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
70.0%
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
943,000
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
1,800
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
520,000
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
2,500
rooms and suites; approximately
296,000
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
242,000
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, a theater 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 Resort Las Vegas"), with
three
hotel towers, which include The Venetian Tower, a Renaissance Venice-themed resort; the adjoining Venezia Tower; The Palazzo Tower, 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 Resort Las Vegas, 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 an enclosed retail, dining and entertainment complex that was sold to GGP Limited Partnership ("GGP," see "Note 14 — Mall Activities"). In total, the Las Vegas Operating Properties offer approximately
2.3 million
gross square feet of state-of-the-art exhibition and meeting facilities that can be configured to provide small, mid-size or large meeting rooms and/or accommodate large-scale multi-media events or trade shows.
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.
On March 8, 2018, the Company entered into a purchase and sale agreement under which PCI Gaming Authority, an unincorporated, chartered instrumentality of the Poarch Band of Creek Indians, will acquire Sands Bethlehem for a total enterprise value of
$1.30 billion
. The closing of the transaction is subject to regulatory review and other closing conditions.
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
The Company previously announced the renovation, expansion and rebranding of 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, and expanded retail and food and beverage venues. The Company will add approximately
370
luxury suites in the St. Regis Tower Suites Macao. Design work is nearing completion and construction is being
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
initiated and will be phased to minimize disruption during the property’s peak periods. The Company expects the additional St. Regis Tower Suites Macao to be completed in
2020
and The Londoner Macao project to be completed in phases throughout
2020
and
2021
.
The Company also previously announced the Four Seasons Tower Suites Macao, which will feature approximately
290
additional premium quality suites. The Company has completed the structural work of the tower and has commenced preliminary build out of the suites. The Company expects the project to be completed in
the first quarter of 2020
.
The Company anticipates the total costs associated with these development projects to be approximately
$2.2 billion
. The ultimate costs and completion dates for these projects are subject to change as the Company finalizes its planning and design work and completes the projects.
United States
The Company was constructing a high-rise residential condominium tower (the "Las Vegas Condo Tower"), located on the Las Vegas Strip within The Venetian Resort Las Vegas. In 2008, the Company suspended construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. The Company continues to evaluate the highest return opportunity for the project. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty. Should demand and conditions fail to improve or management decides to abandon the project, the Company could record a charge for some portion of the
$129 million
in capitalized construction costs (net of depreciation) as of
December 31, 2018
.
Other
The Company continues to evaluate current development projects in each of our markets and pursue new development opportunities globally.
Note 2 — Summary of Significant Accounting Policies
Principles of Consolidation
T
he 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, 2018
and
2017
, the Company's consolidated joint ventures had total assets of
$73 million
and
$77 million
, respectively, and total liabilities of
$225 million
and
$198 million
, respectively. The Company's joint ventures had intercompany liabilities of
$223 million
and
$196 million
as of
December 31, 2018
and
2017
, 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 currently available to the Company
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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. Restricted cash represents those amounts contractually reserved for substantial mall-related repairs and maintenance expenditures. The estimated fair value of the Company's cash equivalents is based on level 1 inputs (quoted market prices in active markets).
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 gaming promoters in Macao, which receivables can be offset against commissions payable to the respective gaming promoters. Business or economic conditions, the legal enforceability of gaming debts, foreign currency control measures or other significant events in foreign countries could affect the collectability of receivables from customers and gaming promoters 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 there are no concentrations of credit risk for which an allowance has not been established. Although management believes the allowance is adequate, it is possible 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 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 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 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.
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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
substantially complete or construction activity is suspended for more than a brief period. During the years ended
December 31, 2018
,
2017
and
2016
, the Company capitalized
$3 million
,
$2 million
and
$34 million
, respectively, of interest expense.
During the years ended December 31,
2018
,
2017
and
2016
, the Company capitalized approximately
$31 million
,
$24 million
and
$29 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 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" the asset is impaired. If the Company elects to perform a qualitative assessment and it is determined it is "more-likely-than-not" 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, 2018
, 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 years ended December 31, 2018 and 2016, 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 it was not "more-likely-than-not" the indefinite lived intangible assets were impaired. 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 19 — 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.
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 necessary for the years ended
December 31, 2018
,
2017
and
2016
.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Revenue Recognition
Revenue from contracts with customers primarily consists of casino wagers, room sales, food and beverage transactions, rental income from the Company’s mall tenants, convention sales and entertainment and ferry ticket sales. These contracts can be written, oral or implied by customary business practices.
Gross casino revenue is the aggregate of gaming wins and losses. The commissions rebated to gaming promoters and premium players for rolling play, cash discounts and other cash incentives to patrons related to gaming play are recorded as a reduction to gross casino revenue. Gaming contracts include a performance obligation to honor the patron’s wager and typically include a performance obligation to provide a product or service to the patron on a complimentary basis to incentivize gaming or in exchange for points earned under the Company’s loyalty programs.
For wagering contracts that include complimentary products and services provided by the Company to incentivize gaming, the Company allocates the relative stand-alone selling price of each product and service to the respective revenue type. Complimentary products or services provided under the Company's control and discretion, which are supplied by third parties, are recorded as an operating expense.
For wagering contracts that include products and services provided to a patron in exchange for points earned under the Company’s loyalty programs, the Company allocates the estimated fair value of the points earned to the loyalty program liability. The loyalty program liability is a deferral of revenue until redemption occurs. Upon redemption of loyalty program points for Company-owned products and services, the stand-alone selling price of each product or service is allocated to the respective revenue type. For redemptions of points with third parties, the redemption amount is deducted from the loyalty program liability and paid directly to the third party. Any discounts received by the Company from the third party in connection with this transaction are recorded to other revenue.
After allocation to the other revenue types for products and services provided to patrons as part of a wagering contract, the residual amount is recorded to casino revenue as soon as the wager is settled. As all wagers have similar characteristics, the Company accounts for its gaming contracts collectively on a portfolio basis versus an individual basis.
Hotel revenue recognition criteria are met at the time of occupancy. Food and beverage revenue recognition criteria are met at the time of service. Convention revenues are recognized when the related service is rendered or the event is held. Deposits for future hotel occupancy, convention space or food and beverage services contracts are recorded as deferred revenue until the revenue recognition criteria are met. Cancellation fees for hotel, convention space and food and beverage services are recognized upon cancellation by the customer and are included in other revenues. Ferry and entertainment revenue recognition criteria are met at the completion of the ferry trip or event, respectively. Revenue from contracts with a combination of these services is allocated pro rata based on each service’s relative stand-alone selling price.
Revenue from leases is primarily recorded to mall revenue and is 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-line 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 threshold is met.
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
$4.09 billion
,
$3.60 billion
and
$3.24 billion
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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
$132 million
,
$129 million
and
$121 million
for the years ended
December 31, 2018
,
2017
and
2016
, 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.
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,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Weighted average common shares outstanding (used in the calculation of basic earnings per share)
|
786
|
|
|
792
|
|
|
795
|
|
Potential dilution from stock options and restricted stock and stock units
|
—
|
|
|
—
|
|
|
—
|
|
Weighted average common and common equivalent shares (used in the calculation of diluted earnings per share)
|
786
|
|
|
792
|
|
|
795
|
|
Antidilutive stock options excluded from the calculation of diluted earnings per share
|
2
|
|
|
6
|
|
|
7
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 stock-based employee compensation plans are more fully discussed in "Note 16 — 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 income earned in Singapore and Macao is taxed at local rates, which are lower than U.S. tax rates. The Company enjoys an income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. In August 2018, the Company received an additional exemption from Macao's corporate income tax on profits generated by the operation of casino games of chance for the period January 1, 2019 through
June 26, 2022
, the date the Company's subconcession agreement expires. The Company entered into an agreement with the Macao government, effective through the
end of 2018
that provided for an annual payment of
42 million
patacas (approximately
$5 million
at exchange rates in effect on
December 31, 2018
) that is a substitution for a
12%
tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. In September 2018, VML requested an additional agreement with the Macao government through June 26, 2022, to correspond to the expiration of the income tax exemption for gaming operations; however, there is no assurance VML will receive the additional agreement.
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" 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
$268 million
and
$261 million
, as of
December 31, 2018
and
2017
, respectively, and a valuation allowance on certain deferred tax assets of its U.S. operations of
$4.50 billion
and
$4.43 billion
as of
December 31, 2018
and
2017
, respectively, which increased during the current year primarily due to a change in the expected utilization of U.S. foreign tax credits primarily due to guidance issued by the Internal Revenue Service ("IRS") related to the international provisions of U.S. tax reform, defined below. 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 the financial results of these operations improve and it becomes "more-likely-than-not" 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" 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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
$118 million
and
$92 million
as of
December 31, 2018
and
2017
, 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, during the year ended December 31, 2017, the Company recorded a tax benefit of
$526 million
relating to the reduction of the valuation allowance on certain deferred tax assets 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%
.
The Company recorded this impact of enactment of U.S. tax reform subject to Staff Accounting Bulletin ("SAB") 118, which provided for a twelve-month remeasurement period to complete the accounting required under Accounting Standards Codification ("ASC") 740, Income Taxes. During this twelve month remeasurement period, as the new tax law continued to evolve, the Company adjusted these provisional amounts for related administrative guidance, notices, implementing regulations, legislative amendments and interpretations. The Company completed the accounting for effects of the Act in December 2018.
Accounting for Derivative Instruments and Hedging Activities
Accounting standards require an entity to recognize all derivatives as either assets or liabilities in the balance sheet 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.
Changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices, can impact the Company’s results of operations. The Company’s primary exposures to market risk are interest rate risk associated with long-term debt and foreign currency exchange rate risk associated with the Company’s operations outside the United States. 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 does not hold or issue financial instruments for trading purposes and does not enter into derivative transactions that would be considered speculative positions. 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 10 — Derivative Instruments" for additional disclosures regarding derivatives.
Recent Accounting Pronouncements
In February 2016, the FASB issued an accounting standard update on leases, which requires all lessees to recognize right-of-use ("ROU") assets and lease liabilities, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. In July 2018, the FASB issued an additional update that allows for an optional transition approach allowing companies to forgo comparative reporting and instead adopt the guidance on a prospective basis. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, with early adoption permitted. The Company adopted the new standard on January 1, 2019, on a prospective basis. The most significant impact is the recognition of ROU assets and lease liabilities on the Company's balance sheet for real estate operating leases. Management estimates adoption of the standard will result in the recognition of ROU assets and lease liabilities
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
for operating leases of approximately
$330 million
and approximately
$340 million
, respectively, as of January 1, 2019, with the difference recorded as a write-off of deferred rent. The adoption of this guidance will not have a material impact on net income.
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 effect the guidance will have on the Company's financial condition and results of operations, but does not expect it will have a material impact.
Reclassification
Certain amounts in the accompanying consolidated balance sheet as of December 31, 2017, and the related consolidated statements of operations, comprehensive income, equity and cash flows for the years ended December 31, 2017 and 2016, have been adjusted to be consistent with the current year presentation. These adjustments resulted from the implementation of the accounting standards updates for revenue from contracts with customers and presentation of restricted cash on the statements of cash flows and reclassifying the immaterial cost of aircraft spare parts from inventories to other assets, net.
Note 3 — Revenue
Revenue Disaggregation
The Company operates Integrated Resorts internationally, in Macao and Singapore, and domestically, in Las Vegas and Pennsylvania. The Company generates revenues at its properties by providing the following types of products and services: gaming, rooms, food and beverage, mall and convention, retail and other. Revenue disaggregated by type of revenue and geographic location is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
Rooms
|
|
Food and Beverage
|
|
Mall
|
|
Convention, Retail and Other
|
|
Net Revenues
|
Year Ended December 31, 2018
|
(In millions)
|
Macao:
|
|
|
|
|
|
|
|
|
|
|
|
The Venetian Macao
|
$
|
2,829
|
|
|
$
|
223
|
|
|
$
|
81
|
|
|
$
|
234
|
|
|
$
|
107
|
|
|
$
|
3,474
|
|
Sands Cotai Central
|
1,622
|
|
|
331
|
|
|
102
|
|
|
69
|
|
|
29
|
|
|
2,153
|
|
The Parisian Macao
|
1,265
|
|
|
124
|
|
|
65
|
|
|
57
|
|
|
22
|
|
|
1,533
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
502
|
|
|
39
|
|
|
29
|
|
|
145
|
|
|
4
|
|
|
719
|
|
Sands Macao
|
598
|
|
|
17
|
|
|
27
|
|
|
3
|
|
|
5
|
|
|
650
|
|
Ferry Operations and Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
160
|
|
|
160
|
|
|
6,816
|
|
|
734
|
|
|
304
|
|
|
508
|
|
|
327
|
|
|
8,689
|
|
Marina Bay Sands
|
2,178
|
|
|
393
|
|
|
211
|
|
|
179
|
|
|
108
|
|
|
3,069
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas Operating Properties
|
357
|
|
|
590
|
|
|
324
|
|
|
—
|
|
|
411
|
|
|
1,682
|
|
Sands Bethlehem
|
468
|
|
|
16
|
|
|
26
|
|
|
4
|
|
|
22
|
|
|
536
|
|
|
825
|
|
|
606
|
|
|
350
|
|
|
4
|
|
|
433
|
|
|
2,218
|
|
Intercompany eliminations
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(246
|
)
|
|
(247
|
)
|
Total net revenues
|
$
|
9,819
|
|
|
$
|
1,733
|
|
|
$
|
865
|
|
|
$
|
690
|
|
|
$
|
622
|
|
|
$
|
13,729
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Casino
|
|
Rooms
|
|
Food and Beverage
|
|
Mall
|
|
Convention, Retail and Other
|
|
Net Revenues
|
Year Ended December 31, 2017
|
|
Macao:
|
|
|
|
|
|
|
|
|
|
|
|
The Venetian Macao
|
$
|
2,362
|
|
|
$
|
179
|
|
|
$
|
74
|
|
|
$
|
220
|
|
|
$
|
89
|
|
|
$
|
2,924
|
|
Sands Cotai Central
|
1,433
|
|
|
291
|
|
|
102
|
|
|
63
|
|
|
27
|
|
|
1,916
|
|
The Parisian Macao
|
1,120
|
|
|
128
|
|
|
61
|
|
|
66
|
|
|
20
|
|
|
1,395
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
391
|
|
|
34
|
|
|
28
|
|
|
131
|
|
|
3
|
|
|
587
|
|
Sands Macao
|
574
|
|
|
19
|
|
|
27
|
|
|
—
|
|
|
6
|
|
|
626
|
|
Ferry Operations and Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
161
|
|
|
161
|
|
|
5,880
|
|
|
651
|
|
|
292
|
|
|
480
|
|
|
306
|
|
|
7,609
|
|
Marina Bay Sands
|
2,333
|
|
|
358
|
|
|
183
|
|
|
167
|
|
|
93
|
|
|
3,134
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas Operating Properties
|
380
|
|
|
561
|
|
|
325
|
|
|
—
|
|
|
391
|
|
|
1,657
|
|
Sands Bethlehem
|
493
|
|
|
16
|
|
|
28
|
|
|
4
|
|
|
23
|
|
|
564
|
|
|
873
|
|
|
577
|
|
|
353
|
|
|
4
|
|
|
414
|
|
|
2,221
|
|
Intercompany eliminations
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(236
|
)
|
|
(236
|
)
|
Total net revenues
|
$
|
9,086
|
|
|
$
|
1,586
|
|
|
$
|
828
|
|
|
$
|
651
|
|
|
$
|
577
|
|
|
$
|
12,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2016
|
|
Macao:
|
|
|
|
|
|
|
|
|
|
|
|
The Venetian Macao
|
$
|
2,286
|
|
|
$
|
177
|
|
|
$
|
75
|
|
|
$
|
209
|
|
|
$
|
84
|
|
|
$
|
2,831
|
|
Sands Cotai Central
|
1,471
|
|
|
267
|
|
|
99
|
|
|
62
|
|
|
25
|
|
|
1,924
|
|
The Parisian Macao
|
315
|
|
|
36
|
|
|
20
|
|
|
23
|
|
|
7
|
|
|
401
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
392
|
|
|
36
|
|
|
26
|
|
|
127
|
|
|
3
|
|
|
584
|
|
Sands Macao
|
614
|
|
|
20
|
|
|
26
|
|
|
—
|
|
|
8
|
|
|
668
|
|
Ferry Operations and Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|
158
|
|
|
5,078
|
|
|
536
|
|
|
246
|
|
|
421
|
|
|
285
|
|
|
6,566
|
|
Marina Bay Sands
|
1,965
|
|
|
376
|
|
|
189
|
|
|
166
|
|
|
95
|
|
|
2,791
|
|
United States:
|
|
|
|
|
|
|
|
|
|
|
|
Las Vegas Operating Properties
|
359
|
|
|
572
|
|
|
282
|
|
|
—
|
|
|
358
|
|
|
1,571
|
|
Sands Bethlehem
|
484
|
|
|
15
|
|
|
30
|
|
|
4
|
|
|
22
|
|
|
555
|
|
|
843
|
|
|
587
|
|
|
312
|
|
|
4
|
|
|
380
|
|
|
2,126
|
|
Intercompany eliminations
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(212
|
)
|
|
(212
|
)
|
Total net revenues
|
$
|
7,886
|
|
|
$
|
1,499
|
|
|
$
|
747
|
|
|
$
|
591
|
|
|
$
|
548
|
|
|
$
|
11,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
____________________
|
|
(1)
|
Intercompany eliminations include royalties and other intercompany services (see "Note 19 — Segment Information").
|
Contract and Contract Related Liabilities
The Company provides numerous products and services to its customers. There is often a timing difference between the cash payment by the customers and recognition of revenue for each of the associated performance obligations. The Company has the following main types of liabilities associated with contracts with customers: (1) outstanding chip liability, (2) loyalty program liability and (3) customer deposits and other deferred revenue for gaming and non-gaming products and services yet to be provided.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The outstanding chip liability represents the collective amounts owed to gaming promoters and patrons in exchange for gaming chips in their possession. Outstanding chips are expected to be recognized as revenue or redeemed for cash within one year of being purchased. The loyalty program liability represents a deferral of revenue until patron redemption of points earned. The loyalty program points are expected to be redeemed and recognized as revenue within one year of being earned. Customer deposits and other deferred revenue represent cash deposits made by customers for future services provided by the Company. With the exception of mall deposits, which typically extend beyond a year based on the terms of the lease, the majority of these customer deposits and other deferred revenue are expected to be recognized as revenue or refunded to the customer within one year of the date the deposit was recorded.
The following table summarizes the liability activity related to contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding Chip Liability
|
|
Loyalty Program Liability
|
|
Customer Deposits and Other Deferred Revenue
(1)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
(In millions)
|
Balance at January 1
|
$
|
478
|
|
|
$
|
525
|
|
|
$
|
63
|
|
|
$
|
69
|
|
|
$
|
714
|
|
|
$
|
633
|
|
Balance at December 31
|
551
|
|
|
478
|
|
|
66
|
|
|
63
|
|
|
827
|
|
|
714
|
|
Increase (decrease)
|
$
|
73
|
|
|
$
|
(47
|
)
|
|
$
|
3
|
|
|
$
|
(6
|
)
|
|
$
|
113
|
|
|
$
|
81
|
|
____________________
|
|
(1)
|
Of this amount,
$152 million
,
$145 million
and
$131 million
as of
December 31, 2018
, December 31,
2017
and January 1,
2017
, respectively, relates to mall deposits that are accounted for based on lease terms usually greater than one year.
|
Significant Impacts of Adoption
The Company adopted the new revenue recognition standard on January 1, 2018, on a full retrospective basis. The adoption of the change in accounting standards related to revenue from contracts with customers resulted in the following significant impacts: (1) promotional allowances line item was eliminated from the condensed consolidated statement of operations with the amount being deducted primarily from casino revenue, (2) the valuation of points associated with the Company’s loyalty programs was changed from cost to fair value; the loyalty program expense, previously charged to casino expense, was deducted from casino revenue to defer revenue recognition until redemption of the loyalty program points occurs; and redemption of the loyalty program points at third parties is now deducted from the loyalty program liability and paid directly to the third party, with any discounts received from the third party recorded to other revenue and (3) the portion of gaming promoter commissions previously recorded to casino expense is now deducted from casino revenue. These adjustments resulted in a decrease to net revenues and operating expenses of
$154 million
and
$156 million
, respectively, and an increase in operating income of
$2 million
for the year ended December 31, 2017, and a decrease to net revenues and operating expenses of
$139 million
and
$148 million
, respectively, and an increase in operating income of
$9 million
for the year ended December 31, 2016. The cumulative effect of the adoption was recognized as a decrease in retained earnings of
$18 million
and a decrease in equity from noncontrolling interests of
$1 million
on January 1, 2016.
Note 4 — Accounts Receivable, Net
Accounts receivable consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Casino
|
$
|
763
|
|
|
$
|
837
|
|
Rooms
|
98
|
|
|
109
|
|
Mall
|
78
|
|
|
47
|
|
Other
|
111
|
|
|
64
|
|
|
1,050
|
|
|
1,057
|
|
Less — allowance for doubtful accounts
|
(324
|
)
|
|
(442
|
)
|
|
$
|
726
|
|
|
$
|
615
|
|
Note 5 — Property and Equipment, Net
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Land and improvements
|
$
|
651
|
|
|
$
|
672
|
|
Building and improvements
|
17,861
|
|
|
17,703
|
|
Furniture, fixtures, equipment and leasehold improvements
|
4,255
|
|
|
3,999
|
|
Transportation
|
458
|
|
|
455
|
|
Construction in progress
|
1,184
|
|
|
1,179
|
|
|
24,409
|
|
|
24,008
|
|
Less — accumulated depreciation and amortization
|
(9,255
|
)
|
|
(8,492
|
)
|
|
$
|
15,154
|
|
|
$
|
15,516
|
|
The property and equipment legally sold to GGP totaling
$189 million
(net of
$111 million
of accumulated depreciation) as of
December 31, 2018
, 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. See "Note 14 — Mall Activities — The Shoppes at The Palazzo."
The cost and accumulated depreciation of property and equipment the Company is leasing to third parties, primarily as part of its mall operations, was
$1.36 billion
and
$469 million
, respectively, as of
December 31, 2018
. The cost and accumulated depreciation of property and equipment that the Company is leasing to these third parties was
$1.31 billion
and
$415 million
, respectively, as of
December 31, 2017
.
The cost and accumulated depreciation of property and equipment the Company is leasing under capital lease arrangements was
$40 million
and
$24 million
, respectively, as of
December 31, 2018
. 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
.
During the year ended
December 31, 2018
, the Company recognized a loss on disposal or impairment of assets of
$150 million
, consisting primarily of
$128 million
in write-off of costs related to the Four Seasons Tower Suites Macao, as well as other dispositions at the Company's operating properties. During the years ended
December 31, 2017
and 2016, the Company recognized a loss on disposal or impairment of assets of
$20 million
and
$79 million
, respectively.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 6 — Leasehold Interests in Land, Net
Leasehold interests in land consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Marina Bay Sands
|
$
|
1,006
|
|
|
$
|
1,027
|
|
Sands Cotai Central
|
237
|
|
|
237
|
|
The Venetian Macao
|
192
|
|
|
182
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
91
|
|
|
89
|
|
The Parisian Macao
|
75
|
|
|
75
|
|
Sands Macao
|
31
|
|
|
30
|
|
|
1,632
|
|
|
1,640
|
|
Less — accumulated amortization
|
(434
|
)
|
|
(403
|
)
|
|
$
|
1,198
|
|
|
$
|
1,237
|
|
The Company amortizes the leasehold interests in land on a straight-line basis over the expected term of the lease, which includes automatic extensions in Macao as discussed further below. Amortization expense of
$35 million
,
$37 million
and
$38 million
was included in amortization of leasehold interests in land expense for the years ended
December 31, 2018
,
2017
and
2016
, respectively. The estimated future amortization expense over the expected term of the lease is approximately
$36 million
for each of the five years in the period ending December 31,
2023
, and
$1.36 billion
thereafter at exchange rates in effect on
December 31, 2018
.
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. For the Company's future rental payment obligations, see "Note 15 — Commitments and Contingencies — Operating Leases."
Note 7 — Intangible Assets, Net
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Sands Bethlehem gaming license and certificate
|
$
|
67
|
|
|
$
|
67
|
|
|
|
|
|
Marina Bay Sands gaming license
|
48
|
|
|
49
|
|
Trademarks and other
|
1
|
|
|
1
|
|
|
49
|
|
|
50
|
|
Less — accumulated amortization
|
(44
|
)
|
|
(28
|
)
|
|
5
|
|
|
22
|
|
Total intangible assets, net
|
$
|
72
|
|
|
$
|
89
|
|
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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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. The Company has filed a renewal application and believes it meets the renewal requirements as determined by the CRA; however, no assurance can be given the license renewal will be granted or for what period of time it will be granted.
Amortization expense was
$16 million
,
$16 million
and
$15 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively. The estimated future amortization expense is approximately
$5 million
for the year ending December 31, 2019.
Note 8 — Other Accrued Liabilities
Other accrued liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Customer deposits
|
$
|
676
|
|
|
$
|
572
|
|
Outstanding chip liability
|
551
|
|
|
478
|
|
Taxes and licenses
|
403
|
|
|
367
|
|
Payroll and related
|
359
|
|
|
342
|
|
Other accruals
|
446
|
|
|
317
|
|
|
$
|
2,435
|
|
|
$
|
2,076
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 9 — Long-Term Debt
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(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 $21 and $11, respectively)
|
$
|
3,464
|
|
|
$
|
2,150
|
|
HVAC Equipment Lease
|
12
|
|
|
12
|
|
Macao Related
(1)
:
|
|
|
|
4.600% Senior Notes due 2023 (net of unamortized original issue discount and deferred financing costs of $14 and a positive cumulative fair value adjustment of $5)
|
1,791
|
|
|
—
|
|
5.125% Senior Notes due 2025 (net of unamortized original issue discount and deferred financing costs of $16 and a positive cumulative fair value adjustment of $5)
|
1,789
|
|
|
—
|
|
5.400% Senior Notes due 2028 (net of unamortized original issue discount and deferred financing costs of $21 and a positive cumulative fair value adjustment of $5)
|
1,884
|
|
|
—
|
|
2016 VML Credit Facility — Term (net of unamortized deferred financing costs of $56)
|
—
|
|
|
4,043
|
|
2016 VML Credit Facility — Non-Extended Term (net of unamortized deferred financing costs of $2)
|
—
|
|
|
247
|
|
Other
|
4
|
|
|
5
|
|
Singapore Related
(1)
:
|
|
|
|
2012 Singapore Credit Facility — Term (net of unamortized deferred financing costs of $43 and $32, respectively)
|
3,041
|
|
|
3,183
|
|
|
11,985
|
|
|
9,640
|
|
Less — current maturities
|
(111
|
)
|
|
(296
|
)
|
Total long-term debt
|
$
|
11,874
|
|
|
$
|
9,344
|
|
____________________
|
|
(1)
|
Unamortized deferred financing costs of
$47 million
and
$24 million
as of
December 31, 2018
and
2017
, 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
and working capital needs. The Company recorded a
$2 million
loss on modification 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 lowered the adjusted Eurodollar rate floor from
0.75%
per annum to
0.0%
per annum (and thereby effectively lowered 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 Facility remained unchanged. The Company recorded a
$2 million
loss on modification of debt during the quarter ended December 31, 2016, in connection with this amendment.
During March 2017, the Company entered into an agreement (the "Fourth 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 Fourth 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 Company recorded a
$5 million
loss on modification of debt during the year ended December 31, 2017, in connection with the Amendment Agreement.
During March 2018, the Company entered into an agreement (the "Fifth 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
$2.16 billion
and to lower the applicable margin credit spread for adjusted Eurodollar rate term loans from
2.0%
to
1.75%
per annum and for alternative base rate term loans from
1.0%
to
0.75%
per annum. Additionally, the Fifth Amendment Agreement extended the maturity date of the term loans from
March 29, 2024
to
March 27, 2025
. The Company recorded a
$3 million
loss on modification of debt during the year ended
December 31, 2018
, in connection with the Fifth Amendment Agreement.
During June 2018, the Company further amended the 2013 U.S. Credit Facility (the "Sixth Amendment Agreement") to, among other things, increase the amount of the term loans by
$1.35 billion
, to an aggregate amount of
$3.51 billion
. The additional
$1.35 billion
, which was fully drawn on the closing date, matures on
March 27, 2025
, and has terms substantially identical to those applicable to the term loans outstanding under the then existing credit agreement. The 2013 Extended U.S. Term B Facility is subject to
quarterly
amortization payments of
$9 million
, which began on
June 30, 2018
, followed by a balloon payment of
$3.27 billion
due on
March 27, 2025
. As of
December 31, 2018
, 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
1.75%
per annum, or at an alternative base rate, plus a credit spread of
0.75%
per annum (the interest rate was set at
4.3%
as of
December 31, 2018
). 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
1.125%
to
1.625%
per annum for loans accruing interest at an adjusted Eurodollar rate and
0.125%
to
0.625%
per annum for loans accruing interest at the base 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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
3.9%
during the year ended December 31, 2018, and
3.2%
during the years ended December 31, 2017 and 2016.
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, 2018
, 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 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%
and
2.2%
during the years ended December 31,
2017
and
2016
, 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%
and
2.0%
during the years ended December 31,
2017
and
2016
, 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
SCL Senior Notes
On August 9, 2018, SCL issued, in a private offering, three series of senior unsecured notes in an aggregate principal amount of
$5.50 billion
, consisting of
$1.80 billion
of
4.600%
Senior Notes due
August 8, 2023
(the "2023 Notes"),
$1.80 billion
of
5.125%
Senior Notes due
August 8, 2025
(the "2025 Notes") and
$1.90 billion
of
5.400%
Senior Notes due
August 8, 2028
(the "2028 Notes" and, together with the 2023 Notes and the 2025 Notes, the "SCL Senior Notes"). A portion of the net proceeds from the offering was used to repay in full the outstanding borrowings under the 2016 VML Credit Facility (defined below). There are
no
interim principal payments on the SCL Senior Notes and interest is payable semi-annually in arrears on each February 8 and August 8, commencing on
February 8, 2019
.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
In connection with the SCL Senior Notes, the Company entered into fixed-to-variable interest rate swap contracts (see "Note 10 — Derivative Instruments").
The SCL Senior Notes are general senior unsecured obligations of SCL. Each series of SCL Senior Notes rank equally in right of payment with all of SCL's existing and future senior unsecured debt and rank senior in right of payment to all of SCL's future subordinated debt, if any. The SCL Senior Notes are effectively subordinated in right of payment to all of SCL's future secured debt (to the extent of the value of the collateral securing such debt) and are structurally subordinated to all of the liabilities of SCL's subsidiaries. None of SCL's subsidiaries guarantee the SCL Senior Notes.
The SCL Senior Notes were issued pursuant to an indenture, dated August 9, 2018 (the "Indenture"), between SCL and U.S. Bank National Association, as trustee. Upon the occurrence of certain events described in the Indenture, the interest rate on the SCL Senior Notes may be adjusted. The Indenture contains covenants, subject to customary exceptions and qualifications, that limit the ability of SCL and its subsidiaries to, among other things, incur liens, enter into sale and leaseback transactions and consolidate, merge, sell or otherwise dispose of all or substantially all of SCL's assets on a consolidated basis. The Indenture also provides for customary events of default.
2018 SCL Credit Facility
On November 20, 2018, SCL entered into a facility agreement with the arrangers and lenders named therein and Bank of China Limited, Macau Branch, as agent for the lenders, (the "2018 SCL Credit Facility") pursuant to which the lenders made available a
$2.0 billion
revolving unsecured credit facility to SCL (the "2018 SCL Revolving Facility"). The facility is available until
July 31, 2023
, and SCL may draw loans under the facility, which may consist of general revolving loans (consisting of a United States dollar component and a Hong Kong dollar component) or loans drawn under a swing-line loan sub-facility (denominated in either United States dollars or Hong Kong dollars). SCL may utilize the loans for general corporate purposes and working capital requirements of SCL and its subsidiaries.
Loans under the 2018 SCL Revolving Facility bear interest calculated by reference to (1) in the case of general revolving loans denominated in United States dollars, LIBOR, (2) in the case of loans denominated in United States dollars drawn under the swing-line loan sub-facility, a United States dollar alternate base rate (determined by reference to, among other things, the United States dollar prime lending rate and the Federal Funds Effective Rate), (3) in the case of general revolving loans denominated in Hong Kong dollars, the Hong Kong Interbank Offered Rate ("HIBOR") or (4) in the case of loans denominated in Hong Kong dollars drawn under the swing-line loan sub-facility, a Hong Kong dollar alternate base rate (determined by reference to, among other things, the Hong Kong dollar prime lending rate), in each case, plus a margin that is determined by reference to the consolidated leverage ratio as defined in the 2018 SCL Credit Facility. The initial margin for general revolving loans is
2.0%
per annum and the initial margin for loans drawn under the swing-line loan sub-facility is
1.0%
per annum. SCL is also required to pay a commitment fee of
0.60%
per annum on the undrawn amounts under the 2018 SCL Revolving Facility. As of
December 31, 2018
, the Company had
$2.0 billion
of available borrowing capacity under the 2018 SCL Revolving Facility.
The 2018 SCL Credit Facility contains affirmative and negative covenants customary for similar unsecured financings, including, but not limited to, limitations on indebtedness secured by liens on principal properties and sale and leaseback transactions. The 2018 SCL Credit Facility also requires SCL to maintain a maximum ratio of total indebtedness to adjusted EBITDA of
4.00
throughout the life of the facility and a minimum ratio of adjusted EBITDA to net interest expense (including capitalized interest) of
2.50
throughout the life of the facility.
The 2018 SCL Credit Facility also contains certain events of default (some of which are subject to grace and remedy periods and materiality qualifiers), including, but not limited to, events relating to SCL's gaming operations and the loss or termination of certain land concession contracts.
2016 VML Credit Facility
Two subsidiaries of the Company, VML US Finance LLC, the Borrower, and Venetian Macau Limited ("VML"), as guarantor, entered into a credit agreement (the "2016 VML Credit Facility"), which pursuant to various amendments, provided for a
$4.12 billion
term loan (the "2016 VML Term Loans"), a
$269 million
non-extended term loan (the
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
"2016 Non-Extended VML Term Loans"), and a
$2.0 billion
revolving facility (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 were 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 paid 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
3.1%
,
2.6%
and
2.1%
for the years ended December 31, 2018,
2017
and
2016
, respectively.
As previously described, a portion of the proceeds from the SCL Senior Notes was used to repay the outstanding borrowings under the 2016 VML Credit Facility. As a result, the Company recorded a
$52 million
loss on early retirement of debt during the three months ended September 30, 2018.
On November 20, 2018, effective as of November 21, 2018, the 2016 VML Credit Facility was terminated. As a result, the Company recorded a
$9 million
loss on early retirement of debt during the three months ended December 31, 2018.
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
$3.73 billion
at exchange rates in effect on
December 31, 2018
) credit agreement (the "2012 Singapore Credit Facility"), providing for a fully funded SGD
4.6 billion
(approximately
$3.37 billion
at exchange rates in effect on
December 31, 2018
) term loan (the "2012 Singapore Term Facility") and a SGD
500 million
(approximately
$366 million
at exchange rates in effect on
December 31, 2018
) revolving facility (the "2012 Singapore Revolving Facility") that was available until
November 25, 2017
, which included a SGD
100 million
(approximately
$73 million
at exchange rates in effect on
December 31, 2018
) 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.
During 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
.
During March 2018, the Company amended its 2012 Singapore Credit Facility, which refinanced the facility in an aggregate amount of SGD
4.80 billion
(approximately
$3.51 billion
at exchange rates in effect on
December 31, 2018
), pursuant to which consenting lenders of borrowings under the 2012 Singapore Term Facility extended the maturity to
March 29, 2024
, and consenting lenders of borrowings under the 2012 Singapore Revolving Facility extended the maturity to
September 29, 2023
. As of
December 31, 2018
, the Company had SGD
495 million
(approximately
$362 million
at exchange rates in effect on
December 31, 2018
) 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
June 30, 2018
, and at the end of each subsequent quarter through March 31, 2022, 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 March 19, 2018 (the "Singapore Restatement Date"). Commencing with the quarterly period ending June 30, 2022, and at the end of each subsequent quarter through March 31, 2023, 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. For the quarterly periods ending June 30, 2023 through the termination date of
March 29, 2024
, 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Date. The 2012 Singapore Revolving Facility has
no
interim amortization payments and matures on
September 29, 2023
.
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
3.1%
as of
December 31, 2018
). MBS pays a standby commitment fee of
35%
to
40%
of the spread per annum on all undrawn amounts under the 2012 Singapore Revolving Facility. The weighted average interest rate for the 2012 Singapore Credit Facility was
2.6%
for the year ended December 31, 2018, and
2.2%
for the years ended December 31,
2017
and
2016
.
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
4.0
x for all quarterly periods through maturity. Based on the actual leverage ratio as of
December 31, 2018
, 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, 2018
, 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,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Proceeds from SCL Senior Notes
|
$
|
5,500
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Proceeds from 2016 VML Credit Facility
|
746
|
|
|
649
|
|
|
1,000
|
|
Proceeds from 2013 U.S. Credit Facility
|
1,347
|
|
|
5
|
|
|
296
|
|
Proceeds from 2011 VML Credit Facility
|
—
|
|
|
—
|
|
|
1,000
|
|
|
$
|
7,593
|
|
|
$
|
654
|
|
|
$
|
2,296
|
|
|
|
|
|
|
|
Repayments on 2016 VML Credit Facility
|
$
|
(5,083
|
)
|
|
$
|
(668
|
)
|
|
$
|
—
|
|
Repayments on 2012 Singapore Credit Facility
|
(65
|
)
|
|
(67
|
)
|
|
(66
|
)
|
Repayments on 2013 U.S. Credit Facility
|
(26
|
)
|
|
(63
|
)
|
|
(914
|
)
|
Repayments on 2011 VML Credit Facility
|
—
|
|
|
—
|
|
|
(1,000
|
)
|
Repayments on Airplane Financings
|
—
|
|
|
(56
|
)
|
|
(4
|
)
|
Repayments on HVAC Equipment Lease and Other Long-Term Debt
|
(4
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
$
|
(5,178
|
)
|
|
$
|
(858
|
)
|
|
$
|
(1,987
|
)
|
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, 2018
, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
Capital
Lease
Obligations
|
|
Long-term
Debt
|
|
(In millions)
|
2019
|
$
|
14
|
|
|
$
|
98
|
|
2020
|
2
|
|
|
98
|
|
2021
|
1
|
|
|
98
|
|
2022
|
—
|
|
|
520
|
|
2023
|
—
|
|
|
3,682
|
|
Thereafter
|
—
|
|
|
7,573
|
|
|
17
|
|
|
12,069
|
|
Less — amount representing interest
|
(1
|
)
|
|
—
|
|
Total
|
$
|
16
|
|
|
$
|
12,069
|
|
Fair Value of Long-Term Debt
The estimated fair value of the Company's long-term debt as of
December 31, 2018
and
2017
, was approximately
$11.65 billion
and
$9.61 billion
, respectively, compared to its carrying value of
$12.08 billion
and
$9.72 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 10 — Derivative Instruments
In August 2018, the Company entered into interest rate swap agreements (the "IR Swaps"), which qualified and were designated as fair value hedges, swapping fixed-rate for variable-rate interest to hedge changes in the fair value of the SCL Senior Notes. These IR Swaps have a total notional value of
$5.50 billion
and expire in
August 2020
.
The total fair value of the IR Swaps as of
December 31, 2018
was
$56 million
. In the accompanying condensed consolidated balance sheets,
$15 million
was recorded as an
asset
in other assets, net with an equal corresponding adjustment recorded against the carrying value of the SCL Senior Notes. The realized portion of the IR swaps of
$41 million
was recorded as interest receivable in accounts receivable, net. The fair value of the IR Swaps was estimated using level 2 inputs from recently reported market forecasts of interest rates. Gains and losses due to changes in fair value of the IR Swaps completely offset changes in the fair value of the hedged portion of the underlying debt; therefore,
no
gain or loss has been recognized due to hedge ineffectiveness. Additionally, for the year ended
December 31, 2018
, the Company recorded
$9 million
as a reduction to interest expense related to the realized amount associated with the IR Swaps.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 11 — 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 30, June 28, September 27 and December 27, 2018, the Company paid a dividend of
$0.75
per common share as part of a regular cash dividend program. During the year ended
December 31, 2018
, the Company recorded
$2.35 billion
as a distribution against retained earnings (of which
$1.30 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 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).
In January 2019, as part of a regular cash dividend program, the Company's Board of Directors declared a quarterly dividend of
$0.77
per common share (a total estimated to be approximately
$597 million
) to be paid on
March 28, 2019
, to shareholders of record on
March 20, 2019
.
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 was to expire in
November 2018
. In June 2018, the Company's Board of Directors authorized increasing the remaining repurchase amount of
$1.11 billion
to
$2.50 billion
and extending the expiration date to
November 2020
. 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, 2018
and
2017
, the Company repurchased
14,998,127
and
6,194,137
shares, respectively, of its common stock for
$905 million
and
$375 million
, respectively, (including commissions) under the Company's current program. 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.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Rollforward of Shares of Common Stock
A summary of the outstanding shares of common stock is as follows:
|
|
|
|
Balance as of January 1, 2016
|
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
|
|
Exercise of stock options
|
1,007,551
|
|
Issuance of restricted stock
|
10,296
|
|
Vesting of restricted stock units
|
5,000
|
|
Repurchase of common stock
|
(15,044,620
|
)
|
Balance as of December 31, 2018
|
775,463,214
|
|
Other Equity Transactions
In addition to the shares repurchased under the share repurchase program, during the year ended December 31, 2018, the Company repurchased
46,493
shares in satisfaction of tax withholding and exercise price obligations on stock option exercises.
Noncontrolling Interests
SCL
On
February 23
and
June 22, 2018
, SCL paid a dividend of
0.99
Hong Kong dollars ("HKD") and HKD
1.00
per share, respectively, to SCL shareholders (a total of
$2.05 billion
, of which the Company retained
$1.44 billion
during the year ended
December 31, 2018
).
On
February 24
and
June 23, 2017
, 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, 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
).
In January 2019, 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
$715 million
) to SCL shareholders of record on
February 4, 2019
, which was paid on
February 22, 2019
.
Other
During the years ended
December 31, 2018
,
2017
and
2016
, the Company distributed
$12 million
,
$13 million
and
$15 million
, respectively, to certain of its noncontrolling interests.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Note 12 — Income Taxes
Consolidated income before taxes and noncontrolling interests for domestic and foreign operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Foreign
|
$
|
3,164
|
|
|
$
|
2,806
|
|
|
$
|
2,227
|
|
Domestic
|
162
|
|
|
248
|
|
|
37
|
|
Total income before income taxes
|
$
|
3,326
|
|
|
$
|
3,054
|
|
|
$
|
2,264
|
|
The components of the income tax expense (benefit) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Foreign:
|
|
|
|
|
|
Current
|
$
|
245
|
|
|
$
|
258
|
|
|
$
|
206
|
|
Deferred
|
(12
|
)
|
|
12
|
|
|
29
|
|
Federal:
|
|
|
|
|
|
Current
|
15
|
|
|
30
|
|
|
9
|
|
Deferred
|
135
|
|
|
(509
|
)
|
|
(5
|
)
|
State:
|
|
|
|
|
|
Current
|
2
|
|
|
—
|
|
|
—
|
|
Deferred
|
(10
|
)
|
|
—
|
|
|
—
|
|
Total income tax expense (benefit)
|
$
|
375
|
|
|
$
|
(209
|
)
|
|
$
|
239
|
|
The reconciliation of the statutory federal income tax rate and the Company's effective tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
Statutory federal income tax rate
|
21.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Increase (decrease) in tax rate resulting from:
|
|
|
|
|
|
Tax exempt income of foreign subsidiary
|
(8.3
|
)%
|
|
(7.9
|
)%
|
|
(8.7
|
)%
|
Foreign and U.S. tax rate differential
|
(6.5
|
)%
|
|
(18.8
|
)%
|
|
(20.4
|
)%
|
Change in valuation allowance
|
4.5
|
%
|
|
18.3
|
%
|
|
43.2
|
%
|
Repatriation of foreign earnings
|
—
|
%
|
|
72.1
|
%
|
|
79.8
|
%
|
U.S. foreign tax credits
|
—
|
%
|
|
(105.9
|
)%
|
|
(119.3
|
)%
|
Other, net
|
0.6
|
%
|
|
0.4
|
%
|
|
1.0
|
%
|
Effective tax rate
|
11.3
|
%
|
|
(6.8
|
)%
|
|
10.6
|
%
|
The Company enjoys an income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. In August 2018, VML received an additional exemption from Macao's corporate income tax on profits generated by the operation of casino games of chance through
June 26, 2022
, the date VML's subconcession agreement expires. Had the Company not received the income tax exemption in Macao, consolidated net income attributable to LVSC would have been reduced by
$184 million
,
$158 million
and
$127 million
, and diluted earnings per share would have been reduced by
$0.23
,
$0.20
and
$0.16
per share for the years ended
December 31, 2018
,
2017
and
2016
, respectively. In May 2014, the Company entered into an agreement with the Macao government, which was effective through the
end of 2018
and provided for an annual payment of
42 million
patacas (approximately
$5 million
at exchange rates in effect on
December 31, 2018
) that is a substitution for a
12%
tax otherwise due from VML shareholders on dividend distributions paid from VML gaming profits. In September 2018,
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
VML requested an additional agreement with the Macao government through June 26, 2022, to correspond to the expiration of the income tax exemption for gaming operations; however, there is no assurance VML will receive the additional agreement, which could have a significant impact on the Company's tax obligation in Macao. In September 2013, the Company and the Internal Revenue Service entered into a Pre-Filing Agreement providing 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.
The Company's foreign and U.S. tax rate differential reflects the fact that U.S. tax rates are higher than the statutory tax rates in Singapore and Macao of
17%
and
12%
, respectively.
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 therefore, no longer generating U.S. foreign tax credits. As a result, during the year ended December 31, 2017, the Company recorded a tax benefit of
$526 million
relating to the reduction of the valuation allowance on certain deferred tax assets 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 this impact of enactment of U.S. tax reform subject to SAB 118, which provided for a twelve-month measurement period to complete the accounting required under ASC 740, Income Taxes.
During the year ended
December 31, 2018
, the Company recorded a tax expense of
$57 million
resulting from recently issued guidance by the IRS related to certain international provisions of U.S. tax reform. While management believes the amounts recorded during the year ended
December 31, 2018
, reasonably represent the ultimate impact of U.S. tax reform on the Company's consolidated financial statements, it is possible the Company may adjust these amounts for future related administrative guidance, notices, implementation regulations, potential legislative amendments and interpretations as the Act continues to evolve. These adjustments could have an impact on the Company's tax assets and liabilities, effective tax rate, net income and earnings per share.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The primary tax affected components of the Company's net deferred tax assets (liabilities) are as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
(In millions)
|
Deferred tax assets:
|
|
|
|
U.S. foreign tax credit carryforwards
|
$
|
4,919
|
|
|
$
|
4,937
|
|
Net operating loss carryforwards
|
271
|
|
|
262
|
|
Allowance for doubtful accounts
|
16
|
|
|
21
|
|
Accrued expenses
|
16
|
|
|
16
|
|
Deferred gain on the sale of The Grand Canal Shoppes and The Shoppes at The Palazzo
|
14
|
|
|
16
|
|
Stock-based compensation
|
13
|
|
|
14
|
|
Pre-opening expenses
|
11
|
|
|
14
|
|
State deferred items
|
10
|
|
|
8
|
|
Other
|
1
|
|
|
—
|
|
|
5,271
|
|
|
5,288
|
|
Less — valuation allowances
|
(4,769
|
)
|
|
(4,690
|
)
|
Total deferred tax assets
|
502
|
|
|
598
|
|
Deferred tax liabilities:
|
|
|
|
Property and equipment
|
(245
|
)
|
|
(246
|
)
|
Prepaid expenses
|
(3
|
)
|
|
(5
|
)
|
Other
|
(77
|
)
|
|
(60
|
)
|
Total deferred tax liabilities
|
(325
|
)
|
|
(311
|
)
|
Deferred tax assets, net
|
$
|
177
|
|
|
$
|
287
|
|
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, which were carried forward to tax years 2018 and beyond. The Company's U.S. foreign tax credit carryforwards were
$4.99 billion
and
$5.0 billion
as of
December 31, 2018
and
2017
, respectively, which will begin to expire in
2021
. The Company's state net operating loss carryforwards were
$232 million
and
$237 million
as of
December 31, 2018
and
2017
, respectively, which will begin to expire in
2029
. There was a valuation allowance of
$4.50 billion
and
$4.43 billion
as of
December 31, 2018
and
2017
, 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
$2.21 billion
and
$2.14 billion
as of
December 31, 2018
and
2017
, respectively, which begin to expire in
2019
. There are valuation allowances of
$268 million
and
$261 million
as of
December 31, 2018
and
2017
, 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 deferred tax liabilities are not recorded for undistributed earnings of foreign subsidiaries 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
excess of their current year's tax earnings and profits in order to meet the Company's liquidity needs. As of
December 31, 2018
, the amount of earnings and profits of foreign subsidiaries the Company does not intend to repatriate was
$3.53 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.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Balance at the beginning of the year
|
$
|
92
|
|
|
$
|
74
|
|
|
$
|
65
|
|
Additions to tax positions related to prior years
|
2
|
|
|
1
|
|
|
14
|
|
Additions to tax positions related to current year
|
24
|
|
|
18
|
|
|
7
|
|
Settlements
|
—
|
|
|
—
|
|
|
(10
|
)
|
Lapse in statutes of limitations
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
Balance at the end of the year
|
$
|
118
|
|
|
$
|
92
|
|
|
$
|
74
|
|
As of
December 31, 2018
,
2017
and
2016
, unrecognized tax benefits of
$67 million
,
$62 million
and
$58 million
, respectively, were recorded as reductions to the U.S. foreign tax credit deferred tax asset. As of
December 31, 2018
,
2017
and
2016
, unrecognized tax benefits of
$51 million
,
$30 million
and
$16 million
, respectively, were recorded in other long-term liabilities.
Included in the unrecognized tax benefit balance as of
December 31, 2018
,
2017
and
2016
, are
$103 million
,
$80 million
and
$65 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 could be subject to examination for tax years beginning
2010
in the U.S. and tax years beginning in
2014
in Macao and Singapore. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance 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
$3 million
and
$1 million
were accrued as of
December 31, 2018
and
2017
, respectively.
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 13 — 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 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.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
The Company used foreign currency forward contracts as effective economic hedges to manage a portion of its foreign currency exposure, the last of which expired in December 2017. 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 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
and
2016
, the Company recorded in other income (expense) a
$12 million
loss and
$10 million
gain, respectively, related to the change in fair value of the forward contracts.
Cash equivalents, which are short-term investments with original maturities of less than 90 days, had an estimated fair value of
$2.64 billion
and
$1.05 billion
as of
December 31, 2018
and
2017
, respectively. The estimated fair value of the Company's cash equivalents is based on level 1 inputs (quoted market prices in active markets).
Note 14 — 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
18 years
. The leases include minimum base rents with escalated contingent rent clauses. As of
December 31, 2018
, the future minimum rentals on these non-cancelable leases are as follows (in millions, at exchange rates in effect on
December 31, 2018
):
|
|
|
|
|
2019
|
$
|
457
|
|
2020
|
366
|
|
2021
|
269
|
|
2022
|
184
|
|
2023
|
80
|
|
Thereafter
|
140
|
|
Total minimum future rentals
|
$
|
1,496
|
|
The total minimum future rentals do not include the escalated contingent rent clauses. Contingent rentals amounted to
$88 million
,
$48 million
and
$36 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
The Grand Canal Shoppes at The Venetian Resort Las Vegas
In April 2004, the Company entered into an agreement to sell the portion of the Grand Canal Shoppes located within The Venetian Resort 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 Resort 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 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 Resort 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, 2018
,
2017
and
2016
,
$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; (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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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, 2018
,
2017
and
2016
,
$3 million
of this deferred item was amortized as an offset to convention, retail and other expense.
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. As the transaction has not been accounted for as a sale in accordance with related accounting standards,
$265 million
of the mall sale transaction has been recorded as deferred proceeds from the sale as of
December 31, 2018
, 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 Tower 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 Company leased nine restaurant and retail spaces on the casino level within the Palazzo Tower 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 Company, which is amortized into income on a straight-line basis over the
89
-year lease term.
Note 15 — 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, 2018
. 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.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 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 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 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 has been set to begin on March 4, 2019. The Company has accrued a nominal amount for estimated costs related to this legal matter as of
December 31, 2018
. In the event 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.
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 Venetian Casino Resort, LLC ("VCR") (collectively, the "Defendants"). The claim is for
3.0 billion
patacas (approximately
$372 million
at exchange rates in effect on
December 31, 2018
) 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 the claim should proceed exclusively against the U.S. Defendants. On May 8, 2014, AAEC lodged an appeal against that decision. The Macao
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 the court file be transferred back to the Macao Judicial Court. Evidence gathering by the Macao Judicial Court 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 February 10, 2018, the Macao Judicial Court notified the parties that a communication dated January 25, 2018, had been received from the U.S. Department of Justice. The Macao Judicial Court extended the time for processing the letters rogatory until the end of June 2018. On May 7, 2018, the Macao Judicial Court further extended the time for processing one of the letters rogatory until mid-September 2018, which was further extended on August 16, 2018, to mid-November 2018. The trial of this matter has been scheduled by the Macao Judicial Court for mid-September 2019.
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. In a letter dated April 14, 2016, such confirmation was 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 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, 2018
). 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
$37,195
,
$18,598
and
$124
, respectively, at exchange rates in effect on
December 31, 2018
), subject to a minimum of
45 million
patacas (approximately
$6 million
at exchange rates in effect on
December 31, 2018
). 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, 2018
, the Company was obligated under its subconcession to make minimum future payments of approximately
$42 million
during each of the three years in the period ending
December 31,
2021, and approximately
$21 million
during the year ending December 31, 2022.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
Operating Leases
The Company leases real estate, including the Macao and Singapore leasehold interests in land, and various equipment under operating lease arrangements with terms in excess of
one year
. As of
December 31, 2018
, the Company was obligated under non-cancelable operating leases to make future minimum lease payments as follows (in millions):
|
|
|
|
|
2019
|
$
|
35
|
|
2020
|
27
|
|
2021
|
24
|
|
2022
|
23
|
|
2023
|
22
|
|
Thereafter
|
294
|
|
Total minimum payments
|
$
|
425
|
|
Expenses incurred under operating lease agreements, including amortization of leasehold interest in land and those that are short-term and variable-rate in nature, totaled
$94 million
,
$116 million
and
$109 million
for the years ended
December 31, 2018
,
2017
and
2016
, respectively.
Note 16 — Stock-Based Employee Compensation
The Company has
two
equity award plans for grants of options to purchase the Company's common stock and ordinary shares of SCL (the "2004 Plan" and the "SCL Equity Plan," respectively), 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 2004 Plan gives 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 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, 2018
, there were
917,674
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 SCL Equity Plan gives 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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, 2018
, there were
714,665,526
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. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant.
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,
|
|
2018
|
|
2017
|
|
2016
|
LVSC 2004 Plan:
|
|
|
|
|
|
Weighted average volatility
|
25.8
|
%
|
|
26.7
|
%
|
|
33.5
|
%
|
Expected term (in years)
|
6.7
|
|
|
5.1
|
|
|
5.6
|
|
Risk-free rate
|
2.9
|
%
|
|
1.9
|
%
|
|
1.4
|
%
|
Expected dividend yield
|
5.7
|
%
|
|
4.7
|
%
|
|
5.7
|
%
|
SCL Equity Plan:
|
|
|
|
|
|
Weighted average volatility
|
36.0
|
%
|
|
36.9
|
%
|
|
40.8
|
%
|
Expected term (in years)
|
4.7
|
|
|
4.4
|
|
|
4.4
|
|
Risk-free rate
|
1.7
|
%
|
|
1.3
|
%
|
|
1.2
|
%
|
Expected dividend yield
|
5.8
|
%
|
|
6.6
|
%
|
|
5.5
|
%
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
A summary of the stock option activity for the Company's equity award plans for the year ended
December 31, 2018
, 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, 2018
|
6,290,747
|
|
|
$
|
57.43
|
|
|
|
|
|
Granted
|
3,124,168
|
|
|
55.23
|
|
|
|
|
|
Exercised
|
(1,007,551
|
)
|
|
58.80
|
|
|
|
|
|
Forfeited or expired
|
(451,000
|
)
|
|
80.22
|
|
|
|
|
|
Outstanding as of December 31, 2018
|
7,956,364
|
|
|
$
|
55.10
|
|
|
7.78
|
|
$
|
13
|
|
Exercisable as of December 31, 2018
|
2,217,728
|
|
|
$
|
53.99
|
|
|
5.96
|
|
$
|
7
|
|
SCL Equity Plan:
|
|
|
|
|
|
|
|
Outstanding as of January 1, 2018
|
48,251,975
|
|
|
$
|
4.39
|
|
|
|
|
|
Granted
|
18,872,800
|
|
|
5.62
|
|
|
|
|
|
Exercised
|
(6,185,925
|
)
|
|
3.74
|
|
|
|
|
|
Forfeited or expired
|
(3,556,475
|
)
|
|
5.24
|
|
|
|
|
|
Outstanding as of December 31, 2018
|
57,382,375
|
|
|
$
|
4.81
|
|
|
7.64
|
|
$
|
18
|
|
Exercisable as of December 31, 2018
|
18,152,075
|
|
|
$
|
5.00
|
|
|
6.00
|
|
$
|
8
|
|
A summary of the unvested restricted stock and stock units under the Company's equity award plans for the year ended
December 31, 2018
, is presented below:
|
|
|
|
|
|
|
|
|
Shares
|
|
Weighted
Average
Grant Date
Fair Value
|
LVSC 2004 Plan:
|
|
|
|
Unvested Restricted Stock
|
|
|
|
Balance as of January 1, 2018
|
74,281
|
|
|
$
|
51.17
|
|
Granted
|
10,296
|
|
|
77.68
|
|
Vested
|
(42,874
|
)
|
|
53.06
|
|
Balance as of December 31, 2018
|
41,703
|
|
|
$
|
55.77
|
|
Unvested Restricted Stock Units
|
|
|
|
Balance as of January 1, 2018
|
5,000
|
|
|
$
|
73.20
|
|
Vested
|
(5,000
|
)
|
|
73.20
|
|
Balance as of December 31, 2018
|
—
|
|
|
$
|
—
|
|
SCL Equity Plan:
|
|
|
|
Unvested Restricted Stock Units, Cash-Settled
|
|
|
|
Balance as of January 1, 2018
|
852,000
|
|
|
$
|
7.51
|
|
Vested
|
(852,000
|
)
|
|
7.51
|
|
Balance as of December 31, 2018
|
—
|
|
|
$
|
—
|
|
As of
December 31, 2018
, under the 2004 Plan there was
$37 million
of unrecognized compensation cost related to unvested stock options. The stock option and restricted stock costs are expected to be recognized over a weighted average period of
3.4
years and
0.4
years, respectively.
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
As of
December 31, 2018
, under the SCL Equity Plan there was
$25 million
of unrecognized compensation cost related to unvested stock options. The stock option costs are expected to be recognized over a weighted average period of
2.7
years.
The stock-based compensation activity for the 2004 Plan and SCL Equity Plan is as follows for the three years ended
December 31, 2018
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(Dollars in millions, except weighted average grant date fair values)
|
Compensation expense:
|
|
|
|
|
|
Stock options
|
$
|
29
|
|
|
$
|
29
|
|
|
$
|
25
|
|
Restricted stock and stock units
|
1
|
|
|
5
|
|
|
10
|
|
|
$
|
30
|
|
|
$
|
34
|
|
|
$
|
35
|
|
Income tax benefit recognized in the consolidated statements of operations
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
6
|
|
Compensation cost capitalized as part of property and equipment
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
LVSC 2004 Plan:
|
|
|
|
|
|
Stock options granted
|
3,124,168
|
|
|
1,027,108
|
|
|
1,672,458
|
|
Weighted average grant date fair value
|
$
|
7.52
|
|
|
$
|
8.95
|
|
|
$
|
8.62
|
|
Restricted stock granted
|
10,296
|
|
|
37,270
|
|
|
61,546
|
|
Weighted average grant date fair value
|
$
|
77.68
|
|
|
$
|
58.51
|
|
|
$
|
42.50
|
|
Stock options exercised:
|
|
|
|
|
|
Intrinsic value
|
$
|
16
|
|
|
$
|
11
|
|
|
$
|
3
|
|
Cash received
|
$
|
56
|
|
|
$
|
28
|
|
|
$
|
11
|
|
SCL Equity Plan:
|
|
|
|
|
|
Stock options granted
|
18,872,800
|
|
|
17,364,000
|
|
|
18,407,200
|
|
Weighted average grant date fair value
|
$
|
1.01
|
|
|
$
|
0.71
|
|
|
$
|
0.73
|
|
Stock options exercised:
|
|
|
|
|
|
Intrinsic value
|
$
|
12
|
|
|
$
|
4
|
|
|
$
|
2
|
|
Cash received
|
$
|
23
|
|
|
$
|
12
|
|
|
$
|
6
|
|
Note 17 — 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 Las Vegas Sands Corp. 401(k) Retirement 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, 2018
,
2017
and
2016
, the Company's matching contributions under the savings plan were
$12 million
,
$10 million
and
$9 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
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
to
100%
after working for
ten
years. For the years ended
December 31, 2018
,
2017
and
2016
, VML's contributions into the provident fund were
$38 million
,
$37 million
and
$35 million
, respectively.
Participation in MBS's provident retirement fund is available for all permanent and part-time employees that are a Singapore citizen or a permanent resident upon joining the Company. As of
December 31, 2018
, 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 reaching the retirement age or upon meeting requirements set up by local regulations. For the years ended
December 31, 2018
,
2017
and
2016
, MBS's contributions into the provident fund were
$41 million
,
$38 million
and
$35 million
, respectively.
Note 18 — Related Party Transactions
During the years ended
December 31, 2018
,
2017
and
2016
, the Principal Stockholder and his family purchased certain services from the Company including lodging, banquet services and services provided by Company personnel for approximately
$3 million
each year. For the years ended
December 31, 2018
,
2017
and
2016
, the Company incurred
$2 million
,
$1 million
and
$2 million
, respectively, for food and beverage services provided by restaurants the Principal Stockholder has an ownership interest in.
During the years ended
December 31, 2018
,
2017
and
2016
, the Company incurred certain expenses totaling
$6 million
,
$10 million
and
$3 million
, respectively, to its Principal Stockholder related to the Company's use of his personal aircraft and yacht for business purposes. During the years ended
December 31, 2018
,
2017
and
2016
, the Company charged the Principal Stockholder
$20 million
,
$21 million
and
$17 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. In addition, the Principal Stockholder agreed to reimburse the Company for the installation of avionics and aircraft systems on his personal aircraft. The cost of these systems is expected to be
$22 million
, plus all taxes and expenses related to the installation and operation of these systems. During the year ended December 31, 2018, the Company paid
$13 million
for such costs and was reimbursed in full by the Principal Stockholder.
Related party receivables were
$3 million
as of
December 31, 2018
and less than
$1 million
as of December 31,
2017
. Related party payables were less than
$1 million
as of
December 31, 2018
and
2017
.
Note 19 — 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; 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 to The Londoner Macao, the Four Seasons Tower Suites Macao and the St. Regis Tower Suites Macao in Macao, and the Las Vegas Condo Tower (for 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. The segment information for the years ended December 31,
2017
and
2016
have been reclassified to conform to the current presentation.
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, 2018
,
2017
and
2016
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Net Revenues
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
3,474
|
|
|
$
|
2,924
|
|
|
$
|
2,831
|
|
Sands Cotai Central
|
2,153
|
|
|
1,916
|
|
|
1,924
|
|
The Parisian Macao
|
1,533
|
|
|
1,395
|
|
|
401
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
719
|
|
|
587
|
|
|
584
|
|
Sands Macao
|
650
|
|
|
626
|
|
|
668
|
|
Ferry Operations and Other
|
160
|
|
|
161
|
|
|
158
|
|
|
8,689
|
|
|
7,609
|
|
|
6,566
|
|
Marina Bay Sands
|
3,069
|
|
|
3,134
|
|
|
2,791
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
1,682
|
|
|
1,657
|
|
|
1,571
|
|
Sands Bethlehem
|
536
|
|
|
564
|
|
|
555
|
|
|
2,218
|
|
|
2,221
|
|
|
2,126
|
|
Intersegment eliminations
|
(247
|
)
|
|
(236
|
)
|
|
(212
|
)
|
Total net revenues
|
$
|
13,729
|
|
|
$
|
12,728
|
|
|
$
|
11,271
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Intersegment Revenues
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
4
|
|
|
$
|
5
|
|
|
$
|
6
|
|
Sands Cotai Central
|
—
|
|
|
—
|
|
|
1
|
|
Ferry Operations and Other
|
25
|
|
|
23
|
|
|
22
|
|
|
29
|
|
|
28
|
|
|
29
|
|
Marina Bay Sands
|
9
|
|
|
8
|
|
|
8
|
|
Las Vegas Operating Properties
|
209
|
|
|
200
|
|
|
175
|
|
Total intersegment revenues
|
$
|
247
|
|
|
$
|
236
|
|
|
$
|
212
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Adjusted Property EBITDA
|
|
|
|
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
$
|
1,378
|
|
|
$
|
1,133
|
|
|
$
|
1,089
|
|
Sands Cotai Central
|
759
|
|
|
633
|
|
|
616
|
|
The Parisian Macao
|
484
|
|
|
413
|
|
|
115
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
262
|
|
|
233
|
|
|
221
|
|
Sands Macao
|
178
|
|
|
174
|
|
|
172
|
|
Ferry Operations and Other
|
18
|
|
|
21
|
|
|
32
|
|
|
3,079
|
|
|
2,607
|
|
|
2,245
|
|
Marina Bay Sands
|
1,690
|
|
|
1,755
|
|
|
1,395
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
394
|
|
|
391
|
|
|
356
|
|
Sands Bethlehem
|
116
|
|
|
147
|
|
|
143
|
|
|
510
|
|
|
538
|
|
|
499
|
|
Consolidated adjusted property EBITDA
(1)
|
5,279
|
|
|
4,900
|
|
|
4,139
|
|
Other Operating Costs and Expenses
|
|
|
|
|
|
Stock-based compensation
|
(12
|
)
|
|
(14
|
)
|
|
(14
|
)
|
Corporate
|
(202
|
)
|
|
(173
|
)
|
|
(256
|
)
|
Pre-opening
|
(6
|
)
|
|
(8
|
)
|
|
(130
|
)
|
Development
|
(12
|
)
|
|
(13
|
)
|
|
(9
|
)
|
Depreciation and amortization
|
(1,111
|
)
|
|
(1,171
|
)
|
|
(1,111
|
)
|
Amortization of leasehold interests in land
|
(35
|
)
|
|
(37
|
)
|
|
(38
|
)
|
Loss on disposal or impairment of assets
|
(150
|
)
|
|
(20
|
)
|
|
(79
|
)
|
Operating income
|
3,751
|
|
|
3,464
|
|
|
2,502
|
|
Other Non-Operating Costs and Expenses
|
|
|
|
|
|
Interest income
|
59
|
|
|
16
|
|
|
10
|
|
Interest expense, net of amounts capitalized
|
(446
|
)
|
|
(327
|
)
|
|
(274
|
)
|
Other income (expense)
|
26
|
|
|
(94
|
)
|
|
31
|
|
Loss on modification or early retirement of debt
|
(64
|
)
|
|
(5
|
)
|
|
(5
|
)
|
Income tax (expense) benefit
|
(375
|
)
|
|
209
|
|
|
(239
|
)
|
Net income
|
$
|
2,951
|
|
|
$
|
3,263
|
|
|
$
|
2,025
|
|
_________________________
|
|
(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
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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 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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|
|
|
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|
|
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Year Ended December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Capital Expenditures
|
|
|
|
|
|
Corporate and Other
|
$
|
81
|
|
|
$
|
9
|
|
|
$
|
11
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
180
|
|
|
153
|
|
|
94
|
|
Sands Cotai Central
|
131
|
|
|
86
|
|
|
128
|
|
The Parisian Macao
|
131
|
|
|
204
|
|
|
925
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
63
|
|
|
22
|
|
|
16
|
|
Sands Macao
|
29
|
|
|
10
|
|
|
18
|
|
Ferry Operations and Other
|
1
|
|
|
4
|
|
|
4
|
|
|
535
|
|
|
479
|
|
|
1,185
|
|
Marina Bay Sands
|
182
|
|
|
196
|
|
|
83
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
127
|
|
|
123
|
|
|
92
|
|
Sands Bethlehem
|
24
|
|
|
30
|
|
|
27
|
|
|
151
|
|
|
153
|
|
|
119
|
|
Total capital expenditures
|
$
|
949
|
|
|
$
|
837
|
|
|
$
|
1,398
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Total Assets
|
|
|
|
|
|
Corporate and Other
|
$
|
1,296
|
|
|
$
|
953
|
|
|
$
|
465
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
3,403
|
|
|
2,640
|
|
|
2,642
|
|
Sands Cotai Central
|
4,295
|
|
|
3,891
|
|
|
4,152
|
|
The Parisian Macao
|
2,455
|
|
|
2,496
|
|
|
2,711
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
883
|
|
|
930
|
|
|
966
|
|
Sands Macao
|
322
|
|
|
282
|
|
|
316
|
|
Ferry Operations and Other
|
259
|
|
|
275
|
|
|
281
|
|
|
11,617
|
|
|
10,514
|
|
|
11,068
|
|
Marina Bay Sands
|
4,674
|
|
|
5,054
|
|
|
5,031
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
4,321
|
|
|
3,530
|
|
|
3,214
|
|
Sands Bethlehem
|
639
|
|
|
636
|
|
|
691
|
|
|
4,960
|
|
|
4,166
|
|
|
3,905
|
|
Total assets
|
$
|
22,547
|
|
|
$
|
20,687
|
|
|
$
|
20,469
|
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2018
|
|
2017
|
|
2016
|
|
(In millions)
|
Total Long-Lived Assets
(1)
|
|
|
|
|
|
Corporate and Other
|
$
|
281
|
|
|
$
|
249
|
|
|
$
|
264
|
|
Macao:
|
|
|
|
|
|
The Venetian Macao
|
1,750
|
|
|
1,728
|
|
|
1,726
|
|
Sands Cotai Central
|
3,414
|
|
|
3,516
|
|
|
3,720
|
|
The Parisian Macao
|
2,317
|
|
|
2,375
|
|
|
2,572
|
|
The Plaza Macao and Four Seasons Hotel Macao
|
772
|
|
|
853
|
|
|
874
|
|
Sands Macao
|
229
|
|
|
222
|
|
|
245
|
|
Ferry Operations and Other
|
130
|
|
|
146
|
|
|
157
|
|
|
8,612
|
|
|
8,840
|
|
|
9,294
|
|
Marina Bay Sands
|
4,148
|
|
|
4,336
|
|
|
4,192
|
|
United States:
|
|
|
|
|
|
Las Vegas Operating Properties
|
2,762
|
|
|
2,779
|
|
|
2,815
|
|
Sands Bethlehem
|
549
|
|
|
549
|
|
|
548
|
|
|
3,311
|
|
|
3,328
|
|
|
3,363
|
|
Total long-lived assets
|
$
|
16,352
|
|
|
$
|
16,753
|
|
|
$
|
17,113
|
|
_________________________
|
|
(1)
|
Long-lived assets include property and equipment, net of accumulated depreciation and amortization, and leasehold interests in land, net of accumulated amortization.
|
Note 20 — Selected Quarterly Financial Results (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter
|
|
First
(1)
|
|
Second
|
|
Third
|
|
Fourth
(1,2)
|
|
Total
|
|
(In millions, except per share data)
|
2018
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
3,579
|
|
|
$
|
3,303
|
|
|
$
|
3,372
|
|
|
$
|
3,475
|
|
|
$
|
13,729
|
|
Operating income
|
1,158
|
|
|
797
|
|
|
922
|
|
|
874
|
|
|
3,751
|
|
Net income (loss)
|
1,616
|
|
|
676
|
|
|
699
|
|
|
(40
|
)
|
|
2,951
|
|
Net income (loss) attributable to Las Vegas Sands Corp.
|
1,456
|
|
|
556
|
|
|
571
|
|
|
(170
|
)
|
|
2,413
|
|
Basic earnings (loss) per share
|
1.85
|
|
|
0.70
|
|
|
0.73
|
|
|
(0.22
|
)
|
|
3.07
|
|
Diluted earnings (loss) per share
|
1.84
|
|
|
0.70
|
|
|
0.73
|
|
|
(0.22
|
)
|
|
3.07
|
|
2017
(3)
|
|
|
|
|
|
|
|
|
|
Net revenues
|
$
|
3,067
|
|
|
$
|
3,109
|
|
|
$
|
3,161
|
|
|
$
|
3,391
|
|
|
$
|
12,728
|
|
Operating income
|
764
|
|
|
817
|
|
|
855
|
|
|
1,028
|
|
|
3,464
|
|
Net income
|
579
|
|
|
639
|
|
|
684
|
|
|
1,361
|
|
|
3,263
|
|
Net income attributable to Las Vegas Sands Corp.
|
481
|
|
|
546
|
|
|
569
|
|
|
1,212
|
|
|
2,808
|
|
Basic earnings per share
|
0.61
|
|
|
0.69
|
|
|
0.72
|
|
|
1.53
|
|
|
3.55
|
|
Diluted earnings per share
|
0.61
|
|
|
0.69
|
|
|
0.72
|
|
|
1.53
|
|
|
3.55
|
|
________________________
|
|
(1)
|
During Q1 2018, the Company recorded a nonrecurring non-cash discrete income tax benefit of
$670 million
due to the implementation of the Global Intangible Low-Taxed Income ("GILTI") provision of U.S. tax reform.
|
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
During Q4 2018, the IRS issued guidance clarifying the implementation of the GILTI and other provisions that would impact the foreign tax credit utilization and required an increase of a valuation allowance related to the Company's historical foreign tax credits. As a result, in Q4 2018, the Company recorded a nonrecurring non-cash discrete income tax expense of
$727 million
.
|
|
(2)
|
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.
|
|
|
(3)
|
The information for 2017 has been reclassified to conform to the current presentation.
|
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.