LVS

Business Context and Reporting Period

Company: Las Vegas Sands Corp. (LVSC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2009
Overview: LVSC operates integrated resort properties in Las Vegas (The Venetian, The Palazzo, Sands Expo), Macau (Sands Macao, The Venetian Macao, Four Seasons Macao), and is developing projects in Singapore (Marina Bay Sands) and Pennsylvania (Sands Bethlehem). In November 2009, the company completed an initial public offering (IPO) of its Macau subsidiary, Sands China Ltd. (SCL), retaining a 70.3% ownership stake.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Growth: Net revenues increased 3.9% to $4.56 billion, driven by a full year of operations for Four Seasons Macao and the opening of Sands Bethlehem in May 2009. Casino revenues rose 10.4% to $3.52 billion.
• Operating Loss: The company reported an operating loss of $28.7 million in 2009, a significant decline from an operating income of $163.7 million in 2008. This was primarily due to a $169.5 million impairment loss, a $42.5 million legal settlement, and a $96.9 million valuation allowance on U.S. deferred tax assets.
• Segment Performance:
  • Macau: Adjusted property EBITDAR increased 11.5% at The Venetian Macao and 14.1% at Sands Macao, despite a 5.1% decline in total visitor arrivals to Macau. Gaming revenue in Macau grew 9.7% year-over-year.
  • Las Vegas: Adjusted property EBITDAR decreased 33.9% due to a 18.3% drop in room revenues and lower occupancy rates (87.4% vs. 91.3% in 2008) as the company reduced rates to maintain volume.
• Debt and Liquidity: Long-term debt increased to $11.03 billion. However, cash and cash equivalents grew significantly to $4.96 billion, bolstered by $2.39 billion in proceeds from the SCL Offering and related transactions.

Guidance, Outlook, and Risks

• Development Projects: Due to challenging capital markets, the company suspended construction on several projects, including the St. Regis Residences in Las Vegas and portions of the Cotai Strip in Macau. Construction on Marina Bay Sands in Singapore is on track for an April 27, 2010 opening. The company expects to recommence construction on Macau parcels 5 and 6 in early 2010 following a $1.75 billion financing commitment.
• Cost Cutting: Management implemented cost-cutting measures expected to generate approximately $500 million in annualized savings ($200 million in Las Vegas, $300 million in Macau).
• Key Risks:
  • Financing: Significant risk regarding the ability to secure additional financing for suspended projects; failure to do so could result in impairment charges.
  • Regulatory: Risks associated with Macau land concession deadlines (e.g., Parcel 3 deadline of April 2013) and the potential loss of concessions if deadlines are not met.
  • Competition: Intensifying competition in both Las Vegas and Macau, including new openings by competitors.
  • Legal: Ongoing litigation regarding Macau operations, including a $58.6 million judgment on appeal and a settled $42.5 million claim.

Investor Verification Checklist

• Debt Covenants: Verify compliance with leverage ratios under U.S. and Macau credit facilities, which were maintained at 5.3x and 2.8x respectively as of year-end.
• Impairment Charges: Review the $169.5 million impairment loss, specifically the $94.0 million related to The Shoppes at The Palazzo sale proceeds and the $57.2 million related to the suspended Sands Expo expansion.
• Macau Land Concessions: Monitor the status of land concession approvals for Parcels 5, 6, 7, and 8, and the April 2013 deadline for Parcel 3.
• SCL Offering Impact: Assess the long-term value of the 70.3% retained interest in Sands China Ltd. (SCL) following its Hong Kong listing.
• Marina Bay Sands Opening: Confirm the April 2010 opening timeline and associated capital expenditure requirements ($2.3 billion expected through 2011).