NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 — Organization and Business of Company
Las Vegas Sands Corp. ("LVSC" or together with its subsidiaries, the "Company") is incorporated in Nevada and its common stock is traded on the New York Stock Exchange under the symbol "LVS."
The ordinary 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"). The shares were not, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent a registration under the Securities Act of 1933, as amended, or an applicable exception from such registration requirements.
Operations
The Company is a developer of destination properties ("Integrated Resorts") that feature premium accommodations, world-class gaming, entertainment and retail, convention and exhibition facilities, celebrity chef restaurants and other amenities.
Macao
The Company currently owns
70.1%
of SCL, which includes the operations of The Venetian Macao Resort Hotel ("The Venetian Macao"), Sands Cotai Central, The Parisian Macao, The Plaza Macao and Four Seasons Hotel Macao, Cotai Strip (the "Four Seasons Hotel 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 agreement, which expires in June 2022.
The Company owns and operates The Venetian Macao, which anchors the Cotai Strip, the Company's master-planned development of Integrated Resorts on an area of approximately
140
acres in Macao. The Venetian Macao 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; a mall with retail and dining space of approximately
926,000
square feet; and a convention center and meeting room complex of approximately
1.2 million
square feet.
The Company owns the Sands Cotai Central, an Integrated Resort situated across the street from The Venetian Macao, The Parisian Macao and The Plaza Macao and Four Seasons Hotel Macao. The Sands Cotai Central opened in phases, beginning in April 2012. The property features four hotel towers: the first hotel tower, consisting of approximately
650
five-star rooms and suites under the Conrad brand and approximately
1,200
four-star rooms and suites under the Holiday Inn brand; the second hotel tower, consisting of approximately
1,850
rooms and suites under the Sheraton brand; the third hotel tower, consisting of approximately
2,100
rooms and suites under the Sheraton brand; and the fourth hotel tower, consisting of approximately
400
rooms and suites under the St. Regis brand. Within Sands Cotai Central, the Company also owns and currently operates approximately
367,000
square feet of gaming space, approximately
369,000
square feet of meeting space and approximately
424,000
square feet of retail space, as well as entertainment and dining facilities.
On September 13, 2016, the Company opened The Parisian Macao, an Integrated Resort connected to The Venetian Macao and The Plaza Macao and Four Seasons Hotel Macao, which includes a
253,000
square foot casino. The Parisian Macao also features approximately
2,800
rooms and suites; approximately
300,000
square feet of retail and dining space; a meeting room complex of approximately
63,000
square feet; and a
1,200
-seat theater.
The Company owns The Plaza Macao and 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. Within the Integrated Resort, the Company owns and operates the Plaza Casino, which features approximately
105,000
square feet of gaming space;
19
Paiza mansions; retail space of approximately
258,000
square feet, which is connected to the mall at The Venetian Macao; several food and beverage offerings; and conference, banquet and other facilities.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company owns and operates the Sands Macao, the first Las Vegas-style casino in Macao. The Sands Macao offers approximately
213,000
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.
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," together with The Venetian Las Vegas and The Palazzo, the "Las Vegas Operating Properties"). The Las Vegas Operating Properties, situated on the Las Vegas Strip, is 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 the Grand Canal Shoppes, which consists of two enclosed retail, dining and entertainment complexes that were sold to GGP Limited Partnership ("GGP," see "— Note 12 — Mall Activities").
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
146,000
square feet of gaming space; a hotel tower with
282
rooms; a
150,000
-square-foot retail facility; an arts and cultural center; and a
50,000
-square-foot multipurpose event center. 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 approximately
35%
of the economic interest in the retail portion of the property through its ownership interest in Sands Bethworks Retail LLC.
Development Projects
The Company is constantly evaluating opportunities to improve its product offerings, such as refreshing its meeting and convention facilities, suites and rooms, retail malls, restaurant and nightlife mix and its gaming areas, as well as other anticipated revenue generating additions to the Company's Integrated Resorts.
Macao
In October 2017, the Company announced that it will renovate, expand and rebrand the Sands Cotai Central into a new destination Integrated Resort, The Londoner Macao, by adding extensive thematic elements both externally and internally. The Londoner Macao will feature new attractions and features from London, including some of London's most recognizable landmarks, an expanded retail mall and an additional
350
luxury suites. The project will commence in 2018 and be phased to minimize disruption during the property's peak periods. The Company expects the project to be completed in 2020.
In October 2017, the Company announced that the tower adjacent to the Four Seasons Hotel Macao will feature an additional
295
suites. The Company has completed the structural work of the tower and plans to commence build out of the suites in 2018. The Company expects the project to be completed in 2019.
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. In 2008, the Company suspended
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. The Company continues to evaluate the highest return opportunity for the project and intends to recommence construction when demand and conditions improve. 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 decides to abandon the project, the Company could record a charge for some portion of the
$122 million
in capitalized construction costs (net of depreciation) as of
December 31, 2017
.
Other
The Company continues to evaluate current development projects and pursue new development opportunities globally.
Capital Financing Overview
The Company funds its development projects primarily through borrowings under its credit facilities and operating cash flows.
The Company held unrestricted cash and cash equivalents of
$2.42 billion
and restricted cash and cash equivalents of
$11 million
as of
December 31, 2017
. 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 elect to arrange additional financing to fund its planned, and any future, development projects. In the normal course of its activities, the Company will continue to evaluate its capital structure and opportunities for enhancements thereof. In March 2017, the Company amended its U.S. credit facility, which refinanced the term loans in an aggregate amount of
$2.18 billion
, extended the maturity of the term loans to
March 29, 2024
, removed the requirement to prepay outstanding revolving loans and/or permanently reduce revolving commitments in certain circumstances and lowered the applicable margin credit spread for borrowings under the term loans (see "— Note 8 — Long-Term Debt — 2013 U.S. Credit Facility").
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and variable interest entities ("VIEs") in which the Company is the primary beneficiary. All intercompany balances and transactions have been eliminated in consolidation.
Management's determination of the appropriate accounting method with respect to the Company's variable interests is based on accounting standards for VIEs issued by the Financial Accounting Standards Board ("FASB"). The Company consolidates any 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.
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
December 31, 2017
and
2016
, the Company's consolidated joint ventures had total assets of
$77 million
and
$79 million
, respectively, and total liabilities of
$198 million
and
$173 million
, respectively. The Company's joint ventures had intercompany liabilities of
$196 million
and
$171 million
as of
December 31, 2017
and
2016
, respectively.
Use of Estimates
The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. These estimates and judgments are based on historical information, information that is currently available to the
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Company and on various other assumptions that the Company believes to be reasonable under the circumstances. Actual results could vary from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash and short-term investments with original maturities of less than 90 days. Such investments are carried at cost, which is a reasonable estimate of their fair value. Cash equivalents are placed with high credit quality financial institutions and are primarily in money market funds.
Accounts Receivable and Credit Risk
Accounts receivable are comprised of casino, hotel and other receivables, which do not bear interest and are recorded at cost. The Company extends credit to approved casino customers following background checks and investigations of creditworthiness. The Company also extends credit to junket operators in Macao, which receivables can be offset against commissions payable to the respective junket operators. Business or economic conditions, the legal enforceability of gaming debts, or other significant events in foreign countries could affect the collectability of receivables from customers and junket operators residing in these countries.
The allowance for doubtful accounts represents the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The Company determines the allowance based on an analysis of the collectability of each account with a balance over a specified dollar amount, based upon the age of the account, the customer's financial condition, collection history and any other known information, and the Company applies standard reserve percentages to aged account balances under the specified dollar amount. Account balances are charged off against the allowance when the Company believes it is probable the receivable will not be recovered. Management believes that there are no concentrations of credit risk for which an allowance has not been established. Although management believes that the allowance is adequate, it is possible that the estimated amount of cash collections with respect to accounts receivable could change.
Inventories
Inventories consist primarily of food, beverage, retail products and operating supplies, which are stated at the lower of cost or net realizable value. Cost is determined by the weighted average and specific identification methods.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization, and accumulated impairment losses, if any. Depreciation and amortization are provided on a straight-line basis over the estimated useful lives of the assets, which do not exceed the lease term for leasehold improvements, as follows:
|
|
|
Land improvements, building and building improvements
|
10 to 50 years
|
Furniture, fixtures and equipment
|
3 to 20 years
|
Leasehold improvements
|
3 to 15 years
|
Transportation
|
5 to 20 years
|
The estimated useful lives are based on the nature of the assets as well as current operating strategy and legal considerations such as contractual life. Future events, such as property expansions, property developments, new competition or new regulations, could result in a change in the manner in which the Company uses certain assets requiring a change in the estimated useful lives of such assets.
During the year ended
December 31, 2017
, the Company changed the estimated useful lives of certain of its property and equipment based on a combination of factors accumulating over time that provided the Company with updated information to make a better estimate of the economic lives of these assets. These factors included (1) the accumulation of historical asset replacement data at the Company's operating properties, which reflects the actual length of time the Company uses certain property and equipment, (2) the stabilization of the operating, regulatory and competitive environment in each jurisdiction the Company operates in, which includes meeting the final land concession government-imposed deadlines for the Company's Macao properties on the Cotai Strip, (3) transitioning to more predictable renovation cycles at the Company's operating properties and (4) consideration of the estimated useful lives
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
assigned to buildings of the Company's peers in the gaming and hospitality industry. Based on these factors, as well as the anticipated use and condition of the assets evaluated, the Company determined that changes to the useful lives of certain property and equipment were appropriate. As a result, the Company revised the estimated useful lives of its buildings, building improvements and land improvements from a range of
15
to
40
years to
10
to
50
years and certain other furniture, fixtures and equipment from
3
to
6
years to
5
to
10
years to better reflect the estimated periods during which these assets are expected to remain in service.
This change in estimated useful lives was accounted for as a change in accounting estimate effective July 1, 2017. The impact of this change for the year ended December 31, 2017, was a decrease in depreciation and amortization expense and an increase in operating income of
$112 million
, and an increase in net income attributable to LVSC of
$72 million
, or earnings per share of
$0.09
on a basic and diluted basis.
Maintenance and repairs that neither materially add to the value of the asset nor appreciably prolong its life are charged to expense as incurred. Gains or losses on disposition of property and equipment are included in the consolidated statements of operations.
The Company evaluates its property and equipment and other long-lived assets for impairment in accordance with related accounting standards. For assets to be disposed of, the Company recognizes the asset to be sold at the lower of carrying value or fair value less costs of disposal. Fair value for assets to be disposed of is estimated based on comparable asset sales, solicited offers or a discounted cash flow model.
For assets to be held and used (including projects under development), fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company first groups its assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the "asset group"). Secondly, the Company estimates the undiscounted future cash flows that are directly associated with and expected to arise from the completion, use and eventual disposition of such asset group. The Company estimates the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.
To estimate the undiscounted cash flows of the Company's asset groups, the Company considers all potential cash flow scenarios, which are probability weighted based on management's estimates given current conditions. Determining the recoverability of the Company's asset groups is judgmental in nature and requires the use of significant estimates and assumptions, including estimated cash flows, probability weighting of potential scenarios, costs to complete construction for assets under development, growth rates and future market conditions, among others. Future changes to the Company's estimates and assumptions based upon changes in macro-economic factors, regulatory environments, operating results or management's intentions may result in future changes to the recoverability of these asset groups.
For assets to be held for sale, the fixed assets (the "disposal group") are measured at the lower of their carrying amount or fair value less cost to sell. Losses are recognized for any initial or subsequent write-down to fair value less cost to sell, while gains are recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized. Any gains or losses not previously recognized that result from the sale of the disposal group shall be recognized at the date of sale. Fixed assets are not depreciated while classified as held for sale.
During the year ended
December 31, 2017
, the Company recognized a loss on disposal or impairment of assets of
$20 million
, primarily related to dispositions at our Macao and U.S. operations. During the years ended December 31,
2016
and
2015
, the Company recognized a loss on disposal or impairment of assets of
$79 million
and
$35 million
, respectively.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Capitalized Interest and Internal Costs
Interest costs associated with major construction projects are capitalized and included in the cost of the projects. When no debt is incurred specifically for construction projects, interest is capitalized on amounts expended using the weighted average cost of the Company's outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period. During the years ended
December 31, 2017
,
2016
and
2015
, the Company capitalized
$2 million
,
$34 million
and
$27 million
, respectively, of interest expense.
During the years ended December 31,
2017
,
2016
and
2015
, the Company capitalized approximately
$24 million
,
$29 million
and
$31 million
, respectively, of internal costs, consisting primarily of compensation expense for individuals directly involved with the development and construction of property.
Deferred Financing Costs and Original Issue Discounts
Certain direct and incremental costs and discounts incurred in obtaining loans are capitalized and amortized to interest expense based on the terms of the related debt instruments using the effective interest method.
Leasehold Interests in Land
Leasehold interests in land represent payments made for the use of land over an extended period of time. The leasehold interests in land are amortized on a straight-line basis over the expected term of the related lease agreements.
Indefinite Useful Life Assets
Assets with indefinite useful lives are regularly assessed to ensure they continue to meet the indefinite useful life criteria. These assets are not subject to amortization and are tested for impairment and recoverability annually or more frequently if events or circumstances indicate that the assets might be impaired. When performing the impairment analysis, the Company may first conduct a qualitative assessment to determine whether it is "more-likely-than-not" that the asset is impaired. If the Company elects to perform a qualitative assessment and it is determined that it is "more-likely-than-not" that the asset is impaired after assessing the qualitative factors, the Company then performs an impairment test that consists of a comparison of the fair value of the asset with its carrying amount. If the fair value of the asset exceeds the carrying amount, no impairment is recognized. If the fair value of the asset does not exceed the carrying amount, an impairment will be recognized in an amount equal to the difference.
As of
December 31, 2017
, the Company had assets of
$50 million
and
$17 million
related to its Sands Bethlehem gaming license and table games certificate, respectively, both of which were determined to have an indefinite useful life and have been recorded within intangible assets in the accompanying consolidated balance sheets. For the year ended December 31, 2017, the Company elected to perform a quantitative analysis with the last quantitative analysis being performed during the year ended December 31, 2014. The fair value of the Company’s gaming license and table games certificate was estimated using the Company’s expected adjusted property EBITDA (as defined in “— Note 17 — Segment Information”), combined with estimated future tax-affected cash flows and a terminal value using the Gordon Growth Model, which were discounted to present value at rates commensurate with the Company’s capital structure and the prevailing borrowing rates within the casino industry in general. Adjusted property EBITDA and discounted cash flows are common measures used to value cash-intensive businesses such as casinos. Determining the fair value of the gaming license and table games certificate is judgmental in nature and requires the use of significant estimates and assumptions, including adjusted property EBITDA, growth rates, discount rates and future market conditions, among others.
For the years ended December 31, 2016 and 2015, the annual impairment analysis included an assessment of certain qualitative factors including, but not limited to, the results of the most recent fair value calculation, current year and projected operating results, and macro-economic and industry conditions. The Company considered the qualitative factors and determined that it was not "more-likely-than-not" that the indefinite lived intangible assets were impaired.
Future changes to the Company's estimates and assumptions based upon changes in macro-economic factors, operating results or management's intentions may result in future changes to the fair value of the gaming license and table games certificate.
No
impairment charge related to these assets was recorded for the years ended
December 31, 2017
,
2016
and
2015
.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Revenue Recognition and Promotional Allowances
Casino revenue is the aggregate of gaming wins and losses. The commissions rebated directly or indirectly through junket operators to customers, cash discounts and other cash incentives to customers related to gaming play are recorded as a reduction to gross casino revenue. Hotel revenue recognition criteria are met at the time of occupancy. Food and beverage revenue recognition criteria are met at the time of service. Deposits for future hotel occupancy, meeting space or food and beverage services contracts are recorded as deferred income until revenue recognition criteria are met. Cancellation fees for hotel, meeting space and food and beverage services are recognized upon cancellation by the customer and are included in convention, retail and other revenues. Mall revenue is primarily generated from base rents and overage rents received through long-term leases with retail tenants. Base rent, adjusted for contractual escalations, is recognized on a straight-lined basis over the term of the related lease. Overage rent is paid by a tenant when its sales exceed an agreed upon minimum amount and is not recognized by the Company until the thresholds are met. Convention revenues are recognized when the related service is rendered or the event is held.
In accordance with industry practice, the retail value of rooms, food and beverage, and other services furnished to the Company's patrons without charge is included in gross revenue and then deducted as promotional allowances. The estimated retail value of such promotional allowances is included in operating revenues as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Rooms
|
$
|
516
|
|
|
$
|
477
|
|
|
$
|
408
|
|
Food and beverage
|
227
|
|
|
210
|
|
|
215
|
|
Convention, retail and other
|
96
|
|
|
99
|
|
|
103
|
|
|
$
|
839
|
|
|
$
|
786
|
|
|
$
|
726
|
|
The estimated departmental cost of providing such promotional allowances, which is included primarily in casino operating expenses, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Rooms
|
$
|
129
|
|
|
$
|
113
|
|
|
$
|
90
|
|
Food and beverage
|
172
|
|
|
155
|
|
|
158
|
|
Convention, retail and other
|
76
|
|
|
75
|
|
|
81
|
|
|
$
|
377
|
|
|
$
|
343
|
|
|
$
|
329
|
|
Gaming Taxes
The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes, including the goods and services tax in Singapore, are an assessment on the Company's gaming revenue and are recorded as a casino expense in the accompanying consolidated statements of operations. These taxes were
$3.60 billion
,
$3.24 billion
and
$3.31 billion
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
Frequent Players Program
The Company has established promotional clubs to encourage repeat business from frequent and active slot machine and table games patrons. Members earn points primarily based on gaming activity and such points can be redeemed for cash, free play and other free goods and services. The Company accrues for club points expected to be redeemed for cash and free play as a reduction to gaming revenue and accrues for club points expected to be redeemed for free goods and services primarily as casino expense. The accruals are based on estimates and assumptions regarding the mix of cash, free play and other free goods and services that will be redeemed and the costs of providing those benefits. Historical data is used to assist in the determination of the estimated accruals.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Pre-Opening and Development Expenses
The Company accounts for costs incurred in the development and pre-opening phases of new ventures in accordance with accounting standards regarding start-up activities. Pre-opening expenses represent personnel and other costs incurred prior to the opening of new ventures and are expensed as incurred. Development expenses include the costs associated with the Company's evaluation and pursuit of new business opportunities, which are also expensed as incurred.
Advertising Costs
Costs for advertising are expensed the first time the advertising takes place or as incurred. Advertising costs included in the accompanying consolidated statements of operations were
$129 million
,
$121 million
and
$124 million
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
Corporate Expenses
Corporate expense represents payroll, travel, legal fees, professional fees and various other expenses not allocated or directly related to the Company's Integrated Resort operations and related ancillary operations.
Foreign Currency
The Company accounts for foreign currency translation in accordance with related accounting standards. Gains or losses from foreign currency remeasurements are included in other income (expense). Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date and income statement accounts are translated at the average exchange rates during the year. Translation adjustments resulting from this process are charged or credited to other comprehensive income.
Comprehensive Income and Accumulated Other Comprehensive Income (Loss)
Comprehensive income includes net income and all other non-stockholder changes in equity, or other comprehensive income. The balance of accumulated other comprehensive income (loss) consisted solely of foreign currency translation adjustments. During the year ended December 31, 2015, a
$5 million
gain related to the dissolution of a wholly owned foreign subsidiary was reclassified from accumulated other comprehensive income (loss) and comprehensive income to other income in the accompanying consolidated statements of operations.
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:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Weighted average common shares outstanding (used in the calculation of basic earnings per share)
|
792
|
|
|
795
|
|
|
797
|
|
Potential dilution from stock options and restricted stock and stock units
|
—
|
|
|
—
|
|
|
1
|
|
Weighted average common and common equivalent shares (used in the calculation of diluted earnings per share)
|
792
|
|
|
795
|
|
|
798
|
|
Antidilutive stock options excluded from the calculation of diluted earnings per share
|
6
|
|
|
7
|
|
|
6
|
|
Stock-Based Employee Compensation
The Company accounts for its stock-based employee compensation in accordance with accounting standards regarding share-based payment, which establishes accounting for equity instruments exchanged for employee services. Stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized over the employee's requisite service period (generally the vesting period of the equity grant). The Company's
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
stock-based employee compensation plans are more fully discussed in "— Note 14 — Stock-Based Employee Compensation."
Income Taxes
The Company is subject to income taxes in the U.S. (including federal and state) and numerous foreign jurisdictions in which it operates. The Company records income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards.
The Company's foreign and U.S. tax rate differential reflects the fact that income earned in Singapore and Macao is taxed at local rates, which are lower than U.S. tax rates. 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 2018
. In December 2017, the Company requested an additional income tax exemption for either an additional
5
-year period or through
June 26, 2022
, the date the Company's subconcession agreement expires.
Accounting standards regarding income taxes require a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is "more-likely-than-not" that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a "more-likely-than-not" realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, the Company's experience with operating loss and tax credit carryforwards not expiring, and tax planning strategies.
The Company recorded valuation allowances on the net deferred tax assets of certain foreign jurisdictions of
$261 million
and
$234 million
, as of
December 31, 2017
and
2016
, respectively, and a valuation allowance on certain deferred tax assets of its U.S. operations of
$4.43 billion
and
$3.96 billion
as of
December 31, 2017
and
2016
, respectively, which increased during the current year primarily due to an increase in U.S. foreign tax credits. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period and consider the scheduled reversal of deferred tax liabilities, sources of taxable income and tax planning strategies. To the extent that the financial results of these operations improve and it becomes "more-likely-than-not" that the deferred tax assets are realizable, the Company will be able to reduce the valuation allowance in the period such determination is made as appropriate.
Significant judgment is required in evaluating the Company's tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provide a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is "more-likely-than-not" that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than
50%
likely, based solely on the technical merits, of being sustained on examinations. The Company recorded unrecognized tax benefits of
$92 million
and
$74 million
as of
December 31, 2017
and
2016
, respectively. The Company considers many factors when evaluating and estimating its tax positions and tax benefits, which may require periodic adjustments and for which actual outcomes may be different.
In December 2017, the U.S. enacted the Tax Cuts and Jobs Act (the "Act") also referred to as "U.S. tax reform." The Act made significant changes to U.S. income tax laws including lowering the U.S. corporate tax rate to
21%
effective beginning in 2018 and transitioning from a worldwide tax system to a territorial tax system resulting in dividends from the Company's foreign subsidiaries not being subject to U.S. income tax and creating a one-time tax on previously unremitted earnings of foreign subsidiaries. As a result, the Company recorded a tax benefit of
$526 million
relating to the reduction of the valuation allowance on certain deferred tax assets that were previously determined not likely to be utilized and also the revaluation of the Company's U.S. deferred tax liabilities at the reduced corporate income tax rate of
21%
.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company recorded the impact of enactment of U.S. tax reform subject to Staff Accounting Bulletin ("SAB") 118, which provides for a twelve month remeasurement period to complete the accounting required under Accounting Standards Codification ("ASC") 740. While the Company believes these provisional amounts represent a reasonable estimate of the ultimate enactment-related impact that U.S. tax reform will have on the Company's consolidated financial statements, it is possible that the Company may materially adjust these amounts for related administrative guidance, notices, implementing regulations, potential legislative amendments and interpretations as the new tax law evolves. These adjustments could have an impact on the Company's tax assets and liabilities, effective tax rate and earnings per share.
Accounting for Derivative Instruments and Hedging Activities
Accounting standards require that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If specific conditions are met, a derivative may be designated as a hedge of specific financial exposures. The accounting for changes in fair value of a derivative depends on the intended use of the derivative and, if used in hedging activities, on its effectiveness as a hedge. In order to qualify for hedge accounting, the underlying hedged item must expose the Company to risks associated with market fluctuations and the financial instrument used must be designated as a hedge and must reduce the Company's exposure to market fluctuation throughout the hedge period.
The Company has a policy aimed at managing interest rate risk associated with its current and anticipated future borrowings and foreign currency exchange rate risk associated with operations of its foreign subsidiaries. This policy enables the Company to use any combination of interest rate swaps, futures, options, caps, forward contracts and similar instruments. The Company employed such financial instruments pursuant to this policy, none of which were designated as hedges for accounting purposes. As such, all gains and losses were recognized in other income (expense). Depending on its classification and position at the end of the reporting period, each derivative was reported as prepaid expenses and other; other assets, net; other accrued liabilities; or other long-term liabilities, as applicable, in the accompanying consolidated balance sheets. See "— Note 11 — Fair Value Measurements" for additional disclosures regarding derivatives.
Recent Accounting Pronouncements
In May 2014, the FASB issued an accounting standard update (as subsequently amended) on revenue recognition applicable to all contracts with customers. The update requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The guidance is required to be applied on a retrospective basis, using one of two methodologies, and is effective for fiscal years beginning after December 15, 2017. The Company adopted the new standard on January 1, 2018, on a full retrospective basis. Adoption of the standard will change the presentation of, and accounting for, complimentary revenues and promotional allowances currently presented in the statements of operations in accordance with current industry standards (as indicated above, see "Revenue Recognition and Promotional Allowances"). A majority of total promotional allowances will be netted against casino revenue and expenses will be allocated among the respective categories in a different manner. Certain commission arrangements with third parties will be reclassified out of operating expenses and netted against revenue. There will also be a change in the manner in which the Company assigns value to accrued customer benefits related to its frequent players programs. The resulting liability will be recorded using the retail value of such benefits less estimated breakage and will be offset against casino revenue. When the benefits are redeemed, revenue will be recognized in the resulting category of the goods or services provided. Upon retrospective application on January 1, 2018, management estimates that net revenues and operating expenses for amounts previously reported for the years ended December 31, 2017 and 2016 will decrease in an amount not expected to exceed
$200 million
, primarily due to changes in the accounting for certain commissions and frequent players programs. The adoption of this guidance is not expected to have a material impact on the Company's financial condition or net income.
In February 2016, the FASB issued an accounting standard update on leases, which requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, with early adoption permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company expects to adopt this guidance beginning January 1, 2019, and continues to assess the impact the guidance will have on its financial condition and results of operations. The primary effect of this update is expected to increase assets and liabilities on the balance sheet. The adoption of this guidance is not expected to have a material impact on net income.
In March 2016, the FASB issued an accounting standard update to simplify several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification in the statement of cash flows and electing an accounting policy to either estimate the number of forfeitures or account for forfeitures when they occur. The Company adopted this guidance effective January 1, 2017, and as a result, excess tax benefits or deficiencies related to the exercise or vesting of share-based awards are now reflected in the accompanying condensed consolidated statements of operations as a component of income tax expense, whereas previously they were recognized in stockholders' equity when realized. As a result of the prior guidance that required that deferred tax assets are not recognized for net operating loss carryforwards or credit carryforwards resulting from windfall tax benefits, the Company had windfall tax benefits of
$379 million
as of December 31, 2016, that were not reflected in deferred tax assets. With the adoption of the new accounting standard, the Company recorded these deferred tax assets, but established a full valuation allowance against those deferred tax assets based on the determination that it was "more-likely-than-not" that those deferred tax assets would not be realized. The accompanying consolidated statements of cash flows present excess tax benefits as an operating activity on a retrospective basis. The reclassification of the prior period had an immaterial impact on the Company's cash flows from operating and financing activities. The Company has elected to account for forfeitures as they occur rather than account for forfeitures based upon an estimated rate. This change in accounting policy was adopted on a modified retrospective basis and resulted in a
$2 million
cumulative effect adjustment to retained earnings.
In June 2016, the FASB issued an accounting standard update that revises the methodology for measuring credit losses on financial instruments and the timing of when such losses are recorded. The guidance is effective for fiscal years beginning after December 15, 2019, including interim reporting periods within that reporting period, and should be applied on a modified retrospective basis, with early adoption permitted. The Company is currently assessing the impact that the guidance will have on the Company's financial condition, results of operations and cash flows.
In August 2016, the FASB issued an accounting standard update to reduce the diversity on how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that reporting period, and should be applied retrospectively, with early adoption permitted. The Company adopted this guidance as of January 1, 2018. The adoption will not have a material effect on the presentation of cash flows.
In November 2016, the FASB issued an accounting standard update to reduce the diversity on how changes in restricted cash are presented and classified on the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that reporting period, and should be applied retrospectively, with early adoption permitted. The Company adopted this guidance as of January 1, 2018. The adoption will not have a material effect on the presentation of its balance sheet and statement of cash flows.
Reclassification
Certain amounts in the consolidated statements of cash flows for the years ended December 31, 2016 and 2015, have been reclassified to be consistent with the current year presentation. The reclassification had no impact on the Company's financial condition, results of operations or cash flows.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 3 — Accounts Receivable, Net
Accounts receivable consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Casino
|
$
|
837
|
|
|
$
|
1,186
|
|
Rooms
|
109
|
|
|
80
|
|
Mall
|
47
|
|
|
40
|
|
Other
|
64
|
|
|
46
|
|
|
1,057
|
|
|
1,352
|
|
Less — allowance for doubtful accounts
|
(442
|
)
|
|
(576
|
)
|
|
$
|
615
|
|
|
$
|
776
|
|
Note 4 — Property and Equipment, Net
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Land and improvements
|
$
|
672
|
|
|
$
|
626
|
|
Building and improvements
|
17,703
|
|
|
17,478
|
|
Furniture, fixtures, equipment and leasehold improvements
|
3,999
|
|
|
3,720
|
|
Transportation
|
455
|
|
|
454
|
|
Construction in progress
|
1,179
|
|
|
1,094
|
|
|
24,008
|
|
|
23,372
|
|
Less — accumulated depreciation and amortization
|
(8,492
|
)
|
|
(7,469
|
)
|
|
$
|
15,516
|
|
|
$
|
15,903
|
|
Construction in progress consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
The Plaza Macao and Four Seasons Hotel Macao
|
$
|
437
|
|
|
$
|
430
|
|
Sands Cotai Central
|
309
|
|
|
286
|
|
Other
|
433
|
|
|
378
|
|
|
$
|
1,179
|
|
|
$
|
1,094
|
|
The
$433 million
in other construction in progress as of
December 31, 2017
, consists primarily of construction of the Las Vegas Condo Tower and various projects at The Venetian Macao.
In accordance with the April 2004 purchase and sale agreement, as amended, between Venetian Casino Resort, LLC ("VCR") and GGP (the "Amended Agreement"), the Company sold the portion of the Grand Canal Shoppes located within The Palazzo (formerly referred to as "The Shoppes at the Palazzo," see "— Note 12 — Mall Activities — The Shoppes at The Palazzo"). Under terms of the settlement with GGP on June 24, 2011, the Company retained the
$295 million
of proceeds previously received and participates in certain potential future revenues earned by GGP. Under generally accepted accounting principles, the transaction has not been accounted for as a sale because the Company's participation in certain potential future revenues constitutes continuing involvement in The Shoppes at The Palazzo. Therefore,
$266 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and equipment legally sold to GGP totaling
$194 million
(net of
$106 million
of accumulated depreciation) as of
December 31, 2017
, will continue to be recorded on the Company's consolidated balance sheet and will continue to be depreciated in the Company's consolidated statement of operations.
The cost and accumulated depreciation of property and equipment that the Company is leasing to third parties, primarily as part of its mall operations, was
$1.31 billion
and
$415 million
, respectively, as of
December 31, 2017
. The cost and accumulated depreciation of property and equipment that the Company is leasing to these third parties was
$1.25 billion
and
$353 million
, respectively, as of
December 31, 2016
.
The cost and accumulated depreciation of property and equipment that the Company is leasing under capital lease arrangements was
$41 million
and
$24 million
, respectively, as of
December 31, 2017
. The cost and accumulated depreciation of property and equipment that the Company is leasing under capital lease arrangements was
$44 million
and
$23 million
, respectively, as of
December 31, 2016
.
Note 5 — Leasehold Interests in Land, Net
Leasehold interests in land consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Marina Bay Sands
|
$
|
1,027
|
|
|
$
|
951
|
|
Sands Cotai Central
|
237
|
|
|
238
|
|
The Venetian Macao
|
182
|
|
|
182
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
89
|
|
|
89
|
|
The Parisian Macao
|
75
|
|
|
75
|
|
Sands Macao
|
30
|
|
|
29
|
|
|
1,640
|
|
|
1,564
|
|
Less — accumulated amortization
|
(403
|
)
|
|
(354
|
)
|
|
$
|
1,237
|
|
|
$
|
1,210
|
|
The Company amortizes the leasehold interests in land on a straight-line basis over the expected term of the lease. Amortization expense of
$37 million
,
$38 million
and
$39 million
was included in amortization of leasehold interests in land expense for the years ended
December 31, 2017
,
2016
and
2015
, respectively. The estimated future amortization expense is approximately
$36 million
for each of the five years in the period ending December 31, 2022, and
$1.40 billion
thereafter at exchange rates in effect on
December 31, 2017
.
Land concessions in Macao generally have an initial term of
25 years
with automatic extensions of
10 years
thereafter in accordance with Macao law. The Company has received land concessions from the Macao government to build on the sites on which Sands Macao, The Venetian Macao, The Plaza Macao and Four Seasons Hotel Macao, Sands Cotai Central and The Parisian Macao are located. The Company does not own these land sites in Macao; however, the land concessions grant the Company exclusive use of the land. As specified in the land concessions, the Company is required to pay premiums for each parcel, as well as make annual rent payments in the amounts and at the times specified in the land concessions. The rent amounts may be revised every five years by the Macao government. As of
December 31, 2017
, the Company was obligated under its land concessions to make future rental payments of
$5 million
for each of the five years in the period ending December 31, 2022, and
$55 million
thereafter for a total of
$80 million
.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 6 — Intangible Assets, Net
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Sands Bethlehem gaming license and certificate
|
$
|
67
|
|
|
$
|
67
|
|
|
|
|
|
Marina Bay Sands gaming license
|
49
|
|
|
46
|
|
Trademarks and other
|
1
|
|
|
1
|
|
|
50
|
|
|
47
|
|
Less — accumulated amortization
|
(28
|
)
|
|
(11
|
)
|
|
22
|
|
|
36
|
|
Total intangible assets, net
|
$
|
89
|
|
|
$
|
103
|
|
In August 2007 and July 2010, the Company was issued a gaming license and certificate from the Pennsylvania Gaming Control Board for its slots and table games operations at Sands Bethlehem, respectively, which were acquired for
$50 million
and
$17 million
, respectively. The license and certificate were determined to have indefinite lives and therefore, are not subject to amortization. In April 2016, the Company paid
66 million
Singapore dollars ("SGD," approximately
$47 million
at exchange rates in effect at the time of the transaction) to the Singapore Casino Regulatory Authority (the "CRA") as part of the process to renew its gaming license at Marina Bay Sands. This license is being amortized over its
three
-year term, which expires in
April 2019
, and is renewable upon submitting an application, paying the applicable license fee and meeting the requirements as determined by the CRA.
Amortization expense was
$16 million
,
$15 million
and
$14 million
for the years ended
December 31, 2017
,
2016
and
2015
, respectively. The estimated future amortization expense is approximately
$16 million
for the year ending December 31, 2018, and
$5 million
thereafter.
Note 7 — Other Accrued Liabilities
Other accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Customer deposits
|
$
|
572
|
|
|
$
|
508
|
|
Outstanding gaming chips and tokens
|
478
|
|
|
525
|
|
Taxes and licenses
|
367
|
|
|
312
|
|
Payroll and related
|
342
|
|
|
299
|
|
Other accruals
|
309
|
|
|
291
|
|
|
$
|
2,068
|
|
|
$
|
1,935
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 8 — Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Corporate and U.S. Related
(1)
:
|
|
|
|
2013 U.S. Credit Facility — Extended Term B (net of unamortized original issue discount and deferred financing costs of $11)
|
$
|
2,150
|
|
|
$
|
—
|
|
2013 U.S. Credit Facility — Term B (net of unamortized original issue discount and deferred financing costs of $13)
|
—
|
|
|
2,170
|
|
2013 U.S. Credit Facility — Extended Revolving
|
—
|
|
|
36
|
|
Airplane Financings
|
—
|
|
|
56
|
|
HVAC Equipment Lease
|
12
|
|
|
14
|
|
Macao Related
(1)
:
|
|
|
|
2016 VML Credit Facility — Term (net of unamortized deferred financing costs of $56 and $69, respectively)
|
4,043
|
|
|
4,049
|
|
2016 VML Credit Facility — Non-Extended Term (net of unamortized deferred financing costs of $2 and $4, respectively)
|
247
|
|
|
266
|
|
Other
|
5
|
|
|
8
|
|
Singapore Related
(1)
:
|
|
|
|
2012 Singapore Credit Facility — Term (net of unamortized deferred financing costs of $32 and $44, respectively)
|
3,183
|
|
|
2,996
|
|
|
9,640
|
|
|
9,595
|
|
Less — current maturities
|
(296
|
)
|
|
(167
|
)
|
Total long-term debt
|
$
|
9,344
|
|
|
$
|
9,428
|
|
____________________
|
|
(1)
|
Unamortized deferred financing costs of
$24 million
and
$35 million
as of
December 31, 2017
and
2016
, respectively, related to the U.S., Macao and Singapore revolving credit facilities are included in other assets, net in the accompanying consolidated balance sheets.
|
Corporate and U.S. Related Debt
2013 U.S. Credit Facility
In December 2013, the Company entered into a
$3.5 billion
senior secured credit facility (the "2013 U.S. Credit Facility"), which consists of a
$2.25 billion
funded term B loan (the "2013 U.S. Term B Facility") with an original issue discount of
$11 million
and a
$1.25 billion
revolving credit facility (the "2013 U.S. Revolving Facility"). The borrowings under the 2013 U.S. Credit Facility were used to repay the outstanding balance on the Company's prior senior secured credit facility.
During August 2016, the Company amended the 2013 U.S. Credit Facility to, among other things, obtain revolving credit commitments in the aggregate amount of
$1.15 billion
(the "2013 Extended U.S. Revolving Facility"), which mature on
September 19, 2020
, and were used to replace the commitments under, and refinance all amounts outstanding under, the existing 2013 U.S. Revolving Facility and to pay fees and expenses incurred in connection with the amendment. Borrowings under the 2013 Extended U.S. Revolving Facility will be used for general corporate purposes and working capital needs. The Company recorded a
$2 million
loss on early retirement of debt during the quarter ended September 30,
2016
, in connection with this amendment.
During December 2016, the Company amended the 2013 U.S. Credit Facility to lower the applicable margin credit spread for adjusted Eurodollar rate term loans from
2.50%
to
2.25%
per annum and for alternative base rate term loans from
1.50%
to
1.25%
per annum. Additionally, the amendment lowers the adjusted Eurodollar rate floor from
0.75%
per annum to
0.0%
per annum (and thereby effectively lowers the alternative base rate floor from
1.75%
per annum to
1.0%
per annum). Other than the items noted above, the terms and conditions of the existing 2013 U.S. Credit
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Facility remained unchanged. The Company recorded a
$2 million
loss on early retirement of debt during the quarter ended December 31,
2016
, in connection with this amendment.
During March 2017, the Company entered into an agreement (the "Amendment Agreement") to amend the existing 2013 U.S. Credit Facility to, among other things, refinance the term loans (by way of continuing or replacing existing term loans) in an aggregate amount of
$2.18 billion
(the "2013 Extended U.S. Term B Facility") and to lower the applicable margin credit spread for adjusted Eurodollar rate term loans from
2.25%
to
2.0%
per annum and for alternative base rate term loans from
1.25%
to
1.0%
per annum. Additionally, the Amendment Agreement removed the requirement to prepay outstanding revolving loans and/or permanently reduce revolving commitments in certain circumstances and extended the maturity date of the term loans from
December 19, 2020
to
March 29, 2024
. The 2013 Extended U.S. Term B Facility is subject to
quarterly
amortization payments of
$5 million
, which began on
March 31, 2017
, followed by a balloon payment of
$2.03 billion
due on
March 29, 2024
. The Company recorded a
$5 million
loss on modification of debt during the year ended
December 31, 2017
, in connection with the Amendment Agreement. As of
December 31, 2017
, the Company had
$1.15 billion
of available borrowing capacity under the 2013 Extended U.S. Revolving Facility, net of outstanding letters of credit.
The 2013 U.S. Credit Facility is guaranteed by certain of the Company's domestic subsidiaries (the "Guarantors"). The obligations under the 2013 U.S. Credit Facility and the guarantees of the Guarantors are collateralized by a first-priority security interest in substantially all of Las Vegas Sands, LLC ("LVSLLC") and the Guarantors' assets, other than capital stock and similar ownership interests, certain furniture, fixtures and equipment, and certain other excluded assets.
Borrowings under the 2013 Extended U.S. Term B Facility bear interest, at the Company's option, at either an adjusted Eurodollar rate, plus a credit spread of
2.0%
per annum, or at an alternative base rate, plus a credit spread of
1.0%
per annum (the interest rate was set at
3.6%
as of
December 31, 2017
). Borrowings under the 2013 U.S. Extended Revolving Facility bear interest, at the Company's option, at either an adjusted Eurodollar rate, plus a credit spread, or an alternative base rate, plus a credit spread, which credit spread in each case is determined based on the Company's corporate family rating as set forth in the pricing grid per the 2013 U.S Credit Facility, as amended (the "Corporate Rating"). The credit spread ranges from
0.125%
to
0.625%
per annum for loans accruing interest at the base rate and from
1.125%
to
1.625%
per annum for loans accruing interest at an adjusted Eurodollar rate. The 2013 Extended U.S. Revolving Facility has
no
interim amortization payments and matures on
September 19, 2020
. The Company pays a commitment fee on the undrawn amounts under the 2013 Extended U.S. Revolving Facility, which is determined based on the Corporate Rating and ranges from
0.125%
to
0.25%
per annum. The weighted average interest rate for the 2013 U.S Credit Facility was
3.2%
during the years ended December 31, 2017 and 2016, and
3.0%
during the year ended
December 31, 2015
.
The 2013 U.S. Credit Facility contains affirmative and negative covenants customary for such financings, including, but not limited to, limitations on incurring additional liens, incurring additional indebtedness, making certain investments and acquiring and selling assets. The 2013 U.S. Credit Facility also requires the Guarantors to comply with a maximum ratio of net debt outstanding to adjusted earnings before interest, income taxes, depreciation and amortization, as defined ("Adjusted EBITDA") to the extent there is an outstanding balance on the 2013 Extended U.S. Revolving Facility or certain letters of credit are outstanding. The maximum leverage ratio is
5.5
x for all applicable quarterly periods through maturity. Based on the actual leverage ratio as of
December 31, 2017
, there were no material net assets of LVSLLC restricted from being distributed under the terms of the 2013 U.S. Credit Facility.
In addition to the covenants noted above, the 2013 U.S. Credit Facility contains conditions and additional events of default customary for such financings.
Airplane Financings
In February 2007, the Company entered into promissory notes totaling
$72 million
to finance the purchase of one airplane and to finance two others that the Company already owned. The notes consisted of balloon payment promissory notes and amortizing promissory notes, all of which had ten-year maturities and were collateralized by the related aircraft. The notes bore interest at three-month London Inter-Bank Offered Rate ("LIBOR") plus
1.5%
per
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
annum. The amortizing notes, totaling
$29 million
, were subject to
quarterly
amortization payments of
$1 million
, which began
June 1, 2007
. The balloon notes, totaling
$44 million
, matured on
March 1, 2017
, and had
no
interim amortization payments. The weighted average interest rate on the notes was
2.4%
,
2.2%
and
1.8%
during the years ended
December 31, 2017
,
2016
and
2015
, respectively.
In April 2007, the Company entered into promissory notes totaling
$20 million
to finance the purchase of an additional airplane. The notes had ten-year maturities and consisted of a balloon payment promissory note and an amortizing promissory note. The notes bore interest at three-month LIBOR plus
1.25%
per annum. The
$8 million
amortizing note was subject to nominal
quarterly
amortization payments, which began
June 30, 2007
. The
$12 million
balloon note matured on
March 31, 2017
, and had
no
interim amortization payments. The weighted average interest rate on the notes was
2.3%
,
2.0%
and
1.6%
during the years ended
December 31, 2017
,
2016
and
2015
, respectively.
In March 2017, the Company repaid the outstanding
$56 million
balance under the Airplane Financings.
HVAC Equipment Lease
In July 2009, the Company entered into a capital lease agreement with its current heating, ventilation and air conditioning ("HVAC") provider (the "HVAC Equipment Lease") to provide the operation and maintenance services for the HVAC equipment in Las Vegas. The lease has a
10
-year term with a purchase option at the third, fifth, seventh and tenth anniversary dates. The Company is obligated under the agreement to make monthly payments of approximately
$300,000
for the first year with automatic decreases of approximately
$14,000
per month on every anniversary date. The HVAC Equipment Lease was capitalized at the present value of the future minimum lease payments at lease inception.
Macao Related Debt
2016 VML Credit Facility
On September 22, 2011, two subsidiaries of the Company, VML US Finance LLC, the Borrower, and Venetian Macau Limited ("VML"), as guarantor, entered into a credit agreement (the "2011 VML Credit Facility"), which provided for up to
$3.7 billion
(or equivalent in Hong Kong dollars or Macao patacas) and consisted of a
$3.2 billion
term loan (the "2011 VML Term Facility") that was fully drawn on November 15, 2011, and a
$500 million
revolving facility (the "2011 VML Revolving Facility"), that was available until
October 15, 2016
. Borrowings under the facility were used to repay outstanding indebtedness under previous credit facilities and would be used for working capital requirements and general corporate purposes, including for the development, construction and completion of certain components of Sands Cotai Central.
During March 2014, the Company amended its 2011 VML Credit Facility to, among other things, modify certain financial covenants, as discussed further below. In addition to the amendment, certain lenders extended the maturity of
$2.39 billion
in aggregate principal amount of the 2011 VML Term Facility to
March 31, 2020
(the "Extended 2011 VML Term Facility"), and, together with new lenders, provided
$2.0 billion
in aggregate principal amount of revolving loan commitments (the "Extended 2011 VML Revolving Facility"). A portion of the revolving proceeds were used to pay down the
$820 million
in aggregate principal balance of the 2011 VML Term Facility loans that were not extended. Borrowings under the Extended 2011 VML Revolving Facility were used to fund the development, construction and completion of Sands Cotai Central and The Parisian Macao, and for working capital requirements and general corporate purposes.
In April 2015, the Company entered into a joinder agreement (the "Joinder Agreement") to the 2011 VML Credit Facility. Under the Joinder Agreement, certain lenders agreed to provide term loan commitments of
$1.0 billion
(the "2011 VML Accordion Term"), which was funded on April 30, 2015 (the "Joinder Funding Date").
During June 2016, the Company entered into an agreement (the "VML Amendment Agreement") to amend its 2011 VML Credit Facility to, among other things, extend the maturity of a portion of the then existing term loans, modify the scheduled amortization payment dates of such term loans and obtain new term loan commitments (as so amended and restated, the "Restated VML Credit Agreement"). The Restated VML Credit Agreement became effective on August 31, 2016, upon satisfaction of all closing conditions (the "Restatement Date"). Pursuant to the Restated VML
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Credit Agreement and as of the Restatement Date, certain lenders extended the maturity of existing term loans (the "Extended Initial VML Term Loans") to
May 31, 2022
, the balance of which is
$3.12 billion
in aggregate principal amount consisting of
$2.12 billion
related to the Extended 2011 VML Term Facility and
$1.0 billion
related to the 2011 VML Accordion Term. In addition, certain lenders provided
$1.0 billion
in aggregate principal amount of new term loan commitments with a maturity date of
May 31, 2022
(the "New VML Term Loans," and together with the Extended Initial VML Term Loans, the "2016 VML Term Loans," an aggregate principal amount of
$4.12 billion
). The terms and the maturity dates of the balance of the term loans under the 2011 VML Credit Facility that are not 2016 VML Term Loans (the "2016 Non-Extended VML Term Loans") in the amount of
$269 million
and the
$2.0 billion
Extended 2011 VML Revolving Facility remain unchanged (the "2016 VML Revolving Facility," and together with the 2016 VML Term Loans and the 2016 Non-Extended VML Term Loans, the "2016 VML Credit Facility"). Borrowings under the 2016 VML Term Loans will be used for working capital requirements and general corporate purposes, including to make any investment or payment not specifically prohibited by the terms of the loan documents. The Company recorded a
$1 million
loss on modification of debt during the year ended December 31, 2016, in connection with the VML Amendment Agreement. As of
December 31, 2017
, the Company had
$2.0 billion
of available borrowing capacity under the 2016 VML Revolving Facility. Subsequent to year-end, the Company borrowed
$249 million
under the 2016 VML Revolving Facility.
The indebtedness under the 2016 VML Credit Facility is guaranteed by VML, Venetian Cotai Limited, Venetian Orient Limited and certain of the Company's other foreign subsidiaries (collectively, the "2016 VML Guarantors"). The obligations under the 2016 VML Credit Facility are collateralized by a first-priority security interest in substantially all of the Borrower's and the 2016 VML Guarantors' assets, other than (1) capital stock and similar ownership interests, (2) certain furniture, fixtures, fittings and equipment and (3) certain other excluded assets.
Commencing with the
quarterly
period ending
March 31, 2020
, and at the end of each subsequent quarter through December 31, 2020, the Restated VML Credit Agreement requires the borrower to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to
2.5%
of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on March 31 through June 30, 2021, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to
5.0%
of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on September 30 through December 31, 2021, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to
12.5%
of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly period ending on March 31, 2022, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to
20.0%
of the aggregate principal amount outstanding as of the Restatement Date. The remaining balance on the 2016 VML Term Loans is due on the maturity date.
Commencing with the
quarterly
period ended
June 30, 2017
, and at the end of each subsequent quarter through March 31, 2018, the Restated VML Credit Agreement requires the borrower to repay the outstanding 2016 Non-Extended VML Term Loans on a pro rata basis in an amount equal to
2.5%
of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on June 30, 2018, through March 31, 2019, the borrower is required to repay the outstanding 2016 Non-Extended VML Term Loans on a pro rata basis in an amount equal to
5.0%
of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on June 30 through December 31, 2019, the borrower is required to repay the outstanding 2016 Non-Extended VML Term Loans on a pro rata basis in an amount equal to
12.0%
of the aggregate principal amount outstanding as of the Restatement Date. The remaining balance on the 2016 Non-Extended VML Term Loans is due on the maturity date,
March 31, 2020
. The 2016 VML Revolving Facility has
no
interim amortization payments and matures on
March 31, 2020
.
The 2016 VML Term Loans and the 2016 Non-Extended VML Term Loans both bear interest, at the Company's option, at either the adjusted Eurodollar rate or Hong Kong Inter-bank Offered Rate ("HIBOR"), plus a credit spread, or an alternative base rate, plus a credit spread, which credit spread in each case is determined based on the consolidated total leverage ratio as set forth in the Restated VML Credit Agreement. The credit spread ranges from
0.25%
to
1.125%
per annum for loans accruing interest at the base rate and from
1.25%
to
2.125%
per annum for loans accruing interest at an adjusted Eurodollar or HIBOR rate (set at
3.3%
and
2.9%
for loans accruing interest at an adjusted Eurodollar
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and HIBOR rate, respectively, as of
December 31, 2017
). The Borrower will also pay standby fees of
0.5%
per annum on the undrawn amounts under the 2016 VML Revolving Facility. The weighted average interest rate on the 2016 VML Credit Facility was
2.6%
,
2.1%
and
1.6%
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
The 2016 VML Credit Facility, as amended, contains affirmative and negative covenants customary for such financings, including, but not limited to, limitations on liens, loans and guarantees, investments, acquisitions and asset sales, restricted payments and other distributions, affiliate transactions, and use of proceeds from the facility. The 2016 VML Credit Facility also requires the Borrower and VML to comply with financial covenants, including maximum ratios of total indebtedness to Adjusted EBITDA and minimum ratios of Adjusted EBITDA to net interest expense. The maximum leverage ratio, as amended, is
3.5
x for all quarterly periods through maturity. Based on the actual leverage ratio as of
December 31, 2017
, there were no material net assets of the 2016 VML Guarantors restricted from being distributed under the terms of the 2016 VML Credit Facility. In addition to the covenants noted above, the 2016 VML Credit Facility contains conditions and additional events of default customary for such financings.
Singapore Related Debt
2012 Singapore Credit Facility
In June 2012, the Company's wholly owned subsidiary, Marina Bay Sands Pte. Ltd. ("MBS"), entered into a SGD
5.1 billion
(approximately
$3.81 billion
at exchange rates in effect on
December 31, 2017
) credit agreement (the "2012 Singapore Credit Facility"), providing for a fully funded SGD
4.6 billion
(approximately
$3.44 billion
at exchange rates in effect on
December 31, 2017
) term loan (the "2012 Singapore Term Facility") and a SGD
500 million
(approximately
$374 million
at exchange rates in effect on
December 31, 2017
) revolving facility (the "2012 Singapore Revolving Facility") that was available until
November 25, 2017
, which included a SGD
100 million
(approximately
$75 million
at exchange rates in effect on
December 31, 2017
) ancillary facility (the "2012 Singapore Ancillary Facility"). Borrowings under the 2012 Singapore Credit Facility were used to repay the outstanding balance under the previous Singapore credit facility.
In August 2014, the Company amended its 2012 Singapore Credit Facility, pursuant to which consenting lenders of borrowings under the 2012 Singapore Term Facility extended the maturity to
August 28, 2020
, and consenting lenders of borrowings under the 2012 Singapore Revolving Facility extended the maturity to
February 28, 2020
. As of
December 31, 2017
, the Company had SGD
495 million
(approximately
$370 million
at exchange rates in effect on
December 31, 2017
) of available borrowing capacity under the 2012 Singapore Revolving Facility, net of outstanding letters of credit.
The indebtedness under the 2012 Singapore Credit Facility is collateralized by a first-priority security interest in substantially all of MBS's assets, other than capital stock and similar ownership interests, certain furniture, fixtures and equipment and certain other excluded assets.
Commencing with the
quarterly
period ended
December 31, 2014
, and at the end of each subsequent quarter through September 30, 2018, the Company is required to repay the outstanding 2012 Singapore Term Facility in the amount of
0.5%
of the aggregate principal amount outstanding as of August 29, 2014 (the "Singapore Restatement Date"). Commencing with the quarterly period ending December 31, 2018, and at the end of each subsequent quarter through September 30, 2019, the Company is required to repay the outstanding 2012 Singapore Term Facility in the amount of
5.0%
of the aggregate principal amount outstanding as of the Singapore Restatement Date. Commencing with the quarterly period ending December 31, 2019, and at the end of each subsequent quarter through June 30, 2020, and on the maturity date, the Company is required to repay the outstanding 2012 Singapore Term Facility in the amount of
18.0%
of the aggregate principal amount outstanding as of the Singapore Restatement Date. The 2012 Singapore Revolving Facility has
no
interim amortization payments and matures on
February 28, 2020
.
Borrowings under the 2012 Singapore Credit Facility bear interest at the Singapore Swap Offered Rate ("SOR") plus a spread of
1.85%
per annum. Beginning December 23, 2012, the spread for all outstanding loans is subject to reduction based on a ratio of debt to Adjusted EBITDA (interest rate set at approximately
2.6%
as of
December 31, 2017
). MBS pays a standby commitment fee of
35%
to
40%
of the spread per annum on all undrawn amounts under
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
the 2012 Singapore Revolving Facility. The weighted average interest rate for the 2012 Singapore Credit Facility was
2.2%
for the years ended December 31, 2017 and 2016, and
2.5%
for the year ended December 31,
2015
.
As of
December 31, 2017
and
2016
, the Company had
no
interest rate cap agreements in place. As of December 31, 2015, the Company had
one
interest rate cap agreement in place with a notional amount of SGD
100 million
(approximately
$75 million
at exchange rates in effect on
December 31, 2017
), an expiration date of
May 2016
and a strike rate of
3.5%
. The provisions of the interest rate cap agreement entitled the Company to receive from the counterparties the amounts, if any, by which the selected market interest rate exceeds the strike rate as stated in such agreement. There was
no
net effect on interest expense as a result of these interest rate cap agreements for the years ended December 31,
2016
and
2015
.
The 2012 Singapore Credit Facility, as amended, contains affirmative and negative covenants customary for such financings, including, but not limited to, limitations on liens, indebtedness, loans and guarantees, investments, acquisitions and asset sales, restricted payments, affiliate transactions and use of proceeds from the facilities. The 2012 Singapore Credit Facility also requires MBS to comply with financial covenants, including maximum ratios of total indebtedness to Adjusted EBITDA, minimum ratios of Adjusted EBITDA to interest expense and a positive net worth requirement. The maximum leverage ratio, as amended, is
3.5
x for the quarterly periods ended December 31, 2017 through September 30, 2019, and then decreases to, and remains at,
3.0
x for all quarterly periods thereafter through maturity. Based on the actual leverage ratio as of
December 31, 2017
, there were no material net assets of MBS restricted from being distributed under the terms of the 2012 Singapore Credit Facility. In addition to the covenants noted above, the 2012 Singapore Credit Facility contains conditions and additional events of default customary for such financings.
Debt Covenant Compliance
As of
December 31, 2017
, management believes the Company was in compliance with all debt covenants.
Cash Flows from Financing Activities
Cash flows from financing activities related to long-term debt and capital lease obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Proceeds from 2016 VML Credit Facility
|
$
|
649
|
|
|
$
|
1,000
|
|
|
$
|
—
|
|
Proceeds from 2013 U.S. Credit Facility
|
5
|
|
|
296
|
|
|
1,090
|
|
Proceeds from 2011 VML Credit Facility
|
—
|
|
|
1,000
|
|
|
999
|
|
|
$
|
654
|
|
|
$
|
2,296
|
|
|
$
|
2,089
|
|
|
|
|
|
|
|
Repayments on 2011 VML Credit Facility
|
$
|
(668
|
)
|
|
$
|
(1,000
|
)
|
|
$
|
(820
|
)
|
Repayments on 2012 Singapore Credit Facility
|
(67
|
)
|
|
(66
|
)
|
|
(67
|
)
|
Repayments on 2013 U.S. Credit Facility
|
(63
|
)
|
|
(914
|
)
|
|
(1,503
|
)
|
Repayments on Airplane Financings
|
(56
|
)
|
|
(4
|
)
|
|
(4
|
)
|
Repayments on HVAC Equipment Lease and Other Long-Term Debt
|
(4
|
)
|
|
(3
|
)
|
|
(4
|
)
|
|
$
|
(858
|
)
|
|
$
|
(1,987
|
)
|
|
$
|
(2,398
|
)
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Scheduled Maturities of Capital Lease Obligations and Long-Term Debt
Maturities of capital lease obligations and long-term debt outstanding as of
December 31, 2017
, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Capital
Lease
Obligations
|
|
Long-term
Debt
|
|
(In millions)
|
2018
|
$
|
5
|
|
|
$
|
292
|
|
2019
|
12
|
|
|
1,267
|
|
2020
|
1
|
|
|
2,380
|
|
2021
|
1
|
|
|
1,457
|
|
2022
|
—
|
|
|
2,276
|
|
Thereafter
|
—
|
|
|
2,052
|
|
|
19
|
|
|
9,724
|
|
Less — amount representing interest
|
(2
|
)
|
|
—
|
|
Total
|
$
|
17
|
|
|
$
|
9,724
|
|
Fair Value of Long-Term Debt
The estimated fair value of the Company's long-term debt as of
December 31, 2017
and
2016
, was approximately
$9.61 billion
and
$9.58 billion
, respectively, compared to its carrying value of
$9.72 billion
and
$9.70 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 9 — Equity
Preferred Stock
The Company is authorized to issue up to
50,000,000
shares of preferred stock. The Company's Board of Directors is authorized, subject to limitations prescribed by Nevada law and the Company's articles of incorporation, to determine the terms and conditions of the preferred stock, including whether the shares of preferred stock will be issued in one or more series, the number of shares to be included in each series and the powers, designations, preferences and rights of the shares. The Company's Board of Directors also is authorized to designate any qualifications, limitations or restrictions on the shares without any further vote or action by the stockholders.
Common Stock
Dividends
On March 31, June 30, September 29 and December 29, 2017, the Company paid a dividend of
$0.73
per common share as part of a regular cash dividend program. During the year ended
December 31, 2017
, the Company recorded
$2.31 billion
as a distribution against retained earnings (of which
$1.26 billion
related to the Principal Stockholder and his family and the remaining
$1.05 billion
related to all other shareholders).
On March 31, June 30, September 30 and December 30, 2016, the Company paid a dividend of
$0.72
per common share as part of a regular cash dividend program. During the year ended
December 31, 2016
, the Company recorded
$2.29 billion
as a distribution against retained earnings (of which
$1.24 billion
related to the Principal Stockholder and his family and the remaining
$1.05 billion
related to all other shareholders).
On March 31, June 30, September 30 and December 31, 2015, the Company paid a dividend of
$0.65
per common share as part of a regular cash dividend program. During the year ended
December 31, 2015
, the Company recorded
$2.07 billion
as a distribution against retained earnings (of which
$1.12 billion
related to the Principal Stockholder and his family and the remaining
$949 million
related to all other shareholders).
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In January 2018, as part of a regular cash dividend program, the Company's Board of Directors declared a quarterly dividend of
$0.75
per common share (a total estimated to be approximately
$592 million
) to be paid on March 30, 2018, to shareholders of record on March 22, 2018.
Repurchase Program
In October 2014, the Company's Board of Directors authorized the repurchase of
$2.0 billion
of its outstanding common stock, which expired in
October 2016
. In November 2016, the Company's Board of Directors authorized the repurchase of
$1.56 billion
of its outstanding common stock, which expires in
November 2018
. Repurchases of the Company's common stock are made at the Company's discretion in accordance with applicable federal securities laws in the open market or otherwise. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company's financial position, earnings, legal requirements, other investment opportunities and market conditions. During the years ended
December 31, 2017
and
2015
, the Company repurchased
6,194,137
and
4,383,793
shares, respectively, of its common stock for
$375 million
and
$205 million
, respectively, (including commissions) under the Company's current and previous programs, respectively. During the year ended
December 31, 2016
,
no
shares were repurchased. All share repurchases of the Company's common stock have been recorded as treasury stock.
Rollforward of Shares of Common Stock
A summary of the outstanding shares of common stock is as follows:
|
|
|
|
Balance as of January 1, 2015
|
798,258,172
|
|
Exercise of stock options
|
688,743
|
|
Issuance of restricted stock
|
49,438
|
|
Vesting of restricted stock units
|
34,750
|
|
Forfeiture of unvested restricted stock
|
(2,000
|
)
|
Repurchase of common stock
|
(4,383,793
|
)
|
Balance as of December 31, 2015
|
794,645,310
|
|
Exercise of stock options
|
233,804
|
|
Issuance of restricted stock
|
61,546
|
|
Vesting of restricted stock units
|
28,750
|
|
Forfeiture of unvested restricted stock
|
(9,318
|
)
|
Balance as of December 31, 2016
|
794,960,092
|
|
Exercise of stock options
|
617,612
|
|
Issuance of restricted stock
|
37,270
|
|
Vesting of restricted stock units
|
64,150
|
|
Repurchase of common stock
|
(6,194,137
|
)
|
Balance as of December 31, 2017
|
789,484,987
|
|
Noncontrolling Interests
SCL
On
February 24
and
June 23, 2017
, SCL paid a dividend of
0.99
Hong Kong dollars ("HKD") and HKD
1.00
per share, respectively, to SCL shareholders (a total of
$2.07 billion
, of which the Company retained
$1.45 billion
during the year ended
December 31, 2017
).
On
February 26
and
June 24, 2016
, SCL paid a dividend of HKD
0.99
and HKD
1.00
per share, respectively, to SCL shareholders (a total of
$2.07 billion
, of which the Company retained
$1.45 billion
during the year ended
December 31, 2016
).
On
February 27
and
July 15, 2015
, SCL paid a dividend of HKD
0.99
and HKD
1.00
per share, respectively, to SCL shareholders (a total of
$2.07 billion
, of which the Company retained
$1.45 billion
during the year ended
December 31, 2015
).
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In January 2018, the Board of Directors of SCL declared a dividend of HKD
0.99
per share (a total of
$1.02 billion
, of which the Company retained approximately
$717 million
) to SCL shareholders of record on
February 5, 2018
, which was paid on
February 23, 2018
.
Other
During the years ended
December 31, 2017
,
2016
and
2015
, the Company distributed
$13 million
,
$15 million
and
$14 million
, respectively, to certain of its noncontrolling interests.
Note 10 — Income Taxes
Consolidated income before taxes and noncontrolling interests for domestic and foreign operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Foreign
|
$
|
2,804
|
|
|
$
|
2,220
|
|
|
$
|
2,547
|
|
Domestic
|
248
|
|
|
35
|
|
|
75
|
|
Total income before income taxes
|
$
|
3,052
|
|
|
$
|
2,255
|
|
|
$
|
2,622
|
|
The components of the income tax (benefit) expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Foreign:
|
|
|
|
|
|
Current
|
$
|
258
|
|
|
$
|
206
|
|
|
$
|
213
|
|
Deferred
|
12
|
|
|
29
|
|
|
3
|
|
Federal:
|
|
|
|
|
|
Current
|
30
|
|
|
9
|
|
|
4
|
|
Deferred
|
(509
|
)
|
|
(5
|
)
|
|
16
|
|
Total income tax (benefit) expense
|
$
|
(209
|
)
|
|
$
|
239
|
|
|
$
|
236
|
|
The reconciliation of the statutory federal income tax rate and the Company's effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
Statutory federal income tax rate
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) in tax rate resulting from:
|
|
|
|
|
|
U.S. foreign tax credits
|
(105.9
|
)%
|
|
(119.3
|
)%
|
|
(100.7
|
)%
|
Repatriation of foreign earnings
|
72.1
|
%
|
|
79.8
|
%
|
|
68.0
|
%
|
Foreign and U.S. tax rate differential
|
(18.8
|
)%
|
|
(20.4
|
)%
|
|
(20.0
|
)%
|
Change in valuation allowance
|
18.3
|
%
|
|
43.2
|
%
|
|
34.5
|
%
|
Tax exempt income of foreign subsidiary (Macao)
|
(7.9
|
)%
|
|
(8.7
|
)%
|
|
(7.8
|
)%
|
Other, net
|
0.4
|
%
|
|
1.0
|
%
|
|
—
|
%
|
Effective tax rate
|
(6.8
|
)%
|
|
10.6
|
%
|
|
9.0
|
%
|
The Company's foreign and U.S. tax rate differential reflects the fact that income earned in Singapore and Macao is taxed at local rates, which are lower than U.S. tax rates. 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 2018
. In December 2017, the Company requested an additional income tax exemption for either an additional
5
-year period or through
June 26, 2022
, the date the Company's subconcession agreement expires. Had the Company not received the income tax exemption in Macao, consolidated net income attributable to Las Vegas Sands Corp. would have been reduced by
$158 million
,
$127 million
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and
$132 million
, and diluted earnings per share would have been reduced by
$0.20
,
$0.16
and
$0.17
per share for the years ended
December 31, 2017
,
2016
and
2015
, respectively. In May 2014, the Company entered into an agreement with the Macao government, effective through the
end of 2018
that provides for an annual payment of
42 million
patacas (approximately
$5 million
at exchange rates in effect on
December 31, 2017
) that is a substitution for a
12%
tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. VML intends to request an additional agreement with the Macao government to correspond to the income tax exemption for gaming operations; however, there is no certainty that the agreement will be granted, which could have a significant impact on the Company's tax obligation in Macao and a material adverse effect on the Company's financial condition or cash flows. In September 2013, the Company and the Internal Revenue Service ("IRS") entered into a Pre-Filing Agreement providing that the Macao special gaming tax (
35%
of gross gaming revenue) qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. foreign tax credit.
U.S. tax reform made significant changes to U.S. income tax laws including lowering the U.S. corporate tax rate to
21%
effective beginning in 2018 and transitioning from a worldwide tax system to a territorial tax system resulting in dividends from the Company's foreign subsidiaries not being subject to U.S. income tax and creating a one-time tax on previously unremitted earnings of foreign subsidiaries. As a result, the Company recorded a tax benefit of
$526 million
relating to the reduction of the valuation allowance on certain deferred tax assets that were previously determined not likely to be utilized and also the revaluation of its U.S. deferred tax liabilities at the reduced corporate income tax rate of
21%
. The Company recorded the impact of enactment of U.S. tax reform subject to SAB 118, which provides for a twelve month measurement period to complete the accounting required under ASC 740. While the Company believes these provisional amounts represent a reasonable estimate of the ultimate enactment-related impact that U.S. tax reform will have on the Company's consolidated financial statements, it is possible that the Company may materially adjust these amounts for related administrative guidance, notices, implementing regulations, potential legislative amendments and interpretations as the new tax law evolves. These adjustments could have an impact on the Company's tax assets and liabilities, effective tax rate and earnings per share.
The primary tax affected components of the Company's net deferred tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
(In millions)
|
Deferred tax assets:
|
|
|
|
U.S. foreign tax credit carryforwards
|
$
|
4,937
|
|
|
$
|
3,953
|
|
Net operating loss carryforwards
|
262
|
|
|
248
|
|
Allowance for doubtful accounts
|
21
|
|
|
31
|
|
Deferred gain on the sale of The Grand Canal Shoppes and The Shoppes at The Palazzo
|
16
|
|
|
28
|
|
Accrued expenses
|
16
|
|
|
26
|
|
Stock-based compensation
|
14
|
|
|
32
|
|
Pre-opening expenses
|
14
|
|
|
27
|
|
State deferred items
|
8
|
|
|
10
|
|
Other
|
—
|
|
|
3
|
|
|
5,288
|
|
|
4,358
|
|
Less — valuation allowances
|
(4,690
|
)
|
|
(4,197
|
)
|
Total deferred tax assets
|
598
|
|
|
161
|
|
Deferred tax liabilities:
|
|
|
|
Property and equipment
|
(246
|
)
|
|
(273
|
)
|
Prepaid expenses
|
(5
|
)
|
|
(5
|
)
|
Other
|
(60
|
)
|
|
(83
|
)
|
Total deferred tax liabilities
|
(311
|
)
|
|
(361
|
)
|
Deferred tax assets (liabilities), net
|
$
|
287
|
|
|
$
|
(200
|
)
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In March 2016, the FASB issued an accounting standard update to simplify several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, classification in the statement of cash flows and electing an accounting policy to either estimate the number of forfeitures or account for forfeitures when they occur. The Company adopted this guidance effective January 1, 2017, and as a result, excess tax benefits or deficiencies related to the exercise or vesting of share-based awards are now reflected in the accompanying condensed consolidated statements of operations as a component of income tax expense, whereas previously they were recognized in stockholders' equity when realized. As a result of the prior guidance that required that deferred tax assets are not recognized for net operating loss carryforwards or credit carryforwards resulting from windfall tax benefits, the Company had windfall tax benefits of
$379 million
as of December 31, 2016, that were not reflected in deferred tax assets. With the adoption of the new accounting standard, the Company recorded these deferred tax assets, but established a full valuation allowance against those deferred tax assets based on the determination that it was "more-likely-than-not" that those deferred tax assets would not be realized. The accompanying consolidated statements of cash flows present excess tax benefits as an operating activity on a retrospective basis. The reclassification of the prior period had an immaterial impact on the Company's cash flows from operating and financing activities. The Company has elected to account for forfeitures as they occur rather than account for forfeitures based upon an estimated rate. This change in accounting policy was adopted on a modified retrospective basis and resulted in a
$(2) million
cumulative effect adjustment to retained earnings.
U.S. tax reform required the Company to compute a one-time mandatory tax on the previously unremitted earnings of its foreign subsidiaries during the year ended December 31, 2017. This one-time deemed repatriation of these earnings did not result in a cash tax liability for the Company as the incremental U.S. taxable income was fully offset by the utilization of the U.S. foreign tax credits generated as a result of the deemed repatriation. In addition, the deemed repatriation generated excess U.S. foreign tax credits that will be available to be carried forward to tax years beyond 2017. The Company's U.S. foreign tax credit carryforwards were
$5.0 billion
and
$4.14 billion
as of
December 31, 2017
and
2016
, respectively, which will begin to expire in
2021
. The Company's state net operating loss carryforwards were
$237 million
and
$249 million
as of
December 31, 2017
and
2016
, respectively, which will begin to expire in
2024
. There was a valuation allowance of
$4.43 billion
and
$3.96 billion
as of
December 31, 2017
and
2016
, respectively, provided on certain net U.S. deferred tax assets, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition. Net operating loss carryforwards for the Company's foreign subsidiaries were
$2.14 billion
and
$2.01 billion
as of
December 31, 2017
and
2016
, respectively, which begin to expire in
2018
. There are valuation allowances of
$261 million
and
$234 million
as of
December 31, 2017
and
2016
, respectively, provided on the net deferred tax assets of certain foreign jurisdictions, as the Company believes these assets do not meet the "more-likely-than-not" criteria for recognition.
Undistributed earnings of subsidiaries are accounted for as a temporary difference, except that deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries that are deemed to be indefinitely reinvested in foreign jurisdictions. U.S. tax reform required the Company to compute a tax on previously unremitted earnings of its foreign subsidiaries upon transition from a worldwide tax system to a territorial tax system during the year ended December 31, 2017. The Company expects these earnings to be exempt from U.S. income tax if distributed as these earnings were taxed during the year ended December 31, 2017, under U.S. tax reform. The Company does not consider current year's tax earnings and profits of its foreign subsidiaries to be indefinitely reinvested. Beginning with the year ended December 31, 2015, the Company's major foreign subsidiaries distributed, and may continue to distribute, earnings in excess of their current year's tax earnings and profits in order to meet the Company's liquidity needs. As of December 31, 2017, the amount of earnings and profits of foreign subsidiaries that the Company does not intend to repatriate was
$3.30 billion
. The Company does not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise. If the Company's current agreement with the Macao government that provides for a fixed annual payment that is a substitution for a
12%
tax otherwise due on dividend distributions from the Company's Macao gaming operations is not extended beyond December 31, 2018, a
12%
tax would be due on distributions from earnings generated after 2018.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Balance at the beginning of the year
|
$
|
74
|
|
|
$
|
65
|
|
|
$
|
63
|
|
Additions to tax positions related to prior years
|
1
|
|
|
14
|
|
|
2
|
|
Additions to tax positions related to current year
|
18
|
|
|
7
|
|
|
4
|
|
Settlements
|
—
|
|
|
(10
|
)
|
|
(1
|
)
|
Lapse in statutes of limitations
|
(1
|
)
|
|
(2
|
)
|
|
(2
|
)
|
Exchange rate fluctuations
|
—
|
|
|
—
|
|
|
(1
|
)
|
Balance at the end of the year
|
$
|
92
|
|
|
$
|
74
|
|
|
$
|
65
|
|
As of
December 31, 2017
,
2016
and
2015
, unrecognized tax benefits of
$62 million
,
$58 million
and
$57 million
, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of
December 31, 2017
,
2016
and
2015
, unrecognized tax benefits of
$30 million
,
$16 million
and
$3 million
, respectively, were recorded in other long-term liabilities. As of December 31, 2015, unrecognized tax benefits of
$5 million
were recorded in income taxes payable.
Included in the unrecognized tax benefit balance as of
December 31, 2017
,
2016
and
2015
, are
$80 million
,
$65 million
and
$53 million
, respectively, of uncertain tax benefits that would affect the effective income tax rate if recognized.
The Company's major tax jurisdictions are the U.S., Macao, and Singapore. The Company is subject to examination for tax years beginning
2010
in the U.S. and tax years beginning in
2013
in Macao and Singapore. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company's expected outcome and it could impact the provision for income taxes.
The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statement of operations. Interest and penalties of
$1 million
were accrued as of
December 31, 2017
.
No
interest or penalties were accrued as of December 31,
2016
. The Company does not expect a significant increase or decrease in unrecognized tax benefits over the next twelve months.
Note 11 — 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. See "— Note 2 — Summary of Significant Accounting Policies" for additional disclosures regarding derivatives.
The Company used foreign currency forward contracts as effective economic hedges to manage a portion of its foreign currency exposure. Foreign currency forward contracts involve the purchase and sale of a designated currency at an agreed upon rate for settlement on a specified date. The aggregate notional value of these foreign currency contracts
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
was
$427 million
as of
December 31, 2016
. As these derivatives were not designated and/or did not qualify for hedge accounting, the changes in fair value were recognized as other income (expense) in the accompanying consolidated statements of operations. For the years ended
December 31, 2017
,
2016
, and
2015
, the Company recorded in other income (expense) a
$12 million
loss,
$10 million
gain and
$4 million
gain, respectively, related to the change in fair value of the forward contracts.
The following table provides the assets carried at fair value:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
(In millions)
|
As of December 31, 2017
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents
(1)
|
$
|
1,045
|
|
|
$
|
1,045
|
|
|
$
|
—
|
|
|
$
|
—
|
|
As of December 31, 2016
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
Cash equivalents
(1)
|
$
|
931
|
|
|
$
|
931
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Forward contracts
(2)
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
12
|
|
|
$
|
—
|
|
_________________________
|
|
(1)
|
The Company has short-term investments classified as cash equivalents as the original maturities are less than 90 days.
|
|
|
(2)
|
As of
December 31, 2017
, the Company had
no
foreign currency forward contracts. As of
December 31, 2016
, the Company had
18
foreign currency forward contracts with fair values based on recently reported market transactions of forward rates. Assets were included in prepaid expenses and other and liabilities were included in other accrued liabilities in the accompanying consolidated balance sheets.
|
Note 12 — Mall Activities
Operating Leases
The Company leases space at several of its Integrated Resorts to various third parties. These leases are non-cancelable operating leases with remaining lease periods that vary from
1 month
to
19 years
. The leases include minimum base rents with escalated contingent rent clauses. As of
December 31, 2017
, the future minimum rentals on these non-cancelable leases are as follows (in millions, at exchange rates in effect on
December 31, 2017
):
|
|
|
|
|
2018
|
$
|
476
|
|
2019
|
389
|
|
2020
|
275
|
|
2021
|
190
|
|
2022
|
138
|
|
Thereafter
|
113
|
|
Total minimum future rentals
|
$
|
1,581
|
|
The total minimum future rentals do not include the escalated contingent rent clauses. Contingent rentals amounted to
$48 million
,
$36 million
and
$57 million
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
The Grand Canal Shoppes at The Venetian Las Vegas
In April 2004, the Company entered into an agreement to sell the portion of the Grand Canal Shoppes located within The Venetian Las Vegas (formerly referred to as "The Grand Canal Shoppes') and lease certain restaurant and other retail space at the casino level of The Venetian Las Vegas (the "Master Lease") to GGP for approximately
$766 million
(the "Mall Sale"). The Mall Sale closed in May 2004, and the Company realized a gain of
$418 million
in
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
connection with the Mall Sale. Under the Master Lease agreement, The Venetian Las Vegas leased nineteen retail and restaurant spaces on its casino level to GGP for
89
years with annual rent of one dollar and GGP assumed the various leases. In accordance with related accounting standards, the Master Lease agreement does not qualify as a sale of the real property assets, which real property was not separately legally demised. Accordingly,
$109 million
of the transaction has been deferred as prepaid operating lease payments to The Venetian Las Vegas, which will amortize into income on a straight-line basis over the
89
-year lease term. During each of the years ended
December 31, 2017
,
2016
and
2015
,
$1 million
of this deferred item was amortized and included in convention, retail and other revenue. In addition, the Company agreed with GGP to: (i) continue to be obligated to fulfill certain lease termination and asset purchase agreements as further described in "— Note 13 — Commitments and Contingencies — Other Ventures and Commitments"; (ii) lease theater space located within The Grand Canal Shoppes from GGP for a period of
25
years with fixed minimum rent of
$3 million
per year with cost of living adjustments; (iii) operate the Gondola ride under an operating agreement for a period of
25
years for an annual fee of
$4 million
; and (iv) lease certain office space from GGP for a period of
10
years, subject to extension options for a period of up to
65
years, with annual rent of approximately
$1 million
. The lease payments under clauses (ii) through (iv) above are subject to automatic increases beginning on the sixth lease year. The net present value of the lease payments under clauses (ii) through (iv) on the closing date of the sale was
$77 million
. In accordance with related accounting standards, a portion of the transaction must be deferred in an amount equal to the present value of the minimum lease payments set forth in the lease back agreements. This deferred gain will be amortized to reduce lease expense on a straight-line basis over the lives of the leases. During each of the years ended
December 31, 2017
,
2016
and
2015
,
$3 million
of this deferred item was amortized as an offset to convention, retail and other expense. As of
December 31, 2017
, the Company was obligated under (ii), (iii) and (iv) above to make future payments in the amount of
$8 million
for each of the five years in the period ending December 31, 2022, and
$54 million
thereafter for a total of
$94 million
.
The Shoppes at The Palazzo
The Company contracted to sell a portion of the Grand Canal Shoppes (formerly referred to as The Shoppes at The Palazzo) to GGP and under the terms of the settlement with GGP on June 24, 2011, the Company retained
$295 million
of proceeds received and participates in certain potential future revenues earned by GGP. Pursuant to the Amended Agreement, the Company agreed with GGP to lease certain spaces located within The Shoppes at The Palazzo for a period of
10
years with total fixed minimum rents of
$1 million
per year, subject to extension options for a period of up to
10
years and automatic increases beginning on the second lease year. As of
December 31, 2017
, the Company was obligated to make future payments of approximately
$1 million
for the year ending December 31, 2018. In accordance with related accounting standards, the transaction has not been accounted for as a sale because the Company's participation in certain potential future revenues constitutes continuing involvement in The Shoppes at The Palazzo. Therefore,
$266 million
of the mall sale transaction has been recorded as deferred proceeds from the sale as of
December 31, 2017
, which accrues interest at an imputed interest rate offset by (i) imputed rental income and (ii) rent payments made to GGP related to those spaces leased back from GGP.
In the Amended Agreement, the Company agreed to lease certain restaurant and retail space on the casino level of The Palazzo to GGP pursuant to a master lease agreement ("The Palazzo Master Lease"). Under The Palazzo Master Lease, which was executed concurrently with, and as a part of, the closing on the sale of The Shoppes at The Palazzo to GGP on February 29, 2008, The Palazzo leased nine restaurant and retail spaces on its casino level to GGP for
89
years with annual rent of one dollar and GGP assumed the various tenant operating leases for those spaces. In accordance with related accounting standards, The Palazzo Master Lease does not qualify as a sale of the real property, which real property was not separately legally demised. Accordingly,
$23 million
of the mall sale transaction has been deferred as prepaid operating lease payments to The Palazzo, which is amortized into income on a straight-line basis over the
89
-year lease term.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 13 — 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 and has accrued a nominal amount for such costs as of
December 31, 2017
. 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 and cash flows.
Round Square Company Limited v. Las Vegas Sands Corp.
On October 15, 2004, Richard Suen and Round Square Company Limited ("Roundsquare") 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"), asserting a breach of an alleged agreement to pay a success fee of
$5 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
$44 million
. On June 30, 2008, a judgment was entered in this matter in the amount of
$59 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 for a new trial. In its decision reversing the monetary judgment against the Company, the Nevada Supreme Court also made several other rulings, 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. On February 27, 2012, the District Court 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 granted both requests. The retrial began on March 27 and on May 14, 2013, the jury returned a verdict in favor of Roundsquare in the amount of
$70 million
. On May 28, 2013, a judgment was entered in the matter in the amount of
$102 million
(including pre-judgment interest). On June 7, 2013, the Company filed a motion with the District Court 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 denied the Company's motion. On October 17, 2013, the District Court entered an order granting plaintiff's request for certain costs and fees associated with the litigation in the amount of approximately
$1 million
. On December 6, 2013, the Company filed a notice of appeal of the jury verdict with the Nevada Supreme Court. The Company filed its opening appellate brief with the Nevada Supreme Court on June 16, 2014. On August 19, 2014, the Nevada Supreme Court issued an order granting plaintiffs additional time until September 15, 2014, to file their answering brief. On September 15, 2014, Roundsquare filed a request to the Nevada Supreme Court to file a brief exceeding the maximum number of words, which was granted. On October 10, 2014, Roundsquare filed its answering brief. On January 12, 2015, the defendants filed their reply brief. On January 27, 2015, Roundsquare filed its reply brief. The Nevada Supreme Court set oral argument for December 17, 2015, before a panel of justices only to reset it for January 26, 2016, en banc. Oral arguments were presented to the Nevada Supreme Court as scheduled. On March 11, 2016, the Nevada Supreme Court issued an order affirming the judgment of liability, but reversing the damages award and remanding for a new trial on damages. On March 29, 2016, Roundsquare filed a petition for rehearing. The Nevada Supreme Court ordered an answer by the Company, which the Company filed on May 4, 2016. On May 12, 2016, Roundsquare filed a motion for leave to file a reply brief in support of its petition for rehearing, and on May 19, 2016, the Company filed an opposition to that motion. On June 24, 2016, the Nevada Supreme Court issued an order granting Roundsquare's petition for rehearing and submitting the appeal for decision on rehearing without further briefing or oral argument. On July 22, 2016, the Nevada Supreme Court once again ordered a new trial as to plaintiff Roundsquare on the issue of quantum merit damages. A pre-trial hearing was set in District Court for December 12, 2016. At the December 12, 2016 hearing, the District Court indicated that it would allow a scope of trial and additional discovery into areas the Company opposed as inconsistent with the Nevada Supreme Court's remand. The District Court issued a written order on the scope of retrial and discovery dated December 15, 2016. On January
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
5, 2017, the Company moved for a stay of proceedings in the District Court, pending the Nevada Supreme Court's resolution of the Company's petition for writ of mandamus or prohibition, which was filed on January 13, 2017. On February 13, 2017, the District Court denied the motion to stay proceedings and, on February 16, 2017, the Nevada Supreme Court denied the writ. The parties are presently engaged in discovery and the damages trial date, originally set for March 26, 2018, has been vacated and the Company is awaiting a new trial date. The Company has accrued a nominal amount for estimated costs related to this legal matter as of
December 31, 2017
. In the event that the Company's assumptions used to evaluate this matter change in future periods, it may be required to record an additional liability for an adverse outcome. The Company intends to defend this matter vigorously.
Frank J. Fosbre, Jr. v. Las Vegas Sands Corp., Sheldon G. Adelson and William P. Weidner
On May 24, 2010, Frank J. Fosbre, Jr. 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 August 1, 2007 through November 6, 2008. The complaint sought, among other relief, class certification, compensatory damages and attorneys' fees and costs. On July 21, 2010, Wendell and Shirley Combs filed a purported class action complaint in the U.S. District Court, against LVSC, Sheldon G. Adelson and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from June 13, 2007 through November 11, 2008. The complaint, which was substantially similar to the Fosbre complaint, discussed above, sought, among other relief, class certification, compensatory damages and attorneys' fees and costs. On August 31, 2010, the U.S. District Court entered an order consolidating the Fosbre and Combs cases, and appointed lead plaintiffs and lead counsel. As such, the Fosbre and Combs cases are reported as one consolidated matter. On November 1, 2010, a purported class action amended complaint was filed in the consolidated action against LVSC, Sheldon G. Adelson and William P. Weidner. The amended complaint alleges that LVSC, through the individual defendants, disseminated or approved materially false and misleading information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 2, 2007 through November 6, 2008. The amended complaint seeks, among other relief, class certification, compensatory damages and attorneys' fees and costs. On January 10, 2011, the defendants filed a motion to dismiss the amended complaint, which, on August 24, 2011, was granted in part, and denied in part, with the dismissal of certain allegations. On November 7, 2011, the defendants filed their answer to the allegations remaining in the amended complaint. On July 11, 2012, the U.S. District Court issued an order allowing defendants' Motion for Partial Reconsideration of the U.S. District Court's order dated August 24, 2011, striking additional portions of the plaintiffs' complaint and reducing the class period to a period of February 4 to November 6, 2008. On August 7, 2012, the plaintiffs 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 was 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. On November 7, 2013, the judge granted in part and denied in part defendants' motions to dismiss. On December 13, 2013, the defendants filed their answer to the Second Amended Complaint. Discovery in the matter resumed. On January 8, 2014, plaintiffs filed a motion to expand the certified class period, which was granted by the U.S. District Court on June 15, 2015. Fact discovery closed on July 31, 2015, and expert discovery closed on December 18, 2015. On January 22, 2016, defendants filed motions for summary judgment. Plaintiffs filed an opposition to the motions for summary judgment on March 11, 2016. Defendants filed their replies in support of summary judgment on April 8, 2016. Summary judgment in favor of the defendants was entered on January 4, 2017. The plaintiffs filed a notice of appeal on February 2, 2017, and their opening brief in support of their appeal on July 14, 2017. Defendants filed their answering briefs in opposition to the appeal on October 13, 2017. Plaintiffs filed their reply brief in support of their appeal on December 14, 2017. Oral argument on the appeal is scheduled for April 12, 2018. The Company intends to defend this matter vigorously.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Benyamin Kohanim v. Adelson, et al.
On March 9, 2011, Benyamin Kohanim filed a shareholder derivative action (the "Kohanim action") on behalf of the Company in the 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 alleges, among other things, breach of fiduciary duties in failing to properly implement, oversee and maintain internal controls to ensure compliance with the Foreign Corrupt Practices Act. 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 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 District 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 District Court denied the motion to dismiss in part, deferred the remainder of the motion to dismiss and stayed the proceedings until July 22, 2013. The District Court granted several successive stays since that time, but lifted the stay on April 25, 2017, following an in-chambers status check. On July 20, 2017, the District Court ordered counsel of record for all parties to appear for an August 10, 2017 status check. The District Court subsequently ordered the parties to submit supplemental briefing on the pending motion to dismiss and a hearing on that motion was held on November 9, 2017. After first entering an order dismissing the case without prejudice, the District Court on January 9, 2018, dismissed the case with prejudice at the plaintiffs’ request. Plaintiffs did not file an appeal and the matter is now closed.
Nasser Moradi, et al. v. Adelson, et al.
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 District 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
pending a further update of the Special Litigation Committee due on October 30, 2012. On October 30, 2012, the defendants filed the update asking the judge to determine whether to continue the stay until January 31, 2013, or to address motions to dismiss. On November 7, 2012, the U.S. District Court denied defendants request for an extension of the stay but asked the parties to brief the motion to dismiss. On November 21, 2012, defendants filed their motion to dismiss. On December 21, 2012, plaintiffs filed their opposition and on January 18, 2013, defendants filed their reply. On May 31, 2013, the case was reassigned to a new judge. On April 11, 2014, the judge denied the motion to dismiss without prejudice and ordered the case stayed pending the outcome of the District Court action in Kohanim described above. Pursuant to a series of court orders, the parties have filed a number of status reports during the pendency of the stay, including most recently on January 5, 2018. 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.
Asian American Entertainment Corporation, Limited v. Venetian Macau Limited, et al.
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 VCR (collectively, the "Defendants"). The claim is for
3.0 billion
patacas (approximately
$373 million
at exchange rates in effect on
December 31, 2017
) as compensation for damages resulting from the alleged breach of agreements entered into between AAEC and LVS (Nevada), LVSLLC and VCR (collectively, the "U.S. 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. On September 23, 2013, the U.S. Defendants filed a motion with the Macao Second Instance Court, seeking recognition and enforcement of the U.S. Court of Appeals ruling in the Prior Action, referred to below, given on April 10, 2009, which partially dismissed AAEC's claims against the U.S. Defendants.
On March 24, 2014, the Macao Judicial Court issued a Decision (Despacho Seneador) holding that AAEC's claim against VML is unfounded and that VML be removed as a party to the proceedings, and that the claim should proceed exclusively against the U.S. Defendants. On May 8, 2014, AAEC lodged an appeal against that decision. The Macao Judicial Court further held that the existence of the pending application for recognition and enforcement of the U.S. Court of Appeals ruling before the Macao Second Instance Court did not justify a stay of the proceedings against the U.S. Defendants at the present time, although in principle an application for a stay of the proceedings against the U.S. Defendants could be reviewed after the Macao Second Instance Court had issued its decision. On June 25, 2014, the Macao Second Instance Court delivered a decision, which gave formal recognition to and allowed enforcement in Macao of the judgment of the U.S. Court of Appeals, dismissing AAEC's claims against the U.S. Defendants.
AAEC appealed against the recognition decision to the Macao Court of Final Appeal, which, on May 6, 2015, dismissed the appeal and held the U.S. judgment to be final and have preclusive effect. The Macao Court of Final Appeal's decision became final on May 21, 2015. On June 5, 2015, the U.S. Defendants applied to the Macao Judicial Court to dismiss the claims against them as res judicata. AAEC filed its response to that application on June 30, 2015. The U.S. Defendants filed their reply on July 23, 2015. On September 14, 2015, the Macao Judicial Court admitted two further legal opinions from Portuguese and U.S. law experts. On March 16, 2016, the Macao Judicial Court dismissed the defense of res judicata. An appeal against that decision was lodged on April 7, 2016, together with a request that the appeal be heard immediately. By a decision dated April 13, 2016, the Macao Judicial Court accepted that the appeal be heard immediately. Legal arguments were submitted May 23, 2016. AAEC replied to the legal arguments on or about July 14, 2016, which was three days late, upon payment of a penalty. The U.S. Defendants submitted a response on September 20, 2016. On December 13, 2016, the Macao Judicial Court confirmed its earlier decision not to stay the proceedings pending appeal. As of the end of December 2016, all appeals (including VML's dismissal and the res judicata appeals) were being transferred to the Macao Second Instance Court. On May 11, 2017, the Macao Second Instance Court notified the parties of its decision of refusal to deal with the appeals at the present time. The Macao Second Instance Court ordered that the court file be transferred back to the Macao Judicial Court. Evidence gathering
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
by the Macao Judicial Court has commenced by letters rogatory. On June 30, 2017, the Macao Judicial Court sent letters rogatory to the Public Prosecutor's office, for onward transmission to relevant authorities in the U.S. and Hong Kong. On August 10, 2017, the Hong Kong Mutual Legal Assistance Unit, International Law Division, Hong Kong Department of Justice ("HKMLAU”) responded to the Public Prosecutor and requested additional information. On August 18, 2017, the Public Prosecutor forwarded the HKMLAU request to the Macao Judicial Court. On November 14, 2017, the Public Prosecutor replied to the HKMLAU. The HKMLAU sent a further communication to the Public Prosecutor on November 29, 2017, again requesting the Macao Judicial Court provide further information to enable processing of the Hong Kong letter rogatory. On January 6, 2018, the Macao Judicial Court notified the parties accordingly.
On March 25, 2015, application was made by the U.S. Defendants to the Macao Judicial Court to revoke the legal aid granted to AAEC, accompanied by a request for evidence taking from AAEC, relating to the fees and expenses that they incurred and paid in the U.S. subsequent action referred to below. The Macao Public Prosecutor has opposed the action on the ground of lack of evidence that AAEC's financial position has improved. No decision has been issued in respect to that application up to the present time. A complaint against AAEC's Macao lawyer arising from certain conduct in relation to recent U.S. proceedings was submitted to the Macao Lawyer's Association on October 19, 2015. A letter dated February 26, 2016, has been received from the Conselho Superior de Advocacia of the Macao Bar Association advising that disciplinary proceedings have commenced. A further letter dated April 5, 2016, was received from the Conselho Superior de Advocacia requesting confirmation that the signatories of the complaint were acting within their corporate authority. By a letter dated April 14, 2016, such confirmation has been provided. On September 28, 2016, the Conselho Superior de Advocacia invited comments on the defense, which had been lodged by AAEC's Macao lawyer.
On July 9, 2014, the plaintiff filed another action in the U.S. District Court against LVSC, LVSLLC, VCR (collectively, the "LVSC entities"), Sheldon G. Adelson, William P. Weidner, David Friedman and Does 1-50 for declaratory judgment, equitable accounting, misappropriation of trade secrets, breach of confidence and conversion based on a theory of copyright law. The claim is for
$5.0 billion
. On November 4, 2014, plaintiff finally effected notice on the LVSC entities, which was followed by a motion to dismiss by the LVSC entities on November 10, 2014. Plaintiff failed to timely respond and on December 2, 2014, the LVSC entities moved for immediate dismissal and sanctions against plaintiff and his counsel for bringing a frivolous lawsuit. On December 19, 2014, plaintiff filed an incomplete and untimely response, which was followed by plaintiff's December 27, 2014 notice of withdrawal of the lawsuit and the LVSC entities' December 29, 2014, reply in favor of sanctions and dismissal with prejudice. On August 31, 2015, the judge dismissed the U.S. action and the LVSC entities' sanctions motion. 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.
Macao Concession and Subconcession
On June 26, 2002, the Macao government granted a concession to operate casinos in Macao through June 26, 2022, subject to certain qualifications, to Galaxy Casino Company Limited ("Galaxy"), a consortium of Macao and Hong Kong-based investors. During December 2002, VML and Galaxy entered into a subconcession agreement that was recognized and approved by the Macao government and allows VML to develop and operate casino projects, including The Venetian Macao, Sands Cotai Central, The Parisian Macao, the Plaza Casino at the The Plaza Macao
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and Four Seasons Hotel Macao and Sands Macao separately from Galaxy. Beginning on December 26, 2017, the Macao government may redeem the subconcession agreement by providing the Company at least one-year prior notice.
Under the subconcession, the Company is obligated to pay to the Macao government an annual premium with a fixed portion and a variable portion based on the number and type of gaming tables it employs and gaming machines it operates. The fixed portion of the premium is equal to
30 million
patacas (approximately
$4 million
at exchange rates in effect on
December 31, 2017
). The variable portion is equal to
300,000
patacas per gaming table reserved exclusively for certain kinds of games or players,
150,000
patacas per gaming table not so reserved and
1,000
patacas per electrical or mechanical gaming machine, including slot machines (approximately
$37,266
,
$18,633
and
$124
, respectively, at exchange rates in effect on
December 31, 2017
), subject to a minimum of
45 million
patacas (approximately
$6 million
at exchange rates in effect on
December 31, 2017
). The Company is also obligated to pay a special gaming tax of
35%
of gross gaming revenues and applicable withholding taxes. The Company must also contribute
4%
of its gross gaming revenue to utilities designated by the Macao government, a portion of which must be used for promotion of tourism in Macao. Based on the number and types of gaming tables employed and gaming machines in operation as of
December 31, 2017
, the Company was obligated under its subconcession to make minimum future payments of approximately
$41 million
during each of the four years in the period ending
December 31,
2021
, and approximately
$21 million
during the year ending December 31, 2022.
Currently, the gaming tax in Macao is calculated as a percentage of gross gaming revenue; however, unlike Nevada, gross gaming revenue does not include deductions for credit losses. As a result, if the Company extends credit to its customers in Macao and is unable to collect on the related receivables, the Company must pay taxes on its winnings from these customers even though it was unable to collect on the related receivables. If the laws are not changed, the Company's business in Macao may not be able to realize the full benefits of extending credit to its customers.
Operating Leases
The Company leases real estate and various equipment under operating lease arrangements with terms in excess of
one year
. As of
December 31, 2017
, the Company was obligated under non-cancelable operating leases to make future minimum lease payments as follows (in millions):
|
|
|
|
|
2018
|
$
|
10
|
|
2019
|
7
|
|
2020
|
4
|
|
2021
|
3
|
|
2022
|
3
|
|
Thereafter
|
131
|
|
Total minimum payments
|
$
|
158
|
|
Expenses incurred under operating lease agreements, including those that are short-term and variable-rate in nature, totaled
$82 million
,
$71 million
and
$75 million
for the years ended
December 31, 2017
,
2016
and
2015
, respectively.
Note 14 — Stock-Based Employee Compensation
The Company has
two
equity award plans, the 2004 Plan and the SCL Equity Plan, which are described below. The plans provide for the granting of equity awards pursuant to the applicable provisions of the Internal Revenue Code and regulations.
Las Vegas Sands Corp. 2004 Equity Award Plan
The Company adopted the 2004 Plan for grants of options to purchase its common stock. The purpose of the 2004 Plan is to give the Company a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide the Company with a stock plan providing incentives directly related to increases in its stockholder value. Any of the Company's subsidiaries' or affiliates' employees, directors or officers and many of its
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
consultants are eligible for awards under the 2004 Plan. The 2004 Plan provides for an aggregate of
26,344,000
shares of the Company's common stock to be available for awards. The 2004 Plan originally had a term of
ten years
, but in June 2014, the Company's Board of Directors approved an amendment to the 2004 Plan, extending the term to
December 2019
. The compensation committee may grant awards of nonqualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of
December 31, 2017
, there were
3,601,138
shares available for grant under the 2004 Plan.
Stock option awards are granted with an exercise price equal to the fair market value (as defined in the 2004 Plan) of the Company's stock on the date of grant. The outstanding stock options generally vest over
three
to
four
years and have
ten
-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting, is recognized on a straight-line basis over the awards' respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on the Company's historical volatility for a period equal to the expected life of the stock options. The expected option life is based on the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate for periods equal to the expected term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.
Sands China Ltd. Equity Award Plan
The Company's subsidiary, SCL, adopted an equity award plan (the "SCL Equity Plan") in November 2009 for grants of options to purchase ordinary shares of SCL. The purpose of the SCL Equity Plan is to give SCL a competitive edge in attracting, retaining and motivating employees, directors and consultants and to provide SCL with a stock plan providing incentives directly related to increases in its stockholder value. Subject to certain criteria as defined in the SCL Equity Plan, SCL's subsidiaries' or affiliates' employees, directors or officers and many of its consultants are eligible for awards under the SCL Equity Plan. The SCL Equity Plan provides for an aggregate of
804,786,508
shares of SCL's common stock to be available for awards. The SCL Equity Plan has a term of
ten years
and no further awards may be granted after the expiration of the term. SCL's remuneration committee may grant awards of stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of
December 31, 2017
, there were
729,981,851
shares available for grant under the SCL Equity Plan.
Stock option awards are granted with an exercise price not less than (i) the closing price of SCL's stock on the date of grant or (ii) the average closing price of SCL's stock for the five business days immediately preceding the date of grant. The outstanding stock options generally vest over
four
years and have
ten
-year contractual terms. Compensation cost for all stock option grants, which all have graded vesting is recognized on a straight-line basis over the awards' respective requisite service periods. SCL estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on SCL's historical volatility for a period equal to the expected life of the stock options. The expected option life is based on the contractual term of the option as well as historical exercise and forfeiture behavior. The risk-free interest rate for periods equal to the expected term of the stock option is based on the Hong Kong Government Bond rate in effect at the time of the grant for stock options granted subsequent to March 31, 2015 and based on the Hong Kong Exchange Fund Note rate in effect at the time of the grant for stock options granted on or before March 31, 2015. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Stock-Based Employee Compensation Activity
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:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
LVSC 2004 Plan:
|
|
|
|
|
|
Weighted average volatility
|
26.7
|
%
|
|
33.5
|
%
|
|
37.3
|
%
|
Expected term (in years)
|
5.1
|
|
|
5.6
|
|
|
5.8
|
|
Risk-free rate
|
1.9
|
%
|
|
1.4
|
%
|
|
1.3
|
%
|
Expected dividend yield
|
4.7
|
%
|
|
5.7
|
%
|
|
4.7
|
%
|
SCL Equity Plan:
|
|
|
|
|
|
Weighted average volatility
|
36.9
|
%
|
|
40.8
|
%
|
|
40.4
|
%
|
Expected term (in years)
|
4.4
|
|
|
4.4
|
|
|
4.0
|
|
Risk-free rate
|
1.3
|
%
|
|
1.2
|
%
|
|
0.7
|
%
|
Expected dividend yield
|
6.6
|
%
|
|
5.5
|
%
|
|
5.6
|
%
|
A summary of the stock option activity for the Company's equity award plans for the year ended
December 31, 2017
, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Life (Years)
|
|
Aggregate
Intrinsic
Value
(in millions)
|
LVSC 2004 Plan:
|
|
|
|
|
|
|
|
Outstanding as of January 1, 2017
|
7,302,364
|
|
|
$
|
59.80
|
|
|
|
|
|
Granted
|
1,027,108
|
|
|
61.96
|
|
|
|
|
|
Exercised
|
(617,612
|
)
|
|
45.98
|
|
|
|
|
|
Forfeited or expired
|
(1,421,113
|
)
|
|
77.88
|
|
|
|
|
|
Outstanding as of December 31, 2017
|
6,290,747
|
|
|
$
|
57.43
|
|
|
6.46
|
|
$
|
81
|
|
Exercisable as of December 31, 2017
|
2,463,572
|
|
|
$
|
59.08
|
|
|
3.89
|
|
$
|
31
|
|
SCL Equity Plan:
|
|
|
|
|
|
|
|
Outstanding as of January 1, 2017
|
38,185,021
|
|
|
$
|
4.48
|
|
|
|
|
|
Granted
|
17,364,000
|
|
|
4.23
|
|
|
|
|
|
Exercised
|
(3,287,521
|
)
|
|
3.61
|
|
|
|
|
|
Forfeited or expired
|
(4,009,525
|
)
|
|
5.20
|
|
|
|
|
|
Outstanding as of December 31, 2017
|
48,251,975
|
|
|
$
|
4.39
|
|
|
7.82
|
|
$
|
54
|
|
Exercisable as of December 31, 2017
|
14,607,550
|
|
|
$
|
5.02
|
|
|
6.20
|
|
$
|
14
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the unvested restricted stock and stock units under the Company's equity award plans for the year ended
December 31, 2017
, is presented below:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
LVSC 2004 Plan:
|
|
|
|
Unvested Restricted Stock
|
|
|
|
Balance as of January 1, 2017
|
97,053
|
|
|
$
|
51.11
|
|
Granted
|
37,270
|
|
|
58.51
|
|
Vested
|
(60,042
|
)
|
|
55.64
|
|
Forfeited
|
—
|
|
|
—
|
|
Balance as of December 31, 2017
|
74,281
|
|
|
$
|
51.17
|
|
Unvested Restricted Stock Units
|
|
|
|
Balance as of January 1, 2017
|
73,150
|
|
|
$
|
61.59
|
|
Granted
|
—
|
|
|
—
|
|
Vested
|
(64,150
|
)
|
|
60.77
|
|
Forfeited
|
(4,000
|
)
|
|
60.24
|
|
Balance as of December 31, 2017
|
5,000
|
|
|
$
|
73.20
|
|
SCL Equity Plan:
|
|
|
|
Unvested Restricted Stock Units, Equity-Settled
|
|
|
|
Balance as of January 1, 2017
|
852,000
|
|
|
$
|
7.51
|
|
Granted
|
—
|
|
|
—
|
|
Vested
|
—
|
|
|
—
|
|
Modified to cash-settled
|
(852,000
|
)
|
|
7.51
|
|
Forfeited
|
—
|
|
|
—
|
|
Balance as of December 31, 2017
|
—
|
|
|
$
|
—
|
|
Unvested Restricted Stock Units, Cash-Settled
|
|
|
|
Balance as of January 1, 2017
|
235,636
|
|
|
$
|
7.13
|
|
Granted
|
—
|
|
|
—
|
|
Modified from equity-settled
|
852,000
|
|
|
7.51
|
|
Vested
|
(235,636
|
)
|
|
7.13
|
|
Forfeited
|
—
|
|
|
—
|
|
Balance as of December 31, 2017
|
852,000
|
|
|
$
|
7.51
|
|
As a result of SCL cash-settling and planning to cash-settle certain future unvested restricted share units on their vesting dates,
852,000
outstanding restricted stock units under the SCL Equity Plan were modified from equity awards to cash-settled liability awards during the year ended
December 31, 2017
. The modification affected
four
employees and resulted in
no
additional compensation expense. The fair value of these awards is remeasured each reporting period until the vesting dates. Upon settlement, SCL will pay the grantees an amount in cash calculated based on the higher of (i) the closing price of SCL's shares on the vesting date, and (ii) the average closing price of SCL's shares for the five trading days immediately preceding the vesting date. During the year ended
December 31, 2017
, SCL paid
$3 million
to settle vested restricted share units that were previously classified as equity awards. The accrued liability associated with these cash-settled restricted stock units was
$4 million
as of
December 31, 2017
.
As of
December 31, 2017
, under the 2004 Plan there was
$32 million
of unrecognized compensation cost related to unvested stock options. The stock option and restricted stock and stock unit costs are expected to be recognized over a weighted average period of
2.2
years and
0.4
years, respectively.
As of
December 31, 2017
, under the SCL Equity Plan there was
$20 million
of unrecognized compensation cost related to unvested stock options. The stock option and restricted stock unit costs are expected to be recognized over a weighted average period of
2.6
years and
0.2
years, respectively.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The stock-based compensation activity for the 2004 Plan and SCL Equity Plan is as follows for the three years ended
December 31, 2017
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(Dollars in millions, except weighted average grant date fair values)
|
Compensation expense:
|
|
|
|
|
|
Stock options
|
$
|
29
|
|
|
$
|
25
|
|
|
$
|
26
|
|
Restricted stock and stock units
|
5
|
|
|
10
|
|
|
20
|
|
|
$
|
34
|
|
|
$
|
35
|
|
|
$
|
46
|
|
Income tax benefit recognized in the consolidated statements of operations
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
7
|
|
LVSC 2004 Plan:
|
|
|
|
|
|
Stock options granted
|
1,027,108
|
|
|
1,672,458
|
|
|
441,809
|
|
Weighted average grant date fair value
|
$
|
8.95
|
|
|
$
|
8.62
|
|
|
$
|
11.97
|
|
Restricted stock granted
|
37,270
|
|
|
61,546
|
|
|
49,438
|
|
Weighted average grant date fair value
|
$
|
58.51
|
|
|
$
|
42.50
|
|
|
$
|
59.57
|
|
Stock options exercised:
|
|
|
|
|
|
Intrinsic value
|
$
|
11
|
|
|
$
|
3
|
|
|
$
|
25
|
|
Cash received
|
$
|
28
|
|
|
$
|
11
|
|
|
$
|
13
|
|
SCL Equity Plan:
|
|
|
|
|
|
Stock options granted
|
17,364,000
|
|
|
18,407,200
|
|
|
6,744,000
|
|
Weighted average grant date fair value
|
$
|
0.71
|
|
|
$
|
0.73
|
|
|
$
|
0.76
|
|
Equity-settled restricted stock units granted
|
—
|
|
|
—
|
|
|
118,800
|
|
Weighted average grant date fair value
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4.90
|
|
Stock options exercised:
|
|
|
|
|
|
Intrinsic value
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
3
|
|
Cash received
|
$
|
12
|
|
|
$
|
6
|
|
|
$
|
4
|
|
Note 15 — Employee Benefit Plans
The Company is self-insured for health care benefits for its U.S. employees and workers' compensation benefits for its employees at the Las Vegas Operating Properties. The liability for claims filed and estimates of claims incurred but not filed is included in other accrued liabilities in the accompanying consolidated balance sheets.
Participation in the VCR 401(k) employee savings plan is available for all eligible employees as of their date of hire. The savings plan allows participants to defer, on a pre-tax basis, a portion of their salary and accumulate tax-deferred earnings as a retirement fund. The Company matches
150%
of the first $390 of employee contributions and
50%
of employee contributions in excess of $390 subject to a cap whereby the amount of the contributions do not exceed
5%
of the participating employee's eligible gross wages. For the years ended
December 31, 2017
,
2016
and
2015
, the Company's matching contributions under the savings plan were
$10 million
,
$9 million
and
$10 million
, respectively.
Participation in VML's provident retirement fund is available for all permanent employees after a
three
-month probation period. VML contributes
5%
of each employee's basic salary to the fund and the employee is eligible to receive, upon resignation,
30%
of these contributions after working for
three
consecutive years, gradually increasing to
100%
after working for
ten
years. For the years ended
December 31, 2017
,
2016
and
2015
, VML's contributions into the provident fund were
$37 million
,
$35 million
and
$33 million
, respectively.
Participation in MBS's provident retirement fund is available for all permanent employees that are Singapore residents upon joining the Company. As of
December 31, 2017
, MBS contributes
17%
of each employee's basic salary to the fund, subject to certain caps as mandated by local regulations. The employee is eligible to receive funds upon
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
reaching the retirement age or upon meeting requirements set up by local regulations. For the years ended
December 31, 2017
,
2016
and
2015
, MBS's contributions into the provident fund were
$38 million
,
$35 million
and
$32 million
, respectively.
Note 16 — Related Party Transactions
During the years ended
December 31, 2017
,
2016
and
2015
, the Principal Stockholder and his family purchased certain services from the Company including lodging, banquet services and the use of Company personnel for approximately
$3 million
,
$3 million
and
$2 million
, respectively. For the year
December 31, 2017
, and for each of the years ended
2016
and
2015
, the Company incurred and made payments of
$1 million
and
$2 million
, respectively, for food and beverage services provided by restaurants that the Principal Stockholder has an ownership interest in.
During the years ended
December 31, 2017
,
2016
and
2015
, the Company incurred and paid certain expenses totaling
$10 million
,
$3 million
and
$4 million
, respectively, to its Principal Stockholder related to the Company's use of his personal aircraft and yacht (during 2016 and 2017) for business purposes. In addition, during the years ended
December 31, 2017
,
2016
and
2015
, the Company charged and received from the Principal Stockholder
$21 million
,
$17 million
and
$20 million
, respectively, related to aviation costs incurred by the Company for the Principal Stockholder's use of Company aviation personnel and assets for personal purposes.
Related party receivables were less than
$1 million
as of December 31, 2017 and
$2 million
as of December 31, 2016. Related party payables were less than
$1 million
as of December 31, 2017 and 2016.
Note 17 — Segment Information
The Company's principal operating and developmental activities occur in three geographic areas: Macao, Singapore and the U.S. The Company reviews the results of operations for each of its operating segments: The Venetian Macao; Sands Cotai Central; The Parisian Macao, which opened in September 2016; The Plaza Macao and Four Seasons Hotel Macao; Sands Macao; Marina Bay Sands; Las Vegas Operating Properties; and Sands Bethlehem. The Company also reviews construction and development activities for each of its primary projects currently under development, in addition to its reportable segments noted above, which include the renovation, expansion and rebranding of Sands Cotai Central and the additional rooms in the tower adjacent to the Four Seasons Hotel Macao in Macao, and the Las Vegas Condo Tower (which construction currently is suspended) in the United States. The Company has included Ferry Operations and Other (comprised primarily of the Company's ferry operations and various other operations that are ancillary to its properties in Macao) to reconcile to consolidated results of operations and financial condition. The Company has included Corporate and Other (which includes the Las Vegas Condo Tower and corporate activities of the Company) to reconcile to the consolidated financial condition.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company's segment information as of and for the years ended
December 31, 2017
,
2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Net Revenues
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
2,990
|
|
|
$
|
2,895
|
|
|
$
|
2,987
|
|
Sands Cotai Central
|
1,943
|
|
|
1,965
|
|
|
2,182
|
|
The Parisian Macao
|
1,429
|
|
|
413
|
|
|
—
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
607
|
|
|
597
|
|
|
691
|
|
Sands Macao
|
640
|
|
|
688
|
|
|
879
|
|
Ferry Operations and Other
|
177
|
|
|
174
|
|
|
160
|
|
|
7,786
|
|
|
6,732
|
|
|
6,899
|
|
Marina Bay Sands
|
3,154
|
|
|
2,799
|
|
|
2,952
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
1,618
|
|
|
1,537
|
|
|
1,508
|
|
Sands Bethlehem
|
579
|
|
|
571
|
|
|
549
|
|
|
2,197
|
|
|
2,108
|
|
|
2,057
|
|
Intersegment eliminations
|
(255
|
)
|
|
(229
|
)
|
|
(220
|
)
|
Total net revenues
|
$
|
12,882
|
|
|
$
|
11,410
|
|
|
$
|
11,688
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Intersegment Revenues
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
5
|
|
|
$
|
6
|
|
|
$
|
6
|
|
Sands Cotai Central
|
—
|
|
|
1
|
|
|
1
|
|
Ferry Operations and Other
|
41
|
|
|
39
|
|
|
39
|
|
|
46
|
|
|
46
|
|
|
46
|
|
Marina Bay Sands
|
8
|
|
|
8
|
|
|
10
|
|
Las Vegas Operating Properties
|
201
|
|
|
175
|
|
|
164
|
|
Total intersegment revenues
|
$
|
255
|
|
|
$
|
229
|
|
|
$
|
220
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Adjusted Property EBITDA
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
1,132
|
|
|
$
|
1,089
|
|
|
$
|
1,079
|
|
Sands Cotai Central
|
633
|
|
|
616
|
|
|
651
|
|
The Parisian Macao
|
412
|
|
|
114
|
|
|
—
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
233
|
|
|
221
|
|
|
243
|
|
Sands Macao
|
174
|
|
|
172
|
|
|
226
|
|
Ferry Operations and Other
|
23
|
|
|
32
|
|
|
23
|
|
|
2,607
|
|
|
2,244
|
|
|
2,222
|
|
Marina Bay Sands
|
1,755
|
|
|
1,389
|
|
|
1,507
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
391
|
|
|
356
|
|
|
305
|
|
Sands Bethlehem
|
147
|
|
|
141
|
|
|
136
|
|
|
538
|
|
|
497
|
|
|
441
|
|
Consolidated adjusted property EBITDA
(1)
|
4,900
|
|
|
4,130
|
|
|
4,170
|
|
Other Operating Costs and Expenses
|
|
|
|
|
|
Stock-based compensation
|
(14
|
)
|
|
(14
|
)
|
|
(22
|
)
|
Corporate
|
(174
|
)
|
|
(256
|
)
|
|
(176
|
)
|
Pre-opening
|
(9
|
)
|
|
(130
|
)
|
|
(48
|
)
|
Development
|
(13
|
)
|
|
(9
|
)
|
|
(10
|
)
|
Depreciation and amortization
|
(1,171
|
)
|
|
(1,111
|
)
|
|
(999
|
)
|
Amortization of leasehold interests in land
|
(37
|
)
|
|
(38
|
)
|
|
(39
|
)
|
Loss on disposal or impairment of assets
|
(20
|
)
|
|
(79
|
)
|
|
(35
|
)
|
Operating income
|
3,462
|
|
|
2,493
|
|
|
2,841
|
|
Other Non-Operating Costs and Expenses
|
|
|
|
|
|
Interest income
|
16
|
|
|
10
|
|
|
15
|
|
Interest expense, net of amounts capitalized
|
(327
|
)
|
|
(274
|
)
|
|
(265
|
)
|
Other income (expense)
|
(94
|
)
|
|
31
|
|
|
31
|
|
Loss on modification or early retirement of debt
|
(5
|
)
|
|
(5
|
)
|
|
—
|
|
Income tax benefit (expense)
|
209
|
|
|
(239
|
)
|
|
(236
|
)
|
Net income
|
$
|
3,261
|
|
|
$
|
2,016
|
|
|
$
|
2,386
|
|
_________________________
|
|
(1)
|
Consolidated adjusted property EBITDA, which is a non-GAAP financial measure, is net income before stock-based compensation expense, corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, gain or loss on disposal or impairment of assets, interest, other income or expense, gain or loss on modification or early retirement of debt and income taxes. Consolidated adjusted property EBITDA is a supplemental non-GAAP financial measure used by management, as well as industry analysts, to evaluate operations and operating performance. In particular, management utilizes consolidated adjusted property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation. Integrated resort companies have historically reported adjusted property EBITDA as a supplemental performance measure to GAAP financial measures. In order to view the operations of their properties on a more stand-alone basis, integrated resort companies, including Las Vegas Sands Corp., have historically excluded certain expenses that do not relate to the management of specific properties, such as pre-opening expense, development expense and corporate expense, from their adjusted property EBITDA calculations. Consolidated adjusted property EBITDA should not be interpreted as an alternative to income from operations (as an indicator of operating performance) or to cash flows from operations (as a measure of liquidity), in each case, as determined in accordance with GAAP. The Company has significant uses of cash flow, including capital expenditures, dividend payments, interest
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
payments, debt principal repayments and income taxes, which are not reflected in consolidated adjusted property EBITDA. Not all companies calculate adjusted property EBITDA in the same manner. As a result, consolidated adjusted property EBITDA as presented by the Company may not be directly comparable to similarly titled measures presented by other companies.
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|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Capital Expenditures
|
|
|
|
|
|
Corporate and Other
|
$
|
9
|
|
|
$
|
11
|
|
|
$
|
11
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
153
|
|
|
94
|
|
|
82
|
|
Sands Cotai Central
|
86
|
|
|
128
|
|
|
403
|
|
The Parisian Macao
|
204
|
|
|
925
|
|
|
767
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
22
|
|
|
16
|
|
|
15
|
|
Sands Macao
|
10
|
|
|
18
|
|
|
22
|
|
Ferry Operations and Other
|
4
|
|
|
4
|
|
|
4
|
|
|
479
|
|
|
1,185
|
|
|
1,293
|
|
Marina Bay Sands
|
196
|
|
|
83
|
|
|
130
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
123
|
|
|
92
|
|
|
77
|
|
Sands Bethlehem
|
30
|
|
|
27
|
|
|
18
|
|
|
153
|
|
|
119
|
|
|
95
|
|
Total capital expenditures
|
$
|
837
|
|
|
$
|
1,398
|
|
|
$
|
1,529
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Total Assets
|
|
|
|
|
|
Corporate and Other
|
$
|
953
|
|
|
$
|
465
|
|
|
$
|
463
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
2,640
|
|
|
2,642
|
|
|
2,949
|
|
Sands Cotai Central
|
3,891
|
|
|
4,152
|
|
|
4,394
|
|
The Parisian Macao
|
2,496
|
|
|
2,711
|
|
|
1,649
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
930
|
|
|
966
|
|
|
1,039
|
|
Sands Macao
|
282
|
|
|
316
|
|
|
373
|
|
Ferry Operations and Other
|
275
|
|
|
281
|
|
|
288
|
|
|
10,514
|
|
|
11,068
|
|
|
10,692
|
|
Marina Bay Sands
|
5,054
|
|
|
5,031
|
|
|
5,497
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
3,530
|
|
|
3,214
|
|
|
3,518
|
|
Sands Bethlehem
|
636
|
|
|
691
|
|
|
693
|
|
|
4,166
|
|
|
3,905
|
|
|
4,211
|
|
Total assets
|
$
|
20,687
|
|
|
$
|
20,469
|
|
|
$
|
20,863
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2017
|
|
2016
|
|
2015
|
|
(In millions)
|
Total Long-Lived Assets
(1)
|
|
|
|
|
|
Corporate and Other
|
$
|
249
|
|
|
$
|
264
|
|
|
$
|
335
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
1,728
|
|
|
1,726
|
|
|
1,795
|
|
Sands Cotai Central
|
3,516
|
|
|
3,720
|
|
|
3,944
|
|
The Parisian Macao
|
2,375
|
|
|
2,572
|
|
|
1,646
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
853
|
|
|
874
|
|
|
904
|
|
Sands Macao
|
222
|
|
|
245
|
|
|
266
|
|
Ferry Operations and Other
|
146
|
|
|
157
|
|
|
168
|
|
|
8,840
|
|
|
9,294
|
|
|
8,723
|
|
Marina Bay Sands
|
4,336
|
|
|
4,192
|
|
|
4,476
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
2,779
|
|
|
2,815
|
|
|
2,909
|
|
Sands Bethlehem
|
549
|
|
|
548
|
|
|
551
|
|
|
3,328
|
|
|
3,363
|
|
|
3,460
|
|
Total long-lived assets
|
$
|
16,753
|
|
|
$
|
17,113
|
|
|
$
|
16,994
|
|
_________________________
|
|
(1)
|
Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and leasehold interests in land, net of accumulated amortization.
|
Note 18 — Selected Quarterly Financial Results (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
First
|
|
Second
(1)
|
|
Third
(2)
|
|
Fourth
(3)(4)
|
|
Total
|
|
(In millions, except per share data)
|
2017
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
3,106
|
|
|
$
|
3,141
|
|
|
$
|
3,199
|
|
|
$
|
3,436
|
|
|
$
|
12,882
|
|
Operating income
|
763
|
|
|
816
|
|
|
856
|
|
|
1,027
|
|
|
3,462
|
|
Net income
|
578
|
|
|
638
|
|
|
685
|
|
|
1,360
|
|
|
3,261
|
|
Net income attributable to Las Vegas Sands Corp.
|
480
|
|
|
545
|
|
|
570
|
|
|
1,211
|
|
|
2,806
|
|
Basic earnings per share
|
0.60
|
|
|
0.69
|
|
|
0.72
|
|
|
1.53
|
|
|
3.54
|
|
Diluted earnings per share
|
0.60
|
|
|
0.69
|
|
|
0.72
|
|
|
1.53
|
|
|
3.54
|
|
2016
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
2,717
|
|
|
$
|
2,649
|
|
|
$
|
2,969
|
|
|
$
|
3,075
|
|
|
$
|
11,410
|
|
Operating income
|
586
|
|
|
518
|
|
|
720
|
|
|
669
|
|
|
2,493
|
|
Net income
|
409
|
|
|
394
|
|
|
606
|
|
|
607
|
|
|
2,016
|
|
Net income attributable to Las Vegas Sands Corp.
|
320
|
|
|
328
|
|
|
513
|
|
|
509
|
|
|
1,670
|
|
Basic earnings per share
|
0.40
|
|
|
0.41
|
|
|
0.65
|
|
|
0.64
|
|
|
2.10
|
|
Diluted earnings per share
|
0.40
|
|
|
0.41
|
|
|
0.65
|
|
|
0.64
|
|
|
2.10
|
|
________________________
|
|
(1)
|
The Company recorded a nonrecurring corporate expense of
$79 million
in June 2016.
|
|
|
(2)
|
During Q3 2016, the Company recorded pre-opening expenses of
$86 million
in connection with the opening of The Parisian Macao in September 2016.
|
|
|
(3)
|
During Q4 2016, the Company recognized a loss on disposal or impairment of assets of
$64 million
, primarily related to the write-off of costs related to the Las Vegas Condo Tower, as well as other dispositions at the Company's various operating properties.
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
(4)
|
During Q4 2017, the Company recorded a nonrecurring non-cash income tax benefit of
$526 million
due to U.S. tax reform enacted at the end of 2017.
|
Because earnings per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four quarters may not equal the total earnings per share amounts for the respective year.