

 
     46,516         108,651   
  

 

 

    

 

 

 

Total capital expenditures

   $ 599,482       $ 1,062,778   
  

 

 

    

 

 

 

 

26


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

     September 30,
2013
     December 31,
2012
 

Total Assets

     

Corporate and Other

   $ 695,078       $ 586,788   

Macao:

     

The Venetian Macao

     3,406,451         3,254,193   

Sands Cotai Central

     4,959,618         4,791,560   

Four Seasons Macao

     1,304,821         1,338,714   

Sands Macao

     404,031         414,531   

Other Asia

     350,495         345,522   

The Parisian Macao

     284,718         118,975   

Other Development Projects

     217         123   
  

 

 

    

 

 

 
     10,710,351         10,263,618   

Marina Bay Sands

     6,745,555         6,941,510   

United States:

     

Las Vegas Operating Properties

     3,629,824         3,605,513   

Sands Bethlehem

     704,287         766,223   
  

 

 

    

 

 

 
     4,334,111         4,371,736   
  

 

 

    

 

 

 

Total assets

   $ 22,485,095       $ 22,163,652   
  

 

 

    

 

 

 

 

     September 30,
2013
     December 31,
2012
 

Total Long-Lived Assets

     

Corporate and Other

   $ 405,813       $ 398,100   

Macao:

     

The Venetian Macao

     1,920,083         1,968,415   

Sands Cotai Central

     3,773,522         3,836,471   

Four Seasons Macao

     943,248         971,732   

Sands Macao

     277,657         285,344   

Other Asia

     191,700         202,392   

The Parisian Macao

     284,665         118,912   
  

 

 

    

 

 

 
     7,390,875         7,383,266   

Marina Bay Sands

     5,382,629         5,657,351   

United States:

     

Las Vegas Operating Properties

     3,073,986         3,179,426   

Sands Bethlehem

     586,602         607,346   
  

 

 

    

 

 

 
     3,660,588         3,786,772   
  

 

 

    

 

 

 

Total long-lived assets

   $ 16,839,905       $ 17,225,489   
  

 

 

    

 

 

 

 

27


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 11 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION

LVSLLC, VCR, Mall Intermediate Holding Company, LLC, Venetian Transport, LLC, Venetian Marketing, Inc., Lido Intermediate Holding Company, LLC, Lido Casino Resort Holding Company, LLC, Sands Expo & Convention Center, Inc. (formerly Interface Group-Nevada, Inc.), Palazzo Condo Tower, LLC, Sands Pennsylvania, Inc., Phase II Mall Holding, LLC, LVS (Nevada) International Holdings, Inc. and LVS Management Services, LLC (collectively, the “Restricted Subsidiaries”), are all guarantors under the Senior Secured Credit Facility. In March 2013, Phase II Mall Holding, LLC was merged into Lido Casino Resort Holding Company, LLC, which was then merged into Lido Intermediate Holding Company, LLC, which was then merged into VCR. Mall Intermediate Holding Company, LLC was also merged into VCR in March 2013 and Venetian Transport, LLC was merged into LVSLLC in May 2013. The noncontrolling interest amount included in the Restricted Subsidiaries’ condensed consolidating balance sheets is related to non-voting preferred stock of one of the subsidiaries held by third parties.

In February 2008, all of the capital stock of Phase II Mall Subsidiary, LLC was sold to GGP; however, the sale is not complete from an accounting perspective due to the Company’s continuing involvement in the transaction related to the participation in certain future revenues earned by GGP. Certain of the assets, liabilities and operating results related to the ownership and operation of the mall by Phase II Mall Subsidiary, LLC subsequent to the sale will continue to be accounted for by the Restricted Subsidiaries, and therefore are included in the “Restricted Subsidiaries” columns in the following condensed consolidating financial information. As a result, net liabilities of $26.4 million (consisting of $242.1 million of property and equipment, offset by $268.5 million of liabilities consisting primarily of deferred proceeds from the sale) and $17.3 million (consisting of $250.8 million of property and equipment, offset by $268.1 million of liabilities consisting primarily of deferred proceeds from the sale) as of September 30, 2013 and December 31, 2012, respectively, and a net loss (consisting primarily of depreciation expense) of $3.2 million and $9.6 million for the three and nine months ended September 30, 2013, respectively, and $3.8 million and $11.3 million for the three and nine months ended September 30, 2012, respectively, related to the mall and are being accounted for by the Restricted Subsidiaries. These balances and amounts are not collateral for the Senior Secured Credit Facility.

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The condensed consolidating financial information of LVSC, the Restricted Subsidiaries and the non-restricted subsidiaries on a combined basis as of September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012, is as follows (in thousands):

CONDENSED CONSOLIDATING BALANCE SHEETS

September 30, 2013

 

     Las Vegas
Sands Corp.
     Restricted
Subsidiaries
     Non-Restricted
Subsidiaries
     Consolidating/
Eliminating
Entries
    Total  

Cash and cash equivalents

   $ 134,201       $ 286,393       $ 2,788,526       $ —        $ 3,209,120   

Restricted cash and cash equivalents

     —           —           5,750         —          5,750   

Intercompany receivables

     203,179         41,409         —           (244,588     —     

Accounts receivable, net

     2,724         291,056         1,554,742         —          1,848,522   

Inventories

     4,522         10,957         26,204         —          41,683   

Deferred income taxes, net

     7,786         —           —           (5,286     2,500   

Prepaid expenses and other

     21,309         9,220         74,016         (4,852     99,693   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     373,721         639,035         4,449,238         (254,726     5,207,268   

Property and equipment, net

     175,002         3,229,420         12,008,787         —          15,413,209   

Investments in subsidiaries

     7,320,645         5,852,048         —             (13,172,693     —     

Deferred financing costs, net

     195         7,923         161,299         —          169,417   

Restricted cash and cash equivalents

     —           1,102         482         —          1,584   

Intercompany receivables

     5,112         39,709         —           (44,821     —     

Intercompany notes receivable

     —           1,042,760         —           (1,042,760     —     

Deferred income taxes, net

     560         41,156         —           (734     40,982   

Leasehold interests in land, net

     —           —           1,426,696         —          1,426,696   

Intangible assets, net

     690         —           105,544         —          106,234   

Other assets, net

     264         24,786         94,655         —          119,705   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 7,876,189       $ 10,877,939       $ 18,246,701       $ (14,515,734   $ 22,485,095   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Accounts payable

   $ 10,096       $ 31,966       $ 72,679       $ —        $ 114,741   

Construction payables

     2,296         4,474         258,261         —          265,031   

Intercompany payables

     —           197,491         47,097         (244,588     —     

Accrued interest payable

     76         490         861         —          1,427   

Other accrued liabilities

     164,313         240,662         1,817,072         —          2,222,047   

Income taxes payable

     —           2         145,098         (4,852     140,248   

Deferred income taxes

     —           5,203         83         (5,286     —     

Current maturities of long-term debt

     3,688         1,221,383         76,553         —          1,301,624   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     180,469         1,701,671         2,417,704         (254,726     4,045,118   

Other long-term liabilities

     44,907         10,227         91,690         —          146,824   

Intercompany payables

     —           —           44,821         (44,821     —     

Intercompany notes payable

     —           —           1,042,760         (1,042,760     —     

Deferred income taxes

     —           —           173,900         (734     173,166   

Deferred amounts related to mall transactions

     —           426,999         —           —          426,999   

Long-term debt

     64,593         1,589,231         6,808,168         —          8,461,992   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     289,969         3,728,128         10,579,043         (1,343,041     13,254,099   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

     7,586,220         7,149,406         6,023,287         (13,172,693     7,586,220   

Noncontrolling interests

     —           405         1,644,371         —          1,644,776   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     7,586,220         7,149,811         7,667,658         (13,172,693     9,230,996   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 7,876,189       $ 10,877,939       $ 18,246,701       $ (14,515,734   $ 22,485,095   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

29


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2012

 

     Las Vegas
Sands Corp.
     Restricted
Subsidiaries
     Non-Restricted
Subsidiaries
     Consolidating/
Eliminating
Entries
    Total  

Cash and cash equivalents

   $ 7,962       $ 182,402       $ 2,322,402       $ —        $ 2,512,766   

Restricted cash and cash equivalents

     —           34         4,487         —          4,521   

Intercompany receivables

     209,961         62,968         —           (272,929     —     

Intercompany notes receivable

     —           1,100,000         237,161         (1,337,161     —     

Accounts receivable, net

     6,646         259,691         1,552,923         —          1,819,260   

Inventories

     3,501         13,081         27,293         —          43,875   

Deferred income taxes, net

     5,687         —           87         (3,475     2,299   

Prepaid expenses and other

     13,257         12,223         69,313         —          94,793   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     247,014         1,630,399         4,213,666         (1,613,565     4,477,514   

Property and equipment, net

     173,065         3,329,824         12,263,859         —          15,766,748   

Investments in subsidiaries

     7,045,198         4,657,313         —           (11,702,511     —     

Deferred financing costs, net

     238         12,528         201,699         —          214,465   

Restricted cash and cash equivalents

     —           1,068         870         —          1,938   

Intercompany receivables

     6,109         54,982         —           (61,091     —     

Intercompany notes receivable

     —           928,728         —           (928,728     —     

Deferred income taxes, net

     3,665         39,429         —           186        43,280   

Leasehold interests in land, net

     —           —           1,458,741         —          1,458,741   

Intangible assets, net

     690         —           69,928         —          70,618   

Other assets, net

     243         18,994         111,111         —          130,348   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 7,476,222       $ 10,673,265       $ 18,319,874       $ (14,305,709   $ 22,163,652   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Accounts payable

   $ 9,948       $ 25,007       $ 71,543       $ —        $ 106,498   

Construction payables

     5,318         7,680         330,374         —          343,372   

Intercompany payables

     —           173,698         99,231         (272,929     —     

Intercompany notes payable

     237,161         —           1,100,000         (1,337,161     —     

Accrued interest payable

     82         1,050         14,410         —          15,542   

Other accrued liabilities

     42,318         235,882         1,617,283         —          1,895,483   

Income taxes payable

     —           4         164,122         —          164,126   

Deferred income taxes

     —           3,475         —           (3,475     —     

Current maturities of long-term debt

     3,688         90,649         3,465         —          97,802   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     298,515         537,445         3,400,428         (1,613,565     2,622,823   

Other long-term liabilities

     48,506         9,776         75,654         —          133,936   

Intercompany payables

     —           —           61,091         (61,091     —     

Intercompany notes payable

     —           —           928,728         (928,728     —     

Deferred income taxes

     —           —           185,759         186        185,945   

Deferred amounts related to mall transactions

     —           430,271         —           —          430,271   

Long-term debt

     67,359         2,753,745         7,311,161         —          10,132,265   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     414,380         3,731,237         11,962,821         (2,603,198     13,505,240   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

     7,061,842         6,941,623         4,760,888         (11,702,511     7,061,842   

Noncontrolling interests

     —           405         1,596,165         —          1,596,570   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     7,061,842         6,942,028         6,357,053         (11,702,511     8,658,412   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 7,476,222       $ 10,673,265       $ 18,319,874       $ (14,305,709   $ 22,163,652   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

30


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Three Months Ended September 30, 2013

 

     Las Vegas
Sands Corp.
    Restricted
Subsidiaries
    Non-Restricted
Subsidiaries
    Consolidating/
Eliminating
Entries
    Total  

Revenues:

          

Casino

   $ —        $ 168,131      $ 2,816,407      $ —        $ 2,984,538   

Rooms

     —          110,934        238,067        —          349,001   

Food and beverage

     —          40,267        133,993        —          174,260   

Mall

     —          —          128,068        —          128,068   

Convention, retail and other

     —          69,798        95,187        (41,726     123,259   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          389,130        3,411,722        (41,726     3,759,126   

Less — promotional allowances

     (413     (23,488     (166,178     (507     (190,586
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     (413     365,642        3,245,544        (42,233     3,568,540   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Casino

     —          80,901        1,587,997        (791     1,668,107   

Rooms

     —          39,298        30,216        (3     69,511   

Food and beverage

     —          19,455        69,645        (1,080     88,020   

Mall

     —          —          17,319        —          17,319   

Convention, retail and other

     —          21,656        53,932        (6,486     69,102   

Provision for doubtful accounts

     —          6,123        49,248        —          55,371   

General and administrative

     —          126,782        254,309        (226     380,865   

Corporate

     34,257        349        37,506        (33,644     38,468   

Pre-opening

     —          271        1,507        —          1,778   

Development

     3,460        30        —          (3     3,487   

Depreciation and amortization

     6,989        45,323        196,613        —          248,925   

Amortization of leasehold interests in land

     —          —          10,022        —          10,022   

(Gain) loss on disposal of assets

     1,000        (5     1,744        —          2,739   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     45,706        340,183        2,310,058        (42,233     2,653,714   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (46,119     25,459        935,486        —          914,826   

Other income (expense):

          

Interest income

     49        40,047        4,266        (40,543     3,819   

Interest expense, net of amounts capitalized

     (885     (21,590     (84,985     40,543        (66,917

Other income (expense)

     (1     1,153        2,055        —          3,207   

Income from equity investments in subsidiaries

     669,879        591,965        —          (1,261,844     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     622,923        637,034        856,822        (1,261,844     854,935   

Income tax benefit (expense)

     3,821        (1,041     (48,417     —          (45,637
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     626,744        635,993        808,405        (1,261,844     809,298   

Net income attributable to noncontrolling interests

     —          (768     (181,786     —          (182,554
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 626,744      $ 635,225      $ 626,619      $ (1,261,844   $ 626,744   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

31


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Three Months Ended September 30, 2012

 

                 Non-     Consolidating/        
     Las Vegas     Restricted     Restricted     Eliminating        
     Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  

Revenues:

          

Casino

   $ —       $ 171,472      $ 2,029,558      $ —       $ 2,201,030   

Rooms

     —         105,695        182,154        —         287,849   

Food and beverage

     —         31,157        111,528        —         142,685   

Mall

     —         —         103,232        —         103,232   

Convention, retail and other

     —         69,094        88,212        (40,177     117,129   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —         377,418        2,514,684        (40,177     2,851,925   

Less — promotional allowances

     (270     (22,337     (119,428     (408     (142,443
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     (270     355,081        2,395,256        (40,585     2,709,482   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Casino

     —         78,953        1,199,871        (662     1,278,162   

Rooms

     —         32,893        26,019        (1     58,911   

Food and beverage

     —         17,848        60,916        (1,016     77,748   

Mall

     —         —         16,666        —         16,666   

Convention, retail and other

     —         17,963        54,346        (5,442     66,867   

Provision for doubtful accounts

     —         9,047        63,758        —         72,805   

General and administrative

     —         69,861        199,172        (201     268,832   

Corporate

     50,017        119        37,742        (33,261     54,617   

Pre-opening

     —         —         39,872        —         39,872   

Development

     4,203        —         —         (2     4,201   

Depreciation and amortization

     7,432        54,137        164,969        —         226,538   

Amortization of leasehold interests in land

     —         —         10,014        —         10,014   

(Gain) loss on disposal of assets

     —         (64     218        —         154   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     61,652        280,757        1,873,563        (40,585     2,175,387   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (61,922     74,324        521,693        —         534,095   

Other income (expense):

          

Interest income

     44        34,804        3,557        (34,229     4,176   

Interest expense, net of amounts capitalized

     (373     (21,425     (74,723     34,229        (62,292

Other income

     —         804        1,548        —         2,352   

Income from equity investments in subsidiaries

     331,727        309,588        —         (641,315     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     269,476        398,095        452,075        (641,315     478,331   

Income tax benefit (expense)

     80,306        (81,569     (32,088     —         (33,351
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     349,782        316,526        419,987        (641,315     444,980   

Net income attributable to noncontrolling interests

     —         (685     (94,513     —         (95,198
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 349,782      $ 315,841      $ 325,474      $ (641,315   $ 349,782   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

32


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2013

 

     Las Vegas
Sands Corp.
    Restricted
Subsidiaries
    Non-
Restricted
Subsidiaries
    Consolidating/
Eliminating
Entries
    Total  

Revenues:

          

Casino

   $ —        $ 433,095      $ 7,961,626      $ —        $ 8,394,721   

Rooms

     —          352,615        646,031        —          998,646   

Food and beverage

     —          146,611        387,750        —          534,361   

Mall

     —          —          321,522        —          321,522   

Convention, retail and other

     —          233,063        268,880        (129,573     372,370   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          1,165,384        9,585,809        (129,573     10,621,620   

Less — promotional allowances

     (1,027     (66,228     (438,791     (1,374     (507,420
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     (1,027     1,099,156        9,147,018        (130,947     10,114,200   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Casino

     —          231,948        4,484,376        (2,217     4,714,107   

Rooms

     —          117,329        86,560        (3     203,886   

Food and beverage

     —          67,369        209,895        (3,219     274,045   

Mall

     —          —          52,724        —          52,724   

Convention, retail and other

     —          76,723        169,579        (18,257     228,045   

Provision for doubtful accounts

     —          25,449        156,659        —          182,108   

General and administrative

     —          265,942        713,825        (619     979,148   

Corporate

     122,181        614        125,045        (106,619     141,221   

Pre-opening

     —          386        9,260        —          9,646   

Development

     14,428        425        —          (13     14,840   

Depreciation and amortization

     19,466        135,918        597,146        —          752,530   

Amortization of leasehold interests in land

     —          —          30,297        —          30,297   

Loss on disposal of assets

     1,000        1,109        7,324        —          9,433   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     157,075        923,212        6,642,690        (130,947     7,592,030   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (158,102     175,944        2,504,328        —          2,522,170   

Other income (expense):

          

Interest income

     1,144        132,375        12,550        (135,221     10,848   

Interest expense, net of amounts capitalized

     (3,755     (66,140     (269,451     135,221        (204,125

Other income (expense)

     31        (1,312     6,273        —          4,992   

Income from equity investments in subsidiaries

     1,842,779        1,554,840        —          (3,397,619     —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     1,682,097        1,795,707        2,253,700        (3,397,619     2,333,885   

Income tax benefit (expense)

     46,361        (54,436     (140,865     —          (148,940
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,728,458        1,741,271        2,112,835        (3,397,619     2,184,945   

Net income attributable to noncontrolling interests

     —          (1,853     (454,634     —          (456,487
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 1,728,458      $ 1,739,418      $ 1,658,201      $ (3,397,619   $ 1,728,458   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

33


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2012

 

                 Non-     Consolidating/        
     Las Vegas     Restricted     Restricted     Eliminating        
     Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  

Revenues:

          

Casino

   $ —       $ 424,764      $ 6,110,183      $ —       $ 6,534,947   

Rooms

     —         331,931        498,956        —         830,887   

Food and beverage

     —         133,056        322,828        —         455,884   

Mall

     —         —         268,390        —         268,390   

Convention, retail and other

     —         218,361        262,296        (116,977     363,680   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —         1,108,112        7,462,653        (116,977     8,453,788   

Less — promotional allowances

     (783     (63,596     (334,092     (1,187     (399,658
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     (783     1,044,516        7,128,561        (118,164     8,054,130   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Casino

     —         220,989        3,454,012        (1,830     3,673,171   

Rooms

     —         102,974        69,240        (4     172,210   

Food and beverage

     —         64,354        176,812        (3,144     238,022   

Mall

     —         —         50,765        —         50,765   

Convention, retail and other

     —         61,313        177,702        (14,221     224,794   

Provision for doubtful accounts

     —         23,070        160,327        —         183,397   

General and administrative

     —         206,635        540,557        (605     746,587   

Corporate

     149,687        316        110,508        (98,347     162,164   

Pre-opening

     —         —         134,805        (2     134,803   

Development

     12,207        —         —         (11     12,196   

Depreciation and amortization

     14,691        165,343        461,691        —         641,725   

Amortization of leasehold interests in land

     —         —         30,016        —         30,016   

Impairment loss

     —         —         143,674        —         143,674   

(Gain) loss on disposal of assets

     (1     503        727        —         1,229   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     176,584        845,497        5,510,836        (118,164     6,414,753   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

     (177,367     199,019        1,617,725        —         1,639,377   

Other income (expense):

          

Interest income

     237        99,361        15,224        (98,106     16,716   

Interest expense, net of amounts capitalized

     (4,107     (70,686     (214,810     98,106        (191,497

Other income (expense)

     (47     480        282        —         715   

Loss on modification or early retirement of debt

     (2,831     (1,599     (14,804     —         (19,234

Income from equity investments in subsidiaries

     1,142,450        959,487        —         (2,101,937     —    
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     958,335        1,186,062        1,403,617        (2,101,937     1,446,077   

Income tax benefit (expense)

     130,976        (122,787     (143,796     —         (135,607
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     1,089,311        1,063,275        1,259,821        (2,101,937     1,310,470   

Net income attributable to noncontrolling interests

     —         (1,946     (219,213     —         (221,159
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 1,089,311      $ 1,061,329      $ 1,040,608      $ (2,101,937   $ 1,089,311   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

34


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended September 30, 2013

 

    Las Vegas
Sands Corp.
    Restricted
Subsidiaries
    Non-
Restricted
Subsidiaries
    Consolidating/
Eliminating
Entries
    Total  

Net income

  $ 626,744      $ 635,993      $ 808,405      $ (1,261,844   $ 809,298   

Currency translation adjustment, net of tax

    19,105        16,468        19,865        (35,573     19,865   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    645,849        652,461        828,270        (1,297,417     829,163   

Comprehensive income attributable to noncontrolling interests

    —          (768     (182,546     —          (183,314
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

  $ 645,849      $ 651,693      $ 645,724      $ (1,297,417   $ 645,849   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

35


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

For the Three Months Ended September 30, 2012

 

                Non-     Consolidating/        
    Las Vegas     Restricted     Restricted     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  

Net income

  $ 349,782      $ 316,526      $ 419,987      $ (641,315   $ 444,980   

Currency translation adjustment, net of tax

    93,693        79,671        94,294        (173,364     94,294   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    443,475        396,197        514,281        (814,679     539,274   

Comprehensive income attributable to noncontrolling interests

    —          (685     (95,114     —          (95,799
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

  $ 443,475      $ 395,512      $ 419,167      $ (814,679   $ 443,475   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2013

 

    Las Vegas
Sands Corp.
    Restricted
Subsidiaries
    Non-
Restricted
Subsidiaries
    Consolidating/
Eliminating
Entries
    Total  

Net income

  $ 1,728,458      $ 1,741,271      $ 2,112,835      $ (3,397,619   $ 2,184,945   

Currency translation adjustment, net of tax

    (68,866     (58,573     (69,672     127,439        (69,672
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    1,659,592        1,682,698        2,043,163        (3,270,180     2,115,273   

Comprehensive income attributable to noncontrolling interests

    —          (1,853     (453,828     —          (455,681
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

  $ 1,659,592      $ 1,680,845      $ 1,589,335      $ (3,270,180   $ 1,659,592   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

For the Nine Months Ended September 30, 2012

 

                Non-     Consolidating/        
    Las Vegas     Restricted     Restricted     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  

Net income

  $ 1,089,311      $ 1,063,275      $ 1,259,821      $ (2,101,937   $ 1,310,470   

Currency translation adjustment, net of tax

    162,118        138,465        165,214        (300,583     165,214   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

    1,251,429        1,201,740        1,425,035        (2,402,520     1,475,684   

Comprehensive income attributable to noncontrolling interests

    —         (1,946     (222,309     —         (224,255
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

  $ 1,251,429      $ 1,199,794      $ 1,202,726      $ (2,402,520   $ 1,251,429   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2013

 

    Las Vegas
Sands Corp.
    Restricted
Subsidiaries
    Non-Restricted
Subsidiaries
    Consolidating/
Eliminating
Entries
    Total  

Net cash generated from operating activities

  $ 1,437,786      $ 1,578,525      $ 2,994,139      $ (2,849,667   $ 3,160,783   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

         

Change in restricted cash and cash equivalents

    —          —          (877     —          (877

Capital expenditures

    (25,425     (39,542     (534,515     —          (599,482

Proceeds from disposal of property and equipment

    —          121        592        —          713   

Acquisition of intangible assets

    —          —          (45,857     —          (45,857

Dividends received from non-restricted subsidiaries

    —          1,115,116        —          (1,115,116     —     

Repayments of receivable from Las Vegas Sands Corp.

    —          —          237,161        (237,161     —     

Repayments of receivable from
non-restricted subsidiaries

    —          1,155        —          (1,155     —     

Capital contributions to subsidiaries

    (33     (1,054,416     —          1,054,449        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash generated from (used in) investing activities

    (25,458     22,434        (343,496     (298,983     (645,503
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

         

Proceeds from exercise of stock options

    28,686        —          17,747        —          46,433   

Excess tax benefit from stock option exercises

    2,394        —          —          —          2,394   

Repurchase of common stock

    (211,241     —          —          —          (211,241

Dividends paid

    (866,001     —          (411,359     —          (1,277,360

Distributions to noncontrolling interests

    —          (1,853     (5,955     —          (7,808

Dividends paid to Las Vegas Sands Corp.

    —          (1,460,929     (65,765     1,526,694        —     

Dividends paid to Restricted Subsidiaries

    —          —          (2,438,089     2,438,089        —     

Capital contributions received

    —          —          1,054,449        (1,054,449     —     

Repayments on borrowings from Restricted Subsidiaries

    —          —          (1,155     1,155        —     

Repayments on borrowings from
non-restricted subsidiaries

    (237,161     —          —          237,161        —     

Proceeds from senior secured credit facility

    —          250,000        —          —          250,000   

Proceeds from 2012 Singapore credit facility

    —          —          104,357        —          104,357   

Repayments on 2012 Singapore credit facility

    —          —          (430,504     —          (430,504

Repayments on senior secured credit facility

    —          (282,424     —          —          (282,424

Repayments on airplane financings

    (2,766     —          —          —          (2,766

Repayments on HVAC equipment lease and other long-term debt

    —          (1,762     (2,721     —          (4,483
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

    (1,286,089     (1,496,968     (2,178,995     3,148,650        (1,813,402
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate on cash

    —          —          (5,524     —          (5,524
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase in cash and cash equivalents

    126,239        103,991        466,124        —          696,354   

Cash and cash equivalents at beginning of period

    7,962        182,402        2,322,402        —          2,512,766   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $ 134,201      $ 286,393      $ 2,788,526      $ —        $ 3,209,120   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2012

 

                Non-     Consolidating/        
    Las Vegas     Restricted     Restricted     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  

Net cash generated from operating activities

  $ 356,400      $ 1,133,389      $ 2,038,698      $ (1,355,654   $ 2,172,833   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

         

Change in restricted cash and cash equivalents

    —          —          (717     —          (717

Capital expenditures

    (33,081     (91,052     (938,645     —          (1,062,778

Proceeds from disposal of property and equipment

    —          348        1,918        —          2,266   

Notes receivable to non-restricted subsidiaries

    —          (9,773     —          9,773        —     

Dividends received from non-restricted subsidiaries

    —          959,500        —          (959,500     —     

Repayments of receivable from non-restricted subsidiaries

    —          570        —          (570     —     

Capital contributions to subsidiaries

    (34,064     (880,000     —          914,064        —     
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

    (67,145     (20,407     (937,444     (36,233     (1,061,229
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

         

Proceeds from exercise of stock options

    24,505        —          5,865        —          30,370   

Proceeds from the exercise of warrants

    528,908        —          —          —          528,908   

Dividends paid

    (616,052     —          (357,056     —          (973,108

Distributions to noncontrolling interests

    —          (1,946     (5,678     —          (7,624

Deemed distribution to Principal Stockholder

    —          —          (18,576     —          (18,576

Dividends paid to Las Vegas Sands Corp.

    —          (442,138     (75,012     517,150        —     

Dividends paid to Restricted Subsidiaries

    —          —          (1,798,004     1,798,004        —     

Capital contributions received

    —          —          914,064        (914,064     —     

Borrowings from Restricted Subsidiaries

    —          —          9,773        (9,773     —     

Repayments on borrowings from Restricted Subsidiaries

    —          —          (570     570        —     

Proceeds from 2012 Singapore credit facility

    —          —          3,625,516        —          3,625,516   

Repayments on Singapore credit facility

    —          —          (3,635,676     —          (3,635,676

Repayments on senior secured credit facility

    —          (419,448     —          —          (419,448

Redemption of senior notes

    (189,712     —          —          —          (189,712

Repayments on ferry financing

    —          —          (140,337     —          (140,337

Repayments on airplane financings

    (2,766     —          —          —          (2,766

Repayments on HVAC equipment lease and other long-term debt

    —          (1,599     (1,773     —          (3,372

Payments of deferred financing costs

    —          —          (100,190     —          (100,190
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in financing activities

    (255,117     (865,131     (1,577,654     1,391,887        (1,306,015
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Effect of exchange rate on cash

    —          —          37,108        —          37,108   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

    34,138        247,851        (439,292     —          (157,303

Cash and cash equivalents at beginning of period

    12,849        689,642        3,200,227        —          3,902,718   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

  $ 46,987      $ 937,493      $ 2,760,935      $ —        $ 3,745,415   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto, and other financial information included in this Form 10-Q. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “—Special Note Regarding Forward-Looking Statements.”

Operations

We view each of our casino properties as an operating segment. Our operating segments in the Macao Special Administrative Region (“Macao”) of the People’s Republic of China consist of The Venetian Macao Resort Hotel (“The Venetian Macao”); Sands Cotai Central; the Four Seasons Hotel Macao, Cotai Strip and the Plaza Casino (collectively, the “Four Seasons Macao”); the Sands Macao; and other ancillary operations in that region (“Other Asia”). Our operating segment in Singapore is the Marina Bay Sands. Our operating segments in the United States consist of The Venetian Resort Hotel Casino (“The Venetian Las Vegas”), The Palazzo Resort Hotel Casino (“The Palazzo”) and the Sands Casino Resort Bethlehem (the “Sands Bethlehem”). The Venetian Las Vegas and The Palazzo operating segments are managed as a single integrated resort and have been aggregated into one reportable segment (the “Las Vegas Operating Properties”), considering their similar economic characteristics, types of customers, types of services and products, the regulatory business environment of the operations within each segment and our organizational and management reporting structure.

Macao

We own 70.2% of Sands China Ltd. (“SCL”), which includes the operations of The Venetian Macao, Sands Cotai Central, Four Seasons Macao, Sands Macao and other ancillary operations that support these properties. We operate the gaming areas within these properties pursuant to a 20-year gaming subconcession.

We own and operate The Venetian Macao, which anchors the Cotai Strip, our master-planned development of integrated resort properties on an area of approximately 140 acres in Macao (consisting of parcels referred to as 1, 2, 3 and 5 and 6). The Venetian Macao (located on parcel 1) includes a 39-floor luxury hotel with over 2,900 suites; approximately 374,000 square feet of gaming space; a 15,000-seat arena; an 1,800-seat theater; retail and dining space of approximately 1.0 million square feet; and a convention center and meeting room complex of approximately 1.2 million square feet. Approximately 85.7% and 83.4% of the gross revenue at The Venetian Macao for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived from room, mall, food and beverage and other non-gaming sources.

In April and September 2012 and January 2013, we opened phases I, IIA and IIB, respectively, of our Sands Cotai Central integrated resort (located on parcels 5 and 6), which is situated across the street from The Venetian Macao and Four Seasons Macao. Phase I consists of a hotel tower on parcel 5, which includes approximately 600 five-star rooms and suites under the Conrad brand and approximately 1,200 four-star rooms and suites under the Holiday Inn brand; more than 350,000 square feet of meeting space; several food and beverage establishments; along with the 230,000-square-foot casino and VIP gaming areas. Phase IIA includes the first hotel tower on parcel 6, which features approximately 1,800 rooms and suites managed by Starwood Asia Pacific Hotels and Resorts Pte Ltd. and Sheraton Overseas Management Co. (collectively “Starwood”) under the Sheraton brand, along with the second casino and additional retail, entertainment, dining and meeting facilities. Phase IIB consists of the second hotel tower on parcel 6 and features approximately 2,100 rooms and suites managed by Starwood under the Sheraton brand. With the completion of phases I and II of the project, the integrated resort features approximately 300,000 square feet of gaming space, approximately 800,000 square feet of retail, dining and entertainment space, over 550,000 square feet of meeting facilities and a multipurpose theater (to open in 2014). We have commenced pre-construction activities on phase III of the project, which is expected to include a fourth hotel and mixed-use tower, located on parcel 5, to be managed by Starwood under the St. Regis brand and the total cost to complete is expected to be in excess of $450 million. As of September 30, 2013, we have capitalized costs of $4.09 billion for the entire project, including the land premium (net of amortization) and $129.5 million in outstanding construction payables. Approximately 86.1% and 88.0% of the gross revenue at Sands Cotai Central for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived primarily from room and food and beverage operations.

We own the Four Seasons Macao (located on parcel 2), which is adjacent and connected to The Venetian Macao. The Four Seasons Macao is an integrated resort that includes 360 rooms and suites managed and operated by Four Seasons Hotels Inc., and features 19 Paiza mansions; approximately 108,000 square feet of gaming space; retail space of approximately 260,000 square feet, which is connected to the mall at The Venetian Macao; several food and beverage offerings; and conference, banquet and other facilities operated by us. This integrated resort will also feature the Four Seasons Apartment Hotel Macao, Cotai Strip (the “Four Seasons Apartments”), an apart-hotel tower that consists of approximately 1.0 million square feet of Four Seasons-serviced and -branded luxury apart-hotel units and common areas. We have completed the structural work of the tower and are advancing our plans to monetize units within the Four Seasons Apartments. Approximately 85.8% and 87.3% of the gross revenue at the Four Seasons Macao for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived primarily from mall, room and food and beverage operations.

 

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Table of Contents

We own and operate the Sands Macao, the first Las Vegas-style casino in Macao. The Sands Macao includes approximately 249,000 square feet of gaming space; a 289-suite hotel tower; several restaurants; VIP facilities; a theater and other high-end services and amenities. Approximately 94.2% and 94.6% of the gross revenue at the Sands Macao for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived primarily from food and beverage operations.

Singapore

We own and operate the Marina Bay Sands in Singapore, which features three 55-story hotel towers (totaling approximately 2,600 rooms and suites), the Sands SkyPark (which sits atop the hotel towers and features an infinity swimming pool and several dining options), approximately 160,000 square feet of gaming space, an enclosed retail, dining and entertainment complex of approximately 800,000 net leasable square feet, a convention center and meeting room complex of approximately 1.2 million square feet, theaters and a landmark iconic structure at the bay-front promenade that contains an art/science museum. In April 2013, we paid 57.0 million Singapore dollars (“SGD,” approximately $45.4 million at exchange rates in effect on September 30, 2013) to the Casino Regulatory Authority in Singapore as part of the process to renew our gaming license, which now expires in April 2016. Approximately 75.9% and 75.1% of the gross revenue at the Marina Bay Sands for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived from room, food and beverage, mall and other non-gaming sources.

United States

Las Vegas

Our Las Vegas Operating Properties, situated on or near the Las Vegas Strip, consist of The Venetian Las Vegas, a Renaissance Venice-themed resort; The Palazzo, a resort featuring modern European ambience and design; and an expo and convention center of approximately 1.2 million square feet (the “Sands Expo Center”). Our Las Vegas Operating Properties represent an integrated resort with approximately 7,100 suites and approximately 225,000 square feet of gaming space. Our Las Vegas Operating Properties also feature a meeting and conference facility of approximately 1.1 million square feet; Canyon Ranch SpaClub facilities; a Paiza Club, offering services and amenities to premium customers, including luxurious VIP suites, spa facilities and private VIP gaming room facilities; entertainment facilities and two enclosed retail, dining and entertainment complexes, currently referred to as the Grand Canal Shoppes. The complex located within The Venetian Las Vegas (previously known as “The Grand Canal Shoppes”) and the complex located within The Palazzo (previously known as “The Shoppes at The Palazzo”) were sold to GGP Limited Partnership (“GGP”). See “Item 1 —Financial Statements — Notes to Condensed Consolidated Financial Statements —Note 2 —Property and Equipment, Net” regarding the sale of The Shoppes at The Palazzo.

Approximately 63.9% and 62.8% of gross revenue at our Las Vegas Operating Properties for the nine months ended September 30, 2013 and 2012, respectively, was derived from room, food and beverage and other non-gaming sources, with the remainder derived from gaming activities. The percentage of non-gaming revenue reflects the integrated resort’s emphasis on the group convention and trade show business.

Pennsylvania

We own and operate the Sands Bethlehem, a gaming, hotel, retail and dining complex located on the site of the historic Bethlehem Steel Works in Bethlehem, Pennsylvania. Sands Bethlehem currently features approximately 145,000 square feet of gaming space; a 300-room hotel tower; a 150,000-square-foot retail facility; an arts and cultural center; and a 50,000-square-foot multipurpose event center, which opened in May 2012. We own 86% of the economic interest in the gaming, hotel and entertainment portion of the property through our ownership interest in Sands Bethworks Gaming LLC and more than 35% of the economic interest in the retail portion of the property through our ownership interest in Sands Bethworks Retail LLC. Approximately 88.5% and 88.7% of the gross revenue at Sands Bethlehem for the nine months ended September 30, 2013 and 2012, respectively, was derived from gaming activities, with the remainder derived primarily from food and beverage operations.

Critical Accounting Policies and Estimates

The preparation of our condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires our management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to us and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our financial condition and results of operations. We believe that these critical accounting policies affect our more significant judgments and estimates used in the preparation of our condensed consolidated financial statements. For a discussion of our significant accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our 2012 Annual Report on Form 10-K filed on March 1, 2013.

 

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There were no newly identified significant accounting estimates during the nine months ended September 30, 2013, nor were there any material changes to the critical accounting policies and estimates discussed in our 2012 Annual Report.

Recent Accounting Pronouncements

See related disclosure at “Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 1 — Organization and Business of Company — Recent Accounting Pronouncements.”

Summary Financial Results

The following table summarizes our results of operations:

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2013      2012      Percent
Change
    2013      2012      Percent
Change
 
     (Dollars in thousands)  

Net revenues

   $ 3,568,540       $ 2,709,482         31.7   $ 10,114,200       $ 8,054,130         25.6

Operating expenses

     2,653,714         2,175,387         22.0     7,592,030         6,414,753         18.4

Operating income

     914,826         534,095         71.3     2,522,170         1,639,377         53.8

Income before income taxes

     854,935         478,331         78.7     2,333,885         1,446,077         61.4

Net income

     809,298         444,980         81.9     2,184,945         1,310,470         66.7

Net income attributable to Las Vegas Sands Corp.

     626,744         349,782         79.2     1,728,458         1,089,311         58.7

 

     Percent of Net Revenues  
     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2013     2012     2013     2012  

Operating expenses

     74.4     80.3     75.1     79.6

Operating income

     25.6     19.7     24.9     20.4

Income before income taxes

     24.0     17.7     23.1     18.0

Net income

     22.7     16.4     21.6     16.3

Net income attributable to Las Vegas Sands Corp.

     17.6     12.9     17.1     13.5

Operating Results

Key Operating Revenue Measurements

Operating revenues at The Venetian Macao, Sands Cotai Central, Four Seasons Macao, Marina Bay Sands and our Las Vegas Operating Properties are dependent upon the volume of customers who stay at the hotel, which affects the price that can be charged for hotel rooms and our gaming volume. Operating revenues at Sands Macao and Sands Bethlehem are principally driven by casino customers who visit the properties on a daily basis.

The following are the key measurements we use to evaluate operating revenues:

Casino revenue measurements for Macao and Singapore: Macao and Singapore table games are segregated into two groups, consistent with the Macao and Singapore markets’ convention: Rolling Chip play (all VIP players) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-negotiable gaming chips wagered and lost. The volume measurement for Non-Rolling Chip play is table games drop (“drop”), which is the sum of markers issued (credit instruments) less markers paid at the table, plus cash deposited in the table drop box. Rolling Chip and Non-Rolling Chip volume measurements are not comparable as the amounts wagered and lost are substantially higher than the amounts dropped. Slot handle (“handle”), also a volume measurement, is the gross amount wagered for the period cited.

We view Rolling Chip win as a percentage of Rolling Chip volume, Non-Rolling Chip win as a percentage of drop and slot hold as a percentage of slot handle. Win or hold percentage represents the percentage of Rolling Chip volume, Non-Rolling Chip drop or slot handle that is won by the casino and recorded as casino revenue. Based upon our mix of table games, our Rolling Chip win percentage (calculated before discounts and commissions) is expected to be 2.7% to 3.0% and our Non-Rolling Chip table games have produced a trailing 12-month win percentage (calculated before discounts) of 28.0%, 22.1%, 33.0%, 20.7% and 23.6% at The Venetian Macao, Sands Cotai Central, Four Seasons Macao, Sands Macao and Marina Bay Sands, respectively. Our slot machines have produced a trailing 12-month hold percentage (calculated before slot club cash incentives) of 5.6%, 3.9%, 5.5%, 4.0% and 5.1% at The Venetian Macao, Sands Cotai Central, Four Seasons Macao, Sands Macao and Marina Bay Sands, respectively. Actual win may vary from our expected win percentage and the trailing 12-month win and hold percentages. Generally, slot machine play is conducted on a cash basis. In Macao and Singapore, 28.8% and 29.1%, respectively, of our table games play was conducted on a credit basis for the nine months ended September 30, 2013.

 

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Casino revenue measurements for the U.S.: The volume measurements in the U.S. are table games drop and slot handle, as previously described. We view table games win as a percentage of drop and slot hold as a percentage of handle. Based upon our mix of table games, our table games are expected to produce a win percentage (calculated before discounts) of 20% to 22% at our Las Vegas Operating Properties and 14% to 16% at Sands Bethlehem. Our slot machines have produced a trailing 12-month hold percentage (calculated before slot club cash incentives) of 8.8% and 7.1% at our Las Vegas Operating Properties and at Sands Bethlehem, respectively. Actual win may vary from our expected win percentage and the trailing 12-month hold percentage. As in Macao and Singapore, slot machine play is generally conducted on a cash basis. Approximately 72.5% of our table games play at our Las Vegas Operating Properties, for nine months ended September 30, 2013, was conducted on a credit basis, while our table games play at Sands Bethlehem is primarily conducted on a cash basis.

Hotel revenue measurements: Performance indicators used are occupancy rate, which is the average percentage of available hotel rooms occupied during a period, and average daily room rate, which is the average price of occupied rooms per day. The calculations of the hotel occupancy and average daily room rates include the impact of rooms provided on a complimentary basis. Complimentary room rates are determined based on an analysis of retail (or cash) room rates by customer segment and type of room product to ensure the complimentary room rates are consistent with retail rates. Revenue per available room represents a summary of hotel average daily room rates and occupancy. Because not all available rooms are occupied, average daily room rates are normally higher than revenue per available room. Reserved rooms where the guests do not show up for their stay and lose their deposit may be re-sold to walk-in guests. These rooms are considered to be occupied twice for statistical purposes due to obtaining the original deposit and the walk-in guest revenue. In cases where a significant number of rooms are resold, occupancy rates may be in excess of 100% and revenue per available room may be higher than the average daily room rate.

Mall revenue measurements: Occupancy, base rent per square foot and tenant sales per square foot are used as performance indicators. Occupancy represents gross leasable occupied area (“GLOA”) divided by gross leasable area (“GLA”) at the end of the reporting period. GLOA is the sum of: (1) tenant occupied space under lease and (2) tenants no longer occupying space, but paying rent. GLA does not include space that is currently under development or not on the market for lease. Base rent per square foot is the weighted average base, or minimum, rent charge in effect at the end of the reporting period for all tenants that would qualify to be included in occupancy. Tenant sales per square foot is the sum of reported comparable sales for the trailing 12 months divided by the comparable square footage for the same period. Only tenants that have been open for a minimum of 12 months are included in the tenant sales per square foot calculation.

Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012

Operating Revenues

Our net revenues consisted of the following:

 

     Three Months Ended September 30,  
     2013     2012     Percent
Change
 
     (Dollars in thousands)  

Casino

   $ 2,984,538      $ 2,201,030        35.6

Rooms

     349,001        287,849        21.2

Food and beverage

     174,260        142,685        22.1

Mall

     128,068        103,232        24.1

Convention, retail and other

     123,259        117,129        5.2
  

 

 

   

 

 

   
     3,759,126        2,851,925        31.8

Less — promotional allowances

     (190,586     (142,443     (33.8 )% 
  

 

 

   

 

 

   

Total net revenues

   $ 3,568,540      $ 2,709,482        31.7
  

 

 

   

 

 

   

Consolidated net revenues were $3.57 billion for the three months ended September 30, 2013, an increase of $859.1 million compared to $2.71 billion for the three months ended September 30, 2012. The increase in net revenues was driven by an increase of $440.7 million at Sands Cotai Central due to its progressive opening that commenced in April 2012, and increases of $162.5 million and $148.7 million at The Venetian Macao and Marina Bay Sands, respectively, primarily due to increased casino revenues.

 

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Casino revenues increased $783.5 million compared to the three months ended September 30, 2012. The increase is attributable to an increase of $388.8 million at Sands Cotai Central, a $157.2 million increase at Marina Bay Sands, driven by an increase in Rolling Chip win percentage, as well as a $153.9 million increase at The Venetian Macao, driven by increases in Non-Rolling Chip drop and Rolling Chip volume. The following table summarizes the results of our casino activity:

 

     Three Months Ended September 30,  
     2013     2012     Change  
     (Dollars in thousands)  

Macao Operations:

      

The Venetian Macao

      

Total casino revenues

   $ 824,956      $ 671,104        22.9

Non-Rolling Chip drop

   $ 2,005,109      $ 1,140,871        75.8

Non-Rolling Chip win percentage

     23.9     31.3     (7.4 )pts 

Rolling Chip volume

   $ 14,152,346      $ 11,199,354        26.4

Rolling Chip win percentage

     3.03     3.32     (0.29 )pts 

Slot handle

   $ 1,144,392      $ 1,262,770        (9.4 )% 

Slot hold percentage

     5.7     4.9     0.8  pts 

Sands Cotai Central

      

Total casino revenues

   $ 660,898      $ 272,138        142.9

Non-Rolling Chip drop

   $ 1,429,345      $ 541,956        163.7

Non-Rolling Chip win percentage

     23.4     20.7     2.7  pts 

Rolling Chip volume

   $ 15,550,073      $ 9,055,220        71.7

Rolling Chip win percentage

     2.71     2.28     0.43  pts 

Slot handle

   $ 1,459,744      $ 1,032,351        41.4

Slot hold percentage

     4.1     3.1     1.0  pts 

Four Seasons Macao

      

Total casino revenues

   $ 290,637      $ 194,670        49.3

Non-Rolling Chip drop

   $ 272,266      $ 110,834        145.7

Non-Rolling Chip win percentage

     28.3     32.6     (4.3 )pts 

Rolling Chip volume

   $ 10,451,747      $ 8,962,513        16.6

Rolling Chip win percentage

     2.88     2.58     0.30  pts 

Slot handle

   $ 263,350      $ 214,810        22.6

Slot hold percentage

     5.6     4.4     1.2  pts 

Sands Macao

      

Total casino revenues

   $ 297,930      $ 307,731        (3.2 )% 

Non-Rolling Chip drop

   $ 877,375      $ 738,953        18.7

Non-Rolling Chip win percentage

     19.6     20.8     (1.2 )pts 

Rolling Chip volume

   $ 5,232,928      $ 6,818,553        (23.3 )% 

Rolling Chip win percentage

     2.94     2.96     (0.02 )pts 

Slot handle

   $ 660,258      $ 596,340        10.7

Slot hold percentage

     3.9     4.2     (0.3 )pts 

Singapore Operations:

      

Marina Bay Sands

      

Total casino revenues

   $ 628,053      $ 470,838        33.4

Non-Rolling Chip drop

   $ 1,156,271      $ 1,131,326        2.2

Non-Rolling Chip win percentage

     23.6     24.0     (0.4 )pts 

Rolling Chip volume

   $ 13,785,351      $ 11,790,826        16.9

Rolling Chip win percentage

     2.85     1.79     1.06  pts 

Slot handle

   $ 2,763,660      $ 2,620,753        5.5

Slot hold percentage

     5.1     5.2     (0.1 )pts 

U.S. Operations:

      

Las Vegas Operating Properties

      

Total casino revenues

   $ 168,132      $ 171,472        (1.9 )% 

Table games drop

   $ 544,330      $ 581,484        (6.4 )% 

Table games win percentage

     28.7     28.1     0.6  pts 

Slot handle

   $ 511,441      $ 498,446        2.6

Slot hold percentage

     8.7     8.7     —   pts 

Sands Bethlehem

      

Total casino revenues

   $ 113,932      $ 113,077        0.8

Table games drop

   $ 261,618      $ 234,881        11.4

Table games win percentage

     15.0     16.0     (1.0 )pts 

Slot handle

   $ 1,045,129      $ 1,015,293        2.9

Slot hold percentage

     6.9     7.2     (0.3 )pts 

 

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In our experience, average win percentages remain steady when measured over extended periods of time, but can vary considerably within shorter time periods as a result of the statistical variances that are associated with games of chance in which large amounts are wagered.

Room revenues increased $61.2 million compared to the three months ended September 30, 2012. The increase is attributable to an increase of $41.9 million at Sands Cotai Central, due to its progressive opening, and an increase of $9.3 million and $5.2 million at Marina Bay Sands and at our Las Vegas Operating Properties, respectively, driven by an increase in average daily room rates. The suites at Sands Macao are primarily provided to casino patrons on a complimentary basis. The following table summarizes the results of our room activity:

 

     Three Months Ended September 30,  
     2013     2012     Change  
     (Room revenues in thousands)  

Macao Operations:

      

The Venetian Macao

      

Total room revenues

   $ 58,328      $ 55,354        5.4

Occupancy rate

     91.8     93.9     (2.1 )pts 

Average daily room rate

   $ 242      $ 227        6.6

Revenue per available room

   $ 222      $ 213        4.2

Sands Cotai Central

      

Total room revenues

   $ 65,916      $ 24,002        174.6

Occupancy rate

     84.8     88.9     (4.1 )pts 

Average daily room rate

   $ 152      $ 149        2.0

Revenue per available room

   $ 129      $ 132        (2.3 )% 

Four Seasons Macao

      

Total room revenues

   $ 11,094      $ 10,009        10.8

Occupancy rate

     88.2     83.1     5.1  pts 

Average daily room rate

   $ 363      $ 349        4.0

Revenue per available room

   $ 321      $ 290        10.7

Sands Macao

      

Total room revenues

   $ 6,205      $ 6,037        2.8

Occupancy rate

     96.9     97.3     (0.4 )pts 

Average daily room rate

   $ 243      $ 236        3.0

Revenue per available room

   $ 236      $ 230        2.6

Singapore Operations:

      

Marina Bay Sands

      

Total room revenues

   $ 93,324      $ 84,003        11.1

Occupancy rate

     99.8     99.8     —   pts 

Average daily room rate

   $ 401      $ 361        11.1

Revenue per available room

   $ 400      $ 360        11.1

U.S. Operations:

      

Las Vegas Operating Properties

      

Total room revenues

   $ 110,934      $ 105,695        5.0

Occupancy rate

     87.6     87.3     0.3  pts 

Average daily room rate

   $ 196      $ 191        2.6

Revenue per available room

   $ 171      $ 167        2.4

Sands Bethlehem

      

Total room revenues

   $ 3,200      $ 2,749        16.4

Occupancy rate

     82.1     69.6     12.5  pts 

Average daily room rate

   $ 141      $ 142        (0.7 )% 

Revenue per available room

   $ 115      $ 99        16.2

Food and beverage revenues increased $31.6 million compared to the three months ended September 30, 2012. The increase was primarily attributable to a $16.9 million increase at Sands Cotai Central, due to its progressive opening, as well as a $9.5 million increase at our Las Vegas Operating Properties, driven by an increase in banquet operations.

 

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Mall revenues increased $24.8 million compared to the three months ended September 30, 2012. The increase was primarily due to a $25.9 million increase at our Macao operating properties, driven by an increase in base rents as well as the progressive opening of Sands Cotai Central. For further information related to the financial performance of our malls, see “— Additional Information Regarding our Retail Mall Operations.” The following table summarizes the results of our mall activity:

 

     Three Months Ended September 30,  
     2013     2012     Change  
     (Mall revenues in thousands)  

Macao Operations:

      

The Grand Canal Shoppes at The Venetian Macao

      

Total mall revenues

   $ 45,377      $ 36,346        24.8

Mall gross leasable area (in square feet)

     756,271        809,024        (6.5 )% 

Occupancy

     94.2     91.7     2.5  pts 

Base rent per square foot

   $ 167      $ 140        19.3

Tenant sales per square foot

   $ 1,473      $ 1,186        24.2

The Shoppes at Sands Cotai Central(1)

      

Total mall revenues

   $ 11,452      $ 3,693        210.1

Mall gross leasable area (in square feet)

     210,143        210,143        —  

Occupancy

     100.0     100.0     —   pts 

Base rent per square foot

   $ 120      $ 131        (8.4 )% 

The Shoppes at Four Seasons(2)

      

Total mall revenues

   $ 32,245      $ 23,112        39.5

Mall gross leasable area (in square feet)

     241,416        189,088        27.7

Occupancy

     90.7     91.2     (0.5 )pts 

Base rent per square foot

   $ 336      $ 150        124.0

Tenant sales per square foot

   $ 4,769      $ 4,353        9.6

Singapore Operations:

      

The Shoppes at Marina Bay Sands(3)

      

Total mall revenues

   $ 38,021      $ 39,670        (4.2 )% 

Mall gross leasable area (in square feet)

     641,442        631,024        1.7

Occupancy

     88.7     96.2     (7.5 )pts 

Base rent per square foot

   $ 195      $ 216        (9.7 )% 

Tenant sales per square foot

   $ 1,556      $ 1,366        13.9

U.S. Operations:

      

The Outlets at Sands Bethlehem(4)

      

Total mall revenues

   $ 973      $ 411        136.7

Mall gross leasable area (in square feet)

     134,907        129,216        4.4

Occupancy

     87.6     71.3     16.3  pts 

Base rent per square foot

   $ 24      $ —          —  

 

(1)

Phases I and II of The Shoppes at Sands Cotai Central opened in April and September 2012, respectively.

(2)

In November 2012, The Shoppes at Four Seasons expanded the duty-free luxury shops, resulting in approximately 52,000 square feet of additional gross leasable space. Additionally, beginning in August 2013, a significant portion of the rent paid by the duty-free luxury shops was converted from overage rent to base rent in accordance with the respective lease agreements, resulting in an increase in base rent per square foot.

(3)

The decrease in occupancy at The Shoppes at Marina Bay Sands is due to an ongoing repositioning of the mall that will bring in several new key luxury tenants. Approximately 39,000 square feet of gross leasable area is currently undergoing new fit-out and is not considered occupied as of September 30, 2013.

(4)

A progressive opening of The Outlets at Sands Bethlehem began in November 2011. Base rent per square foot for the three months ended September 30, 2012, and tenant sales per square foot for the three months ended September 30, 2013 and 2012, are excluded from the table as certain co-tenancy requirements were not met during 2012 as the mall was only partially occupied.

 

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Operating Expenses

The breakdown of operating expenses is as follows:

 

     Three Months Ended September 30,  
     2013      2012      Percent
Change
 
     (Dollars in thousands)  

Casino

   $ 1,668,107       $ 1,278,162         30.5

Rooms

     69,511         58,911         18.0

Food and beverage

     88,020         77,748         13.2

Mall

     17,319         16,666         3.9

Convention, retail and other

     69,102         66,867         3.3

Provision for doubtful accounts

     55,371         72,805         (23.9 )% 

General and administrative

     380,865         268,832         41.7

Corporate

     38,468         54,617         (29.6 )% 

Pre-opening

     1,778         39,872         (95.5 )% 

Development

     3,487         4,201         (17.0 )% 

Depreciation and amortization

     248,925         226,538         9.9

Amortization of leasehold interests in land

     10,022         10,014         0.1

Loss on disposal of assets

     2,739         154         N.M.   
  

 

 

    

 

 

    

Total operating expenses

   $ 2,653,714       $ 2,175,387         22.0
  

 

 

    

 

 

    

 

N.M. – Not meaningful

Operating expenses were $2.65 billion for the three months ended September 30, 2013, an increase of $478.3 million compared to $2.18 billion for the three months ended September 30, 2012. The increase in operating expenses was primarily attributable to the progressive opening of Sands Cotai Central that commenced in April 2012.

Casino expenses increased $389.9 million compared to the three months ended September 30, 2012. Of the increase, $286.7 million was attributable to the 39.0% gross win tax on increased casino revenues across all of our Macao properties, as well as a $41.7 million increase in additional casino expenses at Sands Cotai Central.

Rooms and food and beverage expenses increased $10.6 million and $10.3 million, respectively, compared to the three months ended September 30, 2012. The increases were driven by the associated increases in the related revenues described above.

The provision for doubtful accounts was $55.4 million for the three months ended September 30, 2013, compared to $72.8 million for the three months ended September 30, 2012. The amount of this provision can vary over short periods of time because of factors specific to the customers who owe us money from gaming activities at any given time. We believe that the amount of our provision for doubtful accounts in the future will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.

General and administrative expenses increased $112.0 million compared to the three months ended September 30, 2012. The increase was primarily attributable to a $56.9 million increase at our Las Vegas Operating Properties, driven by a $47.4 million legal settlement expense (see “Part I — Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 9 — Commitments and Contingencies — Litigation”), as well as a $31.3 million increase at Sands Cotai Central.

Corporate expenses decreased $16.1 million compared to the three months ended September 30, 2012, driven by a decrease in legal fees.

Pre-opening expenses were $1.8 million for the three months ended September 30, 2013, compared to $39.9 million for the three months ended September 30, 2012. Pre-opening expense represents personnel and other costs incurred prior to the opening of new ventures, which are expensed as incurred. Pre-opening expenses for the three months ended September 30, 2012, were primarily related to activities at Sands Cotai Central. Development expenses include the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are also expensed as incurred.

Depreciation and amortization expense increased $22.4 million compared to the three months ended September 30, 2012. The increase was primarily attributable to a $33.2 million increase at Sands Cotai Central, partially offset by a decrease at our Las Vegas Operating Properties due to certain assets being fully depreciated.

 

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Adjusted Property EBITDA

Adjusted property EBITDA is used by management as the primary measure of the operating performance of our segments. Adjusted property EBITDA is net income before royalty fees, stock-based compensation expense, legal settlement expense, corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, impairment loss, loss on disposal of assets, interest, other income (expense), loss on modification or early retirement of debt and income taxes. The following table summarizes information related to our segments (see “Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 10 — Segment Information” for discussion of our operating segments and a reconciliation of adjusted property EBITDA to net income):

 

     Three Months Ended September 30,  
     2013      2012     Percent
Change
 
     (Dollars in thousands)  

Macao:

       

The Venetian Macao

   $ 357,197       $ 299,001        19.5

Sands Cotai Central

     224,272         53,654        318.0

Four Seasons Macao

     112,922         54,386        107.6

Sands Macao

     89,947         80,869        11.2

Other Asia

     1,177         (2,124     N.M.   
  

 

 

    

 

 

   
     785,515         485,786        61.7

Marina Bay Sands

     373,612         260,788        43.3

United States:

       

Las Vegas Operating Properties

     87,135         98,206        (11.3 )% 

Sands Bethlehem

     29,553         32,118        (8.0 )% 
  

 

 

    

 

 

   
     116,688         130,324        (10.5 )% 
  

 

 

    

 

 

   

Total adjusted property EBITDA

   $ 1,275,815       $ 876,898        45.5
  

 

 

    

 

 

   

 

N.M. – Not meaningful

Adjusted property EBITDA at our Macao operations increased $299.7 million compared to the three months ended September 30, 2012. The increase was primarily attributable to an increase of $170.6 million at Sands Cotai Central, due to its progressive opening that commenced in April 2012, as well as increases of $58.5 million and $58.2 million at the Four Seasons Macao and The Venetian Macao, respectively, driven by an increase in casino activity.

Adjusted property EBITDA at Marina Bay Sands increased $112.8 million compared to the three months ended September 30, 2012. The increase was primarily attributable to a $148.7 million increase in net revenues, driven by an increase in casino revenues, partially offset by increases in the associated operating expenses.

Adjusted property EBITDA at our Las Vegas Operating Properties decreased $11.1 million compared to the three months ended September 30, 2012. Net revenues increased $10.1 million (excluding intersegment royalty revenue), but was offset by increases in the associated operating expenses.

Adjusted property EBITDA at Sands Bethlehem decreased $2.6 million compared to the three months ended September 30, 2012. Net revenues increased $1.0 million, but was offset by increases in the associated operating expenses.

Interest Expense

The following table summarizes information related to interest expense on long-term debt:

 

     Three Months Ended
September 30,
 
     2013     2012  
     (Dollars in thousands)  

Interest cost (which includes the amortization of deferred financing costs)

   $ 64,048      $ 68,425   

Add — imputed interest on deferred proceeds from sale of The Shoppes at The Palazzo

     3,793        3,783   

Less — capitalized interest

     (924     (9,916
  

 

 

   

 

 

 

Interest expense, net

   $ 66,917      $ 62,292   
  

 

 

   

 

 

 

Cash paid for interest

   $ 59,880      $ 51,782   

Weighted average total debt balance

   $ 9,492,227      $ 9,417,803   

Weighted average interest rate

     2.7     2.9

 

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Interest cost decreased $4.4 million compared to the three months ended September 30, 2012, resulting primarily from a decrease in our weighted average interest rate. Capitalized interest decreased $9.0 million compared to the three months ended September 30, 2012, primarily due to the completion of phases IIA and IIB of Sands Cotai Central in September 2012 and January 2013, respectively.

Other Factors Effecting Earnings

Other income was $3.2 million for the three months ended September 30, 2013, compared to $2.4 million for the three months ended September 30, 2012. The amounts in both periods were primarily attributable to foreign exchange gains.

Our effective income tax rate was 5.3% for the three months ended September 30, 2013, compared to 7.0% for the three months ended September 30, 2012. The effective income tax rate for the three months ended September 30, 2013 and 2012, reflects a 17% statutory tax rate on our Singapore operations and a zero percent tax rate on our Macao gaming operations due to our income tax exemption in Macao, which was extended in October 2013 through the end of 2018. We have recorded a valuation allowance related to deferred tax assets generated by operations in the U.S. and certain foreign jurisdictions; however, to the extent that the financial results of these operations improve and it becomes “more-likely-than-not” that these deferred tax assets or portion thereof are realizable, we will reduce the valuation allowances in the period such determination is made.

The net income attributable to our noncontrolling interests was $182.6 million for the three months ended September 30, 2013, compared to $95.2 million for the three months ended September 30, 2012. These amounts are primarily related to the noncontrolling interest of SCL.

Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012

Operating Revenues

Our net revenues consisted of the following:

 

     Nine Months Ended September 30,  
     2013     2012     Percent
Change
 
     (Dollars in thousands)  

Casino

   $ 8,394,721      $ 6,534,947        28.5

Rooms

     998,646        830,887        20.2

Food and beverage

     534,361        455,884        17.2

Mall

     321,522        268,390        19.8

Convention, retail and other

     372,370        363,680        2.4
  

 

 

   

 

 

   
     10,621,620        8,453,788        25.6

Less — promotional allowances

     (507,420     (399,658     (27.0 )% 
  

 

 

   

 

 

   

Total net revenues

   $ 10,114,200      $ 8,054,130        25.6
  

 

 

   

 

 

   

Consolidated net revenues were $10.11 billion for the nine months ended September 30, 2013, an increase of $2.06 billion compared to $8.05 billion for the nine months ended September 30, 2012. The increase in net revenues was driven by an increase of $1.35 billion at Sands Cotai Central, due to its progressive opening that commenced in April 2012, as well as an increase of $507.2 million at The Venetian Macao, primarily due to increased casino activity.

 

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Casino revenues increased $1.86 billion compared to the nine months ended September 30, 2012. The increase is attributable to an increase of $1.20 billion at Sands Cotai Central, due to its progressive opening, as well as a $497.5 million increase at The Venetian Macao, driven by an increase in Non-Rolling Chip drop. The following table summarizes the results of our casino activity:

 

     Nine Months Ended September 30,  
     2013     2012     Change  
     (Dollars in thousands)  

Macao Operations:

      

The Venetian Macao

      

Total casino revenues

   $ 2,404,046      $ 1,906,569        26.1

Non-Rolling Chip drop

   $ 4,932,826      $ 3,267,352        51.0

Non-Rolling Chip win percentage

     27.5     30.8     (3.3 )pts 

Rolling Chip volume

   $ 37,661,230      $ 36,162,486        4.1

Rolling Chip win percentage

     3.32     2.97     0.35  pts 

Slot handle

   $ 3,485,599      $ 3,652,412        (4.6 )% 

Slot hold percentage

     5.6     5.2     0.4  pts 

Sands Cotai Central

      

Total casino revenues

   $ 1,725,210      $ 521,604        230.8

Non-Rolling Chip drop

   $ 3,692,883      $ 931,402        296.5

Non-Rolling Chip win percentage

     22.4     21.0     1.4  pts 

Rolling Chip volume

   $ 43,507,873      $ 15,875,851        174.1

Rolling Chip win percentage

     2.71     2.64     0.07  pts 

Slot handle

   $ 3,937,837      $ 1,697,735        131.9

Slot hold percentage

     4.0     3.4     0.6  pts 

Four Seasons Macao

      

Total casino revenues

   $ 739,225      $ 717,367        3.0

Non-Rolling Chip drop

   $ 568,846      $ 307,720        84.9

Non-Rolling Chip win percentage

     30.3     39.1     (8.8 )pts 

Rolling Chip volume

   $ 29,876,157      $ 30,872,992        (3.2 )% 

Rolling Chip win percentage

     2.68     2.82     (0.14 )pts 

Slot handle

   $ 629,757      $ 612,125        2.9

Slot hold percentage

     5.6     5.2     0.4  pts 

Sands Macao

      

Total casino revenues

   $ 887,796      $ 913,580        (2.8 )% 

Non-Rolling Chip drop

   $ 2,463,465      $ 2,163,888        13.8

Non-Rolling Chip win percentage

     20.3     20.6     (0.3 )pts 

Rolling Chip volume

   $ 17,430,087      $ 19,416,833        (10.2 )% 

Rolling Chip win percentage

     2.76     3.10     (0.34 )pts 

Slot handle

   $ 2,003,935      $ 1,871,312        7.1

Slot hold percentage

     3.9     4.2     (0.3 )pts 

Singapore Operations:

      

Marina Bay Sands

      

Total casino revenues

   $ 1,858,579      $ 1,722,351        7.9

Non-Rolling Chip drop

   $ 3,514,567      $ 3,503,830        0.3

Non-Rolling Chip win percentage

     23.4     22.8     0.6  pts 

Rolling Chip volume

   $ 46,364,282      $ 36,101,116        28.4

Rolling Chip win percentage

     2.62     2.62      pts 

Slot handle

   $ 8,293,454      $ 8,102,457        2.4

Slot hold percentage

     5.1     5.3     (0.2 )pts 

U.S. Operations:

      

Las Vegas Operating Properties

      

Total casino revenues

   $ 433,096      $ 424,764        2.0

Table games drop

   $ 1,602,052      $ 1,625,115        (1.4 )% 

Table games win percentage

     23.9     23.5     0.4  pts 

Slot handle

   $ 1,481,976      $ 1,427,355        3.8

Slot hold percentage

     8.8     8.7     0.1  pts 

Sands Bethlehem

      

Total casino revenues

   $ 346,769      $ 328,712        5.5

Table games drop

   $ 765,165      $ 654,809        16.9

Table games win percentage

     15.6     15.1     0.5  pts 

Slot handle

   $ 3,134,161      $ 3,061,520        2.4

Slot hold percentage

     7.0     7.2     (0.2 )pts 

 

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In our experience, average win percentages remain steady when measured over extended periods of time, but can vary considerably within shorter time periods as a result of the statistical variances that are associated with games of chance in which large amounts are wagered.

Room revenues increased $167.8 million compared to the nine months ended September 30, 2012. The increase is attributable to an increase of $120.8 million at Sands Cotai Central, due to its progressive opening, a $23.2 million increase at Marina Bay Sands, driven by an increase in average daily room rates, and a $20.7 million increase at our Las Vegas Operating Properties, driven by an increase in occupancy. The suites at Sands Macao are primarily provided to casino patrons on a complimentary basis. The following table summarizes the results of our room activity:

 

     Nine Months Ended September 30,  
     2013     2012     Change  
     (Room revenues in thousands)  

Macao Operations:

      

The Venetian Macao

      

Total room revenues

   $ 163,829      $ 164,227        (0.2 )% 

Occupancy rate

     90.3     91.4     (1.1 )pts 

Average daily room rate

   $ 234      $ 233        0.4

Revenue per available room

   $ 211      $ 213        (0.9 )% 

Sands Cotai Central

      

Total room revenues

   $ 160,117      $ 39,339        307.0

Occupancy rate

     74.6     82.8     (8.2 )pts 

Average daily room rate

   $ 149      $ 146        2.1

Revenue per available room

   $ 111      $ 121        (8.3 )% 

Four Seasons Macao

      

Total room revenues

   $ 30,975      $ 29,020        6.7

Occupancy rate

     83.4     79.6     3.8  pts 

Average daily room rate

   $ 362      $ 355        2.0

Revenue per available room

   $ 302      $ 282        7.1

Sands Macao

      

Total room revenues

   $ 18,179      $ 18,020        0.9

Occupancy rate

     95.6     94.8     0.8  pts 

Average daily room rate

   $ 244      $ 243        0.4

Revenue per available room

   $ 233      $ 231        0.9

Singapore Operations:

      

Marina Bay Sands

      

Total room revenues

   $ 264,442      $ 241,263        9.6

Occupancy rate

     99.2     99.1     0.1  pts 

Average daily room rate

   $ 386      $ 351        10.0

Revenue per available room

   $ 383      $ 348        10.1

U.S. Operations:

      

Las Vegas Operating Properties

      

Total room revenues

   $ 352,615      $ 331,931        6.2

Occupancy rate

     89.8     85.6     4.2  pts 

Average daily room rate

   $ 204      $ 203        0.5

Revenue per available room

   $ 183      $ 174        5.2

Sands Bethlehem

      

Total room revenues

   $ 8,489      $ 7,087        19.8

Occupancy rate

     73.4     60.7     12.7  pts 

Average daily room rate

   $ 141      $ 141         % 

Revenue per available room

   $ 103      $ 86        19.8

Food and beverage revenues increased $78.5 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $52.2 million increase at Sands Cotai Central, due to its progressive opening, as well as a $15.3 million increase at our Las Vegas Operating Properties, driven by an increase in banquet operations.

 

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Mall revenues increased $53.1 million compared to the nine months ended September 30, 2012. The increase was primarily due to a $53.1 million increase at our Macao operating properties, driven by an increase in base rents as well as the progressive opening of Sands Cotai Central. For further information related to the financial performance of our malls, see “— Additional Information Regarding our Retail Mall Operations.” The following table summarizes the results of our mall activity:

 

     Nine Months Ended September 30,(1)  
     2013     2012     Change  
     (Mall revenues in thousands)  

Macao Operations:

      

The Grand Canal Shoppes at The Venetian Macao

      

Total mall revenues

   $ 112,647      $ 93,774        20.1

Mall gross leasable area (in square feet)

     756,271        809,024        (6.5 )% 

Occupancy

     94.2     91.7     2.5  pts 

Base rent per square foot

   $ 167      $ 140        19.3

Tenant sales per square foot

   $ 1,473      $ 1,186        24.2

The Shoppes at Sands Cotai Central(2)

      

Total mall revenues

   $ 28,076      $ 6,945        304.3

Mall gross leasable area (in square feet)

     210,143        210,143        —  

Occupancy

     100.0     100.0     —    pts 

Base rent per square foot

   $ 120      $ 131        (8.4 )% 

The Shoppes at Four Seasons(3)

      

Total mall revenues

   $ 67,971      $ 54,918        23.8

Mall gross leasable area (in square feet)

     241,416        189,088        27.7

Occupancy

     90.7     91.2     (0.5 )pts 

Base rent per square foot

   $ 336      $ 150        124.0

Tenant sales per square foot

   $ 4,769      $ 4,353        9.6

Singapore Operations:

      

The Shoppes at Marina Bay Sands(4)

      

Total mall revenues

   $ 110,569      $ 111,580        (0.9 )% 

Mall gross leasable area (in square feet)

     641,442        631,024        1.7

Occupancy

     88.7     96.2     (7.5 )pts 

Base rent per square foot

   $ 195      $ 216        (9.7 )% 

Tenant sales per square foot

   $ 1,556      $ 1,366        13.9

U.S. Operations:

      

The Outlets at Sands Bethlehem(5)

      

Total mall revenues

   $ 2,259      $ 1,173        92.6

Mall gross leasable area (in square feet)

     134,907        129,216        4.4

Occupancy

     87.6     71.3     16.3  pts 

Base rent per square foot

   $ 24      $ —          —  

 

(1)

As GLA, occupancy, base rent per square foot and tenant sales per square foot are calculated as of September 30, 2013 and 2012, they are identical to the summary presented herein for the three months ended September 30, 2013 and 2012, respectively.

(2)

Phases I and II of The Shoppes at Sands Cotai Central opened in April and September 2012, respectively.

(3)

In November 2012, The Shoppes at Four Seasons expanded the duty-free luxury shops, resulting in approximately 52,000 square feet of additional gross leasable space. Additionally, beginning in August 2013, a significant portion of the rent paid by the duty-free luxury shops was converted from overage rent to base rent in accordance with the respective lease agreements, resulting in an increase in base rent per square foot.

(4)

The decrease in occupancy at The Shoppes at Marina Bay Sands is due to an ongoing repositioning of the mall that will bring in several new key luxury tenants. Approximately 39,000 square feet of gross leasable area is currently undergoing new fit-out and is not considered occupied as of September 30, 2013.

(5)

A progressive opening of The Outlets at Sands Bethlehem began in November 2011. Base rent per square foot for the nine months ended September 30, 2012, and tenant sales per square foot for the nine months ended September 30, 2013 and 2012, are excluded from the table as certain co-tenancy requirements were not met during 2012 as the mall was only partially occupied.

 

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Operating Expenses

The breakdown of operating expenses is as follows:

 

     Nine Months Ended September 30,  
     2013      2012      Percent
Change
 
     (Dollars in thousands)  

Casino

   $ 4,714,107       $ 3,673,171         28.3

Rooms

     203,886         172,210         18.4

Food and beverage

     274,045         238,022         15.1

Mall

     52,724         50,765         3.9

Convention, retail and other

     228,045         224,794         1.4

Provision for doubtful accounts

     182,108         183,397         (0.7 )% 

General and administrative

     979,148         746,587         31.1

Corporate

     141,221         162,164         (12.9 )% 

Pre-opening

     9,646         134,803         (92.8 )% 

Development

     14,840         12,196         21.7

Depreciation and amortization

     752,530         641,725         17.3

Amortization of leasehold interests in land

     30,297         30,016         0.9

Impairment loss

     —           143,674         (100.0 )% 

Loss on disposal of assets

     9,433         1,229         N.M.   
  

 

 

    

 

 

    

Total operating expenses

   $ 7,592,030       $ 6,414,753         18.4
  

 

 

    

 

 

    

 

N.M. – Not meaningful

Operating expenses were $7.59 billion for the nine months ended September 30, 2013, an increase of $1.18 billion compared to $6.41 billion for the nine months ended September 30, 2012. The increase in operating expenses was primarily attributable to the progressive opening of Sands Cotai Central that commenced in April 2012.

Casino expenses increased $1.04 billion compared to the nine months ended September 30, 2012. Of the increase, $759.3 million was attributable to the 39.0% gross win tax on increased casino revenues across all of our Macao properties, as well as a $181.3 million increase in additional casino expenses at Sands Cotai Central.

Rooms and food and beverage expenses increased $31.7 million and $36.0 million, respectively, compared to the nine months ended September 30, 2012. The increases were driven by the associated increases in the related revenues described above.

The provision for doubtful accounts was $182.1 million for the nine months ended September 30, 2013, compared to $183.4 million for the nine months ended September 30, 2012. The amount of this provision can vary over short periods of time because of factors specific to the customers who owe us money from gaming activities at any given time. We believe that the amount of our provision for doubtful accounts in the future will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.

General and administrative expenses increased $232.6 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $110.7 million increase at Sands Cotai Central, a $59.2 million increase at our Las Vegas Operating Properties, driven by a $47.4 million legal settlement expense (see “Part I — Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 9 — Commitments and Contingencies — Litigation”), as well as a $35.4 million increase at The Venetian Macao, driven by an increase in advertising expense.

Corporate expenses decreased $20.9 million compared to the nine months ended September 30, 2012, driven by a decrease in legal fees.

Pre-opening expenses were $9.6 million for the nine months ended September 30, 2013, compared to $134.8 million for the nine months ended September 30, 2012. Pre-opening expense represents personnel and other costs incurred prior to the opening of new ventures, which are expensed as incurred. Pre-opening expenses for the nine months ended September 30, 2013 and 2012, were primarily related to activities at Sands Cotai Central. Development expenses include the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are also expensed as incurred.

 

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Depreciation and amortization expense increased $110.8 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $132.7 million increase at Sands Cotai Central, partially offset by decreases at our Las Vegas Operating Properties and our other Macao operating properties due to certain assets being fully depreciated.

The impairment loss of $143.7 million for the nine months ended September 30, 2012, consisted primarily of a $100.7 million write-off of capitalized construction costs related to our former Cotai Strip development (referred to as parcels 7 and 8) in Macao and a $42.9 million impairment due to the termination of the ZAiA show at The Venetian Macao.

Adjusted Property EBITDA

The following table summarizes information related to our segments (see “Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 10 — Segment Information” for discussion of our operating segments and a reconciliation of adjusted property EBITDA to net income):

 

     Nine Months Ended September 30,  
     2013     2012     Percent
Change
 
     (Dollars in thousands)  

Macao:

      

The Venetian Macao

   $ 1,066,543      $ 810,175        31.6

Sands Cotai Central

     501,940        105,492        375.8

Four Seasons Macao

     228,283        198,492        15.0

Sands Macao

     274,887        259,129        6.1

Other Asia

     (4,547     (13,801     67.1
  

 

 

   

 

 

   
     2,067,106        1,359,487        52.1

Marina Bay Sands

     1,125,742        1,063,712        5.8

United States:

      

Las Vegas Operating Properties

     263,532        278,362        (5.3 )% 

Sands Bethlehem

     92,988        86,537        7.5
  

 

 

   

 

 

   
     356,520        364,899        (2.3 )% 
  

 

 

   

 

 

   

Total adjusted property EBITDA

   $ 3,549,368      $ 2,788,098        27.3
  

 

 

   

 

 

   

Adjusted property EBITDA at our Macao operations increased $707.6 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $396.4 million increase at Sands Cotai Central, due to its progressive opening that commenced in April 2012, as well as a $256.4 million increase at The Venetian Macao, driven by an increase in casino activity.

Adjusted property EBITDA at Marina Bay Sands increased $62.0 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $139.6 million increase in net revenues, driven by an increase in casino revenues, partially offset by increases in the associated operating expenses.

Adjusted property EBITDA at our Las Vegas Operating Properties decreased $14.8 million compared to the nine months ended September 30, 2012. Net revenues increased $47.5 million (excluding intersegment royalty revenue), but was offset by increases in the associated operating expenses.

Adjusted property EBITDA at Sands Bethlehem increased $6.5 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to a $20.0 million increase in net revenues, driven by an increase in casino revenues, partially offset by increases in the associated operating expenses.

 

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Interest Expense

The following table summarizes information related to interest expense on long-term debt:

 

     Nine Months Ended
September 30,
 
     2013     2012  
     (Dollars in thousands)  

Interest cost (which includes the amortization of deferred financing costs and original issue discount)

   $ 196,037      $ 224,472   

Add — imputed interest on deferred proceeds from sale of The Shoppes at The Palazzo

     11,373        11,338   

Less — capitalized interest

     (3,285     (44,313
  

 

 

   

 

 

 

Interest expense, net

   $ 204,125      $ 191,497   
  

 

 

   

 

 

 

Cash paid for interest

   $ 167,535      $ 209,491   

Weighted average total debt balance

   $ 9,789,503      $ 9,755,978   

Weighted average interest rate

     2.7     3.1

Interest cost decreased $28.4 million compared to the nine months ended September 30, 2012, resulting primarily from a decrease in our weighted average interest rate. Capitalized interest decreased $41.0 million compared to the nine months ended September 30, 2012, primarily due to the completion of phases I, IIA and IIB of Sands Cotai Central in April and September 2012 and January 2013, respectively.

Other Factors Effecting Earnings

Other income was $5.0 million for the nine months ended September 30, 2013, compared to $0.7 million for the nine months ended September 30, 2012. The amounts in both periods were primarily attributable to foreign exchange gains, partially offset by changes in the fair value of our interest rate cap agreements.

The loss on modification or early retirement of debt of $19.2 million for the nine months ended September 30, 2012, was primarily due to a $13.1 million loss related to the refinancing of our Singapore credit facility in June 2012.

Our effective income tax rate was 6.4% for the nine months ended September 30, 2013, compared to 9.4% for the nine months ended September 30, 2012. The effective income tax rate for the nine months ended September 30, 2013 and 2012, reflects a 17% statutory tax rate on our Singapore operations and a zero percent tax rate on our Macao gaming operations due to our income tax exemption in Macao, which was extended in October 2013 through the end of 2018. We have recorded a valuation allowance related to deferred tax assets generated by operations in the U.S. and certain foreign jurisdictions; however, to the extent that the financial results of these operations improve and it becomes “more-likely-than-not” that these deferred tax assets or portion thereof are realizable, we will reduce the valuation allowances in the period such determination is made.

The net income attributable to our noncontrolling interests was $456.5 million for the nine months ended September 30, 2013, compared to $221.2 million for the nine months ended September 30, 2012. These amounts are primarily related to the noncontrolling interest of SCL.

Additional Information Regarding our Retail Mall Operations

We own and operate retail malls at our integrated resorts at The Venetian Macao, Four Seasons Macao, Sands Cotai Central, Marina Bay Sands and Sands Bethlehem. Management believes that being in the retail mall business and, specifically, owning some of the largest retail properties in Asia will provide meaningful value for us, particularly as the retail market in Asia continues to grow.

Our malls are designed to complement our other unique amenities and service offerings provided by our integrated resorts. Our strategy is to seek out desirable tenants that appeal to our customers and provide a wide variety of shopping options. We generate our mall revenues primarily from leases with tenants through minimum base rents, overage rents, management fees and reimbursements for common area maintenance (“CAM”) and other expenditures.

 

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The following tables summarize the results of our mall operations for the three and nine months ended September 30, 2013 and 2012 (in thousands):

 

    The Grand
Canal Shoppes at
The Venetian
Macao
    The Shoppes at
Four Seasons
    The Shoppes at
Sands Cotai
Central(1)
    The Shoppes at
Marina Bay
Sands
    The Outlets at
Sands
Bethlehem(2)
    Total  

For the three months ended
September 30, 2013

           

Mall revenues:

           

Minimum rents(3)

  $ 25,990      $ 11,571      $ 5,743      $ 26,683      $ 338      $ 70,325   

Overage rents

    12,883        18,898        3,759        4,526        635        40,701   

CAM, levies and management fees

    6,504        1,776        1,950        6,812        —          17,042   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mall revenues

    45,377        32,245        11,452        38,021        973        128,068   

Mall operating expenses:

           

Common area maintenance

    4,016        1,498        1,486        5,977        359        13,336   

Management fees and other direct operating expenses

    1,597        269        319        1,597        201        3,983   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

    5,613        1,767        1,805        7,574        560        17,319   

Property taxes(4)

    371        —          —          1,755        281        2,407   

Provision for (recovery of) doubtful accounts

    56        29        29        (2     —          112   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(5)

    6,040        1,796        1,834        9,327        841        19,838   

For the three months ended
September 30, 2012

           

Mall revenues:

           

Minimum rents(3)

  $ 20,968      $ 5,511      $ 2,698      $ 27,396      $ 204      $ 56,777   

Overage rents

    9,879        16,309        32        4,719        207        31,146   

CAM, levies and management fees

    5,499        1,292        963        7,555        —          15,309   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mall revenues

    36,346        23,112        3,693        39,670        411        103,232   

Mall operating expenses:

           

Common area maintenance

    4,100        1,029        698        6,638        289        12,754   

Management fees and other direct operating expenses

    1,692        275        307        1,599        39        3,912   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

    5,792        1,304        1,005        8,237        328        16,666   

Property taxes(4)

    —          —          —          1,349        174        1,523   

Provision for (recovery of) doubtful accounts

    (109     (29     13        61        —          (64
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(5)

    5,683        1,275        1,018        9,647        502        18,125   

 

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    The Grand
Canal Shoppes at
The Venetian
Macao
    The Shoppes at
Four Seasons
    The Shoppes at
Sands Cotai
Central(1)
    The Shoppes at
Marina Bay
Sands
    The Outlets at
Sands
Bethlehem(2)
    Total  

For the nine months ended
September 30, 2013

           

Mall revenues:

           

Minimum rents(3)

  $ 74,088      $ 35,905      $ 17,264      $ 77,923      $ 874      $ 206,054   

Overage rents

    20,130        26,719        5,187        9,938        1,385        63,359   

CAM, levies and management fees

    18,429        5,347        5,625        22,708        —          52,109   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mall revenues

    112,647        67,971        28,076        110,569        2,259        321,522   

Mall operating expenses:

           

Common area maintenance

    11,881        4,050        4,197        19,253        956        40,337   

Management fees and other direct operating expenses

    5,105        1,012        865        4,943        462        12,387   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

    16,986        5,062        5,062        24,196        1,418        52,724   

Property taxes(4)

    371        —          —          5,355        811        6,537   

Provision for (recovery of)
doubtful accounts

    (363     184        (93     (5     —          (277
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(5)

    16,994        5,246        4,969        29,546        2,229        58,984   

For the nine months ended
September 30, 2012

           

Mall revenues:

           

Minimum rents(3)

  $ 59,487      $ 16,259      $ 4,794      $ 81,102      $ 723      $ 162,365   

Overage rents

    18,422        34,731        32        7,879        450        61,514   

CAM, levies and management fees

    15,865        3,928        2,119        22,599        —          44,511   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total mall revenues

    93,774        54,918        6,945        111,580        1,173        268,390   

Mall operating expenses:

           

Common area maintenance

    11,870        2,976        1,206        18,861        773        35,686   

Management fees and other direct operating expenses

    5,477        1,600        976        6,905        121        15,079   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall operating expenses

    17,347        4,576        2,182        25,766        894        50,765   

Property taxes(4)

    —          —          —          4,041        461        4,502   

Provision for (recovery of)
doubtful accounts

    (253     310        35        73        —          165   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Mall-related expenses(5)

    17,094        4,886        2,217        29,880        1,355        55,432   

 

(1)

Phases I and II of The Shoppes at Sands Cotai Central opened in April and September 2012, respectively.

(2)

Revenues from CAM, levies and management fees are included in minimum rents for The Outlets at Sands Bethlehem.

(3)

Minimum rents include base rents and straight-line adjustments of base rents.

(4)

Commercial property that generates rental income is exempt from property tax for the first six years for newly constructed buildings in Cotai. This property tax exemption expired in August 2013 for The Venetian Macao and we are currently in the process of requesting an extension from the Macao government.

(5)

Mall-related expenses consist of CAM, management fees and other direct operating expenses, property taxes and provision for (recovery of) doubtful accounts, but excludes depreciation and amortization and general and administrative costs.

It is common in the mall operating industry for companies to disclose mall net operating income (“NOI”) as a useful supplemental measure of a mall’s operating performance. In the tables above, we believe that taking total mall revenues less mall- related expenses provides an operating performance measure for our malls. Other mall operating companies may use different methodologies for deriving mall-related expenses. As such, this calculation may not be comparable to the NOI of other mall operating companies.

Because NOI excludes general and administrative expenses, interest expense, impairment losses, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests and provision for income taxes, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.

 

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Development Projects

Macao

We submitted plans to the Macao government for The Parisian Macao, an integrated resort that will be connected to The Venetian Macao and Four Seasons Macao. The Parisian Macao, which is currently expected to open in late 2015, is intended to include a gaming area (to be operated under our gaming subconcession), hotel and shopping mall. We expect the cost to design, develop and construct The Parisian Macao to be approximately $2.7 billion, inclusive of payments made for the land premium. We commenced construction activities and have capitalized costs of $284.6 million, including the land premium (net of amortization), as of September 30, 2013. In addition, we will be completing the development of some public areas surrounding our Cotai Strip properties on behalf of the Macao government.

As of September 30, 2013, we have capitalized an aggregate of $8.78 billion in construction costs and land premiums (net of amortization) for our Cotai Strip developments, which include The Venetian Macao, Sands Cotai Central, Four Seasons Macao and The Parisian Macao, as well as our investments in transportation infrastructure, including our passenger ferry service operations. In addition to funding phases I and II of Sands Cotai Central with borrowings under our $3.7 billion Macao credit facility, we may need to arrange additional financing to fund the balance of our Cotai Strip developments.

Land concessions in Macao generally have an initial term of 25 years with automatic extensions of 10 years thereafter in accordance with Macao law. We have received land concessions from the Macao government to build on parcels 1, 2, 3 and 5 and 6, including the sites on which The Venetian Macao, Sands Cotai Central and Four Seasons Macao are, and The Parisian Macao will be, located. We do not own these land sites in Macao; however, the land concessions grant us exclusive use of the land. As specified in the land concessions, we are required to pay premiums for each parcel, which are either payable in a single lump sum upon acceptance of the land concessions by the Macao government or in seven semi-annual installments, as well as annual rent for the term of the land concessions.

Under our land concession for Sands Cotai Central, we are required to complete the development by May 2014. We will be applying for an extension from the Macao government to complete Sands Cotai Central, as we will be unable to meet the May 2014 deadline. The land concession for The Parisian Macao contains a similar requirement, which was extended by the Macao government in July 2012, that the development be completed by April 2016. Should we determine that we are unable to complete The Parisian Macao by April 2016, we would then also expect to apply for another extension from the Macao government. If we are unable to meet The Parisian Macao deadline and the deadlines for either development are not extended, we could lose our land concessions for Sands Cotai Central or The Parisian Macao, which would prohibit us from operating any facilities developed under the respective land concessions. As a result, we could record a charge for all or some portion of the $4.09 billion or $284.6 million in capitalized construction costs and land premiums (net of amortization), as of September 30, 2013, related to Sands Cotai Central and The Parisian Macao, respectively.

United States

We were constructing a high-rise residential condominium tower (the “Las Vegas Condo Tower”), located on the Las Vegas Strip between The Palazzo and The Venetian Las Vegas. We suspended our construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. We intend to recommence construction when demand and conditions improve. As of September 30, 2013, we have capitalized construction costs of $178.8 million for this project. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty. Should demand and conditions fail to improve or management decide to abandon the project, we could record a charge for all or some portion of the $178.8 million in capitalized construction costs as of September 30, 2013.

Other

We continue to aggressively pursue a variety of new development opportunities around the world.

 

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Liquidity and Capital Resources

Cash Flows — Summary

Our cash flows consisted of the following:

 

     Nine Months Ended
September 30,
 
     2013     2012  
     (In thousands)  

Net cash generated from operating activities

   $ 3,160,783      $ 2,172,833   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Change in restricted cash and cash equivalents

     (877     (717

Capital expenditures

     (599,482     (1,062,778

Proceeds from disposal of property and equipment

     713        2,266   

Acquisition of intangible assets

     (45,857     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (645,503     (1,061,229
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from exercise of stock options

     46,433        30,370   

Excess tax benefits from stock-based compensation

     2,394        —     

Repurchase of common stock

     (211,241     —     

Proceeds from exercise of warrants

     —          528,908   

Dividends paid

     (1,277,360     (973,108

Distributions to noncontrolling interests

     (7,808     (7,624

Deemed distribution to Principal Stockholder

     —          (18,576

Proceeds from long-term debt

     354,357        3,625,516   

Repayments on long-term debt

     (720,177     (4,391,311

Payments of deferred financing costs

     —          (100,190
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,813,402     (1,306,015
  

 

 

   

 

 

 

Effect of exchange rate on cash

     (5,524     37,108   
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

   $ 696,354      $ (157,303
  

 

 

   

 

 

 

Cash Flows — Operating Activities

Table games play at our properties is conducted on a cash and credit basis. Slot machine play is primarily conducted on a cash basis. The retail hotel rooms business is generally conducted on a cash basis, the group hotel rooms business is conducted on a cash and credit basis, and banquet business is conducted primarily on a credit basis resulting in operating cash flows being generally affected by changes in operating income and accounts receivable. Net cash generated from operating activities for the nine months ended September 30, 2013, increased $988.0 million compared to the nine months ended September 30, 2012. The increase was primarily attributable to the increase in operating cash flows generated from our Macao operations.

Cash Flows — Investing Activities

Capital expenditures for the nine months ended September 30, 2013, totaled $599.5 million, including $396.6 million for construction and development activities in Macao, which consisted primarily of $176.3 million for Sands Cotai Central and $133.7 million for The Parisian Macao; $122.9 million in Singapore; $40.8 million at our Las Vegas Operating Properties; and $39.2 million for corporate and other activities. Additionally, during the nine months ended September 30, 2013, we paid SGD 57.0 million (approximately $45.4 million at exchange rates in effect on September 30, 2013) to renew our Singapore gaming license.

Cash Flows — Financing Activities

Net cash flows used in financing activities were $1.81 billion for the nine months ended September 30, 2013, which was primarily attributable to $1.28 billion in dividend payments, repayments of $430.5 million on our 2012 Singapore Credit Facility and $211.2 million in common stock repurchases.

 

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As of September 30, 2013, we had $938.2 million available for borrowing under our U.S., Macao and Singapore credit facilities, net of letters of credit and outstanding banker’s guarantees.

Development Financing Strategy

Through September 30, 2013, we have funded our development projects primarily through borrowings under our U.S., Macao and Singapore credit facilities, operating cash flows, proceeds from our equity offerings and proceeds from the disposition of non-core assets.

The U.S. credit facility requires our Las Vegas operations to comply with certain financial covenants at the end of each quarter, including maintaining a maximum leverage ratio of net debt, as defined, to trailing twelve-month adjusted earnings before interest, income taxes, depreciation and amortization, as defined (“Adjusted EBITDA”). The maximum leverage ratio is 5.0x for all quarterly periods through maturity. We can elect to contribute up to $50 million of cash on hand to our Las Vegas operations on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio. Our Macao credit facility also requires our Macao operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.0x for the quarterly period ended September 30, 2013, decreases to 3.5x for the quarterly periods ending March 31 through December 31, 2015, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. Our Singapore credit facility requires operations of Marina Bay Sands to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.0x for the quarterly period ended September 30, 2013, decreases to 3.5x for the quarterly periods ending December 31, 2013 through December 31, 2014, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. As of September 30, 2013, our U.S., Macao and Singapore leverage ratios were 1.0x, 1.2x and 2.7x, respectively, compared to the maximum leverage ratios allowed of 5.0x, 4.0x and 4.0x, respectively. If we are unable to maintain compliance with the financial covenants under these credit facilities, we would be in default under the respective credit facilities. A default under the U.S. credit facility would trigger a cross-default under our airplane financings. Any defaults or cross-defaults under these agreements would allow the lenders, in each case, to exercise their rights and remedies as defined under their respective agreements. If the lenders were to exercise their rights to accelerate the due dates of the indebtedness outstanding, there can be no assurance that we would be able to repay or refinance any amounts that may become due and payable under such agreements, which could force us to restructure or alter our operations or debt obligations.

We held unrestricted cash and cash equivalents of approximately $3.21 billion and restricted cash and cash equivalents of approximately $7.3 million as of September 30, 2013, of which approximately $2.74 billion of the unrestricted amount is held by non-U.S. subsidiaries. Of the $2.74 billion, approximately $2.03 billion is available to be repatriated to the U.S. with minimal taxes owed on such amounts due to the significant foreign taxes we paid, which would ultimately generate U.S. foreign tax credits if cash is repatriated. The remaining unrestricted amounts are not available for repatriation primarily due to dividend requirements to third party public shareholders in the case of funds being repatriated from SCL. We believe the cash on hand and cash flow generated from operations will be sufficient to maintain compliance with the financial covenants of our credit facilities. We may need to arrange additional financing to fund the balance of our Cotai Strip developments.

During the nine months ended September 30, 2013, we repaid the outstanding balance under our 2012 Singapore Revolving Facility and had net borrowings of $50.0 million under our Senior Secured Extended Revolving Facility. As of September 30, 2013, $1.22 billion of borrowings under the Senior Secured Credit Facility is due within the next 12 months. In the normal course of our activities, we will continue to evaluate our capital structure and opportunities for enhancements thereof.

On February 28 and June 21, 2013, SCL paid a dividend of 0.67 Hong Kong dollars (“HKD”) and HKD 0.66 per share, respectively (a total of $1.38 billion) to SCL shareholders (of which we retained $970.2 million). On March 29, June 28 and September 28, 2013, we paid a dividend of $0.35 per common share as part of a regular cash dividend program. During the nine months ended September 30, 2013, we recorded $866.4 million as a distribution against retained earnings (of which $453.1 million related to our Principal Stockholder’s family). In October 2013, our Board of Directors declared a quarterly dividend of $0.35 per common share (a total estimated to be approximately $287 million) to be paid on December 31, 2013, to shareholders of record on December 20, 2013. We intend to increase the quarterly dividend to $0.50 per common share, beginning in the first quarter of 2014.

In June 2013, our Board of Directors approved a share repurchase program, which expires in June 2015, with an initial authorization of $2.0 billion. Repurchases of our common stock are made at our discretion in accordance with applicable federal securities laws in the open market or otherwise. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including our financial position, earnings, legal requirements, other investment opportunities and market conditions. During the nine months ended September 30, 2013, we repurchased 5,479,601 shares of our common stock for $346.3 million (including commissions) under this program. All share repurchases of our common stock have been recorded as treasury shares.

 

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Aggregate Indebtedness and Other Known Contractual Obligations

As of September 30, 2013, there had been no material changes to our aggregated indebtedness and other known contractual obligations, which are set forth in the table included in our Annual Report on Form 10-K for the year ended December 31, 2012, with the exception of the following:

 

 

 

repayment of $327.6 million outstanding balance under our 2012 Singapore Revolving Facility (which would have matured in December 2017 with no interim amortization); and

 

 

 

net borrowings of $50.0 million under our Senior Secured Extended Revolving Facility (which matures in May 2014 with no interim amortization).

Restrictions on Distributions

We are a parent company with limited business operations. Our main asset is the stock and membership interests of our subsidiaries. The debt instruments of our U.S., Macao and Singapore subsidiaries contain certain restrictions that, among other things, limit the ability of certain subsidiaries to incur additional indebtedness, issue disqualified stock or equity interests, pay dividends or make other distributions, repurchase equity interests or certain indebtedness, create certain liens, enter into certain transactions with affiliates, enter into certain mergers or consolidations or sell our assets of our company without prior approval of the lenders or noteholders.

Inflation

We believe that inflation and changing prices have not had a material impact on our sales, revenues or income from continuing operations during the past year.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the discussions of our business strategies and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, in certain portions included in this report, the words: “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to our company or management, are intended to identify forward-looking statements. Although we believe that these forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward- looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the risks associated with:

 

 

 

general economic and business conditions in the U.S. and internationally, which may impact levels of disposable income, consumer spending, group meeting business, pricing of hotel rooms and retail and mall sales;

 

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our substantial leverage, debt service and debt covenant compliance (including the pledge of our assets as security for our indebtedness);

 

 

 

disruptions in the global financing markets and our ability to obtain sufficient funding for our current and future developments;

 

 

 

the extensive regulations to which we are subject to and the costs of compliance with such regulations;

 

 

 

increased competition for labor and materials due to other planned construction projects in Macao and quota limits on the hiring of foreign workers;

 

 

 

the impact of the suspensions of certain of our development projects and our ability to meet certain development deadlines;

 

 

 

the uncertainty of tourist behavior related to discretionary spending and vacationing at casino-resorts in Macao, Singapore, Las Vegas and Pennsylvania;

 

 

 

regulatory policies in mainland China or other countries in which our customers reside, including visa restrictions limiting the number of visits or the length of stay for visitors from mainland China to Macao, restrictions on foreign currency exchange or importation of currency, and the judicial enforcement of gaming debts;

 

 

 

our dependence upon properties primarily in Macao, Singapore and Las Vegas for all of our cash flow;

 

 

 

our relationship with GGP or any successor owner of the Grand Canal Shoppes;

 

 

 

new developments, construction and ventures, including our Cotai Strip developments;

 

 

 

the passage of new legislation and receipt of governmental approvals for our proposed developments in Macao and other jurisdictions where we are planning to operate;

 

 

 

our insurance coverage, including the risk that we have not obtained sufficient coverage or will only be able to obtain additional coverage at significantly increased rates;

 

 

 

disruptions or reductions in travel due to acts of terrorism;

 

 

 

disruptions or reductions in travel, as well as disruptions in our operations, due to natural or man-made disasters, outbreaks of infectious diseases, such as avian flu, SARS and H1N1 flu, terrorist activity or war;

 

 

 

government regulation of the casino industry (as well as new laws and regulations and changes to existing laws and regulations), including gaming license regulation, the requirement for certain beneficial owners of our securities to be found suitable by gaming authorities, the legalization of gaming in other jurisdictions and regulation of gaming on the Internet;

 

 

 

increased competition in Macao and Las Vegas, including recent and upcoming increases in hotel rooms, meeting and convention space, retail space and potential additional gaming licenses;

 

 

 

fluctuations in the demand for all-suites rooms, occupancy rates and average daily room rates in Macao, Singapore and Las Vegas;

 

 

 

the popularity of Macao, Singapore and Las Vegas as convention and trade show destinations;

 

 

 

new taxes, changes to existing tax rates or proposed changes in tax legislation;

 

 

 

our ability to maintain our gaming licenses, certificate and subconcession;

 

 

 

the continued services of our key management and personnel;

 

 

 

any potential conflict between the interests of our Principal Stockholder and us;

 

 

 

the ability of our subsidiaries to make distribution payments to us;

 

 

 

our failure to maintain the integrity of our internal or customer data;

 

 

 

the completion of infrastructure projects in Macao and Singapore; and

 

 

 

the outcome of any ongoing and future litigation.

 

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All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by federal securities laws.

ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposure to market risk is interest rate risk associated with our variable rate long-term debt, which we attempt to manage through the use of interest rate cap agreements. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions. Our derivative financial instruments consist exclusively of interest rate cap agreements, which do not qualify for hedge accounting. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense.

To manage exposure to counterparty credit risk in interest rate cap agreements, we enter into agreements with highly rated institutions that can be expected to fully perform under the terms of such agreements. Frequently, these institutions are also members of the bank group providing our credit facilities, which management believes further minimizes the risk of nonperformance.

The table below provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents notional amounts and weighted average interest rates by contractual maturity dates. Notional amounts are used to calculate the contractual payments to be exchanged under the contract. Weighted average variable rates are based on September 30, 2013, LIBOR, HIBOR and SOR plus the applicable interest rate spread in accordance with the respective debt agreements. The information is presented in U.S. dollar equivalents, which is the Company’s reporting currency, for the twelve months ending September 30:

 

     2014     2015     2016     2017     2018     Thereafter     Total     Fair Value(1)  
     (Dollars in millions)  

LIABILITIES

                

Long-term debt

                

Fixed rate

   $ 0.9      $ 0.4      $ —        $ —        $ —        $ —        $ 1.3      $ 1.3   

Average interest rate(2)

     5.0     5.0     —       —       —       —       5.0  

Variable rate

   $ 1,296.0      $ 1,333.5      $ 1,991.2      $ 4,013.5      $ 1,099.8      $  —        $ 9,734.0      $ 9,682.9   

Average interest rate(2)

     1.8     1.8     1.9     2.1     1.9     —       2.0  

ASSETS

                

Cap agreements(3)

   $ —        $ 0.1      $ 0.1      $ —        $ —        $ —        $ 0.2      $ 0.2   

 

 

(1)

The estimated fair values are based on quoted market prices, if available, or by pricing models based on the value of related cash flows discounted at current market interest rates.

(2)

Based upon contractual interest rates for fixed rate indebtedness or current LIBOR, HIBOR and SOR for variable-rate indebtedness. Based on variable-rate debt levels as of September 30, 2013, an assumed 100 basis point change in LIBOR, HIBOR and SOR would cause our annual interest cost to change approximately $94.0 million.

(3)

As of September 30, 2013, we had 22 interest rate cap agreements with an aggregate fair value of approximately $0.2 million based on quoted market values from the institutions holding the agreements.

 

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Borrowings under the U.S. credit facility bear interest, at our election, at either an adjusted Eurodollar rate or at an alternative base rate plus a credit spread. The portions of the revolving facility and term loans that were not extended bear interest at the alternative base rate plus 0.25% per annum or 0.5% per annum, respectively, or at the adjusted Eurodollar rate plus 1.25% per annum or 1.5% per annum, respectively. The extended revolving facility and extended term loans bear interest at the alternative base rate plus 1.0% per annum or 1.5% per annum, respectively, or at the adjusted Eurodollar rate plus 2.0% per annum or 2.5% per annum, respectively. Applicable spreads under the U.S. credit facility are subject to downward adjustments based upon our credit rating. Borrowings under the 2011 VML Credit Facility bear interest at either the adjusted Eurodollar rate or an alternative base rate (in the case of U.S. dollar denominated loans) or HIBOR (in the case of Hong Kong dollar and Macao pataca denominated loans), as applicable, plus a spread of 1.5% per annum to 2.25% per annum based on a specified consolidated leverage. Borrowings under the 2012 Singapore Credit Facility bear interest at SOR plus a spread of 1.85% per annum, which spread is subject to a reduction based on a ratio of debt to Adjusted EBITDA. Borrowings under the airplane financings bear interest at LIBOR plus approximately 1.5% per annum.

Foreign currency transaction gains for the nine months ended September 30, 2013, were $4.9 million. We may be vulnerable to changes in the U.S. dollar/pataca exchange rate. Based on balances as of September 30, 2013, an assumed 1% change in the U.S. dollar/pataca exchange rate would cause a foreign currency transaction gain/loss of approximately $14.8 million. We do not hedge our exposure to foreign currencies; however, we maintain a significant amount of our operating funds in the same currencies in which we have obligations thereby reducing our exposure to currency fluctuations.

See also “Liquidity and Capital Resources.”

ITEM 4 — CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. The Company’s Chief Executive Officer and its Chief Accounting Officer (Principal Financial Officer) have evaluated the disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) of the Company as of September 30, 2013, and have concluded that they are effective at the reasonable assurance level.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that had, or was reasonably likely to have, a material effect on the Company’s internal control over financial reporting.

 

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PART II OTHER INFORMATION

ITEM 1 — LEGAL PROCEEDINGS

The Company is party to litigation matters and claims related to its operations. For more information, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, and “Part I — Item 1 —Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 9 — Commitments and Contingencies” of this Quarterly Report on Form 10-Q.

ITEM 1A — RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides information about share repurchases made by the Company of its common stock during the quarter ended September 30, 2013:

 

Period

   Total
Number of
Shares
Purchased
     Weighted
Average
Price Paid
per Share(1)
     Total Number
of Shares
Purchased as
Part of a Publicly
Announced Program
     Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Program
(in thousands)(2)
 

July 1, 2013 — July 31, 2013

     366,185       $ 54.62         366,185       $ 1,933,452   

August 1, 2013 — August 31, 2013

     —         $ —           —         $ 1,933,452   

September 1, 2013 — September 30, 2013

     4,230,370       $ 66.10         4,230,370       $ 1,653,830   

 

 

(1)

Calculated excluding commissions.

(2)

On June 5, 2013, the Company announced a stock repurchase program pursuant to which the Company has been authorized to repurchase up to $2.0 billion of its outstanding common stock. As of September 30, 2013, approximately $1.65 billion of shares remained available for repurchase. The stock repurchase program will expire on June 5, 2015. All repurchases under the stock repurchase program are made from time to time at the Company’s discretion in accordance with applicable federal securities laws. All share repurchases of the Company’s common stock have been recorded as treasury shares.

 

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ITEM 6 — EXHIBITS

List of Exhibits

 

Exhibit No.

  

Description of Document

  31.1

  

Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  31.2

  

Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

  32.1

  

Certification of Chief Executive Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  32.2

  

Certification of Principal Financial Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS

  

XBRL Instance Document

101.SCH

  

XBRL Taxonomy Extension Schema Document

101.CAL

  

XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

  

XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

  

XBRL Taxonomy Extension Label Linkbase Document

101.PRE

  

XBRL Taxonomy Extension Presentation Linkbase Document

 

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LAS VEGAS SANDS CORP.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

LAS VEGAS SANDS CORP.

November 7, 2013

   

By:

 

/s/ Sheldon G. Adelson

     

Sheldon G. Adelson

     

Chairman of the Board and

Chief Executive Officer

November 7, 2013

   

By:

 

/s/ Michael A. Quartieri

     

Michael A. Quartieri

     

Chief Accounting Officer

(Principal Financial Officer)

 

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