Las Vegas Sands Corp 10-Q for FY2022 Q3
Las Vegas Sands Corp (LVS)
10-Q
2022-10-21
For: 2022-09-30
View Original
Added on
April 03, 2026
About this 10-Q
Las Vegas Sands Corp filed this 10-Q on October 21, 2022, covering the quarter ended September 30, 2022 (FY2022 Q3).
Headline figures
Quarter ended September 30, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.01B
- up 17.3% from $857M a year earlier
- Net loss
- $239M
- compared with a net loss of $368M a year earlier
- Diluted EPS
- -$0.31
- compared with -$0.48 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________________________________________
Form 10-Q
_________________________________________________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended September 30, 2022
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission file number 001-32373
_________________________________________________________
(Exact name of registration as specified in its charter)
_________________________________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(702 ) 923-9000
(Registrant’s telephone number, including area code)
_______________________________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated Filer | ☐ | ||||||||||||||||||
| Non-accelerated Filer | ☐ | Smaller Reporting Company | ||||||||||||||||||
| Emerging Growth Company | ||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at October 19, 2022 | |||||||
| Common Stock ($0.001 par value) | ||||||||
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Table of Contents
| Item 1. | ||||||||
| Item 2. | ||||||||
| Item 3. | ||||||||
| Item 4. | ||||||||
| Item 1. | ||||||||
| Item 1A. | ||||||||
| Item 6. | ||||||||
2
PART I FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
| September 30, 2022 | December 31, 2021 | ||||||||||
| (In millions, except par value) (Unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents | |||||||||||
Accounts receivable, net of provision for credit losses of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other | |||||||||||
| Current assets of discontinued operations held for sale | |||||||||||
| Total current assets | |||||||||||
| Loan receivable | |||||||||||
| Property and equipment, net | |||||||||||
| Restricted cash | |||||||||||
| Deferred income taxes, net | |||||||||||
| Leasehold interests in land, net | |||||||||||
| Intangible assets, net | |||||||||||
| Other assets, net | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | $ | |||||||||
| Construction payables | |||||||||||
| Other accrued liabilities | |||||||||||
| Income taxes payable | |||||||||||
| Current maturities of long-term debt | |||||||||||
| Current liabilities of discontinued operations held for sale | |||||||||||
| Total current liabilities | |||||||||||
| Other long-term liabilities | |||||||||||
| Deferred income taxes | |||||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
Commitments and contingencies (Note 10) | |||||||||||
| Equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
Treasury stock, at cost, | ( | ( | |||||||||
| Capital in excess of par value | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Retained earnings (deficit) | ( | ||||||||||
| Total Las Vegas Sands Corp. stockholders’ equity | |||||||||||
| Noncontrolling interests | ( | ||||||||||
| Total equity | |||||||||||
| Total liabilities and equity | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In millions, except per share data) (Unaudited) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Casino | $ | $ | $ | $ | |||||||||||||||||||
| Rooms | |||||||||||||||||||||||
| Food and beverage | |||||||||||||||||||||||
| Mall | |||||||||||||||||||||||
| Convention, retail and other | |||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | |||||||||||||||||||||||
| Rooms | |||||||||||||||||||||||
| Food and beverage | |||||||||||||||||||||||
| Mall | |||||||||||||||||||||||
| Convention, retail and other | |||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Corporate | |||||||||||||||||||||||
| Pre-opening | |||||||||||||||||||||||
| Development | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Amortization of leasehold interests in land | |||||||||||||||||||||||
| Loss on disposal or impairment of assets | |||||||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense, net of amounts capitalized | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense) | ( | ( | ( | ||||||||||||||||||||
| Loss on modification or early retirement of debt | ( | ( | |||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ( | |||||||||||||||||||
| Income tax (expense) benefit | ( | ( | |||||||||||||||||||||
| Net loss from continuing operations | ( | ( | ( | ( | |||||||||||||||||||
| Discontinued operations: | |||||||||||||||||||||||
| Income from operations of discontinued operations, net of tax | |||||||||||||||||||||||
| Gain on disposal of discontinued operations, net of tax | |||||||||||||||||||||||
| Adjustment to gain on disposal of discontinued operations, net of tax | ( | ( | |||||||||||||||||||||
| Income (loss) from discontinued operations, net of tax | ( | ||||||||||||||||||||||
| Net income (loss) | ( | ( | ( | ||||||||||||||||||||
| Net loss attributable to noncontrolling interests from continuing operations | |||||||||||||||||||||||
| Net income (loss) attributable to Las Vegas Sands Corp. | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Earnings (loss) per share - basic and diluted: | |||||||||||||||||||||||
| Loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
| Income (loss) from discontinued operations, net of tax | |||||||||||||||||||||||
| Net income (loss) attributable to Las Vegas Sands Corp. | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic and diluted | |||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In millions) (Unaudited) | |||||||||||||||||||||||
| Net income (loss) | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
| Currency translation adjustment | ( | ( | ( | ( | |||||||||||||||||||
| Cash flow hedge fair value adjustment | ( | ( | |||||||||||||||||||||
| Total comprehensive income (loss) | ( | ( | ( | ||||||||||||||||||||
| Comprehensive loss attributable to noncontrolling interests | |||||||||||||||||||||||
| Comprehensive income (loss) attributable to Las Vegas Sands Corp. | $ | ( | $ | ( | $ | $ | ( | ||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
| Las Vegas Sands Corp. Stockholders’ Equity | |||||||||||||||||||||||||||||||||||||||||
| Common Stock | Treasury Stock | Capital in Excess of Par Value | Accumulated Other Comprehensive Income (Loss) | Retained Earnings (Deficit) | Noncontrolling Interests | Total | |||||||||||||||||||||||||||||||||||
| (In millions) (Unaudited) | |||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Cash flow hedge fair value adjustment | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | ( | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Cash flow hedge fair value adjustment | — | — | — | ( | — | — | ( | ||||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | |||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2021 | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | ( | $ | $ | ( | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | ( | ( | ( | ||||||||||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Cash flow hedge fair value adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | ( | $ | $ | ( | $ | ( | $ | $ | |||||||||||||||||||||||||||||||
| Net income (loss) | — | — | — | — | ( | ||||||||||||||||||||||||||||||||||||
Currency translation adjustment | — | — | — | ( | — | ( | ( | ||||||||||||||||||||||||||||||||||
| Cash flow hedge fair value adjustment | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | — | — | |||||||||||||||||||||||||||||||||||||
| Tax withholding on vesting of equity awards | — | — | ( | — | — | — | ( | ||||||||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | $ | ( | $ | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) (Unaudited) | |||||||||||
| Cash flows from operating activities from continuing operations: | |||||||||||
| Net loss from continuing operations | $ | ( | $ | ( | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | |||||||||||
| Amortization of leasehold interests in land | |||||||||||
| Amortization of deferred financing costs and original issue discount | |||||||||||
| Change in fair value of derivative asset/liability | ( | ( | |||||||||
| Paid-in-kind interest income | ( | ||||||||||
| Loss on modification or early retirement of debt | |||||||||||
| Loss on disposal or impairment of assets | |||||||||||
| Stock-based compensation expense | |||||||||||
| Provision for credit losses | |||||||||||
| Foreign exchange loss | |||||||||||
| Deferred income taxes | ( | ( | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Other assets | ( | ||||||||||
| Accounts payable | ( | ||||||||||
| Other liabilities | ( | ( | |||||||||
| Net cash used in operating activities from continuing operations | ( | ( | |||||||||
| Cash flows from investing activities from continuing operations: | |||||||||||
| Capital expenditures | ( | ( | |||||||||
| Proceeds from disposal of property and equipment | |||||||||||
| Acquisition of intangible assets and other | ( | ( | |||||||||
| Net cash used in investing activities from continuing operations | ( | ( | |||||||||
| Cash flows from financing activities from continuing operations: | |||||||||||
| Proceeds from exercise of stock options | |||||||||||
| Tax withholding on vesting of equity awards | ( | ||||||||||
| Proceeds from long-term debt | |||||||||||
| Repayments of long-term debt | ( | ( | |||||||||
| Payments of financing costs | ( | ( | |||||||||
| Make-whole premium on early extinguishment of debt | ( | ||||||||||
| Transactions with discontinued operations | |||||||||||
| Net cash generated from financing activities from continuing operations | |||||||||||
| Cash flows from discontinued operations: | |||||||||||
| Net cash generated from operating activities | |||||||||||
| Net cash generated from (used in) investing activities | ( | ||||||||||
| Net cash provided (to) by continuing operations and (used in) financing activities | ( | ( | |||||||||
| Net cash provided by discontinued operations | |||||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash and cash equivalents | ( | ( | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash and cash equivalents | ( | ||||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at end of period | |||||||||||
| Less: cash and cash equivalents at end of period for discontinued operations | ( | ||||||||||
| Cash, cash equivalents and restricted cash and cash equivalents at end of period for continuing operations | $ | $ | |||||||||
| Supplemental disclosure of cash flow information | |||||||||||
| Cash payments for interest, net of amounts capitalized | $ | $ | |||||||||
| Cash payments for taxes, net of refunds | $ | $ | |||||||||
| Change in construction payables | $ | ( | $ | ( | |||||||
| Capitalized stock-based compensation costs | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Organization and Business of Company
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Las Vegas Sands Corp. (“LVSC”), a Nevada corporation, and its subsidiaries (collectively the “Company”) for the year ended December 31, 2021, and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to such rules and regulations; however, the Company believes the disclosures herein are adequate to make the information presented not misleading. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the interim period have been included. The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of expected results for the full year.
COVID-19 Pandemic Update
Macao
Visitation to the Macao Special Administrative Region (“Macao”) of the People’s Republic of China (“China”) remains substantially below pre-COVID-19 levels as a result of various government policies limiting or discouraging travel. Currently, visitors from mainland China in general may enter Macao without having to quarantine, subject to them holding the appropriate travel documents, a negative COVID-19 test result issued within a specified time period and a green health-code. On August 30, 2022, the Health Bureau announced that from September 1, 2022, individuals from 41 foreign countries will be allowed to enter Macao without prior authorization but will still be required to undergo a seven-day hotel quarantine. The Company’s operations in Macao will continue to be impacted and subject to changes in the government policies of Macao, China, Hong Kong and other jurisdictions in Asia addressing travel and public health measures associated with COVID-19.
Following an outbreak in Macao in mid-June 2022, the Macao government announced a series of preventative measures (“State of Immediate Prevention”). Those included closure of a range of government, public and social facilities, with restaurants only permitted to offer take away services. Residential and commercial buildings with confirmed COVID-19 cases were required to implement various levels of access control. In addition to the health safeguards already in place, the Macao government implemented a series of mass nucleic acid tests (“NAT”) and rapid antigen tests for the general population.
On July 9, 2022, the Macao government ordered casinos and all non-essential businesses to close from July 11 to July 18 in an attempt to control an outbreak of COVID-19 in Macao, which was extended through July 22, 2022. On July 20, 2022, the Macao government announced a consolidation period, which would start on July 23, 2022 and end on July 30, 2022 whereby certain business activities would be allowed to resume limited operations, clarifying that casino operations could resume, but with a maximum capacity of 50% of casino staff working at any point.
On August 2, 2022, the State of Immediate Prevention was lifted and Macao entered a stabilization period until August 7, 2022, which allowed for the reopening of various public and social facilities and the resumption of restaurant dine-in services subject to the need to wear facemasks and present a negative NAT conducted within the past three days. On August 6, 2022, the quarantine period for fully-vaccinated visitors from Hong Kong, Taiwan and other overseas jurisdictions changed from “10+7” (10 days of hotel quarantine plus 7 days of self-health management) to “7+3” (7 days of hotel quarantine plus 3 days of self-health management). Restrictions on the number of casino staff working were lifted on August 15, 2022. Throughout August, various restrictions on movement between Macao and Zhuhai were progressively lifted by both the Macao and mainland China governments.
On September 19, 2022, the NAT requirement was extended from within 24 hours of travel to 48 hours for those travelers entering Zhuhai from Macao and on September 21, 2022, the NAT requirement was extended from within 48 hours of travel to seven days for those travelers entering mainland China from Macao by plane.
8
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Company’s Macao gaming operations remained open during the nine months ended September 30, 2022, with the exception of the casino closure in July 2022 mentioned above. Guest visitation to the properties, however, was adversely affected during this period due to the various outbreaks that occurred in Shanghai, Hong Kong, Guangdong and Macao, which resulted in tighter travel restrictions. The timing and manner in which our casinos, restaurants and shopping malls will reopen and/or operate at full capacity are currently unknown.
As with prior periods, in support of the Macao government’s initiatives to fight the COVID-19 Pandemic, throughout the nine months ended September 30, 2022 and in June and July in particular, the Company provided both towers of the Sheraton Grand Macao hotel and also The Parisian Macao hotel to the Macao government to house individuals for quarantine and medical observation purposes. The Parisian Macao hotel ceased operations as a medical observation facility on July 27, 2022, and the Sheraton Grand Macao hotel ceased operations as a quarantine and medical observation facility on September 23, 2022.
The Company’s ferry operations between Macao and Hong Kong remain suspended. The timing and manner in which the Company’s ferry operations will be able to resume are currently unknown.
The Company’s operations in Macao have been significantly impacted by the reduced visitation to Macao. The Macao government announced total visitation from mainland China to Macao decreased approximately 25.0% and 81.7%, during the nine months ended September 30, 2022, as compared to the same period in 2021 and 2019 (pre-pandemic), respectively. The Macao government also announced gross gaming revenue decreased approximately 53.1% and 85.6%, during the nine months ended September 30, 2022, as compared to the same period in 2021 and 2019, respectively.
Singapore
In Singapore, the Vaccinated Travel Framework (“VTF”) was launched on April 1, 2022, to facilitate the resumption of travel for all travelers, including short-term visitors. Under the VTF, all fully vaccinated travelers and non-fully vaccinated children aged 12 and below are permitted to enter Singapore, without entry approvals, and starting April 26, 2022, these travelers are no longer required to take a COVID-19 test before departing for Singapore. Operations at Marina Bay Sands will continue to be impacted and subject to changes in the government policies of Singapore and other jurisdictions in Asia, if any, addressing travel and public health measures associated with COVID-19.
Visitation to Marina Bay Sands continues to be impacted by the effects of the COVID-19 Pandemic; however, visitation has increased since restrictions have been lifted. The Singapore Tourism Board (“STB”) announced total visitation to Singapore increased from approximately 172,000 in 2021 to 3.7 million in 2022 on a year-to-date basis, while visitation decreased 74.1% when compared to the same period in 2019. For the three months ended September 30, 2022, visitation decreased 55.9% when compared to the same period in 2019.
Summary
The disruptions arising from the COVID-19 Pandemic continued to have a significant adverse impact on the Company’s financial condition and operations during the nine months ended September 30, 2022. The duration and intensity of this global health situation and related disruptions are uncertain. Given the dynamic nature of these circumstances, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2022 will be material, but cannot be reasonably estimated at this time as it is unknown when the impact of the COVID-19 Pandemic will end, when or how quickly the current travel and operational restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business and the willingness of tourism patrons to spend on travel and entertainment and business patrons to spend on MICE.
While each of the Company’s properties were open with some operating at reduced levels due to lower visitation and required safety measures in place during the nine months ended September 30, 2022, the current economic and regulatory environment on a global basis and in each of the Company’s jurisdictions continue to evolve. The Company cannot predict the manner in which governments will react as the global and regional impact of the COVID-19 Pandemic changes over time, which could significantly alter the Company’s current operations.
9
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The Company has a strong balance sheet and sufficient liquidity in place, including total unrestricted cash and cash equivalents of $5.84 billion and access to $1.50 billion, $1.04 billion and $412 million of available borrowing capacity from the LVSC Revolving Facility, 2018 SCL Revolving Facility and 2012 Singapore Revolving Facility, respectively, as of September 30, 2022. The Company believes it is able to support continuing operations, complete the major construction projects that are underway, proceed with the Macao concession tendering process and respond to the current COVID-19 Pandemic challenges. The Company has taken various mitigating measures to manage through the current environment, including a cost reduction program to minimize cash outflow for non-essential items.
Macao Subconcession
Gaming in Macao is administered by the government through concession agreements awarded to three different concessionaires and three subconcessionaires, of which Venetian Macau Limited (“VML,” a subsidiary of Sands China Ltd.) is one. On June 23, 2022, an extension was approved and authorized by the Macao government and executed between VML and Galaxy Casino, S.A., pursuant to which the subconcession was extended from June 26, 2022 to December 31, 2022 (the “Amendment to the Subconcession Contract”). VML paid the Macao government 47 million patacas (approximately $6 million at exchange rates in effect at the time of the transaction) and provided a bank guarantee on September 20, 2022 of 2.31 billion patacas (approximately $289 million at exchange rates as defined in the bank guarantee contract) to secure the fulfillment of VML's payment obligations towards its employees should VML be unsuccessful in tendering for a new concession contract after its subconcession expires. Refer to “Note 4 — Restricted Cash and Cash Equivalents” for further information on the bank guarantee.
In order to enable VML to fulfill the relevant requirements to become eligible to obtain the subconcession extension as mentioned above, each of VML, Venetian Cotai Limited (“VCL”) and Venetian Orient Limited (“VOL”) entered into a letter of undertaking (“Undertakings”), pursuant to which each of VML, VCL and VOL has undertaken, pursuant to article 40 of the Gaming Law and article 43 of VML’s subconcession agreement, to revert to the Macao government relevant gaming equipment and gaming areas (as identified in the Undertakings) without compensation and free of any liens or charges upon the expiry of the term of the subconcession extension period. The total casino areas and supporting areas subject to reversion is approximately 136,000 square meters, representing approximately 4.7 % of the total property area of these entities.
On June 21, 2022, the Macao Legislative Assembly passed a draft bill entitled Amendment to Law No. 16/2001 to amend Macao’s gaming law, which was published in the Macao Official Gazette on June 22, 2022 as Law No. 7/2022, and became effective on June 23, 2022 (the "Gaming Law"). Certain changes to the Gaming Law include a reduction in the maximum term of future gaming concessions to ten (10) years; authorization of up to six (6) gaming concession contracts; an increase in the minimum capital contribution of concessionaires to 5 billion patacas (approximately $618 million at exchange rates in effect on September 30, 2022); an increase in the percentage of the share capital of the concessionaire that must be held by the local managing director to 15%; a requirement that casinos be located in real estate owned by the concessionaire; and a prohibition of revenue sharing arrangements between gaming promoters and concessionaires.
On July 5, 2022, the Macao government published Administrative Regulation No. 28/2022 – Amendment of Administrative Regulation No. 26/2001, which sets forth the regulations governing the tender for gaming concessions in Macao. The regulation includes details on the process of bidding for the gaming concessions, qualifications of the companies bidding and the criteria for granting them.
On July 27, 2022, the Macao government officially launched the public tender process for the award of concessions for the operation of games of chance in casinos. VML submitted its bid for one of up to six gaming concessions on September 14, 2022. All bids received by the Macao government, of which there were a total of seven companies, including VML, were formally accepted in the tender. The Macao government has disclosed that it intends to complete the tender process and grant the new gaming concessions before the end of 2022.
The Company continues to believe it will be successful in extending the term of its subconcession and/or obtaining a new gaming concession when its current subconcession expires; however, it is possible the Macao
10
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
government could further change or interpret the associated gaming laws in a manner that could negatively impact the Company.
Under the Company's Sands China Ltd. (“SCL”) senior notes indentures, upon the occurrence of any event resulting from any change in the Gaming Law (as defined in the indentures) or any action by the gaming authority after which none of SCL or any of its subsidiaries own or manage casino or gaming areas or operate casino games of fortune and chance in Macao in substantially the same manner as they were owning or managing casino or gaming areas or operating casino games as at the issue date of the SCL senior notes, for a period of 30 consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties or results of operations of SCL and its subsidiaries, taken as a whole, each holder of the SCL senior notes would have the right to require the Company to repurchase all or any part of such holder's SCL senior notes at par, plus any accrued and unpaid interest (the "Investor Put Option").
Additionally, under the 2018 SCL Credit Facility, the events that trigger an Investor Put Option under the SCL senior notes (as described above) would be an event of default, which may result in commitments being immediately cancelled, in whole or in part, and the related outstanding balances and accrued interest, if any, becoming immediately due and payable.
The subconcession not being further extended or not obtaining a new gaming concession when the current subconcession expires and the potential impact if holders of the notes and the agent have the ability to, and make the election to, accelerate the repayment of the Company's debt would have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. The Company intends to follow the process for a concession renewal as indicated above.
Marina Bay Sands Gaming License
In April 2022, the Company paid 72 million Singapore dollars ("SGD," approximately $53 million at exchange rates in effect at the time of the transaction) to the Singapore Gambling Regulatory Authority as part of the process to renew its gaming license at Marina Bay Sands, which will now expire in April 2025.
Intercompany Loan Agreement with SCL
On July 11, 2022, the Company entered into an intercompany term loan agreement with SCL, a related party, in the amount of $1.0 billion, which is repayable on July 11, 2028. In the first two years from July 11, 2022, SCL will have the option to elect to pay cash interest at 5 % per annum or payment-in-kind interest at 6 % per annum by adding the amount of such interest to the then-outstanding principal amount of the loan, following which only cash interest at 5 % per annum will be payable. This loan is unsecured, subordinated to all third party unsecured indebtedness and other obligations of SCL and its subsidiaries and is eliminated in consolidation.
Recent Accounting Pronouncements
The Company’s management has evaluated all of the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board (“FASB”) or other standards-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position, results of operations and cash flows.
11
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 2 — Discontinued Operations
On February 23, 2022, the Company completed the previously announced sale of its Las Vegas real property and operations (the “Closing”), including The Venetian Resort Las Vegas and the Sands Expo and Convention Center (collectively referred to as the “Las Vegas Operations”), to VICI Properties L.P. (“PropCo”) and Pioneer OpCo, LLC (“OpCo”) for an aggregate purchase price of approximately $6.25 billion (the “Las Vegas Sale”). Under the terms of the agreements related to the Las Vegas Sale, OpCo acquired subsidiaries that hold the operating assets and liabilities of the Las Vegas Operations for approximately $1.05 billion in cash, subject to certain post-closing adjustments, and $1.20 billion in seller financing in the form of a six-year term loan credit and security agreement (the “Seller Financing Loan Agreement”) and PropCo acquired subsidiaries that hold the real estate and real estate-related assets of the Las Vegas Operations for approximately $4.0 billion in cash.
Upon closing, the Company received approximately $5.05 billion in cash proceeds, before transaction costs and working capital adjustments of $77 million, and recognized a gain on disposal of $3.61 billion, before income tax expense of $750 million, during the nine months ended September 30, 2022.
As there is no continuing involvement between the Company and the Las Vegas Operations, the Company accounted for the transaction as a sale of a business. The Company concluded the Las Vegas Operations met the criteria for held for sale and discontinued operations beginning in the first quarter of 2021. As a result, the Las Vegas Operations is presented in the accompanying condensed consolidated statements of operations and cash flows as a discontinued operation for all periods presented. The Company reported the operating results and cash flows related to the Las Vegas Operations through February 22, 2022. Current and non-current assets and liabilities of the Las Vegas Operations as of December 31, 2021, are presented in the accompanying condensed consolidated balance sheets as current assets and liabilities held for sale.
Unless otherwise noted, amounts and disclosures throughout these Notes to Condensed Consolidated Financial Statements relate to the Company's continuing operations.
Contingent Lease Support Agreement
On February 23, 2022, in connection with the Closing, the Company and OpCo entered into a post-closing contingent lease support agreement (the “Contingent Lease Support Agreement”) pursuant to which, among other things, the Company may be required to make certain payments (“Support Payments”) to OpCo.
The Support Payments are payable on a monthly basis following the Closing through the year ending December 31, 2023, based upon the performance of the Las Vegas Operations relative to certain agreed upon target metrics and subject to quarterly and annual adjustments. The target metrics are measured against a benchmark annual EBITDAR (as defined in the Contingent Lease Support Agreement) of the Las Vegas Operations equal to $125 million for the period beginning October 1, 2022 and ending December 31, 2022, and $500 million for the period beginning January 1, 2023 and ending December 31, 2023. The Company’s remaining payment obligations are subject to a cap equal to $63 million for the period beginning October 1, 2022 and ending December 31, 2022, and $250 million for the period beginning January 1, 2023 and ending December 31, 2023. Each monthly Support Payment is subject to a prorated cap based on the annual cap. No Support Payments were made for the period post-Closing through September 30, 2022.
Seller Financing Loan Agreement
At the Closing, the Company, as lender, OpCo, as borrower, the parent company of OpCo (“Holdings”) and certain subsidiaries of OpCo, as guarantors party thereto (collectively, and with Holdings, the “Guarantors” and, together with OpCo in its capacity as borrower, the “Loan Parties”), entered into the Seller Financing Loan Agreement. Refer to “Note 3 — Loan Receivable” for further information.
12
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Las Vegas Operations
The following table represents summarized balance sheet information of assets and liabilities of the discontinued operation:
| December 31, 2021 | |||||||||||
| (In millions) | |||||||||||
| Cash and cash equivalents | $ | ||||||||||
Accounts receivable, net of provision for credit losses of $ | |||||||||||
| Inventories | |||||||||||
| Prepaid expenses and other | |||||||||||
| Property and equipment, net | |||||||||||
| Other assets, net | |||||||||||
| Total held for sale assets in the balance sheet | $ | ||||||||||
| Accounts payable | $ | ||||||||||
| Construction payables | |||||||||||
| Other accrued liabilities | |||||||||||
| Long-term debt | |||||||||||
| Deferred amounts related to mall sale transactions | |||||||||||
| Other long-term liabilities | |||||||||||
| Total held for sale liabilities in the balance sheet | $ | ||||||||||
13
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following table represents summarized income statement information of discontinued operations:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022(1) | 2021 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Revenues: | |||||||||||||||||||||||
| Casino | $ | $ | $ | $ | |||||||||||||||||||
| Rooms | |||||||||||||||||||||||
| Food and beverage | |||||||||||||||||||||||
| Convention, retail and other | |||||||||||||||||||||||
| Net revenues | |||||||||||||||||||||||
| Resort operations expenses | |||||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| General and administrative | |||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||
| Loss on disposal or impairment of assets | |||||||||||||||||||||||
| Operating income | |||||||||||||||||||||||
| Interest expense | ( | ( | ( | ||||||||||||||||||||
| Other expense | ( | ( | |||||||||||||||||||||
| Income from operations of discontinued operations | |||||||||||||||||||||||
| Gain on disposal of discontinued operations | |||||||||||||||||||||||
Adjustment to gain on disposal of discontinued operations(2) | ( | ( | |||||||||||||||||||||
| Income (loss) from discontinued operations, before income tax | ( | ||||||||||||||||||||||
| Income tax expense | ( | ( | ( | ||||||||||||||||||||
| Net income (loss) from discontinued operations presented in the statement of operations | $ | ( | $ | $ | $ | ||||||||||||||||||
| Adjusted Property EBITDA | $ | $ | $ | $ | |||||||||||||||||||
__________________________
(1) Includes the Las Vegas Operations financial results for the period from January 1, 2022 through February 22, 2022.
(2) Primarily relates to the finalization of the working capital adjustment pursuant to the terms of the related agreements.
For the 53-day period ended February 22, 2022 and for the nine months ended September 30, 2021, the Company’s Las Vegas Operations were classified as a discontinued operation held for sale. The Company applied the intraperiod tax allocation rules to allocate the provision for income taxes between continuing operations and discontinued operations using the “with and without” approach. The Company calculated income tax expense from all financial statement components (continuing and discontinued operations), the “with” computation, and compared that to the income tax expense attributable to continuing operations, the “without” computation. The difference between the “with” and “without” computations was allocated to discontinued operations.
14
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 3 — Loan Receivable
Seller Financing Loan Agreement
At the Closing, the Company and the Loan Parties entered into the Seller Financing Loan Agreement. The Seller Financing Loan Agreement provides for a -year senior secured term loan facility in an aggregate principal amount of $1.20 billion (the “Seller Loan”) at the date of the Closing. The Seller Loan is guaranteed by the Guarantors and secured by a first-priority lien on substantially all of the Loan Parties’ assets (subject to customary exceptions and limitations), including a leasehold mortgage from OpCo over certain real estate that was sold to PropCo at the Closing and leased by OpCo.
The Seller Loan will bear interest at a rate equal to 1.50 % per annum for the calendar years ending December 31, 2022 and 2023, and 4.25 % per annum for each calendar year thereafter, subject to an increase of 1.00 % per annum for any interest OpCo elects to pay by increasing the principal amount of the Seller Loan prior to January 1, 2024, and an increase of 1.50 % per annum for any such election during the calendar year ending December 31, 2024. Any interest to be paid after December 31, 2024, will be paid in cash.
The Seller Financing Loan Agreement contains certain customary representations and warranties and covenants, subject to customary exceptions and thresholds. The Seller Financing Loan Agreement’s negative covenants restrict the ability of the Loan Parties and their subsidiaries to, among other things, (i) incur debt, (ii) create certain liens on their assets, (iii) dispose of their assets, (iv) make investments or restricted payments, including dividends, (v) merge, liquidate, dissolve, change their business or consolidate with other entities and (vi) enter into affiliate transactions.
The Seller Financing Loan Agreement also contains customary events of default, including payment defaults, cross defaults to material debt, bankruptcy and insolvency, breaches of covenants and inaccuracy of representations and warranties, subject to customary grace periods. Upon an event of default, the Company may declare any then-outstanding amounts due and payable and exercise other customary remedies available to a secured lender.
15
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 4 — Restricted Cash and Cash Equivalents
As required by the Amendment to the Subconcession Contract, VML provided a bank guarantee in favor of the Macao government, on September 20, 2022 of 2.31 billion patacas (approximately $289 million at exchange rates as defined in the bank guarantee contract) to secure the fulfillment of VML's payment obligations towards its employees should VML be unsuccessful in tendering for a new concession contract after its subconcession expires. As stipulated in the bank guarantee contract, a minimum amount of 2.31 billion patacas or $289 million is required to be held within SCL’s cash deposit account as collateral in order to secure the bank guarantee. Any amount in excess of the minimum amount can be withdrawn from the cash deposit by SCL. The bank guarantee will remain in effect until canceled at the request or with the authorization of the Macao government and was classified as noncurrent restricted cash in the accompanying condensed consolidated balance sheets.
16
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 5 — Long-Term Debt
Long-term debt consists of the following:
| September 30, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
Corporate and U.S. Related(1): | |||||||||||
3.200% Senior Notes due 2024 (net of unamortized original issue discount and deferred financing costs of $ | $ | $ | |||||||||
2.900% Senior Notes due 2025 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
3.500% Senior Notes due 2026 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
3.900% Senior Notes due 2029 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
Macao Related(1): | |||||||||||
5.125% Senior Notes due 2025 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
3.800% Senior Notes due 2026 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
2.300% Senior Notes due 2027 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
5.400% Senior Notes due 2028 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
2.850% Senior Notes due 2029 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
4.375% Senior Notes due 2030 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
3.250% Senior Notes due 2031 (net of unamortized original issue discount and deferred financing costs of $ | |||||||||||
| 2018 SCL Credit Facility — Revolving | |||||||||||
Other(2) | |||||||||||
Singapore Related(1): | |||||||||||
2012 Singapore Credit Facility — Term (net of unamortized deferred financing costs of $ | |||||||||||
2012 Singapore Credit Facility — Delayed Draw Term (net of unamortized deferred financing costs of $ | |||||||||||
Other(2) | |||||||||||
| Less — current maturities | ( | ( | |||||||||
| Total long-term debt | $ | $ | |||||||||
____________________
(1)Unamortized deferred financing costs of $64 million and $81 million as of September 30, 2022 and December 31, 2021, respectively, related to the Company’s revolving credit facilities and the undrawn portion of the Singapore Delayed Draw Term Facility are included in other assets, net, and prepaid expenses and other in the accompanying condensed consolidated balance sheets.
(2)Includes finance leases related to Macao and Singapore of $20 million and $1 million, respectively, as of September 30, 2022, and $24 million and $1 million, respectively, as of December 31, 2021.
17
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
LVSC Revolving Facility
As of September 30, 2022, the Company had $1.50 billion of available borrowing capacity under the LVSC Revolving Facility, net of outstanding letters of credit.
SCL Senior Notes
On February 16 and June 16, 2022, Standard & Poor’s (“S&P”) and Fitch, respectively, downgraded the credit rating for the Company and SCL to BB+. As a result of the downgrades, the coupon on each series of the outstanding SCL Senior Notes increased by 0.50 % per annum, with a 0.25 % per annum increase becoming effective on the first interest payment date after February 16, 2022 as it relates to S&P and an additional 0.25 % increase per annum after June 16, 2022 as it relates to Fitch. This will result in an increase of $16 million in interest expense for the year ended December 31, 2022 and $36 million for each year thereafter through 2024, at which time this will decrease as the SCL Senior Notes are repaid based on each of their set maturity dates.
2018 SCL Credit Facility
During the nine months ended September 30, 2022, SCL drew down $67 million and 4.96 billion Hong Kong dollars (“HKD,” approximately $632 million at exchange rates in effect on September 30, 2022) under the facility for general corporate purposes.
As of September 30, 2022, SCL had $1.04 billion of available borrowing capacity under the 2018 SCL Revolving Facility comprised of HKD commitments of HKD 7.36 billion (approximately $937 million at exchange rates in effect on September 30, 2022) and U.S. dollar commitments of $99 million.
2012 Singapore Credit Facility
As of September 30, 2022, Marina Bay Sands Pte. Ltd. (“MBS”) had SGD 590 million (approximately $412 million at exchange rates in effect on September 30, 2022) of available borrowing capacity under the 2012 Singapore Revolving Facility, net of outstanding letters of credit, primarily consisting of a banker’s guarantee for SGD 153 million (approximately $107 million at exchange rates in effect on September 30, 2022) pursuant to a development agreement.
On February 9, 2022, MBS entered into the Fourth Amendment and Restatement Agreement (the “Fourth Amendment Agreement”) with DBS Bank Ltd., as agent and security trustee. The Fourth Amendment Agreement amended and restated the facility agreement, dated as of June 25, 2012 (as amended, the “Existing Facility Agreement”). Pursuant to the Fourth Amendment Agreement, the Existing Facility Agreement was amended to update the terms therein that provide for a transition away from the Swap Offer Rate (“SOR”) as a benchmark interest rate and the replacement of SOR by a replacement benchmark interest rate or mechanism.
Under the Fourth Amendment Agreement, outstanding loans bear interest at the Singapore Overnight Rate Average (“SORA”) with a credit spread adjustment of 0.19 % per annum, plus an applicable margin ranging from 1.15 % to 1.85 % per annum, based on MBS’s consolidated leverage ratio (estimated interest rate set at approximately 4.25 % as of September 30, 2022).
During 2021, the Company amended its 2012 Singapore Credit Facility, which, among other things, extended to March 31, 2022, the deadline for delivering the construction cost estimate and the construction schedule for the MBS Expansion Project. The Company is in the process of reviewing the budget and timing of the MBS expansion based on the impact of the COVID-19 Pandemic and other factors. As a result, the construction cost estimate and construction schedule were not delivered to the lenders by the March 31, 2022 deadline. As of September 30, 2022, there is SGD 3.69 billion (approximately $2.57 billion at exchange rates in effect on September 30, 2022) left of total borrowing capacity, which is only available to be drawn under the Singapore Delayed Draw Term Facility after the construction cost estimate and construction schedule for the MBS Expansion Project are delivered to lenders. The Company does not anticipate material spend related to the MBS Expansion Project prior to the delivery of these items to the lenders.
18
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Debt Covenant Compliance
As of September 30, 2022, management believes the Company was in compliance with all debt covenants. The Company amended its credit facilities to, among other things, waive the Company’s requirement to comply with certain financial covenant ratios through December 31, 2022 for LVSC and MBS and January 1, 2023 for SCL, which include a maximum leverage ratio or net debt to trailing twelve-months adjusted earnings before interest, income taxes, depreciation and amortization, calculated in accordance with the respective credit agreement, of 4.0 x, 4.0 x and 4.5 x under the LVSC Revolving Facility, 2018 SCL Credit Facility and 2012 Singapore Credit Facility, respectively. The Company’s compliance with its financial covenants for periods beyond December 31, 2022 for MBS and LVSC and January 1, 2023 for SCL, could be affected by certain factors beyond the Company’s control, such as the impact of the COVID-19 Pandemic, including current travel, quarantine and border restrictions continuing in the future. The Company will pursue additional waivers to meet the required financial covenant ratios for periods beyond the current covenant waiver periods, if deemed necessary.
Cash Flows from Financing Activities
Cash flows from financing activities related to long-term debt and finance lease obligations are as follows:
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Proceeds from 2027, 2029 and 2031 SCL Senior Notes | $ | $ | |||||||||
| Proceeds from 2018 SCL Credit Facility | |||||||||||
| $ | $ | ||||||||||
| Repayment on 2023 SCL Senior Notes | $ | $ | ( | ||||||||
| Repayments on 2012 Singapore Credit Facility | ( | ( | |||||||||
| Repayments on Other Long-Term Debt | ( | ( | |||||||||
| $ | ( | $ | ( | ||||||||
Fair Value of Long-Term Debt
The estimated fair value of the Company’s long-term debt as of September 30, 2022 and December 31, 2021, was approximately $13.75 billion and $15.06 billion, respectively, compared to its contractual value of $15.38 billion and $14.90 billion, respectively. The estimated fair value of the Company’s long-term debt is based on recent trades, if available, and indicative pricing from market information (level 2 inputs).
Note 6 — Accounts Receivable, Net and Customer Contract Related Liabilities
Accounts Receivable and Provision for Credit Losses
Accounts receivable is comprised of casino, hotel, mall and other receivables, which do not bear interest and are recorded at amortized cost. The Company extends credit to approved casino patrons following background checks and investigations of creditworthiness. 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 patrons in these countries.
Accounts receivable primarily consists of casino receivables. Other than casino receivables, there is no other concentration of credit risk with respect to accounts receivable. The Company believes the concentration of its credit risk in casino receivables is mitigated substantially by its credit evaluation process, credit policies, credit control and collection procedures, and also believes there are no concentrations of credit risk for which a provision has not been established. Although management believes the provision is adequate, it is possible the estimated amount of cash collections with respect to accounts receivable could change.
19
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Accounts receivable, net, consists of the following:
| September 30, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
Casino | $ | $ | |||||||||
Rooms | |||||||||||
Mall | |||||||||||
Other | |||||||||||
Less - provision for credit losses | ( | ( | |||||||||
| $ | $ | ||||||||||
The following table shows the movement in the provision for credit losses recognized for accounts receivable:
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Balance at January 1 | $ | $ | |||||||||
Current period provision for credit losses | |||||||||||
Write-offs | ( | ( | |||||||||
Exchange rate impact | ( | ( | |||||||||
Balance at September 30 | $ | $ | |||||||||
Customer Contract Related Liabilities
The Company provides numerous products and services to its patrons. There is often a timing difference between the cash payment by the patrons 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.
20
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
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) | |||||||||||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Balance at January 1 | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Balance at September 30 | |||||||||||||||||||||||||||||||||||
| Increase (decrease) | $ | $ | ( | $ | $ | $ | ( | $ | ( | ||||||||||||||||||||||||||
____________________
(1)Of this amount, $148 million and $145 million as of September 30 and January 1, 2022, respectively, and $148 million and $152 million as of September 30 and January 1, 2021, respectively, relate to mall deposits that are accounted for based on lease terms usually greater than one year.
Note 7 — Equity and Earnings (Loss) Per Share
Common stock
Repurchase Program
In June 2018, the Company's Board of Directors authorized the repurchase of $2.50 billion of its outstanding common stock, which was to expire in November 2020. In October 2020, the Company's Board of Directors authorized the extension of the expiration date of the remaining repurchase amount of $916 million to November 2022, and in October 2022, the Company’s Board of Directors authorized the further extension of the expiration date of the remaining repurchase amount of $916 million to November 2024. 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. All share repurchases of the Company's common stock have been recorded as treasury stock.
Earnings (Loss) Per Share
The weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings (loss) per share consisted of the following:
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Weighted-average common shares outstanding (used in the calculation of basic earnings (loss) per share) | |||||||||||||||||||||||
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 (loss) per share) | |||||||||||||||||||||||
Antidilutive stock options excluded from the calculation of diluted earnings per share | |||||||||||||||||||||||
Note 8 — Income Taxes
21
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 9 — Leases
Lessor
Lease revenue for the Company’s mall operations consists of the following:
| Three Months Ended September 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Mall | Other | Mall | Other | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Minimum rents | $ | $ | $ | $ | |||||||||||||||||||
| Overage rents | |||||||||||||||||||||||
Rent concessions(1) | ( | ( | |||||||||||||||||||||
| Total overage rents, rent concessions and other | ( | ||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
| Nine Months Ended September 30, | |||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Mall | Other | Mall | Other | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Minimum rents | $ | $ | $ | $ | |||||||||||||||||||
| Overage rents | |||||||||||||||||||||||
Rent concessions(1) | ( | ( | |||||||||||||||||||||
Other(2) | |||||||||||||||||||||||
| Total overage rents, rent concessions and other | ( | ||||||||||||||||||||||
| $ | $ | $ | $ | ||||||||||||||||||||
(1)Rent concessions were provided for the periods presented to tenants as a result of the COVID-19 Pandemic and the impact on mall operations.
22
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 10 — Commitments and Contingencies
Litigation
The Company is involved in other litigation in addition to those noted below, arising in the normal course of business. Management has made certain estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material effect on the Company’s financial condition, results of operations and cash flows.
Asian American Entertainment Corporation, Limited v. Venetian Macau Limited, et al.
On February 5, 2007, Asian American Entertainment Corporation, Limited (“AAEC” or “Plaintiff”) brought a claim (the “Prior Action”) in the U.S. District Court for the District of Nevada (the “U.S. District Court”) against Las Vegas Sands, Inc. (now known as Las Vegas Sands, LLC (“LVSLLC”)), Venetian Casino Resort, LLC (“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 Prior Action sought damages based on an alleged breach of agreements entered into between AAEC and the aforementioned 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. The U.S. District Court entered an order dismissing the Prior Action on April 16, 2010.
On January 19, 2012, AAEC filed another claim (the “Macao Action”) with the Macao Judicial Court against VML, LVS (Nevada) International Holdings, Inc. (“LVS (Nevada)”), LVSLLC and VCR (collectively, the “Defendants”). The claim was for 3.0 billion patacas (approximately $371 million at exchange rates in effect on September 30, 2022). The Macao Action alleges a 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 and amended the defense on January 4, 2013.
On March 24, 2014, the Macao Judicial Court issued a decision 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 and the appeal is currently pending.
On June 5, 2015, the U.S. Defendants applied to the Macao Judicial Court to dismiss the claims against them as res judicata based on the dismissal of the Prior Action. On March 16, 2016, the Macao Judicial Court dismissed the defense of res judicata. An appeal against that decision was lodged by U.S. Defendants on April 7, 2016. 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, which was completed on March 14, 2019, and the trial of this matter was scheduled for September 2019.
On July 15, 2019, AAEC submitted a request to the Macao Judicial Court to increase the amount of its claim to 96.45 billion patacas (approximately $11.93 billion at exchange rates in effect on September 30, 2022), allegedly representing lost profits from 2004 to 2018, and reserving its right to claim for lost profits up to 2022 in due course at the enforcement stage. On September 4, 2019, the Macao Judicial Court allowed AAEC’s request to increase the amount of its claim. On September 17, 2019, the U.S. Defendants appealed the decision granting AAEC’s request and that appeal is currently pending.
23
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On June 18, 2020, the U.S. Defendants moved to reschedule the trial, which had been scheduled to begin on September 16, 2020, due to travel disruptions and other extraordinary circumstances resulting from the ongoing COVID-19 Pandemic. The Macao Judicial Court granted that motion and rescheduled the trial to begin on June 16, 2021. On April 16, 2021, the U.S. Defendants again moved to reschedule the trial because continued travel disruptions resulting from the pandemic prevented the representatives of the U.S. Defendants and certain witnesses from attending the trial as scheduled. Plaintiff opposed that motion on April 29, 2021. The Macao Judicial Court denied the U.S. Defendants’ motion on May 28, 2021, concluding that, under Macao law, it lacked the power to reschedule the trial absent agreement of the parties. The U.S. Defendants appealed that ruling on June 16, 2021, and that appeal is currently pending.
The trial began as scheduled on June 16, 2021. The Macao Judicial Court heard testimony on June 16, 17, 23, and July 1. By order dated June 17, 2021, the Macao Judicial Court scheduled additional trial dates during September, October and December 2021 to hear witnesses who are currently subject to COVID-19 travel restrictions that prevent or severely limit their ability to enter Macao. That order also provided a procedure for the parties to request written testimony from witnesses who are not able to travel to Macao on those dates. On June 28, 2021, the U.S. Defendants sought clarification of certain aspects of that ruling concerning procedures for written testimony and appealed aspects of that ruling setting limits on written testimony, imposing a deadline for in-person testimony, and rejecting the U.S. Defendants’ request to have witnesses testify via video conference. On July 9, 2021, the Macao Judicial Court issued an order clarifying the procedure for written testimony. The U.S. Defendants’ appeal on the remainder of the Macao Judicial Court’s June 17, 2021 order is currently pending.
On July 10, 2021, the U.S. Defendants were notified of an invoice for supplemental court fees totaling 93 million patacas (approximately $12 million at exchange rates in effect on September 30, 2022) based on Plaintiff’s July 15, 2019 amendment of its claim amount. By motion dated July 20, 2021, the U.S. Defendants moved the Macao Judicial Court for an order withdrawing that invoice on the grounds that it was procedurally improper and conflicted with rights guaranteed in Macao’s Basic Law. The Macao Judicial Court denied that motion by order dated September 11, 2021. The U.S. Defendants appealed that order on September 23, 2021, and that appeal is currently pending. By order dated September 29, 2021, the Macao Judicial Court ordered that the invoice for supplemental court fees be stayed pending resolution of that appeal.
The Macao Judicial Court heard additional testimony on October 8, 11, and 15, and December 14 and 15, 2021. Certain witnesses who were not able to enter Macao due to ongoing COVID-19 travel restrictions presented testimony in writing. On December 15, 2021, the U.S. Defendants sought to initiate a proceeding to impeach the testimony of certain witnesses offered by Plaintiff, and the Macao Judicial Court admitted that incident and ordered Plaintiff to produce its shareholder registry. By notice dated December 16, 2021, Plaintiff appealed the order to produce its shareholder registry, and that appeal is currently pending.
From December 17, 2021 to January 19, 2022, Plaintiff submitted additional documents to the court file and disclosed written reports from two purported experts, who calculated Plaintiff’s damages at 57.88 billion patacas and 62.29 billion patacas (approximately $7.16 billion and $7.70 billion, respectively, at exchange rates in effect on September 30, 2022). In response, the U.S. Defendants moved to exclude those materials or, in the alternative, to require additional testimony from relevant witnesses. By order dated January 19, 2022, the Macao Judicial Court denied the U.S. Defendants’ motion and ruled that the materials could be included in the court file with the probative value of their contents to be determined by the Court.
Plaintiff presented its factual summation on January 21, 2022. On January 26, 2022, the U.S. Defendants presented their factual summation, and Plaintiff and the U.S. Defendants presented rebuttal summations. The Macao Judicial Court announced its proposed findings on disputed facts at a February 15, 2022 hearing. The Plaintiff filed its brief on points of law with the Macao Judicial Court on March 1, 2022, and the U.S. Defendants filed their brief on points of law on March 10, 2022. On April 28, 2022, the Macao Judicial Court entered a judgment for the U.S. Defendants. The Macao Judicial Court also held that Plaintiff litigated certain aspects of its case in bad faith.
Plaintiff filed a notice of appeal from the Macao Judicial Court’s judgment on May 13, 2022. Plaintiff filed its appeal brief on July 5, 2022, and the U.S. Defendants filed their response brief on September 19, 2022. That appeal is currently pending with the Macao Second Instance Court.
24
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
On September 19, 2022, the U.S. Defendants were notified of an invoice for appeal court fees totaling 48 million patacas (approximately $6 million at exchange rates in effect on September 30, 2022). By motion dated September 29, 2022, the U.S. Defendants moved the Macao Judicial Court for an order withdrawing that invoice. That motion is currently pending with the Macao Judicial Court.
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.
The Daniels Family 2001 Revocable Trust v. LVSC, et al.
On October 22, 2020, The Daniels Family 2001 Revocable Trust, a putative purchaser of the Company’s shares, filed a purported class action complaint in the U.S. District Court against LVSC, Sheldon G. Adelson and Patrick Dumont. The complaint asserts violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and alleges that LVSC made materially false or misleading statements, or failed to disclose material facts, from February 27, 2016 through September 15, 2020, with respect to its operations at the Marina Bay Sands, its compliance with Singapore laws and regulations, and its disclosure controls and procedures. On January 5, 2021, the U.S. District Court entered an order appointing Carl S. Ciaccio and Donald M. DeSalvo as lead plaintiffs (“Lead Plaintiffs”). On March 8, 2021, Lead Plaintiffs filed a purported class action amended complaint against LVSC, Sheldon G. Adelson, Patrick Dumont, and Robert G. Goldstein, alleging similar violations of Sections 10(b) and 20(a) of the Exchange Act over the same time period of February 27, 2016 through September 15, 2020. On March 22, 2021, the U.S. District Court granted Lead Plaintiffs’ motion to substitute Dr. Miriam Adelson, in her capacity as the Special Administrator for the estate of Sheldon G. Adelson, for Sheldon G. Adelson as a defendant in this action. On May 7, 2021, the defendants filed a motion to dismiss the amended complaint. Lead Plaintiffs filed an opposition to the motion to dismiss on July 6, 2021, and the defendants filed their reply on August 5, 2021. On March 28, 2022, the U.S. District Court entered an order dismissing the amended complaint in its entirety. The U.S. District Court dismissed certain claims with prejudice but granted Lead Plaintiffs leave to amend the complaint with respect to the other claims by April 18, 2022. On April 8, 2022, Lead Plaintiffs filed a Motion for Reconsideration and to Extend Time to File the Amended Complaint, requesting the U.S. District Court reconsider certain aspects of its March 28, 2022 order, and to extend the deadline for Lead Plaintiffs to file an amended complaint. The defendants filed an opposition to the motion on April 22, 2022. On April 18, 2022, Lead Plaintiffs filed a second amended complaint. On May 18, 2022, the defendants filed a motion to dismiss the second amended complaint. Lead Plaintiffs filed an opposition to the motion to dismiss on June 17, 2022, and the defendants filed their reply on July 8, 2022. This action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
Turesky v. Sheldon G. Adelson, et al.
25
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
Note 11 — Segment Information
The Company’s principal operating and developmental activities occur in two geographic areas: Macao and Singapore. The Company reviews the results of operations and construction and development activities for each of its operating segments: The Venetian Macao; The Londoner Macao; The Parisian Macao; The Plaza Macao and Four Seasons Macao; Sands Macao; and Marina Bay Sands. 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) and Corporate and Other to reconcile to the condensed consolidated results of operations and financial condition. The operations that comprised the Company’s former Las Vegas Operating Properties reportable business segment were classified as a discontinued operation and the information below for the three and nine months ended September 30, 2022 and 2021, excludes these results.
The Company’s segment information as of September 30, 2022 and December 31, 2021, and for the three and nine months ended September 30, 2022 and 2021 is as follows:
| Casino | Rooms | Food and Beverage | Mall | Convention, Retail and Other | Net Revenues | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||||||||||||||
| The Venetian Macao | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| The Londoner Macao | |||||||||||||||||||||||||||||||||||
| The Parisian Macao | |||||||||||||||||||||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||||||||||||||||||||
| Sands Macao | |||||||||||||||||||||||||||||||||||
| Ferry Operations and Other | |||||||||||||||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||||||||||||||
| Intercompany royalties | |||||||||||||||||||||||||||||||||||
Intercompany eliminations(1) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||||||||||||||
| The Venetian Macao | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| The Londoner Macao | |||||||||||||||||||||||||||||||||||
| The Parisian Macao | |||||||||||||||||||||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||||||||||||||||||||
| Sands Macao | |||||||||||||||||||||||||||||||||||
| Ferry Operations and Other | |||||||||||||||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||||||||||||||
| Intercompany royalties | |||||||||||||||||||||||||||||||||||
Intercompany eliminations(1) | ( | ( | |||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
26
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
| Casino | Rooms | Food and Beverage | Mall | Convention, Retail and Other | Net Revenues | ||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||||||||||||||
| The Venetian Macao | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| The Londoner Macao | |||||||||||||||||||||||||||||||||||
| The Parisian Macao | |||||||||||||||||||||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||||||||||||||||||||
| Sands Macao | |||||||||||||||||||||||||||||||||||
| Ferry Operations and Other | |||||||||||||||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||||||||||||||
| Intercompany royalties | |||||||||||||||||||||||||||||||||||
Intercompany eliminations(1) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| Nine Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||||||||||||||
| The Venetian Macao | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
| The Londoner Macao | |||||||||||||||||||||||||||||||||||
| The Parisian Macao | |||||||||||||||||||||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||||||||||||||||||||
| Sands Macao | |||||||||||||||||||||||||||||||||||
| Ferry Operations and Other | |||||||||||||||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||||||||||||||
| Intercompany royalties | |||||||||||||||||||||||||||||||||||
Intercompany eliminations(1) | ( | ( | ( | ||||||||||||||||||||||||||||||||
| Total net revenues | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
____________________
(1)Intercompany eliminations include royalties and other intercompany services.
27
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Intersegment Revenues | |||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||
| The Venetian Macao | $ | $ | $ | $ | |||||||||||||||||||
| The Londoner Macao | |||||||||||||||||||||||
| Ferry Operations and Other | |||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||
| Intercompany royalties | |||||||||||||||||||||||
| Total intersegment revenues | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Adjusted Property EBITDA | |||||||||||||||||||||||
| Macao: | |||||||||||||||||||||||
| The Venetian Macao | $ | ( | $ | $ | ( | $ | |||||||||||||||||
| The Londoner Macao | ( | ( | ( | ( | |||||||||||||||||||
| The Parisian Macao | ( | ( | ( | ||||||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||||||||
| Sands Macao | ( | ( | ( | ( | |||||||||||||||||||
| Ferry Operations and Other | ( | ( | ( | ( | |||||||||||||||||||
| ( | ( | ||||||||||||||||||||||
| Marina Bay Sands | |||||||||||||||||||||||
Consolidated adjusted property EBITDA(1) | |||||||||||||||||||||||
| Other Operating Costs and Expenses | |||||||||||||||||||||||
Stock-based compensation(2) | ( | ( | ( | ||||||||||||||||||||
| Corporate | ( | ( | ( | ( | |||||||||||||||||||
| Pre-opening | ( | ( | ( | ( | |||||||||||||||||||
| Development | ( | ( | ( | ( | |||||||||||||||||||
| Depreciation and amortization | ( | ( | ( | ( | |||||||||||||||||||
| Amortization of leasehold interests in land | ( | ( | ( | ( | |||||||||||||||||||
| Loss on disposal or impairment of assets | ( | ( | ( | ( | |||||||||||||||||||
| Operating loss | ( | ( | ( | ( | |||||||||||||||||||
| Other Non-Operating Costs and Expenses | |||||||||||||||||||||||
| Interest income | |||||||||||||||||||||||
| Interest expense, net of amounts capitalized | ( | ( | ( | ( | |||||||||||||||||||
| Other income (expense) | ( | ( | ( | ||||||||||||||||||||
| Loss on modification or early retirement of debt | ( | ( | |||||||||||||||||||||
| Income tax (expense) benefit | ( | ( | |||||||||||||||||||||
| Net loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | |||||||||||||||
____________________
(1)Consolidated adjusted property EBITDA, which is a non-GAAP financial measure, is net income (loss) from continuing operations before stock-based compensation expense, corporate expense, pre-opening expense, development expense,
28
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(2)During the three months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense of $18 million and $3 million, respectively, of which $9 million and $3 million, respectively, was included in corporate expense in the accompanying condensed consolidated statements of operations. During the nine months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense of $47 million and $17 million, respectively, of which $27 million and $9 million, respectively, was included in corporate expense in the accompanying condensed consolidated statements of operations.
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Capital Expenditures | |||||||||||
| Corporate and Other | $ | $ | |||||||||
| Macao: | |||||||||||
| The Venetian Macao | |||||||||||
| The Londoner Macao | |||||||||||
| The Parisian Macao | |||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||
| Sands Macao | |||||||||||
| Ferry Operations and Other | |||||||||||
| Marina Bay Sands | |||||||||||
| Total capital expenditures | $ | $ | |||||||||
29
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
| September 30, 2022 | December 31, 2021 | ||||||||||
| (In millions) | |||||||||||
| Total Assets | |||||||||||
| Corporate and Other | $ | $ | |||||||||
| Macao: | |||||||||||
| The Venetian Macao | |||||||||||
| The Londoner Macao | |||||||||||
| The Parisian Macao | |||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||
| Sands Macao | |||||||||||
| Ferry Operations and Other | |||||||||||
| Marina Bay Sands | |||||||||||
| Total assets | $ | $ | |||||||||
30
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto, and other financial information included in this Form 10-Q. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “Special Note Regarding Forward-Looking Statements.”
Operations
We view each of our Integrated Resort properties as an operating segment. Our operating segments in Macao consist of The Venetian Macao; The Londoner Macao; The Parisian Macao; The Plaza Macao and Four Seasons Macao; and the Sands Macao. Our operating segment in Singapore is Marina Bay Sands.
On February 23, 2022, we closed the sale of our Las Vegas real property and operations including The Venetian Resort Las Vegas and the Sands Expo and Convention Center (the “Las Vegas Operations”) for $6.25 billion (the “Las Vegas Sale”). At closing, we received approximately $5.05 billion in cash proceeds, before transaction costs and working capital adjustments of $77 million, a $1.20 billion seller financing loan and recognized a gain on disposal of $3.61 billion, before income tax expense of $750 million, during the nine months ended September 30, 2022.
COVID-19 Pandemic Update
Visitation to the Macao Special Administrative Region (“Macao”) of the People’s Republic of China (“China”) remains substantially below pre-COVID-19 levels as a result of various government policies limiting or discouraging travel. Currently, visitors from mainland China in general may enter Macao without having to quarantine, subject to them holding the appropriate travel documents, a negative COVID-19 test result issued within a specified time period and a green health-code. On August 30, 2022, the Health Bureau announced that from September 1, 2022, individuals from 41 foreign countries will be allowed to enter Macao without prior authorization but will still be required to undergo a seven-day hotel quarantine. Our operations in Macao will continue to be impacted and subject to changes in the government policies of Macao, China, Hong Kong and other jurisdictions in Asia addressing travel and public health measures associated with COVID-19.
Following an outbreak in Macao in mid-June 2022, the Macao government announced a series of preventative measures (“State of Immediate Prevention”). Those included closure of a range of government, public and social facilities, with restaurants only permitted to offer take away services. Residential and commercial buildings with confirmed COVID-19 cases were required to implement various levels of access control. In addition to the health safeguards already in place, the Macao government implemented a series of mass nucleic acid tests (“NAT”) and rapid antigen tests for the general population.
On July 9, 2022, the Macao government ordered casinos and all non-essential businesses to close from July 11 to July 18 in an attempt to control an outbreak of COVID-19 in Macao, which was extended through July 22, 2022. On July 20, 2022, the Macao government announced a consolidation period, which would start on July 23, 2022 and end on July 30, 2022 whereby certain business activities would be allowed to resume limited operations, clarifying that casino operations could resume, but with a maximum capacity of 50% of casino staff working at any point.
On August 2, 2022, the State of Immediate Prevention was lifted and Macao entered a stabilization period until August 7, 2022, which allowed for the reopening of various public and social facilities and the resumption of restaurant dine-in services subject to the need to wear facemasks and present a negative NAT conducted within the past three days. On August 6, 2022, the quarantine period for fully-vaccinated visitors from Hong Kong, Taiwan and other overseas jurisdictions changed from “10+7” (10 days of hotel quarantine plus 7 days of self-health management) to “7+3” (7 days of hotel quarantine plus 3 days of self-health management). Restrictions on the number of casino staff working were lifted on August 15, 2022. Throughout August, various restrictions on movement between Macao and Zhuhai were progressively lifted by both the Macao and mainland China governments.
31
On September 19, 2022, the NAT requirement was extended from within 24 hours of travel to 48 hours for those travelers entering Zhuhai from Macao and on September 21, 2022, the NAT requirement was extended from within 48 hours of travel to seven days for those travelers entering mainland China from Macao by plane.
Our Macao gaming operations remained open during the nine months ended September 30, 2022, with the exception of the casino closure in July 2022 mentioned above. Guest visitation to the properties, however, was adversely affected during this period due to the various outbreaks that occurred in Shanghai, Hong Kong, Guangdong and Macao, which resulted in tighter travel restrictions. The timing and manner in which our casinos, restaurants and shopping malls will reopen and/or operate at full capacity are currently unknown.
As with prior periods, in support of the Macao government’s initiatives to fight the COVID-19 Pandemic, throughout the nine months ended September 30, 2022 and in June and July in particular, we provided both towers of the Sheraton Grand Macao hotel and also The Parisian Macao hotel to the Macao government to house individuals for quarantine and medical observation purposes. The Parisian Macao hotel ceased operations as a medical observation facility on July 27, 2022, and the Sheraton Grand Macao hotel ceased operations as a quarantine and medical observation facility on September 23, 2022.
Our ferry operations between Macao and Hong Kong remain suspended. The timing and manner in which our ferry operations will be able to resume are currently unknown.
Our Macao operations have been significantly impacted by the reduced visitation to Macao. The Macao government announced total visitation from mainland China to Macao decreased approximately 25.0% and 81.7%, during the nine months ended September 30, 2022, as compared to the same period in 2021 and 2019 (pre-pandemic), respectively. The Macao government also announced gross gaming revenue decreased approximately 53.1% and 85.6%, during the nine months ended September 30, 2022, as compared to the same period in 2021 and 2019, respectively.
In Singapore, the Vaccinated Travel Framework (“VTF”) was launched on April 1, 2022, to facilitate the resumption of travel for all travelers, including short-term visitors. Under the VTF, all fully vaccinated travelers and non-fully vaccinated children aged 12 and below are permitted to enter Singapore, without entry approvals, and starting April 26, 2022, these travelers are no longer required to take a COVID-19 test before departing for Singapore. Operations at Marina Bay Sands will continue to be impacted and subject to changes in the government policies of Singapore and other jurisdictions in Asia, if any, addressing travel and public health measures associated with COVID-19.
Visitation to Marina Bay Sands continues to be impacted by the effects of the COVID-19 Pandemic; however, visitation has increased since restrictions have been lifted. The Singapore Tourism Board (“STB”) announced total visitation to Singapore increased from approximately 172,000 in 2021 to 3.7 million in 2022 on a year-to-date basis, while visitation decreased 74.1% when compared to the same period in 2019. For the three months ended September 30, 2022, visitation decreased 55.9% when compared to the same period in 2019. The latest available statistics show that passenger traffic at Changi Airport has been on the rise reaching approximately 3.3 million in August 2022, up from approximately 2.9 million in June 2022, and is at 56% of pre-pandemic levels as the travel industry continues to recover from the impact of COVID-19.
At our Macao properties, we are adhering to social distancing requirements, which include reduced seating at table games and a decreased number of active slot machines on the casino floor compared to pre-COVID-19 levels. Additionally, there is uncertainty whether the impact of the COVID-19 Pandemic on operations will continue in future periods. If our Integrated Resorts are not permitted to resume normal operations, travel restrictions such as those related to inbound travel from other countries are not modified or eliminated, there is a resumption of the suspension of the China Individual Visit Scheme, or the global response to contain the COVID-19 Pandemic escalates or is unsuccessful, our operations, cash flows and financial condition will be further materially impacted.
While our properties were open and some operating at reduced levels due to lower visitation and required safety measures in place as described above during the nine months ended September 30, 2022, the current economic and regulatory environment on a global basis and in each of our jurisdictions continue to evolve. We cannot predict the manner in which governments will react as the global and regional impact of the COVID-19 Pandemic changes over time, which could significantly alter our current operations.
32
We have a strong balance sheet and sufficient liquidity in place, including total unrestricted cash and cash equivalents of $5.84 billion and access to $1.50 billion, $1.04 billion and $412 million of available borrowing capacity from our LVSC Revolving Facility, 2018 SCL Revolving Facility and 2012 Singapore Revolving Facility, respectively, as of September 30, 2022. We believe we are able to support continuing operations, complete the major construction projects that are underway, proceed with the Macao concession tendering process and respond to the current COVID-19 Pandemic challenges. We have taken various mitigating measures to manage through the current environment, including a cost and capital expenditure reduction program to minimize cash outflow for non-essential items.
Macao Subconcession
Gaming in Macao is administered by the government through concession agreements awarded to three different concessionaires and three subconcessionaires, of which Venetian Macau Limited (“VML,” a subsidiary of Sands China Ltd.) is one. On June 23, 2022, an extension was approved and authorized by the Macao government and executed between VML and Galaxy Casino, S.A., pursuant to which the subconcession has been extended from June 26, 2022 to December 31, 2022. VML paid the Macao government 47 million patacas (approximately $6 million at exchange rates in effect at the time of the transaction) and provided a bank guarantee on September 20, 2022 of 2.31 billion patacas (approximately $289 million at exchange rates as defined in the bank guarantee contract) to secure the fulfillment of VML's payment obligations towards its employees should VML be unsuccessful in tendering for a new concession contract after its subconcession expires.
In order to enable VML to fulfill the relevant requirements to become eligible to obtain the subconcession extension as mentioned above, each of VML, Venetian Cotai Limited (“VCL”) and Venetian Orient Limited (“VOL”) entered into a letter of undertaking (“Undertakings”), pursuant to which each of VML, VCL and VOL has undertaken, pursuant to article 40 of the Gaming Law and article 43 of VML’s subconcession agreement, to revert to the Macao government relevant gaming equipment and gaming areas (as identified in the Undertakings) without compensation and free of any liens or charges upon the expiry of the term of the subconcession extension period. The total casino areas and supporting areas subject to reversion is approximately 136,000 square meters, representing approximately 4.7% of the total property area of these entities.
On June 21, 2022, the Macao Legislative Assembly passed a draft bill entitled Amendment to Law No. 16/2001 to amend Macao’s gaming law, which was published in the Macao Official Gazette on June 22, 2022 as Law No. 7/2022, and became effective on June 23, 2022 (the "Gaming Law"). Certain changes to the Gaming Law include a reduction in the maximum term of future gaming concessions to ten (10) years; authorization of up to six (6) gaming concession contracts; an increase in the minimum capital contribution of concessionaires to 5 billion patacas (approximately $618 million at exchange rates in effect on September 30, 2022); an increase in the percentage of the share capital of the concessionaire that must be held by the local managing director to 15%; a requirement that casinos be located in real estate owned by the concessionaire; and a prohibition of revenue sharing arrangements between gaming promoters and concessionaires.
On July 5, 2022, the Macao government published Administrative Regulation No. 28/2022 – Amendment of Administrative Regulation No. 26/2001, which sets forth the regulations governing the tender for gaming concessions in Macao. The regulation includes details on the process of bidding for the gaming concessions, qualifications of the companies bidding and the criteria for granting them.
On July 27, 2022, the Macao government officially launched the public tender process for the award of concessions for the operation of games of chance in casinos. VML submitted its bid for one of up to six gaming concessions on September 14, 2022. All bids received by the Macao government, of which there were a total of seven companies, including VML, were formally accepted in the tender. The Macao government has disclosed that it intends to complete the tender process and grant the new gaming concessions before the end of 2022.
We continue to believe we will be successful in extending the term of our subconcession and/or obtaining a new gaming concession when our current subconcession expires; however, it is possible the Macao government could further change or interpret the associated gaming laws in a manner that could negatively impact us.
Under our Sands China Ltd. (“SCL”) senior notes indentures, upon the occurrence of any event resulting from any change in the Gaming Law (as defined in the indentures) or any action by the gaming authority after which none of SCL or any of its subsidiaries own or manage casino or gaming areas or operate casino games of fortune and
33
chance in Macao in substantially the same manner as they were owning or managing casino or gaming areas or operating casino games as at the issue date of the SCL senior notes, for a period of 30 consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties or results of operations of SCL and its subsidiaries, taken as a whole, each holder of the SCL senior notes would have the right to require us to repurchase all or any part of such holder's SCL senior notes at par, plus any accrued and unpaid interest (the "Investor Put Option").
Additionally, under the 2018 SCL Credit Facility, the events that trigger an Investor Put Option under the SCL senior notes (as described above) would be an event of default, which may result in commitments being immediately cancelled, in whole or in part, and the related outstanding balances and accrued interest, if any, becoming immediately due and payable.
The subconcession not being further extended or not obtaining a new gaming concession when our current subconcession expires and the potential impact if holders of the notes and the agent have the ability to, and make the election to, accelerate the repayment of our debt would have a material adverse effect on our business, financial condition, results of operations and cash flows. We intend to follow the process for a concession renewal as indicated above.
Inflation Reduction Act
The Inflation Reduction Act (“IRA”) of 2022 was signed into law on August 16, 2022. The IRA contains numerous provisions including a 15% corporate alternative minimum tax (“CAMT”) for certain large corporations that have at least an average of $1 billion adjusted financial statement income over a consecutive three-year period effective in tax years beginning after December 31, 2022. Applicable corporations would be allowed to claim a credit for the corporate minimum tax paid against regular tax in future years. The IRA also includes a 1% excise tax on corporate stock repurchases beginning January 1, 2023. The CAMT could impact our future cash flows and results of operations. The Internal Revenue Service has been granted broad authority to issue regulations or other guidance that could clarify how these taxes will be applied. We will continue to evaluate the impact of the IRA as additional information becomes available.
Marina Bay Sands Gaming License
In April 2022, we paid 72 million Singapore dollars ("SGD," approximately $53 million at exchange rates in effect at the time of the transaction) to the Singapore Gambling Regulatory Authority as part of the process to renew its gaming license at Marina Bay Sands, which will now expire in April 2025.
Intercompany Loan Agreement with SCL
On July 11, 2022, we entered into an intercompany term loan agreement with SCL, a related party, in the amount of $1.0 billion, which is repayable on July 11, 2028. In the first two years from July 11, 2022, SCL will have the option to elect to pay cash interest at 5% per annum or payment-in-kind interest at 6% per annum by adding the amount of such interest to the then-outstanding principal amount of the loan, following which only cash interest at 5% per annum will be payable. This loan is unsecured, subordinated to all third party unsecured indebtedness and other obligations of SCL and its subsidiaries and is eliminated in consolidation.
Critical Accounting Policies and Estimates
For a discussion of our significant accounting policies and estimates, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” presented in our 2021 Annual Report on Form 10-K filed on February 4, 2022.
There were no newly identified significant accounting estimates during the nine months ended September 30, 2022, nor were there any material changes to the critical accounting policies and estimates discussed in our 2021 Annual Report.
Recent Accounting Pronouncements
See related disclosure at “Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 1 — Organization and Business of Company — Recent Accounting Pronouncements.”
34
Operating Results
Key Operating Revenue Measurements
Operating revenues at The Venetian Macao, The Londoner Macao, The Parisian Macao, The Plaza Macao and Four Seasons Macao, Marina Bay Sands and our Las Vegas Operating Properties, prior to its sale on February 23, 2022, are dependent upon the volume of patrons who stay at the hotel, which affects the price charged for hotel rooms and our gaming volume. Operating revenues at Sands Macao are principally driven by the volume of gaming patrons who visit the property on a daily basis.
Management utilizes the following volume and pricing measures in order to evaluate past performance and assist in forecasting future revenues. The various volume measurements indicate our ability to attract patrons to our Integrated Resorts. In casino operations, win and hold percentages indicate the amount of revenue to be expected based on volume. In hotel operations, average daily rate and revenue per available room indicate the demand for rooms and our ability to capture that demand. In mall operations, base rent per square foot indicates our ability to attract and maintain profitable tenants for our leasable space.
The following are the key measurements we use to evaluate operating revenues:
Casino revenue measurements for Macao and Singapore: Macao and Singapore table games are segregated into two groups: Rolling Chip play (composed of VIP players) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-negotiable gaming chips wagered and lost. The volume measurement for Non-Rolling Chip play is table games drop (“drop”), which is net markers issued (credit instruments), cash deposited in the table drop boxes and gaming chips purchased and exchanged at the cage. Rolling Chip and Non-Rolling Chip volume measurements are not comparable as they are two distinct measures of volume. The amounts wagered and lost for Rolling Chip play are substantially higher than the amounts dropped for Non-Rolling Chip play. Slot handle, also a volume measurement, is the gross amount wagered for the period cited.
We view Rolling Chip win as a percentage of Rolling Chip volume, Non-Rolling Chip win as a percentage of drop and slot hold (amount won by the casino) as a percentage of slot handle. Win or hold percentage represents the percentage of Rolling Chip volume, Non-Rolling Chip drop or slot handle that is won by the casino and recorded as casino revenue. Our win and hold percentages are calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis. Our Rolling Chip table games are expected to produce a win percentage of 3.15% to 3.45% in Macao and Singapore, and our Non-Rolling Chip table games have produced a trailing 12-month win percentage of 25.6%, 22.5%, 24.0%, 26.1%, 18.6% and 17.1% at The Venetian Macao, The Londoner Macao, The Parisian Macao, The Plaza Macao and Four Seasons Macao, Sands Macao and Marina Bay Sands, respectively. Our slot machines have produced a trailing 12-month hold percentage of 3.9%, 3.7%, 3.8%, 7.7%, 2.8% and 4.2% at The Venetian Macao, The Londoner Macao, The Parisian Macao, The Plaza Macao and Four Seasons Macao, Sands Macao and Marina Bay Sands, respectively. Actual win and hold percentages may vary from our expected win percentage and the trailing 12-month win and hold percentages. Generally, slot machine play is conducted on a cash basis. In Macao and Singapore, 11.3% and 14.8%, respectively, of our table games play was conducted on a credit basis for the nine months ended September 30, 2022.
Casino revenue measurements for the U.S.: The volume measurements in the U.S. were slot handle, as previously described, and table games drop, which was the total amount of cash and net markers issued (credit instruments) deposited in the table drop box. We viewed table games win as a percentage of drop and slot hold as a percentage of slot handle. Our win and hold percentages were calculated before discounts, commissions, deferring revenue associated with our loyalty programs and allocating casino revenues related to goods and services provided to patrons on a complimentary basis. Similar to Macao and Singapore, slot machine play was generally conducted on a cash basis.
Hotel revenue measurements: Performance indicators used are occupancy rate (a volume indicator), which is the average percentage of available hotel rooms occupied during a period and average daily room rate (“ADR,” a price indicator), which is the average price of occupied rooms per day. Available rooms exclude those rooms unavailable for occupancy during the period due to renovation, development or other requirements (such as government mandated closure, lodging for team members and usage by the Macao government for quarantine measures). The calculations of the occupancy rate and ADR include the impact of rooms provided on a
35
complimentary basis. Revenue per available room (“RevPAR”) represents a summary of hotel ADR and occupancy. Because not all available rooms are occupied, ADR is normally higher than RevPAR. Reserved rooms where the guests do not show up for their stay and lose their deposit, or where guests check out early, may be re-sold to walk-in guests.
Mall revenue measurements: Occupancy, base rent per square foot and tenant sales per square foot are used as performance indicators. Occupancy represents gross leasable occupied area (“GLOA”) divided by gross leasable area (“GLA”) at the end of the reporting period. GLOA is the sum of: (1) tenant occupied space under lease and (2) tenants no longer occupying space, but paying rent. GLA does not include space currently under development or not on the market for lease. Base rent per square foot is the weighted average base or minimum rent charge in effect at the end of the reporting period for all tenants that would qualify to be included in occupancy. Tenant sales per square foot is the reported comparable sales for the trailing 12 months divided by the comparable square footage for the same period. Only tenants that have been open for a minimum of 12 months are included in the tenant sales per square foot calculation.
Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021
Summary Financial Results
The reopening of borders and elimination of most pandemic-related restrictions in Singapore positively impacted the financial results of Marina Bay Sands. Net revenues and adjusted property EBITDA at Marina Bay Sands increased $508 million and $328 million, respectively. In contrast, net revenues and adjusted property EBITDA at our Macao operations decreased $360 million and $184 million, respectively, driven by a COVID-19 outbreak in Macao that resulted in a temporary government mandated closure of all casinos and non-essential businesses, as well as a series of various preventative measures that impacted visitation to our Macao operations. See “COVID-19 Pandemic” for further information.
Net revenues for the three months ended September 30, 2022, were $1.01 billion, compared to $857 million for the three months ended September 30, 2021. Operating loss was $177 million for the three months ended September 30, 2022, compared to $316 million for the three months ended September 30, 2021. Net loss from continuing operations was $380 million for the three months ended September 30, 2022, compared to $594 million for the three months ended September 30, 2021.
36
Operating Revenues
Our net revenues consisted of the following:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Casino | $ | 637 | $ | 533 | 19.5 | % | |||||||||||
| Rooms | 123 | 100 | 23.0 | % | |||||||||||||
| Food and beverage | 82 | 42 | 95.2 | % | |||||||||||||
| Mall | 119 | 165 | (27.9) | % | |||||||||||||
| Convention, retail and other | 44 | 17 | 158.8 | % | |||||||||||||
| Total net revenues | $ | 1,005 | $ | 857 | 17.3 | % | |||||||||||
Consolidated net revenues were $1.01 billion for the three months ended September 30, 2022, an increase of $148 million compared to $857 million for the three months ended September 30, 2021. The increase is due to a $508 million increase at Marina Bay Sands, partially offset by a $360 million decrease at our Macao operations.
Net casino revenues increased $104 million compared to the three months ended September 30, 2021. Casino revenues at Marina Bay Sands increased $368 million due to increases in Rolling Chip volume, Non-Rolling Chip drop and slot handle driven by an increase in play due to the reopening of borders and elimination of most pandemic-related restrictions. This increase was partially offset by a $264 million decrease at our Macao operations due to closures mandated by the Macao government that resulted in decreased visitation and table games and slot volumes. The following table summarizes the results of our casino activity:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| The Venetian Macao | |||||||||||||||||
| Total net casino revenues | $ | 60 | $ | 176 | (65.9) | % | |||||||||||
| Non-Rolling Chip drop | $ | 292 | $ | 632 | (53.8) | % | |||||||||||
| Non-Rolling Chip win percentage | 24.3 | % | 27.9 | % | (3.6) | pts | |||||||||||
| Rolling Chip volume | $ | 115 | $ | 781 | (85.3) | % | |||||||||||
| Rolling Chip win percentage | 1.70 | % | 2.22 | % | (0.52) | pts | |||||||||||
| Slot handle | $ | 158 | $ | 362 | (56.4) | % | |||||||||||
| Slot hold percentage | 4.0 | % | 3.8 | % | 0.2 | pts | |||||||||||
| The Londoner Macao | |||||||||||||||||
| Total net casino revenues | $ | 24 | $ | 80 | (70.0) | % | |||||||||||
| Non-Rolling Chip drop | $ | 116 | $ | 388 | (70.1) | % | |||||||||||
| Non-Rolling Chip win percentage | 20.2 | % | 20.5 | % | (0.3) | pts | |||||||||||
| Rolling Chip volume | $ | 179 | $ | 1,266 | (85.9) | % | |||||||||||
| Rolling Chip win percentage | 5.27 | % | 2.04 | % | 3.23 | pts | |||||||||||
| Slot handle | $ | 104 | $ | 225 | (53.8) | % | |||||||||||
| Slot hold percentage | 4.0 | % | 3.8 | % | 0.2 | pts | |||||||||||
| The Parisian Macao | |||||||||||||||||
| Total net casino revenues | $ | 8 | $ | 75 | (89.3) | % | |||||||||||
| Non-Rolling Chip drop | $ | 60 | $ | 246 | (75.6) | % | |||||||||||
| Non-Rolling Chip win percentage | 24.1 | % | 22.8 | % | 1.3 | pts | |||||||||||
| Rolling Chip volume | $ | 26 | $ | 175 | (85.1) | % | |||||||||||
| Rolling Chip win percentage | (14.10) | % | 16.12 | % | (30.22) | pts | |||||||||||
| Slot handle | $ | 34 | $ | 153 | (77.8) | % | |||||||||||
| Slot hold percentage | 4.4 | % | 3.1 | % | 1.3 | pts | |||||||||||
37
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||
| Total net casino revenues | $ | 27 | $ | 44 | (38.6) | % | |||||||||||
| Non-Rolling Chip drop | $ | 90 | $ | 269 | (66.5) | % | |||||||||||
| Non-Rolling Chip win percentage | 17.6 | % | 20.0 | % | (2.4) | pts | |||||||||||
| Rolling Chip volume | $ | 212 | $ | 308 | (31.2) | % | |||||||||||
| Rolling Chip win percentage | 9.37 | % | 2.40 | % | 6.97 | pts | |||||||||||
| Slot handle | $ | 4 | $ | 7 | (42.9) | % | |||||||||||
| Slot hold percentage | 14.4 | % | 9.7 | % | 4.7 | pts | |||||||||||
| Sands Macao | |||||||||||||||||
| Total net casino revenues | $ | 8 | $ | 16 | (50.0) | % | |||||||||||
| Non-Rolling Chip drop | $ | 47 | $ | 89 | (47.2) | % | |||||||||||
| Non-Rolling Chip win percentage | 16.5 | % | 17.4 | % | (0.9) | pts | |||||||||||
| Rolling Chip volume | $ | 16 | $ | 137 | (88.3) | % | |||||||||||
| Rolling Chip win percentage | 2.98 | % | 0.11 | % | 2.87 | pts | |||||||||||
| Slot handle | $ | 72 | $ | 147 | (51.0) | % | |||||||||||
| Slot hold percentage | 3.4 | % | 3.4 | % | — | pts | |||||||||||
| Singapore Operations: | |||||||||||||||||
| Marina Bay Sands | |||||||||||||||||
| Total net casino revenues | $ | 510 | $ | 142 | 259.2 | % | |||||||||||
| Non-Rolling Chip drop | $ | 1,258 | $ | 638 | 97.2 | % | |||||||||||
| Non-Rolling Chip win percentage | 18.6 | % | 11.7 | % | 6.9 | pts | |||||||||||
| Rolling Chip volume | $ | 6,837 | $ | 459 | 1,389.5 | % | |||||||||||
| Rolling Chip win percentage | 3.47 | % | 4.05 | % | (0.58) | pts | |||||||||||
| Slot handle | $ | 4,424 | $ | 2,299 | 92.4 | % | |||||||||||
| Slot hold percentage | 4.3 | % | 4.2 | % | 0.1 | pts | |||||||||||
In our experience, average win percentages remain fairly consistent when measured over extended periods of time with a significant volume of wagers, but can vary considerably within shorter time periods as a result of the statistical variances associated with games of chance in which large amounts are wagered.
38
Room revenues increased $23 million compared to the three months ended September 30, 2021. The increase was due to increased occupancy rates and ADR driven by increased visitation at Marina Bay Sands compared to the three months ended September 30, 2021. This increase was partially offset by a decrease at our Macao operations as visitation decreased driven by mandated government closures described above resulting in lower occupancy rates. The following table summarizes the results of our room activity:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Room revenues in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| The Venetian Macao | |||||||||||||||||
| Total room revenues | $ | 10 | $ | 18 | (44.4) | % | |||||||||||
| Occupancy rate | 36.7 | % | 48.4 | % | (11.7) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 135 | $ | 149 | (9.4) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 50 | $ | 72 | (30.6) | % | |||||||||||
| The Londoner Macao | |||||||||||||||||
| Total room revenues | $ | 10 | $ | 22 | (54.5) | % | |||||||||||
| Occupancy rate | 23.2 | % | 38.8 | % | (15.6) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 159 | $ | 155 | 2.6 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 37 | $ | 60 | (38.3) | % | |||||||||||
| The Parisian Macao | |||||||||||||||||
| Total room revenues | $ | 5 | $ | 12 | (58.3) | % | |||||||||||
| Occupancy rate | 37.1 | % | 52.5 | % | (15.4) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 98 | $ | 116 | (15.5) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 36 | $ | 61 | (41.0) | % | |||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||
| Total room revenues | $ | 5 | $ | 11 | (54.5) | % | |||||||||||
| Occupancy rate | 19.8 | % | 41.3 | % | (21.5) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 453 | $ | 439 | 3.2 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 90 | $ | 181 | (50.3) | % | |||||||||||
| Sands Macao | |||||||||||||||||
| Total room revenues | $ | 1 | $ | 2 | (50.0) | % | |||||||||||
| Occupancy rate | 43.8 | % | 63.2 | % | (19.4) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 157 | $ | 134 | 17.2 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 69 | $ | 85 | (18.8) | % | |||||||||||
| Singapore Operations: | |||||||||||||||||
Marina Bay Sands(1) | |||||||||||||||||
| Total room revenues | $ | 92 | $ | 35 | 162.9 | % | |||||||||||
| Occupancy rate | 96.0 | % | 71.7 | % | 24.3 | pts | |||||||||||
| Average daily room rate (ADR) | $ | 515 | $ | 235 | 119.1 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 494 | $ | 169 | 192.3 | % | |||||||||||
__________________________
(1) During the three months ended September 30, 2022, approximately 500 rooms were under construction for renovation purposes.
39
Food and beverage revenues increased $40 million compared to the three months ended September 30, 2021. The increase was due to a $50 million increase at Marina Bay Sands driven by higher business volume at food and beverage outlets as a result of larger group sizes, elimination of most pandemic-related restrictions and the opening of new venues during the last twelve months. This increase was partially offset by a $10 million decrease at our Macao operations due to lower business volume at banquet operations and at most food and beverage outlets.
Mall revenues decreased $46 million compared to the three months ended September 30, 2021. A $60 million decrease in mall revenues in Macao, driven by decreases in base rent and turnover rent, and an increase in rent concessions granted to our mall tenants, was partially offset by a $14 million increase in mall revenues at Marina Bay Sands, driven by a decrease in rent concessions granted to our mall tenants and an increase in turnover rent.
For further information related to the financial performance of our malls, see “Additional Information Regarding our Retail Mall Operations.” The following table summarizes the results of our malls on the Cotai Strip in Macao and in Singapore:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Mall revenues in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| Shoppes at Venetian | |||||||||||||||||
| Total mall revenues | $ | 26 | $ | 49 | (46.9) | % | |||||||||||
| Mall gross leasable area (in square feet) | 814,771 | 814,731 | — | % | |||||||||||||
| Occupancy | 79.1 | % | 78.7 | % | 0.4 | pts | |||||||||||
| Base rent per square foot | $ | 286 | $ | 296 | (3.4) | % | |||||||||||
Tenant sales per square foot(1) | $ | 1,021 | $ | 1,368 | (25.4) | % | |||||||||||
| Shoppes at Londoner | |||||||||||||||||
| Total mall revenues | $ | 9 | $ | 13 | (30.8) | % | |||||||||||
| Mall gross leasable area (in square feet) | 605,461 | 520,302 | 16.4 | % | |||||||||||||
| Occupancy | 54.9 | % | 60.4 | % | (5.5) | pts | |||||||||||
| Base rent per square foot | $ | 136 | $ | 138 | (1.4) | % | |||||||||||
Tenant sales per square foot(1) | $ | 1,112 | $ | 1,240 | (10.3) | % | |||||||||||
| Shoppes at Parisian | |||||||||||||||||
| Total mall revenues | $ | 5 | $ | 10 | (50.0) | % | |||||||||||
| Mall gross leasable area (in square feet) | 296,322 | 296,322 | — | % | |||||||||||||
| Occupancy | 73.8 | % | 76.7 | % | (2.9) | pts | |||||||||||
| Base rent per square foot | $ | 121 | $ | 146 | (17.1) | % | |||||||||||
Tenant sales per square foot(1) | $ | 376 | $ | 683 | (44.9) | % | |||||||||||
| Shoppes at Four Seasons | |||||||||||||||||
| Total mall revenues | $ | 23 | $ | 52 | (55.8) | % | |||||||||||
| Mall gross leasable area (in square feet) | 248,674 | 244,193 | 1.8 | % | |||||||||||||
| Occupancy | 94.4 | % | 94.3 | % | 0.1 | pts | |||||||||||
| Base rent per square foot | $ | 542 | $ | 550 | (1.5) | % | |||||||||||
Tenant sales per square foot(1) | $ | 4,301 | $ | 6,298 | (31.7) | % | |||||||||||
| Singapore Operations: | |||||||||||||||||
| The Shoppes at Marina Bay Sands | |||||||||||||||||
| Total mall revenues | $ | 55 | $ | 41 | 34.1 | % | |||||||||||
| Mall gross leasable area (in square feet) | 622,007 | 622,073 | — | % | |||||||||||||
| Occupancy | 99.8 | % | 97.5 | % | 2.3 | pts | |||||||||||
| Base rent per square foot | $ | 283 | $ | 265 | 6.8 | % | |||||||||||
Tenant sales per square foot(1) | $ | 2,359 | $ | 1,480 | 59.4 | % | |||||||||||
40
__________________________
Note: This table excludes the results of our mall operations at Sands Macao. As a result of the COVID-19 Pandemic, tenants were provided rent concessions during the three months ended September 30, 2022 and 2021. Base rent per square foot presented above excludes the impact of these rent concessions.
(1) Tenant sales per square foot is the sum of reported comparable sales for the trailing 12 months divided by the comparable square footage for the same period.
Convention, retail and other revenues increased $27 million compared to the three months ended September 30, 2021. This increase was due to an $19 million increase at Marina Bay Sands, primarily driven by an $11 million increase in convention revenue. In addition, a $8 million increase at our Macao operations was driven primarily by quarantine room revenue at the Sheraton Grand Macao hotel and The Parisian Macao.
Operating Expenses
Our operating expenses consisted of the following:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Casino | $ | 410 | $ | 451 | (9.1) | % | |||||||||||
| Rooms | 41 | 40 | 2.5 | % | |||||||||||||
| Food and beverage | 83 | 55 | 50.9 | % | |||||||||||||
| Mall | 16 | 17 | (5.9) | % | |||||||||||||
| Convention, retail and other | 27 | 21 | 28.6 | % | |||||||||||||
| Provision for credit losses | 8 | 3 | 166.7 | % | |||||||||||||
| General and administrative | 238 | 223 | 6.7 | % | |||||||||||||
| Corporate | 53 | 64 | (17.2) | % | |||||||||||||
| Pre-opening | 4 | 6 | (33.3) | % | |||||||||||||
| Development | 26 | 13 | 100.0 | % | |||||||||||||
| Depreciation and amortization | 260 | 262 | (0.8) | % | |||||||||||||
| Amortization of leasehold interests in land | 14 | 14 | — | % | |||||||||||||
| Loss on disposal or impairment of assets | 2 | 4 | (50.0) | % | |||||||||||||
| Total operating expenses | $ | 1,182 | $ | 1,173 | 0.8 | % | |||||||||||
Operating expenses were $1.18 billion for the three months ended September 30, 2022, an increase of $9 million compared to $1.17 billion for the three months ended September 30, 2021, primarily driven by increases of $28 million in food and beverage expenses, $15 million in general and administrative expenses, $13 million in development expenses and $6 million increase in convention, retail, and other, partially offset by decreases of $41 million in casino expenses and $11 million in corporate expenses.
Casino expenses decreased $41 million compared to the three months ended September 30, 2021. The decrease was primarily attributable to a $124 million decrease in gaming taxes at our Macao operations due to decreased revenues, partially offset by an $87 million increase in gaming taxes at Marina Bay Sands due to increased revenues. The $264 million decrease in casino revenue at our Macao operating properties is subject to a 39% tax rate, whereas the $368 million increase in casino revenue at Marina Bay Sands is subject to a lower tax rate.
Food and beverage expenses increased $28 million compared to the three months ended September 30, 2021. An increase of $33 million at Marina Bay Sands was due to increased food outlet and banquet volumes, partially offset by a $5 million decrease at our Macao operations due to lower business volume.
Convention, retail and other expenses increased $6 million compared to the three months ended September 30, 2021, primarily driven by a $7 million increase at Marina Bay Sands, partially offset by a $1 million decrease at our Macao operations.
Provision for credit losses was $8 million for three months ended September 30, 2022, compared to $3 million for the three months ended September 30, 2021. The $5 million increase was driven by increased provision for the aging of patron receivables at our Marina Bay Sands and Macao operations. The amount of this provision can vary
41
over short periods of time because of factors specific to the patrons who owe us money from gaming activities. We believe the amount of our provision for credit losses in the future will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.
General and administrative expenses increased $15 million compared to the three months ended September 30, 2021. The increase was primarily due to a $22 million increase at Marina Bay Sands, driven by an increase in payroll, marketing and property operation costs, partially offset by a $7 million decrease at our Macao operations, driven by a decrease in marketing, property tax and insurance costs.
Corporate expenses decreased $11 million compared to the three months ended September 30, 2021. The decrease was primarily due to an $11 million in legal fee insurance recoveries.
Development expenses were $26 million for the three months ended September 30, 2022, compared to $13 million for the three months ended September 30, 2021. During the three months ended September 30, 2022, the costs were associated with our evaluation and pursuit of new business opportunities, primarily in Texas and digital gaming related efforts. Development costs are expensed as incurred.
Loss on disposal or impairment of assets was $2 million for three months ended September 30, 2022, compared to $4 million for the three months ended September 30, 2021. The losses incurred for the three months ended September 30, 2022 were primarily due to room renovation at Marina Bay Sands. The losses incurred for the three months ended September 30, 2021 were primarily due to asset disposal and demolition costs at The Londoner Macao.
Segment Adjusted Property EBITDA
The following table summarizes information related to our segments:
| Three Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Macao: | |||||||||||||||||
| The Venetian Macao | $ | (37) | $ | 40 | (192.5) | % | |||||||||||
| The Londoner Macao | (60) | (33) | 81.8 | % | |||||||||||||
| The Parisian Macao | (37) | 5 | (840.0) | % | |||||||||||||
| The Plaza Macao and Four Seasons Macao | 6 | 42 | (85.7) | % | |||||||||||||
| Sands Macao | (22) | (21) | 4.8 | % | |||||||||||||
| Ferry Operations and Other | (2) | (1) | 100.0 | % | |||||||||||||
| (152) | 32 | (575.0) | % | ||||||||||||||
| Marina Bay Sands | 343 | 15 | 2,186.7 | % | |||||||||||||
Consolidated adjusted property EBITDA(1) | $ | 191 | $ | 47 | 306.4 | % | |||||||||||
42
__________________________
(1) Consolidated adjusted property EBITDA, which is a non-GAAP financial measure, is used by management as the primary measure of the operating performance of our segments. Consolidated adjusted property EBITDA is net income (loss) from continuing operations before stock-based compensation expense, corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, gain or loss on disposal or impairment of assets, interest, other income or expense, gain or loss on modification or early retirement of debt and income taxes. Consolidated adjusted property EBITDA is a supplemental non-GAAP financial measure used by management, as well as industry analysts, to evaluate operations and operating performance. In particular, management utilizes consolidated adjusted property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation. Integrated Resort companies have historically reported adjusted property EBITDA as a supplemental performance measure to GAAP financial measures. In order to view the operations of their properties on a more stand-alone basis, Integrated Resort companies, including Las Vegas Sands Corp., have historically excluded certain expenses that do not relate to the management of specific properties, such as pre-opening expense, development expense and corporate expense, from their adjusted property EBITDA calculations. Consolidated adjusted property EBITDA should not be interpreted as an alternative to income from operations (as an indicator of operating performance) or to cash flows from operations (as a measure of liquidity), in each case, as determined in accordance with GAAP. We have 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, our presentation of consolidated adjusted property EBITDA may not be directly comparable to similarly titled measures presented by other companies.
| Three Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Consolidated adjusted property EBITDA | $ | 191 | $ | 47 | |||||||
| Other Operating Costs and Expenses | |||||||||||
Stock-based compensation(a) | (9) | — | |||||||||
| Corporate | (53) | (64) | |||||||||
| Pre-opening | (4) | (6) | |||||||||
| Development | (26) | (13) | |||||||||
| Depreciation and amortization | (260) | (262) | |||||||||
| Amortization of leasehold interests in land | (14) | (14) | |||||||||
| Loss on disposal or impairment of assets | (2) | (4) | |||||||||
| Operating loss | (177) | (316) | |||||||||
| Other Non-Operating Costs and Expenses | |||||||||||
| Interest income | 38 | 1 | |||||||||
| Interest expense, net of amounts capitalized | (183) | (157) | |||||||||
| Other income (expense) | 2 | (12) | |||||||||
| Loss on modification or early retirement of debt | — | (137) | |||||||||
| Income tax (expense) benefit | (60) | 27 | |||||||||
| Net loss from continuing operations | $ | (380) | $ | (594) | |||||||
(a)During the three months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense of $18 million and $3 million, respectively, of which $9 million and $3 million, respectively, was included in corporate expense in the accompanying condensed consolidated statements of operations.
Adjusted property EBITDA at our Macao operations decreased $184 million compared with the three months ended September 30, 2021, primarily due to decreases in casino, room, food and beverage and mall revenues due to decreased visitation at our Macao properties driven by government mandated closures as described above.
Adjusted property EBITDA at Marina Bay Sands increased $328 million compared to the three months ended September 30, 2021, primarily due to increases in casino, room, food and beverage and mall revenues due to the reopening of borders and elimination of most pandemic-related restrictions.
43
Interest Expense
The following table summarizes information related to interest expense:
| Three Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (Dollars in millions) | |||||||||||
Interest cost | $ | 184 | $ | 160 | |||||||
Less — capitalized interest | (1) | (3) | |||||||||
Interest expense, net | $ | 183 | $ | 157 | |||||||
Weighted average total debt balance | $ | 15,491 | $ | 14,574 | |||||||
Weighted average interest rate | 4.8 | % | 4.4 | % | |||||||
Interest cost increased $24 million compared to the three months ended September 30, 2021, primarily resulting from an increase in our weighted average total debt balance primarily due to $951 million drawn on the SCL Revolving Facility during the twelve months ended September 30, 2022. The weighted average interest rate increased from 4.4% to 4.8% during the three months ended September 30, 2022 when compared to the three months ended September 30, 2021, primarily driven by the increase in the underlying benchmark rate on our Singapore Credit Facility and the increase in interest rates on the SCL senior notes as a result of the credit rating downgrade to BB+ by S&P in February 2022, and by Fitch in June 2022., offset by the extinguishment of the SCL 4.600% senior notes in Q3 2021.
Other Factors Affecting Earnings
Interest income was $38 million for the three months ended September 30, 2022, compared to $1 million for the three months ended September 30, 2021. Interest income during the three months ended September 30, 2022 was primarily attributed to $29 million in interest income on money market funds and bank deposits driven by an increase in cash due to the sale of the Las Vegas Operating Properties and higher interest rates. We also had $8 million in interest income on the seller financing loan provided in connection with the sale of the Las Vegas Operating Properties in 2022.
Other income was $2 million for the three months ended September 30, 2022, compared to other expense of $12 million for the three months ended September 30, 2021. Other income during the three months ended September 30, 2022, was primarily attributable to foreign currency transaction gains driven by Singapore dollar denominated debt reported in U.S. dollars.
Our income tax expense was $60 million on a loss before income taxes of $320 million for the three months ended September 30, 2022, resulting in an 18.8% effective income tax rate. This compares to a (4.3)% effective income tax rate for the three months ended September 30, 2021. The income tax expense for the three months ended September 30, 2022, reflects a 17% statutory tax rate on our Singapore operations and a 21% corporate income tax on our domestic operations. Our operations in Macao are subject to a 12% statutory income tax rate, but in connection with the 35% gaming tax, our subsidiaries in Macao and their peers received an income tax exemption on gaming operations through December 31, 2022. Our income tax expense is based on the Company’s estimated annual effective tax rate for the year applied to year-to-date operating results in accordance with interim accounting guidelines.
The net loss attributable to our noncontrolling interests was $142 million for the three months ended September 30, 2022, compared to $127 million for the three months ended September 30, 2021. These amounts are related to the noncontrolling interest of SCL.
Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021
Summary Financial Results
The reopening of borders and elimination of most pandemic-related restrictions in Singapore positively impacted the financial results of Marina Bay Sands. Net revenues and adjusted property EBITDA at Marina Bay Sands increased $834 million and $512 million, respectively. In contrast, net revenues and adjusted property EBITDA at our Macao operations decreased $1.07 billion and $537 million, respectively, as tighter border
44
restrictions were introduced as a result of increased positive COVID-19 cases in Macao and the surrounding regions. See “COVID-19 Pandemic” for further information.
Net revenues for the nine months ended September 30, 2022, were $2.99 billion, compared to $3.23 billion for the nine months ended September 30, 2021. Operating loss was $626 million for the nine months ended September 30, 2022, compared to $551 million for the nine months ended September 30, 2021. Net loss from continuing operations was $1.27 billion for the nine months ended September 30, 2022, compared to $1.15 billion for the nine months ended September 30, 2021.
Operating Revenues
Our net revenues consisted of the following:
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Casino | $ | 1,973 | $ | 2,241 | (12.0) | % | |||||||||||
| Rooms | 315 | 311 | 1.3 | % | |||||||||||||
| Food and beverage | 198 | 148 | 33.8 | % | |||||||||||||
| Mall | 416 | 469 | (11.3) | % | |||||||||||||
| Convention, retail and other | 91 | 57 | 59.6 | % | |||||||||||||
| Total net revenues | $ | 2,993 | $ | 3,226 | (7.2) | % | |||||||||||
Consolidated net revenues were $2.99 billion for the nine months ended September 30, 2022, a decrease of $233 million compared to $3.23 billion for the nine months ended September 30, 2021, due to a decrease of $1.07 billion at our Macao operations. The decrease at our Macao operations was due to decreased visitation compared to the nine months ended September 30, 2021, as tighter border restrictions were introduced as a result of increased positive COVID-19 cases in Macao and the surrounding region. The decrease was partially offset by an $834 million increase at Marina Bay Sands primarily due to increased visitation resulting from the reopening of borders and elimination of most pandemic-related restrictions.
Net casino revenues decreased $268 million compared to the nine months ended September 30, 2021. The decrease was driven by an $878 million decrease at our Macao operations due to lower visitation across our properties resulting in decreased table games and slot volumes. Casino revenues at Marina Bay Sands increased by $610 million due to increased table games and slot volumes, driven by the reopening of borders and elimination of most pandemic-related restrictions. The following table summarizes the results of our casino activity:
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| The Venetian Macao | |||||||||||||||||
| Total net casino revenues | $ | 308 | $ | 749 | (58.9) | % | |||||||||||
| Non-Rolling Chip drop | $ | 1,260 | $ | 2,539 | (50.4) | % | |||||||||||
| Non-Rolling Chip win percentage | 25.1 | % | 27.6 | % | (2.5) | pts | |||||||||||
| Rolling Chip volume | $ | 1,099 | $ | 3,522 | (68.8) | % | |||||||||||
| Rolling Chip win percentage | 3.45 | % | 4.15 | % | (0.70) | pts | |||||||||||
| Slot handle | $ | 835 | $ | 1,376 | (39.3) | % | |||||||||||
| Slot hold percentage | 3.8 | % | 3.8 | % | — | pts | |||||||||||
45
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| The Londoner Macao | |||||||||||||||||
| Total net casino revenues | $ | 145 | $ | 304 | (52.3) | % | |||||||||||
| Non-Rolling Chip drop | $ | 645 | $ | 1,347 | (52.1) | % | |||||||||||
| Non-Rolling Chip win percentage | 22.1 | % | 21.1 | % | 1.0 | pts | |||||||||||
| Rolling Chip volume | $ | 770 | $ | 2,915 | (73.6) | % | |||||||||||
| Rolling Chip win percentage | 4.74 | % | 3.39 | % | 1.35 | pts | |||||||||||
| Slot handle | $ | 499 | $ | 709 | (29.6) | % | |||||||||||
| Slot hold percentage | 3.6 | % | 3.8 | % | (0.2) | pts | |||||||||||
| The Parisian Macao | |||||||||||||||||
| Total net casino revenues | $ | 83 | $ | 203 | (59.1) | % | |||||||||||
| Non-Rolling Chip drop | $ | 331 | $ | 903 | (63.3) | % | |||||||||||
| Non-Rolling Chip win percentage | 24.4 | % | 22.0 | % | 2.4 | pts | |||||||||||
| Rolling Chip volume | $ | 235 | $ | 321 | (26.8) | % | |||||||||||
| Rolling Chip win percentage | 6.78 | % | 8.53 | % | (1.75) | pts | |||||||||||
| Slot handle | $ | 220 | $ | 620 | (64.5) | % | |||||||||||
| Slot hold percentage | 3.8 | % | 3.1 | % | 0.7 | pts | |||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||
| Total net casino revenues | $ | 120 | $ | 233 | (48.5) | % | |||||||||||
| Non-Rolling Chip drop | $ | 406 | $ | 874 | (53.5) | % | |||||||||||
| Non-Rolling Chip win percentage | 24.2 | % | 21.8 | % | 2.4 | pts | |||||||||||
| Rolling Chip volume | $ | 1,275 | $ | 2,273 | (43.9) | % | |||||||||||
| Rolling Chip win percentage | 4.92 | % | 5.10 | % | (0.18) | pts | |||||||||||
| Slot handle | $ | 16 | $ | 29 | (44.8) | % | |||||||||||
| Slot hold percentage | 9.7 | % | 5.9 | % | 3.8 | pts | |||||||||||
| Sands Macao | |||||||||||||||||
| Total net casino revenues | $ | 39 | $ | 84 | (53.6) | % | |||||||||||
| Non-Rolling Chip drop | $ | 181 | $ | 341 | (46.9) | % | |||||||||||
| Non-Rolling Chip win percentage | 18.1 | % | 16.4 | % | 1.7 | pts | |||||||||||
| Rolling Chip volume | $ | 163 | $ | 953 | (82.9) | % | |||||||||||
| Rolling Chip win percentage | 4.49 | % | 4.49 | % | — | pts | |||||||||||
| Slot handle | $ | 316 | $ | 466 | (32.2) | % | |||||||||||
| Slot hold percentage | 3.1 | % | 3.4 | % | (0.3) | pts | |||||||||||
| Singapore Operations: | |||||||||||||||||
| Marina Bay Sands | |||||||||||||||||
| Total net casino revenues | $ | 1,278 | $ | 668 | 91.3 | % | |||||||||||
| Non-Rolling Chip drop | $ | 3,191 | $ | 1,865 | 71.1 | % | |||||||||||
| Non-Rolling Chip win percentage | 18.4 | % | 16.3 | % | 2.1 | pts | |||||||||||
| Rolling Chip volume | $ | 14,130 | $ | 2,583 | 447.0 | % | |||||||||||
| Rolling Chip win percentage | 3.76 | % | 5.52 | % | (1.76) | pts | |||||||||||
| Slot handle | $ | 11,797 | $ | 9,209 | 28.1 | % | |||||||||||
| Slot hold percentage | 4.3 | % | 4.2 | % | 0.1 | pts | |||||||||||
46
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| U.S. Operations: | |||||||||||||||||
Las Vegas Operating Properties(1) | |||||||||||||||||
| Total net casino revenues | $ | 61 | $ | 304 | (79.9) | % | |||||||||||
| Table games drop | $ | 257 | $ | 1,137 | (77.4) | % | |||||||||||
| Table games win percentage | 13.6 | % | 16.0 | % | (2.4) | pts | |||||||||||
| Slot handle | $ | 599 | $ | 2,683 | (77.7) | % | |||||||||||
| Slot hold percentage | 8.2 | % | 8.5 | % | (0.3) | pts | |||||||||||
__________________________
(1) The Las Vegas Operating Properties are classified as a discontinued operation. We completed the sale on February 23, 2022. Financial results are for the period through February 22, 2022.
47
Room revenues increased $4 million compared to the nine months ended September 30, 2021. The increase was primarily due to increased occupancy rates and ADR at Marina Bay Sands driven by increased visitation, partially offset by decreased occupancy rates and ADR driven by reduced visitation across our Macao properties. The following table summarizes the results of our room activity:
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Room revenues in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| The Venetian Macao | |||||||||||||||||
| Total room revenues | $ | 38 | $ | 61 | (37.7) | % | |||||||||||
| Occupancy rate | 38.9 | % | 51.5 | % | (12.6) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 143 | $ | 155 | (7.7) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 56 | $ | 80 | (30.0) | % | |||||||||||
| The Londoner Macao | |||||||||||||||||
| Total room revenues | $ | 43 | $ | 69 | (37.7) | % | |||||||||||
| Occupancy rate | 25.7 | % | 39.9 | % | (14.2) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 149 | $ | 158 | (5.7) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 38 | $ | 63 | (39.7) | % | |||||||||||
| The Parisian Macao | |||||||||||||||||
| Total room revenues | $ | 23 | $ | 41 | (43.9) | % | |||||||||||
| Occupancy rate | 38.7 | % | 52.6 | % | (13.9) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 107 | $ | 118 | (9.3) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 41 | $ | 62 | (33.9) | % | |||||||||||
| The Plaza Macao and Four Seasons Macao | |||||||||||||||||
| Total room revenues | $ | 20 | $ | 34 | (41.2) | % | |||||||||||
| Occupancy rate | 26.3 | % | 44.5 | % | (18.2) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 435 | $ | 439 | (0.9) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 114 | $ | 195 | (41.5) | % | |||||||||||
| Sands Macao | |||||||||||||||||
| Total room revenues | $ | 5 | $ | 7 | (28.6) | % | |||||||||||
| Occupancy rate | 53.5 | % | 68.6 | % | (15.1) | pts | |||||||||||
| Average daily room rate (ADR) | $ | 137 | $ | 138 | (0.7) | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 74 | $ | 95 | (22.1) | % | |||||||||||
| Singapore Operations: | |||||||||||||||||
Marina Bay Sands(1) | |||||||||||||||||
| Total room revenues | $ | 186 | $ | 99 | 87.9 | % | |||||||||||
| Occupancy rate | 91.3 | % | 67.4 | % | 23.9 | pts | |||||||||||
| Average daily room rate (ADR) | $ | 375 | $ | 228 | 64.5 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 343 | $ | 154 | 122.7 | % | |||||||||||
| U.S. Operations: | |||||||||||||||||
Las Vegas Operating Properties(2) | |||||||||||||||||
| Total room revenues | $ | 78 | $ | 294 | (73.5) | % | |||||||||||
| Occupancy rate | 84.6 | % | 76.2 | % | 8.4 | pts | |||||||||||
| Average daily room rate (ADR) | $ | 247 | $ | 209 | 18.2 | % | |||||||||||
| Revenue per available room (RevPAR) | $ | 209 | $ | 160 | 30.6 | % | |||||||||||
__________________________
(1)During the nine months ended September 30, 2022, approximately 500 rooms were under construction for renovation purposes.
(2) The Las Vegas Operating Properties are classified as a discontinued operation. We completed the sale on February 23, 2022. Financial results are for the period through February 22, 2022.
48
Food and beverage revenues increased $50 million compared to the nine months ended September 30, 2021. The increase was due to a $72 million increase driven by increased business volume at food and beverage outlets, including new outlets and the reopening of entertainment venues, at Marina Bay Sands, partially offset by a $22 million decrease at our Macao operations.
Mall revenues decreased $53 million compared to the nine months ended September 30, 2021. The decrease was primarily due to decreases of $67 million in total overage rent and rent concessions and $14 million in lower base rent at our Macao operations, partially offset by increases of $27 million in total overage rent, rent concessions and other and $2 million in higher base rent at Marina Bay Sands.
For further information related to the financial performance of our malls, see “Additional Information Regarding our Retail Mall Operations.” The following table summarizes the results of our malls on the Cotai Strip in Macao and in Singapore:
Nine Months Ended September 30,(1) | |||||||||||||||||
| 2022 | 2021 | Change | |||||||||||||||
| (Mall revenues in millions) | |||||||||||||||||
| Macao Operations: | |||||||||||||||||
| Shoppes at Venetian | |||||||||||||||||
| Total mall revenues | $ | 111 | $ | 144 | (22.9) | % | |||||||||||
| Mall gross leasable area (in square feet) | 814,771 | 814,731 | — | % | |||||||||||||
| Occupancy | 79.1 | % | 78.7 | % | 0.4 | pts | |||||||||||
| Base rent per square foot | $ | 286 | $ | 296 | (3.4) | % | |||||||||||
Tenant sales per square foot(2) | $ | 1,021 | $ | 1,368 | (25.4) | % | |||||||||||
| Shoppes at Londoner | |||||||||||||||||
| Total mall revenues | $ | 35 | $ | 42 | (16.7) | % | |||||||||||
| Mall gross leasable area (in square feet) | 605,461 | 520,302 | 16.4 | % | |||||||||||||
| Occupancy | 54.9 | % | 60.4 | % | (5.5) | pts | |||||||||||
| Base rent per square foot | $ | 136 | $ | 138 | (1.4) | % | |||||||||||
Tenant sales per square foot(2) | $ | 1,112 | $ | 1,240 | (10.3) | % | |||||||||||
| Shoppes at Parisian | |||||||||||||||||
| Total mall revenues | $ | 20 | $ | 30 | (33.3) | % | |||||||||||
| Mall gross leasable area (in square feet) | 296,322 | 296,322 | — | % | |||||||||||||
| Occupancy | 73.8 | % | 76.7 | % | (2.9) | pts | |||||||||||
| Base rent per square foot | $ | 121 | $ | 146 | (17.1) | % | |||||||||||
Tenant sales per square foot(2) | $ | 376 | $ | 683 | (44.9) | % | |||||||||||
| Shoppes at Four Seasons | |||||||||||||||||
| Total mall revenues | $ | 90 | $ | 125 | (28.0) | % | |||||||||||
| Mall gross leasable area (in square feet) | 248,674 | 244,193 | 1.8 | % | |||||||||||||
| Occupancy | 94.4 | % | 94.3 | % | 0.1 | pts | |||||||||||
| Base rent per square foot | $ | 542 | $ | 550 | (1.5) | % | |||||||||||
Tenant sales per square foot(2) | $ | 4,301 | $ | 6,298 | (31.7) | % | |||||||||||
| Singapore Operations: | |||||||||||||||||
| The Shoppes at Marina Bay Sands | |||||||||||||||||
| Total mall revenues | $ | 159 | $ | 127 | 25.2 | % | |||||||||||
| Mall gross leasable area (in square feet) | 622,007 | 622,073 | — | % | |||||||||||||
| Occupancy | 99.8 | % | 97.5 | % | 2.3 | pts | |||||||||||
| Base rent per square foot | $ | 283 | $ | 265 | 6.8 | % | |||||||||||
Tenant sales per square foot(2) | $ | 2,359 | $ | 1,480 | 59.4 | % | |||||||||||
__________________________
Note: This table excludes the results of our mall operations at Sands Macao. As a result of the COVID-19 Pandemic, tenants were provided rent concessions during the nine months ended September 30, 2022 and 2021. Base rent per square foot presented above excludes the impact of these rent concessions.
49
(1) As GLA, occupancy, base rent per square foot and tenant sales per square foot are calculated as of September 30, 2022 and 2021, they are identical to the summary presented herein for the three months ended September 30, 2022 and 2021, respectively.
(2) Tenant sales per square foot is the sum of reported comparable sales for the trailing 12 months divided by the comparable square footage for the same period.
Convention, retail and other revenues increased $34 million compared to the nine months ended September 30, 2021, due primarily to increases of $33 million and $1 million at Marina Bay Sands and our Macao operations, respectively, driven primarily by an increase in convention revenue at Marina Bay Sands and quarantine room revenue at the Sheraton Grand Macao hotel and The Parisian Macao.
Operating Expenses
Our operating expenses consisted of the following:
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Casino | $ | 1,323 | $ | 1,603 | (17.5) | % | |||||||||||
| Rooms | 125 | 124 | 0.8 | % | |||||||||||||
| Food and beverage | 221 | 186 | 18.8 | % | |||||||||||||
| Mall | 53 | 48 | 10.4 | % | |||||||||||||
| Convention, retail and other | 73 | 62 | 17.7 | % | |||||||||||||
| Provision for credit losses | 14 | 9 | 55.6 | % | |||||||||||||
| General and administrative | 694 | 667 | 4.0 | % | |||||||||||||
| Corporate | 167 | 169 | (1.2) | % | |||||||||||||
| Pre-opening | 11 | 15 | (26.7) | % | |||||||||||||
| Development | 108 | 59 | 83.1 | % | |||||||||||||
| Depreciation and amortization | 780 | 775 | 0.6 | % | |||||||||||||
| Amortization of leasehold interests in land | 42 | 42 | — | % | |||||||||||||
| Loss on disposal or impairment of assets | 8 | 18 | (55.6) | % | |||||||||||||
| Total operating expenses | $ | 3,619 | $ | 3,777 | (4.2) | % | |||||||||||
Operating expenses were $3.62 billion for the nine months ended September 30, 2022, a decrease of $158 million compared to $3.78 billion for the nine months ended September 30, 2021. The decrease was primarily driven by a $280 million decrease in casino expenses.
Casino expenses decreased $280 million compared to the nine months ended September 30, 2021. The decrease was primarily attributable to a decrease of $270 million in gaming taxes. The $878 million decrease in casino revenue at our Macao operating properties is subject to a 39% tax rate, whereas the $610 million increase in casino revenue at Marina Bay Sands is subject to a lower tax rate.
Food and beverage expenses increased $35 million compared to the nine months ended September 30, 2021. The increase was due to a $45 million increase at Marina Bay Sands, driven by increased business volume at food outlets and banquets, new venues, and the reopening of entertainment outlets, partially offset by a $10 million decrease at our Macao operations.
Convention, retail and other expenses increased $11 million compared to the nine months ended September 30, 2021, primarily driven by a $13 million increase at Marina Bay Sands, partially offset by a $2 million decrease at our Macao operations.
Provision for credit losses was $14 million for nine months ended September 30, 2022, compared to $9 million for the nine months ended September 30, 2021. The $5 million increase was primarily driven by $7 million in increased provision for the aging of patron receivables at Marina Bay Sands, partially offset by a $2 million provision for deferred mall receivables at our Macao operations recorded during the nine months ended September 30, 2021. The amount of this provision can vary over short periods of time because of factors specific to the patrons who owe us money from gaming activities. We believe the amount of our provision for credit losses in the future
50
will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.
General and administrative expenses increased $27 million compared to the nine months ended September 30, 2021. The increase was primarily due to an increase of $42 million at Marina Bay Sands, driven by increased marketing, payroll and property operations costs, partially offset by a decrease of $15 million at our Macao operations, driven by decreased marketing and property tax and insurance costs.
Development expenses were $108 million for the nine months ended September 30, 2022, compared to $59 million for the nine months ended September 30, 2021. During the nine months ended September 30, 2022, the costs were associated with our evaluation and pursuit of new business opportunities primarily in Florida and Texas and digital gaming related efforts. Development costs are expensed as incurred.
Loss on disposal or impairment of assets was $8 million for the nine months ended September 30, 2022, compared to $18 million for the nine months ended September 30, 2021. The losses incurred for the nine months ended September 30, 2022 were primarily due to $4 million in asset disposals related to aircraft parts and $3 million in asset disposal and demolition costs, primarily at The Londoner Macao, The Venetian Macao, Sands Macao and our Corporate offices. The losses incurred for the nine months ended September 30, 2021 were primarily due to asset disposals and demolition costs related to The Londoner Macao.
51
Segment Adjusted Property EBITDA
The following table summarizes information related to our segments:
| Nine Months Ended September 30, | |||||||||||||||||
| 2022 | 2021 | Percent Change | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Macao: | |||||||||||||||||
| The Venetian Macao | $ | (39) | $ | 230 | (117.0) | % | |||||||||||
| The Londoner Macao | (147) | (61) | 141.0 | % | |||||||||||||
| The Parisian Macao | (77) | (3) | 2,466.7 | % | |||||||||||||
| The Plaza Macao and Four Seasons Macao | 55 | 156 | (64.7) | % | |||||||||||||
| Sands Macao | (61) | (52) | 17.3 | % | |||||||||||||
| Ferry Operations and Other | (4) | (6) | (33.3) | % | |||||||||||||
| (273) | 264 | (203.4) | % | ||||||||||||||
| Marina Bay Sands | 783 | 271 | 188.9 | % | |||||||||||||
Consolidated adjusted property EBITDA(1) | $ | 510 | $ | 535 | (4.7) | % | |||||||||||
Las Vegas Operating Properties (2) | $ | 63 | $ | 136 | (53.7) | % | |||||||||||
____________________
(1) Consolidated adjusted property EBITDA, which is a non-GAAP financial measure, is used by management as the primary measure of the operating performance of our segments. Consolidated adjusted property EBITDA is net income (loss) from continuing operations before stock-based compensation expense, corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, gain or loss on disposal or impairment of assets, interest, other income or expense, gain or loss on modification or early retirement of debt and income taxes. Consolidated adjusted property EBITDA is a supplemental non-GAAP financial measure used by management, as well as industry analysts, to evaluate operations and operating performance. In particular, management utilizes consolidated adjusted property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation. Integrated Resort companies have historically reported adjusted property EBITDA as a supplemental performance measure to GAAP financial measures. In order to view the operations of their properties on a more stand-alone basis, Integrated Resort companies, including Las Vegas Sands Corp., have historically excluded certain expenses that do not relate to the management of specific properties, such as pre-opening expense, development expense and corporate expense, from their adjusted property EBITDA calculations. Consolidated adjusted property EBITDA should not be interpreted as an alternative to income from operations (as an indicator of operating performance) or to cash flows from operations (as a measure of liquidity), in each case, as determined in accordance with GAAP. We have 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, our presentation of consolidated adjusted property EBITDA may not be directly comparable to similarly titled measures presented by other companies.
52
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Consolidated adjusted property EBITDA | $ | 510 | $ | 535 | |||||||
| Other Operating Costs and Expenses | |||||||||||
Stock-based compensation(a) | (20) | (8) | |||||||||
| Corporate | (167) | (169) | |||||||||
| Pre-opening | (11) | (15) | |||||||||
| Development | (108) | (59) | |||||||||
| Depreciation and amortization | (780) | (775) | |||||||||
| Amortization of leasehold interests in land | (42) | (42) | |||||||||
| Loss on disposal or impairment of assets | (8) | (18) | |||||||||
| Operating loss | (626) | (551) | |||||||||
| Other Non-Operating Costs and Expenses | |||||||||||
| Interest income | 56 | 3 | |||||||||
| Interest expense, net of amounts capitalized | (501) | (469) | |||||||||
| Other expense | (29) | (19) | |||||||||
| Loss on modification or early retirement of debt | — | (137) | |||||||||
| Income tax (expense) benefit | (172) | 19 | |||||||||
| Net loss from continuing operations | $ | (1,272) | $ | (1,154) | |||||||
(a)During the nine months ended September 30, 2022 and 2021, the Company recorded stock-based compensation expense of $47 million and $17 million, respectively, of which $27 million and $9 million, respectively, was included in corporate expense in the accompanying condensed consolidated statements of operations.
(2) The Las Vegas Operating Properties are classified as a discontinued operation. We completed the sale on February 23, 2022. Financial results are for the period through February 22, 2022.
Adjusted property EBITDA at our Macao operations decreased $537 million compared to the nine months ended September 30, 2021, primarily due to decreased casino, mall and room operations driven by decreased visitation at our properties as tighter boarder restrictions were introduced as a result of increased COVID-19 cases in Macao and the surrounding region.
Adjusted property EBITDA at Marina Bay Sands increased $512 million compared to the nine months ended September 30, 2021. The increase was primarily due to increased casino, room, food and beverage and mall operations driven by increased visitation and loosened pandemic-related restrictions.
Discontinued Operations
Adjusted property EBITDA at our Las Vegas Operating Properties decreased $73 million compared to the nine months ended September 30, 2021. The decrease was primarily due to the current year activity representing 53 days of operations as we completed the sale of the Las Vegas Operating properties on February 23, 2022, partially offset by increased casino and room operations as Las Vegas Operating Properties operated under pre-pandemic guidelines.
53
Interest Expense
The following table summarizes information related to interest expense:
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (Dollars in millions) | |||||||||||
Interest cost | $ | 504 | $ | 480 | |||||||
Less — capitalized interest | (3) | (11) | |||||||||
Interest expense, net | $ | 501 | $ | 469 | |||||||
Weighted average total debt balance | $ | 15,188 | $ | 14,509 | |||||||
Weighted average interest rate | 4.4 | % | 4.4 | % | |||||||
Interest cost increased $24 million compared to the nine months ended September 30, 2021, primarily resulting from an increase in our weighted average total debt balance primarily due to $951 million drawn on the SCL Revolving Facility during the twelve months ended September 30, 2022. The weighted average interest rate remained flat during the nine months ended September 30, 2022 when compared to the nine months ended September 30, 2021, primarily driven by the increase in the underlying benchmark rate on our Singapore Credit Facility and the increase in interest rates on the SCL senior notes as a result of the credit rating downgrade to BB+ by S&P in February 2022, and by Fitch in June 2022., offset by the extinguishment of the SCL 4.600% senior notes in Q3 2021.
Other Factors Affecting Earnings
Interest income was $56 million for the nine months ended September 30, 2022, compared to $3 million for the nine months ended September 30, 2021. Interest income during the nine months ended September 30, 2022 was primarily attributed to $38 million in interest income on money market funds and bank deposits driven by an increase in cash due to the sale of the Las Vegas Operating Properties and higher interest rates. We also had $14 million in interest income on the seller financing loan provided in connection with the sale of the Las Vegas Operating Properties in 2022.
Other expense was $29 million for the nine months ended September 30, 2022, compared to $19 million for the nine months ended September 30, 2021. Other expense during the nine months ended September 30, 2022, was primarily attributable to $39 million of foreign currency transaction losses driven by U.S. dollar denominated debt held by SCL, partially offset by $11 million of foreign currency transaction gains driven by Singapore dollar denominated intercompany debt reported in U.S. dollars.
Our income tax expense was $172 million on a loss before income taxes of $1.10 billion for the nine months ended September 30, 2022, resulting in a 15.6% effective income tax rate. This compares to a (1.6)% effective income tax rate for the nine months ended September 30, 2021. The income tax expense for the nine months ended September 30, 2022, reflects a 17% statutory tax rate on our Singapore operations, a 21% corporate income tax on our domestic operations and a zero percent tax rate on our Macao gaming operations due to our income tax exemption in Macao. Our U.S. operations recorded tax benefits associated with the pre-tax book losses, primarily related to U.S. corporate and interest expense incurred during the nine months ended September 30, 2022. Our income tax expense is based on the Company’s estimated annual effective tax rate for the year applied to year-to-date operating results in accordance with interim accounting guidance.
The net loss attributable to our noncontrolling interests was $370 million for the nine months ended September 30, 2022, compared to $241 million for the nine months ended September 30, 2021. These amounts were primarily related to the noncontrolling interest of SCL.
Additional Information Regarding our Retail Mall Operations
We own and operate retail malls at our Integrated Resorts at The Venetian Macao, The Plaza Macao and Four Seasons Macao, The Londoner Macao, The Parisian Macao and Marina Bay Sands. Management believes being in the retail mall business and, specifically, owning some of the largest retail properties in Asia will provide meaningful value for us, particularly as the retail market in Asia continues to grow.
54
Our malls are designed to complement our other unique amenities and service offerings provided by our Integrated Resorts. Our strategy is to seek out desirable tenants that appeal to our patrons and provide a wide variety of shopping options. We generate our mall revenues primarily from leases with tenants through minimum base rents, overage rents, and reimbursements for common area maintenance (“CAM”) and other expenditures.
The following tables summarize the results of our mall operations on the Cotai Strip and at Marina Bay Sands for the three and nine months ended September 30, 2022 and 2021:
| Shoppes at Venetian | Shoppes at Four Seasons | Shoppes at Londoner | Shoppes at Parisian | The Shoppes at Marina Bay Sands | |||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| For the three months ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
Mall revenues: | |||||||||||||||||||||||||||||||||||
Minimum rents(1) | $ | 40 | $ | 29 | $ | 7 | $ | 5 | $ | 37 | |||||||||||||||||||||||||
Overage rents | 2 | 1 | 2 | — | 11 | ||||||||||||||||||||||||||||||
Rent concessions(2) | (22) | (9) | (3) | (3) | — | ||||||||||||||||||||||||||||||
| Total overage rents and rent concessions | (20) | (8) | (1) | (3) | 11 | ||||||||||||||||||||||||||||||
| CAM, levies and direct recoveries | 6 | 2 | 3 | 3 | 7 | ||||||||||||||||||||||||||||||
Total mall revenues | 26 | 23 | 9 | 5 | 55 | ||||||||||||||||||||||||||||||
Mall operating expenses: | |||||||||||||||||||||||||||||||||||
Common area maintenance | 2 | 1 | 2 | 1 | 6 | ||||||||||||||||||||||||||||||
Marketing and other direct operating expenses | 1 | 1 | 1 | — | 1 | ||||||||||||||||||||||||||||||
Mall operating expenses | 3 | 2 | 3 | 1 | 7 | ||||||||||||||||||||||||||||||
Property taxes(4) | — | — | — | — | 1 | ||||||||||||||||||||||||||||||
Mall-related expenses(5) | $ | 3 | $ | 2 | $ | 3 | $ | 1 | $ | 8 | |||||||||||||||||||||||||
| For the three months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
Mall revenues: | |||||||||||||||||||||||||||||||||||
Minimum rents(1) | $ | 45 | $ | 29 | $ | 8 | $ | 7 | $ | 35 | |||||||||||||||||||||||||
| Overage rents | 4 | 20 | 3 | 1 | 6 | ||||||||||||||||||||||||||||||
Rent concessions(2) | (8) | — | (1) | (1) | (6) | ||||||||||||||||||||||||||||||
| Total overage rents and rent concessions | (4) | 20 | 2 | — | — | ||||||||||||||||||||||||||||||
| CAM, levies and direct recoveries | 8 | 3 | 3 | 3 | 6 | ||||||||||||||||||||||||||||||
Total mall revenues | 49 | 52 | 13 | 10 | 41 | ||||||||||||||||||||||||||||||
Mall operating expenses: | |||||||||||||||||||||||||||||||||||
Common area maintenance | 3 | 1 | 1 | 1 | 4 | ||||||||||||||||||||||||||||||
Marketing and other direct operating expenses | 1 | 1 | 1 | 1 | 1 | ||||||||||||||||||||||||||||||
Mall operating expenses | 4 | 2 | 2 | 2 | 5 | ||||||||||||||||||||||||||||||
Property taxes(4) | — | — | — | — | 2 | ||||||||||||||||||||||||||||||
Mall-related expenses(5) | $ | 4 | $ | 2 | $ | 2 | $ | 2 | $ | 7 | |||||||||||||||||||||||||
55
| Shoppes at Venetian | Shoppes at Four Seasons | Shoppes at Londoner | Shoppes at Parisian | The Shoppes at Marina Bay Sands | |||||||||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||||||||
| For the nine months ended September 30, 2022 | |||||||||||||||||||||||||||||||||||
Mall revenues: | |||||||||||||||||||||||||||||||||||
Minimum rents(1) | $ | 128 | $ | 90 | $ | 22 | $ | 18 | $ | 110 | |||||||||||||||||||||||||
Overage rents | 3 | 3 | 8 | 1 | 27 | ||||||||||||||||||||||||||||||
Rent concessions(2) | (41) | (10) | (4) | (6) | — | ||||||||||||||||||||||||||||||
Total overage rents and rent concessions | (38) | (7) | 4 | (5) | 27 | ||||||||||||||||||||||||||||||
CAM, levies and direct recoveries | 21 | 7 | 9 | 7 | 22 | ||||||||||||||||||||||||||||||
Total mall revenues | 111 | 90 | 35 | 20 | 159 | ||||||||||||||||||||||||||||||
Mall operating expenses: | |||||||||||||||||||||||||||||||||||
Common area maintenance | 8 | 3 | 5 | 3 | 15 | ||||||||||||||||||||||||||||||
Marketing and other direct operating expenses | 5 | 4 | 3 | 2 | 4 | ||||||||||||||||||||||||||||||
Mall operating expenses | 13 | 7 | 8 | 5 | 19 | ||||||||||||||||||||||||||||||
Property taxes(4) | 1 | — | — | — | 3 | ||||||||||||||||||||||||||||||
Mall-related expenses(5) | $ | 14 | $ | 7 | $ | 8 | $ | 5 | $ | 22 | |||||||||||||||||||||||||
| For the nine months ended September 30, 2021 | |||||||||||||||||||||||||||||||||||
Mall revenues: | |||||||||||||||||||||||||||||||||||
Minimum rents(1) | $ | 137 | $ | 91 | $ | 22 | $ | 23 | $ | 108 | |||||||||||||||||||||||||
Overage rents | 10 | 28 | 13 | 3 | 14 | ||||||||||||||||||||||||||||||
Rent concessions(2) | (25) | (1) | (3) | (4) | (20) | ||||||||||||||||||||||||||||||
Other(3) | — | — | — | — | 6 | ||||||||||||||||||||||||||||||
| Total overage rents, rent concessions and other | (15) | 27 | 10 | (1) | — | ||||||||||||||||||||||||||||||
CAM, levies and direct recoveries | 22 | 7 | 10 | 8 | 19 | ||||||||||||||||||||||||||||||
Total mall revenues | 144 | 125 | 42 | 30 | 127 | ||||||||||||||||||||||||||||||
Mall operating expenses: | |||||||||||||||||||||||||||||||||||
Common area maintenance | 9 | 4 | 5 | 3 | 12 | ||||||||||||||||||||||||||||||
Marketing and other direct operating expenses | 4 | 2 | 2 | 2 | 4 | ||||||||||||||||||||||||||||||
Mall operating expenses | 13 | 6 | 7 | 5 | 16 | ||||||||||||||||||||||||||||||
Property taxes(4) | 1 | — | — | — | 5 | ||||||||||||||||||||||||||||||
| Provision for (recovery of) credit losses | (1) | — | — | 3 | — | ||||||||||||||||||||||||||||||
Mall-related expenses(5) | $ | 13 | $ | 6 | $ | 7 | $ | 8 | $ | 21 | |||||||||||||||||||||||||
____________________
Note: These tables exclude the results of our mall operations at Sands Macao.
(1)Minimum rents include base rents and straight-line adjustments of base rents.
(2)Rent concessions were provided to tenants as a result of the COVID-19 Pandemic and the impact on mall operations.
(3)The amount for Marina Bay Sands of $6 million related to a grant provided by the Singapore government to lessors to support small and medium enterprises impacted by the COVID-19 Pandemic in connection with their rent obligations.
(4)Commercial property that generates rental income is exempt from property tax for the first six years for newly constructed buildings in Cotai. If the property also qualifies for Tourism Utility Status, the property tax exemption can be extended to twelve years with effect from the opening of the property. To date, The Venetian Macao, The Plaza Macao and Four Seasons Macao, The Londoner Macao and The Parisian Macao have obtained an extended exemption. The exemption for The Venetian Macao and The Plaza Macao and Four Seasons Macao expired in August 2019 and August 2020, respectively, and the exemption for The Londoner Macao and The Parisian Macao will be expiring in December 2027 and September 2028, respectively.
(5)Mall-related expenses consist of CAM, marketing fees and other direct operating expenses, property taxes and provision for credit losses, but excludes depreciation and amortization and general and administrative costs.
56
It is common in the mall operating industry for companies to disclose mall net operating income (“NOI”) as a useful supplemental measure of a mall’s operating performance. Because NOI excludes general and administrative expenses, interest expense, impairment losses, depreciation and amortization, gains and losses from property dispositions, allocations to noncontrolling interests and provision for income taxes, it provides a performance measure that, when compared year over year, reflects the revenues and expenses directly associated with owning and operating commercial real estate properties and the impact on operations from trends in occupancy rates, rental rates and operating costs.
In the tables above, we believe taking total mall revenues less mall-related expenses provides an operating performance measure for our malls. Other mall operating companies may use different methodologies for deriving mall-related expenses. As such, this calculation may not be comparable to the NOI of other mall operating companies.
Development Projects
We regularly evaluate opportunities to improve our product offerings, such as refreshing our meeting and convention facilities, suites and rooms, retail malls, restaurant and nightlife mix and our gaming areas, as well as other anticipated revenue-generating additions to our Integrated Resorts.
Singapore
In April 2019, our wholly owned subsidiary, Marina Bay Sands Pte. Ltd. (“MBS”) and the Singapore Tourism Board (the “STB”) entered into a development agreement (the “Second Development Agreement”) pursuant to which MBS has agreed to construct a development, which will include a hotel tower with approximately 1,000 rooms and suites, a rooftop attraction, convention and meeting facilities and a state-of-the-art live entertainment arena with approximately 15,000 seats (the “MBS Expansion Project”). The Second Development Agreement provides for a total project cost of approximately SGD 4.50 billion (approximately $3.14 billion at exchange rates in effect on September 30, 2022), which investment must be completed within eight years from the effective date of the agreement. On March 30, 2022, MBS and the STB entered into a letter agreement (the “Letter Agreement”) that amended the Second Development Agreement and extended the deadline for MBS to commence construction, as defined in the Second Development Agreement, by one year to April 8, 2023. The amount of the total project cost will be finalized as we complete design and development and begin construction. We amended our 2012 Singapore Credit Facility to provide for the financing of the development and construction costs, fees and other expenses related to the MBS Expansion Project pursuant to the Second Development Agreement. On September 7, 2021, we amended the 2012 Singapore Credit Facility, which, among other things, extended the deadline for delivering the construction cost estimate and the construction schedule for the MBS Expansion Project to March 31, 2022. We are in the process of reviewing the budget and timing of the MBS expansion based on the impact of the COVID-19 Pandemic and other factors. As a result, the construction cost estimate and construction schedule were not delivered to the lenders by the extended deadline, and we will not be permitted to make further draws on the Singapore Delayed Draw Term Facility until these items are delivered. We do not anticipate material spend related to the MBS Expansion Project prior to the delivery of these items to lenders.
We also began the approximately $1.0 billion renovation of Marina Bay Sands, which is expected to introduce world-class suites in Tower 1 and Tower 2, and substantially upgrade the overall guest experience for premium customers. This project is in addition to our previously announced plans for the MBS Expansion Project.
Other
We continue to evaluate additional development projects in each of our markets and pursue new development opportunities globally.
57
Liquidity and Capital Resources
Cash Flows — Summary
Our cash flows consisted of the following:
| Nine Months Ended September 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| (In millions) | |||||||||||
| Net cash used in operating activities from continuing operations | $ | (840) | $ | (345) | |||||||
| Cash flows from investing activities from continuing operations: | |||||||||||
| Capital expenditures | (504) | (640) | |||||||||
| Proceeds from disposal of property and equipment | 9 | 7 | |||||||||
| Acquisition of intangible assets and other | (104) | (5) | |||||||||
| Net cash used in investing activities from continuing operations | (599) | (638) | |||||||||
| Cash flows from financing activities from continuing operations: | |||||||||||
| Proceeds from exercise of stock options | — | 19 | |||||||||
| Tax withholding on vesting of equity awards | (1) | — | |||||||||
| Proceeds from long-term debt | 700 | 2,451 | |||||||||
| Repayments on long-term debt | (50) | (1,852) | |||||||||
| Payments of financing costs | (9) | (36) | |||||||||
| Make-whole premium on early extinguishment of debt | — | (131) | |||||||||
| Transactions with discontinued operations | 5,032 | 111 | |||||||||
| Net cash generated from financing activities from continuing operations | $ | 5,672 | $ | 562 | |||||||
| Net cash provided by discontinued operations | $ | — | $ | 2 | |||||||
Cash Flows — Operating Activities
Table games play at our properties is conducted on a cash and credit basis, while slot machine play is primarily conducted on a cash basis. Our rooms, food and beverage and other non-gaming revenues are conducted primarily on a cash basis and to a lesser extent as a trade receivable. Operating cash flows are generally affected by changes in operating income, accounts receivable, gaming related liabilities and interest payments. Net cash used in operating activities for the nine months ended September 30, 2022, increased $495 million as compared to the nine months ended September 30, 2021. The increased cash used for operations was primarily due to our Macao operations generating increased operating losses and working capital requirements due to the decrease in visitation resulting from COVID-19 travel restrictions across key China markets in 2022 and Macao experiencing COVID-19 cases in June and July 2022. This cash usage was partially offset by operating cash flows provided by Marina Bay Sands due to the acceleration of visitation and elimination of restrictions in Singapore over the course of 2022.
Cash Flows — Investing Activities
Capital expenditures for the nine months ended September 30, 2022, totaled $504 million. Included in this amount was $255 million at Marina Bay Sands in Singapore and $199 million for construction and development activities in Macao, which consisted of $153 million for The Londoner Macao, $35 million for The Venetian Macao, $7 million for The Plaza Macao and Four Seasons Macao, $2 million for Sands Macao and $2 million for The Parisian Macao. Additionally, this amount included $50 million for corporate and other costs.
Capital expenditures for the nine months ended September 30, 2021, totaled $640 million. Included in this amount was $513 million for construction and development activities in Macao, which consisted primarily of $440 million for The Londoner Macao, $50 million for The Venetian Macao and $15 million for The Plaza Macao and Four Seasons Macao. Additionally, this amount included $102 million at Marina Bay Sands in Singapore and $25 million for corporate and other costs.
58
Cash Flows — Financing Activities
Net cash flows generated from financing activities were $5.67 billion for the nine months ended September 30, 2022, which was primarily attributable to the net proceeds from the sale of the Las Vegas Operating Properties of $4.89 billion. Additionally, $700 million was received from the drawdown of our SCL revolving facility. These items were partially offset by $50 million in repayments on long-term debt and $9 million in deferred offering costs relating to obtaining LVSC Revolving Facility lender consents to consummate the Las Vegas Sale.
Net cash flows generated from financing activities were $562 million for the nine months ended September 30, 2021, which was primarily attributable to the proceeds of $505 million received from the drawdown of our SCL revolving facility, and transactions with discontinued operations. These items were partially offset by $36 million in deferred financing costs related to the issuance of the new unsecured notes at SCL and the various credit agreements.
Cash Flows — Discontinued Operations
Cash flows for discontinued operations for the nine months ended September 30, 2022, were primarily attributable to $4.89 billion in net proceeds from the Las Vegas Sale, which were transferred to continuing operations.
Capital Financing Overview
We fund our development projects primarily through borrowings from our debt instruments and operating cash flows.
On February 23, 2022, we closed the sale of our Las Vegas Operations. At closing, we received approximately $5.05 billion in cash proceeds, before transaction costs and income taxes. The net proceeds of approximately $4.37 billion, after working capital adjustments, transaction costs and the payment of income taxes throughout 2022, will be used for incremental liquidity and general corporate purposes, which may include capital expenditures and development activities. In connection with the closing of the sale we may be required to make certain payments (“Support Payments”) to OpCo. The Support Payments are payable on a monthly basis following the closing through the year ending December 31, 2023, based upon the performance of the Las Vegas Operations relative to certain agreed upon target metrics and subject to quarterly and annual adjustments. Our remaining payment obligations are subject to a cap equal to $63 million for the period beginning October 1, 2022 and ending December 31, 2022 and $250 million for the period beginning January 1, 2023 and ending December 31, 2023. No Support Payments were made for the period post-close through September 30, 2022, and we do not anticipate making these payments.
Our U.S., SCL and Singapore credit facilities, as amended, contain various financial covenants, which include maintaining a maximum leverage ratio or net debt, as defined, to trailing twelve-month adjusted earnings before interest, income taxes, depreciation and amortization, as defined. In September 2021, LVSC extended the amendment, pursuant to which lenders, among other things, removed LVSC’s requirement to maintain a maximum leverage ratio as of the last day of the fiscal quarter, through and including December 31, 2022. In July 2021, SCL extended the waiver and amendment request letter, pursuant to which lenders, among other things, waived SCL’s requirement to ensure the leverage ratio does not exceed 4.0x and the interest coverage ratio is greater than 2.50x, through January 1, 2023. In September 2021, MBS extended the amendment letter, pursuant to which MBS will not have to comply with the leverage or interest coverage covenants as of the last day of the fiscal quarter, through and including December 31, 2022. Our compliance with our financial covenants for periods beyond December 31, 2022 could be affected by certain factors beyond our control, such as the impact of the COVID-19 Pandemic, including current travel, quarantine and border restrictions continuing in the future. We will pursue additional waivers to meet the required financial covenant ratios, which include a maximum leverage ratio of 4.0x, 4.0x and 4.5x under our U.S., Macao and Singapore credit facilities, respectively, for periods beyond December 31, 2022 for LVSC and MBS and January 1, 2023 for SCL, if deemed necessary. We believe we will be successful in obtaining the additional waivers, although no assurance can be provided that such waivers will be granted, which could negatively impact our ability to be in compliance with our debt covenants for periods beyond December 31, 2022 for LVSC and MBS and January 1, 2023 for SCL. The 2018 SCL Credit facility expires on July 31, 2023; however, we believe we will be successful in extending the maturity date of the facility prior to its expiration. If we are unable to
59
extend the maturity date or refinance the SCL Credit Facility, we would be required to seek alternative forms of capital to repay the outstanding balance and our available liquidity may be reduced.
Any defaults under our debt agreements would allow the lenders, in each case, to exercise their rights and remedies as defined under their respective agreements. If the lenders were to exercise their rights to accelerate the due dates of the indebtedness outstanding, there can be no assurance we would be able to repay or refinance any amounts that may become due and payable under such agreements, which could force us to restructure or alter our operations or debt obligations.
We held unrestricted cash and cash equivalents of approximately $5.84 billion and restricted cash of approximately $289 million as of September 30, 2022, which approximately $1.92 billion of the unrestricted amount is held by non-U.S. subsidiaries. Of the $1.92 billion, approximately $1.42 billion is available to be repatriated to the U.S. and we do not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise. The remaining unrestricted amounts held by non-U.S. subsidiaries are not available for repatriation primarily due to dividend requirements to third-party public stockholders in the case of funds being repatriated from SCL.
We believe the unrestricted cash and cash equivalents of $5.84 billion and cash flow generated from operations, as well as the $2.95 billion available for borrowing under our U.S., SCL and Singapore revolving credit facilities, net of outstanding letters of credit, and SGD 3.69 billion (approximately $2.57 billion at exchange rates in effect on September 30, 2022) under our Singapore Delayed Draw Term Facility as of September 30, 2022 (only available for draws after the construction cost estimate and construction schedule for the MBS Expansion Project have been delivered to the lenders), will be sufficient to maintain compliance with the financial covenants of our credit facilities and fund the requirements in connection with the Macao concession tendering, our working capital needs, committed and planned capital expenditures, development opportunities and debt obligations. In the normal course of our activities, we will continue to evaluate global capital markets to consider future opportunities for enhancements of our capital structure. During the nine months ended September 30, 2022, SCL drew down $67 million and HKD 4.96 billion (approximately $632 million at exchange rates in effect on September 30, 2022) under its revolving credit facility for general corporate purposes.
We have suspended our quarterly dividend program beginning in April 2020, and SCL suspended its dividend payments after paying its interim dividend for 2019 on February 21, 2020.
We believe we have a strong balance sheet and sufficient liquidity in place, including access to available borrowing capacity under our credit facilities. We also believe we are well positioned to support our continuing operations, proceed with the requirements in connection with the Macao concession renewal and complete the major construction projects in Macao and Singapore that are underway and respond to the current COVID-19 Pandemic challenges. We have taken various mitigating measures to manage through the current environment, including a cost and capital expenditure reduction program to minimize cash outflow for non-essential items.
Share Repurchase Program
In June 2018, our Board of Directors authorized the repurchase of $2.50 billion of our outstanding common stock, which was to expire in November 2020. In October 2020, our Board of Directors authorized the extension of the expiration date of the remaining repurchase amount of $916 million to November 2022, and in October 2022, our Board of Directors authorized the further extension of the expiration date of the remaining repurchase amount of $916 million to November 2024. As of September 30, 2022, we have remaining authorization to repurchase $916 million of our outstanding common shares. Repurchases of our common stock are made at our 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 our financial position, earnings, legal requirements, other investment opportunities and market conditions.
60
Aggregate Indebtedness and Other Contractual Obligations
As of September 30, 2022, there had been no material changes to our aggregated indebtedness and other contractual obligations previously reported in our Annual Report on Form 10-K for the year ended December 31, 2021, with the exception of the $700 million draw on the 2018 SCL Revolving Credit Facility and accompanying interest and the aggregate 0.50% per annum increase in fixed interest on the SCL Senior Notes due to a downgraded credit rating from Standard & Poor’s and Fitch; the increase being effective on the first payment date after the date of the respective downgrade. These transactions are summarized below:
| Payments Due During Period Ending December 31, | |||||||||||||||||||||||||||||
2022(1) | 2023 - 2024 | 2025 - 2026 | Thereafter | Total | |||||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||||||||
Long-Term Debt Obligations(2) | |||||||||||||||||||||||||||||
| 2018 SCL Credit Facility — Revolving | $ | — | $ | 1,447 | $ | — | $ | — | $ | 1,447 | |||||||||||||||||||
| Fixed Interest Payments | 17 | 692 | 573 | 520 | 1,802 | ||||||||||||||||||||||||
Variable Interest Payments(3) | 19 | 44 | — | — | 63 | ||||||||||||||||||||||||
| Total | $ | 36 | $ | 2,183 | $ | 573 | $ | 520 | $ | 3,312 | |||||||||||||||||||
_______________________
(1)Represents the three-month period ending December 31, 2022.
(2)See “Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 5 — Long-Term Debt” for further details on these financing transactions.
(3)Based on the 1-month rate as of September 30, 2022, London Interbank Offered Rate (“LIBOR”) and Hong Kong Interbank Offered Rate (“HIBOR”) of 3.14% and 2.62% plus the applicable interest rate spread in accordance with the respective debt agreement.
Special Note Regarding Forward-Looking Statements
This report contains forward-looking statements made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the discussions of our business strategies and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, in certain portions included in this report, the words: “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to our Company or management, are intended to identify forward-looking statements. Although we believe these forward-looking statements are reasonable, we cannot assure you any forward-looking statements will prove to be correct. These forward-looking statements involve known and unknown risks, uncertainties and other factors beyond our control, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the risks associated with:
•the uncertainty of the extent, duration and effects of the COVID-19 Pandemic and the response of governments and other third parties, including government-mandated property closures, increased operational regulatory requirements or travel restrictions, on our business, results of operations, cash flows, liquidity and development prospects;
•our ability to maintain our gaming license and subconcession in Macao and Singapore, including the extension of our subconcession in Macao that expires on December 31, 2022 and the grant of any new concession in Macao;
•our ability to invest in future growth opportunities;
•the ability to execute our previously announced capital expenditure programs in Singapore, and produce future returns;
•legal proceedings, judgments or settlements that may be instituted in connection with the Las Vegas Sale;
61
•general economic and business conditions internationally, which may impact levels of disposable income, consumer spending, group meeting business, pricing of hotel rooms and retail and mall tenant sales;
•disruptions or reductions in travel and our operations due to natural or man-made disasters, pandemics, epidemics or outbreaks of infectious or contagious diseases, political instability, civil unrest, terrorist activity or war;
•the uncertainty of consumer behavior related to discretionary spending and vacationing at our Integrated Resorts in Macao and Singapore;
•the extensive regulations to which we are subject and the costs of compliance or failure to comply with such regulations;
•new developments, construction projects and ventures, including our Cotai Strip developments and MBS Expansion Project;
•regulatory policies in China or other countries in which our patrons reside, or where we have operations, including visa restrictions limiting the number of visits or the length of stay for visitors from China to Macao, restrictions on foreign currency exchange or importation of currency, and the judicial enforcement of gaming debts;
•the possibility that the laws and regulations of mainland China become applicable to our operations in Macao and Hong Kong;
•the possibility that economic, political and legal developments in Macao adversely affect our Macao operations, or that there is a change in the manner in which regulatory oversight is conducted in Macao;
•our leverage, debt service and debt covenant compliance, including the pledge of certain of our assets (other than our equity interests in our subsidiaries) as security for our indebtedness and ability to refinance our debt obligations as they come due or to obtain sufficient funding for our planned, or any future, development projects;
•fluctuations in currency exchange rates and interest rates;
•increased competition for labor and materials due to planned construction projects in Macao and Singapore and quota limits on the hiring of foreign workers;
•our ability to compete for limited management and labor resources in Macao and Singapore, and policies of those governments may also affect our ability to employ imported managers or labor from other countries;
•our dependence upon properties primarily in Macao and Singapore for all of our cash flow and the ability of our subsidiaries to make distribution payments to us;
•the passage of new legislation and receipt of governmental approvals for our operations in Macao and Singapore and other jurisdictions where we are planning to operate;
•our insurance coverage may not be adequate to cover all possible losses that our properties could suffer and our insurance costs may increase in the future;
•our ability to collect gaming receivables from our credit players;
•the collectability of our outstanding loans receivable;
•our dependence on chance and theoretical win rates;
•fraud and cheating;
•our ability to establish and protect our intellectual property rights;
•the possibility that our securities may be prohibited from being traded in the U.S. securities market under the Holding Foreign Companies Accountable Act;
•conflicts of interest that arise because certain of our directors and officers are also directors and officers of SCL;
62
•government regulation of the casino industry (as well as new laws and regulations and changes to existing laws and regulations), including gaming license regulation, the requirement for certain beneficial owners of our securities to be found suitable by gaming authorities, the legalization of gaming in other jurisdictions and regulation of gaming on the internet;
•increased competition in Macao, including recent and upcoming increases in hotel rooms, meeting and convention space, retail space, potential additional gaming licenses and online gaming;
•the popularity of Macao and Singapore as convention and trade show destinations;
•new taxes, changes to existing tax rates or proposed changes in tax legislation;
•the continued services of our key officers;
•risks related to our loan receivables;
•any potential conflict between the interests of our Principal Stockholders and us;
•labor actions and other labor problems;
•our failure to maintain the integrity of our information and information systems or comply with applicable privacy and data security requirements and regulations could harm our reputation and adversely affect our business;
•the completion of infrastructure projects in Macao;
•limitations on the transfers of cash to and from our subsidiaries, limitations of the pataca exchange markets and restrictions on the export of the renminbi;
•potential negative impacts from environmental, social and governance and sustainability matters; and
•the outcome of any ongoing and future litigation.
All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by federal securities laws.
Investors and others should note we announce material financial information using our investor relations website (https://investor.sands.com), our company website, SEC filings, investor events, news and earnings releases, public conference calls and webcasts. We use these channels to communicate with our investors and the public about our company, our products and services, and other issues.
In addition, we post certain information regarding SCL, a subsidiary of Las Vegas Sands Corp. with ordinary shares listed on The Stock Exchange of Hong Kong Limited, from time to time on our company website and our investor relations website. It is possible the information we post regarding SCL could be deemed to be material information.
The contents of these websites are not intended to be incorporated by reference into this Quarterly Report on Form 10-Q or in any other report or document we file, and any reference to these websites are intended to be inactive textual references only.
63
ITEM 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. Our primary exposures to market risk are interest rate risk associated with our long-term debt and foreign currency exchange rate risk associated with our operations outside the United States, which we may manage through the use of futures, options, caps, forward contracts and similar instruments. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions.
As of September 30, 2022, the estimated fair value of our long-term debt was approximately $13.75 billion, compared to its contractual value of $15.38 billion. The estimated fair value of our long-term debt is based on recent trades, if available, and indicative pricing from market information (level 2 inputs). A hypothetical 100 basis point change in market rates would cause the fair value of our long-term debt to change by $358 million. A hypothetical 100 basis point change in London Inter-Bank Offered Rate (“LIBOR”), Hong Kong Inter-Bank Offered Rate (“HIBOR”) and Singapore Overnight Rate Average (“SORA”) would cause our annual interest cost on our long-term debt to change by approximately $40 million.
Foreign currency transaction losses were $35 million for the nine months ended September 30, 2022, primarily due to U.S. dollar denominated debt issued by SCL and Singapore denominated intercompany debt reported in U.S. dollars. We may be vulnerable to changes in the U.S. dollar/SGD and U.S. dollar/pataca exchange rates. Based on balances as of September 30, 2022, a hypothetical 10% weakening of the U.S. dollar/SGD exchange rate would cause a foreign currency transaction loss of approximately $21 million, and a hypothetical 1% weakening of the U.S. dollar/pataca exchange rate would cause a foreign currency transaction loss of approximately $55 million (net of the impact from the foreign currency swap agreements). The pataca is pegged to the Hong Kong dollar and the Hong Kong dollar is pegged to the U.S. dollar (within a narrow range). We maintain a significant amount of our operating funds in the same currencies in which we have obligations thereby reducing our exposure to currency fluctuations.
ITEM 4 — CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure information required to be disclosed in the reports the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and such information is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. The Company’s Chief Executive Officer and its Chief Financial Officer have evaluated the disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) of the Company as of September 30, 2022, and have concluded they are effective at the reasonable assurance level.
It should be noted any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that had a material effect, or were reasonably likely to have a material effect, on the Company’s internal control over financial reporting.
64
PART II OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
The Company is party to litigation matters and claims related to its operations. For more information, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and “Part I — Item 1 — Financial Statements — Notes to Condensed Consolidated Financial Statements — Note 10 — Commitments and Contingencies” of this Quarterly Report on Form 10-Q.
ITEM 1A — RISK FACTORS
In addition to the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, the following risk factors were identified or updated:
Risks Related to Doing Business in China
Our business, financial condition and results of operations and/or the value of our securities or our ability to offer or continue to offer securities to investors may be materially and adversely affected to the extent the laws and regulations of mainland China become applicable to our operations in Macao and Hong Kong. In that case, we may be subject to the risks and uncertainties associated with the evolving laws and regulations in mainland China, their interpretation and implementation, and the legal and regulatory system in mainland China more generally, including with respect to the enforcement of laws and the possibility of changes of rules and regulations with little advance notice. In addition, there can be no assurance that economic, political and legal developments in Macao will not adversely affect our Macao operations, or that there will not be a change in the manner in which regulatory oversight is conducted in Macao, if China were to apply such laws and regulations of mainland China to our operations in Macao and Hong Kong. If any such change were to occur, it could potentially adversely affect our results of operations, financial position and prospects.
We are a parent company with limited business operations of our own, and our main asset is the capital stock of our subsidiaries. A significant portion of our business operations are based in Macao and held by various Macao-incorporated indirect subsidiaries of Sands China Ltd. ("SCL"), our majority-owned subsidiary incorporated in Cayman Islands and listed in Hong Kong (collectively referred to as the "Macao Operations"). We also have subsidiaries incorporated in mainland China and Hong Kong that provide back-office support, such as information technology, accounting, hotel management and marketing services, which complement and support SCL’s main back-office functions in Macao.
We face various legal and operational risks and uncertainties relating to having a majority of our operations based in Macao and held by various Macao-incorporated indirect subsidiaries of SCL. Substantially all of SCL’s assets are located in Macao and substantially all of SCL’s revenue is derived from Macao. Accordingly, our results of operations, financial position and prospects are subject to a significant degree to the economic, political and legal situation in Macao. China’s economy differs from the economies of most developed countries, including the structure of the economy, level of government involvement, level of development, growth rate, control of capital inflows and outflows, control of foreign exchange and allocation of resources.
Our operations face risks and uncertainties associated with evolving Chinese laws and regulations, such as those associated with the extent to which the level of Chinese government involvement, control of capital inflows and outflows, control of foreign exchange and allocation of resources currently applicable within mainland China may become applicable to us and other risks and uncertainties as to whether and how recent Chinese government statements and regulatory developments, such as those relating to data and cyberspace security and anti-monopoly, could result in a material change in our operations and/or the value of our securities or could significantly limit or completely hinder our ability to offer or continue to offer securities to investors, cause the value of such securities to significantly decline or be worthless and affect our ability to list securities on a U.S. or other foreign exchange. If, in the future, there were to be a significant change in the manner in which the Chinese government exercises direct or indirect oversight, discretion or control over businesses operated in Macao, China and Hong Kong, including the current interpretation and application of existing Chinese laws and regulations on how the Chinese government exercises direct or indirect oversight, discretion or control over businesses operated in Macao, China and Hong Kong, it could potentially result in our Macao Operations being materially adversely affected and it could potentially
65
adversely affect our results of operations, financial position and cash flows. In addition, the Chinese government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers.
There may be risks and uncertainties associated with the evolving laws and regulations in China, including their interpretation and implementation with respect to the enforcement of laws, rules and regulations and the possibility of changes thereto with little advance notice. If, in the future, there were to be any significant governmental intervention or influence in the future on, or in relation to our business or operations, or significant control over offerings of our securities or foreign investment in China-based issuers, this could potentially significantly limit or completely hinder our ability to offer or continue to offer securities to investors, cause the value of our securities to significantly decline or be worthless and affect our ability to list securities on a U.S. or other foreign exchange. For example, on August 20, 2021, the Standing Committee of the National People's Congress (“SCNPC”) promulgated the Personal Information Protection Law of the PRC (“PIPL”), which became effective on November 1, 2021. As the first systematic and comprehensive law specifically for the protection of personal information in the PRC, the PIPL provides extraterritorial effect on the personal information processing activities. Since our data processing activities outside mainland China from our Macao Operations relate to the offering of goods or services directed at natural persons in mainland China, our businesses from our Macao Operations operated outside mainland China are potentially subject to the requirements of PIPL. However, the implementation rules to the extraterritorial jurisdiction of the PIPL have not been finalized yet, and it remains unclear how the Chinese government will enforce such law. If the extraterritorial jurisdiction under the PIPL were to be extended to us, our Macao Operations would be subject to certain data privacy obligations which could potentially result in a material change to our operations. These data privacy obligations would primarily include bearing the responsibility for our personal information processing activities, and adopting the necessary measures to safeguard the security of the personal information we process in compliance with the standards required under the PIPL, the failure of which may result in us being ordered to correct or suspend or terminate the provision of services, confiscation of illegal income, fines or other penalties. Specifically, if the PIPL were to become applicable to us, we would be required to (i) notify the individuals concerned of the processing of their personal information in detail and establish legal bases for such processing; (ii) improve internal data governance by implementing managerial and technical security measures and response plans for security incidents; (iii) where we qualify as a “quantity processor” (to be defined by the Cyberspace Administration of China, “CAC”), designate a person in charge of personal information protection; (iv) establish a special agency or designate a representative within the territory of the PRC to be responsible for handling matters relating to personal information protection; (v) establish and make public the procedure for individuals to exercise their rights related to personal information; (vi) conduct an impact assessment on personal information protection before any high-risk processing activities; (vii) where we entrust processing of personal information to any vendor, conclude an agreement with such vendor and supervise its processing; (viii) where we transfer personal information outside the territory of the PRC due to business or other needs, meet one of the conditions prescribed by the PIPL, such as, passing the security evaluation organized by the CAC or other conditions prescribed by PRC laws, administrative regulations or the CAC. In addition, under the PIPL, where an overseas organization or individual engages in personal information processing activities that infringe upon the personal information rights and interests of PRC citizens or endangering the national security and public interests of the PRC, the CAC may include such organization or individual in the list of subjects to whom provision of personal information is restricted or prohibited, announce the same, and take measures such as restricting or prohibiting provision of personal information to such organization or individual. Moreover, if the recent Chinese regulatory actions on data security or other data-related laws and regulations were to become applicable to us in the future, we could become subject to certain cybersecurity and data privacy obligations which could potentially result in a material change to our operations, and the failure to meet such obligations could result in penalties and other regulatory actions against us and may materially and adversely affect our business and results of operations.
Recent events also indicate greater oversight by the CAC over data security, particularly for companies with Chinese operations seeking to list on a foreign exchange. For example, the Measures for Cybersecurity Review (“Review Measures”) issued by the CAC came into effect on February 15, 2022. The Review Measures provide that, in addition to critical information infrastructure operators (“CIIOs”) that intend to purchase network products or services, online platform operators engaging in data processing activities that affect or may affect national security shall also be subject to cybersecurity review. The Review Measures require that an online platform operator which
66
possesses the personal information of at least one million users must apply for a cybersecurity review by the CAC if it intends to be listed in foreign countries. The Review Measures does not provide for a definition of “online platform operator” and, therefore, we cannot assure you that our Macao Operations will not be deemed as an “online platform operator.” However, as of the date of this report, our subsidiaries incorporated in mainland China do not have over one million users’ personal information and do not anticipate that they will be collecting over one million users’ personal information in the foreseeable future, and on that basis we believe we are not required to apply for cybersecurity review by the CAC, even if we are deemed as an “online platform operator.” The Review Measures are not enacted in accordance with the PIPL, so our obligation to apply for cybersecurity review will not change no matter whether the PIPL applies to us or not. Further, we have not received any notice from any authorities identifying any of our subsidiaries as a CIIO or requiring them to undertake a cybersecurity review by the CAC. While we believe our subsidiaries are not required to apply for cybersecurity review, the Review Measures provide CAC and relevant authorities certain discretion to initiate cybersecurity review where any network product or service or any data handling activity is considered to affect or may affect national security, which may lead to uncertainties in relation to the Review Measures’ impact on our operations or the offering of our securities.
As advised by our PRC legal advisers, Haiwen & Partners, SCL is currently not required to obtain any permission or approval from the China Securities Regulatory Commission (“CSRC”), CAC or any other mainland Chinese governmental authority to operate its business or to issue securities to foreign investors, other than those related to its two subsidiaries incorporated in mainland China that only provide back office support. SCL has received all requisite permissions and approvals for its back office supporting functions located in mainland China, primarily being the standard business licenses issued by the relevant authorities in mainland China, and it has never been denied such permissions and approvals. If SCL does not receive or maintain such permissions or approvals in relation to such back office support functions, we do not expect there will be any material adverse impact on the business, financial condition and results of our Macao Operations. However, in the event that we have inadvertently concluded that such permissions or approvals are not required or if, in the future, applicable laws, regulations or interpretations were to change and require SCL to obtain such permissions or approvals, the failure to obtain such permissions or approvals could potentially result in penalties and other regulatory actions against SCL and may materially and adversely affect our business and results of operations.
In addition, we face risks and uncertainties associated with evolving Chinese laws and regulations, such as those associated with the extent to which the level of Chinese government involvement, control of capital inflows and outflows, control of foreign exchange and allocation of resources currently applicable within mainland China may become applicable to us. A significant portion of our assets are located in Macao and a significant portion of our revenue is derived from Macao. Accordingly, our results of operations, financial position and prospects are subject to a significant degree to the economic, political and legal situation in Macao. From December 20, 1999, Macao became a Special Administrative Region of China when China resumed the exercise of sovereignty over Macao. The Basic Law of Macao provides that Macao will be governed under the principle of “one country, two systems” with its own separate government and legislature and that Macao will have a high degree of legislative, judicial and economic autonomy. However, there can be no assurance that economic, political and legal developments in Macao will not adversely affect our operations, or that there will not be a change in the manner in which regulatory oversight is conducted in Macao, if China were to apply such laws and regulations of mainland China to our operations in Macao and Hong Kong. If any such change were to occur, it could potentially adversely affect our results of operations, financial position and prospects. For example, currently in mainland China, the Renminbi cannot be freely exchanged into any foreign currencies, and exchange and remittance of foreign currencies are subject to Chinese foreign exchange regulations, such as the requirement to obtain approval from the State Administration of Foreign Exchange of the PRC or qualified commercial banks in the PRC. If, in the future, similar regulations were to become applicable to the exchange and remittance of MOP or other currencies in Macao, there could potentially be a material adverse effect on our business, financial condition, results of operations and cash flows.
67
Our securities may be prohibited from being traded in the U.S. securities market under the Holding Foreign Companies Accountable Act under certain circumstances. The cessation of trading of our securities, or the threat of their trading being prohibited, may materially and adversely affect the value and/or liquidity of our securities. Additionally, the inability of the PCAOB to conduct full inspections or investigations of our auditor may deprive our investors of the benefits of such inspections or investigations.
The Holding Foreign Companies Accountable Act (the “HFCA Act”) was enacted on December 18, 2020. The HFCA Act states that if the SEC determines that an issuer has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years, the SEC shall prohibit the securities of the issuer from being traded on a national securities exchange or in the over-the-counter trading market in the United States.
On September 22, 2021, the PCAOB adopted Rule 6100, Board Determinations Under the Holding Foreign Companies Accountable Act, which established a framework for the PCAOB to use when determining whether the PCAOB is unable to inspect or investigate completely registered public accounting firms located in a foreign jurisdiction because of a position taken by one or more authorities in those jurisdictions. The SEC approved PCAOB Rule 6100 on November 5, 2021. On December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements under the HFCA Act, pursuant to which the SEC will identify a “Commission-Identified Issuer” if an issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years. If, in the future, we were to be identified as a Commission-Identified Issuer and have a “non-inspection” year, there is no assurance that we will be able to take remedial measures in a timely manner. On December 16, 2021, the PCAOB issued a report on its determinations that it is unable to inspect or investigate completely PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong, because of positions taken by one or more authorities in those jurisdictions. On August 26, 2022, the PCAOB signed a Statement of Protocol with the CSRC and the Ministry of Finance of the People’s Republic of China governing the PCAOB’s inspections and investigations of audit firms based in China and Hong Kong. The PCAOB reported that the new Protocol grants it, among other things, independent discretion to select any issuer audits for inspection or investigation and the unfettered ability to transfer information to the SEC. However, uncertainties remain whether and how this new Protocol will be implemented and whether the PCAOB can make a determination that it is able to inspect and investigate completely PCAOB-registered audit firms based in mainland China and Hong Kong.
There could be additional regulatory or legislative requirements or guidance that could impact us if, in the future, our auditor is not subject to PCAOB inspection. For example, on June 22, 2021, the U.S. Senate passed the Accelerating Holding Foreign Companies Accountable Act, which, if passed by the U.S. House of Representatives and signed into law, would amend the HFCA Act and reduce the number of consecutive non-inspection years required for triggering the listing and trading prohibitions under the HFCA Act from three years to two years. The SEC also may propose additional rules or guidance that could impact us if our auditor is not subject to PCAOB inspection. The implications of any additional regulation or guidance in addition to the requirements of the HFCA Act are uncertain, and such uncertainty could cause the market price of our securities to be materially and adversely affected.
Our auditor, Deloitte & Touche LLP, is headquartered in the United States and was not identified as a firm that the PCAOB is unable to inspect in its determinations announced on December 16, 2021, pursuant to the HFCA Act. However, there is no assurance that future audit reports will be prepared by auditors able to be inspected by the PCAOB.
If the PCAOB is unable to conduct inspections or full investigations of our auditor, our securities could be prohibited from being traded in the U.S. securities market, including “over-the-counter,” if, in the future, we were to be identified as a Commission-Identified Issuer for three consecutive years. Such a prohibition could substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with a potential prohibition could have a negative impact on the price of our securities. Also, such a prohibition could significantly affect our ability to raise capital on acceptable terms, or at all, which may have a material adverse effect on our business, financial condition and prospects.
68
Inspections of other audit firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. If the PCAOB were unable to conduct inspections or full investigations of our auditor, we and investors in our securities would be deprived of the benefits of such PCAOB inspections. In addition, the inability of the PCAOB to conduct inspections or full investigations of auditors would make it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors that are subject to the PCAOB inspections, which could cause investors and potential investors to lose confidence in the audit procedures and reported financial information and the quality of our financial statements.
Risks Related to Our Business
Our loans receivable are subject to certain risks, which could materially adversely affect our financial position, results of operations and cash flows.
In connection with closing of the Las Vegas sale, the Company entered into a seller financing loan agreement, which provides for a six-year senior secured term loan in an aggregate principal amount of $1.20 billion. If this loan were to become impaired and could not be collected, our financial position, results of operations and cash flows could be materially adversely affected for the amount of uncollected, or deemed uncollectible, principal and interest.
Risks Associated with Our International Operations
We are subject to limitations on the transfers of cash to and from our subsidiaries, limitations of the pataca exchange markets and restrictions on the export of the renminbi.
Our revenues in Macao are denominated in patacas, the legal currency of Macao, and Hong Kong dollars. The Macao pataca is pegged to the Hong Kong dollar and, in many cases, is used interchangeably with the Hong Kong dollar in Macao. Although currently permitted, we cannot assure you patacas will continue to be freely exchangeable into U.S. dollars. Also, our ability to convert large amounts of patacas into U.S. dollars over a relatively short period may be limited.
The ability of subsidiaries to make distributions to us depends on the earnings and cash flow generated from gaming operations and various other factors, including compliance with certain local statutes, the laws and regulations currently and in the future applicable to our subsidiaries and restrictions in connection with their contractual arrangements. While currently there is no foreign exchange or capital control restriction applicable to transactions between us and our Singapore, Macao, Hong Kong and China subsidiaries, we cannot assure you that this will continue to be the case in the future, and our ability to convert over a relatively short period large amounts of patacas into U.S. dollars may be limited. In addition, the mainland Chinese government also imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China by our subsidiaries incorporated in mainland China. If, in the future, foreign exchange or capital control restrictions were to be imposed and become applicable to us, such restrictions could potentially reduce the amounts that we would be able to receive from our Singapore, Macao, Hong Kong and China subsidiaries. Our non-U.S. subsidiaries, including those located in Singapore, Macao, Hong Kong and mainland China, held unrestricted cash and cash equivalents of $1.92 billion and restricted cash of $289 million as of September 30, 2022, of which approximately $1.42 billion is available to be repatriated to the U.S. We do not expect withholding taxes or other foreign income taxes to apply should these earnings be distributed in the form of dividends or otherwise. The remaining unrestricted amounts are not available for repatriation primarily due to dividend requirements to third-party public stockholders in the case of funds being repatriated from SCL.
Venetian Macau Limited, a subsidiary of SCL incorporated in Macao ("VML"), is also subject to a 12% complementary tax on dividend distributions to its shareholders from gaming profits. In May 2014, VML entered into an agreement with the Macao government that required VML to make fixed annual payments in lieu of paying this 12% tax (“Shareholder Dividend Tax Agreement”) through the end of 2018. In April 2019, VML entered into a renewed Shareholder Dividend Tax Agreement with the Macao government, effective through June 26, 2022. In September 2022, VML received an additional extension of the tax exemption regarding Macao complementary tax on VML’s gaming activities to December 31, 2022. As of the date of this report, management is reviewing the option of applying for the Shareholder Dividend Tax Arrangement for the period June 27, 2022 to December 31, 2022.
69
We are currently prohibited from accepting wagers in renminbi, the legal currency of China. There are also restrictions on the remittance of the renminbi from mainland China and the amount of renminbi that can be converted into foreign currencies, including the pataca and Hong Kong dollar. Restrictions on the remittance of the renminbi from mainland China may impede the flow of gaming customers from mainland China to Macao, inhibit the growth of gaming in Macao and negatively impact our gaming operations. There is no assurance that incremental mainland Chinese regulations will not be promulgated in the future that have the effect of restricting or eliminating the remittance of renminbi from mainland China. Further, if any new mainland Chinese regulations are promulgated in the future that have the effect of permitting or restricting (as the case may be) the remittance of renminbi from mainland China, then such remittances will need to be made subject to the specific requirements or restrictions set out in such rules.
If we are unable to obtain the Shareholder Dividend Tax Agreement in subsequent periods, restrictions are placed on the ability of our subsidiaries in Singapore, Macao, Hong Kong and mainland China to make distributions or declare dividends or limitations of the pataca exchange markets and restrictions on the export of the renminbi are realized, it could potentially adversely affect our results of operations, financial position and cash flows.
70
ITEM 6 — EXHIBITS
List of Exhibits
| Exhibit No. | Description of Document | |||||||
| 10.1 | ||||||||
| 23.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1+ | ||||||||
| 32.2+ | ||||||||
| 101 | The following financial information from the Company’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2022, formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) Condensed Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021, (ii) Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021, (iii) Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2022 and 2021, (iv) Condensed Consolidated Statements of Equity for the three and nine months ended September 30, 2022 and 2021, (v) Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021, and (vi) Notes to Condensed Consolidated Financial Statements. | |||||||
| 104 | Cover Page Interactive Data File - the cover page XBRL tags are embedded within the Inline XBRL document | |||||||
____________________
+ This exhibit will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.
71
LAS VEGAS SANDS CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this quarterly report on Form 10-Q to be signed on its behalf by the undersigned thereunto duly authorized.
| LAS VEGAS SANDS CORP. | |||||||||||
| October 21, 2022 | By: | /S/ ROBERT G. GOLDSTEIN | |||||||||
| Robert G. Goldstein Chairman of the Board and Chief Executive Officer (Principal Executive Officer) | |||||||||||
| October 21, 2022 | By: | /S/ RANDY HYZAK | |||||||||
| Randy Hyzak Executive Vice President and Chief Financial Officer (Principal Financial Officer) | |||||||||||
72
Exhibit 23.1
October 21, 2022
Las Vegas Sands Corp.
5500 Haven Street
Las Vegas, Nevada 89119
Dear Sir/Madam:
We hereby consent to the reference of our name under the headings “ITEM IA — Risk Factors—Risks Related to Doing Business in China” in the Quarterly Report on Form 10-Q of Las Vegas Sands Corp. for the quarter ended September 30, 2022 (the “Form 10-Q”), which will be filed with the Securities and Exchange Commission (the “SEC”) on the date hereof, as well as to the incorporation by reference thereof into Las Vegas Sands Corp.’s Registration Statement on Form S-8 (File No. 333-232819) and Form S-3 (File No. 333-249825), including any amendments thereto, in accordance with the requirements of the Securities Act of 1933, as amended.
We also consent to the filing of this consent letter with the SEC as an exhibit to the Form 10-Q.
In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Very truly yours,
/s/ Haiwen & Partners
HAIWEN & PARTNERS
EXHIBIT 31.1
LAS VEGAS SANDS CORP.
CERTIFICATION
I, Robert G. Goldstein, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Las Vegas Sands Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | October 21, 2022 | By: | /S/ ROBERT G. GOLDSTEIN | |||||||||||
| Robert G. Goldstein Chief Executive Officer (Principal Executive Officer) | ||||||||||||||
EXHIBIT 31.2
LAS VEGAS SANDS CORP.
CERTIFICATION
I, Randy Hyzak, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Las Vegas Sands Corp.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| Date: | October 21, 2022 | By: | /S/ RANDY HYZAK | |||||||||||
| Randy Hyzak Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||||||||
EXHIBIT 32.1
LAS VEGAS SANDS CORP.
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, as filed by Las Vegas Sands Corp. with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Las Vegas Sands Corp.
| Date: | October 21, 2022 | By: | /S/ ROBERT G. GOLDSTEIN | |||||||||||
| Robert G. Goldstein Chief Executive Officer (Principal Executive Officer) | ||||||||||||||
EXHIBIT 32.2
LAS VEGAS SANDS CORP.
CERTIFICATION UNDER SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, as filed by Las Vegas Sands Corp. with the Securities and Exchange Commission on the date hereof (the “Report”), I certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Las Vegas Sands Corp.
| Date: | October 21, 2022 | By: | /S/ RANDY HYZAK | |||||||||||
| Randy Hyzak Executive Vice President and Chief Financial Officer (Principal Financial Officer) | ||||||||||||||