Form 10-Q
Table of Contents

 
 
UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
     
o   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   (I.R.S. Employer
incorporation or organization)   Identification No.)
     
3355 Las Vegas Boulevard South   89109
Las Vegas, Nevada   (Zip Code)
(Address of principal executive offices)    
(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 þ No o
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 þ No o
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 þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a 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 o No þ
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 July 29, 2011
     
Common Stock ($0.001 par value)   730,174,694 shares
 
 

 

 


 

LAS VEGAS SANDS CORP. AND SUBSIDIARIES
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 Exhibit 10.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

 

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Table of Contents

ITEM 1  
— FINANCIAL STATEMENTS
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
                 
    June 30,     December 31,  
    2011     2010  
    (In thousands, except share and  
    per share data)  
    (Unaudited)  
ASSETS
 
Current assets:
               
Cash and cash equivalents
  $ 3,479,106     $ 3,037,081  
Restricted cash and cash equivalents
    171,228       164,315  
Accounts receivable, net
    968,988       716,919  
Inventories
    35,634       32,260  
Deferred income taxes, net
    14,713       61,606  
Prepaid expenses and other
    51,636       46,726  
 
           
Total current assets
    4,721,305       4,058,907  
Property and equipment, net
    14,892,790       14,502,197  
Deferred financing costs, net
    133,882       155,378  
Restricted cash and cash equivalents
    272,563       645,605  
Deferred income taxes, net
    9,259       10,423  
Leasehold interests in land, net
    1,441,023       1,398,840  
Intangible assets, net
    85,844       89,805  
Other assets, net
    180,491       183,153  
 
           
Total assets
  $ 21,737,157     $ 21,044,308  
 
           
 
               
LIABILITIES AND EQUITY
 
 
               
Current liabilities:
               
Accounts payable
  $ 92,953     $ 113,505  
Construction payables
    383,489       516,981  
Accrued interest payable
    13,982       42,625  
Other accrued liabilities
    1,136,304       1,160,234  
Income taxes payable
    39,130        
Current maturities of long-term debt
    1,073,484       767,068  
 
           
Total current liabilities
    2,739,342       2,600,413  
Other long-term liabilities
    79,938       78,240  
Deferred income taxes
    133,859       115,219  
Deferred proceeds from sale of The Shoppes at The Palazzo
    266,184       243,928  
Deferred gain on sale of The Grand Canal Shoppes
    49,076       50,808  
Deferred rent from mall transactions
    116,712       147,378  
Long-term debt
    8,985,396       9,373,755  
 
           
Total liabilities
    12,370,507       12,609,741  
 
           
Preferred stock, $0.001 par value, issued to Principal Stockholder’s family, 5,250,000 shares issued and outstanding, after allocation of fair value of attached warrants, aggregate redemption/liquidation value of $577,500
    549,651       503,379  
Commitments and contingencies (Note 9)
               
Equity:
               
Preferred stock, $0.001 par value, 50,000,000 shares authorized, 2,406,123 and 3,614,923 shares issued and outstanding with warrants to purchase up to 2,178,171 and 22,663,212 shares of common stock
    138,018       207,356  
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 729,950,068 and 707,507,982 shares issued and outstanding
    730       708  
Capital in excess of par value
    5,564,289       5,444,705  
Accumulated other comprehensive income
    218,495       129,519  
Retained earnings
    1,476,466       880,703  
 
           
Total Las Vegas Sands Corp. stockholders’ equity
    7,397,998       6,662,991  
Noncontrolling interests
    1,419,001       1,268,197  
 
           
Total equity
    8,816,999       7,931,188  
 
           
Total liabilities and equity
  $ 21,737,157     $ 21,044,308  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
    (In thousands, except share and per share data)  
    (Unaudited)  
Revenues:
                               
Casino
  $ 1,862,272     $ 1,294,301     $ 3,526,761     $ 2,356,071  
Rooms
    239,696       190,767       471,670       371,549  
Food and beverage
    146,016       105,079       291,409       197,158  
Convention, retail and other
    200,642       115,266       365,297       223,481  
 
                       
 
    2,448,626       1,705,413       4,655,137       3,148,259  
Less-promotional allowances
    (103,530 )     (110,937 )     (198,122 )     (218,895 )
 
                       
Net revenues
    2,345,096       1,594,476       4,457,015       2,929,364  
 
                       
Operating expenses:
                               
Casino
    974,413       790,947       1,895,949       1,485,582  
Rooms
    50,733       34,073       99,186       63,727  
Food and beverage
    73,135       47,798       144,838       92,101  
Convention, retail and other
    105,024       65,326       192,269       123,730  
Provision for doubtful accounts
    23,496       18,711       58,554       35,153  
General and administrative
    223,561       172,919       434,046       299,178  
Corporate expense
    42,376       25,954       79,952       49,430  
Rental expense
    10,034       12,806       23,190       21,504  
Pre-opening expense
    18,178       50,118       27,649       87,577  
Development expense
    2,420       676       2,993       833  
Depreciation and amortization
    206,161       170,694       396,398       323,783  
Loss on disposal of assets
    7,443       37,679       7,942       38,171  
 
                       
 
    1,736,974       1,427,701       3,362,966       2,620,769  
 
                       
Operating income
    608,122       166,775       1,094,049       308,595  
Other income (expense):
                               
Interest income
    4,028       2,073       6,075       3,706  
Interest expense, net of amounts capitalized
    (70,592 )     (76,987 )     (144,177 )     (155,152 )
Other income (expense)
    1,908       (6,201 )     (2,767 )     (12,649 )
Gain on early retirement of debt
          961             3,137  
 
                       
Income before income taxes
    543,466       86,621       953,180       147,637  
Income tax expense
    (54,374 )     (8,073 )     (99,585 )     (21,275 )
 
                       
Net income
    489,092       78,548       853,595       126,362  
Net income attributable to noncontrolling interests
    (78,455 )     (36,741 )     (153,635 )     (66,974 )
 
                       
Net income attributable to Las Vegas Sands Corp.
    410,637       41,807       699,960       59,388  
Preferred stock dividends
    (19,219 )     (23,350 )     (38,817 )     (46,700 )
Accretion to redemption value of preferred stock issued to Principal Stockholder’s family
    (23,136 )     (23,136 )     (46,272 )     (46,272 )
Preferred stock inducement and repurchase premiums
    (675 )           (19,108 )      
 
                       
Net income (loss) attributable to common stockholders
  $ 367,607     $ (4,679 )   $ 595,763     $ (33,584 )
 
                       
Basic earnings (loss) per share
  $ 0.50     $ (0.01 )   $ 0.82     $ (0.05 )
 
                       
Diluted earnings (loss) per share
  $ 0.45     $ (0.01 )   $ 0.73     $ (0.05 )
 
                       
Weighted average shares outstanding:
                               
Basic
    728,695,140       660,364,559       726,056,840       660,322,428  
 
                       
Diluted
    811,274,706       660,364,559       811,243,195       660,322,428  
 
                       
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Equity and Comprehensive Income
                                                                 
    Las Vegas Sands Corp. Stockholders’ Equity              
                            Accumulated                            
                    Capital in     Other             Total              
    Preferred     Common     Excess of     Comprehensive     Retained     Comprehensive     Noncontrolling        
    Stock     Stock     Par Value     Income     Earnings     Income     Interests     Total  
    (In thousands)  
    (Unaudited)  
Balance at January 1, 2010
  $ 234,607     $ 660     $ 5,114,851     $ 26,748     $ 473,833             $ 1,089,888     $ 6,940,587  
Net income
                            59,388       59,388       66,974       126,362  
Currency translation adjustment
                      (348 )           (348 )     (4,148 )     (4,496 )
 
                                                         
Total comprehensive income
                                            59,040       62,826       121,866  
Exercise of stock options
          1       3,922                                 3,923  
Tax shortfall from stock-based compensation
                (195 )                               (195 )
Stock-based compensation
                28,718                           1,742       30,460  
Deemed contribution from Principal Stockholder
                213                                 213  
Acquisition of remaining shares of noncontrolling interest
                2,345                           (2,345 )      
Dividends declared, net of amounts previously accrued
                            (39,846 )                   (39,846 )
Accumulated but undeclared dividend requirement on preferred stock issued to Principal Stockholder’s family
                            (6,854 )                   (6,854 )
Accretion to redemption value of preferred stock issued to Principal Stockholder’s family
                            (46,272 )                   (46,272 )
 
                                                 
Balance at June 30, 2010
  $ 234,607     $ 661     $ 5,149,854     $ 26,400     $ 440,249             $ 1,152,111     $ 7,003,882  
 
                                                 
Balance at January 1, 2011
  $ 207,356     $ 708     $ 5,444,705     $ 129,519     $ 880,703             $ 1,268,197     $ 7,931,188  
Net income
                            699,960       699,960       153,635       853,595  
Currency translation adjustment
                      88,976             88,976       (128 )     88,848  
 
                                                         
Total comprehensive income
                                            788,936       153,507       942,443  
Exercise of stock options
          1       13,605                           724       14,330  
Tax shortfall from stock-based compensation
                (83 )                               (83 )
Stock-based compensation
                32,698                           1,607       34,305  
Issuance of restricted stock
          1       (1 )                                
Exercise of warrants
    (66,625 )     20       73,365                                 6,760  
Repurchase of preferred stock
    (2,713 )                       (2,615 )                   (5,328 )
Disposition of interest in majority owned subsidiary
                                          829       829  
Distributions to noncontrolling interests
                                          (5,863 )     (5,863 )
Dividends declared, net of amounts previously accrued
                            (31,963 )                   (31,963 )
Accumulated but undeclared dividend requirement on preferred stock issued to Principal Stockholder’s family
                            (6,854 )                   (6,854 )
Accretion to redemption value of preferred stock issued to Principal Stockholder’s family
                            (46,272 )                   (46,272 )
Preferred stock inducement premium
                            (16,493 )                   (16,493 )
 
                                                 
Balance at June 30, 2011
  $ 138,018     $ 730     $ 5,564,289     $ 218,495     $ 1,476,466             $ 1,419,001     $ 8,816,999  
 
                                                 
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
                 
    Six Months Ended  
    June 30,  
    2011     2010  
    (In thousands)  
    (Unaudited)  
Cash flows from operating activities:
               
Net income
  $ 853,595     $ 126,362  
Adjustments to reconcile net income to net cash generated from operating activities:
               
Depreciation and amortization
    396,398       323,783  
Amortization of leasehold interests in land included in rental expense
    23,190       21,504  
Amortization of deferred financing costs and original issue discount
    23,762       17,530  
Amortization of deferred gain and rent
    (2,580 )     (2,580 )
Gain on early retirement of debt
          (3,137 )
Loss on disposal of assets
    7,942       38,171  
Stock-based compensation expense
    33,289       28,932  
Provision for doubtful accounts
    58,554       35,153  
Foreign exchange (gain) loss
    2,444       (8,836 )
Deferred income taxes
    61,255       (6,450 )
Non-cash contribution from Principal Stockholder included in corporate expense
          213  
Changes in operating assets and liabilities:
               
Accounts receivable
    (297,370 )     (104,581 )
Inventories
    (3,046 )     543  
Prepaid expenses and other
    1,409       (6,561 )
Leasehold interests in land
    (22,988 )     (17,211 )
Accounts payable
    (21,416 )     36,285  
Accrued interest payable
    (29,063 )     2,464  
Income taxes payable
    38,038       15,011  
Other accrued liabilities
    (41,890 )     141,310  
 
           
Net cash generated from operating activities
    1,081,523       637,905  
 
           
Cash flows from investing activities:
               
Changes in restricted cash and cash equivalents
    366,680       22,926  
Capital expenditures
    (720,696 )     (1,127,268 )
Proceeds from disposal of property and equipment
    4,416       5,647  
Acquisition of intangible assets
    (575 )     (43,305 )
Purchases of investments
          (173,774 )
 
           
Net cash used in investing activities
    (350,175 )     (1,315,774 )
 
           
Cash flows from financing activities:
               
Proceeds from exercise of stock options
    14,330       3,923  
Proceeds from exercise of warrants
    6,760        
Dividends paid to preferred stockholders
    (38,817 )     (46,700 )
Distributions to noncontrolling interests
    (5,863 )      
Proceeds from long-term debt (Note 3)
          596,560  
Repayments on long-term debt (Note 3)
    (259,518 )     (1,265,218 )
Repurchase of preferred stock
    (5,328 )      
Payments of preferred stock inducement premium
    (16,493 )      
Payments of deferred financing costs
    (57 )     (54,365 )
 
           
Net cash used in financing activities
    (304,986 )     (765,800 )
 
           
Effect of exchange rate on cash
    15,663       7,088  
 
           
Increase (decrease) in cash and cash equivalents
    442,025       (1,436,581 )
Cash and cash equivalents at beginning of period
    3,037,081       4,955,416  
 
           
Cash and cash equivalents at end of period
  $ 3,479,106     $ 3,518,835  
 
           
Supplemental disclosure of cash flow information:
               
Cash payments for interest, net of amounts capitalized
  $ 149,045     $ 134,979  
 
           
Cash payments for taxes, net of refunds
  $ (5,672 )   $ 150  
 
           
Changes in construction payables
  $ (133,492 )   $ (24,104 )
 
           
Non-cash investing and financing activities:
               
Capitalized stock-based compensation costs
  $ 1,016     $ 1,528  
 
           
Property and equipment acquired under capital lease
  $     $ 2,802  
 
           
Accumulated but undeclared dividend requirement on preferred stock issued to Principal Stockholder’s family
  $ 6,854     $ 6,854  
 
           
Accretion to redemption value of preferred stock issued to Principal Stockholder’s family
  $ 46,272     $ 46,272  
 
           
Acquisition of remaining shares of noncontrolling interest
  $     $ 2,345  
 
           
Disposition of interest in majority owned subsidiary
  $ 829     $  
 
           
Warrants exercised and settled through tendering of preferred stock
  $ 66,625     $  
 
           
The accompanying notes are an integral part of these condensed consolidated financial statements.

 

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Las Vegas Sands Corp.
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, 2010. The year-end balance sheet data was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles 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.”
In November 2009, the Company’s subsidiary, Sands China Ltd. (“SCL,” the indirect owner and operator of the majority of the Company’s operations in the Macau Special Administrative Region (“Macau”) of the People’s Republic of China), completed an initial public offering by listing its ordinary shares (the “SCL Offering”) on The Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”). Immediately following the SCL Offering and several transactions consummated in connection with such offering, the Company owned 70.3% of the issued and outstanding ordinary shares of SCL. The shares of SCL were 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
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; an enclosed retail, dining and entertainment complex located within The Venetian Las Vegas of approximately 440,000 net leasable square feet (“The Grand Canal Shoppes”), which was sold to GGP Limited Partnership (“GGP”) in 2004; and an enclosed retail and dining complex located within The Palazzo of approximately 400,000 net leasable square feet (“The Shoppes at The Palazzo”), which was sold to GGP in February 2008. See “— Note 2 — Property and Equipment, Net” regarding the sale of The Shoppes at The Palazzo.
Pennsylvania
In May 2009, the Company partially opened 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. The Sands Bethlehem currently features approximately 152,000 square feet of gaming space, which include table games operations that commenced in July 2010, a 300-room hotel tower, which opened in May 2011, an arts and cultural center, and the broadcast home of the local PBS affiliate. The Company has initiated construction activities on the remaining components of the integrated resort, which include an approximate 200,000-square-foot retail facility and a 50,000-square-foot multipurpose event center. Sands Bethlehem is also expected to be home to the National Museum of Industrial History. The Company owns 86% of the economic interest of 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 of the retail portion of the property through its ownership interest in Sands Bethworks Retail LLC. As of June 30, 2011, the Company has capitalized construction costs of $686.8 million for this project (including $8.8 million in outstanding construction payables). The Company expects to spend approximately $40 million to complete construction of the project, on furniture, fixtures and equipment (“FF&E”) and other costs, and to pay outstanding construction payables, as noted above.
Macau
The Company currently owns 70.3% of SCL, which includes the operations of the Sands Macao, The Venetian Macao, Four Seasons 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.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The Company owns and operates the Sands Macao, the first Las Vegas-style casino in Macau. The Sands Macao offers approximately 197,000 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.
The Company also owns and operates The Venetian Macao Resort Hotel (“The Venetian Macao”), which anchors the Cotai Striptm, the Company’s master-planned development of integrated resort properties in Macau. With a theme similar to that of The Venetian Las Vegas, The Venetian Macao includes a 39-floor luxury hotel with over 2,900 suites; approximately 550,000 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.
The Company owns the Four Seasons Hotel Macao, Cotai Striptm (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, the “Four Seasons Macao”), which features approximately 70,000 square feet of gaming space; 19 Paiza mansions; retail space of approximately 211,000 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 Striptm (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 expects to subsequently monetize units within the Four Seasons Apartments subject to market conditions and obtaining the necessary government approvals. As of June 30, 2011, the Company has capitalized $1.16 billion for the property, including the land premium and $15.3 million in outstanding construction payables. The Company expects to spend approximately $110 million primarily on additional costs to complete the Four Seasons Apartments, including FF&E and pre-opening costs, and to pay outstanding construction payables, as noted above.
Singapore
The Company owns and operates the Marina Bay Sands in Singapore, which partially opened on April 27, 2010, with additional portions opened progressively throughout 2010. The Marina Bay Sands features three 55-story hotel towers (totaling approximately 2,600 rooms and suites), the Sands SkyParktm (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 1.3 million square feet and theaters. In February 2011, the Marina Bay Sands opened a landmark iconic structure at the bay-front promenade that contains an art/science museum. As of June 30, 2011, the Company has capitalized 7.59 billion Singapore dollars (“SGD,” approximately $6.15 billion at exchange rates in effect on June 30, 2011) in costs for this project, including the land premium and SGD 228.5 million (approximately $185.2 million at exchange rates in effect on June 30, 2011) in outstanding construction payables. The Company expects to spend approximately SGD 590 million (approximately $478 million at exchange rates in effect on June 30, 2011) on additional costs to complete the construction of the integrated resort, FF&E and other costs, and to pay outstanding construction payables, as noted above. As the Company has obtained Singapore-denominated financing and primarily pays its costs in Singapore dollars, its exposure to foreign exchange gains and losses is expected to be minimal.
Development Projects
The Company has suspended portions of its development projects to focus its efforts on those projects with the highest expected rates of return on invested capital. Should general economic conditions fail to improve, if the Company is unable to obtain sufficient funding or applicable government approvals such that completion of its suspended projects is not probable, or should management decide to abandon certain projects, all or a portion of the Company’s investment to date on its suspended projects could be lost and would result in an impairment charge. In addition, the Company may be subject to penalties under the termination clauses in its construction contracts or termination rights under its management contracts with certain hotel management companies.
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 and expects that it will take approximately 18 months thereafter to complete construction of the project. As of June 30, 2011, the Company has capitalized construction costs of $177.7 million for this project. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Macau
The Company submitted plans to the Macau government for its other Cotai Strip developments, which represent three integrated resort developments, in addition to The Venetian Macao and Four Seasons Macao, on an area of approximately 200 acres (which are referred to as Sands Cotai Central (formerly referred to as parcels 5 and 6) and parcels 3 and 7 and 8). Subject to the approval from the Macau government, as discussed further below, the developments are expected to include hotels, exhibition and conference facilities, gaming areas, showrooms, shopping malls, spas, restaurants, entertainment facilities and other amenities. The Company had commenced construction or pre-construction activities on these developments and plans to operate the related gaming areas under the Company’s Macau gaming subconcession.
The Company is staging the construction of its Sands Cotai Central integrated resort development. Upon completion of phases I and II of the project, the integrated resort is expected to feature approximately 5,800 hotel rooms, approximately 300,000 square feet of gaming space, approximately 1.2 million square feet of retail, entertainment and dining facilities, exhibition and conference facilities and a multipurpose theater. Phase I of the project is expected to include two hotel towers, one of which will be managed by Sheraton International Inc. and Sheraton Overseas Management Co. (collectively “Starwood”) under its Sheraton brand, as well as completion of the structural work of an adjacent hotel tower to be managed by Starwood under its Sheraton Towers brand. The second hotel tower was to be managed by Shangri-La International Hotel Management Limited (“Shangri-La”); however, in March 2011, the Company and Shangri-La mutually agreed to terminate the hotel management agreement. This second tower will now be managed by Hilton Worldwide and InterContinental Hotels Group under their Conrad and Holiday Inn brands, respectively. The Company’s anticipated opening of phase I will be on a progressive schedule starting in the first quarter of 2012 with the opening of parcel 5, which will feature 600 five-star rooms and suites under the Conrad brand along with 1,200 four-star rooms and suites under the Holiday Inn brand. Parcel 5 will also open with a variety of retail offerings, more than 300,000 square feet of meeting space, several food and beverage establishments along with the 106,000 square foot casino and VIP gaming areas. Phase I also includes the opening of the first hotel tower on parcel 6, which will feature nearly 2,000 Sheraton-branded rooms, along with the second casino and the remaining dining, entertainment, retail and meeting facilities, and is currently scheduled to open in the third quarter of 2012. Phase II of the project consisting of the second hotel tower on parcel 6, which will feature an additional 2,000 rooms and suites under the Sheraton Towers brand, is projected to open in early 2013. The total cost to complete phases I and II is expected to be approximately $1.9 billion. Phase III of the project is expected to include a fourth hotel and mixed-use tower to be managed by Starwood under its St. Regis brand and the total cost is expected to be approximately $450 million. The Company has recommenced construction activities and is currently working with the Macau government to obtain sufficient construction labor for the project. The Company intends to commence construction of phase III of the project as demand and market conditions warrant it. As of June 30, 2011, the Company has capitalized costs of $2.48 billion for the entire project, including the land premium and $164.9 million in outstanding construction payables. The Company’s management agreement with Starwood imposes certain construction deadlines and opening obligations on the Company and certain past and/or anticipated delays, as described above, would allow Starwood to terminate its agreement. See “— Note 9 — Commitments and Contingencies — Other Agreements.” The Company is currently negotiating an amendment to the management agreement with Starwood to provide for new opening timelines.
The Company had commenced pre-construction activities on parcels 7 and 8 and 3, and has capitalized costs of $102.1 million for parcels 7 and 8 and $96.9 million for parcel 3 (including the land premium) as of June 30, 2011. The Company intends to commence construction after Sands Cotai Central is complete, necessary government approvals are obtained (including the land concession, see below), regional and global economic conditions improve, future demand warrants it and additional financing is obtained.
The impact of the delayed construction on the Company’s previously estimated cost to complete its Cotai Strip developments is currently not determinable. As of June 30, 2011, the Company has capitalized an aggregate of $6.87 billion in construction costs and land premiums for its Cotai Strip developments, including The Venetian Macao and Four Seasons Macao, as well as the Company’s investments in transportation infrastructure, including its passenger ferry service operations. In addition to funding phases I and II of Sands Cotai Central with the $1.75 billion VOL credit facility, the Company will need to arrange additional financing to fund the balance of its Cotai Strip developments and there is no assurance that the Company will be able to obtain any of the additional financing required.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Land concessions in Macau generally have an initial term of 25 years with automatic extensions of 10 years thereafter in accordance with Macau law. The Company has received land concessions from the Macau government to build on parcels 1, 2, 3 and 5 and 6, including the sites on which The Venetian Macao (parcel 1), the Four Seasons Macao (parcel 2) and Sands Cotai Central (parcels 5 and 6) are located. The Company does not own these land sites in Macau; however, the land concessions grant the Company exclusive use of the land. As specified in the land concessions, the Company is required to pay premiums for each parcel, which are either payable in a single lump sum upon acceptance of the land concessions by the Macau government or in seven semi-annual installments (provided that the outstanding balance is due upon the completion of the corresponding integrated resort), as well as annual rent for the term of the land concessions. During December 2010, the Company received notice from the Macau government that its application for a land concession for parcels 7 and 8 was not approved and the Company applied to the Chief Executive of Macau for a review of the decision. In January 2011, the Company filed an appeal with the Court of Second Instance in Macau, which has yet to issue a decision. Should the Company win its appeal, it is still possible for the Chief Executive of Macau to again deny the land concession based upon public policy considerations. If the Company does not obtain the land concession or does not receive full reimbursement of its capitalized investment in this project, the Company would record a charge for all or some portion of the $102.1 million in capitalized construction costs, as of June 30, 2011, related to its development on parcels 7 and 8.
Under the Company’s land concession for parcel 3, the Company was initially required to complete the corresponding development by August 2011. The Macau government has granted the Company a two-year extension to complete the development of parcel 3, which now must be completed by April 2013. The land concession for Sands Cotai Central contains a similar requirement that the corresponding development be completed by May 2014. The Company believes that if it is not able to complete the developments by the respective deadlines, it will likely be able to obtain extensions from the Macau government; however, no assurances can be given that additional extensions will be granted. If the Company is unable to meet the applicable deadlines and those deadlines are not extended, it could lose its land concessions for parcel 3 or Sands Cotai Central, 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 $96.9 million and $2.48 billion in capitalized construction costs and land premiums, as of June 30, 2011, related to its developments on parcel 3 or Sands Cotai Central, respectively.
Other
When the current economic environment and access to capital improve, the Company may continue exploring the possibility of developing and operating additional properties, including integrated resorts, in additional Asian and U.S. jurisdictions, and in Europe.
Development Financing Strategy
Through June 30, 2011, the Company has funded its development projects primarily through borrowings under its U.S., Macau and Singapore credit facilities, operating cash flows, proceeds from its equity offerings and proceeds from the disposition of non-core assets.
The U.S. credit facility, as amended in August 2010, 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 6.5x for the quarter ended June 30, 2011, decreases to 6.0x for the quarterly periods ended September 30 and December 31, 2011, decreases to 5.5x for the quarterly periods ended March 31 and June 30, 2012, and then decreases to 5.0x for all quarterly periods thereafter through maturity. One of the Company’s Macau credit facilities, the VML credit facility, as amended in August 2009, requires certain of the Company’s Macau operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 3.0x for the quarterly periods through maturity. The Company can elect to contribute up to $50 million and $20 million of cash on hand to its Las Vegas and relevant Macau operations, respectively, on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA by the corresponding amount during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio (the “EBITDA true-up”). The Singapore credit facility requires operations of Marina Bay Sands to comply with similar financial covenants commencing with the quarterly period ending September 30, 2011, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 5.5x for the quarterly period ending September 30, 2011, and then decreases by 0.25x every other quarter until it decreases to, and remains at, 3.75x for all quarterly periods thereafter through maturity (commencing with the quarterly period ending September 30, 2014). 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, which, if the respective lenders chose to accelerate the indebtedness outstanding under these agreements, would result in a default under the Company’s senior notes. A default under the VML credit facility would trigger a cross-default under the Company’s ferry financing. 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.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
In 2008, the Company completed a $475.0 million convertible senior notes offering and a $2.1 billion common and preferred stock and warrants offering. In 2009, the Company completed a $600.0 million exchangeable bond offering and its $2.5 billion SCL Offering. A portion of the proceeds from these offerings was used in the U.S. to pay down $775.9 million under the revolving portion of the U.S. credit facility in March 2010 and $1.0 billion under the term loan portions of the U.S. credit facility in August 2010, and to exercise the EBITDA true-up provision during the quarterly periods ended September 30, 2010 and March 31, 2011.
The Company held unrestricted and restricted cash and cash equivalents of approximately $3.48 billion and $443.8 million, respectively, as of June 30, 2011. The Company believes the cash on hand, cash flow generated from operations and available borrowings under its credit facilities will be sufficient to fund its developments currently under construction and maintain compliance with the financial covenants of its U.S., Macau and Singapore credit facilities. In the normal course of its activities, the Company will continue to evaluate its capital structure and opportunities for enhancements thereof. The Company has recommenced construction activities at Sands Cotai Central using the proceeds from the $1.75 billion VOL credit facility together with $500.0 million of proceeds from the SCL Offering.
The Company is currently in the process of refinancing its VML and VOL credit facilities. The Company has received lender commitments for $3.7 billion and will have the option to raise incremental senior secured and unsecured debt under existing baskets within the new credit facility. See “— Note 3 — Long-Term Debt” for further disclosure.
Recent Accounting Pronouncements
In January 2010, the Financial Accounting Standards Board issued authoritative guidance for fair value measurements, which requires new disclosures regarding significant transfers in and out of Level 1 and 2 fair value measurements and gross presentation of activity within the reconciliation for Level 3 fair value measurements. The guidance also clarifies existing requirements on the level of disaggregation and required disclosures regarding inputs and valuation techniques for both recurring and nonrecurring Level 2 and 3 fair value measurements. The guidance is effective for interim and annual reporting periods beginning after December 15, 2009, with the exception of gross presentation of Level 3 activity, which is effective for interim and annual reporting periods beginning after December 15, 2010. The adoption of this guidance did not have a material effect on the Company’s financial condition, results of operations or cash flows. See “— Note 8 — Fair Value Measurements” for the required disclosure.
In June 2011, the Financial Accounting Standards Board issued authoritative guidance that amends the presentation of comprehensive income in the financial statements by requiring an entity to present the total of comprehensive income, the components of net income and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The update also eliminates the option to present the components of other comprehensive income as part of the statement of equity. The guidance is effective for interim and annual reporting periods beginning on or after December 15, 2011, 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.
NOTE 2 — PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following (in thousands):
                 
    June 30,     December 31,  
    2011     2010  
Land and improvements
  $ 436,053     $ 410,758  
Building and improvements
    11,482,772       10,881,936  
Furniture, fixtures, equipment and leasehold improvements
    2,078,752       1,990,721  
Transportation
    405,740       402,904  
Construction in progress
    3,208,655       3,147,750  
 
           
 
    17,611,972       16,834,069  
Less — accumulated depreciation and amortization
    (2,719,182 )     (2,331,872 )
 
           
 
  $ 14,892,790     $ 14,502,197  
 
           

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Construction in progress consists of the following (in thousands):
                 
    June 30,     December 31,  
    2011     2010  
Sands Cotai Central
  $ 2,364,732     $ 2,005,386  
Four Seasons Macao (principally the Four Seasons Apartments)
    387,089       379,161  
Marina Bay Sands
    84,767       337,835  
Sands Bethlehem
    52,761       101,960  
Other
    319,306       323,408  
 
           
 
  $ 3,208,655     $ 3,147,750  
 
           
The $319.3 million in other construction in progress consists primarily of construction of the Las Vegas Condo Tower and costs incurred at the Cotai Strip parcels 3 and 7 and 8.
The final purchase price for The Shoppes at The Palazzo was to be determined in accordance with the April 2004 purchase and sale agreement, as amended, between Venetian Casino Resort, LLC (“VCR”) and GGP (the “Amended Agreement”) based on net operating income (“NOI”) of The Shoppes at The Palazzo calculated 30 months after the closing date of the sale, as defined under the Amended Agreement (the “Final Purchase Price”) and subject to certain later audit adjustments. The Company and GGP had entered into several amendments to the Amended Agreement to defer the time to reach agreement on the Final Purchase Price as both parties continued to work on various matters related to the calculation of NOI. On June 24, 2011, the Company reached a settlement with GGP regarding the Final Purchase Price. Under the terms of the settlement, the Company retained the $295.4 million of proceeds previously received and participates in certain future revenues earned by GGP. Under generally accepted accounting principles, the transaction has not been accounted for as a sale because the Company’s participation in certain future revenues constitutes continuing involvement in The Shoppes at The Palazzo. 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 $271.0 million (net of $40.4 million of accumulated depreciation) as of June 30, 2011, 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 six months ended June 30, 2011 and the three and six months ended June 30, 2010, the Company capitalized interest expense of $31.8 million, $62.4 million, $22.7 million and $42.3 million, respectively. During the three and six months ended June 30, 2011 and the three and six months ended June 30, 2010, the Company capitalized approximately $5.6 million, $17.0 million, $15.6 million and $31.0 million, respectively, of internal costs, consisting primarily of compensation expense for individuals directly involved with the development and construction of property and equipment.
The Company suspended portions of its development projects. As described in “— Note 1 — Organization and Business of Company — Development Projects,” the Company may be required to record an impairment charge related to these developments in the future.
The Company had commenced pre-construction activities on parcels 7 and 8, and has capitalized construction costs of $102.1 million as of June 30, 2011. During December 2010, the Company received notice from the Macau government that its application for a land concession for parcels 7 and 8 was not approved and the Company applied to the Chief Executive of Macau for a review of the decision. In January 2011, the Company filed an appeal with the Court of Second Instance in Macau, which has yet to issue a decision. Should the Company win its appeal, it is still possible for the Chief Executive of Macau to again deny the land concession based upon public policy considerations. In order to obtain the land concession and construct the resort, the Company would need to win its appeal and avoid any future denial of the land concession based upon public policy considerations. If the Company does not obtain the land concession or does not receive full reimbursement of its capitalized investment in this project, the Company would record a charge for all or some portion of the $102.1 million in capitalized construction costs, as of June 30, 2011, related to its development on parcels 7 and 8.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
NOTE 3 — LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
                 
    June 30,     December 31,  
    2011     2010  
Corporate and U.S. Related:
               
Senior Secured Credit Facility — Term B
  $ 2,146,352     $ 2,157,199  
Senior Secured Credit Facility — Delayed Draws I and II
    716,711       720,332  
6.375% Senior Notes (net of original issue discount of $634 and $720, respectively)
    189,078       188,992  
Airplane Financings
    76,578       78,422  
HVAC Equipment Lease
    22,145       23,006  
Other
    3,413       3,868  
Macau Related:
               
VML Credit Facility — Term B
    1,465,789       1,483,789  
VML Credit Facility — Term B Delayed
    570,029       577,029  
VOL Credit Facility — Term
    749,918       749,930  
Ferry Financing
    157,504       175,011  
Other
    470       640  
Singapore Related:
               
Singapore Credit Facility
    3,958,995       3,980,435  
Other
    1,898       2,170  
 
           
 
    10,058,880       10,140,823  
Less — current maturities
    (1,073,484 )     (767,068 )
 
           
Total long-term debt
  $ 8,985,396     $ 9,373,755  
 
           
Senior Secured Credit Facility
As of June 30, 2011, the Company had $724.6 million of available borrowing capacity under the Senior Secured Credit Facility, net of outstanding letters of credit and undrawn amounts committed to be funded by Lehman Brothers Commercial Paper Inc.
VML Credit Facility
As of June 30, 2011, the Company has no available borrowing capacity under the VML Credit Facility.
VOL Credit Facility
As of June 30, 2011, the Company had $1.0 billion of available borrowing capacity under the VOL Credit Facility.
VML and VOL Credit Facilities Refinancing
The Company is currently in the process of refinancing its VML and VOL credit facilities. The Company has received lender commitments for $3.7 billion and will have the option to raise incremental senior secured and unsecured debt under existing baskets within the new credit facility. The new credit facility, once entered into, is expected to significantly reduce the Company’s interest expense, extend the Macau debt maturities to 2016, enhance the Company’s financial flexibility and further strengthen its financial position. Proceeds from the new Macau senior secured credit facility coupled with cash on hand will be used to retire the outstanding balances and commitments on the existing VML and VOL credit facilities as well as fund the completion of construction of the first two phases of Sands Cotai Central on the Cotai Strip in Macau. The refinancing is subject to final loan documentation as well as certain Macao Government approvals. The refinancing is expected to close in late 2011 and the Company anticipates recording a loss on modification or extinguishment of debt in conjunction with the refinancing.
Singapore Credit Facility
As of June 30, 2011, the Company had SGD 102.8 million (approximately $83.3 million at exchange rates in effect on June 30, 2011) of available borrowing capacity under the Singapore Credit Facility, net of outstanding banker’s guarantees.
Cash Flows from Financing Activities
Cash flows from financing activities related to long-term debt are as follows (in thousands):
                 
    Six Months Ended  
    June 30,  
    2011     2010  
Proceeds from Singapore Credit Facility
  $     $ 596,560  
 
           
Repayments on Singapore Credit Facility
  $ (198,940 )   $  
Repayments on VML Credit Facility
    (25,000 )     (375,036 )
Repayments on Senior Secured Credit Facility
    (14,469 )     (795,860 )
Repayments on Ferry Financing
    (17,508 )     (17,493 )
Repayments on Airplane Financings
    (1,844 )     (1,844 )
Repayments on HVAC Equipment Lease
    (861 )     (882 )
Repayments on FF&E Facility and Other Long-Term Debt
    (896 )     (17,428 )
Repurchase and cancellation of Senior Notes
          (56,675 )
 
           
 
  $ (259,518 )   $ (1,265,218 )
 
           

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Fair Value of Long-Term Debt
The estimated fair value of the Company’s long-term debt as of June 30, 2011, was approximately $9.83 billion, compared to its carrying value of $10.04 billion. As of December 31, 2010, the estimated fair value of the Company’s long-term debt was approximately $9.72 billion, compared to its carrying value of $10.10 billion. The estimated fair value of the Company’s long-term debt is 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.
NOTE 4 — EQUITY AND EARNINGS (LOSS) PER SHARE
Preferred Stock and Warrants
Preferred stock dividend activity is as follows (in thousands):
                                 
            Preferred Stock              
            Dividends Paid to     Preferred Stock        
Board of Directors’           Principal     Dividends Paid to     Total Preferred Stock  
Declaration Date   Payment Date     Stockholder’s Family     Public Holders     Dividends Paid  
February 5, 2010
  February 16, 2010   $ 13,125     $ 10,225     $ 23,350  
May 4, 2010
  May 17, 2010   $ 13,125     $ 10,225     $ 23,350  
 
                             
 
                          $ 46,700  
 
                             
February 1, 2011
  February 15, 2011   $ 13,125     $ 6,473     $ 19,598  
May 5, 2011
  May 16, 2011   $ 13,125     $ 6,094     $ 19,219  
 
                             
 
                          $ 38,817  
 
                             
August 4, 2011
  August 15, 2011   $ 13,125     $ 6,015     $ 19,140  
During the six months ended June 30, 2011, holders of preferred stock exercised 1,229,100 warrants to purchase an aggregate of 20,485,036 shares of the Company’s common stock at $6.00 per share and tendered 1,161,500 shares of preferred stock and $6.8 million in cash as settlement of the warrant exercise price. In conjunction with certain of these transactions, the Company paid $16.5 million in premiums to induce the exercise of warrants with settlement through tendering preferred stock. During the six months ended June 30, 2011, the Company also repurchased and retired 47,300 shares of preferred stock for $5.3 million and recorded a $2.6 million repurchase premium as part of the transaction. During the six months ended June 30, 2010, no warrants were exercised and no preferred shares were repurchased and retired.
Accumulated Comprehensive Income and Comprehensive Income
As of June 30, 2011 and December 31, 2010, accumulated comprehensive income consisted solely of foreign currency translation adjustments.
Total comprehensive income consisted of the following (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Net income
  $ 489,092     $ 78,548     $ 853,595     $ 126,362  
Currency translation adjustment
    56,892       (2,172 )     88,848       (4,496 )
 
                       
Total comprehensive income
    545,984       76,376       942,443       121,866  
Less: comprehensive income attributable to noncontrolling interests
    (80,864 )     (34,040 )     (153,507 )     (62,826 )
 
                       
Comprehensive income attributable to Las Vegas Sands Corp.
  $ 465,120     $ 42,336     $ 788,936     $ 59,040  
 
                       

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Noncontrolling Interests
In June 2011, the Company disposed of its interest in one of its majority owned subsidiaries, resulting in a loss of $3.7 million, which is included in loss on disposal of assets. In addition, during the six months ended June 30, 2011, the Company distributed $5.9 million to certain of its noncontrolling interests.
Earnings (Loss) Per Share
The weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings (loss) per share consisted of the following:
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Weighted-average common shares outstanding (used in the calculation of basic earnings (loss) per share)
    728,695,140       660,364,559       726,056,840       660,322,428  
Potential dilution from stock options, restricted stock and warrants
    82,579,566             85,186,355        
 
                       
Weighted-average common and common equivalent shares (used in the calculation of diluted earnings (loss) per share)
    811,274,706       660,364,559       811,243,195       660,322,428  
 
                       
Antidilutive stock options, restricted stock and warrants excluded from the calculation of diluted earnings (loss) per share
    5,981,719       173,331,327       6,515,362       173,331,327  
 
                       
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 will assess the appropriateness of the VIE’s status when events have occurred that would trigger such an analysis.
As of June 30, 2011 and December 31, 2010, the Company’s joint ventures had total assets of $101.0 million and $95.3 million, respectively, and total liabilities of $89.9 million and $78.4 million, respectively.
NOTE 6 — INCOME TAXES
The Company’s major tax jurisdictions are the U.S., Macau and Singapore. In 2010, the Internal Revenue Service (“IRS”) issued a Revenue Agent’s Report for tax years 2005 through 2008 proposing certain adjustments, which the Company is appealing. The Company is in the initial stages of the appeals process with the IRS and while the final outcome of these matters is inherently uncertain, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits may decrease by a range between $0 and $23 million within the next twelve months primarily due to the possible settlement of matters presently under consideration at appeals. In the U.S., the Company’s 2009 tax year is also under examination by the IRS. The Company is subject to examination for tax years after 2006 in Macau and Singapore. 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 more or less than the Company’s expected outcome and impact the provision for income taxes.
The Company recorded valuation allowances on the net deferred tax assets of the Company’s U.S. operations and certain foreign jurisdictions and does not anticipate recording an income tax benefit related to these deferred tax assets. The Company will reassess the realization of deferred tax assets based on accounting standards for income taxes each reporting period and will be able to reduce the valuation allowance to the extent that the financial results of these operations improve and it becomes more likely than not that the deferred tax assets are realizable.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The Company received a 5-year income tax exemption in Macau 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 2013. In February 2011, the Company entered into an agreement with the Macau government effective through 2013 that provides for an annual payment of 14.4 million patacas (approximately $1.8 million at exchange rates in effect on June 30, 2011) that is a substitution for a 12% tax otherwise due from Venetian Macau Limited (“VML”) shareholders on dividend distributions paid from VML gaming profits.
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     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Compensation expense:
                               
Stock options
  $ 9,668     $ 13,714     $ 24,969     $ 28,682  
Restricted shares
    3,382       125       8,320       250  
 
                       
 
  $ 13,050     $ 13,839     $ 33,289     $ 28,932  
 
                       
Compensation cost capitalized as part of property and equipment
  $ 416     $ 798     $ 1,016     $ 1,528  
 
                       
LVSC 2004 Plan:
                               
Stock options granted
    30       2,043       260       4,089  
 
                       
Weighted average grant date fair value
  $ 37.19     $ 25.69     $ 36.33     $ 20.62  
 
                       
Restricted shares granted
    71       14       691       14  
 
                       
Weighted average grant date fair value
  $ 44.19     $ 24.94     $ 47.62     $ 24.94  
 
                       
SCL Equity Plan:
                               
Stock options granted
    2,531       2,500       5,277       20,376  
 
                       
Weighted average grant date fair value
  $ 1.81     $ 0.88     $ 1.66     $ 1.03  
 
                       
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     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
LVSC 2004 Plan:
                               
Weighted average volatility
    95.1 %     88.1 %     94.4 %     92.9 %
Expected term (in years)
    6.3       6.3       6.3       5.3  
Risk-free rate
    2.4 %     3.0 %     2.7 %     2.9 %
Expected dividends
                       
SCL Equity Plan:
                               
Weighted average volatility
    68.4 %     73.6 %     68.7 %     73.6 %
Expected term (in years)
    6.3       5.6       6.3       6.2  
Risk-free rate
    1.6 %     2.0 %     1.6 %     2.0 %
Expected dividends
                       
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.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
The following table provides the assets carried at fair value (in thousands):
                                 
            Fair Value Measurements Using:  
            Quoted Market     Significant Other     Significant  
    Total Carrying     Prices in Active     Observable Inputs     Unobservable Inputs  
    Value     Markets (Level 1)     (Level 2)     (Level 3)  
As of June 30, 2011
                               
Cash equivalents(1)
  $ 1,993,951     $ 1,993,951     $     $  
Interest rate caps(2)
  $ 1,316     $     $ 1,316     $  
As of December 31, 2010
                               
Cash equivalents(1)
  $ 2,490,809     $ 2,490,809     $     $  
Interest rate caps(2)
  $ 1,617     $     $ 1,617     $  
 
     
(1)  
The Company has short-term investments classified as cash equivalents as the original maturities are less than 90 days.
 
(2)  
As of June 30, 2011 and December 31, 2010, the Company has 38 and 34 interest rate cap agreements with an aggregate fair value of approximately $1.3 million and $1.6 million, respectively, 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 claims 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.
On October 15, 2004, Richard Suen and Round Square Company Limited 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, 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 Macau 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. As such, the Company is unable at this time to determine the probability of the outcome or range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
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, Nevada, 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. Mr. Jacobs is seeking unspecified damages. 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 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 that it is conducting a similar investigation. It is the Company’s belief that the subpoena may have emanated from allegations contained in the lawsuit filed by Steven C. Jacobs described above. The Company intends to cooperate with the investigations. Based on proceedings to date, management is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
On March 31, 2011, SCL filed an announcement with the SEHK stating that SCL has been informed by the Securities and Futures Commission of Hong Kong (the “SFC”) that SCL is under investigation by the SFC in relation to alleged breaches of the provisions of the Hong Kong Securities and Futures Ordinance and has been requested to produce certain documents. The Company intends to cooperate with the investigation. Based on proceedings to date, management is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.
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 alleges 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 seeks, 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 alleges 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 is substantially similar to the Fosbre litigation, discussed above, seeks, 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. 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 is pending before the U.S. District Court. 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 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, Nevada, 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 current members of the Board of Directors. 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. This case has been consolidated with the Gaines action described below. On July 25, 2011, the plaintiffs filed a first verified amended consolidated complaint. 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 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 current members of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim action. 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. 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 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, Nevada, 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 current members of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim and Moradi actions. The complaint seeks to recover for the Company unspecified damages, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiffs. 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 Gaines action has been consolidated with the Kohanim action and will be reported as one consolidated matter in the future. The Company intends to defend this matter vigorously.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
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 current members of the Board of Directors, 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. 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 April 22, 2011, John Zaremba filed a shareholder derivative 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 current members of the Board of Directors, 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. 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.
Singapore Development Project
In August 2006, the Company entered into a development agreement, as amended by a supplementary agreement on December 11, 2009 (the “Development Agreement”), with the Singapore Tourism Board (the “STB”), which requires the Company to construct and operate the Marina Bay Sands in accordance with the Company’s proposal for the integrated resort and in accordance with the agreement. The Company entered into the SGD 5.44 billion (approximately $4.41 billion at exchange rates in effect on June 30, 2011) Singapore Credit Facility to fund a significant portion of the construction, operating and other development costs of the Marina Bay Sands.
The Development Agreement permits the Marina Bay Sands to open in stages and in accordance with an agreed upon schedule that runs through September 30, 2011. There are no financial consequences to MBS if it fails to meet the agreed upon schedule, provided that the entire integrated resort is opened by December 31, 2011. The Company believes it will meet this deadline; however, if it doesn’t, the STB will be entitled to draw on the SGD 192.6 million (approximately $156.1 million at exchange rates in effect on June 30, 2011) security deposit under the Singapore Credit Facility.
Other Agreements
The Company has entered into an agreement with Starwood to manage hotels, as well as brand serviced luxury apart-hotels, on the Company’s Cotai Strip parcels 5 and 6. The management agreement imposes certain construction and opening obligations and deadlines on the Company, and certain past and/or anticipated delays would allow Starwood to terminate its agreement. The Company has recommenced construction activities at Sands Cotai Central and is negotiating an amendment to its management agreement with Starwood to provide for new opening timelines. If negotiations are unsuccessful and Starwood exercises its rights to terminate its agreement, the Company would have to find a new manager and brand for these projects. The Company’s agreement with Starwood related to the sales and marketing of the Las Vegas Condo Tower has been terminated. If the Company is unsuccessful in finding a new brand in Las Vegas, it could have a material adverse effect on the Company’s financial condition, results of operations and cash flows.
NOTE 10 — SEGMENT INFORMATION
The Company’s principal operating and developmental activities occur in three geographic areas: United States, Macau and Singapore. The Company reviews the results of operations for each of its key operating segments: The Venetian Las Vegas, which includes the Sands Expo Center; The Palazzo; Sands Bethlehem; Sands Macao; The Venetian Macao; Four Seasons Macao; and Other Asia (comprised primarily of the Company’s ferry operations and various other operations that are ancillary to the Company’s properties in Macau); and Marina Bay Sands. The Company also reviews construction and development activities for each of its primary projects: The Venetian Las Vegas; The Palazzo; Sands Bethlehem; Sands Macao; The Venetian Macao; Four Seasons Macao; Other Asia; Marina Bay Sands; Other Development Projects (Sands Cotai Central and Cotai Strip parcels 3 and 7 and 8); and Corporate and Other

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
(comprised primarily of airplanes and the Las Vegas Condo Tower). 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 service and products, the regulatory business environment of the operations within each segment and the Company’s organizational and management reporting structure. The information for the three and six months ended June 30, 2010, has been reclassified to conform to the current presentation. The Company’s segment information as of June 30, 2011 and December 31, 2010, and for the three and six months ended June 30, 2011 and 2010, is as follows (in thousands):
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Net Revenues:
                               
Macau:
                               
The Venetian Macao
  $ 735,405     $ 581,032     $ 1,373,674     $ 1,130,727  
Sands Macao
    330,960       302,212       653,753       586,018  
Four Seasons Macao
    120,757       144,096       292,864       246,440  
Other Asia
    32,450       28,386       66,223       52,558  
 
                       
 
    1,219,572       1,055,726       2,386,514       2,015,743  
United States:
                               
Las Vegas Operating Properties
    332,522       281,219       637,597       611,729  
Sands Bethlehem
    97,120       68,624       188,150       135,865  
 
                       
 
    429,642       349,843       825,747       747,594  
Marina Bay Sands
    737,569       216,393       1,322,494       216,393  
Intersegment eliminations
    (41,687 )     (27,486 )     (77,740 )     (50,366 )
 
                       
Total net revenues
  $ 2,345,096     $ 1,594,476     $ 4,457,015     $ 2,929,364  
 
                       
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Adjusted Property EBITDA(1)
                               
Macau:
                               
The Venetian Macao
  $ 258,366     $ 192,829     $ 486,766     $ 362,744  
Sands Macao
    95,573       81,212       188,221       150,973  
Four Seasons Macao
    37,620       32,999       95,167       52,494  
Other Asia
    (9,230 )     (6,154 )     (13,836 )     (10,586 )
 
                       
 
    382,329       300,886       756,318       555,625  
United States:
                               
Las Vegas Operating Properties
    92,909       65,992       158,074       171,284  
Sands Bethlehem
    21,039       12,121       43,148       23,089  
 
                       
 
    113,948       78,113       201,222       194,373  
Marina Bay Sands
    405,359       94,466       689,830       94,466  
 
                       
Total adjusted property EBITDA
    901,636       473,465       1,647,370       844,464  
Other Operating Costs and Expenses
                               
Stock-based compensation expense
    (6,902 )     (8,763 )     (15,197 )     (14,571 )
Corporate expense
    (42,376 )     (25,954 )     (79,952 )     (49,430 )
Rental expense
    (10,034 )     (12,806 )     (23,190 )     (21,504 )
Pre-opening expense
    (18,178 )     (50,118 )     (27,649 )     (87,577 )
Development expense
    (2,420 )     (676 )     (2,993 )     (833 )
Depreciation and amortization
    (206,161 )     (170,694 )     (396,398 )     (323,783 )
Loss on disposal of assets
    (7,443 )     (37,679 )     (7,942 )     (38,171 )
 
                       
Operating income
    608,122       166,775       1,094,049       308,595  
Other Non-Operating Costs and Expenses
                               
Interest income
    4,028       2,073       6,075       3,706  
Interest expense, net of amounts capitalized
    (70,592 )     (76,987 )     (144,177 )     (155,152 )
Other income (expense)
    1,908       (6,201 )     (2,767 )     (12,649 )
Gain on early retirement of debt
          961             3,137  
Income tax expense
    (54,374 )     (8,073 )     (99,585 )     (21,275 )
 
                       
Net income
  $ 489,092     $ 78,548     $ 853,595     $ 126,362  
 
                       
 
     
(1)  
Adjusted property EBITDA is net income before stock-based compensation expense, corporate expense, rental expense, pre-opening expense, development expense, depreciation and amortization, loss on disposal of assets, interest, other income (expense), gain on 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.

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
Intersegment Revenues
                               
Macau:
                               
The Venetian Macao
  $ 928     $ 2,753     $ 1,823     $ 5,166  
Other Asia
    9,582       16,608       17,483       30,433  
 
                       
 
    10,510       19,361       19,306       35,599  
Las Vegas Operating Properties
    30,925       7,721       57,985       14,363  
Singapore
    252       404       449       404  
 
                       
Total intersegment revenues
  $ 41,687     $ 27,486     $ 77,740     $ 50,366  
 
                       
                 
    Six Months Ended  
    June 30,  
    2011     2010  
Capital Expenditures
               
Corporate and Other
  $ 8,071     $ 8,759  
Macau:
               
The Venetian Macao
    3,431       18,003  
Sands Macao
    2,070       1,374  
Four Seasons Macao
    7,660       15,624  
Other Asia
    4,142       2,409  
Other Development Projects
    339,172       85,993  
 
           
 
    356,475       123,403  
United States:
               
Las Vegas Operating Properties
    15,844       9,192  
Sands Bethlehem
    36,042       22,177  
 
           
 
    51,886       31,369  
Marina Bay Sands
    304,264       963,737  
 
           
Total capital expenditures
  $ 720,696     $ 1,127,268  
 
           
                 
    June 30,     December 31,  
    2011     2010  
Total Assets
               
Corporate and Other
  $ 1,342,991     $ 1,574,180  
Macau:
               
The Venetian Macao
    3,634,032       3,194,598  
Sands Macao
    468,997       483,678  
Four Seasons Macao
    1,124,745       1,155,243  
Other Asia
    356,285       370,525  
Other Development Projects
    3,168,339       3,140,905  
 
           
 
    8,752,398       8,344,949  
United States:
               
Las Vegas Operating Properties
    3,997,235       3,966,754  
Sands Bethlehem
    814,513       757,993  
 
           
 
    4,811,748       4,724,747  
Marina Bay Sands
    6,830,020       6,400,432  
 
           
Total assets
  $ 21,737,157     $ 21,044,308  
 
           

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
                 
    June 30,     December 31,  
    2011     2010  
Total Long-Lived Assets
               
Corporate and Other
  $ 307,776     $ 308,438  
Macau:
               
The Venetian Macao
    2,048,482       2,138,419  
Sands Macao
    300,958       315,380  
Four Seasons Macao
    1,006,648       1,024,302  
Other Asia
    223,236       230,640  
Other Development Projects
    2,679,949       2,303,959  
 
           
 
    6,259,273       6,012,700  
United States:
               
Las Vegas Operating Properties
    3,324,056       3,429,997  
Sands Bethlehem
    625,797       608,021  
 
           
 
    3,949,853       4,038,018  
Marina Bay Sands
    5,816,911       5,541,881  
 
           
Total long-lived assets
  $ 16,333,813     $ 15,901,037  
 
           
NOTE 11 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION
LVSC is the obligor of the Senior Notes due 2015. Las Vegas Sands, LLC, VCR, Mall Intermediate Holding Company, LLC, Venetian Transport, LLC, Venetian Marketing, Inc., Lido Intermediate Holding Company, LLC, Lido Casino Resort Holding Company, LLC, 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 “Guarantor Subsidiaries”), have jointly and severally guaranteed the Senior Notes on a full and unconditional basis. The voting stock of all entities included as Guarantor Subsidiaries is 100% owned directly or indirectly by Las Vegas Sands Corp. The noncontrolling interest amount included in the Guarantor 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 and in connection therewith, it was released as a guarantor under the Senior Notes. 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 Guarantor Subsidiaries, and therefore are included in the “Guarantor Subsidiaries” columns in the following condensed consolidating financial information. As a result, net assets of $4.8 million (consisting of $271.0 million of property and equipment, offset by $266.2 million of liabilities consisting of deferred proceeds from the sale) and $38.0 million (consisting of $282.1 million of property and equipment, offset by $244.1 million of liabilities consisting of deferred proceeds from the sale) as of June 30, 2011 and December 31, 2010, respectively, and a net loss (consisting primarily of depreciation expense) of $11.1 million for the three and six months ended June 30, 2011, and $3.7 million and $7.4 million for the three and six months ended June 30, 2010, respectively, related to the mall and are being accounted for by the Guarantor Subsidiaries. These balances and amounts are not collateral for the Senior Notes and should not be considered as credit support for the guarantees of the Senior Notes.
The condensed consolidating financial information of LVSC, the Guarantor Subsidiaries and the non-guarantor subsidiaries on a combined basis as of June 30, 2011 and December 31, 2010, and for the three and six months ended June 30, 2011 and 2010, is as follows (in thousands):

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheets
June 30, 2011
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Cash and cash equivalents
  $ 898,445     $ 527,972     $ 2,052,689     $     $ 3,479,106  
Restricted cash and cash equivalents
          417       170,811             171,228  
Intercompany receivables
    89,797       66,887       24,320       (181,004 )      
Accounts receivable, net
    1,356       183,668       784,415       (451 )     968,988  
Inventories
    2,448       12,296       20,890             35,634  
Deferred income taxes, net
          23,777       306       (9,370 )     14,713  
Prepaid expenses and other
    9,512       6,824       35,300             51,636  
 
                             
Total current assets
    1,001,558       821,841       3,088,731       (190,825 )     4,721,305  
Property and equipment, net
    132,171       3,468,373       11,292,246             14,892,790  
Investment in subsidiaries
    7,150,809       5,690,170             (12,840,979 )      
Deferred financing costs, net
    688       25,189       108,005             133,882  
Restricted cash and cash equivalents
          4,307       268,256             272,563  
Intercompany receivables
    30,815       112,041             (142,856 )      
Intercompany notes receivable
          724,122             (724,122 )      
Deferred income taxes, net
    44,608                   (35,349 )     9,259  
Leasehold interests in land, net
                1,441,023             1,441,023  
Intangible assets, net
    690             85,154             85,844  
Other assets, net
    113       24,992       155,386             180,491  
 
                             
Total assets
  $ 8,361,452     $ 10,871,035     $ 16,438,801     $ (13,934,131 )   $ 21,737,157  
 
                             
Accounts payable
  $ 10,487     $ 23,859     $ 59,058     $ (451 )   $ 92,953  
Construction payables
    33       1,888       381,568             383,489  
Intercompany payables
    24,320       89,797       66,887       (181,004 )      
Accrued interest payable
    4,623       1,043       8,316             13,982  
Other accrued liabilities
    12,843       176,716       946,745             1,136,304  
Income taxes payable
    4,970       3       34,157             39,130  
Deferred income taxes
    9,370                   (9,370 )      
Current maturities of long-term debt
    3,688       30,583       1,039,213             1,073,484  
 
                             
Total current liabilities
    70,334       323,889       2,535,944       (190,825 )     2,739,342  
Other long-term liabilities
    26,761       10,552       42,625             79,938  
Intercompany payables
    54,739             88,117       (142,856 )      
Intercompany notes payable
                724,122       (724,122 )      
Deferred income taxes
          35,489       133,719       (35,349 )     133,859  
Deferred amounts related to mall transactions
          431,972                   431,972  
Long-term debt
    261,969       2,854,624       5,868,803             8,985,396  
 
                             
Total liabilities
    413,803       3,656,526       9,393,330       (1,093,152 )     12,370,507  
 
                             
Preferred stock issued to Principal Stockholder’s family
    549,651                         549,651  
Total Las Vegas Sands Corp. stockholders’ equity
    7,397,998       7,214,104       5,626,875       (12,840,979 )     7,397,998  
Noncontrolling interests
          405       1,418,596             1,419,001  
 
                             
Total equity
    7,397,998       7,214,509       7,045,471       (12,840,979 )     8,816,999  
 
                             
Total liabilities and equity
  $ 8,361,452     $ 10,871,035     $ 16,438,801     $ (13,934,131 )   $ 21,737,157  
 
                             

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Balance Sheets
December 31, 2010
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Cash and cash equivalents
  $ 1,031,844     $ 412,226     $ 1,593,011     $     $ 3,037,081  
Restricted cash and cash equivalents
          2,179       162,136             164,315  
Intercompany receivables
    11,843       65,834       22,927       (100,604 )      
Accounts receivable, net
    298       156,012       561,217       (608 )     716,919  
Inventories
    2,174       11,755       18,331             32,260  
Deferred income taxes, net
          24,496       47,389       (10,279 )     61,606  
Prepaid expenses and other
    15,272       4,782       30,432       (3,760 )     46,726  
 
                             
Total current assets
    1,061,431       677,284       2,435,443       (115,251 )     4,058,907  
Property and equipment, net
    133,901       3,570,465       10,797,831             14,502,197  
Investment in subsidiaries
    6,273,755       4,996,023             (11,269,778 )      
Deferred financing costs, net
    767       29,198       125,413             155,378  
Restricted cash and cash equivalents
          4,616       640,989             645,605  
Intercompany receivables
    31,996       97,813             (129,809 )      
Intercompany notes receivable
          638,986             (638,986 )      
Deferred income taxes, net
    62,638                   (52,215 )     10,423  
Leasehold interests in land, net
                1,398,840             1,398,840  
Intangible assets, net
    590             89,215             89,805  
Other assets, net
    78       27,104       155,971             183,153  
 
                             
Total assets
  $ 7,565,156     $ 10,041,489     $ 15,643,702     $ (12,206,039 )   $ 21,044,308  
 
                             
Accounts payable
  $ 5,750     $ 26,975     $ 81,388     $ (608 )   $ 113,505  
Construction payables
          2,179       514,802             516,981  
Intercompany payables
    22,926       11,843       65,835       (100,604 )      
Accrued interest payable
    4,629       7,689       30,307             42,625  
Other accrued liabilities
    15,692       175,011       969,531             1,160,234  
Income taxes payable
                3,760       (3,760 )      
Deferred income taxes
    10,279                   (10,279 )      
Current maturities of long-term debt
    3,687       30,606       732,775             767,068  
 
                             
Total current liabilities
    62,963       254,303       2,398,398       (115,251 )     2,600,413  
Other long-term liabilities
    26,761       10,911       40,568             78,240  
Intercompany payables
    45,336             84,473       (129,809 )      
Intercompany notes payable
                638,986       (638,986 )      
Deferred income taxes
          53,034       114,400       (52,215 )     115,219  
Deferred amounts related to mall transactions
          442,114                   442,114  
Long-term debt
    263,726       2,869,931       6,240,098             9,373,755  
 
                             
Total liabilities
    398,786       3,630,293       9,516,923       (936,261 )     12,609,741  
 
                             
Preferred stock issued to Principal Stockholder’s family
    503,379                         503,379  
Total Las Vegas Sands Corp. stockholders’ equity
    6,662,991       6,410,791       4,858,987       (11,269,778 )     6,662,991  
Noncontrolling interests
          405       1,267,792             1,268,197  
 
                             
Total equity
    6,662,991       6,411,196       6,126,779       (11,269,778 )     7,931,188  
 
                             
Total liabilities and equity
  $ 7,565,156     $ 10,041,489     $ 15,643,702     $ (12,206,039 )   $ 21,044,308  
 
                             

 

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Table of Contents

Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2011
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Revenues:
                                       
Casino
  $     $ 105,123     $ 1,757,149     $     $ 1,862,272  
Rooms
          112,931       126,765             239,696  
Food and beverage
          47,573       98,443             146,016  
Convention, retail and other
          69,156       166,066       (34,580 )     200,642  
 
                             
 
          334,783       2,148,423       (34,580 )     2,448,626  
Less-promotional allowances
    (172 )     (16,217 )     (86,772 )     (369 )     (103,530 )
 
                             
Net revenues
    (172 )     318,566       2,061,651       (34,949 )     2,345,096  
 
                             
Operating expenses:
                                       
Casino
          59,818       915,146       (551 )     974,413  
Rooms
          33,981       16,752             50,733  
Food and beverage
          23,354       51,289       (1,508 )     73,135  
Convention, retail and other
          21,561       89,230       (5,767 )     105,024  
Provision for doubtful accounts
          495       23,001             23,496  
General and administrative
          63,702       159,994       (135 )     223,561  
Corporate expense
    37,069       83       32,212       (26,988 )     42,376  
Rental expense
                10,034             10,034  
Pre-opening expense
          15       18,163             18,178  
Development expense
    2,420                         2,420  
Depreciation and amortization
    4,478       63,800       137,883             206,161  
(Gain) loss on disposal of assets
    7,663       2,082       (2,302 )           7,443  
 
                             
 
    51,630       268,891       1,451,402       (34,949 )     1,736,974  
 
                             
Operating income (loss)
    (51,802 )     49,675       610,249             608,122  
Other income (expense):
                                       
Interest income
    2,531       27,179       1,301       (26,983 )     4,028  
Interest expense, net of amounts capitalized
    (3,450 )     (22,862 )     (71,263 )     26,983       (70,592 )
Other income
          989       919             1,908  
Income from equity investments in subsidiaries
    442,863       368,364             (811,227 )      
 
                             
Income before income taxes
    390,142       423,345       541,206       (811,227 )     543,466  
Income tax benefit (expense)
    20,495       (17,969 )     (56,900 )           (54,374 )
 
                             
Net income
    410,637       405,376       484,306       (811,227 )     489,092  
Net income attributable to noncontrolling interests
          (1,292 )     (77,163 )           (78,455 )
 
                             
Net income attributable to Las Vegas Sands Corp.
  $ 410,637     $ 404,084     $ 407,143     $ (811,227 )   $ 410,637  
 
                             

 

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Table of Contents

Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2010
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Revenues:
                                       
Casino
  $     $ 102,902     $ 1,191,399     $     $ 1,294,301  
Rooms
          120,169       70,598             190,767  
Food and beverage
          41,273       63,806             105,079  
Convention, retail and other
          44,070       81,911       (10,715 )     115,266  
 
                             
 
          308,414       1,407,714       (10,715 )     1,705,413  
Less-promotional allowances
    (115 )     (40,794 )     (69,389 )     (639 )     (110,937 )
 
                             
Net revenues
    (115 )     267,620       1,338,325       (11,354 )     1,594,476  
 
                             
Operating expenses:
                                       
Casino
          68,180       723,336       (569 )     790,947  
Rooms
          25,040       9,034       (1 )     34,073  
Food and beverage
          18,005       31,387       (1,594 )     47,798  
Convention, retail and other
          18,137       51,077       (3,888 )     65,326  
Provision for doubtful accounts
          9,355       9,356             18,711  
General and administrative
          63,460       109,733       (274 )     172,919  
Corporate expense
    22,036       51       8,867       (5,000 )     25,954  
Rental expense
                12,806             12,806  
Pre-opening expense
    179       1       49,966       (28 )     50,118  
Development expense
    676                         676  
Depreciation and amortization
    3,017       57,671       110,006             170,694  
Loss on disposal of assets
          8,704       28,975             37,679  
 
                             
 
    25,908       268,604       1,144,543       (11,354 )     1,427,701  
 
                             
Operating income (loss)
    (26,023 )     (984 )     193,782             166,775  
Other income (expense):
                                       
Interest income
    815       21,755       846       (21,343 )     2,073  
Interest expense, net of amounts capitalized
    (3,886 )     (27,144 )     (67,300 )     21,343       (76,987 )
Other expense
          (255 )     (5,946 )           (6,201 )
Gain on early retirement of debt
    961                         961  
Income from equity investments in subsidiaries
    85,577       83,098             (168,675 )      
 
                             
Income before income taxes
    57,444       76,470       121,382       (168,675 )     86,621  
Income tax benefit (expense)
    (15,637 )     7,710       (146 )           (8,073 )
 
                             
Net income
    41,807       84,180       121,236       (168,675 )     78,548  
Net income attributable to noncontrolling interests
                (36,741 )           (36,741 )
 
                             
Net income attributable to Las Vegas Sands Corp.
  $ 41,807     $ 84,180     $ 84,495     $ (168,675 )   $ 41,807  
 
                             

 

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Table of Contents

Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Operations
For the Six Months Ended June 30, 2011
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Revenues:
                                       
Casino
  $     $ 188,246     $ 3,338,515     $     $ 3,526,761  
Rooms
          225,805       245,865             471,670  
Food and beverage
          97,880       193,529             291,409  
Convention, retail and other
          133,699       296,125       (64,527 )     365,297  
 
                             
 
          645,630       4,074,034       (64,527 )     4,655,137  
Less-promotional allowances
    (335 )     (33,843 )     (163,168 )     (776 )     (198,122 )
 
                             
Net revenues
    (335 )     611,787       3,910,866       (65,303 )     4,457,015  
 
                             
Operating expenses:
                                       
Casino
          124,186       1,772,891       (1,128 )     1,895,949  
Rooms
          66,229       32,957             99,186  
Food and beverage
          46,950       100,852       (2,964 )     144,838  
Convention, retail and other
          42,714       159,812       (10,257 )     192,269  
Provision for doubtful accounts
          6,591       51,963             58,554  
General and administrative
          124,434       309,967       (355 )     434,046  
Corporate expense
    70,049       138       60,364       (50,599 )     79,952  
Rental expense
                23,190             23,190  
Pre-opening expense
          15       27,634             27,649  
Development expense
    2,993                         2,993  
Depreciation and amortization
    8,661       116,613       271,124             396,398  
(Gain) loss on disposal of assets
    7,663       2,027       (1,748 )           7,942  
 
                             
 
    89,366       529,897       2,809,006       (65,303 )     3,362,966  
 
                             
Operating income (loss)
    (89,701 )     81,890       1,101,860             1,094,049  
Other income (expense):
                                       
Interest income
    3,088       52,454       2,593       (52,060 )     6,075  
Interest expense, net of amounts capitalized
    (6,900 )     (45,934 )     (143,403 )     52,060       (144,177 )
Other income (expense)
          272       (3,039 )           (2,767 )
Income from equity investments in subsidiaries
    771,802       646,086             (1,417,888 )      
 
                             
Income before income taxes
    678,289       734,768       958,011       (1,417,888 )     953,180  
Income tax benefit (expense)
    21,671       (27,021 )     (94,235 )           (99,585 )
 
                             
Net income
    699,960       707,747       863,776       (1,417,888 )     853,595  
Net income attributable to noncontrolling interests
          (1,292 )     (152,343 )           (153,635 )
 
                             
Net income attributable to Las Vegas Sands Corp.
  $ 699,960     $ 706,455     $ 711,433     $ (1,417,888 )   $ 699,960  
 
                             

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Operations
For the Six Months Ended June 30, 2010
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Revenues:
                                       
Casino
  $     $ 258,247     $ 2,097,824     $     $ 2,356,071  
Rooms
          240,236       131,313             371,549  
Food and beverage
          84,795       112,363             197,158  
Convention, retail and other
          95,092       148,152       (19,763 )     223,481  
 
                             
 
          678,370       2,489,652       (19,763 )     3,148,259  
Less-promotional allowances
    (247 )     (91,444 )     (125,874 )     (1,330 )     (218,895 )
 
                             
Net revenues
    (247 )     586,926       2,363,778       (21,093 )     2,929,364  
 
                             
Operating expenses:
                                       
Casino
          154,832       1,331,926       (1,176 )     1,485,582  
Rooms
          48,251       15,477       (1 )     63,727  
Food and beverage
          36,337       58,986       (3,222 )     92,101  
Convention, retail and other
          37,837       92,015       (6,122 )     123,730  
Provision for doubtful accounts
          17,695       17,458             35,153  
General and administrative
          120,035       179,681       (538 )     299,178  
Corporate expense
    42,307       132       16,991       (10,000 )     49,430  
Rental expense
                21,504             21,504  
Pre-opening expense
    357       3       87,251       (34 )     87,577  
Development expense
    833                         833  
Depreciation and amortization
    6,036       116,130       201,617             323,783  
Loss on disposal of assets
          8,704       29,467             38,171  
 
                             
 
    49,533       539,956       2,052,373       (21,093 )     2,620,769  
 
                             
Operating income (loss)
    (49,780 )     46,970       311,405             308,595  
Other income (expense):
                                       
Interest income
    1,319       42,033       1,356       (41,002 )     3,706  
Interest expense, net of amounts capitalized
    (8,164 )     (56,708 )     (131,282 )     41,002       (155,152 )
Other expense
          (271 )     (12,378 )           (12,649 )
Gain (loss) on early retirement of debt
    3,358             (221 )           3,137  
Income from equity investments in subsidiaries
    136,167       108,654             (244,821 )      
 
                             
Income before income taxes
    82,900       140,678       168,880       (244,821 )     147,637  
Income tax benefit (expense)
    (23,512 )     (730 )     2,967             (21,275 )
 
                             
Net income
    59,388       139,948       171,847       (244,821 )     126,362  
Net income attributable to noncontrolling interests
                (66,974 )           (66,974 )
 
                             
Net income attributable to Las Vegas Sands Corp.
  $ 59,388     $ 139,948     $ 104,873     $ (244,821 )   $ 59,388  
 
                             

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended June 30, 2011
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Net cash generated from (used in) operating activities
  $ (82,787 )   $ 139,097     $ 1,025,213     $     $ 1,081,523  
 
                             
Cash flows from investing activities:
                                       
Changes in restricted cash and cash equivalents
          2,071       364,609             366,680  
Capital expenditures
    (6,898 )     (16,951 )     (696,847 )           (720,696 )
Proceeds from disposal of property and equipment
                4,416             4,416  
Acquisition of intangible assets
    (100 )           (475 )           (575 )
Notes receivable to non-guarantor subsidiaries
          (34,171 )           34,171        
Dividends from Guarantor Subsidiaries
    49,078                   (49,078 )      
Dividends from non-guarantor subsidiaries
          41,400             (41,400 )      
Capital contributions to subsidiaries
    (50,000 )                 50,000        
 
                             
Net used in investing activities
    (7,920 )     (7,651 )     (328,297 )     (6,307 )     (350,175 )
 
                             
Cash flows from financing activities:
                                       
Proceeds from exercise of stock options
    13,030             1,300             14,330  
Proceeds from exercise of warrants
    6,760                         6,760  
Dividends paid to preferred stockholders
    (38,817 )                       (38,817 )
Dividends paid to Las Vegas Sands Corp.
          (49,078 )           49,078        
Dividends paid to Guarantor Subsidiaries
                (41,400 )     41,400        
Distributions to noncontrolling interests
          (1,292 )     (4,571 )           (5,863 )
Capital contributions received
          50,000             (50,000 )      
Borrowings from Guarantor Subsidiaries
                34,171       (34,171 )      
Repayments on Singapore credit facility
                (198,940 )           (198,940 )
Repayments on VML credit facility
                (25,000 )           (25,000 )
Repayments on senior secured credit facility
          (14,469 )                 (14,469 )
Repayments on ferry financing
                (17,508 )           (17,508 )
Repayments on airplane financings
    (1,844 )                       (1,844 )
Repayments on HVAC equipment lease
          (861 )                 (861 )
Repayments on FF&E facility and other long-term debt
                (896 )           (896 )
Repurchase of preferred stock
    (5,328 )                       (5,328 )
Payments of preferred stock inducement premium
    (16,493 )                       (16,493 )
Payments of deferred financing costs
                (57 )           (57 )
 
                             
Net cash used in financing activities
    (42,692 )     (15,700 )     (252,901 )     6,307       (304,986 )
 
                             
Effect of exchange rate on cash
                15,663             15,663  
 
                             
Increase (decrease) in cash and cash equivalents
    (133,399 )     115,746       459,678             442,025  
Cash and cash equivalents at beginning of period
    1,031,844       412,226       1,593,011             3,037,081  
 
                             
Cash and cash equivalents at end of period
  $ 898,445     $ 527,972     $ 2,052,689     $     $ 3,479,106  
 
                             

 

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Las Vegas Sands Corp.
Notes to Condensed Consolidated Financial Statements — (Continued)
(Unaudited)
Condensed Consolidating Statements of Cash Flows
For the Six Months Ended June 30, 2010
                                         
                            Consolidating/        
    Las Vegas     Guarantor     Non-Guarantor     Eliminating        
    Sands Corp.     Subsidiaries     Subsidiaries     Entries     Total  
Net cash generated from (used in) operating activities
  $ (60,730 )   $ 190,889     $ 507,746     $     $ 637,905  
 
                             
Cash flows from investing activities:
                                       
Changes in restricted cash
          159       22,767             22,926  
Capital expenditures
    (5,246 )     (12,545 )     (1,109,477 )           (1,127,268 )
Proceeds from disposal of property and equipment
          745       4,902             5,647  
Acquisition of intangible assets
                (43,305 )           (43,305 )
Purchases of investments
                (173,774 )           (173,774 )
Notes receivable to non-guarantor subsidiaries
          (72,723 )           72,723        
Dividends from Guarantor Subsidiaries
    3,042,483                   (3,042,483 )      
Dividends from non-guarantor subsidiaries
          23,400             (23,400 )      
Capital contributions to subsidiaries
    (2,700,000 )     (16,500 )           2,716,500        
 
                             
Net cash generated from (used in) investing activities
    337,237       (77,464 )     (1,298,887 )     (276,660 )     (1,315,774 )
 
                             
Cash flows from financing activities:
                                       
Proceeds from exercise of stock options
    3,923                         3,923  
Dividends paid to preferred stockholders
    (46,700 )                       (46,700 )
Dividends paid to Las Vegas Sands Corp.
          (3,042,483 )           3,042,483        
Dividends paid to Guarantor Subsidiaries
                (23,400 )     23,400        
Capital contributions received
          2,700,000       16,500       (2,716,500 )      
Borrowings from Guarantor Subsidiaries
                72,723       (72,723 )      
Proceeds from Singapore credit facility
                596,560             596,560  
Repayments on senior secured credit facility
          (795,860 )                 (795,860 )
Repayments on VML credit facility
                (375,036 )           (375,036 )
Repurchase and cancellation of senior notes
    (56,675 )                       (56,675 )
Repayments on ferry financing
                (17,493 )           (17,493 )
Repayments on airplane financings
    (1,844 )                       (1,844 )
Repayments on HVAC equipment lease
          (882 )                 (882 )
Repayments on FF&E facility and other long-term debt
          (16,700 )     (728 )           (17,428 )
Payments of deferred financing costs
                (54,365 )           (54,365 )
 
                             
Net cash generated from (used in) financing activities
    (101,296 )     (1,155,925 )     214,761       276,660       (765,800 )
 
                             
Effect of exchange rate on cash
                7,088             7,088  
 
                             
Increase (decrease) in cash and cash equivalents
    175,211       (1,042,500 )     (569,292 )           (1,436,581 )
Cash and cash equivalents at beginning of period
    254,256       3,033,625       1,667,535             4,955,416  
 
                             
Cash and cash equivalents at end of period
  $ 429,467     $ 1,991,125     $ 1,098,243     $     $ 3,518,835  
 
                             

 

30


Table of Contents

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 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 service and products, the regulatory business environment of the operations within each segment and our organizational and management reporting structure. Our operating segments in the Macau Special Administrative Region (“Macau”) of the People’s Republic of China consist of the Sands Macao; The Venetian Macao Resort Hotel (“The Venetian Macao”); the Four Seasons Hotel Macao, Cotai Striptm and the Plaza Casino (collectively, the “Four Seasons Macao”); and other ancillary operations in that region (“Other Asia”). Our operating segment in Singapore, Marina Bay Sands, opened on April 27, 2010.
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 Clubtm offering services and amenities to premium customers, including luxurious VIP suites, spa facilities and private VIP gaming room facilities; entertainment facilities; an enclosed retail, dining and entertainment complex located within The Venetian Las Vegas of approximately 440,000 net leasable square feet (“The Grand Canal Shoppes”), which was sold to GGP Limited Partnership (“GGP”) in 2004; and an enclosed retail and dining complex located within The Palazzo of approximately 400,000 net leasable square feet (“The Shoppes at The Palazzo”), which was sold to GGP in February 2008. 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 72.0% and 63.4% of gross revenue at our Las Vegas Operating Properties for the six months ended June 30, 2011 and 2010, respectively, was derived from room revenues, food and beverage services, and other non-gaming sources, and 28.0% and 36.6%, respectively, was 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
In May 2009, we partially opened the Sands Bethlehem, a gaming, hotel, retail and dining complex located on the site of the historic Bethlehem Steel Works in Bethlehem, Pennsylvania. The Sands Bethlehem currently features approximately 152,000 square feet of gaming space, which include table games operations that commenced in July 2010, our 300-room hotel tower, which opened in May 2011, an arts and cultural center, and the broadcast home of the local PBS affiliate. We have initiated construction activities on the remaining components of the integrated resort, which include an approximate 200,000-square-foot retail facility and a 50,000-square-foot multipurpose event center. Sands Bethlehem is also expected to be home to the National Museum of Industrial History. We own 86% of the economic interest of 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 of the retail portion of the property through our ownership interest in Sands Bethworks Retail LLC. Approximately 91.2% and 91.1% of the gross revenue at Sands Bethlehem for the six months ended June 30, 2011 and 2010, respectively, was derived from gaming activities, with the remainder derived from food and beverage services and other non-gaming sources.

 

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Macau
Sands China Ltd. (“SCL”) completed an initial public offering (the “SCL Offering”) by listing its ordinary shares on The Main Board of The Stock Exchange of Hong Kong Limited in November 2009. We own 70.3% of SCL, which includes the operations of the Sands Macao, The Venetian Macao, Four Seasons 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 Sands Macao, the first Las Vegas-style casino in Macau. The Sands Macao includes approximately 197,000 square feet of gaming space; a 289-suite hotel tower; several restaurants; VIP facilities; a theater and other high-end services and amenities. Approximately 94.7% and 94.4% of the gross revenue at the Sands Macao for the six months ended June 30, 2011 and 2010, respectively, was derived from gaming activities, with the remainder primarily derived from room revenues and food and beverage services.
We also own and operate The Venetian Macao, the anchor property of our master-planned development of integrated resort properties that we refer to as the Cotai Striptm in Macau. With a theme similar to that of The Venetian Las Vegas, The Venetian Macao includes a 39-floor luxury hotel with over 2,900 suites; approximately 550,000 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 84.7% and 82.8% of the gross revenue at The Venetian Macao for the six months ended June 30, 2011 and 2010, respectively, was derived from gaming activities, with the remainder derived from room revenues and other non-gaming sources.
We own the Four Seasons Macao, which is located adjacent and connected to The Venetian Macao. The Four Seasons Macao is an integrated resort that features 360 rooms and suites managed and operated by Four Seasons Hotels Inc.; 19 Paiza mansions; approximately 70,000 square feet of gaming space; retail space of approximately 211,000 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 Striptm (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 expect to monetize the units within the Four Seasons Apartments subject to market conditions and obtaining the necessary government approvals. Approximately 84.6% and 85.5% of the gross revenue at the Four Seasons Macao for the six months ended June 30, 2011 and 2010, respectively, was derived from gaming activities, with the remainder derived from mall revenues, room revenues and other non-gaming sources.
Singapore
We own and operate the Marina Bay Sands in Singapore, which partially opened on April 27, 2010, with additional portions opened progressively throughout 2010. Marina Bay Sands features three 55-story hotel towers (with approximately 2,600 rooms and suites), the Sands SkyParktm (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 1.3 million square feet and theaters. In February 2011, the Marina Bay Sands opened a landmark iconic structure at the bay-front promenade that contains an art/science museum. As of June 30, 2011, we have capitalized 7.59 billion Singapore dollars (“SGD,” approximately $6.15 billion at exchange rates in effect on June 30, 2011) in costs for this project, including the land premium and SGD 228.5 million (approximately $185.2 million at exchange rates in effect on June 30, 2011) in outstanding construction payables. We expect to spend approximately SGD 590 million (approximately $478 million at exchange rates in effect on June 30, 2011) on additional costs to complete the integrated resort, FF&E and other costs, and to pay outstanding construction payables, as noted above. As we have obtained Singapore-denominated financing and primarily pay our costs in Singapore dollars, our exposure to foreign exchange gains and losses is expected to be minimal.
Approximately 76.1% of the gross revenue at the Marina Bay Sands for the six months ended June 30, 2011, was derived from gaming activities, with the remainder derived from room revenues, food and beverage services and other non-gaming sources.
Development Projects
We have suspended portions of our development projects to focus our efforts on those projects with the highest expected rates of return on invested capital. Should general economic conditions fail to improve, if we are unable to obtain sufficient funding or applicable government approvals such that completion of our suspended projects is not probable, or should management decide to abandon certain projects, all or a portion of our investment to date on our suspended projects could be lost and would result in an impairment charge. In addition, we may be subject to penalties under the termination clauses in our construction contracts or termination rights under our management contracts with certain hotel management companies.

 

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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 and expect that it will take approximately 18 months thereafter to complete construction of the project. As of June 30, 2011, we have capitalized construction costs of $177.7 million for this project. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty.
Macau
We submitted plans to the Macau government for our other Cotai Strip developments, which represent three integrated resort developments, in addition to The Venetian Macao and Four Seasons Macao, on an area of approximately 200 acres (which we refer to as Sands Cotai Central (formerly referred to as parcels 5 and 6) and parcels 3 and 7 and 8). Subject to the approval from the Macau government, as discussed further below, the developments are expected to include hotels, exhibition and conference facilities, gaming areas, showrooms, spas, dining, retail and entertainment facilities and other amenities. We commenced construction or pre-construction activities on these developments and plan to operate the related gaming areas under our Macau gaming subconcession. In addition, we are completing the development of some public areas surrounding our Cotai Strip properties on behalf of the Macau government. We currently intend to develop our other Cotai Strip properties as follows:
   
Sands Cotai Central — We are staging the construction of the Sands Cotai Central integrated resort. Upon completion of phases I and II of the project, the integrated resort will feature approximately 5,800 hotel rooms, approximately 300,000 square feet of gaming space, approximately 1.2 million square feet of retail, entertainment and dining facilities, exhibition and conference facilities and a multipurpose theater. Phase I of the project is expected to include two hotel towers, one of which will be managed by Sheraton International Inc. and Sheraton Overseas Management Co. (collectively “Starwood”) under its Sheraton brand, as well as completion of the structural work of an adjacent hotel tower to be managed by Starwood under its Sheraton Towers brand. The second hotel tower was to be managed by Shangri-La International Hotel Management Limited (“Shangri-La”); however, in March 2011, we mutually agreed with Shangri-La to terminate the hotel management agreement. This second tower will now be managed by Hilton Worldwide and InterContinental Hotels Group under their Conrad and Holiday Inn brands, respectively. Our anticipated opening of phase I will be on a progressive schedule starting in the first quarter of 2012 with the opening of parcel 5, which will feature 600 five-star rooms and suites under the Conrad brand along with 1,200 four-star rooms and suites under the Holiday Inn brand. Parcel 5 will also open with a variety of retail offerings, more than 300,000 square feet of meeting space, several food and beverage establishments along with the 106,000 square foot casino and VIP gaming areas. Phase I also includes the opening of the first hotel tower on parcel 6, which will feature nearly 2,000 Sheraton-branded rooms, along with the second casino and the remaining dining, entertainment, retail and meeting facilities, and is currently scheduled to open in the third quarter of 2012. Phase II of the project consisting of the second hotel tower on parcel 6, which will feature an additional 2,000 rooms and suites under the Sheraton Towers brand, is projected to open in early 2013. The total cost to complete phases I and II is expected to be approximately $1.9 billion. Phase III of the project is expected to include a fourth hotel and mixed-use tower to be managed by Starwood under its St. Regis brand and the total cost to complete is expected to be approximately $450 million. We are currently working with the Macau government to obtain sufficient construction labor for the project. We intend to commence construction of phase III of the project as demand and market conditions warrant it. As of June 30, 2011, we have capitalized costs of $2.48 billion for the entire project, including the land premium and $164.9 million in outstanding construction payables. Our management agreement with Starwood imposes certain construction deadlines and opening obligations on us and certain past and/or anticipated delays, as described above, would allow Starwood to terminate its agreement. We are currently negotiating an amendment to the management agreement with Starwood to provide for new opening timelines.
   
Parcels 7 and 8 — If we are successful in winning our appeal and obtaining the land concession for parcels 7 and 8 (as discussed below), the related integrated resort is expected to be similar in size and scope to the Sands Cotai Central integrated resort. We had commenced pre-construction activities and have capitalized construction costs of $102.1 million as of June 30, 2011. We intend to commence construction after Sands Cotai Central and the integrated resort on parcel 3 is complete, necessary government approvals are obtained (including the land concession), regional and global economic conditions improve, future demand warrants it and additional financing is obtained.
   
Parcel 3 — The integrated resort on parcel 3 will be connected to The Venetian Macao and Four Seasons Macao. The multi-hotel complex is intended to include a gaming area, a shopping mall and serviced luxury apart-hotel units. We had commenced pre-construction activities and have capitalized costs of $96.9 million, including the land premium, as of June 30, 2011. We intend to commence construction after the Sands Cotai Central is complete, necessary government approvals are obtained, regional and global economic conditions improve, future demand warrants it and additional financing is obtained.

 

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The impact of the delayed construction on our previously estimated cost to complete our Cotai Strip developments is currently not determinable. As of June 30, 2011, we have capitalized an aggregate of $6.87 billion in construction costs and land premiums for our Cotai Strip developments, including The Venetian Macao and Four Seasons 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 the $1.75 billion VOL credit facility, we will need to arrange additional financing to fund the balance of our Cotai Strip developments and there is no assurance that we will be able to obtain any of the additional financing required.
We are currently in the process of refinancing our VML and VOL credit facilities. We have received lender commitments for $3.7 billion and will have the option to raise incremental senior secured and unsecured debt under existing baskets within the new credit facility. See “— Liquidity and Capital Resources — Development Financing Strategy” for further disclosure.
Land concessions in Macau generally have an initial term of 25 years with automatic extensions of 10 years thereafter in accordance with Macau law. We have received land concessions from the Macau government to build on parcels 1, 2, 3 and 5 and 6, including the sites on which The Venetian Macao (parcel 1), Four Seasons Macao (parcel 2) and Sands Cotai Central (parcels 5 and 6) are located. We do not own these land sites in Macau; 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 Macau government or in seven semi-annual installments (provided that the outstanding balance is due upon the completion of the corresponding integrated resort), as well as annual rent for the term of the land concessions. During December 2010, we received notice from the Macau government that our application for a land concession for parcels 7 and 8 was not approved and we applied to the Chief Executive of Macau for a review of the decision. In January 2011, we filed an appeal with the Court of Second Instance in Macau, which has yet to issue a decision. Should we win our appeal, it is still possible for the Chief Executive of Macau to again deny the land concession based upon public policy considerations. If we do not obtain the land concession or do not receive full reimbursement of our capitalized investment in this project, we would record a charge for all or some portion of the $102.1 million in capitalized construction costs, as of June 30, 2011, related to our development on parcels 7 and 8.
Under our land concession for parcel 3, we were initially required to complete the corresponding development by August 2011. The Macau government has granted us a two-year extension to complete the development of parcel 3, which now must be completed by April 2013. The land concession for Sands Cotai Central contains a similar requirement that the corresponding development be completed by May 2014. We believe that if we are not able to complete the developments by the respective deadlines, we will likely be able to obtain extensions from the Macau government; however, no assurances can be given that additional extensions will be granted. If we are unable to meet the applicable deadlines and those deadlines are not extended, we could lose our land concessions for parcel 3 or Sands Cotai Central, 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 $96.9 million and $2.48 billion in capitalized costs and land premiums, as of June 30, 2011, related to our developments on parcel 3 or Sands Cotai Central, respectively.
Other
When the current economic environment and access to capital improve, we may continue exploring the possibility of developing and operating additional properties, including integrated resorts, in additional Asian and U.S. jurisdictions, and in Europe.

 

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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 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 2010 Annual Report on Form 10-K filed on March 1, 2011.
There were no newly identified significant accounting estimates during the six months ended June 30, 2011, nor were there any material changes to the critical accounting policies and estimates discussed in our 2010 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.”

 

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Summary Financial Results
The following table summarizes our results of operations:
                                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
                    Percent                     Percent  
    2011     2010     Change     2011     2010     Change  
    (Dollars in thousands)  
Net revenues
  $ 2,345,096     $ 1,594,476       47.1 %   $ 4,457,015     $ 2,929,364       52.1 %
Operating expenses
    1,736,974       1,427,701       21.7 %     3,362,966       2,620,769       28.3 %
Operating income
    608,122       166,775       264.6 %     1,094,049       308,595       254.5 %
Income before income taxes
    543,466       86,621       527.4 %     953,180       147,637       545.6 %
Net income
    489,092       78,548       522.7 %     853,595       126,362       575.5 %
Net income attributable to Las Vegas Sands Corp.
    410,637       41,807       882.2 %     699,960       59,388       1,078.6 %
                                 
    Percent of Net Revenues  
    Three Months     Six Months  
    Ended June 30,     Ended June 30,  
    2011     2010     2011     2010  
Operating expenses
    74.1 %     89.5 %     75.5 %     89.5 %
Operating income
    25.9 %     10.5 %     24.5 %     10.5 %
Income before income taxes
    23.2 %     5.4 %     21.4 %     5.0 %
Net income
    20.9 %     4.9 %     19.2 %     4.3 %
Net income attributable to Las Vegas Sands Corp.
    17.5 %     2.6 %     15.7 %     2.0 %
Operating Results
Key Operating Revenue Measurements
Operating revenues at our Las Vegas Operating Properties, The Venetian Macao, Four Seasons Macao and Marina Bay Sands are dependent upon the volume of customers who stay at the hotel, which affects the price that can be charged for hotel rooms and the volume of table games and slot machine play. 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 the U.S.: Table games drop (“drop”) and slot handle (“handle”) are volume measurements. Win or hold percentage represents the percentage of drop or handle that is won by the casino and recorded as casino revenue. Table games drop represents the sum of markers issued (credit instruments) less markers paid at the table, plus cash deposited in the table drop box. Slot handle is the gross amount wagered for the period cited. We view table games win as a percentage of drop and slot hold as a percentage of slot handle. Based upon our mix of table games, our table games in Las Vegas have produced a trailing 12-month win percentage (calculated before discounts) of 16.0%. Slot machines in Las Vegas and Pennsylvania have produced a trailing 12-month hold percentage (calculated before slot club cash incentives) of 8.0% and 7.2%, respectively. Actual win may vary from the trailing 12-month win and hold percentages. Generally, slot machine play is conducted on a cash basis, whereas in Las Vegas, approximately 69.5% of our table games play for the six months ended June 30, 2011, was conducted on a credit basis. In Pennsylvania, our table games play, which commenced in July 2010, was primarily conducted on a cash basis. We expect to increase the credit extended to our players as operations ramp up at Sands Bethlehem.
Casino revenue measurements for Macau and Singapore: Macau and Singapore table games are segregated into two groups, consistent with the Macau and Singapore market’s 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 as previously described. 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 is the gross amount wagered for the period cited.

 

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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 of 26.9%, 20.3% and 32.5% at The Venetian Macao, Sands Macao and Four Seasons Macao, respectively. Our slot machines have produced a trailing 12-month hold percentage of 6.9%, 6.0% and 6.2% at The Venetian Macao, Sands Macao and Four Seasons Macao, respectively. Actual win may vary from the trailing 12-month win and hold percentages. In Macau, 25.0% of our table games play was conducted on a credit basis for the six months ended June 30, 2011. This percentage is expected to increase as we continue to extend credit to our premium players and junket operators for table games play. In Singapore, 34.4% of table games play was conducted on a credit basis for the six months ended June 30, 2011. This percentage is expected to increase as we increase the credit extended to our premium players and as our operations ramp up at Marina Bay Sands.
Hotel revenue measurements: Hotel 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, are used as performance indicators. 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.
Three Months Ended June 30, 2011 Compared to the Three Months Ended June 30, 2010
Operating Revenues
Our net revenues consisted of the following:
                         
    Three Months Ended June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Casino
  $ 1,862,272     $ 1,294,301       43.9 %
Rooms
    239,696       190,767       25.6 %
Food and beverage
    146,016       105,079       39.0 %
Convention, retail and other
    200,642       115,266       74.1 %
 
                   
 
    2,448,626       1,705,413       43.6 %
Less — promotional allowances
    (103,530 )     (110,937 )     6.7 %
 
                   
Total net revenues
  $ 2,345,096     $ 1,594,476       47.1 %
 
                   
Consolidated net revenues were $2.35 billion for the three months ended June 30, 2011, an increase of $750.6 million as compared to $1.59 billion for the three months ended June 30, 2010. The increase in net revenues was driven by an increase of $521.2 million at Marina Bay Sands, which opened in April 2010, as well as increases at our Macau and U.S. operations.

 

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Casino revenues increased $568.0 million as compared to the three months ended June 30, 2010. Of the increase, $403.8 million was attributable to Marina Bay Sands, as well as a $134.9 million increase at our Macau operations driven by an increase in Rolling Chip volume and Rolling Chip win percentage at The Venetian Macao. The following table summarizes the results of our casino activity:
                         
    Three Months Ended June 30,  
    2011     2010     Change  
    (Dollars in thousands)  
Macau Operations:
                       
The Venetian Macao
                       
Total casino revenues
  $ 648,471     $ 506,051       28.1 %
Non-Rolling Chip drop
  $ 1,024,247     $ 897,672       14.1 %
Non-Rolling Chip win percentage
    25.6 %     24.8 %     0.8 pts
Rolling Chip volume
  $ 13,369,929     $ 9,765,626       36.9 %
Rolling Chip win percentage
    3.46 %     3.36 %     0.10 pts
Slot handle
  $ 858,244     $ 701,575       22.3 %
Slot hold percentage
    6.7 %     7.1 %     (0.4 )pts
Sands Macao
                       
Total casino revenues
  $ 323,731     $ 297,069       9.0 %
Non-Rolling Chip drop
  $ 713,485     $ 603,581       18.2 %
Non-Rolling Chip win percentage
    20.0 %     20.7 %     (0.7 )pts
Rolling Chip volume
  $ 7,753,323     $ 7,220,885       7.4 %
Rolling Chip win percentage
    2.98 %     3.05 %     (0.07 )pts
Slot handle
  $ 462,617     $ 406,624       13.8 %
Slot hold percentage
    5.8 %     5.5 %     0.3 pts
Four Seasons Macao
                       
Total casino revenues
  $ 98,312     $ 132,543       (25.8 )%
Non-Rolling Chip drop
  $ 96,929     $ 95,553       1.4 %
Non-Rolling Chip win percentage
    37.6 %     28.4 %     9.2 pts
Rolling Chip volume
  $ 3,355,650     $ 4,844,991       (30.7 )%
Rolling Chip win percentage
    2.25 %     3.07 %     (0.82 )pts
Slot handle
  $ 200,577     $ 107,550       86.5 %
Slot hold percentage
    5.4 %     5.6 %     (0.2 )pts
U.S. Operations:
                       
Las Vegas Operating Properties
                       
Total casino revenues
  $ 105,123     $ 102,902       2.2 %
Table games drop
  $ 422,213     $ 417,129       1.2 %
Table games win percentage
    20.0 %     13.8 %     6.2 pts
Slot handle
  $ 411,515     $ 670,779       (38.7 )%
Slot hold percentage
    8.8 %     7.8 %     1.0 pts
Sands Bethlehem
                       
Total casino revenues
  $ 92,019     $ 64,958       41.7 %
Table games drop
  $ 151,541     $       %
Table games win percentage
    14.0 %     %     pts
Slot handle
  $ 947,870     $ 947,350       0.1 %
Slot hold percentage
    7.2 %     6.9 %     0.3 pts
Singapore Operations:
                       
Marina Bay Sands
                       
Total casino revenues
  $ 594,617     $ 190,778       211.7 %
Non-Rolling Chip drop
  $ 1,114,463     $ 538,296       107.0 %
Non-Rolling Chip win percentage
    22.5 %     21.5 %     1.0 pts
Rolling Chip volume
  $ 12,228,811     $ 3,883,995       214.9 %
Rolling Chip win percentage
    2.99 %     2.18 %     0.81 pts
Slot handle
  $ 2,380,655     $ 482,326       393.6 %
Slot hold percentage
    5.4 %     7.5 %     (2.1 )pts
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.

 

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Room revenues increased $48.9 million as compared to the three months ended June 30, 2010. The increase in room revenues was attributable to $51.9 million from the Marina Bay Sands, partially offset by a decrease at our Las Vegas Operating Properties driven by reduced 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:
                         
    Three Months Ended June 30,  
    2011     2010     Change  
    (Room revenues in thousands)  
Macau Operations:
                       
The Venetian Macao
                       
Total room revenues
  $ 51,388     $ 47,782       7.5 %
Average daily room rate
  $ 223     $ 203       9.9 %
Occupancy rate
    89.7 %     91.9 %     (2.2 )pts
Revenue per available room
  $ 200     $ 187       7.0 %
Sands Macao
                       
Total room revenues
  $ 5,579     $ 6,236       (10.5 )%
Average daily room rate
  $ 242     $ 245       (1.2 )%
Occupancy rate
    88.0 %     97.8 %     (9.8 )pts
Revenue per available room
  $ 213     $ 239       (10.9 )%
Four Seasons Macao
                       
Total room revenues
  $ 7,552     $ 6,921       9.1 %
Average daily room rate
  $ 323     $ 298       8.4 %
Occupancy rate
    67.8 %     69.1 %     (1.3 )pts
Revenue per available room
  $ 219     $ 206       6.3 %
U.S. Operations:
                       
Las Vegas Operating Properties
                       
Total room revenues
  $ 112,931     $ 120,169       (6.0 )%
Average daily room rate
  $ 200     $ 192       4.2 %
Occupancy rate
    88.8 %     97.8 %     (9.0 )pts
Revenue per available room
  $ 177     $ 187       (5.4 )%
Sands Bethlehem
                       
Total room revenues
  $ 659     $       %
Average daily room rate
  $ 168     $       %
Occupancy rate
    49.1 %     %     pts
Revenue per available room
  $ 83     $       %
Singapore Operations:
                       
Marina Bay Sands
                       
Total room revenues
  $ 61,588     $ 9,659       537.6 %
Average daily room rate
  $ 295     $ 226       30.5 %
Occupancy rate
    90.8 %     54.9 %     35.9 pts
Revenue per available room
  $ 268     $ 124       116.1 %
Food and beverage revenues increased $40.9 million as compared to the three months ended June 30, 2010. The increase was primarily due to a $32.0 million increase at the Marina Bay Sands and a $7.0 million increase at our Las Vegas Operating Properties driven by increased banquet activities.
Convention, retail and other revenues increased $85.4 million as compared to the three months ended June 30, 2010. The increase was primarily due to a $60.8 million increase at the Marina Bay Sands, an $8.8 million increase at the Four Seasons Macao and a $5.8 million increase at The Venetian Macao.
Operating Expenses
The breakdown of operating expenses is as follows:
                         
    Three Months Ended June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Casino
  $ 974,413     $ 790,947       23.2 %
Rooms
    50,733       34,073       48.9 %
Food and beverage
    73,135       47,798       53.0 %
Convention, retail and other
    105,024       65,326       60.8 %
Provision for doubtful accounts
    23,496       18,711       25.6 %
General and administrative
    223,561       172,919       29.3 %
Corporate expense
    42,376       25,954       63.3 %
Rental expense
    10,034       12,806       (21.6 )%
Pre-opening expense
    18,178       50,118       (63.7 )%
Development expense
    2,420       676       258.0 %
Depreciation and amortization
    206,161       170,694       20.8 %
Loss on disposal of assets
    7,443       37,679       (80.2 )%
 
                   
Total operating expenses
  $ 1,736,974     $ 1,427,701       21.7 %
 
                   

 

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Operating expenses were $1.74 billion for the three months ended June 30, 2011, an increase of $309.3 million as compared to $1.43 billion for the three months ended June 30, 2010. The increase in operating expenses was primarily attributable to the opening of Marina Bay Sands in April 2010.
Casino expenses increased $183.5 million as compared to the three months ended June 30, 2010. Of the increase, $110.7 million was attributable to the Marina Bay Sands and $60.9 million was due to the 39.0% gross win tax on increased casino revenues across all of our Macau operations.
Room, food and beverage and convention, retail and other expenses increased $16.7 million, $25.3 million and $39.7 million, respectively, as compared to the three months ended June 30, 2010. The increases in room and food and beverage expenses were primarily attributable to the Marina Bay Sands and our Las Vegas Operating Properties. The increase in convention, retail and other expenses was driven by the Marina Bay Sands and our Macau operations.
The provision for doubtful accounts was $23.5 million for the three months ended June 30, 2011, compared to $18.7 million for the three months ended June 30, 2010. 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 $50.6 million as compared to the three months ended June 30, 2010, primarily attributable to $44.1 million at the Marina Bay Sands.
Corporate expenses increased $16.4 million as compared to the three months ended June 30, 2010. The increase was primarily due to higher incentive compensation expenses, driven by stock-based compensation, as well as increased legal, transportation and recruitment expenses.
Pre-opening expenses were $18.2 million for the three months ended June 30, 2011, compared to $50.1 million for the three months ended June 30, 2010. 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 June 30, 2011, were primarily related to activities at Sands Cotai Central. Pre-opening expenses for the three months ended June 30, 2010, were primarily related to activities at Marina Bay Sands and costs associated with recommencing work at Sands Cotai Central.
Depreciation and amortization expense increased $35.5 million as compared to the three months ended June 30, 2010. The increase was primarily the result of the Marina Bay Sands, which contributed $36.2 million, partially offset by decreases at our Macau properties due to certain assets being fully depreciated.
Loss on disposal of assets was $7.4 million for the three months ended June 30, 2011, compared to $37.7 million for the three months ended June 30, 2010. The losses incurred for the three months ended June 30, 2011, related to the disposition of one of our majority owned subsidiaries as well as the disposition of construction materials in Macau. The losses incurred for the three months ended June 30, 2010 were due to the disposition of construction materials in Macau and Las Vegas.
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 stock-based compensation expense, corporate expense, rental expense, pre-opening expense, development expense, depreciation and amortization, loss on disposal of assets, interest, other income (expense), gain on 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 June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Macau:
                       
The Venetian Macao
  $ 258,366     $ 192,829       34.0 %
Sands Macao
    95,573       81,212       17.7 %
Four Seasons Macao
    37,620       32,999       14.0 %
Other Asia
    (9,230 )     (6,154 )     (50.0 )%
 
                   
 
    382,329       300,886       27.1 %
United States:
                       
Las Vegas Operating Properties
    92,909       65,992       40.8 %
Sands Bethlehem
    21,039       12,121       73.6 %
 
                   
 
    113,948       78,113       45.9 %
Marina Bay Sands
    405,359       94,466       329.1 %
 
                   
Total adjusted property EBITDA
  $ 901,636     $ 473,465       90.4 %
 
                   

 

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Adjusted property EBITDA at our Macau properties increased $81.4 million as compared to the three months ended June 30, 2010, led by an increase of $65.5 million at The Venetian Macao. As previously described, the increase across the properties was primarily attributable to an increase in net revenues of $163.9 million, partially offset by an increase of $60.9 million in gross win tax on increased casino revenues.
Adjusted property EBITDA at our Las Vegas Operating Properties increased $26.9 million as compared to the three months ended June 30, 2010. As previously described, the increase was primarily attributable to an increase in net revenues of $29.2 million (excluding intersegment royalty revenue), partially offset by increases in the associated operating expenses as a result of higher revenues.
Adjusted property EBITDA at Sands Bethlehem increased $8.9 million as compared to the three months ended June 30, 2010. The increase was driven by the commencement of table games operations in July 2010.
Adjusted property EBITDA at Marina Bay Sands, which opened in April 2010, does not have a comparable prior-year period as the property was only open for 65 days in the three months ended June 30, 2010.
Interest Expense
The following table summarizes information related to interest expense on long-term debt:
                 
    Three Months Ended June 30,  
    2011     2010  
    (Dollars in thousands)  
Interest cost (which includes the amortization of deferred financing costs and original issue discount)
  $ 102,349     $ 99,657  
Less — capitalized interest
    (31,757 )     (22,670 )
 
           
Interest expense, net
  $ 70,592     $ 76,987  
 
           
Cash paid for interest
  $ 99,920     $ 85,500  
Weighted average total debt balance
  $ 10,156,397     $ 10,679,714  
Weighted average interest rate
    4.0 %     3.7 %
Interest cost increased $2.7 million as compared to the three months ended June 30, 2010, resulting from an increase in our weighted average interest rate, partially offset by a decrease in our weighted average debt balances. Capitalized interest increased $9.1 million as compared to the three months ended June 30, 2010, primarily due to the recommencement of activities at Sands Cotai Central in Macau and the increase in the weighted average interest rate.
Other Factors Effecting Earnings
Other income was $1.9 million for the three months ended June 30, 2011, as compared to other expense of $6.2 million for the three months ended June 30, 2010. The other income and expense amounts in both periods were primarily attributable to foreign exchange gains and losses, principally in Macau.
Our effective income tax rate was 10.0% for the three months ended June 30, 2011, as compared to 9.3% for the three months ended June 30, 2010. The effective income tax rate for the three months ended June 30, 2011, reflects a 17% statutory tax rate on our Singapore operations; a zero percent tax rate from our Macau gaming operations due to our income tax exemption in Macau, which is set to expire in 2013; and non-realizable deferred tax assets in the U.S. and certain foreign jurisdictions, which unfavorably impacted our effective income tax rate. Management does not anticipate recording an income tax benefit 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 are realizable, we will reduce the valuation allowances in the period such determination is made.

 

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The net income attributable to our noncontrolling interests was $78.5 million for the three months ended June 30, 2011, as compared to $36.7 million for the three months ended June 30, 2010, and was primarily attributable to the noncontrolling interest of SCL for both periods.
Six Months Ended June 30, 2011 Compared to the Six Months Ended June 30, 2010
Operating Revenues
Our net revenues consisted of the following:
                         
    Six Months Ended June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Casino
  $ 3,526,761     $ 2,356,071       49.7 %
Rooms
    471,670       371,549       26.9 %
Food and beverage
    291,409       197,158       47.8 %
Convention, retail and other
    365,297       223,481       63.5 %
 
                   
 
    4,655,137       3,148,259       47.9 %
Less — promotional allowances
    (198,122 )     (218,895 )     9.5 %
 
                   
Total net revenues
  $ 4,457,015     $ 2,929,364       52.1 %
 
                   
Consolidated net revenues were $4.46 billion for the six months ended June 30, 2011, an increase of $1.53 billion as compared to $2.93 billion for the six months ended June 30, 2010. The increase in net revenues was driven by a $1.11 billion increase at Marina Bay Sands, which opened in April 2010, as well as increases at our Macau and Sands Bethlehem operations.
Casino revenues increased $1.17 billion as compared to the six months ended June 30, 2010. Of the increase, $868.2 million was attributable to Marina Bay Sands, as well as a $321.6 million increase at our Macau operations driven primarily by an increase in Rolling Chip volume and Non-Rolling Chip drop at The Venetian Macao and Sands Macao. The increase was partially offset by our Las Vegas Operating Properties driven by decreases in win percentage, drop and handle. The following table summarizes the results of our casino activity:
                         
    Six Months Ended June 30,  
    2011     2010     Change  
    (Dollars in thousands)  
Macau Operations:
                       
The Venetian Macao
                       
Total casino revenues
  $ 1,201,888     $ 980,806       22.5 %
Non-Rolling Chip drop
  $ 2,004,851     $ 1,819,603       10.2 %
Non-Rolling Chip win percentage
    26.7 %     25.0 %     1.7 pts
Rolling Chip volume
  $ 25,758,907     $ 19,815,304       30.0 %
Rolling Chip win percentage
    3.09 %     3.14 %     (0.05 )pts
Slot handle
  $ 1,601,315     $ 1,372,324       16.7 %
Slot hold percentage
    6.8 %     7.2 %     (0.4 )pts
Sands Macao
                       
Total casino revenues
  $ 639,405     $ 575,014       11.2 %
Non-Rolling Chip drop
  $ 1,402,165     $ 1,193,077       17.5 %
Non-Rolling Chip win percentage
    20.2 %     20.5 %     (0.3 )pts
Rolling Chip volume
  $ 16,022,704     $ 13,627,818       17.6 %
Rolling Chip win percentage
    2.86 %     3.11 %     (0.25 )pts
Slot handle
  $ 898,482     $ 769,128       16.8 %
Slot hold percentage
    6.2 %     5.8 %     0.4 pts

 

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    Six Months Ended June 30,  
    2011     2010     Change  
    (Dollars in thousands)  
Four Seasons Macao
                       
Total casino revenues
  $ 259,135     $ 222,996       16.2 %
Non-Rolling Chip drop
  $ 179,372     $ 194,564       (7.8 )%
Non-Rolling Chip win percentage
    38.8 %     26.8 %     12.0 pts
Rolling Chip volume
  $ 7,303,613     $ 8,562,932       (14.7 )%
Rolling Chip win percentage
    3.14 %     2.81 %     0.33 pts
Slot handle
  $ 388,081     $ 256,310       51.4 %
Slot hold percentage
    5.9 %     5.6 %     0.3 pts
U.S. Operations:
                       
Las Vegas Operating Properties
                       
Total casino revenues
  $ 188,246     $ 258,248       (27.1 )%
Table games drop
  $ 898,795     $ 964,172       (6.8 )%
Table games win percentage
    16.5 %     19.2 %     (2.7 )pts
Slot handle
  $ 818,864     $ 1,308,574       (37.4 )%
Slot hold percentage
    8.7 %     7.8 %     0.9 pts
Sands Bethlehem
                       
Total casino revenues
  $ 179,073     $ 128,229       39.7 %
Table games drop
  $ 270,505     $       %
Table games win percentage
    15.2 %     %     pts
Slot handle
  $ 1,829,247     $ 1,868,981       (2.1 )%
Slot hold percentage
    7.3 %     6.9 %     0.4 pts
Singapore Operations:
                       
Marina Bay Sands
                       
Total casino revenues
  $ 1,059,014     $ 190,778       455.1 %
Non-Rolling Chip drop
  $ 2,100,907     $ 538,296       290.3 %
Non-Rolling Chip win percentage
    22.5 %     21.5 %     1.0 pts
Rolling Chip volume
  $ 22,361,150     $ 3,883,995       475.7 %
Rolling Chip win percentage
    2.80 %     2.18 %     0.62 pts
Slot handle
  $ 4,422,420     $ 482,326       816.9 %
Slot hold percentage
    5.3 %     7.5 %     (2.2 )pts
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 $100.1 million as compared to the six months ended June 30, 2010. The increase in room revenues was attributable to $107.8 million from the Marina Bay Sands, partially offset by a decrease at our Las Vegas Operating Properties driven by reduced 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:
                         
    Six Months Ended June 30,  
    2011     2010     Change  
    (Room revenues in thousands)  
Macau Operations:
                       
The Venetian Macao
                       
Total room revenues
  $ 101,614     $ 95,339       6.6 %
Average daily room rate
  $ 225     $ 203       10.8 %
Occupancy rate
    88.1 %     92.4 %     (4.3 )pts
Revenue per available room
  $ 198     $ 187       5.9 %
Sands Macao
                       
Total room revenues
  $ 11,114     $ 12,830       (13.4 )%
Average daily room rate
  $ 247     $ 253       (2.4 )%
Occupancy rate
    86.5 %     97.6 %     (11.1 )pts
Revenue per available room
  $ 213     $ 247       (13.8 )%
Four Seasons Macao
                       
Total room revenues
  $ 15,058     $ 13,485       11.7 %
Average daily room rate
  $ 331     $ 288       14.9 %
Occupancy rate
    66.2 %     71.0 %     (4.8 )pts
Revenue per available room
  $ 220     $ 204       7.8 %

 

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    Six Months Ended June 30,  
    2011     2010     Change  
    (Room revenues in thousands)  
U.S. Operations:
                       
Las Vegas Operating Properties
                       
Total room revenues
  $ 225,805     $ 240,236       (6.0 )%
Average daily room rate
  $ 206     $ 199       3.5 %
Occupancy rate
    86.4 %     94.5 %     (8.1 )pts
Revenue per available room
  $ 178     $ 188       (5.3 )%
Sands Bethlehem
                       
Total room revenues
  $ 659     $       %
Average daily room rate
  $ 168     $       %
Occupancy rate
    49.1 %     %     pts
Revenue per available room
  $ 83     $       %
Singapore Operations:
                       
Marina Bay Sands
                       
Total room revenues
  $ 117,421     $ 9,659       1,115.6 %
Average daily room rate
  $ 290     $ 226       28.3 %
Occupancy rate
    88.6 %     54.9 %     33.7 pts
Revenue per available room
  $ 257     $ 124       107.3 %
Food and beverage revenues increased $94.3 million as compared to the six months ended June 30, 2010. The increase was primarily due to a $75.2 million increase at the Marina Bay Sands and a $13.6 million increase at our Las Vegas Operating Properties driven by increased banquet activities.
Convention, retail and other revenues increased $141.8 million as compared to the six months ended June 30, 2010. The increase was primarily due to a $114.1 million increase at the Marina Bay Sands and a $27.4 million increase from our Macau operations.
Operating Expenses
The breakdown of operating expenses is as follows:
                         
    Six Months Ended June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Casino
  $ 1,895,949     $ 1,485,582       27.6 %
Rooms
    99,186       63,727       55.6 %
Food and beverage
    144,838       92,101       57.3 %
Convention, retail and other
    192,269       123,730       55.4 %
Provision for doubtful accounts
    58,554       35,153       66.6 %
General and administrative
    434,046       299,178       45.1 %
Corporate expense
    79,952       49,430       61.7 %
Rental expense
    23,190       21,504       7.8 %
Pre-opening expense
    27,649       87,577       (68.4 )%
Development expense
    2,993       833       259.3 %
Depreciation and amortization
    396,398       323,783       22.4 %
Loss on disposal of assets
    7,942       38,171       (79.2 )%
 
                   
Total operating expenses
  $ 3,362,966     $ 2,620,769       28.3 %
 
                   
Operating expenses were $3.36 billion for the six months ended June 30, 2011, an increase of $742.2 million as compared to $2.62 billion for the six months ended June 30, 2010. The increase in operating expenses was primarily attributable to the opening of Marina Bay Sands in April 2010.
Casino expenses increased $410.4 million as compared to the six months ended June 30, 2010. Of the increase, $269.7 million was attributable to the Marina Bay Sands and $141.5 million was due to the 39.0% gross win tax on increased casino revenues across all of our Macau operations.

 

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Room, food and beverage and convention, retail and other expenses increased $35.5 million, $52.7 million and $68.5 million, respectively, as compared to the six months ended June, 2010. The increases in room and food and beverage expenses were primarily attributable to the Marina Bay Sands and our Las Vegas Operating Properties. The increase in convention, retail and other expenses was driven by the Marina Bay Sands and our Macau operations.
The provision for doubtful accounts was $58.6 million for the six months ended June 30, 2011, compared to $35.2 million for the six months ended June 30, 2010. The increase was attributable to $31.0 million in provisions at the Marina Bay Sands. 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 $134.9 million as compared to the six months ended June 30, 2010, primarily attributable to a $122.3 million increase at the Marina Bay Sands.
Corporate expenses increased $30.5 million as compared to the six months ended June 30, 2010. The increase was primarily due to higher incentive compensation expenses, driven by stock-based compensation, as well as increased legal, transportation and recruitment expenses.
Pre-opening expenses were $27.6 million for the six months ended June 30, 2011, compared to $87.6 million for the three months ended June 30, 2010. 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 six months ended June 30, 2011, were primarily related to activities at Sands Cotai Central. Pre-opening expenses for the six months ended June 30, 2010, were primarily related to activities at Marina Bay Sands and costs associated with recommencing work at Sands Cotai Central.
Depreciation and amortization expense increased $72.6 million as compared to the six months ended June 30, 2010. The increase was primarily the result of the opening of Marina Bay Sands, which contributed $91.1 million, partially offset by decreases at our Macau properties due to certain assets being fully depreciated.
Loss on disposal of assets was $7.9 million for the six months ended June 30, 2011, compared to $38.2 million for the six months ended June 30, 2010. The losses incurred for the three months ended June 30, 2011, related to the disposition of one of our majority owned subsidiaries as well as the disposition of construction materials in Macau. The losses incurred during the six months ended June 30, 2010 were due to the disposition of construction materials in Macau and Las Vegas.
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 stock-based compensation expense, corporate expense, rental expense, pre-opening expense, development expense, depreciation and amortization, loss on disposal of assets, interest, other expense, gain on 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):
                         
    Six Months Ended June 30,  
                    Percent  
    2011     2010     Change  
    (Dollars in thousands)  
Macau:
                       
The Venetian Macao
  $ 486,766     $ 362,744       34.2 %
Sands Macao
    188,221       150,973       24.7 %
Four Seasons Macao
    95,167       52,494       81.3 %
Other Asia
    (13,836 )     (10,586 )     (30.7 )%
 
                   
 
    756,318       555,625       36.1 %
United States:
                       
Las Vegas Operating Properties
    158,074       171,284       (7.7 )%
Sands Bethlehem
    43,148       23,089       86.9 %
 
                   
 
    201,222       194,373       3.5 %
Marina Bay Sands
    689,830       94,466       630.2 %
 
                   
Total adjusted property EBITDA
  $ 1,647,370     $ 844,464       95.1 %
 
                   

 

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Adjusted property EBITDA at our Macau properties increased $200.7 million as compared to the six months ended June 30, 2010, led by an increase of $124.0 million at The Venetian Macao. As previously described, the increase across the properties was primarily attributable to an increase in net revenues of $370.8 million, partially offset by an increase of $141.5 million in gross win tax on increased casino revenues.
Adjusted property EBITDA at our Las Vegas Operating Properties decreased $13.2 million as compared to the six months ended June 30, 2010. As previously described, the decrease was primarily attributable to a decrease in net revenues of $15.0 million (excluding intersegment royalty revenue), partially offset by decreases in the associated expenses as result of lower revenues, and increases in food and beverage and convention, retail and other revenues and the associated expenses.
Adjusted property EBITDA at Sands Bethlehem increased $20.1 million as compared to the six months ended June 30, 2010. The increase was driven by the commencement of table games operations in July 2010.
Adjusted property EBITDA at Marina Bay Sands, which opened in April 2010, does not have a comparable prior-year period as the property was only open for 65 days in the six months ended June 30, 2010.
Interest Expense
The following table summarizes information related to interest expense on long-term debt:
                 
    Six Months Ended June 30,  
    2011     2010  
    (Dollars in thousands)  
Interest cost (which includes the amortization of deferred financing costs and original issue discount)
  $ 206,544     $ 197,475  
Less — capitalized interest
    (62,367 )     (42,323 )
 
           
Interest expense, net
  $ 144,177     $ 155,152  
 
           
Cash paid for interest
  $ 211,412     $ 177,302  
Weighted average total debt balance
  $ 10,159,675     $ 10,907,822  
Weighted average interest rate
    4.1 %     3.6 %
Interest cost increased $9.1 million as compared to the six months ended June 30, 2010, resulting from an increase in our weighted average interest rate, partially offset by a decrease in our weighted average debt balances. Capitalized interest increased $20.0 million as compared to the six months ended June 30, 2010, primarily due to the recommencement of activities at Sands Cotai Central in Macau and the increase in the weighted average interest rate.
Other Factors Effecting Earnings
Other expense was $2.8 million for the six months ended June 30, 2011, which was primarily attributable to the decrease in value of our interest rate caps. Other expense was $12.6 million for the six months ended June 30, 2010, which was primarily attributable to foreign exchange losses, principally in Macau.
Our effective income tax rate was 10.4% for the six months ended June 30, 2011, as compared to 14.4% for the six months ended June 30, 2010. The decrease in the effective tax rate was primarily due to the commencement of operations at Marina Bay Sands in April 2010. The effective income tax rate for the six months ended June 30, 2011, reflects a 17% statutory tax rate on our Singapore operations; a zero percent tax rate from our Macau gaming operations due to our income tax exemption in Macau, which is set to expire in 2013; and non-realizable deferred tax assets in the U.S. and certain foreign jurisdictions, which unfavorably impacted our effective income tax rate. Management does not anticipate recording an income tax benefit 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 are realizable, we will reduce the valuation allowances in the period such determination is made.

 

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The net income attributable to our noncontrolling interests was $153.6 million for the six months ended June 30, 2011, as compared to $67.0 million for the six months ended June 30, 2010, and was primarily attributable to the noncontrolling interest of SCL for both periods.
Liquidity and Capital Resources
Cash Flows — Summary
Our cash flows consisted of the following:
                 
    Six Months Ended June 30,  
    2011     2010  
    (Dollars in thousands)  
Net cash generated from operations
  $ 1,081,523     $ 637,905  
 
           
Investing cash flows:
               
Change in restricted cash and cash equivalents
    366,680       22,926  
Capital expenditures
    (720,696 )     (1,127,268 )
Proceeds from disposal of property and equipment
    4,416       5,647  
Acquisition of intangible assets
    (575 )     (43,305 )
Purchases of investments
          (173,774 )
 
           
Net cash used in investing activities
    (350,175 )     (1,315,774 )
 
           
Financing cash flows:
               
Proceeds from exercise of stock options
    14,330       3,923  
Proceeds from exercise of warrants
    6,760        
Dividends paid to preferred stockholders
    (38,817 )     (46,700 )
Distributions to noncontrolling interests
    (5,863 )      
Proceeds from long-term debt
          596,560  
Repayments of long-term debt
    (259,518 )     (1,265,218 )
Repurchase of preferred stock
    (5,328 )      
Payments of preferred stock inducement premium
    (16,493 )      
Payments of deferred financing costs
    (57 )     (54,365 )
 
           
Net cash used in financing activities
    (304,986 )     (765,800 )
 
           
Effect of exchange rate on cash
    15,663       7,088  
 
           
Net increase (decrease) in cash and cash equivalents
  $ 442,025     $ (1,436,581 )
 
           
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 six months ended June 30, 2011, increased $443.6 million as compared to the six months ended June 30, 2010. The increase was primarily attributable to the increase in our operating income during the six months ended June 30, 2011, as previously described, partially offset by unfavorable changes in our working capital, driven by decreases in other accrued liabilities.
Cash Flows — Investing Activities
Capital expenditures for the six months ended June 30, 2011, totaled $720.7 million, including $356.5 million for construction and development activities in Macau (primarily for our Cotai Strip developments), $304.3 million for construction activities in Singapore, $36.0 million for construction activities at Sands Bethlehem; and $23.9 million at our Las Vegas Operating Properties and for corporate and other activities.

 

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Cash Flows — Financing Activities
Net cash flows used in financing activities were $305.0 million for the six months ended June 30, 2011, which was primarily attributable to the repayments of $198.9 million under our Singapore credit facility and $25.0 million under our VML Credit Facility, and payments of $38.8 million for preferred stock dividends and $16.5 million to induce the exercise of warrants with settlement through tendering of preferred stock.
As of June 30, 2011, we had $1.76 billion available for borrowing under our U.S., Macau and Singapore credit facilities, net of letters of credit, outstanding banker’s guarantees and undrawn amounts committed to be funded by Lehman Brothers-related subsidiaries.
Development Financing Strategy
Through June 30, 2011, we have funded our development projects primarily through borrowings under our U.S., Macau 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, as amended in August 2010, 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 6.5x for the quarter ended June 30, 2011, decreases to 6.0x for the quarterly periods ended September 30 and December 31, 2011, decreases to 5.5x for the quarterly periods ended March 31 and June 30, 2012, and then decreases to 5.0x for all quarterly periods thereafter through maturity. One of our Macau credit facilities, the VML credit facility, as amended in August 2009, requires certain of our Macau operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 3.0x for all quarterly periods through maturity. We can elect to contribute up to $50 million and $20 million of cash on hand to our Las Vegas and relevant Macau operations, respectively, on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA by the corresponding amount during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio (the “EBITDA true-up”). The Singapore credit facility requires operations of Marina Bay Sands to comply with similar financial covenants commencing with the quarterly period ending September 30, 2011, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 5.5x for the quarterly period ending September 30, 2011, and then decreases by 0.25x every other quarter until it decreases to, and remains at, 3.75x for all quarterly periods thereafter through maturity (commencing with the quarterly period ending September 30, 2014). If we are 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 our airplane financings, which, if the respective lenders chose to accelerate the indebtedness outstanding under these agreements, would result in a default under our senior notes. A default under the VML credit facility would trigger a cross-default under our ferry financing. 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 its operations or debt obligations.
In 2008, we completed a $475.0 million convertible senior notes offering and a $2.1 billion common and preferred stock and warrants offering. In 2009, we completed a $600.0 million exchangeable bond offering and our $2.5 billion SCL Offering. A portion of the proceeds from these offerings was used in the U.S. to pay down $775.9 million under the revolving portion of the U.S. credit facility in March 2010 and $1.0 billion under the term loan portions of the U.S. credit facility in August 2010, and to exercise the EBITDA true-up provision during the quarterly periods ended September 30, 2010 and March 31, 2011. As of June 30, 2011, our U.S. and VML leverage ratios were 4.6x and 1.4x, respectively, compared to the maximum leverage ratios allowed of 6.5x and 3.0x, respectively.
We held unrestricted and restricted cash and cash equivalents of approximately $3.48 billion and $443.8 million, respectively, as of June 30, 2011, of which approximately $2.0 billion of the unrestricted amount is held by non-US subsidiaries. Of the $2.0 billion, approximately $1.15 billion is available to be repatriated to the U.S. with virtually no tax consequences due to the Company’s significant foreign taxes paid, which would ultimately generate foreign tax credits if cash is repatriated. The remaining unrestricted amounts are not available for repatriation due to bank compliance requirements or dividend requirements to third party public shareholders in the case of funds being repatriated from SCL. We believe the cash on hand, cash flow generated from operations and available borrowings under our credit facilities will be sufficient to fund our developments currently under construction and maintain compliance with the financial covenants of our U.S., Macau and Singapore credit facilities. In the normal course of our activities, we will continue to evaluate our capital structure and opportunities for enhancements thereof. We have recommenced construction activities at Sands Cotai Central using proceeds from the $1.75 billion VOL credit facility together with $500.0 million of proceeds from the SCL Offering.

 

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We are currently in the process of refinancing our Macau credit facilities. We have received lender commitments for $3.7 billion and will have the option to raise incremental senior secured and unsecured debt under existing baskets within the new credit facility. The new credit facility, once entered into, is expected to significantly reduce our interest expense, extend our Macau debt maturities to 2016, enhance our financial flexibility and further strengthen our financial position. Proceeds from the new Macau senior secured credit facility coupled with cash on hand will be used to retire the outstanding balances and commitments on the existing VML and VOL credit facilities as well as fund the completion of construction of the first two phases of Sands Cotai Central in Macau. The refinancing is subject to final loan documentation as well as certain Macao Government approvals. The refinancing is expected to close in late 2011 and we anticipate recording a loss on modification or extinguishment of debt in conjunction with the refinancing.
Additionally, on November 15, 2011, the Company’s intends to redeem its outstanding preferred stock at $110 per share. Based on the number of preferred shares outstanding as of June 30, 2011, the total redemption amount would be approximately $842 million.
Aggregate Indebtedness and Other Known Contractual Obligations
As of June 30, 2011, 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, 2010.
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., Macau 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:
   
our substantial leverage, debt service and debt covenant compliance (including sensitivity to fluctuations in interest rates, as a significant portion of our debt is variable-rate debt, and other capital markets trends);
   
disruptions in the global financing markets and our ability to obtain sufficient funding for our current and future developments, including our Cotai Strip, Singapore, Pennsylvania and Las Vegas developments;
   
general economic and business conditions which may impact levels of disposable income, consumer spending, group meeting business, pricing of hotel rooms and retail and mall sales;
   
increased competition for labor and materials due to other planned construction projects in Macau;

 

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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 spending and vacationing at casino-resorts in Las Vegas, Macau and Singapore;
   
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 Macau and restrictions on foreign currency exchange or importation of currency;
   
our dependence upon properties primarily in Las Vegas, Macau and Singapore for all of our cash flow;
   
our relationship with GGP or any successor owner of The Shoppes at The Palazzo and The Grand Canal Shoppes, and the ability of GGP to perform under the purchase and sale agreement for The Shoppes at The Palazzo, as amended;
   
new developments, construction and ventures, including our Cotai Strip developments, Marina Bay Sands and Sands Bethlehem;
   
the passage of new legislation and receipt of governmental approvals for our proposed developments in Macau 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 outbreaks of infectious diseases, such as severe acute respiratory syndrome, avian flu or swine flu;
   
government regulation of the casino industry, including gaming license regulation, the legalization of gaming in other jurisdictions and regulation of gaming on the Internet;
   
increased competition in Las Vegas and Macau, including recent and upcoming increases in hotel rooms, meeting and convention space, and retail space;
   
fluctuations in the demand for all-suites rooms, occupancy rates and average daily room rates in Las Vegas, Macau and Singapore;
   
the popularity of Las Vegas, Macau and Singapore 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, certificates and subconcession;
   
the completion of infrastructure projects in Macau and Singapore; and
   
the outcome of any ongoing and future litigation.
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.

 

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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.

 

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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 June 30, 2011, 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 years ending June 30:
                                                                 
                                                            Fair  
    2012     2013     2014     2015     2016     Thereafter     Total     Value(1)  
    (Dollars in millions)  
LIABILITIES
                                                               
Long-term debt
                                                               
Fixed rate
  $     $     $     $ 189.7     $     $     $ 189.7     $ 191.1  
Average interest rate(2)
                      6.4 %                 6.4 %        
Variable rate
  $ 1,070.8     $ 2,062.3     $ 1,529.5     $ 3,289.5     $ 235.8     $ 1,657.5     $ 9,845.4     $ 9,641.5  
Average interest rate(2)
    3.7 %     4.1 %     2.3 %     2.8 %     2.7 %     2.7 %     3.1 %        
ASSETS
                                                               
Cap agreements(3)
  $     $ 0.4     $ 0.9     $     $     $     $ 1.3     $ 1.3  
 
     
(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 June 30, 2011, an assumed 100 basis point change in LIBOR, HIBOR and SOR would cause our annual interest cost to change approximately $95.1 million.
 
(3)  
As of June 30, 2011, we have 38 interest rate cap agreements with an aggregate fair value of approximately $1.3 million based on quoted market values from the institutions holding the agreements.
Borrowings under the U.S. credit facility, as amended, 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 VML credit facility, as amended, bear interest, at our election, at either an adjusted Eurodollar rate (or in the case of the local term loan, adjusted HIBOR) plus 4.5% per annum or at an alternative base rate plus 3.5% per annum. Applicable spreads under the VML revolving facility are subject to a downward adjustment if certain consolidated leverage ratios are satisfied. Borrowings under the VOL 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 Macau pataca denominated loans), as applicable, plus a spread of 4.5% per annum. Borrowings under the Singapore credit facility bear interest at SOR plus a spread of 2.25% per annum. Borrowings under the airplane financings bear interest at LIBOR plus approximately 1.5% per annum. Borrowings under the ferry financing, as amended, bear interest at HIBOR plus 2.5% per annum.
Foreign currency transaction losses for the six months ended June 30, 2011, were $0.4 million. We may be vulnerable to changes in the U.S. dollar/pataca exchange rate. Based on balances as of June 30, 2011, an assumed 1% change in the U.S. dollar/pataca exchange rate would cause a foreign currency transaction gain/loss of approximately $16.0 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.”

 

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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 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 June 30, 2011, 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 have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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, 2010, 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, 2010.

 

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ITEM 6 — EXHIBITS
List of Exhibits
         
Exhibit No.   Description of Document
  10.1    
Aircraft Time Sharing Agreement, dated as of April 14, 2011, between Las Vegas Sands Corp. and Interface Operations, LLC.
  31.1    
Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
  31.2    
Certification of the Chief 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 Chief 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
 
     
*  
Pursuant to Rule 406T of Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections.

 

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Table of Contents

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.
 
 
  By:   /s/ Sheldon G. Adelson    
    Sheldon G. Adelson   


August 9, 2011 
  Chairman of the Board and
Chief Executive Officer 
 
         
  By:   /s/ Kenneth J. Kay    
    Kenneth J. Kay   

August 9, 2011 
  Chief Financial Officer   

 

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