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Las Vegas Sands 10-K 2008 Documents found in this filing:Table of Contents
UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Commission file number
001-32373
Registrant’s telephone
number, including Area code:
(702) 414-1000
Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes þ No o
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant’s
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer
or a small reporting company. See the definitions of “large
accelerated filer,” “accelerated filer” and
“small reporting company” in
Rule 12b-2
of the Exchange Act. (Check one):
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
Act). Yes o No þ
As of June 29, 2007, the last business day of the
registrant’s most recently completed second fiscal quarter,
the aggregate market value of the registrant’s common stock
held by non-affiliates of the registrant was $8,001,585,670
based on the closing sale price on that date as reported on the
New York Stock Exchange.
The Company had 355,352,992 shares of common stock
outstanding as of February 21, 2008.
Las Vegas
Sands Corp.
Table of Contents
PART I
Las Vegas Sands Corp. and its subsidiaries (“we” or
the “Company”) own and operate The Venetian Resort
Hotel Casino (“The Venetian”), The Palazzo Resort
Hotel Casino (“The Palazzo”), The Sands Expo and
Convention Center (“The Sands Expo Center”) and The
Congress Center in Las Vegas, Nevada, and the Sands Macao and
The Venetian Macao Resort Hotel (“The Venetian Macao”)
in Macao, China. We are also creating a master-planned
development of integrated resort properties, anchored by The
Venetian Macao, which we refer to as the Cotai
StripTM
in Macao. In addition, we are developing Marina Bay Sands, an
integrated resort in Singapore, and Sands Bethworks, an
integrated resort in Bethlehem, Pennsylvania. We are exploring
the possibility of developing and operating integrated resorts
in additional Asian and U.S. jurisdictions, and in Europe.
Our
Company
Las Vegas Sands Corp. was incorporated as a Nevada corporation
in August 2004. Our common stock is traded on the New York Stock
Exchange (the “NYSE”) under the symbol
“LVS.” Immediately prior to our initial public
offering in December 2004, we acquired 100% of the capital stock
of Las Vegas Sands, Inc., a Nevada corporation and the direct or
indirect owner and operator of The Venetian, The Sands Expo
Center and Sands Macao, by merging Las Vegas Sands, Inc. with
and into our wholly-owned subsidiary, leaving Las Vegas Sands,
Inc. as the surviving subsidiary. Las Vegas Sands, Inc. was
incorporated in Nevada in April 1988. In July 2005, Las Vegas
Sands, Inc. was converted into a limited liability company and
changed its name to Las Vegas Sands, LLC.
Our principal executive office is located at 3355 Las Vegas
Boulevard South, Las Vegas, Nevada 89109. Our telephone number
at that address is
(702) 414-1000.
Our website address is www.lasvegassands.com. The
information on our website is not part of this Annual Report on
Form 10-K.
Our Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q,
Current Reports on
Form 8-K,
proxy statements and other Securities and Exchange Commission
(“SEC”) filings, and any amendments to those reports
that we file with or furnish to the SEC under the Securities
Exchange Act of 1934 are made available free of charge on our
website as soon as reasonably practicable after they are
electronically filed with, or furnished to, the SEC.
This Annual Report on
Form 10-K
contains certain forward-looking statements. See
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Special Note Regarding Forward-Looking
Statements.”
Our principal operating and developmental activities occur in
three geographic areas: Las Vegas, Macao and Singapore.
Management reviews the results of operations for each of our key
operating segments: The Venetian, which includes The Sands Expo
Center and The Congress Center; The Palazzo; Sands Macao; The
Venetian Macao; and Other Asia (comprised primarily of the ferry
operations). The Company also reviews its construction and
development activities for each of its primary projects: The
Venetian; The Palazzo; Sands Macao; The Venetian Macao; a Four
Seasons hotel and casino development (“The Four Seasons
Macao”); Other Asia (comprised of various other operations
that are ancillary to our properties in Macao); Marina Bay Sands
in Singapore; Other Development Projects (comprised primarily of
our other projects on the Cotai Strip); and Corporate and Other
(comprised primarily of the airplanes and our Sands Bethworks
and Las Vegas condominium projects). See
“Item 8 — Financial Statements and
Supplementary Data — Notes to Consolidated Financial
Statements — Note 15 — Segment
Information.”
Our Las Vegas operations consist of The Venetian, including The
Sands Expo Center and The Congress Center, and The Palazzo. With
the opening of The Palazzo, our Las Vegas properties represent
the world’s largest integrated
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resort with 7,093 suites and approximately 225,000 square
feet of gaming, which includes approximately 260 table games and
3,100 slot machines.
The Venetian has 4,027 suites situated in a 3,014-suite,
35-story three-winged tower rising above the casino and the
1,013-suite, 12-story Venezia tower situated above a parking
garage. The casino at The Venetian has approximately
120,000 square feet of gaming space and includes
approximately 130 table games and 1,700 slot machines.
The Venetian features a variety of amenities for its guests,
including a Paiza
Clubtm;
Canyon Ranch SpaClub, operated by Canyon Ranch; the Guggenheim
Hermitage Museum, an art museum featuring masterpiece
collections from the Guggenheim Museum in New York, the State
Hermitage Museum in St. Petersburg, Russia and other museums;
and a theater/entertainment complex featuring a wide variety of
entertainment. The Venetian also includes an enclosed retail,
dining and entertainment complex of approximately
440,000 square feet (“The Grand Canal Shops”),
which was sold to General Growth Partners (“GGP”) in
2004.
The Palazzo, which partially opened on December 30, 2007,
features modern European ambience and design reminiscent of
Italian affluent living, is situated adjacent to and north of
The Venetian, and is directly connected to The Venetian, The
Sands Expo Center and The Congress Center. The casino at The
Palazzo is approximately 105,000 square feet and has
approximately 130 table games and 1,400 slot machines. The
Palazzo has a 50-floor luxury hotel tower with 3,066 suites and
includes a Canyon Ranch SpaClub; a Paiza Club; an entertainment
center; and an enclosed shopping and dining complex of
approximately 400,000 net leasable square feet (“The
Shoppes at The Palazzo”), which we have contracted to sell
to GGP. We anticipate the transaction to close on
February 29, 2008, or shortly thereafter.
With approximately 1.2 million gross square feet of exhibit
and meeting space, The Sands Expo Center is one of the largest
overall trade show and convention facilities in the United
States (as measured by net leasable square footage). We also own
and operate The Congress Center, an approximately
1.1 million gross square foot meeting and conference
facility that links The Sands Expo Center and the rest of The
Venetian and The Palazzo. Together, we offer approximately
2.3 million gross square feet of state-of-the-art
exhibition and meeting facilities that can be configured to
provide small, mid-size or large meeting rooms
and/or
accommodate large-scale multi-media events or trade shows.
Management believes that these combined facilities, together
with the
on-site
amenities offered by The Venetian and The Palazzo, offer a
flexible and expansive space for large-scale trade shows and
conventions.
Management markets The Congress Center to complement the
operations of The Sands Expo Center for business conferences and
upscale business events typically held during the mid-week
period, thereby generating room-night demand and driving average
daily room rates during the weekday move-in/move-out phases of
The Sands Expo Center’s events. Events at The Sands Expo
Center and The Congress Center typically take place during the
week when Las Vegas hotels and casinos experience lower demand,
unlike weekends and holidays during which occupancy and room
rates are at their peak. Our goal is to draw from attendees and
exhibitors at The Sands Expo Center and The Congress Center to
maintain mid-week demand at our hotels from this higher-budget
market segment, when room demand would otherwise be derived from
the lower-budget
tour-and-travel-group
market segment. In 2007, approximately 1.3 million visitors
attended meetings, trade shows and conventions at The Sands Expo
Center and The Congress Center.
Our Macao operations consist of the Sands Macao, The Venetian
Macao and other ancillary operations that support these
properties.
We own and operate the Sands Macao, the first Las Vegas-style
casino in Macao, pursuant to a
20-year
gaming subconcession. The Sands Macao is situated near the
Macao-Hong Kong Ferry Terminal on a waterfront parcel centrally
located between the Gonbei border gate and the central business
district. This location provides the Sands Macao primary access
to a large customer base, particularly the approximately
9.0 million visitors who arrived in Macao by ferry in 2007.
The Sands Macao includes approximately 229,000 square feet
of gaming space and currently has approximately 630 table games
and 1,350 slot machines or similar electronic gaming devices.
The Sands Macao also includes several restaurants, a spacious
Paiza Club offering services and amenities to premium customers,
luxurious VIP suites and spa facilities, private VIP gaming room
facilities, a theater and other high-end
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services and amenities. We recently opened our new 238-suite
hotel tower, which increased the total number of suites
available to nearly 300.
On August 28, 2007, we opened The Venetian Macao, the
anchor property on our Cotai Strip development, which is located
approximately two miles from Macao’s newly opened Taipa
Temporary Ferry Terminal on Macao’s Taipa Island. The
casino at The Venetian Macao is approximately
550,000 square feet and has approximately 820 table games
and 2,650 slot machines or similar electronic gaming devices,
and a designed capacity of approximately 1,150 table games and
7,000 slot machines or similar electronic gaming devices. The
Venetian Macao, with a theme similar to that of The Venetian,
also features a 39-floor luxury hotel tower with over 2,900
suites; approximately 1.0 million square feet of retail and
dining offerings; a convention center and meeting room complex
of approximately 1.2 million square feet; and a 15,000-seat
arena that has hosted a wide range of entertainment and sporting
events. An 1,800-seat theater is currently scheduled to open in
July 2008 and will feature an original production from Cirque du
Soleil.
Management believes that the convention center and meeting room
complex combined with the
on-site
amenities offered at The Venetian Macao offers a flexible and
expansive space for large-scale trade shows and conventions. We
market The Venetian Macao similar to our Las Vegas properties,
with events at the convention and meeting room complex typically
taking place during the week when hotels and casinos in Macao
normally experience lower demand, unlike weekends and holidays
during which occupancy and room rates are at their peak. Our
goal is to draw from attendees and exhibitors at our convention
and meeting room complex to maintain mid-week demand at our
hotel from this higher-budget market segment.
We are in the early stages of constructing a high-rise
residential condominium tower with approximately
1.0 million saleable square feet that will be situated
between The Palazzo and The Venetian. The condominium tower is
currently expected to open in late 2009 and will be built at an
estimated cost of approximately $600.0 million.
On December 20, 2006, the Pennsylvania Gaming Control Board
announced that our indirect majority-owned subsidiary, Sands
Bethworks Gaming LLC (“Sands Bethworks Gaming”), had
been awarded a Pennsylvania gaming license. Sands Bethworks
Gaming is a project venture in which we effectively own 86% of
the economic interest. In July 2007, we paid a
$50.0 million licensing fee to the Commonwealth of
Pennsylvania, and in August 2007 were issued our gaming license
by the Pennsylvania Gaming Control Board. We are in the process
of developing a gaming, hotel, shopping and dining complex
called Sands Bethworks, located on the site of the Historic
Bethlehem Steel Works in Bethlehem, Pennsylvania, which is about
70 miles from midtown Manhattan, New York. The
124-acre
development is expected to feature a 300-room hotel,
200,000 square feet of retail space, up to 5,000 slot
machines, a 50,000-square-foot multipurpose event center and a
variety of dining options. We will own the property through our
joint venture with Bethworks Now, LLC, which has yet to
contribute the land in the joint venture. We expect the
contribution to take place in 2008; however, no assurances can
be given as to the timing of the contribution. If the land is
not contributed as required under our agreement with Bethworks
Now, LLC, we could lose all or a substantial part of our
$116.9 million investment in Sands Bethworks as of
December 31, 2007. Sands Bethworks is currently expected to
open in summer 2009 and will be built at an estimated cost of
approximately $600.0 million.
We have submitted development plans to the Macao government for
six integrated resort developments, in addition to The Venetian
Macao, on an area of approximately 200 acres located on the
Cotai Strip (which we refer to as parcels 2, 3, 5, 6, 7 and 8).
The developments are expected to include hotels, exhibition and
conference facilities, casinos, showrooms, shopping malls, spas,
restaurants, entertainment facilities and other attractions and
amenities, as well as public common areas. We have commenced
construction or pre-construction for these six parcels on the
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Cotai Strip, and we plan to own and operate all of the casinos
in these developments under our Macao gaming subconcession. More
specifically, we intend to develop our other Cotai Strip
properties as follows:
The Four Seasons Macao is currently planned to feature
approximately 130 table games and 225 slot machines. The casinos
on parcels 3, 5, 6, 7 and 8 are currently planned to include a
total of approximately 2,025 table games and 9,250 slot
machines. Upon completion, our developments on the Cotai Strip
(including The Venetian Macao) are currently planned to feature
approximately 19,750 suites/rooms and 1.6 million square
feet of gaming space with a capacity of approximately 3,300
table games and 16,470 slot machines.
Currently, we expect the total cost to build our developments on
the Cotai Strip to be approximately $12.0 billion, which
includes the cost of constructing The Venetian Macao. As of
December 31, 2007, we have capitalized $2.91 billion
in costs on the Cotai Strip. We will need to arrange additional
debt and/or
equity financing to finance the balance of those costs and there
is no assurance that we will be able to obtain all the
additional financing required.
We have received a concession from the Macao government to build
on parcels 1, 2 and 3 on the Cotai Strip, including the site on
which we own and operate The Venetian Macao (parcel 1) and
the site on which we are building The Four Seasons Macao (parcel
2). We do not own these land sites in Macao. However, the land
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concession, which has a term of 25 years and is renewable
at our option, grants us exclusive use of the land. As specified
in the land concession, we are required to pay premiums, which
are payable over four years or are due upon the completion of
the corresponding resort, as well as annual rent for the term of
the land concession.
We do not yet have all the necessary Macao government approvals
that we will need in order to develop all of our planned Cotai
Strip developments. We have commenced construction or
pre-construction for the projects on parcels 5, 6, 7 and 8 on
the Cotai Strip for which we have not yet been granted land
concessions. We are in the process of negotiating with the Macao
government to obtain the land concession for parcels 5 and 6,
and will subsequently negotiate the land concessions for parcels
7 and 8. If we do not obtain land concessions, we could forfeit
all or a substantial part of our $623.0 million in
capitalized construction costs related to these developments as
of December 31, 2007.
We have entered into a non-binding letter of intent with the
Zhuhai Municipal People’s Government of the People’s
Republic of China to work together to create a master plan for,
and develop, a leisure and convention destination resort on
Hengqin Island, which is located within mainland China,
approximately one mile from the Cotai Strip. In January 2007, we
were informed that the Zhuhai Government established a Project
Coordination Committee to act as a government liaison empowered
to work directly with us to advance the development of the
project. We have interfaced with this committee and are working
actively with the committee as we continue to advance our plans.
The project remains subject to a number of conditions, including
further governmental approvals.
In August 2006, our wholly-owned subsidiary, Marina Bay Sands
Pte. Ltd. (“MBS”), entered into a development
agreement (the “Development Agreement”) with the
Singapore Tourism Board (the “STB”) to build and
operate an integrated resort called the Marina Bay Sands in
Singapore. The Marina Bay Sands is expected to include three 50+
story hotel towers (totaling approximately 2,700 rooms), a
casino, an enclosed retail, dining and entertainment complex of
approximately 850,000 net leasable square feet, a
convention center and meeting room complex of approximately
1.2 million square feet, theaters and a landmark iconic
structure at the bay-front promenade that contains an
art/science museum. Although construction has started on the
Marina Bay Sands, we are continuing to work with the Singapore
government to finalize various design aspects of the integrated
resort and are in the process of finalizing our cost estimates
for the project. We expect the cost to design, develop and
construct the Marina Bay Sands will be in excess of
$4.0 billion, inclusive of payments made in 2006 for land
premium, taxes and other fees. The Marina Bay Sands is expected
to open in late 2009.
The United Kingdom government announced that the approval for
the country’s first regional super casino had been
rescinded. Should the government approve an alternative super
casino site, we intend to evaluate the efficacy of participating
in the tender process for that site. In addition, we have an
existing agreement to develop and lease a gaming and
entertainment facility with the Glasgow Rangers football club in
the United Kingdom. Our ability to eventually develop and lease
a gaming and entertainment facility under the agreement is
subject to a number of conditions, including the passage of
appropriate legislation and our ability to obtain a gaming
license.
We are currently exploring the possibility of developing and
operating additional properties, including integrated resorts,
in additional Asian and U.S. jurisdictions, and in Europe.
In December 2007, we submitted applications to the Kansas
Lottery Commission for a gaming license and if we are
successful, we plan to develop a casino resort in the Kansas
City, Kansas, metropolitan area.
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The hotel/casino industry is highly competitive. Hotels on the
Las Vegas Strip compete with other hotels on and off the Las
Vegas Strip, including hotels in downtown Las Vegas. Competitors
of The Venetian and The Palazzo include resorts on the Las Vegas
Strip, such as the Bellagio, Mandalay Bay, Wynn Las Vegas and
Caesars Palace, and properties off the Las Vegas Strip. Several
large projects also are expected to open in the next several
years. Some of these facilities are or will be operated by
companies that may have significant name recognition and
financial and marketing resources, and may target the same
demographic groups as we do. We also compete with legalized
gaming from casinos located on Native American tribal lands. The
proliferation of gaming in California and other areas located in
the same region as The Venetian and The Palazzo could have an
adverse effect on our financial condition, results of operations
or cash flows.
Our Las Vegas hotel/casino operations also compete, to some
extent, with other hotel/casino facilities in Nevada and in
Atlantic City, hotel/casino and other resort facilities
elsewhere in the country and the world, Internet gaming websites
and state lotteries. In addition, certain states have legalized,
and others may legalize, casino gaming in specific areas. The
continued proliferation of gaming venues could significantly and
adversely affect our business. In particular, the legalization
of casino gaming in or near major metropolitan areas from which
we traditionally attract customers could have a material adverse
effect on our business. The current global trend toward
liberalization of gaming restrictions and the resulting
proliferation of gaming venues could result in a decrease in the
number of visitors to our Las Vegas facilities, which could
adversely effect our financial condition, results of operations
or cash flows.
Las Vegas generally competes with trade show and convention
facilities located in and around major U.S. cities. Within
Las Vegas, The Sands Expo Center and The Congress Center compete
with the Las Vegas Convention Center (the “LVCC”),
which is located off the Las Vegas Strip and currently has
approximately 3.2 million gross square feet of convention
and exhibit facilities. A major expansion project for the LVCC
is expected to be completed in 2010. In addition to the LVCC,
Mandalay Bay, MGM Grand Hotel and Casino, Mirage and Wynn Las
Vegas have convention and conference facilities that are The
Congress Center’s primary Las Vegas competition. Several
large projects, which are expected to open in the next several
years, may include additional convention and conference
facilities.
To the extent that any of the competitors of The Venetian and
The Palazzo can offer a hotel/casino experience that is
integrated with substantial trade show and convention,
conference and meeting facilities, our competitive advantage in
attracting trade show and convention, conference and meeting
attendees could be adversely affected. In addition, other
American cities are in the process of developing, or have
announced plans to develop, convention center and other meeting,
trade and exhibition facilities that may compete with ours.
Macao is regarded as the largest and fastest-growing gaming
market in the world and benefits from being the only market in
China to offer legalized casino gaming.
In May 2004, Sands Macao became the first Las Vegas-style casino
to open in Macao and with our opening of The Venetian Macao in
August 2007, we believe that our high-quality gaming product has
enabled us to capture a meaningful share of the overall market,
including the VIP player market segment, in Macao.
Gaming revenues in Macao in 2007 reached a record
$10.3 billion, a 46.6% increase over 2006. Visits to Macao
were up 22.7% in 2007, when compared to 2006. According to Macao
government statistics, during 2007 (through November), 21.4% of
visitors traveling to Macao stayed overnight in hotels and
guestrooms and, for those who stayed overnight in hotels and
guestrooms, the average length of stay was between 1 and 2
nights. We expect this length of stay to increase with increased
visitation, the expansion of gaming and non-gaming amenities
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including retail, entertainment, meeting and convention facility
offerings, and the addition of upscale hotel resort
accommodations in Macao.
Table games are the dominant form of gaming in Asia with
baccarat being the most popular game, followed by other
traditional U.S. and Asian games. Slot machines are offered
in Macao, but the structure of the gaming market in Macao has
historically favored table gaming. However, with the increase in
the mass gaming market in Macao, slot machines of international
standards are becoming an important feature of the market. We
expect the slot machine business to grow in Macao and we intend
to continue to introduce more modern and popular products that
appeal to the Asian marketplace.
We believe that as new facilities and standards of service are
introduced, Macao will become an even more desirable tourist
destination. The improved experience of visitors to Macao should
lead to longer stays, an increased number of return trips from
existing feeder markets and the opening of several new feeder
markets. In addition, we believe that a wealthier Chinese middle
class will lead to increased travel to Macao and generate
increased demand for gaming, entertainment and resort offerings.
We also believe that the combination of less onerous travel
restrictions, the greater ability of Chinese citizens to bring
renminbi (the Chinese currency) to Macao, increasing regional
wealth and the opening of world-class facilities will transform
Macao to a
multi-day
travel destination similar to Las Vegas.
Approximately 1.0 billion people are estimated to live
within a
three-hour
flight from Macao and approximately 3.0 billion people are
estimated to live within a
five-hour
flight from Macao. According to Macao government statistics,
85.4% of the tourists who visited Macao in 2007 came from Hong
Kong or mainland China and the dominant feeder markets to Macao
have been, and continue to be, Hong Kong and China. Although the
total number of visitors from Hong Kong continues to grow, that
market has shrunk as a percentage of the total visitor
distribution from 44.2% in 2002 to 30.3% in 2007, while visitors
from mainland China made up 55.1% of total visitors to Macao in
2007. Until recently, mainland Chinese were permitted to visit
Macao only as part of a tour group. Now that these travel
restrictions have eased for mainland Chinese from most urban
centers and economically developed regions, individual travel to
Macao is expected to increase, generating increased demand for
casino offerings.
Gaming customers from Hong Kong, southeast China, Taiwan and
other locations in Asia can reach Macao in a relatively short
period of time, using a variety of methods of transportation,
and visitors from more distant locations in Asia can take
advantage of short travel times by air to Macao, Zhuhai,
Shenzhen, Guangzhou or to Hong Kong (followed by a road, ferry
or helicopter trip to Macao). In addition, numerous carriers fly
directly into Macao International Airport from many major cities
in Asia. The relatively easy access from major population
centers promotes Macao as a popular gaming destination in Asia.
Macao draws a significant number of gaming customers from both
visitors to and residents of Hong Kong. One of the major methods
of transportation to Macao from Hong Kong is the jetfoil ferry
service, including our ferry service, The Cotai Strip
CotaiJettm,
which we opened in late 2007. Macao is also accessible from Hong
Kong by helicopter. In addition, the proposed bridge linking
Hong Kong, Macao and Zhuhai is expected to reduce the travel
time between central Hong Kong and Macao. The bridge is expected
be completed sometime between 2012 and 2015.
The Macao pataca and the Hong Kong dollar are linked to each
other and, in many cases, are used interchangeably in Macao.
However, currency exchange controls and restrictions on the
export of currency by certain countries may negatively impact
the success of our operations. For example, there are currently
existing currency exchange controls and restrictions on the
export of the renminbi. In addition, restrictions on the export
of the renminbi may impede the flow of gaming customers from
China to Macao, inhibit the growth of gaming in Macao and
negatively impact our gaming operations.
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Gaming in Macao is administered through government-sanctioned
concessions awarded to three different concessionaires and three
subconcessionaires, of which we are one. The Macao government is
precluded by contract from granting any additional gaming
concessions until 2009. In addition, the current laws only
permit three gaming concessions, although future subconcessions
are permitted. However, the laws could change and permit the
Macao government to grant additional gaming concessions before
2009. If the Macao government were to allow additional
competitors to operate in Macao through the grant of additional
concessions or subconcessions, we would face additional
competition, which could have a material adverse effect on our
financial condition, results of operations or cash flows.
SJM, controlled by Stanley Ho, holds one of the three
concessions and currently operates 19 facilities throughout
Macao. Historically, SJM was the only gaming operator in Macao,
with over 40 years of operating experience in Macao. Many
of its 19 casinos are relatively small facilities that are
offered as amenities in hotels; however, a number are large
operations enjoying significant recognition by gaming customers
in the marketplace. SJM was obligated to invest at least
approximately 4.7 billion patacas (approximately
$584.6 million at exchange rates in effect on
December 31, 2007) by March 31, 2009, under its
concession agreement with the government of Macao. SJM’s
projects include the Grand Lisboa; the Fisherman’s Wharf
entertainment complex, which opened in December 2005; and other
projects. In addition, MGM MIRAGE has entered into a joint
venture agreement with Stanley Ho’s daughter, Pansy Ho
Chiu-king, to develop, build and operate two major hotel/casino
resorts in Macao. In April 2005, MGM Grand Paradise Limited
obtained a subconcession allowing it to conduct gaming
operations in Macao. The MGM Grand Macau opened in December 2007
and features approximately 600 rooms, 375 table games, 900 slot
machines, restaurants and entertainment amenities.
Galaxy Casino Company Limited (“Galaxy”) holds a
concession and has the ability to operate casino properties
independent of us. Galaxy was obligated to invest at least
4.4 billion patacas (approximately $547.3 million at
exchange rates in effect on December 31, 2007) by June
2012 under its concession agreement with the government of
Macao. Galaxy currently operates five casinos in Macao,
including StarWorld Hotel, which opened in October 2006 and has
over 500 hotel rooms and a 140,000 square foot gaming floor
with approximately 260 table games and 500 slot machines.
Wynn Resorts (Macau), S.A. (“Wynn Macau”), a
subsidiary of Wynn Resorts Limited, holds the third concession.
Wynn Macau opened in September 2006 and expanded the property in
late 2007. Wynn Macau now includes an approximately 600-room
hotel, a casino and other non-gaming amenities. In 2006, Wynn
Macau sold its subconcession right under its gaming concession
to an affiliate of Publishing and Broadcasting Limited
(“PBL”). The subconcession right permitted the PBL
affiliate to receive a gaming subconcession from the Macao
government. In May 2007, a PBL affiliate opened the Crown Macau,
which includes an approximately 216-room hotel, a casino and
other non-gaming amenities.
Our Macao operations will also face competition from casinos
located in other areas of Asia, such as the major gaming and
resort destination Genting Highlands Resort, located outside of
Kuala Lumpur, Malaysia and casinos in South Korea and the
Philippines, as well as pachinko and pachislot parlors in Japan.
We will also encounter competition from other major gaming
centers worldwide.
We advertise in many types of media, including television,
radio, newspapers, magazines and billboards, to promote general
market awareness of our properties as unique vacation, business
and convention destinations due to our first-class hotels,
casinos, retail stores, restaurants and other amenities. We
actively engage in direct marketing as allowed in various
geographic regions, which is targeted at specific market
segments, including the premium slot and table games markets.
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Regulation
and Licensing
State
of Nevada
The ownership and operation of casino gaming facilities in the
State of Nevada are subject to the Nevada Gaming Control Act and
the regulations promulgated thereunder (collectively, the
“Nevada Act”) and various local regulations. Our
gaming operations are also subject to the licensing and
regulatory control of the Nevada Gaming Commission (the
“Nevada Commission”), the Nevada Gaming Control Board
(the “Nevada Board”) and the Clark County Liquor and
Gaming Licensing Board (the “CCLGLB” and together with
the Nevada Commission and the Nevada Board, the “Nevada
Gaming Authorities”).
The laws, regulations and supervisory procedures of the Nevada
Gaming Authorities are based upon declarations of public policy
that are concerned with, among other things:
Any change in such laws, regulations and procedures could have
an adverse effect on our Las Vegas operations.
Las Vegas Sands, LLC is licensed by the Nevada Gaming
Authorities to operate both The Venetian and The Palazzo as a
single resort hotel as set forth in the Nevada Act. The gaming
license requires the periodic payment of fees and taxes and is
not transferable. Las Vegas Sands, LLC is also registered as an
intermediary company of Venetian Casino Resort, LLC. Venetian
Casino Resort, LLC is licensed as a manufacturer and distributor
of gaming devices. Las Vegas Sands, LLC and Venetian Casino
Resort, LLC are collectively referred to as the “licensed
subsidiaries.” Las Vegas Sands Corp. is registered with the
Nevada Commission as a publicly-traded corporation (the
“registered corporation”). As such, we must
periodically submit detailed financial and operating reports to
the Nevada Gaming Authorities and furnish any other information
that the Nevada Gaming Authorities may require. No person may
become a stockholder of, or receive any percentage of the
profits from, the licensed subsidiaries without first obtaining
licenses and approvals from the Nevada Gaming Authorities.
Additionally, the CCLGLB has taken the position that it has the
authority to approve all persons owning or controlling the stock
of any corporation controlling a gaming licensee. We, and the
licensed subsidiaries, possess all state and local government
registrations, approvals, permits and licenses required in order
for us to engage in gaming activities at The Venetian and The
Palazzo.
The Nevada Gaming Authorities may investigate any individual who
has a material relationship to or material involvement with us
or the licensed subsidiaries to determine whether such
individual is suitable or should be licensed as a business
associate of a gaming licensee. Officers, directors and certain
key employees of the licensed subsidiaries must file
applications with the Nevada Gaming Authorities and may be
required to be licensed by the Nevada Gaming Authorities. Our
officers, directors and key employees who are actively and
directly involved in the gaming activities of the licensed
subsidiaries may be required to be licensed or found suitable by
the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for
licensing or a finding of suitability for any cause they deem
reasonable. A finding of suitability is comparable to licensing;
both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant
for licensing or a finding of suitability, or the gaming
licensee by whom the applicant is employed or for whom the
applicant serves, must pay all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada
Gaming Authorities, and in addition to their authority to deny
an application for a finding of suitability or licensure, the
Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
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If the Nevada Gaming Authorities were to find an officer,
director or key employee unsuitable for licensing or to have an
inappropriate relationship with us or the licensed subsidiaries,
we would have to sever all relationships with such person. In
addition, the Nevada Commission may require us or the licensed
subsidiaries to terminate the employment of any person who
refuses to file appropriate applications. Determinations of
suitability or questions pertaining to licensing are not subject
to judicial review in Nevada.
We, and the licensed subsidiaries, are required to submit
periodic detailed financial and operating reports to the Nevada
Commission. Substantially all of our and our licensed
subsidiaries’ material loans, leases, sales of securities
and similar financing transactions must be reported to or
approved by the Nevada Commission.
If it were determined that we or a licensed subsidiary violated
the Nevada Act, the registration and gaming licenses we then
hold could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory
procedures. In addition, we and the persons involved could be
subject to substantial fines for each separate violation of the
Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be appointed by the Nevada Commission to
operate the casinos, and, under certain circumstances, earnings
generated during the supervisor’s appointment (except for
the reasonable rental value of the casinos) could be forfeited
to the State of Nevada. Limitation, conditioning or suspension
of any gaming registration or license or the appointment of a
supervisor could (and revocation of any gaming license would)
materially adversely affect our gaming operations.
Any beneficial holder of our voting securities, regardless of
the number of shares owned, may be required to file an
application, be investigated, and have its suitability as a
beneficial holder of our voting securities determined if the
Nevada Commission has reason to believe that such ownership
would otherwise be inconsistent with the declared policies of
the State of Nevada. The applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of
our voting securities to report the acquisition to the Nevada
Commission. The Nevada Act requires that beneficial owners of
more than 10% of our voting securities apply to the Nevada
Commission for a finding of suitability within thirty days after
the Chairman of the Nevada Board mails the written notice
requiring such filing. Under certain circumstances, an
“institutional investor” as defined in the Nevada Act,
which acquires more than 10% but not more than 15% of our voting
securities, may apply to the Nevada Commission for a waiver of
such finding of suitability if such institutional investor holds
the voting securities only for investment purposes.
An institutional investor will be deemed to hold voting
securities only for investment purposes if it acquires and holds
the voting securities in the ordinary course of business as an
institutional investment and not for the purpose of causing,
directly or indirectly, the election of a majority of the
members of our board of directors, any change in our corporate
charter, by-laws, management, policies or our operations or any
of our gaming affiliates, or any other action which the Nevada
Commission finds to be inconsistent with holding our voting
securities only for investment purposes. Activities that are
deemed consistent with holding voting securities only for
investment purposes include:
If the beneficial holder of voting securities who must be found
suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of
beneficial owners. If the beneficial holder of nonvoting
securities who must be licensed or found suitable is a
corporation, partnership or trust, it must submit detailed
business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of
investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty days after being ordered
to do so by the Nevada Commission or the Chairman of the Nevada
Board may be found unsuitable. The same restrictions apply to a
record owner if the record owner, after request, fails to
identify the beneficial owner.
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Any stockholder found unsuitable and who holds, directly or
indirectly, any beneficial ownership of the common stock of a
registered corporation beyond such period of time as may be
prescribed by the Nevada Commission may be guilty of a criminal
offense. We are subject to disciplinary action if, after we
receive notice that a person is unsuitable to be a stockholder
or to have any other relationship with us or a licensed
subsidiary, we, or any of the licensed subsidiaries:
Our charter documents include provisions intended to help us
comply with these requirements.
The Nevada Commission may, in its discretion, require the holder
of any debt security of a registered corporation to file an
application, be investigated and be found suitable to own the
debt security of such registered corporation. If the Nevada
Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the registered
corporation can be sanctioned, including the loss of its
approvals, if without the prior approval of the Nevada
Commission, it:
We are required to maintain a current stock ledger in Nevada
that may be examined by the Nevada Gaming Authorities at any
time. If any securities are held in trust by an agent or by a
nominee, the record holder may be required to disclose the
identity of the beneficial owner to the Nevada Gaming
Authorities and we are also required to disclose the identity of
the beneficial owner to the Nevada Gaming Authorities. A failure
to make such disclosure may be grounds for finding the record
holder unsuitable. We are also required to render maximum
assistance in determining the identity of the beneficial owner.
The Nevada Commission has the power to require our stock
certificates to bear a legend indicating that such securities
are subject to the Nevada Act. However, to date, the Nevada
Commission has not imposed such a requirement on us.
We cannot make a public offering of any securities without the
prior approval of the Nevada Commission if the securities or the
proceeds from the offering are intended to be used to construct,
acquire or finance gaming facilities in Nevada, or to retire or
extend obligations incurred for such purposes. On
November 16, 2006, the Nevada Commission granted us prior
approval to make public offerings for a period of two years,
subject to certain conditions (the “shelf approval”).
The shelf approval includes prior approval by the Nevada
Commission permitting us to place restrictions on the transfer
of the membership interests and to enter into agreements not to
encumber the membership interests of Las Vegas Sands, LLC.
However, the shelf approval may be rescinded for good cause
without prior notice upon the issuance of an interlocutory stop
order by the Chairman of the Nevada Board. The shelf approval
does not constitute a finding, recommendation, or approval by
the Nevada Commission or the Nevada Board as to the investment
merits of any securities offered under the shelf approval. Any
representation to the contrary is unlawful.
Changes in our control through a merger, consolidation, stock or
asset acquisition, management or consulting agreement, or any
act or conduct by any person whereby he or she obtains control,
shall not occur without the prior approval of the Nevada
Commission. Entities seeking to acquire control of a registered
corporation must satisfy the Nevada Board and the Nevada
Commission concerning a variety of stringent standards prior to
assuming control of such registered corporation. The Nevada
Commission may also require controlling stockholders, officers,
directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be
investigated and licensed as part of the approval process of the
transaction.
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The Nevada legislature has declared that some corporate
acquisitions opposed by management, repurchases of voting
securities and corporate defense tactics affecting Nevada gaming
licensees, and registered corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming. The Nevada Commission has established a
regulatory scheme to ameliorate the potentially adverse effects
of these business practices upon Nevada’s gaming industry
and to further Nevada’s policy to:
Approvals are, in certain circumstances, required from the
Nevada Commission before we can make exceptional repurchases of
voting securities above the current market price thereof and
before a corporate acquisition opposed by management can be
consummated.
The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the board of directors in response
to a tender offer made directly to the registered
corporation’s stockholders for the purposes of acquiring
control of the registered corporation.
License fees and taxes, computed in various ways depending upon
the type of gaming or activity involved, are payable to the
State of Nevada and to Clark County, Nevada. Depending upon the
particular fee or tax involved, these fees and taxes are payable
monthly, quarterly or annually and are based upon:
The tax on gross revenues received is generally 6.75%. In
addition, an excise tax is paid by us on charges for admission
to any facility where certain forms of live entertainment are
provided. Venetian Casino Resort, LLC, is also required to pay
certain fees and taxes to the State of Nevada as a licensed
manufacturer and distributor.
Any person who is licensed, required to be licensed, registered,
required to be registered, or under common control with such
persons (collectively, “licensees”), and who proposes
to become involved in a gaming operation outside of Nevada, is
required to deposit with the Nevada Board, and thereafter
maintain, a revolving fund in the amount of $10,000 to pay the
expenses of any investigation by the Nevada Board into their
participation in such foreign gaming operation. The revolving
fund is subject to increase or decrease at the discretion of the
Nevada Commission. Thereafter, licensees are also required to
comply with certain reporting requirements imposed by the Nevada
Act. Licensees are also subject to disciplinary action by the
Nevada Commission if they knowingly violate any laws of any
foreign jurisdiction pertaining to such foreign gaming
operation, fail to conduct such foreign gaming operation in
accordance with the standards of honesty and integrity required
of Nevada gaming operations, engage in activities that are
harmful to the State of Nevada or its ability to collect gaming
taxes and fees, or employ a person in such foreign operation who
has been denied a license or a finding of suitability in Nevada
on the ground of personal unsuitability or who has been found
guilty of cheating at gambling.
The sale of alcoholic beverages by the licensed subsidiaries on
the casino premises and The Sands Expo Center is subject to
licensing, control and regulation by the applicable local
authorities. Our licensed subsidiaries have obtained the
necessary liquor licenses to sell alcoholic beverages. All
licenses are revocable and are not transferable. The agencies
involved have full power to limit, condition, suspend or revoke
any such licenses, and any such disciplinary action could (and
revocation of such licenses would) have a material adverse
effect upon our operations.
Sands Bethworks Gaming is subject to the rules and regulations
promulgated by the Pennsylvania Gaming Control Board, the
Pennsylvania State Police and other agencies (collectively, the
“PaGCB”).
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On December 20, 2006, we were awarded one of two category 2
“at large” gaming licenses available in Pennsylvania,
and a location in the Pocono Mountains was awarded the other
category 2 “at large” license. On the same day, two
category 2 licenses were awarded to applicants for locations in
Philadelphia, one category 2 license was awarded to an applicant
in Pittsburgh, and six race tracks were awarded permanent
category 1 licenses. The principal difference between category 1
and category 2 licenses is that the former is available only to
certain race tracks. A category 1 or category 2 licensee is
authorized to open with up to 3,000 slot machines and to
increase to up to 5,000 slot machines upon approval of the
PaGCB, which may not take effect earlier than six months after
opening. In July 2007, we paid a $50.0 million licensing
fee to the Commonwealth of Pennsylvania, and in August 2007 were
issued our gaming license by the Pennsylvania Gaming Control
Board. Just prior to the opening of Sands Bethworks, we will be
required to make a deposit of $5.0 million to cover weekly
withdrawals of our appropriate share of the cost of regulation
and the amount withdrawn must be replenished weekly.
We must notify the PaGCB if we become aware of any proposed or
contemplated change of control including more than 5% of the
ownership interests of Sands Bethworks Gaming or of more than 5%
of the ownership interests of any entity that owns, directly or
indirectly, at least 20% of Sands Bethworks Gaming, including
Las Vegas Sands Corp. The acquisition by a person or a group of
persons acting in concert of more than 20% of the ownership
interests of Sands Bethworks Gaming or of any entity that owns,
directly or indirectly, at least 20% of Sands Bethworks Gaming
with the exception of the ownership interest of a person at the
time of the original licensure when the license fee was paid,
would be defined as a change of control under applicable
Pennsylvania gaming law and regulations. Upon a change of
control, the acquirer of the ownership interests would be
required to qualify for licensure and to pay a new license fee
of $50.0 million. The PaGCB retains the discretion to
eliminate the need for qualification and may reduce the license
fee upon a change of control. The PaGCB may provide up to
120 days for any person who is required to apply for a
license and who is found not qualified to completely divest the
person’s ownership interest.
Any person who acquires beneficial ownership of 5% or more of
our voting securities will be required to apply to the PaGCB for
licensure, obtain licensure and remain licensed. Licensure
requires, among other things, that the applicant establish by
clear and convincing evidence the applicant’s good
character, honesty and integrity. Additionally, any trust that
holds 5% or more of our voting securities is required to be
licensed by the PaGCB and each individual who is a grantor,
trustee or beneficiary of the trust is also required to be
licensed by the PaGCB. Under certain circumstances, an
“institutional investor” as defined under the
regulations of the PaGCB, which acquires beneficial ownership of
10% or more, but less than 15% of our voting securities, may not
be required to be licensed by the PaGCB. In addition, any
beneficial owner of our voting securities, regardless of the
number of shares beneficially owned, may be required at the
discretion of the PaGCB to file an application for licensure.
In the event a security holder is required to be found qualified
and is not found qualified, the security holder may be required
by the PaGCB to divest of the interest at a price not exceeding
the cost of the interest.
In June 2002, the Macao government granted a concession to
operate casinos in Macao to Galaxy. Galaxy was one of three
entities to be granted a casino license in Macao. During
December 2002, we entered into a subconcession agreement with
Galaxy, which was approved by the Macao government. The
subconcession agreement allows us to develop and operate certain
casino projects in Macao, including Sands Macao and The Venetian
Macao, separately from Galaxy. Under the subconcession
agreement, we were obligated to develop and open The Venetian
Macao and a convention center by December 2007, which we did. We
are also obligated to operate casino games of chance or games of
other forms in Macao and are required to invest, or cause to be
invested, at least 4.4 billion patacas (approximately
$547.3 million at exchange rates in effect on
December 31, 2007) in various development projects in
Macao by June 2009, which have been fulfilled as of
December 31, 2007.
If the Galaxy concession is terminated for any reason, our
subconcession will remain in effect. The subconcession may be
terminated by agreement between ourselves and Galaxy. Galaxy is
not entitled to terminate the subconcession unilaterally.
However, the Macao government, with the consent of Galaxy, may
terminate the subconcession under certain circumstances. Galaxy
will develop hotel and casino projects separately from us.
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We are subject to licensing and control under applicable Macao
law and are required to be licensed by the Macao gaming
authorities to operate a casino. We must pay periodic fees and
taxes, and our gaming license is not transferable. We must
periodically submit detailed financial and operating reports to
the Macao gaming authorities and furnish any other information
that the Macao gaming authorities may require. No person may
acquire any rights over the shares or assets of Venetian Macau
Limited and its subsidiaries (“VML”) without first
obtaining the approval of the Macao gaming authorities.
Similarly, no person may enter into possession of its premises
or operate them through a management agreement or any other
contract or through step in rights without first obtaining the
approval of, and receiving a license from, the Macao gaming
authorities. The transfer or creation of encumbrances over
ownership of shares representing the share capital of VML or
other rights relating to such shares, and any act involving the
granting of voting rights or other stockholders’ rights to
persons other than the original owners, would require the
approval of the Macao government and the subsequent report of
such acts and transactions to the Macao gaming authorities.
Our subconcession agreement requires approval of the Macao
government for transfers of shares, or of any rights over such
shares, in any of the direct or indirect stockholders in VML,
including us, provided that such shares or rights are, directly
or indirectly, equivalent to an amount that is equal or higher
than 5% of the share capital in VML. This approval requirement
will not apply, however, if the securities are listed and
tradable on a stock market. In addition, this agreement requires
that the Macao government be given notice of the creation of any
encumbrance or the grant of voting rights or other
stockholder’s rights to persons other than the original
owners on shares in any of the direct or indirect stockholders
in VML, including us, provided that such shares or rights are
indirectly equivalent to an amount that is equal or higher than
5% of the share capital in VML. This notice requirement will not
apply, however, to securities listed and tradable on a stock
exchange.
The Macao gaming authorities may investigate any individual who
has a material relationship to, or material involvement with, us
to determine whether our suitability
and/or
financial capacity is affected by this individual. Our
shareholders with 5% or more of the share capital, directors and
some of our key employees must apply for and undergo a finding
of suitability process and maintain due qualification during the
subconcession term, and accept the persistent and long-term
inspection and supervision exercised by the Macao government.
VML is required to immediately notify the Macao government
should VML become aware of any fact that may be material to the
appropriate qualification of any shareholder who owns 5% of the
share capital, or any director or key employee. Changes in
licensed positions must be reported to the Macao gaming
authorities, and in addition to their authority to deny an
application for a finding of suitability or licensure, the Macao
gaming authorities have jurisdiction to disapprove a change in
corporate position. If the Macao gaming authorities were to find
one of our officers, directors or key employees unsuitable for
licensing, we would have to sever all relationships with that
person. In addition, the Macao gaming authorities may require us
to terminate the employment of any person who refuses to file
appropriate applications.
Any person who fails or refuses to apply for a finding of
suitability after being ordered to do so by the Macao gaming
authorities may be found unsuitable. Any stockholder found
unsuitable and who holds, directly or indirectly, any beneficial
ownership of the common stock of a registered corporation beyond
the period of time prescribed by the Macao gaming authorities
may lose their rights to the shares. We will be subject to
disciplinary action if, after we receive notice that a person is
unsuitable to be a stockholder or to have any other relationship
with us, we:
The Macao gaming authorities also have the authority to approve
all persons owning or controlling the stock of any corporation
holding a gaming license.
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The Macao gaming authorities also require prior approval for the
creation of liens and encumbrances over VML’s assets and
restrictions on stock in connection with any financing.
The Macao gaming authorities must give their prior approval to
changes in control of VML through a merger, consolidation, stock
or asset acquisition, management or consulting agreement or any
act or conduct by any person whereby he or she obtains control.
Entities seeking to acquire control of a registered corporation
must satisfy the Macao gaming authorities concerning a variety
of stringent standards prior to assuming control. The Macao
Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material
relationship or involvement with the entity proposing to acquire
control, to be investigated and licensed as part of the approval
process of the transaction.
The Macao gaming authorities may consider that some management
opposition to corporate acquisitions, repurchases of voting
securities and corporate defense tactics affecting Macao gaming
licensees, and registered corporations that are affiliated with
those operations, may be injurious to stable and productive
corporate gaming.
The Macao gaming authorities also have the power to supervise
gaming licensees in order to:
The subconcession agreement requires the Macao gaming
authorities’ prior approval of any recapitalization plan
proposed by VML’s board of directors. The Chief Executive
of Macao could also require VML to increase its share capital if
he deemed it necessary.
The Macao government also has the right, after consultation with
Galaxy, to unilaterally terminate the subconcession agreement at
any time upon the occurrence of specified events of default,
including:
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In addition, we must comply with various covenants and other
provisions under the subconcession, including obligations to:
The subconcession agreement also allows the Macao government to
request various changes in the plans and specifications of our
Macao properties and to make various other decisions and
determinations that may be binding on us. For example, the Macao
government has the right to require that we contribute
additional capital to our Macao subsidiaries or that we provide
certain deposits or other guarantees of performance in any
amount determined by the Macao government to be necessary. VML
is limited in its ability to raise additional capital by the
need to first obtain the approval of the Macao gaming and
governmental authorities before raising certain debt or equity.
If our subconcession is terminated, all of our casino gaming
operations and related equipment in Macao would be automatically
transferred to the Macao government without compensation to us
and we would cease to generate any revenues from these
operations. In many of these instances, the subconcession
agreement does not provide a specific cure period within which
any such events may be cured and, instead, we would rely on
consultations and negotiations with the Macao government to give
us an opportunity to remedy any such default.
The Sands Macao and The Venetian Macao are being operated under
our subconcession agreement. This subconcession excludes the
following gaming activities: mutual bets, lotteries, raffles,
interactive gaming and games of chance or other gaming, betting
or gambling activities on ships or planes. Our subconcession is
exclusively governed by Macao law. We are subject to the
exclusive jurisdiction of the courts of Macao in case of any
dispute or conflict relating to our subconcession.
Our subconcession agreement expires on June 26, 2022.
Unless our subconcession is extended, on that date, all our
casino operations and related equipment in Macao will
automatically be transferred to the Macao government without
compensation to us and we will cease to generate any revenues
from these operations. Beginning on December 26, 2017, the
Macao government may redeem our subconcession by giving us at
least one year prior notice and by paying us fair compensation
or indemnity. The amount of such compensation or indemnity will
be determined based on the amount of revenue generated during
the tax year prior to the redemption. See “Risk
Factors — Risks Associated with Our International
Operations — We will stop generating any revenues from
our Macao gaming operations if we cannot secure an extension of
our subconcession in 2022 or if the Macao government exercises
its redemption right.”
Under the subconcession, we are obligated to pay to the Macao
government an annual premium with a fixed portion and a variable
portion based on the number and type of gaming tables employed
and gaming machines operated by us. The fixed portion of the
premium is equal to 30.0 million patacas (approximately
$3.7 million at exchange rates in effect on
December 31, 2007). The variable portion is equal to
300,000 patacas per gaming table reserved exclusively for
certain kinds of games or players, 150,000 patacas per gaming
table not so reserved and 1,000 patacas per electrical or
mechanical gaming machine, including slot machines
(approximately $37,314, $18,657 and $124, respectively, at
exchange rates in effect on December 31, 2007), subject to
a minimum of 45.0 million patacas (or $5.6 million at
exchange rates in effect on December 31, 2007). We also
have to pay a special gaming tax of 35% of gross gaming revenues
and applicable withholding taxes. We must also contribute 4% of
our gross gaming revenue to utilities designated by the Macao
government, a portion of which must be used for promotion of
tourism in Macao. This percentage will be subject to change in
2010.
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Currently, the gaming tax in Macao is calculated as a percentage
of gross gaming revenue. However, unlike Nevada, gross gaming
revenue does not include deductions for credit losses. As a
result, if we extend credit to our customers in Macao and are
unable to collect on the related receivables from them, we have
to pay taxes on our winnings from these customers even though we
were unable to collect on the related receivables from them. We
are currently offering credit to customers in Macao on a very
limited basis. If the laws are not changed, our business in
Macao may not be able to realize the full benefits of extending
credit to our customers. Although there are proposals to revise
the gaming tax laws in Macao, there can be no assurance that the
laws will be changed.
We have received an exemption from Macao’s corporate income
tax on profits generated by the operation of casino games of
chance for the five-year period ending December 31, 2008.
See “Risk Factors — Risks Associated with Our
International Operations — We are currently not
required to pay corporate income taxes on our casino gaming
operations in Macao. This tax exemption expires at the end of
2008.”
On August 23, 2006, MBS, a wholly-owned subsidiary of the
Company, entered into the Development Agreement with the STB to
design, develop, construct and operate an integrated resort in
Singapore called the Marina Bay Sands. The Development Agreement
includes a concession for MBS to own and operate a casino within
the integrated resort. In addition to the casino, the integrated
resort will include, among other amenities, a hotel, a retail
complex, a convention center and meeting room complex, theaters,
restaurants and an art/science museum. MBS is one of two
companies that has been awarded a concession to operate a casino
in Singapore. Under the Development Agreement, the STB has
provided a ten-year exclusive period during which only two
licensees will be granted the right to operate a casino in
Singapore. In connection with entering into the Development
Agreement, MBS entered into a
60-year
lease with the STB for the parcels underlying the proposed site
and entered into an agreement with the Land Transport Authority
of Singapore for the provision of necessary infrastructure for
rapid transit systems and roadworks within
and/or
outside the proposed site.
The casino concession provided under the Development Agreement
is for 30 years commencing from the date the Development
Agreement was entered into. In order to renew the casino
concession, MBS must give notice to the STB and other relevant
authorities in Singapore at least five years before its
expiration in August 2036. However, the Singapore government may
terminate the casino concession prior to its expiration in order
to serve the best interests of the public, in which event fair
compensation will be paid to MBS.
Under the Development Agreement, MBS is required to be licensed
by the relevant gaming authorities in Singapore before it can
commence operating the casino under the casino concession. In
connection with issuing the gaming license, the relevant gaming
authorities will look into various factors relating to MBS,
including, but not limited to, (i) its reputation,
character, honesty and integrity, (ii) whether or not it is
sound and stable from a financial point of view,
(iii) confirming that it has a satisfactory corporate
ownership structure, (iv) the adequacy of its financial
resources in order to ensure the financial viability of the
proposed casino operations, (v) whether it has engaged and
employed persons who have sufficient experience managing and
operating a casino and that are suitable to act in such
capacities, (vi) its ability to sufficiently establish and
maintain a successful casino operation, (vii) confirming
that there are no business associations with any person, body or
association who is not of good repute, has a disregard for
character, honesty and integrity, or has undesirable or
unsatisfactory financial resources, (viii) determining
whether the persons associated or connected with the ownership,
administration or management of the casino operations or
business are suitable persons to act in such capacity and
(ix) the development and operation plan for the casino.
The Development Agreement contains, among other things,
restrictions limiting the use of the leased land to the
development and operation of the project, requirements that MBS
obtain prior approval from the STB in order to subdivide the
hotel and retail components of the project and prohibitions on
any such subdivision during an exclusivity period of
approximately eleven years from the signing of the Development
Agreement. The Development Agreement also contains provisions
relating to the construction of the project and associated
deadlines for substantial completion and opening; the location
of the casino within the project site and casino licensing
issues; insurance requirements; and limitations on MBS’
ability to assign the lease or sub-lease any portion of the land
during the exclusivity period. In addition, the Development
Agreement contains events of default, including, among
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other things, the failure of MBS to perform its obligations
under the Development Agreement and events of bankruptcy or
dissolution.
The Development Agreement requires MBS to invest at least
3.85 billion Singapore dollars (“SGD,”
approximately $2.66 billion at exchange rates in effect as
of December 31, 2007) in the integrated resort, which
investment is to be allocated in specified amounts among the
casino, hotel, food and beverage outlets, retail areas, meeting,
convention and exhibition facilities, key attractions,
entertainment venues and public areas. This minimum investment
requirement must be satisfied in full upon the earlier of eight
years from the date of the Development Agreement or three years
from the issuance of the casino license. However, the casino
license will not be granted by the relevant authorities in
Singapore until at least 50% of the required investment has been
made and at least 50% of the construction of the integrated
resort is complete. MBS must complete the construction of the
Marina Bay Sands by no later than August 22, 2014. MBS
currently plans to complete and open substantially all of the
integrated resort, including the casino, at the same time in
late 2009. Under the terms of the Development Agreement, MBS has
agreed to design, develop and construct the integrated resort in
accordance with the plans set forth in its response to the
request for proposal which was ultimately accepted by the STB.
Any changes in the overall design and the components of the
integrated resort from what was contained in the response to the
request for proposal will require the prior approval of the
Singapore government.
Under the proposed casino regulations, employees who exercise a
significant influence over, or with respect to, the operations
in the casino will need to be licensed by the relevant
authorities in Singapore. MBS will also have to comply with
proposed regulations concerning the location, floor plans and
layout of the casino; internal controls with respect to casino
operations; relationships with and permitted payments to junket
operators; security; casino access by Singaporeans and
non-Singaporeans; and those relating to social controls and
maintaining law and order. These regulations have not been
published, but MBS is actively engaged in a regular dialogue
with the relevant authorities in Singapore in connection with
the drafting, adoption and compliance with the proposed casino
regulations.
Under the Development Agreement, MBS will have to pay an annual
license fee that will cover the costs of implementing and
enforcing the proposed regulations. This is expected to be
between SGD 12.5 million to SGD 15.0 million
(approximately $8.6 million and $10.4 million,
respectively, at exchange rates in effect as of
December 31, 2007) and will be reviewed every three
years. The Company must continue to be the single largest entity
with a direct or indirect controlling interest in MBS for the
first ten years from the date of the Development Agreement, and
its interest must be at least 20% thereafter. The Company is
currently a 100% indirect controlling shareholder of MBS.
There will be a casino tax of 15% imposed on the gross gaming
revenue from the casino, except in the case of gaming by premium
VIP players, in which case a casino tax of 5% will be imposed on
the gross gaming revenue generated from such VIP players. The
tax rates will not be changed for at least 15 years. The
casino tax will be deductible against the corporate income tax
payable by MBS to the Singapore tax authorities. The provision
for bad debts arising from the extension of credit granted to
gaming patrons will not be deductible against gross gaming
revenue when calculating the casino tax but will be deductible
for the purposes of calculating corporate income tax (subject to
the prevailing law). MBS will not be permitted to extend credit
in connection with gaming at the casino except to premium
players and non-Singapore residents.
The key constraint imposed on the casino under the Development
Agreement is the total size of the gaming area, which must not
be more than 15,000 square meters (approximately
161,000 square feet). The following will not be counted
towards the gaming area: back of house facilities, reception,
toilets, food and beverage areas, retail shops, stairs,
escalators and lift lobbies leading to the gaming area,
aesthetic and decorative displays, performance areas and major
aisles. The casino located within the Marina Bay Sands may not
have more than 2,500 gaming machines, but there is no limit on
the number of tables for casino games permitted in the casino.
We directly employ approximately 28,000 employees worldwide
and hire temporary employees on an as-needed basis. The
employees at The Venetian and The Palazzo are not covered by
collective bargaining agreements.
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We are not aware of any union activity at our Macao operations.
We believe that we have good relations with our employees.
The unions currently on the Las Vegas Strip include Local 226
Culinary, Workers Union of the Hotel Employees and Restaurant
Employees International Union, the Operating Engineers Union and
the Teamsters Union. Prior to and since the opening of The
Venetian, Local 226 has requested that we recognize it as the
bargaining agent for employees of The Venetian. We have declined
to do so, believing that current and future employees are
entitled to select their own bargaining agent, if any. In the
past, when other hotel/casino operators have taken a similar
position, Local 226 has engaged in certain confrontational and
obstructive tactics, including contacting potential customers,
tenants, and investors, objecting to various administrative
approvals and picketing. Local 226 has engaged in these types of
tactics with respect to The Venetian and may continue to do so.
Although we believe we will be able to operate despite such
dispute, no assurance can be given that we will be able to do so
or that the failure to do so would not result in a material
adverse effect on our financial condition, results of operations
or cash flows. Although no assurances can be given, if employees
decide to be represented by labor unions, management does not
believe that such representation would have a material effect on
our financial condition, results of operations or cash flows.
Certain culinary personnel are hired from time to time for trade
shows and conventions at The Sands Expo Center and are covered
under a collective bargaining agreement between Local 226 and
The Sands Expo Center. This collective bargaining agreement
expired in December 2000. As a result, The Sands Expo Center is
operating under the terms of the expired bargaining agreement
with respect to these employees.
Our principal intellectual property consists of, among others,
the “Sands,” “Venetian,” “Palazzo”
and “Paiza” trademarks, all of which have been
registered in various classes in the United States. In addition,
we have also applied to register numerous other trademarks in
connection with our properties and development projects in the
U.S., Macao and Singapore. We have also registered
and/or
applied to register many of our trademarks in various foreign
jurisdictions. These trademarks are brand names under which we
market our properties and services. We consider these brand
names to be important to our business since they have the effect
of developing brand identification. We believe that the name
recognition, reputation and image that we have developed attract
customers to our facilities. Once granted, our trademark
registrations are of perpetual duration so long as they are
periodically renewed. It is our intent to maintain our trademark
registrations.
On April 12, 2004, we entered into an agreement with GGP to
sell The Grand Canal Shops and lease to GGP certain restaurant
and other retail space at the casino level of The Venetian for
approximately $766.0 million. We completed the sale of The
Grand Canal Shops on May 17, 2004. On the same date, we
leased to GGP 19 spaces on the casino level of The Venetian
currently occupied by various retail and restaurant tenants for
89 years with annual rent of one dollar per year, and GGP
assumed our interest as landlord under the various space leases
associated with these 19 spaces. In addition, on the same date,
we agreed with GGP to:
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The lease payments relating to the Blue Man Group Theater, the
canal space within The Grand Canal Shops and the office space
from GGP are subject to automatic increases of 5% in the sixth
lease year and each subsequent fifth lease year.
The Shoppes at The Palazzo opened on January 18, 2008, with
some tenants not yet open. We are selling The Shoppes at The
Palazzo to GGP pursuant to a purchase and sale agreement dated
as of April 12, 2004, as amended, regarding the development
and sale of The Shoppes at The Palazzo (the “Amended
Agreement”). The total purchase price to be paid by GGP for
The Shoppes at The Palazzo is determined by taking The Shoppes
at The Palazzo’s net operating income, as defined in the
Amended Agreement, for months 19 through 30 of its operations
(assuming that the rent and other periodic payments due from all
tenants in month 30 was actually due in each of months 19
through 30) divided by a capitalization rate. The
capitalization rate is 0.06 for every dollar of net operating
income up to $38.0 million and 0.08 for every dollar of net
operating income above $38.0 million. On the closing date
of the sale of The Shoppes at The Palazzo to GGP, which we
expect to be on February 29, 2008, or shortly thereafter,
GGP will be obligated to make an initial purchase price payment
based on projected net operating income for the first
12 months of operations (but in no event less than
$250.0 million and only taking into account tenants open
for business or paying rent as of the closing date). We are in
the process of finalizing the amount of the initial payment;
however, we expect it to range between $285.0 million and
$295.0 million. Pursuant to the Amended Agreement, at the
fourth, eighth, 12th, 18th, and 24th month after closing,
the required purchase price will be adjusted (up or down, but
will never be less than $250.0 million) based on projected
net operating income for the upcoming 12 months. Subject to
adjustments for certain audit and other issues, the final
adjustment to the purchase price will be made on the
30-month
anniversary of the closing date and will be based on the formula
described above. For all purchase price and purchase price
adjustment calculations, “net operating income” will
be calculated by using the “accrual” method of
accounting and the final purchase price adjustment will be
calculated by applying the base rent and other periodic payments
payable by all tenants in the 30th month to the entire
12-month
period, as defined. Based on our continuing relationship with
GGP related to its ownership of The Grand Canal Shops, knowledge
of local market conditions and discussions with tenants,
management believes the total purchase price to be paid by GGP
will be in excess of $700.0 million.
Our business plan calls for each of The Venetian, The Palazzo,
The Sands Expo Center, The Congress Center, The Grand Canal
Shops and The Shoppes at The Palazzo, though separately owned,
to be integrally related components of one facility (the
“Integrated Resort”). In establishing the terms for
the integrated operation of these components, the cooperation
agreement sets forth agreements regarding, among other things,
encroachments, easements, operating standards, maintenance
requirements, insurance requirements, casualty and condemnation,
joint marketing, and the sharing of some facilities and related
costs. Subject to applicable law, the cooperation agreement
binds all current and future owners of all portions of the
Integrated Resort, and has priority over the liens securing Las
Vegas Sands, LLC’s senior secured credit facility and any
future liens that may secure any indebtedness of the owners of
any portion of the Integrated Resort. Accordingly, subject to
applicable law, the obligations in the cooperation agreement
will “run with the land” if any of the components
change hands.
Operating Covenants. The cooperation agreement
regulates certain aspects of the operation of The Sands Expo
Center, The Grand Canal Shops, The Venetian, The Palazzo and The
Shoppes at The Palazzo. For example, under the cooperation
agreement, we are obligated to operate The Venetian continuously
and to use it exclusively in accordance with standards of
first-class Las Vegas Boulevard-style hotels and casinos.
We are also obligated to operate and to use The Sands Expo
Center exclusively in accordance with standards of first-class
convention, trade show and exposition centers. The owners of The
Grand Canal Shops and The Shoppes at The Palazzo are obligated
to operate their properties exclusively in accordance with
standards of first-class restaurant and retail complexes. For so
long as The Venetian is operated in accordance with a
“Venetian” theme, the owner of The Grand Canal Shops
must operate The Grand Canal Shops in accordance with the
overall Venetian theme.
Maintenance and Repair. We must maintain The
Venetian and The Palazzo as well as some common areas and common
facilities that are to be shared with The Grand Canal Shops and
The Shoppes at The Palazzo. The cost of maintenance of all
shared common areas and common facilities is to be shared
between us and the owners of The Grand Canal Shops and The
Shoppes at The Palazzo. We must also maintain, repair, and
restore The Sands Expo
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Center and certain common areas and common facilities located in
The Sands Expo Center. The owners of The Grand Canal Shops and
The Shoppes at The Palazzo must maintain, repair, and restore
The Grand Canal Shops and The Shoppes at The Palazzo and certain
common areas and common facilities located within.
Insurance. We and the owners of The Grand
Canal Shops and The Shoppes at The Palazzo must maintain minimum
types and levels of insurance, including property damage,
general liability and business interruption insurance. The
cooperation agreement establishes an insurance trustee to assist
in the implementation of the insurance requirements.
Parking. The cooperation agreement also
addresses issues relating to the use of Intergrated
Resort’s parking facilities and easements for access. The
Venetian, The Palazzo, The Grand Canal Shops, The Shoppes at The
Palazzo and The Sands Expo Center may use the parking spaces in
the Integrated Resort’s parking facilities on a “first
come, first served” basis, as long as each property retains
use of sufficient spaces to comply with specified minimum
parking standards. This means that each property shall have the
right to use, at a minimum, sufficient spaces to comply with
applicable laws and to conduct its business as permitted under
the cooperation agreement. The Integrated Resort’s parking
facilities are owned, maintained, and operated by us, with the
operating costs proportionately allocated among
and/or
billed to the owners of the components of the Integrated Resort.
Each party to the cooperation agreement has granted to the
others non-exclusive easements and rights to use the roadways
and walkways on each other’s properties for vehicular and
pedestrian access to the parking garages.
Utility Easement. All property owners have
also granted each other all appropriate and necessary easement
rights to utility lines servicing the Integrated Resort.
Consents, Approvals and Disputes. If any
current or future party to the cooperation agreement has a
consent or approval right or has discretion to act or refrain
from acting, the consent or approval of such party will only be
granted and action will be taken or not taken only if a
commercially reasonable owner would do so and such consent,
approval, action or inaction would not have a material adverse
effect on the property owned by such property owner. The
cooperation agreement provides for the appointment of an
independent expert to resolve some disputes between the parties,
as well as for expedited arbitration for other disputes.
Sale of The Grand Canal Shops or The Shoppes at The Palazzo
by GGP. We have a right of first offer in
connection with any proposed sale of The Grand Canal Shops or
The Shoppes at The Palazzo by GGP. We also have the right to
receive notice of any default by GGP sent by any lender holding
a mortgage on The Grand Canal Shops or The Shoppes at The
Palazzo, if any, and the right to cure such default subject to
our meeting certain net worth tests.
You should carefully consider the risk factors set forth below
as well as the other information contained in this Annual Report
on
Form 10-K
in connection with evaluating the Company. Additional risks and
uncertainties not currently known to us or that we currently
deem to be immaterial may also materially and adversely effect
our business, financial condition, results of operations or cash
flows. Certain statements in “Risk Factors” are
forward-looking statements. See “Item 7 —
Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Special Note Regarding
Forward-Looking Statements.”
Risks
Related to Our Business
Consumer demand for hotel/casino resorts, trade shows and
conventions and for the type of luxury amenities we offer may be
particularly sensitive to downturns in the economy. Changes in
consumer preferences or discretionary consumer spending brought
about by factors such as fears of war, future acts of terrorism,
general economic conditions, disposable consumer income, fears
of recession and changes in consumer confidence in the economy
could reduce customer demand for the luxury products and leisure
services we offer, thus imposing practical limits on pricing and
harming our operations.
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Our
business is sensitive to the willingness of our customers to
travel. Acts of terrorism, regional political events and
developments in the conflicts in certain countries could cause
severe disruptions in air travel that reduce the number of
visitors to our facilities, resulting in a material adverse
effect on our financial condition, results of operations or cash
flows.
We are dependent on the willingness of our customers to travel.
A substantial number of our customers for The Venetian and The
Palazzo use air travel to come to Las Vegas. On
September 11, 2001, acts of terrorism occurred in New York
City, Pennsylvania and Washington, D.C. As a result of
these terrorist acts, domestic and international travel was
severely disrupted, which resulted in a decrease in customer
visits to Las Vegas, including our properties. Developments in
the conflicts in certain countries, and regional issues such as
tension between the People’s Republic of China and Taiwan
and issues relating to North Korea could have a similar effect
on domestic and international travel. Most of our customers
travel to reach our Las Vegas and Macao properties. Only a small
amount of our business is generated by local residents.
Management cannot predict the extent to which disruptions in air
or other forms of travel as a result of any further terrorist
act, outbreak of hostilities or escalation of war would
adversely effect our financial condition, results of operations
or cash flows.
In 2003, Taiwan, China, Hong Kong, Singapore and certain other
regions experienced an outbreak of a highly contagious form of
atypical pneumonia now known as severe acute respiratory
syndrome (“SARS”). As a result of the outbreak, there
was a decrease in travel to and from, and economic activity in,
affected regions, including Macao. In addition, there have been
fears concerning the spread of an “avian flu” in Asia.
Potential future outbreaks of SARS, avian flu or other highly
infectious diseases may adversely affect the number of visitors
to our operating properties and our other properties we are
currently developing. Furthermore, an outbreak might disrupt our
ability to adequately staff our business and could generally
disrupt our operations. If any of our customers or employees are
suspected of having contracted certain highly contagious
diseases, we may be required to quarantine these customers or
employees or the affected areas of our facilities and
temporarily suspend part or all of our operations at affected
facilities. Any new outbreak of such a highly infectious disease
could have a material adverse effect on our financial condition,
results of operations or cash flows.
Our ongoing and future construction projects, such as our Cotai
Strip projects, Marina Bay Sands, Sands Bethworks and the Las
Vegas condominiums, entail significant risks. Construction
activity requires us to obtain qualified contractors and
subcontractors, the availability of which may be uncertain.
Construction projects are subject to cost overruns and delays
caused by events outside of our control or, in certain cases,
our contractors’ control, such as shortages of materials or
skilled labor, unforeseen engineering, environmental
and/or
geological problems, work stoppages, weather interference,
unanticipated cost increases and unavailability of construction
materials or equipment. Construction, equipment or staffing
problems or difficulties in obtaining any of the requisite
materials, licenses, permits, allocations and authorizations
from governmental or regulatory authorities could increase the
total cost, delay, jeopardize, prevent the construction or
opening of our projects, or otherwise affect the design and
features. In addition, the number of ongoing projects and their
locations throughout the world present unique challenges and
risks to our management structure. If our management is unable
to successfully manage our worldwide construction projects, it
could have an adverse effect on our financial condition, results
of operations or cash flows.
We have not entered into a fixed-price or guaranteed maximum
price contract with a single construction manager or general
contractor for the construction of our projects. As a result, we
rely heavily on our in-house development and construction team
to manage construction costs and coordinate the work of the
various trade contractors. The lack of any fixed-price contract
with a construction manager or general contractor will put more
of the risk of cost-overruns on us. If we are unable to manage
costs or we are unable to raise additional capital required,
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we may not be able to open or complete these projects, which may
have an adverse impact on our business and prospects for growth.
The anticipated costs and completion dates for our projects are
based on budgets, designs, development and construction
documents and schedule estimates that we have prepared with the
assistance of architects and other construction development
consultants and that are subject to change as the design,
development and construction documents are finalized and more
actual construction work is performed. A failure to complete our
projects on budget or on schedule may adversely effect our
financial condition, results of operations or cash flows.
The failure to obtain the necessary financing, or satisfy these
funding conditions, could adversely effect our ability to
construct our development projects.
We currently do not have material assets or operations other
than our Las Vegas and Macao properties. As a result, we will be
entirely dependent upon these properties for all of our cash
flow until we complete the development of our Marina Bay Sands,
Sands Bethworks and remaining Cotai Strip projects.
Given that our operations are currently conducted at properties
in Las Vegas and Macao and that a large portion of our planned
future development is in Macao and Singapore, we will be subject
to greater degrees of risk than a gaming company with more
operating properties in more markets. The risks to which we will
have a greater degree of exposure include the following:
We are highly leveraged and have substantial debt service
obligations. As of December 31, 2007, we had approximately
$7.57 billion of long-term debt outstanding. This
substantial indebtedness could have important consequences to
us. For example, it could:
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We expect that all of our current projects will be funded with
additional borrowings from our existing credit facilities, with
the exception of the remaining Cotai Strip developments. We have
a $3.3 billion credit facility for the partial financing of
the Sands Macao expansion, The Venetian Macao, The Four Seasons
Macao and certain of our other Cotai Strip developments. A
significant portion of the Sands Macao’s cash flows was
used to finance the construction of The Venetian Macao. This
credit facility will not cover all of the costs of our remaining
Cotai Strip developments. We expect that the construction of the
Cotai Strip developments will require significant additional
debt and/or
equity financings. We cannot assure you that we will obtain all
the financing required for the construction and opening of our
remaining Cotai Strip developments.
Our current debt instruments contain, and any future debt
instruments likely will contain, a number of restrictive
covenants that impose significant operating and financial
restrictions on us, including restrictions on our ability to:
In addition, our U.S., Macao and Singapore credit agreements
contain various financial covenants. See
“Item 8 — Financial Statements and
Supplementary Data — Notes to Consolidated Financial
Statements — Note 8 — Long-Term
Debt” for further description of these covenants. Our
future debt agreements could contain financial or other
covenants more restrictive than those applicable under our
existing instruments.
Although we have all-risk property insurance for our operating
properties covering damage caused by a casualty loss (such as
fire, natural disasters, acts of war or terrorism), each policy
has certain exclusions. In addition, our property insurance
coverage is in an amount that may be significantly less than the
expected replacement cost of rebuilding the facilities if there
was a total loss. Our level of insurance coverage also may not
be adequate to cover all losses in the event of a major
casualty. In addition, certain casualty events, such as labor
strikes, nuclear events, acts of war, loss of income due to
cancellation of room reservations or conventions due to fear of
terrorism, deterioration or corrosion, insect or animal damage
and pollution, might not be covered at all under our policies.
Therefore, certain acts could expose us to substantial uninsured
losses.
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We also have builder’s risk insurance for many of our
projects in Las Vegas, Pennsylvania, Macao and Singapore.
Builder’s risk insurance provides coverage for projects
during their construction for damage caused by a casualty loss.
In general, our builder’s risk coverage is subject to the
same exclusions, risks and deficiencies as those described above
for our all-risk property coverage. Our level of builder’s
risk insurance coverage may not be adequate to cover all losses
in the event of a major casualty.
In addition, although we currently have insurance coverage for
occurrences of terrorist acts with respect to our properties and
for certain losses that could result from these acts, our
terrorism coverage is subject to the same risks and deficiencies
as those described above for our all-risk property coverage. The
lack of sufficient insurance for these types of acts could
expose us to substantial losses in the event that any damages
occur, directly or indirectly, as a result of terrorist attacks
or otherwise, which could have a significant negative impact on
our operations.
In addition to the damage caused to our properties by a casualty
loss, we may suffer business disruption as a result of these
events or be subject to claims by third parties injured or
harmed. While we carry business interruption insurance and
general liability insurance, this insurance may not be adequate
to cover all losses in any such event.
We renew our insurance policies (other than our builder’s
risk insurance) on an annual basis. The cost of coverage may
become so high that we may need to further reduce our policy
limits or agree to certain exclusions from our coverage. Among
other factors, it is possible that regional political tensions,
homeland security concerns, other catastrophic events or any
change in government legislation governing insurance coverage
for acts of terrorism could materially adversely effect
available insurance coverage and result in increased premiums on
available coverage (which may cause us to elect to reduce our
policy limits), additional exclusions from coverage or higher
deductibles. Among other potential future adverse changes, in
the future we may elect to not, or may not be able to, obtain
any coverage for losses due to acts of terrorism.
Our debt instruments and other material agreements require us to
maintain a certain minimum level of insurance. Failure to
satisfy these requirements could result in an event of default
under these debt instruments or material agreements.
We
depend on the continued services of key managers and employees.
If we do not retain our key personnel or attract and retain
other highly skilled employees, our business will
suffer.
Our ability to maintain our competitive position is dependent to
a large degree on the services of our senior management team,
including Sheldon G. Adelson. Mr. Adelson, William P.
Weidner, Bradley H. Stone, Robert G. Goldstein and Robert P.
Rozek have each entered into employment agreements; however, we
cannot assure you that any of these individuals will remain with
us. We currently do not have a life insurance policy on any of
the members of the senior management team. The death or loss of
the services of any of our senior managers or the inability to
attract and retain additional senior management personnel could
have a material adverse effect on our business.
Mr. Adelson and trusts for the benefit of Mr. Adelson
and/or his
family members beneficially own approximately 69% of our
outstanding common stock as of December 31, 2007.
Accordingly, Mr. Adelson exercises significant influence
over our business policies and affairs, including the
composition of our board of directors and any action requiring
the approval of our stockholders, including the adoption of
amendments to our articles of incorporation and the approval of
a merger or sale of substantially all of our assets. The
concentration of ownership may also delay, defer or even prevent
a change in control of our company and may make some
transactions more difficult or impossible without the support of
Mr. Adelson. Because Mr. Adelson and trusts for the
benefit of Mr. Adelson
and/or his
family members own more than 50% of the voting power of our
company, we are considered a controlled company under the NYSE
listing standards. As such, the NYSE corporate governance
requirements that our board of directors and our compensation
committee be independent, do not apply to us. As a result, the
ability of our independent directors to influence our business
policies and affairs may be reduced. The interests of
Mr. Adelson may conflict with your interests.
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We are a parent company with limited business operations of our
own. Our main asset is the capital stock of our subsidiaries. We
conduct most of our business operations through our direct and
indirect subsidiaries. Accordingly, our primary sources of cash
are dividends and distributions with respect to our ownership
interests in our subsidiaries that are derived from the earnings
and cash flow generated by our operating properties. Our
subsidiaries might not generate sufficient earnings and cash
flow to pay dividends or distributions in the future. Our
subsidiaries’ payments to us will be contingent upon their
earnings and upon other business considerations. In addition,
our subsidiaries’ debt instruments and other agreements
limit or prohibit certain payments of dividends or other
distributions to us. We expect that the debt instruments for the
financing of our other developments, including our Cotai Strip
developments, will contain similar restrictions.
Risks
Associated with Our U.S. Operations
We
face significant competition in Las Vegas which could materially
adversely effect our financial condition, results of operations
or cash flows. Some of our competitors have substantial
resources and access to capital, and several of them are
expanding or renovating their facilities. In addition, any
significant downturn in the trade show and convention business
could significantly and adversely affect our mid-week occupancy
rates and business.
The hotel, resort and casino businesses in Las Vegas are highly
competitive. We also compete, to some extent, with other
hotel/casino facilities in Nevada and in Atlantic City, as well
as hotel/casinos and other resort facilities and vacation
destinations elsewhere in the United States and around the
world. Many of our competitors are subsidiaries or divisions of
large public companies and have substantial financial and other
resources.
In addition, various competitors on the Las Vegas Strip are
expanding and renovating their existing facilities. If demand
for hotel rooms does not keep up with the increase in the number
of hotel rooms, competitive pressures may cause reductions in
average room rates.
We also compete with legalized gaming from casinos located on
Native American tribal lands, including those located in
California. While the competitive impact on our operations in
Las Vegas from the continued growth of Native American gaming
establishments in California remains uncertain, the
proliferation of gaming in California and other areas located in
the same region as The Venetian and The Palazzo could have an
adverse effect on our results of operations.
In addition, certain states have legalized, and others may
legalize, casino gaming in specific areas, including
metropolitan areas from which we traditionally attract
customers. A number of states have permitted or are considering
permitting gaming at “racinos,” on Native American
reservations and through expansion of state lotteries. The
current global trend toward liberalization of gaming
restrictions and resulting proliferation of gaming venues could
result in a decrease in the number of visitors to our Las Vegas
facilities by attracting customers close to home and away from
Las Vegas, which could adversely effect our financial condition,
results of operations or cash flows.
The Sands Expo Center and The Congress Center provide recurring
demand for mid-week room nights for business travelers who
attend meetings, trade shows and conventions in Las Vegas. The
Sands Expo Center and The Congress Center presently compete with
other large convention centers, including convention centers in
Las Vegas and other cities. Competition will be increasing for
The Sands Expo Center and The Congress Center as a result of
planned additional convention and meeting facilities, as well as
the enhancement or expansion of existing convention and meeting
facilities, in Las Vegas. Also, other American cities are in the
process of developing, or have announced plans to develop,
convention centers and other meeting, trade and exhibition
facilities. To the extent that these competitors are able to
capture a substantially larger portion of the trade show and
convention business, there could be a material adverse effect on
our financial position, results of operations or cash flows.
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Our gaming operations and the ownership of our securities are
subject to extensive regulation by the Nevada Commission, the
Nevada Board and the CCLGLB. The Nevada Gaming Authorities have
broad authority with respect to licensing and registration of
our business entities and individuals investing in or otherwise
involved with us.
Although we currently are registered with, and Las Vegas Sands,
LLC and Venetian Casino Resort, LLC currently hold gaming
licenses issued by, the Nevada Gaming Authorities, these
authorities may, among other things, revoke the gaming license
of any corporate entity or the registration of a registered
corporation or any entity registered as a holding company of a
corporate licensee for violations of gaming regulations.
In addition, the Nevada Gaming Authorities may, under certain
conditions, revoke the license or finding of suitability of any
officer, director, controlling person, stockholder, noteholder
or key employee of a licensed or registered entity. If our
gaming licenses were revoked for any reason, the Nevada Gaming
Authorities could require the closing of the casino, which would
have a material adverse effect on our business. In addition,
compliance costs associated with gaming laws, regulations or
licenses are significant. Any change in the laws, regulations or
licenses applicable to our business or gaming licenses could
require us to make substantial expenditures or could otherwise
have a material adverse effect on our financial condition,
results of operations or cash flows.
For a more complete description of the gaming regulatory
requirements affecting our business, see
“Item 1 — Business —
Regulation and Licensing.”
Certain
beneficial owners of our voting securities may be required to
file an application with, and be investigated by, the Nevada
Gaming Authorities, and the Nevada Commission may restrict the
ability of a beneficial owner to receive any benefit from our
voting securities and may require the disposition of shares of
our voting securities, if a beneficial owner is found to be
unsuitable.
Any person who acquires beneficial ownership of more than 10% of
our voting securities will be required to apply to the Nevada
Commission for a finding of suitability within thirty days after
the Chairman of the Nevada Board mails a written notice
requiring the filing. Under certain circumstances, an
“institutional investor” as defined under the
regulations of the Nevada Commission, which acquires beneficial
ownership of more than 10% but not more than 15% of our voting
securities, may apply to the Nevada Commission for a waiver of
such finding of suitability requirement if the institutional
investor holds our voting securities only for investment
purposes. In addition, any beneficial owner of our voting
securities, regardless of the number of shares beneficially
owned, may be required at the discretion of the Nevada
Commission to file an application for a finding of suitability
as such. In either case, a finding of suitability is comparable
to licensing and the applicant must pay all costs of
investigation incurred by the Nevada Gaming Authorities in
conducting the investigation.
Any person who fails or refuses to apply for a finding of
suitability or a license within thirty days after being ordered
to do so by the Nevada Gaming Authorities may be found
unsuitable. The same restrictions apply to a record owner if the
record owner, after request, fails to identify the beneficial
owner. Any stockholder found unsuitable and who holds, directly
or indirectly, any beneficial ownership of the common stock of a
registered corporation beyond such period of time as may be
prescribed by the Nevada Commission may be guilty of a criminal
offense. We are subject to disciplinary action if, after we
receive notice that a person is unsuitable to be a stockholder
or to have any other relationship with us or a licensed
subsidiary, we, or any of the licensed subsidiaries:
For a more complete description of the Nevada gaming regulatory
requirements applicable to beneficial owners of our voting
securities, see
“Item 1 — Business —
Regulation and Licensing — State of Nevada.”
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Any person who acquires beneficial ownership of 5% or more of
our voting securities will be required to apply to the PaGCB for
licensure, obtain licensure and remain licensed. Licensure
requires, among other things, that the applicant establish by
clear and convincing evidence the applicant’s good
character, honesty and integrity. Additionally, any trust that
holds 5% or more of our voting securities is required to be
licensed by the PaGCB and each individual who is a grantor,
trustee or beneficiary of the trust is also required to be
licensed by the PaGCB. Under certain circumstances, an
“institutional investor” as defined under the
regulations of the PaGCB, which acquires beneficial ownership of
10% or more, but less than 15% of our voting securities, may not
be required to be licensed by the PaGCB. In addition, any
beneficial owner of our voting securities, regardless of the
number of shares beneficially owned, may be required at the
discretion of the PaGCB to file an application for licensure.
Furthermore, a person or a group of persons acting in concert
who acquire(s) more than 20% of our securities, with the
exception of the ownership interest of a person at the time of
original licensure when the license fee was paid, would trigger
a “change in control” (as defined under applicable
law). Such a “change in control” could require us to
re-apply for licensure by the PaGCB and incur a
$50.0 million license fee.
In the event a security holder is required to be found qualified
and is not found qualified, the security holder may be required
by the PaGCB to divest of the interest at a price not exceeding
the cost of the interest.
We have entered into agreements with GGP under which, among
other things:
Each of the above-described agreements with GGP could be
adversely affected in ways that could have a material adverse
effect on our financial condition, results of operations or cash
flows if we do not maintain an acceptable working relationship
with GGP. For example:
There could be similar material adverse consequences to us if
GGP breaches any of its agreements to us, such as its agreement
under the cooperation agreement to operate The Grand Canal Shops
consistent with the standards of first-class restaurant and
retail complexes and the overall Venetian theme, and its various
obligations as our landlord under the leases described above.
Although the various agreements with GGP do provide us with
various remedies in the event of any breaches by GGP and also
include various dispute-resolution procedures and mechanisms,
these remedies, procedures and mechanisms may be inadequate to
prevent a material adverse effect on our operations and
financial condition if breaches by GGP occur or if we do not
maintain an acceptable working relationship with GGP.
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We conduct our gaming activities on a credit basis as well as a
cash basis. This credit is unsecured. Table games players
typically are extended more credit than slot players, and
high-stakes players typically are extended more credit than
patrons who tend to wager lower amounts. High-end gaming is more
volatile than other forms of gaming, and variances in win-loss
results attributable to high-end gaming may have a significant
positive or negative impact on cash flow and earnings in a
particular quarter.
Credit play at our Las Vegas properties is significant while at
our Macao properties table games play is primarily cash play. We
extend credit to those customers whose level of play and
financial resources warrant, in the opinion of management, an
extension of credit. For the year ended December 31, 2007,
our table games drop at our Las Vegas properties was
approximately 62.6% from credit-based guest wagering. These
large receivables could have a significant impact on our
operating results if deemed uncollectible.
While gaming debts evidenced by a credit instrument, including
what is commonly referred to as a “marker,” and
judgments on gaming debts are enforceable under the current laws
of Nevada, and Nevada judgments on gaming debts are enforceable
in all states under the Full Faith and Credit Clause of the
U.S. Constitution, other jurisdictions may determine that
enforcement of gaming debts is against public policy. Although
courts of some foreign nations will enforce gaming debts
directly and the assets in the United States of foreign debtors
may be reached to satisfy a judgment, judgments on gaming debts
from U.S. courts are not binding on the courts of many
foreign nations.
Risks
Associated with Our International Operations
We currently own and operate the Sands Macao and The Venetian
Macao. We are developing and plan to operate additional hotels,
casinos and convention centers on the Cotai Strip in Macao. We
also plan to own and operate the Marina Bay Sands in Singapore.
Accordingly, our business development plans, financial
condition, results of operations or cash flows may be materially
and adversely affected by significant political, social and
economic developments in Macao and Singapore, and by changes in
policies of the governments or changes in laws and regulations
or their interpretations. Our operations in Macao are, and our
operations in Singapore will be, also exposed to the risk of
changes in laws and policies that govern operations of companies
based in those countries. Tax laws and regulations may also be
subject to amendment or different interpretation and
implementation, thereby adversely affecting our profitability
after tax. Further, the percentage of our gross gaming revenues
that we must contribute annually to the Macao authorities is
subject to change in 2010. These changes may have a material
adverse effect on our financial condition, results of operations
or cash flows.
As we expect a significant number of consumers to come to our
Macao properties from China, general economic conditions and
policies in China could have a significant impact on our
financial prospects. Any slowdown in economic growth or reversal
of China’s current policies of liberalizing restrictions on
travel and currency movements could adversely impact the number
of visitors from China to our Macao properties as well as the
amounts they are willing to spend at our properties.
Current Macao laws and regulations concerning gaming and gaming
concessions are, for the most part, fairly recent and there is
little precedent on the interpretation of these laws and
regulations. We believe that our organizational structure and
operations are in compliance in all material respects with all
applicable laws and regulations of Macao. However, these laws
and regulations are complex and a court or an administrative or
regulatory body may in the future render an interpretation of
these laws and regulations, or issue regulations, which differs
from our interpretation and could have a material adverse effect
on our financial condition, results of operations or cash flows.
We expect the Marina Bay Sands to be the first gaming facility
to open in Singapore following the government’s adoption of
gaming legislation in 2005. Accordingly, the laws and
regulations relating to gaming and their interpretations are
untested.
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In addition, our activities in Macao are, and our operations in
Singapore will be, subject to administrative review and approval
by various government agencies. We cannot assure you that we
will be able to obtain all necessary approvals, which may
materially affect our long-term business strategy and
operations. Macao and Singapore laws permit redress to the
courts with respect to administrative actions. However, such
redress is largely untested in relation to gaming issues.
We are
constructing projects on the Cotai Strip in Macao on land for
which we have not yet been granted concessions. If we do not
obtain land concessions, we could forfeit all or a substantial
part of our investment in these sites and would not be able to
build or operate the planned facilities on these
sites.
Land concessions in Macao generally have terms of 25 years,
with automatic extensions at our option of 10 years
thereafter and there are common rates based on land use
generally used to determine the cost of these land concessions.
We have not yet obtained land concessions from the Macao
government for parcels 5, 6, 7 and 8 on the Cotai Strip. We are
currently in the process of negotiating with the Macao
government to obtain the land concession for parcels 5 and 6,
and will subsequently negotiate the land concession for parcels
7 and 8. If we do not obtain a land concession for parcels 5, 6,
7 and/or 8,
we will not be able to open and operate the planned projects on
these sites and we could forfeit all or a substantial part of
our $623.0 million in capitalized construction costs
related to these sites as of December 31, 2007.
The Macao government has the right, after consultation with
Galaxy, to unilaterally terminate our subconcession in the event
of VML’s serious non-compliance with its basic obligations
under the subconcession and applicable Macao laws. Upon
termination of our subconcession, all of our casino gaming
operations and related equipment in Macao would be automatically
transferred to the Macao government without compensation to us
and we would cease to generate any revenues from these
operations. The loss of our subconcession would prohibit us from
conducting gaming operations in Macao, which could have a
material adverse effect on our financial condition, results of
operations or cash flows.
Our subconcession agreement expires on June 26, 2022.
Unless our subconcession is extended, on that date, all of our
casino operations and related equipment in Macao will be
automatically transferred to the Macao government without
compensation to us and we will cease to generate any revenues
from these operations. Beginning on December 26, 2017, the
Macao government may redeem the subconcession agreement by
providing us at least one year prior notice. In the event the
Macao government exercises this redemption right, we are
entitled to fair compensation or indemnity. The amount of such
compensation or indemnity will be determined based on the amount
of revenue generated during the tax year prior to the
redemption. We cannot assure you that we will be able to renew
or extend our subconcession agreement on terms favorable to us
or at all. We also cannot assure you that if our subconcession
is redeemed, the compensation paid will be adequate to
compensate us for the loss of future revenues.
The hotel, resort and casino businesses are highly competitive.
Our Macao operations currently compete with numerous other
casinos located in Macao. In addition, we expect competition to
increase in the near future from local and foreign casino
operators. SJM, which is controlled by Stanley Ho, currently
operates 19 gaming facilities in Macao, including the Grand
Lisboa; the Fisherman’s Wharf entertainment complex; and a
number of new hotel/casino projects. In addition, MGM MIRAGE
entered into a joint venture agreement with Stanley Ho’s
daughter, Pansy Ho Chiu-king, to develop, build and operate two
major hotel/casino resorts in Macao. The MGM Grand
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Macau opened in December 2007 and features approximately 600
rooms, 375 table games, 900 slot machines, restaurants and
entertainment amenities.
In addition, Wynn Macau opened in September 2006 and expanded
the property in late 2007. Wynn Macau now includes an
approximately 600-room hotel, a casino and other non-gaming
amenities. In May 2007, a PBL Affiliate opened the Crown Macau,
which includes an approximately 216-room hotel, a casino and
other non-gaming amenities. The other concessionaire holder,
Galaxy, currently operates five casinos in Macao, including
StarWorld Hotel that opened in October 2006.
Our Macao operations will also compete to some extent with
casinos located elsewhere in Asia, such as Malaysia’s
Genting Highlands, as well as gaming venues in Australia, New
Zealand and elsewhere in the world, including Las Vegas. In
addition, certain countries have legalized, and others may in
the future legalize, casino gaming, including Hong Kong, Japan,
Singapore, Taiwan and Thailand and other gaming centers
worldwide. The proliferation of gaming venues in Southeast Asia
could significantly and adversely effect our financial
condition, results of operations or cash flows.
We hold a subconcession under one of only three gaming
concessions authorized by the Macao government to operate
casinos in Macao. The Macao government is precluded from
granting any additional gaming concessions until 2009. However,
we cannot assure you that the laws will not change and permit
the Macao government to grant additional gaming concessions
before 2009. In addition, the Macao government permits existing
concessionaires to grant subconcessions. If the Macao government
were to allow additional competitors to operate in Macao through
the grant of additional concessions or subconcessions, we would
face additional competition, which could have a material adverse
effect on our financial condition, results of operations or cash
flows.
We hold one of two licenses granted by the Singapore government
to develop an integrated resort, including a casino. The
Singapore government has said that it will not license another
casino for at least ten years. If the Singapore government were
to license additional casinos before then, we would face
additional competition which could have a material adverse
effect on our financial condition, results of operations or cash
flows.
Our success depends in large part upon our ability to attract,
retain, train, manage and motivate skilled employees. In
addition, the Macao government requires us to only hire Macao
residents as dealers in our casinos. There is significant
competition in Macao for employees with the skills required to
perform the services we offer and competition for these
individuals is likely to increase as we open our remaining Cotai
Strip developments and as other competitors expand their
operations. We expect competition in Singapore for employees
with the skills we require as we develop and open the Marina Bay
Sands. There can be no assurance that a sufficient number of
skilled employees will continue to be available, or that we will
be successful in training, retaining and motivating current or
future employees. If we are unable to attract, retain and train
skilled employees, our ability to adequately manage and staff
our existing and planned casino and resort properties in Macao
and Singapore could be impaired, which could have a material
adverse effect on our business, financial condition, results of
operations or cash flows.
Junket operators, who organize tours, or junkets, for
high-roller customers to casinos, are responsible for a
significant portion of our gaming revenues in Macao. With the
rise in gaming in Macao, the competition for relationships with
junket operators has increased. While we are undertaking
initiatives to strengthen our relationships with our current
junket operators, there can be no assurance that we will be able
to maintain, or grow, our relationships with junket operators.
If we are unable to maintain or grow our relationships with
junket operators, our
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ability to grow our gaming revenues will be hampered and we may
seek alternative ways to develop relationships with high-roller
customers, which may not be as profitable as our junket programs.
In addition, the quality of junket operators is important to our
reputation and our ability to continue to operate in compliance
with our gaming licenses. While we strive for excellence in our
associations with junket operators, we cannot assure you that
the junket operators with whom we are associated will meet the
high standards we insist upon. If a junket operator falls below
our standards, we may suffer reputational harm, as well as
worsening relationships with, and possibly sanctions from,
gaming regulators with authority over our operations.
Our revenues in Macao are denominated in patacas, the legal
currency of Macao, and Hong Kong dollars. Although currently
permitted, we cannot assure you that patacas will continue to be
freely exchangeable into U.S. dollars. Also, because the
currency market for patacas is relatively small and undeveloped,
our ability to convert large amounts of patacas into
U.S. dollars over a relatively short period may be limited.
As a result, we may experience difficulty in converting patacas
into U.S. dollars.
We are currently prohibited from accepting wagers in renminbi,
the currency of China. There are currently restrictions on the
export of the renminbi outside of mainland China, including to
Macao. Restrictions on the export of the renminbi may impede the
flow of gaming customers from China to Macao, inhibit the growth
of gaming in Macao and negatively impact our gaming operations.
On July 21, 2005, the People’s Bank of China announced
that the renminbi will no longer be pegged to the
U.S. dollar, but will be allowed to float in a band (and,
to a limited extent, increase in value) against a basket of
foreign currencies. The Macao pataca is pegged to the Hong Kong
dollar. Certain Asian countries have publicly asserted their
desire to eliminate the peg of the Hong Kong dollar to the
U.S. dollar. As a result, we cannot assure you that the
Hong Kong dollar and the Macao pataca will continue to be pegged
to the U.S. dollar or that the current peg rate for these
currencies will remain at the same level. The floating of the
renminbi and possible changes to the peg of the Hong Kong dollar
may result in severe fluctuations in the exchange rate for these
currencies. Any change in such exchange rates could have a
material adverse effect on our operations and on our ability to
make payments on certain of our debt instruments. We do not
currently hedge for foreign currency risk.
Certain Nevada gaming laws also apply to our gaming activities
and associations in jurisdictions outside the State of Nevada.
We are required to comply with certain reporting requirements
concerning our proposed gaming activities and associations
occurring outside the State of Nevada, including Macao and other
jurisdictions. We will also be subject to disciplinary action by
the Nevada Commission if we:
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In addition, if the Nevada Board determines that one of our
actual or intended activities or associations in a foreign
gaming operation may violate one or more of the foregoing, we
can be required by it to file an application with the Nevada
Commission for a finding of suitability of such activity or
association. If the Nevada Commission finds that the activity or
association in the foreign gaming operation is unsuitable or
prohibited, we will either be required to terminate the activity
or association, or will be prohibited from undertaking the
activity or association. Consequently, should the Nevada
Commission find that our gaming activities or associations in
Macao or certain other jurisdictions where we operate are
unsuitable, we may be prohibited from undertaking our planned
gaming activities or associations in those jurisdictions.
The Macao gaming authorities exercise similar powers for
purposes of assessing suitability in relation to our activities
in jurisdictions outside of Macao.
Part of our business strategy in Macao relies upon our ability
to profitably operate
and/or sell
certain of our real estate assets once developed, including
retail malls and vacation suites, and to use the proceeds of
these operations and sales to refinance, or repay in part our
construction loans for these assets, as well as to provide
investment capital for additional development both in Macao and
elsewhere. Our ability to sell these assets will be subject to
market conditions, applicable legislation, the receipt of
necessary government approvals and other factors. If we are
unable to profitably operate
and/or
monetize these real estate assets, we will have to seek
alternative sources of capital to refinance in part our
construction loans and for other investment capital. These
alternative sources of capital may not be available on
commercially reasonable terms or at all.
The Macao government has granted VML a quota to permit it to
hire foreign workers. VML has effectively assigned the
management of this quota to its contractors for the construction
of The Venetian Macao and other projects on the Cotai Strip.
VML, however, remains ultimately liable for all employer
obligations relating to these employees, including for payment
of wages and taxes and compliance with labor and workers’
compensation laws. VML requires each contractor to whom it has
assigned the management of part of its labor quota to indemnify
VML for any costs or liabilities VML incurs as a result of such
contractor’s failure to fulfill employer obligations.
VML’s agreements with its contractors also contain
provisions that permit it to retain some payments for up to one
year after the contractors complete work on the projects. We
cannot assure you that VML’s contractors will fulfill their
obligations to employees hired under the labor quotas or to VML
under the indemnification agreements, or that the amount of any
indemnification will be sufficient to pay for any obligations
VML may owe to employees managed by contractors under VML’s
quotas. Until we make final payments to our contractors, we have
offset rights to collect amounts they may owe us, including
amounts owed under the indemnities relating to employer
obligations. After we have made the final payments, it may be
more difficult for us to enforce any unpaid indemnity
obligations.
Macao is in the process of expanding its transportation
infrastructure to service the increased number of visitors to
Macao. If the planned expansions of transportation facilities to
and from Macao are delayed or not completed, and Macao’s
transportation infrastructure is insufficient to meet the
demands of an increased volume of visitors to Macao, the
desirability of Macao as a gaming and tourist destination, as
well as the results of operations of our Macao properties, could
be negatively impacted.
We operate a passenger ferry service between the Cotai Strip in
Macao and Hong Kong under a concession granted by the Macao
government. Another transportation company claims that the grant
of the ferry service was
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improper and has sued the Macao government seeking a review of
the government’s decision. Our inability to operate our
ferry service could result in a significant loss of visitors to
our Cotai Strip properties, including The Venetian Macao, and
could have a material adverse effect on our financial condition,
results of operations or cash flows.
We have had the benefit of a corporate tax exemption in Macao,
which exempts us from paying corporate income tax on profits
generated by the operation of casino games. We will continue to
benefit from this tax exemption through the end of 2008. We plan
to file a request for an extension with the Macao government. We
cannot assure you that this tax exemption will be extended
beyond the expiration date and we do not expect this tax
exemption to apply to our non-gaming activities.
Macao is susceptible to severe typhoons. Macao consists of a
peninsula and two islands off the coast of mainland China. On
some occasions, typhoons have caused a considerable amount of
damage to Macao’s infrastructure and economy. In the event
of a major typhoon or other natural disaster in Macao, our
business may be severely disrupted and our results of operations
could be adversely affected. Although we have insurance coverage
with respect to these events, we cannot assure you that our
coverage will be sufficient to fully indemnify us against all
direct and indirect costs, including loss of business, that
could result from substantial damage to, or partial or complete
destruction of, our Macao properties or other damage to the
infrastructure or economy of Macao.
The Development Agreement between MBS and the STB contains
events of default which could permit the STB to terminate the
agreement without compensation to us. If the Development
Agreement is terminated, we could lose our right to open and
operate the Marina Bay Sands and our investment in Marina Bay
Sands could be lost.
ITEM 1B. —
UNRESOLVED STAFF COMMENTS
None.
We own an approximately
63-acre
parcel of land on which The Venetian, The Palazzo and The Sands
Expo Center sit and an approximately
19-acre
parcel of land located to the east of the
60-acre
parcel. We own these parcels of land in fee simple, subject to
certain easements, encroachments and other non-monetary
encumbrances. Las Vegas Sands, LLC’s new senior secured
credit facility is, subject to certain exceptions,
collateralized by a first priority security interest (subject to
permitted liens) in substantially all of Las Vegas Sands,
LLC’s property.
We have received concessions from the Macao government to build
on a
six-acre
land site for the Sands Macao and parcels 1, 2 and 3 on the
Cotai Strip, including the site on which we own and operate The
Venetian Macao (parcel 1) and the site on which we are
building The Four Seasons Macao (parcel 2). We do not own these
land sites in Macao; however, the land concessions grant us
exclusive use of the land. As specified in the land concessions,
we are required to pay premiums, which are payable over four
years or are due upon the completion of the corresponding
resort, as well as annual rent for the term of the land
concession, which may be revised every five years by the Macao
government. See “Item 8 — Financial
Statements and Supplementary Data — Notes to
Consolidated Financial Statements —
Note 6 — Leasehold Interests in Land, Net”
for more information on our payment obligation under these land
concessions.
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We do not yet have all the necessary Macao government approvals
that we will need in order to develop our remaining Cotai Strip
developments. Although, we have commenced construction or
pre-construction for our projects on parcels 5, 6, 7 and 8 on
the Cotai Strip, we have not yet obtained a land concession for
these parcels from the Macao government, which holds title to
the land. Land concessions in Macao generally have terms of
25 years, with automatic extensions at our option of
10 years thereafter and there are common rates based on
land use generally used to determine the cost of these land
concessions. We are currently in the process of negotiating with
the Macao government to obtain the land concession, which will
require us to pay certain premiums and rent, for parcels 5 and
6, and we will subsequently negotiate the land concession for
parcels 7 and 8. We believe we will be successful in obtaining
the land concessions; however, in the event we are unable to
obtain concessions for the land underlying parcels 5, 6, 7
and/or 8, we
could lose all or a substantial part of our $623.0 million
in capitalized construction costs related to these developments
as of December 31, 2007.
Under the Development Agreement with the STB to build and
operate the Marina Bay Sands in Singapore, we paid SGD
1.2 billion (approximately $830.0 million at exchange
rates in effect on December 31, 2007) in premium
payments for the
60-year
lease of the land on which the resort will be built plus an
additional SGD 105.6 million (approximately
$73.0 million at exchange rates in effect on
December 31, 2007) for various taxes and other fees.
Of this combined amount, $854.4 million has been
capitalized on the balance sheet as leasehold interest in land
with $19.4 million amortized as of December 31, 2007.
The Sands Bethworks development will be located on the
approximately
124-acre
site of the Historic Bethlehem Steel Works in Bethlehem,
Pennsylvania, which is about 70 miles from midtown
Manhattan, New York. The property will be owned by the Company
through its joint venture with Bethworks Now, LLC, which has yet
to contribute the land in the joint venture. We expect the
contribution to take place in 2008; however, no assurances can
be given as to the timing of the contribution. If the land is
not contributed as required under the agreement between the
Company and Bethworks Now, LLC, we could lose all or a
substantial part of our $116.9 million investment in Sands
Bethworks as of December 31, 2007.
In 2004, we entered into a long-term lease with a third party
for airspace over which part of The Shoppes at The Palazzo was
constructed. We acquired fee title to the airspace in order to
build the proposed Las Vegas condominium tower in January 2008.
In addition to the matters described below, we are party to
various legal matters and claims arising in the ordinary course
of business. Management has made certain estimates for potential
litigation costs based upon consultation with legal counsel.
Actual results could differ from these estimates; however, in
the opinion of management, such litigation and claims will not
have a material adverse effect on our financial condition,
results of operations or cash flows.
Lido Casino Resort, LLC (“Lido”), formerly a
wholly-owned subsidiary of the Company and now merged into
Venetian Casino Resort, LLC (“VCR”), and its
construction manager, Taylor International Corp.
(“Taylor”), filed suit in March 2006 in the United
States District Court for the District of Nevada (the
“District Court”) against Malcolm Drilling Company,
Inc. (“Malcolm”), the contractor on The Palazzo
project responsible for completing certain foundation work (the
“District Court Case”). Lido and Taylor claim in the
District Court Case that Malcolm was in default of its contract
for performing defective work, failing to correct defective
work, failing to complete its work and causing delay to the
project. Malcolm responded by filing a Notice of a Lien with the
Clerk of Clark County, Nevada in March 2006 in the amount of
approximately $19.0 million (the “Lien”). In
April 2006, Lido and Taylor moved in the District Court Case to
strike or, in the alternative, to reduce the amount of, the
Lien, claiming, among other things, that the Lien was excessive
for including claims for disruption and delay, which Lido and
Taylor claim are not lienable under Nevada law (the “Lien
Motion”). Malcolm responded in April 2006 by filing a
complaint against Lido and Taylor in District Court of Clark
County, Nevada seeking to foreclose on the Lien against Taylor,
claiming breach of contract, a cardinal change in the underlying
contract, unjust enrichment against Lido and Taylor and bad
faith and fraud against Taylor (the “State Court
Case”), and simultaneously filed a motion
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in the District Court Case, seeking to dismiss the District
Court Case on abstention grounds (the “Abstention
Motion”). In response, in June 2006, Lido filed a motion to
dismiss the State Court Case based on the principle of the
“prior pending” District Court Case (the “Motion
to Dismiss”). In June 2006, the Abstention Motion was
granted in part by the United States District Court, the
District Court Case was stayed pending the outcome of the Motion
to Dismiss in the State Court Case and the Lien Motion was
denied without prejudice. In January 2008, the parties agreed to
the dismissal of the District Court Case without prejudice.
Prior to agreeing on that dismissal, Lido and Malcolm entered
into a stipulation under which Lido withdrew the Motion to
Dismiss, and in July 2006 filed a replacement lien motion in the
State Court Case. The lien motion in the State Court Case was
denied in August 2006 and Lido and Taylor filed a permitted
interlocutory notice of appeal to the Supreme Court of Nevada in
September 2006. In April 2007, Malcolm filed an Amended Notice
of Lien with the Clerk of Clark County, Nevada in the amount of
approximately $16.7 million plus interest, costs and
attorney’s fees. In August 2007, Malcolm filed a motion for
partial summary judgment, seeking the dismissal of the
counterclaim filed in the State Court Case by Lido to the extent
the claim sought lost profits. After argument, the motion for
partial summary judgment was denied without prejudice on
October 23, 2007 and a conforming order was entered in
December 2007. The parties have agreed to complete limited
additional discovery by the end of February 2008. Argument on
the appeal of the denial of the lien motion in the State Court
has been scheduled by the Supreme Court for March 2008 and an
initial trial call of the State Court Case also has been
scheduled for March 2008. In January 2008, Malcolm filed a
series of three motions and again sought summary judgment on the
counterclaim filed in the State Court Case. Based upon the
advice of legal counsel, management has determined that based on
proceedings to date, an adverse outcome is not probable. Lido
intends to defend itself against the claims pending in the State
Court Case.
On October 15, 2004, Richard Suen and Round Square Company
Limited filed an action against Las Vegas Sands Corp.
(“LVSC”), Las Vegas Sands, Inc., 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 Macao resort operations to the plaintiffs as
well as other related claims. In March 2005, LVSC was dismissed
as a party without prejudice based on a stipulation to do so
between the parties. On May 17, 2005, the plaintiffs filed
their first amended complaint. On February 2, 2006,
defendants filed a motion for partial summary judgment with
respect to plaintiffs’ fraud claims against all the
defendants. On March 16, 2006, an order was filed by the
court granting defendants’ motion for partial summary
judgment. Pursuant to the order filed March 16, 2006,
plaintiffs’ fraud claims set forth in the first amended
complaint were dismissed with prejudice as against all
defendants. The order also dismissed with prejudice the first
amended complaint against defendants Sheldon G. Adelson and
William P. Weidner. This action is currently set for trial in
April 2008. Based upon the advice of legal counsel, management
believes that the plaintiff’s case against the Company is
without merit. The Company intends to defend this matter
vigorously.
On January 26, 2006, Clive Basset Jones, Darryl Steven
Turok (a/k/a Dax Turok) and Cheong Jose Vai Chi
(a/k/a Cliff
Cheong), filed an action against LVSC, Las Vegas Sands, LLC,
Venetian Venture Development, LLC and various unspecified
individuals and companies in the District Court of Clark County,
Nevada. The plaintiffs assert breach of an agreement to pay a
success fee in an amount equal to 5% of the ownership interest
in the entity that owns and operates the Macao gaming
subconcession as well as other related claims. In April 2006,
LVSC was dismissed as a party without prejudice based on a
stipulation to do so between the parties. Discovery has begun in
this matter and the case is currently set for trial in December
2008. Based upon the advice of legal counsel, management
believes that the plaintiff’s case against the Company is
without merit. The Company intends to defend this matter
vigorously.
On February 5, 2007, Asian American Entertainment
Corporation, Limited (“AAEC”) filed an action against
Las Vegas Sands, Inc. (“LVSI”), VCR, Venetian Venture
Development, LLC (“Venetian Venture Development”),
William P. Weidner and David Friedman in the United States
District Court for the District of Nevada. The plaintiffs assert
breach of contract by LVSI, VCR and Venetian Venture Development
of an agreement under which AAEC would work to obtain a gaming
license in Macao and, if successful, AAEC would jointly operate
a casino, hotel and related facilities in Macao with Venetian
Venture Development and Venetian Venture Development would
receive fees and a minority equity interest in the venture and
breach of fiduciary duties by all of the defendants. The
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plaintiffs have requested an unspecified amount of actual,
compensatory and punitive damages, and disgorgement of profits
related to our Macao gaming license. The Company filed a motion
to dismiss on July 11, 2007. On August 1, 2007, the
Court granted defendants’ motion to dismiss the complaint
against all defendants without prejudice. The plaintiffs have
appealed this decision. Based upon the advice of legal counsel,
management believes that the plaintiff’s case against the
Company is without merit. The Company intends to defend this
matter vigorously.
None.
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PART II
The Company’s common stock trades on the NYSE under the
symbol “LVS.” The following table sets forth the high
and low sales prices for the common stock on the NYSE for the
fiscal quarter indicated.
As of February 21, 2008, there were 355,352,992 shares
of our common stock issued and outstanding that were held by 259
stockholders of record.
We have not declared or paid any dividends since our formation
in August 2004. We do not expect to pay dividends on our common
stock in the future. We expect to retain our future earnings, if
any, for use in the operation and expansion of our business. Our
board of directors will determine whether to pay dividends in
the future based on conditions then existing, including our
earnings, financial condition and capital requirements, as well
as economic and other conditions our board may deem relevant.
Our ability to declare and pay dividends on our common stock is
subject to the requirements of Nevada law. In addition, we are a
parent company with limited business operations of our own.
Accordingly, our primary sources of cash are dividends and
distributions with respect to our ownership interest in our
subsidiaries that are derived from the earnings and cash flow
generated by our operating properties.
Our subsidiaries’ long-term debt arrangements place
material restrictions on their ability to pay cash dividends to
the Company. This will restrict our ability to pay cash
dividends other than from cash on hand. See
“Item 7 — Management’s Discussion and
Analysis of Financial Condition and Results of
Operations — Liquidity and Capital
Resources — Restrictions on Distributions” and
“Item 8 — Financial Statements and
Supplementary Data — Notes to Consolidated Financial
Statements — Note 8 — Long-Term
Debt.”
There have not been any sales by the Company of equity
securities in the last fiscal year that have not been registered
under the Securities Act of 1933.
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The following performance graph compares the performance of our
common stock with the performance of the Standard &
Poor’s 500 Index and a peer group of companies, during the
period from the Company’s initial public offering on
December 15, 2004 through December 31, 2007. The
selected peer group for 2005, 2006 and 2007 is comprised of
three gaming companies considered to be the Company’s
closest competitors: Harrah’s Entertainment, Inc., MGM
MIRAGE and Wynn Resorts Limited. The selected peer group for
2004 included these three companies, as well as Caesars
Entertainment, Inc. and Mandalay Resort Group. In 2005, Caesars
Entertainment, Inc. was acquired by Harrah’s Entertainment,
Inc. and Mandalay Resort Group was acquired by MGM MIRAGE. The
graph plots the changes in value of an initial $100 investment
over the indicated time period, assuming all dividends are
reinvested.
The performance graph should not be deemed filed or incorporated
by reference into any other Company filing under the Securities
Act of 1933 or the Exchange Act of 1934, except to the extent
the Company specifically incorporates the performance graph by
reference therein.
ITEM 6. —
SELECTED FINANCIAL DATA
The following reflects selected historical financial data that
should be read in conjunction with “Item 7 —
Management’s Discussion and Analysis of Financial Condition
and Results of Operations” and the consolidated
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financial statements and notes thereto included elsewhere in
this Annual Report on
Form 10-K.
The historical results are not necessarily indicative of the
results of operations to be expected in the future.
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The following discussion should be read in conjunction with, and
is qualified in its entirety by, the audited consolidated
financial statements, and the notes thereto and other financial
information included in this
Form 10-K.
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.”
We own and operate integrated resorts in Las Vegas and Macao,
and have current on-going development projects in Macao on the
Cotai Strip, and in Singapore and Pennsylvania.
The Palazzo, which partially opened in December 2007, had an
inconsequential impact on our Las Vegas operations.
Approximately 61.9% of gross revenue at The Venetian, The Sands
Expo Center and The Congress Center for the year ended
December 31, 2007, was derived from hotel rooms, food and
beverage, and other non-gaming sources and 38.1% was derived
from gaming. The percentage of non-gaming revenue for The
Venetian reflects the integrated resort’s emphasis on the
group convention and trade show business and the resulting
higher occupancy and room rates during mid-week periods.
Our Macao operations consist of the Sands Macao, The Venetian
Macao, which opened in August 2007, and other ancillary
operations that support these properties and will support our
on-going development projects on the Cotai Strip as well.
Approximately 94.8% of the Sands Macao’s gross revenue for
the year ended December 31, 2007, was derived from gaming
activities, with the remainder primarily derived from food and
beverage services. Approximately 81.4% of The Venetian
Macao’s gross revenue for the period ended
December 31, 2007, was derived from gaming activities, with
the remainder derived from room revenues, food and beverage
services, and other non-gaming sources.
We are in the early stages of constructing a high-rise
residential condominium tower with approximately
1.0 million saleable square feet that will be situated
between The Palazzo and The Venetian. The condominium tower is
currently expected to open in late 2009 and will be built at an
estimated cost of approximately $600.0 million.
We are in the process of developing a gaming, hotel, shopping
and dining complex called Sands Bethworks located on the site of
the Historic Bethlehem Steel Works in Bethlehem, Pennsylvania,
which is about 70 miles from midtown Manhattan, New York.
Sands Bethworks is currently expected to open in summer 2009 and
will be built at an estimated cost of approximately
$600.0 million.
We have submitted development plans to the Macao government for
six integrated resort developments, in addition to The Venetian
Macao, on an area of approximately 200 acres located on the
Cotai Strip. The developments are expected to include hotels,
exhibition and conference facilities, casinos, showrooms,
shopping malls, spas, restaurants, entertainment facilities and
other attractions and amenities, as well as public common areas.
Upon completion, our developments on the Cotai Strip (including
The Venetian Macao) are currently planned to feature
approximately 19,750 suites/rooms and 1.6 million square
feet of gaming space with a capacity of approximately 3,300
table games and 16,470 slot machines.
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In August 2006, MBS entered into the Development Agreement with
the STB to build and operate an integrated resort called the
Marina Bay Sands in Singapore. Although construction has started
on the Marina Bay Sands, we are continuing to work with the
Singapore government to finalize various aspects of the
integrated resort and are in the process of revising our cost
estimates for the project. We expect the cost to develop and
construct the Marina Bay Sands will be in excess of
$4.0 billion, inclusive of payment made in 2006 for the
land premium, taxes and other fees. The Marina Bay Sands is
expected to open in late 2009.
We are currently exploring the possibility of developing and
operating integrated resorts in additional Asian and
U.S. jurisdictions, and in Europe.
The following table summarizes our results of operations:
As a growth company with a significant development pipeline, our
historical financial results will not be indicative of our
future results as we continue to open new properties, including
our remaining Cotai Strip developments and Marina Bay Sands.
Operating revenues at our Las Vegas properties and The Venetian
Macao 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. Hotel
revenues are not material for the Sands Macao as its revenues
are principally driven by casino customers that visit the casino
on a daily basis. Visitors to our Macao properties arrive by
ferry, automobile, bus, airplane or helicopter from Hong Kong,
cities in China, and other Southeast Asian cities in close
proximity to Macao and elsewhere.
The following are the key measurements we use to evaluate
operating revenue:
Casino revenue measurements for Las
Vegas: Table games drop and slot 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 or coin placed into slot machines in
aggregate for the period cited. Drop and handle are
abbreviations for table games drop and slot handle. Based upon
our mix of table games, our table games produce a statistical
average win percentage (calculated before
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discounts) as measured as a percentage of table game drop of
20.0% to 22.0% and slot machines produce a statistical average
win percentage (calculated before slot club cash incentives) as
measured as a percentage of slot machine handle generally
between 6.0% and 7.0%.
Casino revenue measurements for Macao: Macao
table games are segregated into two groups, consistent with the
Macao market’s convention: Rolling Chip play (all VIP play)
and Non-Rolling Chip play (mostly non-VIP players). The volume
measurement for Rolling Chip play is non-negotiable gaming chips
wagered. The volume measurement for Non-Rolling Chip play is
table games drop as described above. Rolling Chip volume and
Non-Rolling Chip volume are not equivalent as Rolling Chip
volume is a measure of amounts wagered versus dropped. Rolling
Chip volume is substantially higher than table games drop. Slot
handle is the gross amount wagered or coins placed into slot
machines in aggregate for the period cited.
We view Rolling Chip table games win as a percentage of Rolling
Chip volume and Non-Rolling Chip table games win as a percentage
of drop. 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 in Macao, our Rolling Chip table games
win percentage (calculated before discounts and commissions) as
measured as a percentage of Rolling Chip volume is expected to
be 3.0% and our Non-Rolling Chip table games are expected to
produce a statistical average win percentage as measured as a
percentage of table game drop of 18.0% to 20.0%. Similar to Las
Vegas, our Macao slot machines produce a statistical average win
percentage as measured as a percentage of slot machine handle of
generally between 6.0% and 7.0%.
Actual win may vary from the statistical average. Generally,
slot machine play is conducted on a cash basis. Credit-based
wagering for our Las Vegas properties was approximately 62.6% of
table games revenues for the year ended December 31, 2007.
Table games play at our Macao properties are conducted primarily
on a cash basis with only 19.4% credit-based wagering for the
year ended December 31, 2007.
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.
Year
Ended December 31, 2007 compared to the Year Ended
December 31, 2006
Our net revenues consisted of the following:
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Consolidated net revenues were $2.95 billion for the year
ended December 31, 2007, an increase of $713.7 million
compared to $2.24 billion for the year ended
December 31, 2006. The increase in net revenues was due
primarily to the opening of The Venetian Macao in August 2007.
Casino revenues for the year ended December 31, 2007,
increased $574.4 million as compared to the year ended
December 31, 2006. Of the increase, $549.3 million was
attributable to the opening of The Venetian Macao in August 2007
and $32.6 million was attributable to the growth of our
casino operations at the Sands Macao, offset by a slight
decrease at The Venetian of $6.8 million, attributable to a
decrease in win percentage as compared to the year ended
December 31, 2006. The following table summarizes the
results of our casino revenue activity:
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. The table above excludes The Palazzo
for 2007 as the two days of operations are not material or
indicative of future results.
Room revenues for the year ended December 31, 2007,
increased $86.8 million as compared to the year ended
December 31, 2006. The increase was primarily attributable
to $63.4 million from The Venetian Macao as well as an
increase in the average daily room rate at The Venetian. The
Palazzo suites were not open to the public until
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January 2008. The suites at Sands Macao are primarily provided
to casino patrons on a complimentary basis and therefore have
not been included in the following table, which summarizes the
results of our room revenue activity.
Food and beverage revenues for the year ended December 31,
2007, increased $50.4 million as compared to the year ended
December 31, 2006. The increase was primarily attributable
to $21.2 million from The Venetian Macao and increases of
$11.4 million at the Sands Macao due to the increased
number of visitors and $8.0 million at The Venetian from
two of our joint venture restaurants which opened during summer
2007.
Convention, retail and other revenues for the year ended
December 31, 2007, increased $52.7 million as compared
to the year ended December 31, 2006. The increase was
primarily attributable to $41.3 million of revenues from
The Venetian Macao, consisting principally of rental revenues
from the mall, and approximately $9.6 million of other
revenue related to large group room cancellations at The
Venetian.
The breakdown of operating expenses is as follows:
Operating expenses were $2.62 billion for the year ended
December 31, 2007, an increase of $957.8 million as
compared to $1.66 billion for the year ended
December 31, 2006. The increase in operating expenses was
primarily attributable to the higher operating revenues, growth
of our operating businesses in Macao and to a lesser extent in
Las Vegas, and pre-opening activities as more fully described
below.
Casino expenses for the year ended December 31, 2007,
increased $510.6 million as compared to the year ended
December 31, 2006. Of the $510.6 million increase,
$322.1 million was due to the 39.0% gross win tax on higher
casino revenues from our properties in Macao. An additional
$109.6 million in casino-related expenses
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(exclusive of the aforementioned 39.0% gross win tax) were
attributable to The Venetian Macao. The remaining increase was
primarily attributable to additional payroll-related expenses
and our Rolling Chip program at Sands Macao.
Rooms expense increased $8.6 million, food and beverage
expense increased $29.2 million and convention, retail and
other expense increased $33.4 million. These increases were
primarily due to the associated increase in the respective
revenue categories as noted above.
The provision for doubtful accounts was $26.4 million for
the year ended December 31, 2007, compared to
$18.1 million for the year ended December 31, 2006,
due primarily to a $10.6 million provision for one customer
in the beginning of 2007. 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 for the year ended
December 31, 2007, increased $89.0 million as compared
to the year ended December 31, 2006. The increase was
attributable to the growth of our operating businesses in Las
Vegas and Macao, with $69.5 million of the increase being
incurred at The Venetian Macao and $6.9 million being
incurred in Las Vegas and at Sands Macao related to stock-based
compensation expense.
Corporate expense for the year ended December 31, 2007,
increased $34.9 million as compared to the year ended
December 31, 2006. The increase was attributable to
increases of $16.2 million in legal and professional fees,
$5.2 million in payroll-related expenses, $4.5 million
in travel-related expenses and $9.0 million of other
corporate general and administrative costs as we continue to
build our corporate infrastructure to support our current and
planned growth.
Rental expense for the year ended December 31, 2007,
increased $18.3 million as compared to the year ended
December 31, 2006. The increase is primarily attributable
to a full year of amortization of Singapore’s leasehold
interest in land, which we entered into in August 2006, and
amortization of the leasehold interest in land for parcels 1, 2
and 3 on the Cotai Strip, which we entered into in February 2007.
Pre-opening and development expenses were $189.3 million
and $9.7 million, respectively, for the year ended
December 31, 2007, as compared to $37.7 million and
$26.1 million, respectively, for the year ended
December 31, 2006. 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
year ended December 31, 2007, were primarily related to the
opening of The Venetian Macao and The Palazzo, and activities at
our other Cotai Strip, Marina Bay Sands and Sands Bethworks
projects. Development expenses include the costs associated with
the Company’s evaluation and pursuit of new business
opportunities, which are also expensed as incurred. Development
expenses for the year ended December 31, 2007, were
primarily related to our activities in Hengqin Island, Asia,
Europe and the U.S. We expect that pre-opening and
development expenses will decrease due to the opening of The
Venetian Macao and The Palazzo during 2007.
Depreciation and amortization expense for the year ended
December 31, 2007, increased $91.8 million as compared
to the year ended December 31, 2006. The increase was
primarily the result of The Venetian Macao (totaling
$60.0 million) and a full year of depreciation expense
related to the Sands Macao podium expansion (an increase of
$7.0 million), which was placed into service in August
2006. Additionally, there was $7.5 million in accelerated
deprecation expense during the year ended December 31,
2007, related to the replacement of assets at The Venetian in
connection with the room renovation project.
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The following table summarizes information related to interest
expense on long-term debt:
Interest cost increased $237.6 million as compared to the
year ended December 31, 2006, resulting from the
substantial increase in our average long-term debt balances, the
proceeds from which were primarily used to fund our various
development projects. See “— Liquidity and
Capital Resources” for further detail of our financing
activities. The increase in interest cost was offset by the
capitalization of $223.2 million of interest during the
year ended December 31, 2007, as compared to
$94.6 million of capitalized interest during the year ended
December 31, 2006. We expect our interest cost will
continue to increase as our long-term debt balances increase.
Leasehold interest in land payments made in Macao and Singapore
are not considered qualifying assets and as such, are not
included in the base amount used to determine capitalized
interest.
Interest income for the year ended December 31, 2007, was
$72.5 million, an increase of $6.3 million as compared
to $66.2 million for the year ended December 31, 2006.
The increase was attributable to additional invested cash
balances, primarily from our borrowings under the
U.S. senior secured credit facilities and the Macao credit
facility that have not yet been spent.
Other expense for the year ended December 31, 2007, was
$8.7 million as compared to $0.2 million for the year
ended December 31, 2006. The $8.7 million expense
amount was primarily attributable to foreign exchange
translation losses associated with U.S. denominated debt
held in Macao.
The loss on early retirement of debt of $10.7 million for
the year ended December 31, 2007, was due to the
refinancing of our U.S. senior secured credit facility and
the early retirement of the construction loan related to The
Shoppes at The Palazzo.
Our effective income tax rate for the year ended
December 31, 2007, was 15.6%. The effective tax rate for
the year was significantly lower than the federal statutory rate
due primarily to a zero effective tax rate on our Macao net
income as a result of an income tax exemption in Macao on gaming
operations, which is set to expire at the end of 2008. Based on
Macanese law and the treatment of other gaming operators, we
believe the income tax exemption will be extended for an
additional five-year term. The effective tax rate was 12.3% for
the year ended December 31, 2006, primarily due to the
application of the aforementioned Macao income tax exemption.
The effective income tax rate for 2007 was higher than the 2006
period due to no tax benefit being recorded on certain losses in
some foreign jurisdictions and our geographic income mix.
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Year
Ended December 31, 2006 compared to the Year Ended
December 31, 2005
Our net revenues consisted of the following:
Consolidated net revenues were $2.24 billion for the year
ended December 31, 2006, an increase of $495.9 million
compared to $1.74 billion for the year ended
December 31, 2005. The increase in net revenues was due
primarily to an increase in casino revenues of
$426.0 million, which was primarily attributable to the
growth of our operations at the Sands Macao.
Casino revenues for the year ended December 31, 2006,
increased $426.0 million as compared the year ended
December 31, 2005. Of the increase, $382.1 million was
attributable to the growth of our casino operations at the Sands
Macao due primarily to the formal introduction of our Rolling
Chip program in March 2005 and casino expansion in August 2006.
The following table summarizes the results of our casino revenue
activity:
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 for the year ended December 31, 2006,
increased $27.0 million as compared to the year ended
December 31, 2005. The increase was attributable to the
increase in the average daily room rate as well as a slight
increase in the occupancy rate. The following table summarizes
the results of our room revenue activity:
Food and beverage revenues were $187.8 million for the year
ended December 31, 2006, an increase of $40.3 million
as compared to $147.5 million for the year ended
December 31, 2005. The increase was primarily attributable
to food and beverage revenues at The Venetian, which increased
$32.2 million due to increased group business resulting
primarily from approximately 450,000 square feet of
additional meeting space at the property.
Convention, retail and other revenues for the year ended
December 31, 2006, increased $22.6 million as compared
to the year ended December 31, 2005. The increase is
primarily attributable to $7.6 million of additional
convention revenues from The Sands Expo Center and
$10.4 million in revenues associated with the Blue Man
Group, the Phantom of the Opera and the Gordie Brown
performances, which began in October 2005, June 2006 and October
2006, respectively.
The breakdown of operating expenses is as follows:
Operating expenses were $1.66 billion for the year ended
December 31, 2006, an increase of $411.3 million as
compared to $1.25 billion for the year ended
December 31, 2005. The increase in operating expenses was
primarily attributable to the higher operating revenues and
growth of our operating businesses in Macao and to a lesser
extent in Las Vegas, as more fully described below.
Casino expenses for the year ended December 31, 2006,
increased $268.4 million as compared to the year ended
December 31, 2005. Of the increase in casino expenses,
$176.1 million was due to the 39.0% gross win tax on casino
revenues in Macao. Despite the higher gross win tax, casino
operating margins at Sands Macao are similar to those at The
Venetian primarily because of lower labor, marketing and sales
expenses in Macao. As the Rolling Chip volume increases as a
percentage of our total gaming operations, casino margins will
decrease due to the commissions paid under the Rolling Chip
program. The remaining increase was primarily attributable to
the
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additional payroll related expenses related to the continued
growth of our operations at Sands Macao and the casino expansion
in August 2006.
Food and beverage expense increased $12.4 million and
convention, retail and other expense increased
$6.2 million. These increases were primarily due to the
associated increase in the respective revenue categories as
noted above.
The provision for doubtful accounts was $18.1 million for
the year ended December 31, 2006, compared to
$9.4 million for the year ended December 31, 2005, due
primarily to an increase in casino and hotel receivables during
the year. 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 for the year ended
December 31, 2006, increased $37.5 million as compared
to the year ended December 31, 2005. The increase was
attributable to the growth of our operating businesses in Las
Vegas and Macao as well as $7.1 million related to
stock-based compensation expense recorded in connection with the
adoption of Statement of Financial Accounting Standards
(“SFAS”) No. 123R.
Corporate expense for the year ended December 31, 2006,
increased $21.3 million as compared to the year ended
December 31, 2005. Of the increase in corporate expense,
$19.5 million was related to payroll and other operating
expenses as we increase our headcount in the corporate area to
support our continued expansion activities and $5.4 million
related to stock-based compensation recorded in connection with
the adoption of SFAS No. 123R, partially offset by a
$5.0 million charitable contribution that was made in 2005
that did not recur in 2006.
Pre-opening and development expenses were $37.7 million and
$26.1 million, respectively, for the year ended
December 31, 2006, compared to $3.7 million and
$22.2 million, respectively, for the year ended
December 31, 2005. 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
year ended December 31, 2006, were primarily related to The
Venetian Macao project and to the expansion of the Sands Macao.
Development expenses include the costs associated with the
Company’s evaluation and pursuit of new business
opportunities, which are also expensed as incurred. Development
expenses for the year ended December 31, 2006, were
primarily related to our activities in Singapore, Pennsylvania
and Europe. We expect that pre-opening and development expenses
will continue to increase as we progress with The Venetian Macao
and other Cotai Strip projects in Macao, The Palazzo in Las
Vegas, Marina Bay Sands in Singapore, Hengqin Island and
Pennsylvania, as well as our continued pursuit of development
opportunities elsewhere.
Depreciation and amortization expense for the year ended
December 31, 2006, increased $15.5 million as compared
to the year ended December 31, 2005. The increase was
primarily due to additional depreciation expense as a result of
capital improvements at The Venetian and Sands Macao.
The following table summarizes information related to interest
expense on long-term debt:
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Interest expense, net of amounts capitalized, for the year ended
December 31, 2006, increased $39.6 million as compared
to the year ended December 31, 2005. This increase is
primarily attributable to an increase in our average long-term
debt balances resulting primarily from the completion of the
$2.5 billion Macao credit facility, in May 2006, to support
our development activities in Macao and the $1.53 billion
Singapore bridge facility, in August 2006, to support the
development of the Marina Bay Sands. We expect interest expense
will continue to increase as our long-term debt balances and
interest rates increase. This increase was offset by the
capitalization of $94.6 million of interest during the year
ended December 31, 2006, compared to $22.7 million of
capitalized interest during the year ended December 31,
2005. We expect capitalized interest will continue to increase
as The Venetian Macao and The Palazzo projects approach their
anticipated 2007 opening dates and as we increase our
construction activities on the Cotai Strip, at Marina Bay Sands
and Sands Bethworks.
Interest income for the year ended December 31, 2006, was
$66.2 million, an increase of $33.1 million as
compared to $33.1 million for the year ended
December 31, 2005. The increase was attributable to
additional invested cash balances, primarily from our borrowings
under the U.S. senior secured credit facility and the Macao
credit facility.
The loss on early retirement of debt of $137.0 million
during the year ended December 31, 2005, was the result of
the redemption of Las Vegas Sands, Inc.’s
$843.6 million in aggregate principal amount of 11%
mortgage notes and VML’s $120.0 million in aggregate
principal amount of senior secured notes.
Our effective income tax rate for the year ended
December 31, 2006, was 12.3%. The effective tax rate for
the year was significantly lower than the federal statutory rate
due primarily to a zero effective tax rate on our Macao net
income as a result of an income tax exemption in Macao on gaming
operations, which is set to expire at the end of 2008. The
effective tax rate was 1.5% for the year ended December 31,
2005, primarily due to the tax benefit associated with the loss
on early retirement of debt in the 2005 period, as well as the
application of the aforementioned Macao income tax exemption.
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Our cash flows consisted of the following:
Table games play at our Las Vegas properties is conducted on a
cash and credit basis while table games play at our Macao
properties is conducted primarily on a cash 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
provided by operating activities for the year ended
December 31, 2007, was $365.5 million, an increase of
$562.2 million as compared with cash used in operating
activities of $196.7 million for the year ended
December 31, 2006. The main factor contributing to the
increase is the payments of leasehold interests in land. In
2006, we paid $786.7 million for the Singapore leasehold
interest in land and in 2007, we made payments totaling
$235.2 million for the Macao leasehold interests in land
related to parcels 1, 2 and 3 and the Sands Macao hotel tower
expansion. This increase is offset by a decrease in operating
income (as previously described) during the year ended
December 31, 2007, as compared to the year ended
December 31, 2006.
Capital expenditures for the year ended December 31, 2007,
totaled $3.79 billion, including $1.96 billion for
construction and development activities in Macao (including the
Sands Macao, The Venetian Macao and our other developments on
the Cotai Strip); $1.18 billion for construction and
development activities at The Palazzo and The Shoppes at The
Palazzo; $364.6 million for construction and development
activities in Singapore; $152.2 million on expansions,
improvements and maintenance capital expenditures at The
Venetian and The Sands Expo Center in Las Vegas; and
$129.9 million for corporate and other activities,
primarily for the purchase of aircraft and the construction of
Sands Bethworks.
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Restricted cash decreased $556.3 million due primarily to
decreases in restricted cash balances at The Venetian, The
Palazzo and The Sands Expo Center, which totaled
$413.7 million, due primarily to construction payments
related to The Palazzo and, to a lesser extent, the refinancing
of the new $5.0 billion senior secured credit facility,
which removed restrictions on certain cash balances. There was
also a $406.2 million decrease in the restricted cash
balances in Macao due to the use of proceeds from loan draws to
fund additional construction costs for The Venetian Macao and a
$50.0 million decrease related to the payment for our
Pennsylvania gaming license, offset by an increase of
$318.5 million in restricted cash balances held in
Singapore for construction-related payments.
For the year ended December 31, 2007, net cash flows
provided from financing activities were $3.32 billion. The
net increase was primarily attributable to the net borrowings of
$2.99 billion under the new U.S. senior secured credit
facility, $1.55 billion under the Macao credit facility,
$339.8 million under the Singapore bridge facility and
$89.5 million under the airplane financings, offset by the
net repayment of existing U.S. borrowings of
$1.43 billion for the prior senior secured credit facility,
$114.5 million for The Shoppes at The Palazzo construction
loan and $90.9 million for The Sands Expo Center mortgage
loan.
As previously described, we have a number of significant
development projects underway in the United States, Macao and
Singapore for which we expect construction to continue through
2011. In the United States, the estimated costs to build the Las
Vegas condominium tower and the Sands Bethworks project are each
approximately $600.0 million, of which we have capitalized
approximately $82.1 million and $66.9 million,
respectively. In Macao, the estimated cost to build our
developments on the Cotai Strip (including The Venetian Macao)
is approximately $12.0 billion, of which we have
capitalized approximately $2.91 billion. In Singapore,
although construction has started on the Marina Bay Sands, we
are continuing to work with the Singapore government to finalize
various design aspects of the integrated resort and are in the
process of finalizing our cost estimates for the project. We
expect that the cost to design, develop and construct the Marina
Bay Sands will be in excess of $4.0 billion (inclusive of
payments made in 2006 for the land premium, taxes and other
fees) of which we have incurred approximately $1.39 billion.
We have principally funded our global development projects
through borrowings under the bank credit facilities of our
operating subsidiaries, operating cash flows and proceeds from
the disposition of non-core assets. In 2007, we began to execute
our financing strategy to secure additional borrowing capacity
to fund our existing and future development projects and
operations in Asia, including Macao and Singapore, and the
United States.
In April 2007, we increased the size of our Macao credit
facility to fund our Macao development projects from
$2.5 billion to $3.3 billion by exercising our right
to access an additional $800.0 million of incremental
facilities under the accordion feature provided under the Macao
credit facility. The incremental $800.0 million consisted
of an additional $600.0 million of term loans and an
increase of $200.0 million to the revolving credit facility
to $700.0 million. In connection with the increase in the
Macao credit facility, the lenders also approved a reduction of
the interest rate margin for all classes of loans by
50 basis points, thereby reducing our overall interest
expense under the Macao credit facility. As of December 31,
2007, we had approximately $449.0 million available for
borrowing under the revolving credit facility portion of the
Macao credit facility. We are currently in the preliminary
stages of exploring our options with respect to refinancing our
Macao credit facility, the proceeds of which would be used to
refinance the amount currently outstanding under the Macao
credit facility as well as provide incremental borrowings to
continue to fund our development projects on the Cotai Strip in
Macao.
In May 2007, we initiated our U.S. refinancing efforts by
entering into a $5.0 billion senior secured credit
facility. A portion of the proceeds of this facility was used to
refinance the indebtedness collateralized by our Las Vegas
integrated resort, including The Venetian, The Palazzo, The
Shoppes at The Palazzo and The Sands Expo Center, and to fund
design, development and construction costs incurred in the
connection with the completion of The Palazzo, which partially
opened on December 30, 2007, The Shoppes at The Palazzo and
the Las Vegas condominiums. We completed our
U.S. refinancing efforts by entering into a
$167.0 million amended and restated
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FF&E credit facility in August 2007, the proceeds of which
are being used to finance or refinance the acquisition of
furniture, fixtures and equipment located in The Venetian and
The Palazzo. As of December 31, 2007, we had approximately
$1.97 billion and $105.0 million of available
borrowing capacity under the senior secured credit facility and
the amended and restated FF&E credit facility,
respectively. The senior secured credit facility permits us to
make investments in our foreign subsidiaries and our other
development projects outside of Las Vegas in an amount not to
exceed $2.1 billion, and permits us to invest in our Sands
Bethworks project so long as no more than 30% of any such
investment is in the form of equity. As of December 31,
2007, we have used approximately $705.8 million of the
permitted $2.1 billion to fund a portion of our required
equity contribution to the Marina Bay Sands project and
investments with respect to our other Asian development
projects, including in Macao.
In December 2007, we entered into a SGD 5.44 billion credit
facility (approximately $3.76 billion at exchange rates in
effect at December 31, 2007) to fund construction
costs and expenses at the Marina Bay Sands, which closed and
funded in January 2008. A portion of the proceeds of this
facility, together with a portion of our initial
SGD 800.0 million (approximately $553.4 million
at exchange rates in effect at December 31,
2007) equity contribution, were used to repay outstanding
borrowings of approximately SGD 1.92 billion (approximately
$1.33 billion at exchange rates in effect at
December 31, 2007) on the existing Singapore bridge
facility. The remaining funds available for borrowing under the
Singapore credit facility will be used to fund a significant
portion of the design, development and construction costs of the
Marina Bay Sands project. Under the terms of the Singapore
credit facility, we are obligated to fund at least 20% of the
total costs and expenses incurred in connection with the design,
development and construction of the Marina Bay Sands project
with equity contributions or subordinated intercompany loans,
with the remaining 80% funded with debt, including debt under
the Singapore credit facility. We have funded our current equity
contribution requirement through borrowings under our
U.S. senior secured credit facility.
Due to these substantial development activities, included in
current liabilities were construction payables of approximately
$717.5 million as of December 31, 2007. As a portion
of the current liabilities will be funded out of our long-term
borrowing capacity, we had a working capital deficit of
approximately $114.2 million as of December 31, 2007.
Subsequent to year-end, we borrowed approximately
$450.0 million on our credit facilities, of which
approximately $225.0 million was used to pay construction
payables outstanding as of December 31, 2007.
We held unrestricted and restricted cash and cash equivalents of
approximately $857.2 million and $411.8 million,
respectively, as of December 31, 2007. We believe that our
existing cash balances, operating cash flows from The Venetian
and The Palazzo and the proceeds from the anticipated sale of
The Shoppes at the Palazzo to GGP and our Las Vegas condominium
units, together with our available borrowing capacity under the
U.S. senior secured credit facility and the FF&E
credit facility, will be sufficient to fund the estimated
development and construction costs for the Las Vegas
condominiums and the Sands Bethworks projects during 2008. In
addition, we believe that these funds will also enable us to
fund our equity contribution requirement for the Marina Bay
Sands project and provide additional capital to our Macao
subsidiaries to fund a portion of our development projects on
the Cotai Strip in Macao during this same time period.
Existing restricted and unrestricted cash balances at our Macao
subsidiaries, operating cash flows from the Sands Macao and The
Venetian Macao and available borrowing capacity under the Macao
credit facility, together with funds made available under our
U.S. senior secured credit facility, will be used to fund
current development and construction costs for the Cotai Strip
development activities in the short term. However, we will need
to arrange additional debt
and/or
equity financing in the near term to continue to fund our
design, development and construction activities at the remaining
Cotai Strip development projects. We expect to complete this
refinancing in 2008.
In the near term, we will continue to borrow significant amounts
under our existing and future bank credit facilities as we fund
our global construction and development projects. In connection
with such borrowing needs, we regularly evaluate conditions in
the global credit markets. However, we may not be able to obtain
additional borrowings when necessary or on credit terms as
favorable as our existing credit facilities. If we are not able
to obtain the requisite financing or the terms are not as
favorable as we anticipate, we may be required to slow or
suspend our global development activities, including our Cotai
Strip development, until such financing or other sources of
funds become available.
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Our total long-term indebtedness and other known contractual
obligations are summarized below as of December 31, 2007:
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We have not entered into any transactions with special purpose
entities, nor have we engaged in any derivative transactions
other than interest rate caps.
We are a parent company with limited business operations. Our
main asset is the stock and membership interests of our
subsidiaries. The debt instruments of our U.S., Macao and
Singapore subsidiaries contain certain restrictions that, among
other things, limit the ability of certain subsidiaries to incur
additional indebtedness, issue disqualified stock or equity
interests, pay dividends or make other distributions, repurchase
equity interests or certain indebtedness, create certain liens,
enter into certain transactions with affiliates, enter into
certain mergers or consolidations or sell our assets of our
company without prior approval of the lenders or noteholders.
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 three fiscal years.
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 its 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
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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:
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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The preparation of our consolidated financial statements in
conformity with accounting principles generally accepted in the
United States of America requires our management to make
estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses, and related
disclosures of contingent assets and liabilities. These
estimates and judgments are based on historical information,
information that is currently available to us and on various
other assumptions that management believes to be reasonable
under the circumstances. Actual results could vary from those
estimates and we may change our estimates and assumptions in
future evaluations. Changes in these estimates and assumptions
may have a material effect on our results of operations and
financial condition. We believe that the critical accounting
policies discussed below affect our more significant judgments
and estimates used in the preparation of our consolidated
financial statements.
We maintain an allowance, or reserve, for doubtful casino
accounts at our operating casino resorts in Las Vegas and Macao.
We regularly evaluate the allowance for doubtful casino
accounts. We specifically analyze the collectability of each
account with a balance over a specified dollar amount, based
upon the age of the account, the customer’s financial
condition, collection history and any other known information,
and we apply standard reserve percentages to aged account
balances under the specified dollar amount. We also monitor
regional and global economic conditions and forecasts in our
evaluation of the adequacy of the recorded reserves. Credit or
marker play is significant at our Las Vegas properties as credit
table games play represented approximately 62.6% of total table
games play. In Macao where table games play is primarily cash
play, credit table games play represented approximately 19.4% of
total table games play at our Macao resorts. Our allowance for
doubtful casino accounts was 26.5% and 25.8% of gross casino
receivables for the years ended December 31, 2007 and 2006,
respectively. Our allowance for doubtful accounts from our hotel
and other receivables is not material.
We maintain accruals for health and workers compensation
self-insurance, which are classified in other accrued
liabilities in the consolidated balance sheets. We determine the
adequacy of these accruals by periodically evaluating the
historical experience and projected trends related to these
accruals and in consultation with outside actuarial experts. If
such information indicates that the accruals are overstated or
understated, or if business conditions indicate we should adjust
the assumptions utilized, we will reduce or provide for
additional accruals as appropriate.
We are subject to various claims and legal actions. We estimate
the accruals for these claims and legal actions in accordance
with SFAS No. 5, “Accounting for
Contingencies,” and include such accruals in other accrued
liabilities in the consolidated balance sheets.
At December 31, 2007, we had net property and equipment of
$8.57 billion, representing 74.8% of our total assets. We
depreciate property and equipment on a straight-line basis over
their estimated useful lives. The estimated useful lives are
based on the nature of the assets as well as current operating
strategy and legal considerations such as contractual life.
Future events, such as property expansions, property
developments, new competition, or new regulations, could result
in a change in the manner in which we use certain assets
requiring a change in the estimated useful lives of such assets.
For assets to be held and used, fixed assets are reviewed for
impairment whenever indicators of impairment exist. If an
indicator of impairment exists, we first group our assets with
other assets and liabilities at the lowest level for which
identifiable cash flows are largely independent of the cash
flows of other assets and liabilities (the “asset
group”). Secondly, we estimate the undiscounted future cash
flows that are directly associated with and expected to arise
from the use of and eventual disposition of such asset group. We
estimate the undiscounted cash flows over the remaining useful
life of the primary asset within the asset group. If the
undiscounted cash flows exceed the carrying
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value, no impairment is indicated. If the undiscounted cash
flows do not exceed the carrying value, then an impairment is
measured based on fair value compared to carrying value, with
fair value typically based on a discounted cash flow model. If
an asset is still under development, future cash flows include
remaining construction costs.
For assets to be held for sale, the fixed assets (the
“disposal group”) are measured at the lower of their
carrying amount or fair value less cost to sell. Losses are
recognized for any initial or subsequent write-down to fair
value less cost to sell, while gains are recognized for any
subsequent increase in fair value less cost to sell, but not in
excess of the cumulative loss previously recognized. Any gains
or losses not previously recognized that results from the sale
of the disposal group shall be recognized at the date of sale.
Fixed assets are not depreciated while classified as held for
sale.
Interest costs associated with our major construction projects
are capitalized and included in the cost of the projects. When
no debt is incurred specifically for construction projects, we
capitalize interest on amounts expended using the
weighted-average cost of our outstanding borrowings.
Capitalization of interest ceases when the project is
substantially complete or construction activity is suspended for
more than a brief period.
Leasehold interest in land represents payments made for the use
of land over an extended period of time. The leasehold interests
in land are amortized on a straight-line basis over the expected
term of the related lease agreements. Such assets are not
considered qualifying assets for purposes of capitalizing
interest and as such, are not included in the base used to
determine capitalized interest.
SFAS No. 123R, “Share-Based Payment,”
requires the recognition of compensation expense in the
consolidated statements of operations related to the fair value
of employee stock-based compensation. Determining the fair value
of stock-based awards at the grant date requires judgment,
including estimating the expected term that stock options will
be outstanding prior to exercise, the associated volatility and
the expected dividends. Expected volatilities are based on the
historical volatilities from a selection of companies from our
peer group due to our lack of historical information. We used
the simplified method for estimating expected option life, as
the options qualify as “plain-vanilla” options and we
will continue to use the simplified method beyond
December 31, 2007, due to the lack of historical
information as allowed under Staff Accounting
Bulletin No. 110, “Share-Based Payment.” We
believe that the valuation technique and the approach utilized
to develop the underlying assumptions are appropriate in
calculating the fair values of our stock options granted.
Judgment is also required in estimating the amount of
stock-based awards expected to be forfeited prior to vesting. If
actual forfeitures differ significantly from these estimates,
stock-based compensation expense could be materially impacted.
All employee stock options were granted with an exercise price
equal to the fair market value (as defined in the Company’s
2004 Equity Award Plan). We adopted SFAS No. 123R
effective January 1, 2006. During the years ended
December 31, 2007 and 2006, we recorded stock-based
compensation expense of $33.2 million and
$14.7 million, respectively. No such expense was recorded
in 2005. As of December 31, 2007, there was
$113.7 million of unrecognized compensation cost, net of
estimated forfeitures of 8.0%, related to nonvested stock
options and there was $4.1 million of unrecognized
compensation cost related to nonvested restricted stock. The
stock option and restricted stock costs are expected to be
recognized over a weighted average period of 3.3 years and
1.7 years, respectively.
We are subject to income taxes in the U.S. (including
federal and state) and numerous foreign jurisdictions in which
we operate. Deferred income tax balances reflect the effects of
temporary differences between the carrying amounts of assets and
liabilities and their tax bases and are stated at enacted tax
rates expected to be in effect when taxes are actually paid or
recovered. SFAS No. 109, “Accounting for Income
Taxes,” requires that deferred tax assets be evaluated for
future realization and reduced by a valuation allowance to the
extent we believe a portion will
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not be realized. We consider many factors when assessing the
likelihood of future realization of our deferred tax assets,
including our recent cumulative earnings experience and
expectations of future taxable income by taxing jurisdiction,
the carry-forward periods available to us for tax reporting
purposes, and other relevant factors.
Significant judgment is required in evaluating our tax positions
and determining our provision for income taxes. During the
ordinary course of business, there are many transactions and
calculations for which the ultimate tax determination is
uncertain. Effective January 1, 2007, we adopted the
provisions of FIN No. 48, which contains a two-step
approach to recognizing and measuring uncertain tax positions
accounted for in accordance with SFAS No. 109. The
first step is to evaluate the tax position for recognition by
determining if the weight of available evidence indicates it is
more likely than not that the position will be sustained on
audit, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit
as the largest amount which is more than 50% likely of being
realized upon ultimate settlement. We consider many factors when
evaluating and estimating our tax positions and tax benefits,
which may require periodic adjustments and which may not
accurately anticipate actual outcomes.
We are subject to income tax examination by tax authorities for
the years after 2003. There are currently no income tax returns
being examined by the Internal Revenue Service or other major
tax authorities.
See related disclosure at “Item 8 —
Financial Statements and Supplementary Data — Notes to
Consolidated Financial Statements —
Note 2 — Summary of Significant Accounting
Policies.”
ITEM 7A. —
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 long-term debt. We attempt to manage our interest rate risk
by managing the mix of our long-term fixed-rate borrowings and
variable rate borrowings, and by use of interest rate cap
agreements. The ability to enter into interest rate cap
agreements allows us to manage our interest rate risk associated
with our variable rate debt. We do not hold or issue financial
instruments for trading purposes and do not enter into
derivative transactions that would be considered speculative
positions. Our derivative financial instruments consist
exclusively of interest rate cap agreements, which do not
qualify for hedge accounting. Interest differentials resulting
from these agreements are recorded on an accrual basis as an
adjustment to interest expense.
To manage exposure to counterparty credit risk in interest rate
cap agreements, we enter into agreements with highly rated
institutions that can be expected to fully perform under the
terms of such agreements. Frequently, these institutions are
also members of the bank group providing our credit facilities,
which management believes further minimizes the risk of
nonperformance.
The table below provides information about our financial
instruments that are sensitive to changes in interest rates. For
debt obligations, the table presents notional amounts and
weighted average interest rates by contractual maturity dates.
Notional amounts are used to calculate the contractual payments
to be exchanged under the contract. Weighted average variable
rates are based on December 31, 2007, LIBOR, HIBOR and
Singapore SWAP Offer
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rates 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 December
31:
Borrowings under the $5.0 billion senior secured credit
facility bear interest at our election, at either an adjusted
Eurodollar rate or at an alternative base rate plus a credit
spread. The revolving facility and term loans bear interest at
the alternative base rate plus 0.5% or 0.75% per annum,
respectively, or at the adjusted Eurodollar rate plus 1.5% per
annum or 1.75% per annum, respectively, subject to downward
adjustments based upon our credit rating. Borrowings under the
Macao credit facility bear interest at our election, at either
an adjusted Eurodollar rate (or in the case of the Local Term
Loan, adjusted HIBOR) plus 2.25% per annum or at an alternative
base rate plus 1.25% per annum, and is subject to a downward
adjustment of 0.25% per annum from the beginning of the first
interest period following the substantial completion of The
Venetian Macao. Borrowings under the Singapore permanent
facilities bear interest at the Singapore SWAP Offer Rate plus a
spread of 2.25% per annum. $69.8 million and
$19.7 million of the borrowings under the airplane
financings bear interest at LIBOR plus 1.5% and 1.25% per annum,
respectively.
Foreign currency transaction losses for the year ended
December 31, 2007, were $5.3 million primarily due to
U.S. denominated debt held in Macao. We may be vulnerable
to changes in the U.S. dollar/pataca exchange rate. Based
on balances as of December 31, 2007, an assumed 1% change
in the U.S. dollar/pataca exchange rate would cause a
foreign currency transaction gain/loss of approximately
$28.4 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”
and “Item 8 — Financial Statements and
Supplementary Data — Notes to Consolidated Financial
Statements — Note 8 — Long-Term
Debt.”
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ITEM 8. — FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
The financial information included in the financial statement
schedule should be read in conjunction with the consolidated
financial statements. All other financial statement schedules
have been omitted because they are not applicable or the
required information is included in the consolidated financial
statements or the notes thereto.
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To the Directors and Stockholders of Las Vegas Sands Corp.
In our opinion, the consolidated financial statements listed in
the accompanying index, present fairly, in all material
respects, the financial position of Las Vegas Sands Corp. and
its subsidiaries at December 31, 2007 and 2006, and the
results of their operations and their cash flows for each of the
three years in the period ended December 31, 2007, in
conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the
financial statement schedule listed in the accompanying index
presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2007,
based on criteria established in Internal Control —
Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Company’s management is responsible for these financial
statements and financial statement schedule, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Management’s Annual Report
on Internal Control Over Financial Reporting appearing under
Item 9A. Our responsibility is to express opinions on these
financial statements, on the financial statement schedule, and
on the Company’s internal control over financial reporting
based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
As discussed in Note 2 to the consolidated financial
statements, the Company changed the manner in which it accounts
for income tax uncertainties in 2007 and the manner in which it
accounts for stock-based compensation in 2006.
A company’s internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
/s/ PricewaterhouseCoopers LLP
Las Vegas, Nevada
February 28, 2008
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LAS VEGAS
SANDS CORP.
The accompanying notes are an integral part of these
consolidated financial statements.
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LAS VEGAS
SANDS CORP.
The accompanying notes are an integral part of these
consolidated financial statements.
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LAS VEGAS
SANDS CORP.
The accompanying notes are an integral part of these
consolidated financial statements.
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LAS VEGAS
SANDS CORP.
The accompanying notes are an integral part of these
consolidated financial statements.
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LAS VEGAS
SANDS CORP. AND SUBSIDIARIES
Las Vegas Sands Corp. (“LVSC” or together with its
subsidiaries, the “Company”) was incorporated in
Nevada during August 2004 and completed an initial public
offering of its common stock in December 2004. Immediately prior
to the initial public offering, LVSC acquired 100% of the
capital stock of Las Vegas Sands, Inc., which was converted into
a Nevada limited liability company, Las Vegas Sands, LLC
(“LVSLLC”) in July 2005. LVSC’s common stock is
traded on the New York Stock Exchange under the symbol
“LVS.”
The Company owns and operates The Venetian Resort Hotel Casino
(“The Venetian”), a Renaissance Venice-themed resort
situated on the Las Vegas Strip (the “Strip”). The
Venetian includes the first all-suites hotel on the Strip with
4,027 suites; a gaming facility of approximately
120,000 square feet; an enclosed retail, dining and
entertainment complex of approximately 440,000 net leasable
square feet (“The Grand Canal Shops”), which was sold
to General Growth Partners (“GGP”) in 2004; a meeting
and conference facility of approximately 1.1 million square
feet (“The Congress Center”); and an expo and
convention center of approximately 1.2 million square feet
(“The Sands Expo Center”).
The Company owns and operates The Palazzo Resort Hotel Casino
(“The Palazzo”), a second resort similar in size to
The Venetian, which is situated on a
14-acre site
next to The Venetian. The Palazzo, which partially opened in
December 2007, includes a 50-floor luxury hotel tower with 3,066
suites; a gaming facility of approximately 105,000 square
feet; an entertainment center; and an enclosed shopping and
dining complex of approximately 400,000 square feet
(“The Shoppes at The Palazzo”), which the Company has
contracted to sell to GGP. The Company anticipates the
transaction to close on February 29, 2008, or shortly
thereafter.
The Company also owns and operates the Sands Macao, the first
Las Vegas-style casino in Macao, China, pursuant to a
20-year
gaming subconcession. The Sands Macao offers over
229,000 square feet of gaming space, as well as several
restaurants, VIP facilities, a theater, and other high-end
services and amenities. In addition, the completion of the hotel
tower in September 2007 increased the number of suites from 51
to 289.
On August 28, 2007, the Company opened The Venetian Macao
Resort Hotel (“The Venetian Macao”) on the Cotai
Striptm,
a master-planned development of resort properties in Macao,
China. With a theme similar to that of The Venetian, The
Venetian Macao includes a 39-floor luxury hotel with over 2,900
suites; a casino floor of approximately 550,000 square
feet; a 15,000-seat arena; retail space of approximately
1.0 million square feet; and a convention center and
meeting room complex of approximately 1.2 million square
feet.
United
States Development Projects
The Company is in the early stages of constructing a high-rise
residential condominium tower with approximately
1.0 million saleable square feet that will be situated
between The Palazzo and The Venetian. The condominium tower is
currently expected to open in late 2009.
On December 20, 2006, the Pennsylvania Gaming Control Board
announced that the Company’s subsidiary, Sands Bethworks
Gaming LLC (“Sands Bethworks Gaming”), had been
awarded a Pennsylvania gaming license. Sands Bethworks Gaming
will develop a gaming, hotel, shopping and dining complex called
Sands Bethworks, located on the site of the Historic Bethlehem
Steel Works in Bethlehem, Pennsylvania, which is about
70 miles from midtown Manhattan, New York. In its first
phase, the
124-acre
development is expected to feature a 300-room hotel,
200,000 square feet of retail space, up to 5,000 slot
machines, a 50,000-square-foot multipurpose event center and a
variety of dining options. Sands Bethworks is also expected to
be home to the National Museum of Industrial
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LAS VEGAS
SANDS CORP. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
History, an arts and cultural center, and the broadcast home of
the local PBS affiliate. In July 2007, the Company paid a
$50.0 million licensing fee to the Commonwealth of
Pennsylvania, and in August 2007 was issued its gaming license
by the Pennsylvania Gaming Control Board. The Company will own
the property through its joint venture with Bethworks Now, LLC,
which has yet to contribute the land in the joint venture. The
Company expects the contribution to take place in 2008; however,
no assurances can be given as to the timing of the contribution.
If the land is not contributed as required under the
Company’s agreement with Bethworks Now, LLC, the Company
could lose all or a substantial portion of its
$116.9 million investment in Sands Bethworks as of
December 31, 2007. Sands Bethworks is expected to open in
summer 2009.
The Company has submitted development plans to the Macao
government for six integrated resort developments, in addition
to The Venetian Macao, on an area of approximately
200 acres located on the Cotai Strip (referred to as
parcels 2, 3, 5, 6, 7 and 8). The developments are expected to
include hotels, exhibition and conference facilities, casinos,
showrooms, shopping malls, spas, restaurants, entertainment
facilities and other attractions and amenities, as well as
public common areas. The Company has commenced construction or
pre-construction for these six parcels on the Cotai Strip and
plans to own and operate all of the casinos in these
developments under its Macao gaming subconcession. More
specifically, the Company intends to develop its other Cotai
Strip properties as follows:
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LAS VEGAS
SANDS CORP. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
The Four Seasons Macao is currently planned to feature
approximately 130 table games and 225 slot machines. The casinos
on parcels 3, 5, 6, 7 and 8 are currently planned to include a
total of approximately 2,025 table games and 9,250 slot
machines. Upon completion, the Company’s developments on
the Cotai Strip (including The Venetian Macao) are currently
planned to feature approximately 19,750 suites/rooms and
1.6 million square feet of gaming space with a capacity of
approximately 3,300 table games and 16,470 slot machines.
The Company has received a concession from the Macao government
to build on parcels 1, 2 and 3 on the Cotai Strip, including the
site on which the Company owns and operates The Venetian Macao
(parcel 1) and the site on which it is building The Four
Seasons Macao (parcel 2). The Company does not own these land
sites in Macao; however, the land concession, which has a term
of 25 years and is renewable at the Company’s option,
grants the Company exclusive use of the land. As specified in
the land concession, the Company is required to pay premiums,
which are payable over four years or are due upon the completion
of the corresponding resort, as well as annual rent for the term
of the land concession.
The Company does not yet have all the necessary Macao government
approvals that it will need in order to develop all of its
planned Cotai Strip developments. The Company has commenced
construction or pre-construction for the projects on parcels 5,
6, 7 and 8 on the Cotai Strip for which it has not yet been
granted land concessions. The Company is in the process of
negotiating with the Macao government to obtain the land
concession for parcels 5 and 6, and will subsequently
negotiate the land concession for parcels 7 and 8. If the
Company does not obtain land concessions, it could forfeit all
or a substantial part of its $623.0 million in capitalized
construction costs related to these Cotai Strip projects as of
December 31, 2007.
The Company has entered into a non-binding letter of intent with
the Zhuhai Municipal People’s Government of the
People’s Republic of China to work together to create a
master plan for, and develop, a leisure and convention
destination resort on Hengqin Island, which is located within
mainland China, approximately one mile from the Cotai Strip. In
January 2007, the Company was informed that the Zhuhai
Government established a Project Coordination Committee to act
as a government liaison empowered to work directly with the
Company to advance the development of the project. The Company
has interfaced with this committee and is working actively with
the committee as it continues to advance its plans. The project
remains subject to a number of conditions, including further
governmental approvals.
In August 2006, the Company’s wholly-owned subsidiary,
Marina Bay Sands Pte. Ltd. (“MBS”), entered into a
development agreement (the “Development Agreement”)
with the Singapore Tourism Board (the “STB”) to build
and operate an integrated resort called the Marina Bay Sands in
Singapore. The Marina Bay Sands is expected to include three 50+
story hotel towers (totaling approximately 2,700 rooms), a
casino, an enclosed retail, dining and entertainment complex of
approximately 850,000 net leasable square feet, a
convention center and meeting room complex of approximately
1.2 million square feet, theaters and a landmark iconic
structure at the bay-front promenade that contains an
art/science museum. The Marina Bay Sands is expected to open in
late 2009.
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