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Las Vegas Sands 10-Q 2013

Documents found in this filing:

  1. 10-Q
  2. Ex-10.1
  3. Ex-31.1
  4. Ex-31.2
  5. Ex-32.1
  6. Ex-32.2
  7. Ex-32.2
FORM 10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES & EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-Q

 

 

 

x

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

For the quarterly period ended June 30, 2013

 

¨

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

For the transition period from                      to                     

Commission file number 001-32373

 

 

LAS VEGAS SANDS CORP.

(Exact name of registration as specified in its charter)

 

 

 

Nevada   27-0099920

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

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

(702) 414-1000

(Registrant’s telephone number, including area code)

 

 

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

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

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

 

Large accelerated filer

 

x

  

Accelerated filer

 

¨

Non-accelerated filer

 

¨  (Do not check if a smaller reporting company)

  

Smaller reporting company

 

¨

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

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

 

Class

 

Outstanding at July 31, 2013

Common Stock ($0.001 par value)

  824,061,778 shares

 

 

 


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

Table of Contents

 

PART I

FINANCIAL INFORMATION

  

Item 1. Financial Statements (unaudited)

     3   

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

     3   

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012

     4   

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

     5   

Condensed Consolidated Statements of Equity for the Six Months Ended June 30, 2013 and 2012

     6   

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012

     7   

Notes to Condensed Consolidated Financial Statements

     8   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     36   

Item 3. Quantitative and Qualitative Disclosures about Market Risk

     58   

Item 4. Controls and Procedures

     59   

PART II

OTHER INFORMATION

  

Item 1. Legal Proceedings

     59   

Item 1A. Risk Factors

     59   

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     59   

Item 5. Other Information

     60   

Item 6. Exhibits

     61   

Signatures

     62   

 

 

2


Table of Contents

PART 1 FINANCIAL INFORMATION

ITEM 1 — FINANCIAL STATEMENTS

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     June 30,     December 31,  
     2013     2012  
    

(In thousands, except share and
per share data)

(Unaudited)

 
ASSETS   

Current assets:

    

Cash and cash equivalents

   $ 2,514,141     $ 2,512,766  

Restricted cash and cash equivalents

     5,782       4,521  

Accounts receivable, net

     1,803,357       1,819,260  

Inventories

     41,229       43,875  

Deferred income taxes, net

     1,643       2,299  

Prepaid expenses and other

     99,207       94,793  
  

 

 

   

 

 

 

Total current assets

     4,465,359       4,477,514  

Property and equipment, net

     15,437,067       15,766,748  

Deferred financing costs, net

     183,039       214,465  

Restricted cash and cash equivalents

     1,205       1,938  

Deferred income taxes, net

     40,435       43,280  

Leasehold interests in land, net

     1,428,710       1,458,741  

Intangible assets, net

     109,678       70,618  

Other assets, net

     118,331       130,348  
  

 

 

   

 

 

 

Total assets

   $ 21,783,824     $ 22,163,652  
  

 

 

   

 

 

 
LIABILITIES AND EQUITY   

Current liabilities:

    

Accounts payable

   $ 121,035     $ 106,498  

Construction payables

     285,661       343,372  

Accrued interest payable

     11,635       15,542  

Other accrued liabilities

     2,005,915       1,895,483  

Income taxes payable

     171,013       164,126  

Current maturities of long-term debt

     980,168       97,802  
  

 

 

   

 

 

 

Total current liabilities

     3,575,427       2,622,823  

Other long-term liabilities

     141,126       133,936  

Deferred income taxes

     170,906       185,945  

Deferred proceeds from sale of The Shoppes at The Palazzo

     268,244       267,956  

Deferred gain on sale of The Grand Canal Shoppes

     42,148       43,880  

Deferred rent from mall transactions

     117,695       118,435  

Long-term debt

     8,511,231       10,132,265  
  

 

 

   

 

 

 

Total liabilities

     12,826,777       13,505,240  
  

 

 

   

 

 

 

Commitments and contingencies (Note 9)

    

Equity:

    

Common stock, $0.001 par value, 1,000,000,000 shares authorized, 825,289,759 and 824,297,756
shares issued, 824,406,713 and 824,297,756 shares outstanding

     825       824  

Capital in excess of par value

     6,286,224       6,237,488  

Treasury stock, at cost, 883,046 and zero shares

     (46,562     —    

Accumulated other comprehensive income

     175,107       263,078  

Retained earnings

     1,084,511       560,452  
  

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

     7,500,105       7,061,842  

Noncontrolling interests

     1,456,942       1,596,570  
  

 

 

   

 

 

 

Total equity

     8,957,047       8,658,412  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 21,783,824     $ 22,163,652  
  

 

 

   

 

 

 

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

 

3


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  
    

(In thousands, except share and per share data)

(Unaudited)

 

Revenues:

        

Casino

   $ 2,674,129     $ 2,067,424     $ 5,410,183     $ 4,333,917  

Rooms

     324,629       275,311       649,645       543,038  

Food and beverage

     174,772       159,744       360,101       313,199  

Mall

     107,993       93,740       193,454       165,158  

Convention, retail and other

     123,050       116,834       249,111       246,551  
  

 

 

   

 

 

   

 

 

   

 

 

 
     3,404,573       2,713,053       6,862,494       5,601,863  

Less — promotional allowances

     (161,632     (131,147     (316,834     (257,215
  

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     3,242,941       2,581,906       6,545,660       5,344,648  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Casino

     1,519,721       1,187,458       3,046,000       2,395,009  

Rooms

     65,685       60,513       134,375       113,299  

Food and beverage

     89,294       81,973       186,025       160,274  

Mall

     18,147       17,798       35,405       34,099  

Convention, retail and other

     80,094       78,403       158,943       157,927  

Provision for doubtful accounts

     62,058       58,374       126,737       110,592  

General and administrative

     307,869       259,038       598,283       477,755  

Corporate

     46,481       58,592       102,753       107,547  

Pre-opening

     1,031       43,472       7,868       94,931  

Development

     6,002       6,797       11,353       7,995  

Depreciation and amortization

     251,048       220,440       503,605       415,187  

Amortization of leasehold interests in land

     10,108       10,057       20,275       20,002  

Impairment loss

     —         100,781       —         143,674  

Loss on disposal of assets

     4,762       482       6,694       1,075  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,462,300       2,184,178       4,938,316       4,239,366   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     780,641       397,728       1,607,344       1,105,282   

Other income (expense):

        

Interest income

     3,236       6,892       7,029       12,540  

Interest expense, net of amounts capitalized

     (68,376     (64,533     (137,208     (129,205

Other income (expense)

     3,893       1,782       1,785        (1,637

Loss on modification or early retirement of debt

     —          (16,403     —          (19,234
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     719,394       325,466       1,478,950       967,746  

Income tax expense

     (47,721     (39,085     (103,303     (102,256
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

     671,673       286,381       1,375,647       865,490  

Net income attributable to noncontrolling interests

     (141,920     (45,794     (273,933     (125,961
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to Las Vegas Sands Corp.

   $ 529,753     $ 240,587     $ 1,101,714     $ 739,529  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Basic

   $ 0.64     $ 0.29     $ 1.34     $ 0.94  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

   $ 0.64     $ 0.29     $ 1.33     $ 0.90  
  

 

 

   

 

 

   

 

 

   

 

 

 

Weighted average shares outstanding:

        

Basic

     823,974,421       821,110,555       823,671,664       790,773,996  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted

     827,901,261       826,102,326       827,701,270       822,458,833  
  

 

 

   

 

 

   

 

 

   

 

 

 

Dividends declared per common share

   $ 0.35     $ 0.25     $ 0.70     $ 0.50  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

4


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2013     2012     2013     2012  
    

(In thousands)

(Unaudited)

 

Net income

   $ 671,673     $ 286,381     $ 1,375,647     $ 865,490  

Currency translation adjustment

     (41,081     (27,958     (89,537     70,920  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income

     630,592       258,423       1,286,110       936,410  

Comprehensive income attributable to noncontrolling interests

     (143,034     (47,242     (272,367     (128,456
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income attributable to Las Vegas Sands Corp.

   $ 487,558     $ 211,181     $ 1,013,743     $ 807,954  
  

 

 

   

 

 

   

 

 

   

 

 

 

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

 

5


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

 

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

Balance at January 1, 2012

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

Net income

    —          —          —          —          739,529        125,961        865,490   

Currency translation adjustment

    —          —          —          68,425        —          2,495        70,920   

Exercise of stock options

    1        23,706        —          —          —          1,849        25,556   

Stock-based compensation

    —          31,497        —          —          —          1,665        33,162   

Issuance of restricted stock

    1        (1     —          —          —          —          —     

Exercise of warrants

    88        526,310        —          —          —          —          526,398   

Dividends declared

    —          —          —          —          (411,497     (357,056     (768,553

Distributions to noncontrolling interests

    —          —          —          —          —          (5,095     (5,095
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2012

  $ 823      $ 6,191,672      $ —        $  162,529      $ 2,473,724      $ 1,358,282      $ 10,187,030   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at January 1, 2013

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

Net income

    —          —          —          —          1,101,714        273,933        1,375,647   

Currency translation adjustment

    —          —          —          (87,971     —          (1,566     (89,537

Exercise of stock options

    1        20,453        —          —          —          2,381        22,835   

Tax benefit fromstock-based
compensation

    —          3,107        —          —          —          —          3,107   

Stock-based compensation

    —          25,176        —          —          —          1,696        26,872   

Repurchase of common stock

    —          —          (46,562     —          —          —          (46,562

Dividends declared

    —          —          —          —          (577,655     (411,359     (989,014

Distributions to noncontrolling interests

    —          —          —          —          —          (4,713     (4,713
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at June 30, 2013

  $ 825      $ 6,286,224      $ (46,562   $ 175,107      $ 1,084,511      $ 1,456,942      $ 8,957,047   
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

 

6


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Six Months Ended  
     June 30,  
     2013     2012  
    

(In thousands)

(Unaudited)

 

Cash flows from operating activities:

    

Net income

   $ 1,375,647     $ 865,490  

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

    

Depreciation and amortization

     503,605       415,187  

Amortization of leasehold interests in land

     20,275       20,002  

Amortization of deferred financing costs and original issue discount

     28,241       22,590  

Amortization of deferred gain and rent

     (2,472     (2,472

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

     684       860  

Loss on modification or early retirement of debt

     —          16,313  

Impairment and loss on disposal of assets

     6,694       144,749  

Stock-based compensation expense

     26,508       32,867  

Provision for doubtful accounts

     126,737       110,592  

Foreign exchange (gain) loss

     (9,966     2,449  

Excess tax benefits from stock-based compensation

     (3,107     —     

Deferred income taxes

     (5,307     (16,489

Changes in operating assets and liabilities:

    

Accounts receivable

     (139,154     (319,650

Inventories

     2,375        (5,330

Prepaid expenses and other

     4,955        (21,213

Leasehold interests in land

     (25,387     (24,232

Accounts payable

     15,611       29,811   

Accrued interest payable

     (3,623     (24,478

Income taxes payable

     15,903       51,295  

Other accrued liabilities

     85,988       119,978   
  

 

 

   

 

 

 

Net cash generated from operating activities

     2,024,207       1,418,319  
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Change in restricted cash and cash equivalents

     (532     (454

Capital expenditures

     (394,015     (735,512

Proceeds from disposal of property and equipment

     1,716       1,478  

Acquisition of intangible assets

     (45,857     —     
  

 

 

   

 

 

 

Net cash used in investing activities

     (438,688     (734,488
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from exercise of stock options

     22,835       25,556  

Proceeds from exercise of warrants

     —          526,398  

Excess tax benefits from stock-based compensation

     3,107        —     

Dividends paid

     (988,898     (767,642

Distributions to noncontrolling interests

     (4,713     (5,095

Proceeds from long-term debt (Note 3)

     80,496       3,625,516  

Repayments on long-term debt (Note 3)

     (688,431     (4,382,790

Payments of deferred financing costs

     —          (100,142
  

 

 

   

 

 

 

Net cash used in financing activities

     (1,575,604     (1,078,199
  

 

 

   

 

 

 

Effect of exchange rate on cash

     (8,540     13,650  
  

 

 

   

 

 

 

Increase (decrease) in cash and cash equivalents

     1,375        (380,718 )

Cash and cash equivalents at beginning of period

     2,512,766       3,902,718  
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 2,514,141     $ 3,522,000  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash payments for interest, net of amounts capitalized

   $ 105,294     $ 123,312  
  

 

 

   

 

 

 

Cash payments for taxes, net of refunds

   $ 96,257     $ 56,154   
  

 

 

   

 

 

 

Change in construction payables

   $ (57,711   $ (63,554
  

 

 

   

 

 

 

Non-cash investing and financing activities:

    

Capitalized stock-based compensation costs

   $ 364     $ 295  
  

 

 

   

 

 

 

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

   $ 116     $ 911  
  

 

 

   

 

 

 

Property and equipment acquired under capital lease

   $ 2,668     $ 7,930  
  

 

 

   

 

 

 

Repurchase of common stock included in other accrued liabilities

   $ 46,562     $ —     
  

 

 

   

 

 

 

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

 

7


Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

NOTE 1 — ORGANIZATION AND BUSINESS OF COMPANY

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

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

Operations

Macao

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

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

In April and September 2012 and January 2013, the Company opened phases I, IIA and IIB, respectively, of its Sands Cotai Central integrated resort (located on parcels 5 and 6), which is situated across the street from The Venetian Macao and Four Seasons Macao. Phase I consists of a hotel tower on parcel 5, which includes approximately 600 five-star rooms and suites under the Conrad brand and approximately 1,200 four-star rooms and suites under the Holiday Inn brand; more than 350,000 square feet of meeting space; several food and beverage establishments; along with the 230,000-square-foot casino and VIP gaming areas. Phase IIA, includes the first hotel tower on parcel 6, which features approximately 1,800 rooms and suites managed by Starwood Asia Pacific Hotels and Resorts Pte Ltd. and Sheraton Overseas Management Co. (collectively “Starwood”) under the Sheraton brand, along with the second casino and additional retail, entertainment, dining and meeting facilities. Phase IIB consists of the second hotel tower on parcel 6 and features approximately 2,100 rooms and suites managed by Starwood under the Sheraton brand. With the completion of phases I and II of the project, the integrated resort features approximately 300,000 square feet of gaming space, approximately 800,000 square feet of retail, dining and entertainment space, over 550,000 square feet of meeting facilities and a multipurpose theater (to open in 2014). Phase III of the project is expected to include a fourth hotel and mixed-use tower, located on parcel 5, to be managed by Starwood under the St. Regis brand and the total cost to complete is expected to be approximately $450 million. The Company intends to commence construction of phase III of the project as demand and market conditions warrant it. As of June 30, 2013, the Company has capitalized costs of $4.07 billion for the entire project, including the land premium (net of amortization) and $159.6 million in outstanding construction payables.

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

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

Singapore

The Company owns and operates the Marina Bay Sands in Singapore, which features three 55-story hotel towers (totaling approximately 2,600 rooms and suites), the Sands SkyPark (which sits atop the hotel towers and features an infinity swimming pool and several dining options), approximately 160,000 square feet of gaming space, an enclosed retail, dining and entertainment complex of approximately 800,000 net leasable square feet, a convention center and meeting room complex of approximately 1.2 million square feet, theaters and a landmark iconic structure at the bay-front promenade that contains an art/science museum. In April 2013, the Company paid 57.0 million Singapore dollars (“SGD,” approximately $45.1 million at exchange rates in effect on June 30, 2013) to the Casino Regulatory Authority in Singapore as part of the process to renew its gaming license, which now expires in April 2016.

United States

Las Vegas

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

Pennsylvania

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

Development Projects

Macao

The Company submitted plans to the Macao government for The Parisian Macao (located on parcel 3), an integrated resort that will be connected to The Venetian Macao and Four Seasons Macao. The Parisian Macao, which is currently expected to open in late 2015, is intended to include a gaming area (to be operated under the Company’s gaming subconcession), hotel and shopping mall. The Company expects the cost to design, develop and construct The Parisian Macao will be approximately $2.7 billion, inclusive of payments made for the land premium. The Company has commenced construction activities and has capitalized costs of $195.4 million, including the land premium (net of amortization), as of June 30, 2013. In addition, the Company will be completing the development of some public areas surrounding its Cotai Strip properties on behalf of the Macao government.

Under the Company’s land concession for Sands Cotai Central, the Company is required to complete the development by May 2014. The Company will be applying for an extension from the Macao government to complete Sands Cotai Central, as the Company will be unable to meet the May 2014 deadline. The land concession for The Parisian Macao contains a similar requirement, which was extended by the Macao government in July 2012, that the development be completed by April 2016. Should the Company determine that it is unable to complete The Parisian Macao by April 2016, the Company would then also expect to apply for another extension from the Macao government. If the Company is unable to meet The Parisian Macao deadline and the deadlines for either development are not extended, the Company could lose its land concessions for Sands Cotai Central or The Parisian Macao, which would prohibit the Company from operating any facilities developed under the respective land concessions. As a result, the Company could record a charge for all or some portion of its $4.07 billion or $195.4 million in capitalized construction costs and land premiums (net of amortization), as of June 30, 2013, related to Sands Cotai Central and The Parisian Macao, respectively.

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

United States

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

Other

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

Development Financing Strategy

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

The U.S. credit facility requires the Company’s Las Vegas operations to comply with certain financial covenants at the end of each quarter, including maintaining a maximum leverage ratio of net debt, as defined, to trailing twelve-month adjusted earnings before interest, income taxes, depreciation and amortization, as defined (“Adjusted EBITDA”). The maximum leverage ratio is 5.0x for all quarterly periods through maturity. The Company can elect to contribute up to $50 million of cash on hand to its Las Vegas operations on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio. The Company’s Macao facility also requires the Company’s Macao operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.5x for the quarterly period ended June 30, 2013, decreases to 4.0x for the quarterly periods ending September 30, 2013 through December 31, 2014, decreases to 3.5x for the quarterly periods ending March 31 through December 31, 2015, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. The Company’s Singapore credit facility (the “2012 Singapore Credit Facility”) requires operations of Marina Bay Sands to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 4.0x for the quarterly periods ending June 30 through September 30, 2013, decreases to 3.5x for the quarterly periods ending December 31, 2013 through December 31, 2014, and then decreases to, and remains at, 3.0x for all quarterly periods thereafter through maturity. If the Company is unable to maintain compliance with the financial covenants under these credit facilities, it would be in default under the respective credit facilities. A default under the U.S. credit facility would trigger a cross-default under the Company’s airplane financings. Any defaults or cross-defaults under these agreements would allow the lenders, in each case, to exercise their rights and remedies as defined under their respective agreements. If the lenders were to exercise their rights to accelerate the due dates of the indebtedness outstanding, there can be no assurance that the Company would be able to repay or refinance any amounts that may become due and payable under such agreements, which could force the Company to restructure or alter its operations or debt obligations.

The Company held unrestricted cash and cash equivalents of $2.51 billion and restricted cash and cash equivalents of $7.0 million as of June 30, 2013. The Company believes the cash on hand and cash flow generated from operations will be sufficient to maintain compliance with the financial covenants of its credit facilities. The Company may need to arrange additional financing to fund the balance of its Cotai Strip developments. In the normal course of its activities, the Company will continue to evaluate its capital structure and opportunities for enhancements thereof, including evaluating strategic alternatives related to the Company’s Pennsylvania operations.

Recent Accounting Pronouncements

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

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 2 — PROPERTY AND EQUIPMENT, NET

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

 

     June 30,     December 31,  
     2013     2012  

Land and improvements

   $ 555,495     $ 515,538  

Building and improvements

     15,161,374       14,414,026  

Furniture, fixtures, equipment and leasehold improvements

     2,650,013       2,557,071  

Transportation

     442,104       411,671  

Construction in progress

     1,044,737       1,824,531  
  

 

 

   

 

 

 
     19,853,723       19,722,837  

Less — accumulated depreciation and amortization

     (4,416,656     (3,956,089
  

 

 

   

 

 

 
   $ 15,437,067     $ 15,766,748  
  

 

 

   

 

 

 

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

 

     June 30,      December 31,  
     2013      2012  

Four Seasons Macao (principally the Four Seasons Apartments)

   $ 408,765      $ 415,367  

The Parisian Macao

     137,117        59,510  

Sands Cotai Central

     88,433        913,432  

Other

     410,422        436,222  
  

 

 

    

 

 

 
   $ 1,044,737      $ 1,824,531  
  

 

 

    

 

 

 

The $410.4 million in other construction in progress as of June 30, 2013, consists primarily of construction of the Las Vegas Condo Tower and various projects at The Venetian Macao.

Under generally accepted accounting principles, the sale of The Shoppes at The Palazzo has not been accounted for as a sale because the Company’s participation in certain future revenues constitutes continuing involvement in The Shoppes at The Palazzo. Therefore, $266.2 million of the proceeds allocated to the mall sale transaction has been recorded as deferred proceeds (a long-term financing obligation), which will accrue interest at an imputed rate and will be offset by (i) imputed rental income and (ii) rent payments made to GGP related to spaces leased back from GGP by the Company. The property and equipment legally sold to GGP totaling $245.0 million (net of $66.3 million of accumulated depreciation) as of June 30, 2013, will continue to be recorded on the Company’s condensed consolidated balance sheet and will continue to be depreciated in the Company’s condensed consolidated income statement.

During the three and six months ended June 30, 2013 and the three and six months ended June 30, 2012, the Company capitalized interest expense of $0.6 million, $2.4 million, $12.3 million and $34.4 million, respectively. During the three and six months ended June 30, 2013 and the three and six months ended June 30, 2012, the Company capitalized approximately $5.3 million, $11.0 million, $3.7 million and $8.0 million, respectively, of internal costs, consisting primarily of compensation expense for individuals directly involved with the development and construction of property.

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

NOTE 3 — LONG-TERM DEBT

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

 

     June 30,     December 31,  

Corporate and U.S. Related:

   2013     2012  

Senior Secured Credit Facility — Term B

   $ 1,807,320     $ 1,816,477  

Senior Secured Credit Facility — Delayed Draws I and II

     539,239       606,561  

Senior Secured Credit Facility — Revolving

     200,000       400,000  

Airplane Financings

     69,203       71,047  

HVAC Equipment Lease

     18,900       19,714  

Other

     3,193       3,689  

Macao Related:

    

2011 VML Credit Facility

     3,208,154       3,209,839  

Other

     8,755       7,313  

Singapore Related:

    

2012 Singapore Credit Facility — Term

     3,636,628       3,767,141  

2012 Singapore Credit Facility — Revolving

     —         327,578  

Other

     7       708  
  

 

 

   

 

 

 
     9,491,399       10,230,067  

Less — current maturities

     (980,168     (97,802
  

 

 

   

 

 

 

Total long-term debt

   $ 8,511,231     $ 10,132,265  
  

 

 

   

 

 

 

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Senior Secured Credit Facility

As of June 30, 2013, the Company had $295.5 million of available borrowing capacity under the Senior Secured Credit Facility, net of outstanding letters of credit.

2011 VML Credit Facility

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

2012 Singapore Credit Facility

As of June 30, 2013, the Company had SGD 492.7 million (approximately $389.5 million at exchange rates in effect on June 30, 2013) of available borrowing capacity under the 2012 Singapore Credit Facility, net of outstanding banker’s guarantees.

Cash Flows from Financing Activities

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

 

     Six Months Ended  
     June 30,  
     2013     2012  

Proceeds from 2012 Singapore Revolving Facility

   $ 80,496     $ 3,625,516  
  

 

 

   

 

 

 

Repayments on 2012 Singapore Revolving Facility

   $ (406,870   $ —     

Repayments on Singapore Credit Facility

     —         (3,635,676

Repayments on Senior Secured Credit Facility

     (276,479     (413,341

Redemption of Senior Notes

     —         (189,712

Repayments on Airplane Financings

     (1,844     (1,844

Repayments on Ferry Financing

     —         (140,337

Repayments on HVAC Equipment Lease and Other Long-Term Debt

     (3,238     (1,880
  

 

 

   

 

 

 
   $ (688,431   $ (4,382,790
  

 

 

   

 

 

 

Fair Value of Long-Term Debt

The estimated fair value of the Company’s long-term debt as of June 30, 2013 and December 31, 2012, was approximately $9.40 billion and $10.12 billion, respectively, compared to its carrying value of $9.46 billion and $10.20 billion, respectively. The estimated fair value of the Company’s long-term debt is based on level 2 inputs (quoted prices in markets that are not active).

NOTE 4 — EQUITY AND EARNINGS PER SHARE

Common Stock

Dividends

On March 29 and June 28, 2013, the Company paid a dividend of $0.35 per common share as part of a regular cash dividend program. During the six months ended June 30, 2013, the Company recorded $577.7 million as a distribution against retained earnings (of which $302.1 million related to the Principal Stockholder’s family).

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

On March 30 and June 29, 2012, the Company paid a dividend of $0.25 per common share as part of a regular cash dividend program. During the six months ended June 30, 2012, the Company recorded $411.5 million as a distribution against retained earnings (of which $215.7 million related to the Principal Stockholder’s family).

In July 2013, the Company’s Board of Directors declared a quarterly dividend of $0.35 per common share (a total estimated to be approximately $289 million) to be paid on September 30, 2013, to shareholders of record on September 20, 2013.

Repurchase Program

In June 2013, the Company’s Board of Directors approved a share repurchase program, which expires in June 2015, with an initial authorization of $2.0 billion. Repurchases of the Company’s common stock are made at the Company’s discretion in accordance with applicable federal securities laws in the open market or otherwise. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, legal requirements, other investment opportunities and market conditions. During June 2013, the Company repurchased 883,046 shares of its common stock for $46.6 million (including commissions) under this program. All share repurchases of the Company’s common stock have been recorded as treasury shares.

Warrants

On March 2, 2012, the Principal Stockholder’s family exercised all of their outstanding warrants to purchase 87,500,175 shares of the Company’s common stock for $6.00 per share and paid $525.0 million in cash as settlement of the warrant exercise price. Additionally, during the six months ended June 30, 2012, 13,970 warrants were exercised to purchase an aggregate of 232,999 shares of the Company’s common stock at $6.00 per share and $1.4 million in cash was received as settlement of the warrant exercise price. No warrants were exercised during the six months ended June 30, 2013.

Noncontrolling Interests

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

During the six months ended June 30, 2013 and 2012, the Company distributed $4.7 million and $5.1 million to certain of its noncontrolling interests.

Earnings Per Share

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

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2013      2012      2013      2012  

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

     823,974,421        821,110,555        823,671,664        790,773,996  

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

     3,926,840        4,991,771        4,029,606        31,684,837  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     827,901,261        826,102,326        827,701,270        822,458,833  
  

 

 

    

 

 

    

 

 

    

 

 

 

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

     4,554,859        4,681,204        4,544,859        4,681,204  
  

 

 

    

 

 

    

 

 

    

 

 

 

Accumulated Other Comprehensive Income

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

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 5 — VARIABLE INTEREST ENTITIES

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

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

As of June 30, 2013 and December 31, 2012, the Company’s joint ventures had total assets of $105.0 million and $94.5 million, respectively, and total liabilities of $116.3 million and $95.8 million, respectively.

NOTE 6 — INCOME TAXES

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

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

The Company received a 5-year income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through the end of 2013. During July 2012, Venetian Macau Limited (“VML”) requested an additional 5-year income tax exemption; however, there is no assurance that the Company will receive the extension. In February 2011, the Company entered into an agreement with the Macao government, effective through the end of 2013 that provides for an annual payment of 14.4 million patacas (approximately $1.8 million at exchange rates in effect on June 30, 2013) that is a substitution for a 12% tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

NOTE 7 — STOCK-BASED EMPLOYEE COMPENSATION

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2013      2012      2013      2012  

Compensation expense:

           

Stock options

   $ 7,057      $ 7,179      $ 16,090      $ 18,045  

Restricted stock and stock units

     4,834        6,522        10,418        14,822  
  

 

 

    

 

 

    

 

 

    

 

 

 
   $ 11,891      $ 13,701      $ 26,508      $ 32,867  
  

 

 

    

 

 

    

 

 

    

 

 

 

Compensation cost capitalized as part of property and equipment

   $ 92      $ 77      $ 364      $ 295  
  

 

 

    

 

 

    

 

 

    

 

 

 

LVSC 2004 Plan:

           

Stock options granted

     160        416        218        467  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 36.19      $ 37.85      $ 35.01      $ 37.59  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock granted

     25        16        43        513  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 56.98      $ 46.27      $ 54.55      $ 53.08  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock units granted

     26        300        34        313  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 57.28      $ 44.98      $ 56.14      $ 45.22  
  

 

 

    

 

 

    

 

 

    

 

 

 

SCL Equity Plan:

           

Stock options granted

     1,242        2,047        2,729        4,482  
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 2.41      $ 1.57      $ 2.29      $ 1.63  
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock units granted

     1,000        —          1,000        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average grant date fair value

   $ 5.26      $ —         $ 5.26      $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

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

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

LVSC 2004 Plan:

        

Weighted average volatility

     94.8     95.2     94.8     95.2

Expected term (in years)

     5.5       5.3       5.5       5.4  

Risk-free rate

     1.3     1.1     1.2     1.1

Expected dividends

     2.5     1.8     2.5     1.8

SCL Equity Plan:

        

Weighted average volatility

     68.1     70.2     68.2     70.3

Expected term (in years)

     6.3       6.3       6.3       6.2  

Risk-free rate

     0.4     0.5     0.4     0.6

Expected dividends

     3.3     4.2     3.4     4.1

NOTE 8 — FAIR VALUE MEASUREMENTS

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

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

 

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

As of June 30, 2013

           

Cash equivalents(1)

   $ 1,589,352      $ 1,589,352      $ —        $ —    

Interest rate caps(2)

   $ 340      $ —        $ 340      $ —    

As of December 31, 2012

           

Cash equivalents(1)

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

Interest rate caps(2)

   $ 218      $ —        $ 218      $ —    

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

(1)

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

(2)

As of June 30, 2013 and December 31, 2012, the Company had 24 and 30 interest rate cap agreements, respectively, with an aggregate fair value of approximately $0.3 million and $0.2 million, respectively, based on quoted market values from the institutions holding the agreements.

NOTE 9 — COMMITMENTS AND CONTINGENCIES

Litigation

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

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

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

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

Defendants from relying on the Macao Data Privacy Act as an objection or defense under its discovery obligations. On December 21, 2012, the District Court of Clark County ordered the defendants to produce documents from a former counsel to LVSC containing attorney client privileged information. On January 23, 2013, the defendants filed a writ with the Nevada Supreme Court challenging this order (the “January Writ”). On January 29, 2013, the District Court of Clark County granted defendants motion for a stay of the order. On February 15, 2013, the Nevada Supreme Court ordered the plaintiff to answer the January Writ. On February 28, 2013, the District Court of Clark County ordered a hearing on plaintiffs request for sanctions and additional discovery (the “February 28th Order”). On April 8, 2013, the defendants filed a writ with the Nevada Supreme Court challenging the February 28th Order (the “April Writ”); and the Nevada Supreme Court ordered the plaintiff to answer the April Writ by May 20, 2013. The defendants also filed and were granted a stay of the February 28th Order by the District Court of Clark County until such time as the Nevada Supreme Court decides the April Writ. On June 18, 2013, the District Court of Clark County scheduled the jurisdictional hearing for July 16-22, 2013 and issued an order allowing the plaintiff access to privileged communications of counsel to the Company (the “June 18th Order”). On June 21, 2013, the Company filed another writ with the Nevada Supreme Court challenging the June 18th Order (the “June Writ”). The Nevada Supreme Court accepted the June Writ on June 28, 2013, and issued a stay of the June 18th Order. On June 28, 2013, the District Court of Clark County vacated the jurisdictional hearing. On July 3, 2013, the Company filed a motion with the Nevada Supreme Court to consolidate the pending writs (each of which have now been fully briefed to the Nevada Supreme Court). Mr. Jacobs is seeking unspecified damages in this matter. This action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

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

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

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

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

 

 

 

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

 

 

 

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

 

 

 

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

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

On May 24, 2010, Frank J. Fosbre, Jr. filed a purported class action complaint in the United States District Court for the District of Nevada (the “U.S. District Court”), against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 1, 2007 through November 6, 2008. The complaint sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On July 21, 2010, Wendell and Shirley Combs filed a purported class action complaint in the U.S. District Court, against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from June 13, 2007 through November 11, 2008. The complaint, which was substantially similar to the Fosbre complaint, discussed above, sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On August 31, 2010, the U.S. District Court entered an order consolidating the Fosbre and Combs cases, and appointed lead plaintiffs and lead counsel. As such, the Fosbre and Combs cases are reported as one consolidated matter. On November 1, 2010, a purported class action amended complaint was filed in the consolidated action against LVSC, Sheldon G. Adelson and William P. Weidner. The amended complaint alleges that LVSC, through the individual defendants, disseminated or approved materially false and misleading information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 2, 2007

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

through November 6, 2008. The amended complaint seeks, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On January 10, 2011, the defendants filed a motion to dismiss the amended complaint, which, on August 24, 2011, was granted in part, and denied in part, with the dismissal of certain allegations. On November 7, 2011, the defendants filed their answer to the allegations remaining in the amended complaint. On July 11, 2012, the U.S. District Court issued an order allowing Defendants’ Motion for Partial Reconsideration of the Court’s Order dated August 24, 2011, striking additional portions of the plaintiff’s complaint and reducing the class period to a period of February 4 to November 6, 2008. On August 7, 2012, the plaintiff filed a purported class action second amended complaint (the “Second Amended Complaint”) seeking to expand their allegations back to a time period of 2007 (having previously been cut back to 2008 by the U.S. District Court) essentially alleging very similar matters that had been previously stricken by the U.S. District Court. On October 16, 2012, the defendants filed a new motion to dismiss the Second Amended Complaint. The plaintiffs responded to the motion to dismiss on November 1, 2012, and defendants filed their reply on November 12, 2012. On November 20, 2012, the U.S. District Court granted a stay of discovery under the Private Securities Litigation Reform Act pending a decision on the new motion to dismiss and therefore, the discovery process has been suspended. On April 16, 2013, the case was reassigned to a new judge. On July 30, 2013, the U.S. District Court heard the motion to dismiss and took the matter under advisement. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

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

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

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

On January 19, 2012, Asian American Entertainment Corporation, Limited (“AAEC”) filed a claim (the “Macao action”) with the Macao Judicial Court (Tribunal Judicial de Base) against VML, LVS (Nevada) International Holdings, Inc. (“LVS (Nevada)”), Las Vegas Sands, LLC (“LVSLLC”) and Venetian Casino Resort, LLC (“VCR” and collectively, the “Defendants”). The claim is for 3.0 billion patacas (approximately $375.4 million at exchange rates in effect on June 30, 2013) as compensation for damages resulting from the alleged breach of agreements entered into between AAEC and the Defendants for their joint presentation of a bid in response to the public tender held by the Macao government for the award of gaming concessions at the end of 2001. On July 4, 2012, the Defendants filed their defense to the Macao action with the Macao Judicial Court. AAEC then filed a reply that included several amendments to the original claim, although the amount of the claim was not amended. On January 4, 2013, the Defendants filed an amended defense to the amended claim with the Macao Judicial Court. The Macao action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

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

On August 1, 2012, SCL filed an announcement with the SEHK stating that SCL’s subsidiary, VML, has received a notification from the Office for Personal Data Protection of the Macao government (the “OPDP”) indicating that the OPDP has launched an official investigation procedure in relation to the alleged transfer from Macao by VML to the United States of certain data contrary to the Personal Data Protection Act (Macau). On April 13, 2013, the OPDP presented its findings and VML received a cumulative fine of 40,000 patacas (approximately $5,006 at exchange rates in effect on June 30, 2013). VML paid the fine as levied by the OPDP.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

The Company has received subpoenas from the U.S. Attorney’s Office requesting the production of documents relating to two prior customers of the Company’s properties. The Company is cooperating with the U.S. Attorney’s Office on these matters. Based on proceedings to date, management is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any.

NOTE 10 — SEGMENT INFORMATION

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

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2013     2012     2013     2012  

Net Revenues:

        

Macao:

        

The Venetian Macao

   $ 894,706     $ 649,446     $ 1,766,918     $ 1,422,206  

Sands Cotai Central

     584,002       265,601       1,171,181       265,601  

Four Seasons Macao

     274,089       266,137       497,309       565,741  

Sands Macao

     294,667       271,603       604,940       620,686  

Other Asia

     36,408       37,935       70,281       73,503  
  

 

 

   

 

 

   

 

 

   

 

 

 
     2,083,872       1,490,722       4,110,629       2,947,737  

Marina Bay Sands

     739,490       694,762       1,534,354       1,543,431  

United States:

        

Las Vegas Operating Properties

     345,730       327,313       757,271       711,916  

Sands Bethlehem

     126,759       115,096       249,675       230,658  
  

 

 

   

 

 

   

 

 

   

 

 

 
     472,489       442,409       1,006,946       942,574  

Intersegment eliminations

     (52,910     (45,987     (106,269     (89,094
  

 

 

   

 

 

   

 

 

   

 

 

 

Total net revenues

   $ 3,242,941     $ 2,581,906     $ 6,545,660     $ 5,344,648  
  

 

 

   

 

 

   

 

 

   

 

 

 

Adjusted Property EBITDA(1)

        

Macao:

        

The Venetian Macao

   $ 360,864     $ 229,241     $ 709,346     $ 511,174  

Sands Cotai Central

     146,147       51,838       277,668       51,838  

Four Seasons Macao

     61,809       76,587       115,361       144,106  

Sands Macao

     88,338       71,304       184,940       178,260  

Other Asia

     (2,135     (5,955     (5,724     (11,677 )
  

 

 

   

 

 

   

 

 

   

 

 

 
     655,023       423,015       1,281,591       873,701  

Marina Bay Sands

     355,349       330,405       752,130       802,924  

United States:

        

Las Vegas Operating Properties

     62,969       64,350       176,397       180,156  

Sands Bethlehem

     33,579       26,917       63,435       54,419  
  

 

 

   

 

 

   

 

 

   

 

 

 
     96,548       91,267       239,832       234,575  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total adjusted property EBITDA

     1,106,920       844,687       2,273,553       1,911,200  

Other Operating Costs and Expenses

        

Stock-based compensation

     (6,847     (6,338     (13,661     (15,507

Corporate

     (46,481     (58,592     (102,753     (107,547

Pre-opening

     (1,031     (43,472     (7,868     (94,931

Development

     (6,002     (6,797     (11,353     (7,995

Depreciation and amortization

     (251,048     (220,440     (503,605     (415,187

Amortization of leasehold interests in land

     (10,108     (10,057     (20,275     (20,002

Impairment loss

     —         (100,781     —          (143,674

Loss on disposal of assets

     (4,762     (482     (6,694     (1,075
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     780,641       397,728       1,607,344       1,105,282  

Other Non-Operating Costs and Expenses

        

Interest income

     3,236       6,892       7,029       12,540  

Interest expense, net of amounts capitalized

     (68,376     (64,533     (137,208     (129,205

Other income (expense)

     3,893       1,782       1,785        (1,637

Loss on modification or early retirement of debt

     —          (16,403     —          (19,234

Income tax expense

     (47,721     (39,085     (103,303     (102,256
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 671,673     $ 286,381     $ 1,375,647     $ 865,490  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

 

(1)

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

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2013      2012      2013      2012  

Intersegment Revenues

           

Macao:

           

The Venetian Macao

   $ 1,414      $ 1,159      $ 2,488      $ 2,072  

Sands Cotai Central

     89        76        178        76  

Other Asia

     9,607        7,796        18,861        14,212  
  

 

 

    

 

 

    

 

 

    

 

 

 
     11,110        9,031        21,527        16,360  

Marina Bay Sands

     2,344         611        4,752        1,099  

Las Vegas Operating Properties

     39,456         36,345        79,990        71,635  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total intersegment revenues

   $ 52,910      $ 45,987      $ 106,269      $ 89,094  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Six Months Ended
June 30,
 
     2013      2012  

Capital Expenditures

     

Corporate and Other

   $ 21,646      $ 12,958  

Macao:

     

The Venetian Macao

     44,091        35,513  

Sands Cotai Central

     124,841        506,096  

Four Seasons Macao

     5,668        19,345  

Sands Macao

     9,740        12,875  

Other Asia

     217        435  

The Parisian Macao

     59,342        354  
  

 

 

    

 

 

 
     243,899        574,618  

Marina Bay Sands

     96,974        87,450  

United States:

     

Las Vegas Operating Properties

     27,339        46,905  

Sands Bethlehem

     4,157        13,581  
  

 

 

    

 

 

 
     31,496        60,486  
  

 

 

    

 

 

 

Total capital expenditures

   $ 394,015      $ 735,512  
  

 

 

    

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

     June 30,      December 31,  
     2013      2012  

Total Assets

     

Corporate and Other

   $ 864,258      $ 586,788  

Macao:

     

The Venetian Macao

     2,989,848        3,254,193  

Sands Cotai Central

     4,761,747         4,791,560  

Four Seasons Macao

     1,288,725        1,338,714  

Sands Macao

     411,689        414,531  

Other Asia

     329,143        345,522  

The Parisian Macao

     195,445        118,975  

Other Development Projects

     217        123  
  

 

 

    

 

 

 
     9,976,814        10,263,618  

Marina Bay Sands

     6,519,903        6,941,510  

United States:

     

Las Vegas Operating Properties

     3,700,457        3,605,513  

Sands Bethlehem

     722,392        766,223  
  

 

 

    

 

 

 
     4,422,849        4,371,736  
  

 

 

    

 

 

 

Total assets

   $ 21,783,824      $ 22,163,652  
  

 

 

    

 

 

 

 

     June 30,      December 31,  
     2013      2012  

Total Long-Lived Assets

     

Corporate and Other

   $ 404,359      $ 398,100  

Macao:

     

The Venetian Macao

     1,934,698         1,968,415  

Sands Cotai Central

     3,818,917         3,836,471  

Four Seasons Macao

     950,846        971,732  

Sands Macao

     281,259        285,344  

Other Asia

     195,193        202,392  

The Parisian Macao

     195,445        118,912  
  

 

 

    

 

 

 
     7,376,358        7,383,266  

Marina Bay Sands

     5,385,730        5,657,351  

United States:

     

Las Vegas Operating Properties

     3,104,747        3,179,426  

Sands Bethlehem

     594,583        607,346  
  

 

 

    

 

 

 
     3,699,330        3,786,772  
  

 

 

    

 

 

 

Total long-lived assets

   $ 16,865,777      $ 17,225,489  
  

 

 

    

 

 

 

NOTE 11 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION

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

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

In February 2008, all of the capital stock of Phase II Mall Subsidiary, LLC was sold to GGP; however, the sale is not complete from an accounting perspective due to the Company’s continuing involvement in the transaction related to the participation in certain future revenues earned by GGP. Certain of the assets, liabilities and operating results related to the ownership and operation of the mall by Phase II Mall Subsidiary, LLC subsequent to the sale will continue to be accounted for by the Restricted Subsidiaries, and therefore are included in the “Restricted Subsidiaries” columns in the following condensed consolidating financial information. As a result, net liabilities of $23.4 million (consisting of $245.0 million of property and equipment, offset by $268.4 million of liabilities consisting primarily of deferred proceeds from the sale) and $17.3 million (consisting of $250.8 million of property and equipment, offset by $268.1 million of liabilities consisting primarily of deferred proceeds from the sale) as of June 30, 2013 and December 31, 2012, respectively, and a net loss (consisting primarily of depreciation expense) of $3.2 million and $6.4 million for the three and six months ended June 30, 2013, respectively, and $3.8 million and $7.5 million for the three and six months ended June 30, 2012, respectively, related to the mall and are being accounted for by the Restricted Subsidiaries. These balances and amounts are not collateral for the Senior Secured Credit Facility.

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

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

CONDENSED CONSOLIDATING BALANCE SHEETS

June 30, 2013

 

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

Cash and cash equivalents

   $ 34,592      $ 332,564      $ 2,146,985      $ —        $ 2,514,141  

Restricted cash and cash equivalents

     —           —           5,782        —          5,782  

Intercompany receivables

     218,008        58,325        —           (276,333     —     

Intercompany notes receivable

     —           296,012        237,161        (533,173     —     

Accounts receivable, net

     3,674        280,501        1,519,182        —          1,803,357  

Inventories

     4,389        11,492        25,348        —          41,229  

Deferred income taxes, net

     5,976        —           —           (4,333     1,643  

Prepaid expenses and other

     18,091        9,877        71,243        (4     99,207  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

     284,730        988,771        4,005,701        (813,843     4,465,359  

Property and equipment, net

     174,880        3,259,245        12,002,942        —          15,437,067  

Investments in subsidiaries

     7,474,193        5,455,526        —           (12,929,719     —     

Deferred financing costs, net

     209        9,712        173,118        —          183,039  

Restricted cash and cash equivalents

     —           1,102        103        —          1,205  

Intercompany receivables

     5,633        43,078        —           (48,711     —     

Intercompany notes receivable

     —           1,005,813        —           (1,005,813     —     

Deferred income taxes, net

     1,774        39,156        —           (495     40,435  

Leasehold interests in land, net

     —           —           1,428,710        —          1,428,710  

Intangible assets, net

     690        —           108,988        —          109,678  

Other assets, net

     264        23,103        94,964        —          118,331  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

   $ 7,942,373      $ 10,825,506      $ 17,814,526      $ (14,798,581   $ 21,783,824  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Accounts payable

   $ 15,180      $ 30,054      $ 75,801      $ —        $ 121,035  

Construction payables

     3,760        2,379        279,522        —          285,661  

Intercompany payables

     —           213,420        62,913        (276,333     —     

Intercompany notes payable

     237,161        —           296,012        (533,173     —     

Accrued interest payable

     78        594        10,963        —          11,635  

Other accrued liabilities

     72,393        228,624        1,704,898        —          2,005,915  

Income taxes payable

     1,753        —           169,264        (4     171,013  

Deferred income taxes

     —           4,323        10        (4,333     —     

Current maturities of long-term debt

     3,688        973,290        3,190        —          980,168  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

     334,013        1,452,684        2,602,573        (813,843     3,575,427  

Other long-term liabilities

     42,739        10,242        88,145        —          141,126  

Intercompany payables

     —           —           48,711        (48,711     —     

Intercompany notes payable

     —           —           1,005,813        (1,005,813     —     

Deferred income taxes

     —           —           171,401        (495     170,906  

Deferred amounts related to mall transactions

     —           428,087        —           —          428,087  

Long-term debt

     65,516        1,593,844        6,851,871        —          8,511,231  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

     442,268        3,484,857        10,768,514        (1,868,862     12,826,777  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

     7,500,105        7,340,244        5,589,475        (12,929,719     7,500,105  

Noncontrolling interests

     —           405        1,456,537        —          1,456,942  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

     7,500,105        7,340,649        7,046,012        (12,929,719     8,957,047  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

   $ 7,942,373      $ 10,825,506      $ 17,814,526      $ (14,798,581   $ 21,783,824  
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING BALANCE SHEETS

December 31, 2012

 

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

Cash and cash equivalents

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

Restricted cash and cash equivalents

     —           34         4,487         —          4,521   

Intercompany receivables

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

Intercompany notes receivable

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

Accounts receivable, net

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

Inventories

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

Deferred income taxes, net

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

Prepaid expenses and other

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current assets

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

Property and equipment, net

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

Investments in subsidiaries

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

Deferred financing costs, net

     238         12,528         201,699         —          214,465   

Restricted cash and cash equivalents

     —           1,068         870         —          1,938   

Intercompany receivables

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

Intercompany notes receivable

     —           928,728         —           (928,728     —     

Deferred income taxes, net

     3,665         39,429         —           186        43,280   

Leasehold interests in land, net

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

Intangible assets, net

     690         —           69,928         —          70,618   

Other assets, net

     243         18,994         111,111         —          130,348   
  

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total assets

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Accounts payable

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

Construction payables

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

Intercompany payables

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

Intercompany notes payable

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

Accrued interest payable

     82         1,050         14,410         —          15,542   

Other accrued liabilities

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

Income taxes payable

     —           4         164,122         —          164,126   

Deferred income taxes

     —           3,475         —           (3,475     —     

Current maturities of long-term debt

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total current liabilities

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

Other long-term liabilities

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

Intercompany payables

     —           —           61,091         (61,091     —     

Intercompany notes payable

     —           —           928,728         (928,728     —     

Deferred income taxes

     —           —           185,759         186        185,945   

Deferred amounts related to mall transactions

     —           430,271         —           —          430,271   

Long-term debt

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total Las Vegas Sands Corp. stockholders’ equity

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

Noncontrolling interests

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total equity

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

Total liabilities and equity

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

 

 

    

 

 

    

 

 

    

 

 

   

 

 

 

 

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Table of Contents

LAS VEGAS SANDS CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

 

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS

For the Three Months Ended June 30, 2013

 

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

Revenues:

          

Casino

   $ —        $ 105,067     $ 2,569,062     $ —        $ 2,674,129  

Rooms

     —          120,567       204,062       —          324,629  

Food and beverage

     —          51,523       123,249       —          174,772  

Mall

     —          —          107,993       —          107,993  

Convention, retail and other

     —          76,829       89,651       (43,430     123,050  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
     —          353,986       3,094,017       (43,430     3,404,573  

Less — promotional allowances

     (342     (20,510     (140,409     (371     (161,632
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net revenues

     (342     333,476       2,953,608       (43,801     3,242,941  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

          

Casino

     —          71,464       1,448,853       (596     1,519,721  

Rooms

     —          38,880       26,805       —          65,685  

Food and beverage

     —          23,883       66,484       (1,073     89,294  

Mall

     —          —          18,147       —          18,147  

Convention, retail and other

     —          23,777       62,380       (6,063     80,094  

Provision for doubtful accounts

     —          9,748       52,310       —          62,058  

General and administrative

     —          70,351       237,694       (176     307,869  

Corporate

     41,184       134       41,053       (35,890     46,481  

Pre-opening

     —          —          1,030       1        1,031  

Development

     5,997       9       —          (4     6,002  </