Business Context and Reporting Period
Company: Las Vegas Sands Corp. (LVSC)
Filing Type: Form 10-K (Annual Report)
Period Ended: December 31, 2010
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 Singapore (Marina Bay Sands). The company also operates Sands Bethlehem in Pennsylvania. In 2010, the company partially opened Marina Bay Sands in April and recommenced construction on Cotai Strip parcels 5 and 6 in Macau. The company owns 70.3% of Sands China Ltd. (SCL), which operates the majority of Macau assets.
Key Financial Metrics
| Metric | 2010 | 2009 |
|---|---|---|
| Net Revenues | $6.85 billion | $4.56 billion |
| Operating Income | $1.18 billion | $(28.7) million |
| Net Income (Consolidated) | $781.6 million | $(368.7) million |
| Net Income Attributable to LVSC | $599.4 million | $(354.5) million |
| Diluted EPS | $0.51 | $(0.82) |
| Adjusted Property EBITDA | $2.23 billion | $1.09 billion |
| Long-Term Debt | $9.37 billion | $10.85 billion |
| Cash and Cash Equivalents | $3.04 billion (unrestricted) | $4.96 billion |
| Capital Expenditures | $2.02 billion | $2.09 billion |
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased 50.2% to $6.85 billion, driven primarily by the partial opening of Marina Bay Sands (contributing $1.26 billion in net revenues) and increased gaming activity in Macau.
- Profitability Turnaround: The company returned to profitability with $599.4 million in net income attributable to LVSC, compared to a loss of $354.5 million in 2009. This was aided by the absence of a $169.5 million impairment loss and a $42.5 million legal settlement recorded in 2009.
- Debt Reduction: Long-term debt decreased by approximately $1.48 billion due to repayments on U.S. and Macau credit facilities, partially offset by new borrowings for the Singapore and Macau projects.
- Operating Expenses: Operating expenses rose 23.5% to $5.67 billion, largely due to the opening of Marina Bay Sands and increased casino activity, though impairment losses dropped significantly from $169.5 million in 2009 to $16.1 million in 2010.
Guidance, Outlook, Risks, and Contingencies
- Development Projects: Construction on Cotai Strip parcels 5 and 6 has recommenced. However, the Las Vegas Condo Tower remains suspended due to market conditions. The company expects to spend approximately $740 million to complete Marina Bay Sands and $70 million to complete Sands Bethlehem.
- Regulatory Risks (Macau): The Macau government denied the land concession application for parcels 7 and 8 in December 2010. The company has appealed this decision. Failure to obtain the concession could result in a charge of up to $102.1 million in capitalized costs. Deadlines for parcels 3 (April 2013) and 5/6 (May 2014) remain critical; failure to meet them could result in loss of land concessions and impairment of billions in capitalized costs.
- Legal Proceedings: The company is under investigation by the SEC and DOJ regarding compliance with the Foreign Corrupt Practices Act (FCPA), stemming from allegations in a lawsuit filed by a former executive. Additionally, a consolidated class action lawsuit regarding alleged false disclosures between 2007 and 2008 is in preliminary stages.
- Financing Covenants: The company is subject to strict leverage ratios on its U.S., Macau, and Singapore credit facilities. As of December 31, 2010, the U.S. leverage ratio was 5.2x (limit 6.5x) and the Macau ratio was 1.6x (limit 3.5x).
- Tax Expiration: The corporate income tax exemption for Macau gaming operations is set to expire at the end of 2013.
Key Facts for Investor Verification
- Macau Land Concession Appeal: Verify the status of the appeal regarding parcels 7 and 8 and the potential financial impact of a denial ($102.1 million at risk).
- FCPA Investigation: Monitor developments in the SEC and DOJ investigations regarding the FCPA and the potential for fines or reputational damage.
- Debt Covenant Compliance: Confirm ongoing compliance with leverage ratios, particularly as new projects come online and interest rates fluctuate.
- Marina Bay Sands Completion: Track the timeline and cost to complete Marina Bay Sands, as delays could impact cash flow and covenant compliance.
- Shoppes at The Palazzo Sale: Monitor the final purchase price adjustment with GGP, which is deferred and dependent on Net Operating Income calculations that may be lower than initially projected.