<PAGE>
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UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
[ ] 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 333-42147
LAS VEGAS SANDS, INC.
Incorporated pursuant to the Laws of Nevada State
----------
IRS -- Employer Identification No. 04-3010100
3355 Las Vegas Boulevard South, Room 1A, Las Vegas, Nevada 89109
(702) 414-1000
----------
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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of November 13, 2000.
Class Outstanding at November 13, 2000
Common Stock, $.10 par value 925,000 shares
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LAS VEGAS SANDS, INC.
Table of Contents
Part I
FINANCIAL INFORMATION
Item 1. Consolidated Balance Sheets at September 30, 2000 (unaudited)
and December 31, 1999 ..........................................1
Consolidated Statements of Operations for the Three and Nine
Months Ended September 30, 2000 (unaudited)and Three and Nine
Months Ended September 30, 1999 (unaudited).....................2
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 2000 (unaudited)and September 30, 1999
(unaudited) ....................................................3
Notes to Consolidated Financial Statements .....................4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .....................................15
Item 3. Quantitative and Qualitative Disclosures About Market Risk ....22
Part II
OTHER INFORMATION
Item 1. Legal Proceedings .............................................23
Item 6. Exhibits and Reports on Form 8-K ..............................24
Signatures ....................................................25
<PAGE>
Part I
Financial Information
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Item 1. Financial Statements
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LAS VEGAS SANDS, INC.
Consolidated Balance Sheets
(In thousands, except share data)
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September 30, December 31,
2000 1999
----------- -----------
Unaudited
ASSETS
Current assets:
Cash and cash equivalents .................. $ 49,427 $ 26,252
Restricted cash and investments ............ 2,172 10,980
Accounts receivable, net ................... 56,905 43,203
Inventories ................................ 3,662 4,516
Prepaid expenses ........................... 4,071 4,072
----------- -----------
Total current assets ........................... 116,237 89,023
Property and equipment, net .................... 1,066,306 1,079,192
Deferred offering costs, net ................... 23,900 29,865
Other assets, net .............................. 26,578 11,522
----------- -----------
$ 1,233,021 $ 1,209,602
=========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable ........................... $ 21,915 $ 18,128
Construction payables ...................... 5,103 10,178
Construction payables-contested ............ 7,232 7,232
Accrued interest payable ................... 35,699 12,490
Other accrued liabilities .................. 61,490 43,392
Current maturities of long-term debt ....... 38,869 42,859
----------- -----------
Total current liabilities ...................... 170,308 134,279
Other long-term liabilities .................... 10,419 2,333
Long-term debt ................................. 876,254 907,754
----------- -----------
1,056,981 1,044,366
----------- -----------
Redeemable Preferred Interest in
Venetian Casino Resort, LLC,
a wholly owned subsidiary .................. 163,257 149,530
----------- -----------
Commitments and contingencies
Stockholder's equity:
Common stock, $.10 par value, 3,000,000
shares authorized, 925,000 shares
issued and outstanding .................. 92 92
Capital in excess of par value ............. 98,995 112,722
Accumulated deficit since June 30, 1996 .... (86,304) (97,108)
----------- -----------
12,783 15,706
----------- -----------
$ 1,233,021 $ 1,209,602
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
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LAS VEGAS SANDS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
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Three Months Ended
September 30,
2000 1999
--------- ----------
Revenues:
Casino ............................................ $ 81,912 $ 52,718
Rooms ............................................. 45,038 35,541
Food and beverage ................................. 13,873 12,007
Retail and other .................................. 17,758 10,718
--------- ---------
158,581 110,984
Less-promotional allowances .......................... (11,971) (10,646)
--------- ---------
Net revenues ...................................... 146,610 100,338
--------- ---------
Operating expenses:
Casino ............................................ 48,909 33,281
Rooms ............................................. 13,244 9,301
Food and beverage ................................. 6,673 7,381
Retail and other .................................. 9,065 5,126
Provision for doubtful accounts ................... 3,214 3,502
General and administrative ........................ 24,789 20,678
Corporate expense ................................. 1,657 --
Rental expense .................................... 3,080 2,744
Pre-opening expense ............................... -- --
Depreciation and amortization ..................... 10,456 10,290
--------- ---------
121,087 92,303
--------- ---------
Operating income (loss) .............................. 25,523 8,035
--------- ---------
Other income (expense):
Interest income .................................... 359 371
Interest expense, net of amounts capitalized ....... (30,558) (26,596)
--------- ---------
Income (loss) before extraordinary item .............. (4,676) (18,190)
Extraordinary item-loss on early retirement of debt -- --
--------- ---------
Net income (loss) .................................... $ (4,676) $ (18,190)
========= =========
Basic and diluted loss per share before
extraordinary item ................................... $ (10.20) $ (24.07)
========= =========
Basic and diluted loss per share ..................... $ (10.20) $ (24.07)
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
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LAS VEGAS SANDS, INC.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
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Nine Months Ended
September 30,
2000 1999
--------- ----------
Revenues:
Casino ............................................ $ 264,040 $ 77,362
Rooms ............................................. 140,549 48,969
Food and beverage ................................. 49,472 17,876
Retail and other .................................. 49,154 14,442
--------- ---------
503,215 158,649
Less-promotional allowances .......................... (34,597) (15,337)
--------- ---------
Net revenues ...................................... 468,618 143,312
--------- ---------
Operating expenses:
Casino ............................................ 154,037 51,876
Rooms ............................................. 36,587 13,632
Food and beverage ................................. 24,575 11,606
Retail and other .................................. 23,031 6,586
Provision for doubtful accounts ................... 14,554 4,594
General and administrative ........................ 68,970 32,191
Corporate expense ................................. 4,501 --
Rental expense .................................... 8,966 3,517
Pre-opening expense ............................... -- 21,484
Depreciation and amortization ..................... 31,245 14,853
--------- ---------
366,466 160,339
--------- ---------
Operating income (loss) .............................. 102,152 (17,027)
--------- ---------
Other income (expense):
Interest income .................................... 1,199 2,169
Interest expense, net of amounts capitalized ....... (89,762) (43,342)
--------- ---------
Income (loss) before extraordinary item .............. 13,589 (58,200)
Extraordinary item-loss on early retirement of debt (2,785) --
--------- ---------
Net income (loss) .................................... $ 10,804 $ (58,200)
========= =========
Basic and diluted loss per share before
extraordinary item ................................... $ (0.15) $ (73.88)
========= =========
Basic and diluted loss per share ..................... $ (3.16) $ (73.88)
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
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LAS VEGAS SANDS, INC.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
================================================================================
Nine Months Ended
September 30,
2000 1999
-------- ---------
Cash flows from operating activities:
Net income (loss) .................................... $ 10,804 $ (58,200)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization ................ 31,245 14,853
Amortization of debt offering costs and
original issue discount .................... 6,296 4,985
Loss on early retirement of debt ............. 2,785
Provision for doubtful accounts .............. 14,554 4,594
Changes in operating assets and liabilities:
Accounts receivable ........................ (28,256) (37,621)
Inventories ................................ 854 (3,772)
Prepaid expenses ........................... 1 (5,283)
Other assets ............................... (15,056) (22,073)
Accounts payable ........................... 3,787 26,597
Accrued interest payable ................... 23,209 17,428
Other accrued liabilities .................. 26,184 38,555
-------- ---------
Net cash provided by (used in) operating activities .. 76,407 (19,937)
-------- ---------
Cash flows from investing activities:
Proceeds from sale of investments .................... 8,808 115,547
Capital expenditures ................................. (10,607)
Construction of Casino Resort ........................ (12,827) (283,020)
-------- ---------
Net cash used in investing activities ................ (14,626) (167,473)
-------- ---------
Cash flows from financing activities:
Proceeds from preferred interest in Venetian ......... -- 44,431
Proceeds from mall construction loan facility ........ -- 37,287
Repayments on bank credit facility-tranche A term loan (35,625) (5,625)
Proceeds from bank credit facility-tranche A term loan -- 34,000
Repayments on bank credit facility-tranche B term loan (125) --
Proceeds from bank credit facility-tranche B term loan 50,000 --
Repayments on bank credit facility-revolver .......... (50,160) (9,609)
Proceeds from bank credit facility-revolver .......... 11,000 32,006
Repayments on FF&E credit facility ................... (11,236) (2,931)
Proceeds from FF&E credit facility ................... -- 83,842
Payments of deferred offering costs .................. (2,460) (617)
-------- ---------
Net cash provided by (used in) financing activities .. (38,606) 212,784
-------- ---------
Increase in cash and cash equivalents ................ 23,175 25,374
Cash and cash equivalents at beginning of period ..... 26,252 2,285
-------- ---------
Cash and cash equivalents at end of period ........... $ 49,427 $ 27,659
======== =========
Supplemental disclosure of cash flow information:
Cash payments for interest ......................... $ 60,053 $ 51,509
======== =========
The accompanying notes are an integral part of these consolidated financial
statements.
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<PAGE>
Notes to Financial Statements
Note 1 Organization and Basis of Presentation
------ --------------------------------------
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-K for the year ended December
31, 1999. The year end balance sheet data was derived from audited financial
statements but does not include all disclosures required by generally accepted
accounting principles. In addition, certain amounts in the 1999 financial
statements have been reclassified to conform with the 2000 presentation. In the
opinion of management, all adjustments and normal recurring accruals considered
necessary for a fair presentation of the results for the interim period have
been included. The interim results reflected in the unaudited financial
statements are not necessarily indicative of expected results for the full year.
Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. On April 28,
1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring the
Sands Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the Sands
and subsequently demolished the facility to make way for a planned two-phase
hotel-casino resort. The first phase of the hotel-casino resort (the "Casino
Resort") includes 3,036 suites, casino space approximating 116,000 square feet
(the "Casino"), approximately 500,000 square feet of convention space and
approximately 475,000 gross leasable square feet of retail shops and restaurants
(the "Mall"). Construction of the Casino Resort commenced in April 1997. The
Casino and certain suites and facilities at the Casino Resort opened on May 4,
1999 and the Mall opened on June 19, 1999.
The consolidated financial statements include the accounts of LVSI and
its wholly owned subsidiaries (the "Subsidiaries"), including Venetian Casino
Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC (the "Mall Subsidiary"),
Grand Canal Shops Mall Subsidiary, LLC (the "New Mall Subsidiary"), Lido Casino
Resort, LLC (the "Phase II Subsidiary"), Mall Intermediate Holding Company, LLC
("Mall Intermediate"), Grand Canal Shops Mall Construction, LLC ("Mall
Construction"), Lido Intermediate Holding Company, LLC ("Lido Intermediate"),
Grand Canal Shops Mall Holding Company, LLC, Grand Canal Shops Mall MM
Subsidiary, Inc., Lido Casino Resort Holding Company, LLC, Grand Canal Shops
Mall MM, Inc. and Lido Casino Resort MM, Inc. (collectively, the "Company").
Each of LVSI and the Subsidiaries is a separate legal entity and the assets of
each such entity are intended to be available only to the creditors of such
entity.
Venetian was formed on March 20, 1997 to own and operate certain
portions of the Casino Resort. LVSI is the managing member and owns 100% of the
common voting equity in Venetian. The entire preferred interest in Venetian is
owned by Interface Group Holding Company, Inc. ("Interface Holding"), which is
wholly owned by LVSI's sole stockholder (the "Sole Stockholder") .
Mall Intermediate and Lido Intermediate are special purpose companies,
which are wholly owned subsidiaries of Venetian. They are guarantors or
co-obligors of certain indebtedness related to the construction of the Casino
Resort.
The New Mall Subsidiary, an indirect wholly-owned subsidiary of LVSI,
was formed on December 9, 1999 and owns and operates the Mall.
Note 2 Per Share Data
------ --------------
Basic and diluted income (loss) per share are calculated based upon the
weighted average number of shares outstanding. The weighed average number of
shares outstanding used in the computation of income (loss) per share of common
stock was 925,000 for all periods presented. The net income (loss) available to
common stockholders used in computing the basic and diluted loss per share
includes accrued preferred dividends of approximately $4.7 million and $13.7
million, respectively, for the three and nine month periods ended September 30,
2000 and $4.0 million and $10.1 million, respectively, for the three and nine
month periods ended September 30, 1999. The accrued dividends have been
reflected as a charge against capital in excess of par value in the accompanying
financial statements.
<PAGE>
Notes to Financial Statements (Continued)
Note 3 Property and Equipment
------ ----------------------
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
<S> <C> <C>
Land and land improvements ...................... $ 105,528 $ 105,425
Building and improvements ....................... 821,650 816,826
Equipment, furniture, fixtures and
leasehold improvements ........................ 142,047 139,147
Construction in progress ........................ 53,000 42,649
----------- -----------
1,122,225 1,104,047
Less: accumulated depreciation and
amortization ............................. (55,919) (24,855)
----------- -----------
$ 1,066,306 $ 1,079,192
=========== ===========
</TABLE>
During the three and nine month periods ended September 30, 1999, the
Company capitalized interest expense of $0.0 and $31.2 million, respectively. No
interest has been capitalized in 2000 because the Company was not engaged in
active construction or development during such period.
As of September 30, 2000, construction in progress represented project
design and shared facilities costs for the planned second phase of the Casino
Resort, to be owned by a subsidiary of the Company (the "Phase II Resort"), and
ongoing capital improvement projects at the Casino Resort.
Note 4 Long-Term Debt
------ --------------
Long-term debt consists of the following (in thousands):
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------- ---------
<S> <C> <C>
Indebtedness of the Company and its
Subsidiaries other than the New Mall
Subsidiary:
-----------------------------------
12 1/4% Mortgage Notes, due November 15, 2004 ....... $ 425,000 $ 425,000
14 1/4% Senior Subordinated Notes, due November 15,
2005 (Net of unamortized discount of $4,482 in
2000 and $5,138 in 1999) .......................... 93,018 92,362
Bank Credit Facility-Revolver ....................... -- 39,160
Bank Credit Facility-Tranche A Term Loan ............ 103,125 138,750
Bank Credit Facility-Tranche B Term Loan ............ 49,875
FF&E Credit Facility ................................ 80,602 91,838
Subordinated Owner Indebtedness:
--------------------------------
Completion Guaranty Loan ............................ 23,503 23,503
Indebtedness of the New Mall Subsidiary:
----------------------------------------
Mall Tranche A Take-out Loan ........................ 105,000 105,000
Mall Tranche B Take-out Loan ........................ 35,000 35,000
Less: current maturities ............................ (38,869) (42,859)
--------- ---------
Total long-term debt ................................ $ 876,254 $ 907,754
========= =========
</TABLE>
<PAGE>
Notes to Financial Statements (Continued)
Note 4 Long-Term Debt (Continued)
------ --------------------------
In connection with the financing for the Casino Resort, the Company
entered into a series of transactions during 1997 to provide for the development
and construction of the Casino Resort. In November 1997, the Company issued
$425.0 million aggregate principal amount of Mortgage Notes (the "Mortgage
Notes") and $97.5 million aggregate principal amount of Senior Subordinated
Notes (the "Senior Subordinated Notes" and, together with the Mortgage Notes,
the "Notes") in a private placement. On June 1, 1998, LVSI and Venetian
completed an exchange offer to exchange the Notes for other notes with
substantially the same terms.
In November 1997, LVSI, Venetian and a syndicate of lenders entered
into a Bank Credit Facility (the "Bank Credit Facility") providing for up to
$150.0 million in multiple draw term loans (the "Tranche A Term Loan") to the
Company for construction and development of the Casino Resort. Up to $40.0
million of additional credit in the form of revolving loans under the Bank
Credit Facility (the "Revolver") is available generally for working capital. In
June 2000, the Company amended certain terms of the Bank Credit Facility in
order to (i) add a new senior secured tranche B term loan (the "Tranche B Term
Loan") in the amount of $50.0 million, the proceeds of which were applied to (x)
prepay the Tranche A Term Loan in forward order of maturity in the amount of
$30.0 million and (y) reduce outstanding loans under the Revolver by $20.0
million (net of fees and expenses) without decreasing available commitments of
the Revolver and (ii) adjust certain financial covenants provided for in the
Bank Credit Facility. The Company recorded a $2.8 million extraordinary loss on
early retirement of debt in connection with this transaction. The purpose of the
June 2000 modifications to the Bank Credit Facility was to refinance a portion
of the Tranche A Term Loan and to provide additional flexibility and the ability
to fund capital expenditures and possible working capital requirements
associated with the Company's premium gaming business. The Tranche B Term Loan
has a four year maturity, and an interest rate of LIBOR plus 350 basis points.
In December 1997, the Company also entered into an agreement (the "FF&E
Credit Facility") with certain lenders to provide for $97.7 million of financing
for certain furniture, fixtures and equipment to be secured under the FF&E
Credit Facility and an electrical substation. Financial covenant modifications
similar to those made to the Bank Credit Facility were made in June 2000 to the
FF&E Credit Facility, which has substantially identical financial covenants.
On November 12, 1999, an advance of approximately $23.5 million was
made under the Sole Stockholder's completion guaranty (the "Completion
Guaranty"). Advances made under the Completion Guaranty up to $25.0 million are
treated as a junior loan from the Sole Stockholder to Venetian that is
subordinated in right of payment to the indebtedness under the Bank Credit
Facility, the FF&E Credit Facility and the Notes.
In November 1997, LVSI, Venetian, Mall Construction and a major
non-bank lender entered into a Mall Construction Loan Facility to provide up to
$140.0 million in financing for the retail mall in the Casino Resort (the "Mall
Construction Loan Facility"). On December 20, 1999, Goldman Sachs Mortgage
Company, the Bank of Nova Scotia and other lenders (collectively, the "Tranche A
Take-out Lender") funded a $105.0 million tranche A take-out loan to the New
Mall Subsidiary (the "Tranche A Take-out Loan"). The indebtedness under the
Tranche A Take-out Loan is secured by first priority liens on the assets that
comprise the Mall (the "Mall Assets"). Also, on December 20, 1999, an entity
wholly owned by the Sole Stockholder funded a tranche B take-out loan to provide
$35.0 million in financing to the New Mall Subsidiary (the "Tranche B Take-out
Loan" and, together with the Tranche A Take-out Loan, the "Mall Take-out
Financing"). The proceeds, along with $105.0 million of proceeds from the
Tranche A Take-out Loan, were used to repay the Mall Construction Loan Facility
in full.
Note 5 Redeemable Preferred Interest in Venetian Casino Resort, LLC
------ ------------------------------------------------------------
During 1997, Interface Holding contributed $77.1 million in cash to
Venetian in exchange for a Series A preferred interest (the "Series A Preferred
Interest") in Venetian. By its terms, the Series A Preferred Interest was
convertible at any time into a Series B preferred interest in Venetian (the
"Series B Preferred Interest"). In August 1998, the Series A Preferred Interest
was converted into the Series B Preferred Interest. The rights of the Series B
Preferred Interest include the accrual of a preferred return of 12% from the
date of contribution in respect of the Series A Preferred Interest. Until the
indebtedness under the Bank Credit Facility is repaid and cash payments are
permitted under the restricted payment covenants of the indentures entered into
in connection with the Notes (the "Indentures"), the preferred return on the
<PAGE>
Notes to Financial Statements (Continued)
Note 5 Redeemable Preferred Interest in Venetian Casino Resort, LLC
(Continued)
------ ------------------------------------------------------------
Series B Preferred Interest will accrue and will not be paid in cash. Commencing
in November 2009, distributions must be made to the extent of the positive
capital account of the holder. During the second and third quarters of 1999,
Interface Holding contributed $37.3 million and $7.1 million, respectively, in
cash in exchange for an additional Series B Preferred Interest. During the three
and nine month periods ended September 30, 2000 and September 30, 1999, $4.7
million and $13.7 million, and $4.0 million and $10.1 million, respectively,
were accrued on the Series B Preferred Interest related to the contributions
made. Since 1997, no distributions of preferred interest or preferred return
have been paid on the Series B Preferred Interest.
Note 6 Commitments and Contingencies
------ -----------------------------
Litigation
----------
The Company is party to litigation matters and claims related to its
operations and the construction of the Casino Resort. Except as described below,
the Company does not expect that the final resolution of these matters will have
a material impact on the financial position, results of operation or cash flows
of the Company.
The construction of the principal components of the Casino Resort was
undertaken by Lehrer McGovern Bovis, Inc. (the "Construction Manager") pursuant
to a construction management agreement and certain amendments thereto (as so
amended, the "Construction Management Contract"). The Construction Management
Contract established a final guaranteed maximum price (the "Final GMP") of
$645.0 million, so that, subject to certain exceptions (including an exception
for cost overruns due to "scope changes"), the Construction Manager was
responsible for any costs of the work covered by the Construction Management
Contract in excess of the Final GMP. The obligations of the Construction Manager
under the Construction Management Contract are guaranteed by Bovis, Inc.
("Bovis" and such guaranty, the "Bovis Guaranty"), the Construction Manager's
direct parent at the time the Construction Management Contract was entered into.
Bovis' obligations under the Bovis Guaranty are guaranteed by The Peninsular and
Oriental Steam Navigation Company ("P&O"), a British public company and the
Construction Manager's ultimate parent at the time the Construction Management
Contract was entered into (such guaranty, the "P&O Guaranty").
On July 30, 1999, Venetian filed a complaint against the Construction
Manager and Bovis in United States District Court for the District of Nevada.
The action alleges breach of contract by the Construction Manager of its
obligations under the Construction Management Contract and a breach of contract
by Bovis of its obligations under the Bovis Guaranty, including failure to fully
pay trade contractors and vendors and failure to meet the April 21, 1999
guaranteed completion date. The Company amended this complaint on November 23,
1999 to add P&O as an additional defendant. The suit is intended to ask the
courts, among other remedies, to require the Construction Manager and its
guarantors to pay its contractors, to compensate Venetian for the Construction
Manager's failure to perform its duties under the Construction Management
Contract and to pay the Company the agreed upon liquidated damages penalty for
failure to meet the guaranteed substantial completion date. Venetian seeks total
damages in excess of $50.0 million. The Construction Manager subsequently filed
motions to dismiss the Company's complaint on various grounds, which the Company
opposed. The Construction Manager's principal motions to date have either been
denied by the court or voluntarily withdrawn.
In response to Venetian's breach of contract claims against the
Construction Manager, Bovis and P&O, the Construction Manager filed a complaint
on August 3, 1999 against Venetian in the District Court of Clark County,
Nevada. The action alleges a breach of contract and quantum meruit claim under
the Construction Management Contract and also alleges that Venetian defrauded
the Construction Manager in connection with the construction of the Casino
Resort. The Construction Manager seeks damages, attorney's fees and costs and
punitive damages. In the lawsuit, the Construction Manager claims that it is
owed $145.6 million from Venetian and its affiliates. This complaint was
subsequently amended by the Construction Manager, which also filed an additional
complaint against the Company relating to work done and funds advanced with
respect to the contemplated development of the Phase II Resort. Based upon its
preliminary review of the complaints, the fact that the Construction Manager has
not provided Venetian with reasonable documentation to support such claims, and
the Company's belief that the Construction Manager has materially breached its
agreements with the Company, the Company believes that the Construction
Manager's claims are without merit and intends to vigorously defend itself and
pursue its claims against the Construction Manager in any litigation.
<PAGE>
Notes to Financial Statements (Continued)
Note 6 Commitments and Contingencies (Continued)
------ -----------------------------------------
In connection with these disputes, as of December 31, 1999 the
Construction Manager and its subcontractors filed mechanics liens against the
Casino Resort for $145.6 million and $182.2 million, respectively. As of
December 31, 1999, the Company had purchased surety bonds for virtually all of
the claims underlying these liens (other than approximately $15.0 million of
claims with respect to which the Construction Manager purchased bonds). As a
result, there can be no foreclosure of the Casino Resort in connection with the
claims of Construction Manager and its subcontractors. However, the Company will
be required to pay or immediately reimburse the bonding company if and to the
extent that the underlying claims are judicially determined to be valid. If such
claims are not settled, it is likely to take a significant amount of time for
their validity to be judicially determined.
The Company believes that these claims are, in general,
unsubstantiated, without merit, overstated and/or duplicative. The Construction
Manager itself has publicly acknowledged that at least some of the claims of its
subcontractors are without merit. In addition, the Company believes that
pursuant to the Construction Management Contract and the Final GMP, the
Construction Manager is responsible for payment of any subcontractors' claims to
the extent they are determined to be valid. The Company may also have a variety
of other defenses to the liens that have been filed, including, for example, the
fact that the Construction Manager and its subcontractors previously waived or
released their right to file liens against the Casino Resort. The Company
intends to vigorously defend itself in any lien proceedings.
On August 9, 1999, the Company notified the insurance companies
providing coverage under its liquidated damages insurance policy (the "LD
Policy") that it has a claim under the LD Policy. The LD Policy provides
insurance coverage for the failure of the Construction Manager to achieve
substantial completion of the portions of the Casino Resort covered by the
Construction Management Contract within 30 days of the April 21, 1999 deadline,
with a maximum liability under the LD Policy of approximately $24.1 million and
with coverage being provided, on a per-day basis, for days 31-120 of the delay
in the achievement of substantial completion. Because the Company believes that
substantial completion was not achieved until November 12, 1999, the Company's
claim under the LD Policy is likely to be for the above-described maximum
liability of $24.1 million. The Company expects the LD Policy insurers to assert
many of the same claims and defenses that the Construction Manager has or will
assert in the above-described litigations. Liability under the LD Policy may
ultimately be determined by binding arbitration.
In June 2000, the Company purchased an insurance policy (the "Insurance
Policy") for loss coverage in connection with all litigation relating to the
construction of the Casino Resort (the "Construction Litigation"). Under the
Insurance Policy, the Company will self-insure the first $45.0 million and the
insurer will insure up to the next $80.0 million of any possible covered losses.
The Insurance Policy provides coverage for any amounts determined in the
Construction Litigation to be owed to the Construction Manager or its
subcontractors relating to claimed delays, inefficiencies, disruptions, lack of
productivity/unauthorized overtime or schedule impact, allegedly caused by the
Company during construction of the Casino Resort, as well as any defense costs.
The insurance is in addition to, and does not affect, any scope change
guarantees provided by the Sole Stockholder pursuant to the Completion Guaranty.
On July 8, 1999, the Company and other competitors filed an action in
the Eighth Judicial District Court for the State of Nevada challenging the
actions of the Board of the Las Vegas Convention and Visitors Authority (the
"LVCVA") with respect to the Las Vegas Convention Center (the "LVCC") expansion,
as well as the LVCVA's financing through proposed sale of "revenue bonds." In
that litigation, the Company and others alleged inter alia that the LVCVA
engaged in violations of Nevada's Open Meeting Law, and further alleged that the
proposed bonds were not "revenue" bonds and thus could not be issued without
prior approval of the voters of Clark County, Nevada. After a trial on the
merits of that case, the court rendered a decision in favor of the LVCVA and
against the plaintiffs. On December 22, 1999, the Company filed a Notice of
Appeal of the State Court Action to the Supreme Court of the State of Nevada.
All of the pending litigation described above is in preliminary stages
and it is not yet possible to determine its ultimate outcome. If any litigation
or other proceedings concerning the claims of the Construction Manager or its
subcontractors were decided adversely to the Company, such litigation or other
lien proceedings could have a material effect on the financial position, results
of operations or cash flows of the Company to the extent such litigation is not
covered by the Insurance Policy.
<PAGE>
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information
------ --------------------------------
Venetian and LVSI are co-obligors of the Notes and certain other
indebtedness related to construction of the Casino Resort and are jointly and
severally liable for such indebtedness (including the Notes). Venetian, Mall
Intermediate, Mall Construction, and Lido Intermediate (collectively, the
"Subsidiary Guarantors") are wholly owned subsidiaries of LVSI. The Subsidiary
Guarantors have jointly and severally guaranteed (or are co-obligors of) such
debt on a full and unconditional basis. No other subsidiary of LVSI is an
obligor or guarantor of any of the Casino Resort financing.
Because the New Mall Subsidiary is not a guarantor of any indebtedness
of the Company or any of its other subsidiaries (collectively, the "Venetian
Entities") (other than the Mall Take-out Financing), creditors of the Venetian
Entities (including the holders of the Notes) do not have a direct claim against
the Mall Assets. As a result, indebtedness of the Venetian Entities (including
the Notes) is, with respect to the Mall Assets, effectively subordinated to
indebtedness of the New Mall Subsidiary. The New Mall Subsidiary is not
restricted by any of the debt instruments of LVSI, Venetian or the Subsidiary
Guarantors (including the Indentures) from incurring any indebtedness. The terms
of the Tranche A Take-out Loan prohibit the New Mall Subsidiary from paying
dividends or making distributions to any of the Venetian Entities unless
payments under the Tranche A Take-out Loan are current, and, with certain
limited exceptions, prohibit the New Mall Subsidiary from making any loans to
such entities. Any additional indebtedness incurred by the New Mall Subsidiary
may include additional restrictions on the ability of the New Mall Subsidiary to
pay any such dividends and make any such distributions or loans.
Prior to October 1998, Venetian owned approximately 44 acres of land on
or near the Las Vegas Strip (the "Strip"), on the site of the former Sands. Such
property includes the site on which the Casino Resort was constructed.
Approximately 14 acres of such land was transferred to the Phase II Subsidiary
in October 1998. On December 31, 1999, an additional 1.75 acres of land was
contributed indirectly by the Sole Stockholder to the Phase II Subsidiary. The
Phase II Resort is planned to be constructed adjacent to the Casino Resort.
Because the Phase II Subsidiary will not be a guarantor of the Company's
indebtedness, creditors of the Company (including the holders of the Notes) will
not have a direct claim against the assets of the Phase II Subsidiary. As a
result, the indebtedness of the Company (including the Notes) will be
effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase
II Subsidiary is not subject to any of the restrictive covenants of the debt
instruments of the Company (including the Notes). Any indebtedness incurred by
the Phase II Subsidiary is expected to include material restrictions on the
ability of the Phase II Subsidiary to pay dividends or make distributions or
loans to the Company and its subsidiaries.
Separate financial statements and other disclosures concerning each of
Venetian and the Subsidiary Guarantors are not presented below because
management believes that they are not material to investors. Summarized
financial information of LVSI, Venetian, the Subsidiary Guarantors and the
non-guarantor subsidiaries on a combined basis as of September 30, 2000 and
December 31, 1999 and for the three and nine month periods ended September 30,
2000 and September 30, 1999 is as follows (in thousands):
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS
September 30, 2000
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Cash and cash equivalents ......................... $ 34,479 $ 14,602
Restricted cash and investments ................... -- 1,110
Intercompany receivable ........................... 34,585 --
Accounts receivable, net .......................... 36,252 17,610
Inventories ....................................... -- 3,662
Prepaid expenses .................................. 1,176 2,824
----------- -----------
Total current assets ............................ 106,492 39,808
Property and equipment, net ....................... -- 844,209
Investment in Subsidiaries ........................ 126,022 67,116
Deferred offering costs, net ...................... -- 19,442
Other assets, net ................................. 3,835 19,616
----------- -----------
$ 236,349 $ 990,191
=========== ===========
Accounts payable .................................. $ 3,307 $ 17,179
Construction payable .............................. -- 2,187
Construction payable-contested .................... -- 7,232
Intercompany payables ............................. -- 15,992
Accrued interest payable .......................... -- 30,720
Other accrued liabilities ......................... 21,707 39,243
Current maturities of
long term debt ................................... -- 38,869
----------- -----------
Total current liabilities ....................... 25,014 151,422
Other long-term liabilities ....................... -- 10,419
Long-term debt .................................... -- 736,254
----------- -----------
25,014 898,095
Redeemable Preferred Interest
in Venetian ...................................... -- 163,257
----------- -----------
Stockholder's equity .............................. 211,335 (71,161)
----------- -----------
$ 236,349 $ 990,191
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
September 30, 2000
(Unaudited)
GUARANTOR SUBSIDIARIES
-------------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
----------- -----------
Cash and cash equivalents ......................... $ 4 $ 4
Restricted cash and investments ................... -- --
Intercompany receivable ........................... -- --
Accounts receivable, net .......................... -- --
Inventories ....................................... -- --
Prepaid expenses .................................. -- --
----------- -----------
Total current assets ............................ 4 4
Property and equipment, net ....................... -- --
Investment in Subsidiaries ........................ -- --
Deferred offering costs, net ...................... -- --
Other assets, net ................................. -- --
----------- -----------
$ 4 $ 4
=========== ===========
Accounts payable .................................. $ -- $ --
Construction payable .............................. -- --
Construction payable-contested .................... -- --
Intercompany payables ............................. -- --
Accrued interest payable .......................... -- --
Other accrued liabilities ......................... -- --
Current maturities of
long term debt ................................... -- --
----------- -----------
Total current liabilities ....................... -- --
Other long-term liabilities ....................... -- --
Long-term debt .................................... -- --
----------- -----------
Redeemable Preferred Interest
in Venetian ...................................... -- --
----------- -----------
Stockholder's equity .............................. 4 4
----------- -----------
$ 4 $ 4
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
September 30, 2000
(Unaudited)
NON-GUARANTOR SUBSIDIARIES
------------------------------
Grand Canal Other
Shops Mall Non-
Subsidiary Guarantor
LLC (1) Subsidiaries (2)
----------- -----------
Cash and cash equivalents ................. $ 288 $ 50
Restricted cash and investments ........... 1,062 --
Intercompany receivable ................... -- --
Accounts receivable, net .................. 2,998 45
Inventories ............................... -- --
Prepaid expenses .......................... 71 --
----------- -----------
Total current assets .................... 4,419 95
Property and equipment, net ............... 141,152 80,945
Investment in Subsidiaries ................ -- --
Deferred offering costs, net .............. 4,458 --
Other assets, net ......................... 3,127 --
----------- -----------
$ 153,156 $ 81,040
=========== ===========
Accounts payable .......................... $ 1,429 $ --
Construction payable ...................... -- 2,916
Construction payable-contested ............ -- --
Intercompany payables ..................... 18,593 --
Accrued interest payable .................. 4,979 --
Other accrued liabilities ................. 489 51
Current maturities of
long term debt ........................... -- --
----------- -----------
Total current liabilities ............... 25,490 2,967
Other long-term liabilities ............... -- --
Long-term debt ............................ 140,000 --
----------- -----------
165,490 2,967
Redeemable Preferred Interest
in Venetian .............................. -- --
----------- -----------
Stockholder's equity ...................... (12,334) 78,073
----------- -----------
$ 153,156 $ 81,040
=========== ===========
[FN]
----------
(1) The assets and liabilities of Mall Construction, a guarantor, were
transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial
completion of the Casino Resort on November 12, 1999, and subsequently
transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall
Construction had no assets or liabilities as of September 30, 2000.
(2) Land with a historical cost basis of $29,169 was transferred from Venetian,
a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor
subsidiary, in October 1998 and land with a value of $11.8 million was
indirectly contributed by the Sole Stockholder during December 1999.
</FN>
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
September 30, 2000
(Unaudited)
Consolidating/
Eliminating
Entries Total
----------- -----------
Cash and cash equivalents ....................... $ -- $ 49,427
Restricted cash and investments ................. -- 2,172
Intercompany receivable ......................... (34,585) --
Accounts receivable, net ........................ -- 56,905
Inventories ..................................... -- 3,662
Prepaid expenses ................................ -- 4,071
----------- -----------
Total current assets .......................... (34,585) 116,237
Property and equipment, net ..................... -- 1,066,306
Investment in Subsidiaries ...................... (193,138) --
Deferred offering costs, net .................... -- 23,900
Other assets, net ............................... -- 26,578
----------- -----------
$ (227,723) $ 1,233,021
=========== ===========
Accounts payable ................................ $ -- $ 21,915
Construction payable ............................ -- 5,103
Construction payable-contested .................. -- 7,232
Intercompany payables ........................... (34,585) --
Accrued interest payable ........................ -- 35,699
Other accrued liabilities ....................... -- 61,490
Current maturities of
long term debt ................................. -- 38,869
----------- -----------
Total current liabilities ..................... (34,585) 170,308
Other long-term liabilities ..................... -- 10,419
Long-term debt .................................. -- 876,254
----------- -----------
(34,585) 1,056,981
Redeemable Preferred Interest
in Venetian .................................... -- 163,257
----------- -----------
Stockholder's equity ............................ (193,138) 12,783
----------- -----------
$ (227,723) $ 1,233,021
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS
December 31, 1999
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Cash and cash equivalents ....................... $ 23,961 $ 2,237
Restricted cash and investments ................. -- 8,789
Intercompany receivable ......................... -- 24,736
Accounts receivable, net ........................ 22,279 17,519
Inventories ..................................... -- 4,516
Prepaid expenses ................................ 629 3,229
----------- -----------
Total current assets .......................... 46,869 61,026
Property and equipment, net ..................... -- 853,282
Investment in Subsidiaries ...................... 126,016 67,091
Deferred offering costs, net .................... -- 24,441
Other assets, net ............................... 3,804 4,651
----------- -----------
$ 176,689 $ 1,010,491
=========== ===========
Accounts payable ................................ $ 834 $ 15,843
Construction payable ............................ -- 6,262
Construction payable-contested .................. -- 7,232
Intercompany payables ........................... 2,051 --
Accrued interest payable ........................ -- 12,327
Other accrued liabilities ....................... 19,848 22,580
Current maturities of long
term debt ...................................... -- 42,859
----------- -----------
Total current liabilities ..................... 22,733 107,103
Other long-term liabilities ..................... -- 2,333
Long-term debt .................................. -- 767,754
----------- -----------
22,733 877,190
Redeemable Preferred Interest
in Venetian .................................... -- 149,530
----------- -----------
Stockholder's equity ............................ 153,956 (16,229)
----------- -----------
$ 176,689 $ 1,010,491
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
December 31, 1999
GUARANTOR SUBSIDIARIES
-------------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
----------- -----------
Cash and cash equivalents ......................... $ 4 $ 5
Restricted cash and investments ................... -- --
Intercompany receivable ........................... -- --
Accounts receivable, net .......................... -- --
Inventories ....................................... -- --
Prepaid expenses .................................. -- --
----------- -----------
Total current assets ............................ 4 5
Property and equipment, net ....................... -- --
Investment in Subsidiaries ........................ -- --
Deferred offering costs, net ...................... -- --
Other assets, net ................................. -- --
----------- -----------
$ 4 $ 5
=========== ===========
Accounts payable .................................. $ -- $ --
Construction payable .............................. -- --
Construction payable-contested .................... -- --
Intercompany payables ............................. -- --
Accrued interest payable .......................... -- --
Other accrued liabilities ......................... -- --
Current maturities of long
term debt ........................................ -- --
----------- -----------
Total current liabilities ....................... -- --
Other long-term liabilities ....................... -- --
Long-term debt .................................... -- --
----------- -----------
Redeemable Preferred Interest
in Venetian ...................................... -- --
----------- -----------
Stockholder's equity .............................. 4 5
----------- -----------
$ 4 $ 5
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
December 31, 1999
NON-GUARANTOR SUBSIDIARIES
--------------------------
Grand Canal Other
Shops Mall Non-
Subsidiary Guarantor
LLC (1) Subsidiaries(2)
----------- -----------
Cash and cash equivalents .................... $ -- $ 45
Restricted cash and investments .............. 2,191 --
Intercompany receivable ...................... -- --
Accounts receivable, net ..................... 3,405 --
Inventories .................................. -- --
Prepaid expenses ............................. 214 --
----------- -----------
Total current assets ....................... 5,810 45
Property and equipment, net .................. 143,965 81,945
Investment in Subsidiaries ................... -- --
Deferred offering costs, net ................. 5,424 --
Other assets, net ............................ 3,067 --
----------- -----------
$ 158,266 $ 81,990
=========== ===========
Accounts payable ............................. $ 1,451 $ --
Construction payable ......................... -- 3,916
Construction payable-contested ............... -- --
Intercompany payables ........................ 22,685 --
Accrued interest payable ..................... 163 --
Other accrued liabilities .................... 964 --
Current maturities of long
term debt ................................... -- --
----------- -----------
Total current liabilities .................. 25,263 3,916
Other long-term liabilities .................. -- --
Long-term debt ............................... 140,000 --
----------- -----------
165,263 3,916
Redeemable Preferred Interest
in Venetian ................................. -- --
----------- -----------
Stockholder's equity ......................... (6,997) 78,074
----------- -----------
$ 158,266 $ 81,990
=========== ===========
[FN]
(1) The assets and liabilities of Mall Construction, a guarantor, were
transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial
completion of the Casino Resort on November 12, 1999, and subsequently
transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall
Construction had no assets or liabilities as of December 31, 1999.
(2) Land with a historical cost basis of $29,169 was transferred from Venetian,
a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor
subsidiary, in October 1998 and land with a value of $11.8 million was
indirectly contributed by the Sole Stockholder during December 1999.
</FN>
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED BALANCE SHEETS, (Continued)
December 31, 1999
Consolidating/
Eliminating
Entries Total
----------- -----------
Cash and cash equivalents ....................... $ -- $ 26,252
Restricted cash and investments ................. -- 10,980
Intercompany receivable ......................... (24,736) --
Accounts receivable, net ........................ -- 43,203
Inventories ..................................... -- 4,516
Prepaid expenses ................................ -- 4,072
----------- -----------
Total current assets .......................... (24,736) 89,023
Property and equipment, net ..................... -- 1,079,192
Investment in Subsidiaries ...................... (193,107) --
Deferred offering costs, net .................... -- 29,865
Other assets, net ............................... -- 11,522
----------- -----------
$ (217,843) $ 1,209,602
=========== ===========
Accounts payable ................................ $ -- $ 18,128
Construction payable ............................ -- 10,178
Construction payable-contested .................. -- 7,232
Intercompany payables ........................... (24,736) --
Accrued interest payable ........................ -- 12,490
Other accrued liabilities ....................... -- 43,392
Current maturities of long
term debt ...................................... -- 42,859
----------- -----------
Total current liabilities ..................... (24,736) 134,279
Other long-term liabilities ..................... -- 2,333
Long-term debt .................................. -- 907,754
----------- -----------
(24,736) 1,044,366
Redeemable Preferred Interest
in Venetian .................................... -- 149,530
----------- -----------
Stockholder's equity ............................ (193,107) 15,706
----------- -----------
$ (217,843) $ 1,209,602
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended September 30, 2000
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Revenues:
Casino ........................................... $ 81,912 $ --
Room ............................................. -- 45,038
Food and beverage ................................ -- 13,873
Retail and other ................................. 337 19,730
----------- -----------
Total revenue .................................... 82,249 78,641
Less promotional allowance ....................... -- (11,971)
----------- -----------
Net revenues ..................................... 82,249 66,670
----------- -----------
Operating expenses:
Casino ........................................... 60,068 --
Room ............................................. -- 13,244
Food and beverage ................................ -- 6,673
Retail and other ................................. -- 4,687
Provision for doubtful accounts .................. 2,614 600
General and administrative ....................... 1,136 23,622
Corporate expense ................................ 655 1,002
Rental expense ................................... 1,056 1,462
Depreciation and amortization .................... -- 9,324
----------- -----------
65,529 60,614
----------- -----------
Operating income (loss) .......................... 16,720 6,056
----------- -----------
Other income (expense):
Interest income .............................. 147 192
Interest expense ............................. -- (25,873)
----------- -----------
Income (loss) before extraordinary item .......... 16,867 (19,625)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ 16,867 $ (19,625)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the three months ended September 30, 2000
(Unaudited)
GUARANTOR SUBSIDIARIES
--------------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
----------- -----------
Revenues:
Casino ........................................... $ -- $ --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. -- --
----------- -----------
Total revenue .................................... -- --
Less promotional allowance ....................... -- --
----------- -----------
Net revenues ..................................... -- --
----------- -----------
Operating expenses:
Casino ........................................... -- --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. -- --
Provision for doubtful accounts .................. -- --
General and administrative ....................... -- 5
Corporate expense ................................ -- --
Rental expense ................................... -- --
Depreciation and amortization .................... -- --
----------- -----------
-- 5
----------- -----------
Operating income (loss) .......................... -- (5)
----------- -----------
Other income (expense):
Interest income .............................. -- --
Interest expense ............................. -- --
----------- -----------
Income (loss) before extraordinary item .......... -- (5)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ -- $ (5)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS,(Continued)
For the three months ended September 30, 2000
(Unaudited)
NON-GUARANTOR SUBSIDIARIES
--------------------------
Grand Canal Other
Shops Mall Non-
Subsidiary Guarantor
LLC (1) Subsidiaries
----------- -----------
Revenues:
Casino ........................................... $ -- $ --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. 8,850 --
----------- -----------
Total revenue .................................... 8,850 --
Less promotional allowance ....................... -- --
----------- -----------
Net revenues ..................................... 8,850 --
----------- -----------
Operating expenses:
Casino ........................................... -- --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. 4,378 --
Provision for doubtful accounts .................. -- --
General and administrative ....................... 5 21
Corporate expense ................................ -- --
Rental expense ................................... 562 --
Depreciation and amortization .................... 1,132 --
----------- -----------
6,077 21
----------- -----------
Operating income (loss) .......................... 2,773 (21)
----------- -----------
Other income (expense):
Interest income .............................. 20 --
Interest expense ............................. (4,685) --
----------- -----------
Income (loss) before extraordinary item .......... (1,892) (21)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ (1,892) $ (21)
=========== ===========
[FN]
----------
(1) The assets and liabilities of Mall Construction, a guarantor, were
transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial
completion of the Casino Resort on November 12, 1999, and subsequently
transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall
Construction had no revenues or expenses as of September 30, 2000.
</FN>
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the three months ended September 30, 2000
(Unaudited)
Consolidating/
Eliminating
Entries Total
----------- -----------
Revenues:
Casino ........................................... $ -- $ 81,912
Room ............................................. -- 45,038
Food and beverage ................................ -- 13,873
Retail and other ................................. (11,159) 17,758
----------- -----------
Total revenue .................................... (11,159) 158,581
Less promotional allowance ....................... -- (11,971)
----------- -----------
Net revenues ..................................... (11,159) 146,610
----------- -----------
Operating expenses:
Casino ........................................... (11,159) 48,909
Room ............................................. -- 13,244
Food and beverage ................................ -- 6,673
Retail and other ................................. -- 9,065
Provision for doubtful accounts .................. -- 3,214
General and administrative ....................... -- 24,789
Corporate expense ................................ -- 1,657
Rental expense ................................... -- 3,080
Depreciation and amortization .................... -- 10,456
----------- -----------
(11,159) 121,087
----------- -----------
Operating income (loss) .......................... -- 25,523
----------- -----------
Other income (expense):
Interest income .............................. -- 359
Interest expense ............................. -- (30,558)
----------- -----------
Income (loss) before extraordinary item .......... -- (4,676)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ -- $ (4,676)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS
For the three months ended September 30, 1999
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Revenues:
Casino ....................................... $ 52,718 $ --
Room ......................................... -- 35,541
Food and beverage ............................ -- 12,007
Retail and other ............................. 210 18,453
-------- --------
Total revenue ................................ 52,928 66,001
Less promotional allowance ................... -- (10,646)
-------- --------
Net revenues ................................. 52,928 55,355
-------- --------
Operating expenses:
Casino ....................................... 44,440 --
Room ......................................... -- 9,301
Food and beverage ............................ -- 7,381
Retail and other ............................. -- 2,940
Provision for doubtful accounts .............. 2,902 600
General and administrative ................... 1,618 19,060
Rental Expense ............................... 548 1,535
Depreciation and amortization ................ 2 9,219
-------- --------
49,510 50,036
-------- --------
Operating income (loss) ...................... 3,418 5,319
-------- --------
Other income (expense):
Interest income .......................... 53 318
Interest expense ......................... -- (23,201)
-------- --------
Net (loss) ................................... $ 3,471 $(17,564)
======== ========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the three months ended September 30, 1999
(Unaudited)
GUARANTOR SUBSIDIARIES
----------------------------------------
Lido Mall Grand Canal
Intermediate Intermediate Shops Mall
Holding Holding Construction
Company LLC Company LLC LLC
----------- ----------- -----------
Revenues:
Casino ........................ $ -- $ -- $ --
Room .......................... -- -- --
Food and beverage ............. -- -- --
Retail and other .............. -- -- 3,214
----------- ----------- -----------
Total revenue ................. -- -- 3,214
Less promotional allowance .... -- -- --
----------- ----------- -----------
Net revenues .................. -- -- 3,214
----------- ----------- -----------
Operating expenses:
Casino ........................ -- -- --
Room .......................... -- -- --
Food and beverage ............. -- -- --
Retail and other .............. -- -- 2,186
Provision for doubtful accounts -- -- --
General and administrative .... -- -- --
Rental Expense ................ -- -- 661
Depreciation and amortization . -- -- 1,069
----------- ----------- -----------
-- -- 3,916
----------- ----------- -----------
Operating income (loss) ....... -- -- (702)
----------- ----------- -----------
Other income (expense):
Interest income ........... -- -- --
Interest expense .......... -- -- (3,395)
----------- ----------- -----------
Net (loss) .................... $ -- $ -- $ (4,097)
=========== =========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS,(Continued)
For the three months ended September 30, 1999
(Unaudited)
Non- Consolidating/
Guarantor Eliminating
Subsidiaries Entries Total
----------- ----------- -----------
Revenues:
Casino ........................ $ -- $ -- $ 52,718
Room .......................... -- -- 35,541
Food and beverage ............. -- -- 12,007
Retail and other .............. -- (11,159) 10,718
----------- ----------- -----------
Total revenue ................. -- (11,159) 110,984
Less promotional allowance .... -- -- (10,646)
----------- ----------- -----------
Net revenues .................. -- (11,159) 100,338
----------- ----------- -----------
Operating expenses:
Casino ........................ -- (11,159) 33,281
Room .......................... -- -- 9,301
Food and beverage ............. -- -- 7,381
Retail and other .............. -- -- 5,126
Provision for doubtful accounts -- -- 3,502
General and administrative .... -- -- 20,678
Rental Expense ................ -- -- 2,744
Depreciation and amortization . -- -- 10,290
----------- ----------- -----------
-- (11,159) 92,303
----------- ----------- -----------
Operating income (loss) ....... -- -- 8,035
----------- ----------- -----------
Other income (expense):
Interest income ........... -- -- 371
Interest expense .......... -- -- (26,596)
----------- ----------- -----------
Net (loss) .................... $ -- $ -- $ (18,190)
=========== =========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 2000
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Revenues:
Casino ........................................... $ 264,040 $ --
Room ............................................. -- 140,549
Food and beverage ................................ -- 49,472
Retail and other ................................. 947 58,727
----------- -----------
Total revenue .................................... 264,987 248,748
Less promotional allowance ....................... -- (34,597)
----------- -----------
Net revenues ..................................... 264,987 214,151
----------- -----------
Operating expenses:
Casino ........................................... 187,514 --
Room ............................................. -- 36,587
Food and beverage ................................ -- 24,575
Retail and other ................................. -- 13,428
Provision for doubtful accounts .................. 12,954 1,200
General and administrative ....................... 2,898 66,040
Corporate expense ................................ 1,798 2,703
Rental expense ................................... 2,870 4,428
Depreciation and amortization .................... -- 27,836
----------- -----------
208,034 176,797
----------- -----------
Operating income (loss) .......................... 56,953 37,354
----------- -----------
Other income (expense):
Interest income .............................. 426 717
Interest expense ............................. -- (76,492)
----------- -----------
Income (loss) before extraordinary item .......... 57,379 (38,421)
Loss on early retirement of debt ............. -- (2,785)
----------- -----------
Net income (loss) ................................ $ 57,379 $ (41,206)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
GUARANTOR SUBSIDIARIES
--------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
--------- --------------
Revenues:
Casino ........................................... $ -- $ --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. -- --
----------- -----------
Total revenue .................................... -- --
Less promotional allowance ....................... -- --
----------- -----------
Net revenues ..................................... -- --
----------- -----------
Operating expenses:
Casino ........................................... -- --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. -- --
Provision for doubtful accounts .................. -- --
General and administrative ....................... -- 6
Corporate expense ................................ -- --
Rental expense ................................... -- --
Depreciation and amortization .................... -- --
----------- -----------
-- 6
----------- -----------
Operating income (loss) .......................... -- (6)
----------- -----------
Other income (expense):
Interest income .............................. -- --
Interest expense ............................. -- --
----------- -----------
Income (loss) before extraordinary item .......... -- (6)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ -- $ (6)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
NON-GUARANTOR SUBSIDIARIES
---------------------------
Grand Canal Other
Shops Mall Non-
Subsidiary Guarantor
LLC (1) Subsidiaries
---------------------------
Revenues:
Casino ........................................... $ -- $ --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. 22,957 --
----------- -----------
Total revenue .................................... 22,957 --
Less promotional allowance ....................... -- --
----------- -----------
Net revenues ..................................... 22,957 --
----------- -----------
Operating expenses:
Casino ........................................... -- --
Room ............................................. -- --
Food and beverage ................................ -- --
Retail and other ................................. 9,603 --
Provision for doubtful accounts .................. 400 --
General and administrative ....................... 5 21
Corporate expense ................................ -- --
Rental expense ................................... 1,668 --
Depreciation and amortization .................... 3,409 --
----------- -----------
15,085 21
----------- -----------
Operating income (loss) .......................... 7,872 (21)
----------- -----------
Other income (expense):
Interest income .............................. 56 --
Interest expense ............................. (13,270) --
----------- -----------
Income (loss) before extraordinary items ......... (5,342) (21)
Loss on early retirement of debt ............. -- --
----------- -----------
Net income (loss) ................................ $ (5,342) $ (21)
=========== ===========
[FN]
----------
(1) The assets and liabilities of Mall Construction, a guarantor, were
transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial
completion of the Casino Resort on November 12, 1999, and subsequently
transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall
Construction had no revenues or expenses as of September 30, 2000.
</FN>
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
Consolidating/
Eliminating
Entries Total
----------- -----------
Revenues:
Casino ........................................... $ -- $ 264,040
Room ............................................. -- 140,549
Food and beverage ................................ -- 49,472
Retail and other ................................. (33,477) 49,154
----------- -----------
Total revenue .................................... (33,477) 503,215
Less promotional allowance ....................... -- (34,597)
----------- -----------
Net revenues ..................................... (33,477) 468,618
----------- -----------
Operating expenses:
Casino ........................................... (33,477) 154,037
Room ............................................. -- 36,587
Food and beverage ................................ -- 24,575
Retail and other ................................. -- 23,031
Provision for doubtful accounts .................. -- 14,554
General and administrative ....................... -- 68,970
Corporate expense ................................ -- 4,501
Rental expense ................................... -- 8,966
Depreciation and amortization .................... -- 31,245
----------- -----------
(33,477) 366,466
----------- -----------
Operating income (loss) .......................... -- 102,152
----------- -----------
Other income (expense):
Interest income .............................. -- 1,199
Interest expense ............................. -- (89,762)
----------- -----------
Income (loss) before extraordinary item .......... -- 13,589
Loss on early retirement of debt ............. -- (2,785)
----------- -----------
Net income (loss) ................................ $ -- $ 10,804
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS
For the nine months ended September 30, 1999
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Revenues:
Casino ............................................ $ 77,362 $ --
Room .............................................. -- 48,969
Food and beverage ................................. -- 17,876
Retail and other .................................. 968 28,419
----------- -----------
Total revenue ..................................... 78,330 95,264
Less promotional allowance ........................ -- (15,337)
----------- -----------
Net revenues ...................................... 78,330 79,927
----------- -----------
Operating expenses:
Casino ............................................ 70,184 --
Room .............................................. -- 13,632
Food and beverage ................................. -- 11,606
Retail and other .................................. -- 4,238
Provision for doubtful accounts ................... 3,764 830
General and administrative ........................ 2,168 30,023
Rental Expense .................................... 725 2,079
Pre-opening expense ............................... 143 21,341
Depreciation and amortization ..................... 52 13,588
----------- -----------
77,036 97,337
----------- -----------
Operating income (loss) ........................... 1,294 (17,410)
----------- -----------
Other income (expense):
Interest income ............................... 141 2,028
Interest expense .............................. -- (39,438)
----------- -----------
Net (loss) ........................................ $ 1,435 $ (54,820)
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the nine months ended September 30, 1999
(Unaudited)
GUARANTOR SUBSIDIARIES
----------------------------------------
Lido Mall Grand Canal
Intermediate Intermediate Shops Mall
Holding Holding Construction
Company LLC Company LLC LLC
----------- ------------ ------------
Revenues:
Casino ........................... $ -- $ -- $ --
Room ............................. -- -- --
Food and beverage ................ -- -- --
Retail and other ................. -- -- 3,363
----------- ----------- -----------
Total revenue .................... -- -- 3,363
Less promotional allowance ....... -- -- --
----------- ----------- -----------
Net revenues ..................... -- -- 3,363
----------- ----------- -----------
Operating expenses:
Casino ........................... -- -- --
Room ............................. -- -- --
Food and beverage ................ -- -- --
Retail and other ................. -- -- 2,348
Provision for doubtful accounts .. -- -- --
General and administrative ....... -- -- --
Rental Expense ................... -- -- 713
Pre-opening expense .............. -- -- --
Depreciation and amortization .... -- -- 1,213
----------- ----------- -----------
-- -- 4,274
----------- ----------- -----------
Operating income (loss) .......... -- -- (911)
----------- ----------- -----------
Other income (expense):
Interest income .............. -- -- --
Interest expense ............. -- -- (3,904)
----------- ----------- -----------
Net (loss) ....................... $ -- $ -- $ (4,815)
=========== =========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF OPERATIONS, (Continued)
For the nine months ended September 30, 1999
(Unaudited)
Non- Consolidating/
Guarantor Eliminating
Subsidiaries Entries Total
----------- ----------- -----------
Revenues:
Casino ........................... $ -- $ -- $ 77,362
Room ............................. -- -- 48,969
Food and beverage ................ -- -- 17,876
Retail and other ................. -- (18,308) 14,442
----------- ----------- -----------
Total revenue .................... -- (18,308) 158,649
Less promotional allowance ....... -- -- (15,337)
----------- ----------- -----------
Net revenues ..................... -- (18,308) 143,312
----------- ----------- -----------
Operating expenses:
Casino ........................... -- (18,308) 51,876
Room ............................. -- -- 13,632
Food and beverage ................ -- -- 11,606
Retail and other ................. -- -- 6,586
Provision for doubtful accounts .. -- -- 4,594
General and administrative ....... -- -- 32,191
Rental Expense ................... -- -- 3,517
Pre-opening expense .............. -- -- 21,484
Depreciation and amortization .... -- -- 14,853
----------- ----------- -----------
-- (18,308) 160,339
----------- ----------- -----------
Operating income (loss) .......... -- -- (17,027)
----------- ----------- -----------
Other income (expense):
Interest income .............. -- -- 2,169
Interest expense ............. -- -- (43,342)
----------- ----------- -----------
Net (loss) ....................... $ -- $ -- $ (58,200)
=========== =========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2000
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
----------- -----------
Net cash provided by (used in) operating
activities ................................... $ 47,154 $ 25,351
----------- -----------
Cash flows from investing activities:
Proceeds from purchases of investments ....... -- 7,679
Capital expenditures ......................... -- (10,011)
Construction of Casino Resort ................ -- (12,827)
----------- -----------
Net cash provided by (used in) investing
activities ................................... -- (15,159)
----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions .......... -- (30)
Repayments on bank credit facility-tranche
-A term loan ............................... (35,625)
Repayments on bank credit facility-tranche
-B term loan ............................... -- (125)
Proceeds from bank credit facility-tranche
-B term loan ............................... 50,000
Repayments on bank credit facility
-revolver .................................. (50,160)
Proceeds from bank credit facility-revolver... -- 11,000
Repayments on FF&E credit facility ........... -- (11,236)
Payments of deferred offering costs .......... -- (2,379)
Net increase (decrease) in intercompany
accounts .................................... (36,636) 40,728
----------- -----------
Net cash provided by (used in) financing
activities .................................. (36,636) 2,173
----------- -----------
Increase (decrease) in cash and cash
equivalents ................................... 10,518 12,365
Cash and cash equivalents at beginning of
period ........................................ 23,961 2,237
----------- -----------
Cash and cash equivalents at end of period ..... $ 34,479 $ 14,602
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
GUARANTOR SUBSIDIARIES
-------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
----------- -----------
Net cash provided by (used in) operating
activities ...................................... $ -- $ (6)
----------- -----------
Cash flows from investing activities:
Proceeds from purchases of investments .......... -- --
Capital expenditures ............................ -- --
Construction of Casino Resort ................... -- --
----------- -----------
Net cash provided by (used in) investing
activities ...................................... -- --
----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions ............. -- 5
Repayments on bank credit facility-tranche
-A term loan .................................. -- --
Repayments on bank credit facility-tranche
-B term loan .................................. -- --
Proceeds from bank credit facility-tranche
-B term loan .................................. -- --
Repayments on bank credit facility
-revolve ...................................... -- --
Proceeds from bank credit facility-revolve ...... -- --
Repayments on FF&E credit facility .............. -- --
Payments of deferred offering costs ............. -- --
Net increase (decrease) in intercompany
accounts ....................................... -- --
----------- -----------
Net cash provided by (used in) financing
activities ..................................... -- 5
----------- -----------
Increase (decrease) in cash and cash
equivalents ...................................... -- (1)
Cash and cash equivalents at beginning of
period ........................................... 4 5
----------- -----------
Cash and cash equivalents at end of period ........ $ 4 $ 4
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
NON-GUARANTOR SUBSIDIARIES
---------------------------
Grand Canal Other
Shops Mall Non-
Subsidiary Guarantor
LLC (1) Subsidiaries
----------- -----------
Net cash provided by (used in) operating
activities ................................... $ 3,923 $ (15)
----------- -----------
Cash flows from investing activities:
Proceeds from purchases of investments ....... 1,129 --
Capital expenditures ......................... (596) --
Construction of Casino Resort ................ -- --
----------- -----------
Net cash provided by (used in) investing
activities ................................... 533 --
----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions .......... 5 20
Repayments on bank credit facility-tranche
-A term loan ............................... -- --
Repayments on bank credit facility-tranche
-B term loan ............................... -- --
Proceeds from bank credit facility-tranche
-B term loan ............................... -- --
Repayments on bank credit facility
-revolve ................................... -- --
Proceeds from bank credit facility-revolve ... -- --
Repayments on FF&E credit facility ........... -- --
Payments of deferred offering costs .......... (81) --
Net increase (decrease) in intercompany
accounts .................................... (4,092) --
----------- -----------
Net cash provided by (used in) financing
activities .................................. (4,168) 20
----------- -----------
Increase (decrease) in cash and cash
equivalents ................................... 288 5
Cash and cash equivalents at beginning of
period ........................................ -- 45
----------- -----------
Cash and cash equivalents at end of period ..... $ 288 $ 50
=========== ===========
[FN]
----------
(1) The assets and liabilities of Mall Construction, a guarantor, were
transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial
completion of the Casino Resort on November 12, 1999, and subsequently
transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall
Construction had no cash flows as of September 30, 2000.
</FN>
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 2000
(Unaudited)
Consolidating/
Eliminating
Entries Total
----------- -----------
Net cash provided by (used in) operating
activities ..................................... $ -- $ 76,407
----------- -----------
Cash flows from investing activities:
Proceeds from purchases of investments ......... -- 8,808
Capital expenditures ........................... -- (10,607)
Construction of Casino Resort .................. -- (12,827)
----------- -----------
Net cash provided by (used in) investing
activities ..................................... -- (14,626)
----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions ............ -- --
Repayments on bank credit facility-tranche
-A term loan ................................. -- (35,625)
Repayments on bank credit facility-tranche
-B term loan ................................. -- (125)
Proceeds from bank credit facility-tranche
-B term loan ................................. -- 50,000
Repayments on bank credit facility
-revolve ..................................... -- (50,160)
Proceeds from bank credit facility-revolve ..... -- 11,000
Repayments on FF&E credit facility ............. -- (11,236)
Payments of deferred offering costs ............ -- (2,460)
Net increase (decrease) in intercompany
accounts ...................................... -- --
----------- -----------
Net cash provided by (used in) financing
activities .................................... -- (38,606)
----------- -----------
Increase (decrease) in cash and cash
equivalents ..................................... -- 23,175
Cash and cash equivalents at beginning of
period .......................................... -- 26,252
----------- -----------
Cash and cash equivalents at end of period ....... $ -- $ 49,427
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 1999
(Unaudited)
Venetian
Las Vegas Casino
Sands, Inc. Resort LLC
--------- ---------
Net cash provided by (used in) operating
activities ......................................... $ (6,119) $ (9,766)
--------- ---------
Cash flows from investing activities:
Proceeds from sale of investments .................. -- 115,547
Investment in subsidiaries ......................... -- (37,262)
Construction of Casino Resort ...................... -- (191,879)
--------- ---------
Net cash used in investing activities ................ -- (113,594)
--------- ---------
Cash flows from financing activities:
Proceeds from preferred interest in
Venetian ......................................... -- 44,431
Proceeds from mall construction loan
facility ......................................... -- --
Repayments on bank credit facility-
tranche-A term loan .............................. -- (5,625)
Proceeds from bank credit facility-
tranche-A term loan .............................. -- 34,000
Repayments on bank credit facility-
revolver ......................................... -- (9,609)
Proceeds from bank credit facility-
revolver ......................................... -- 32,006
Repayments on FF&E credit facility ................. -- (2,931)
Proceeds from FF&E credit facility ................. -- 83,842
Payments of deferred offering costs ................ -- (601)
Net increase and (decrease) in
intercompany accounts ............................ 22,429 (43,624)
Proceeds from investment by parent
company .......................................... -- --
--------- ---------
Net cash provided by financing activities ............ 22,429 131,889
--------- ---------
Increase (decrease) in cash and cash
equivalents ........................................ 16,310 8,529
Cash and cash equivalents at beginning
of period .......................................... 1,216 1,025
--------- ---------
Cash and cash equivalents at end of period ........... $ 17,526 $ 9,554
========= =========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 1999
(Unaudited)
GUARANTOR SUBSIDIARIES
--------------------------
Lido Mall
Intermediate Intermediate
Holding Holding
Company LLC Company LLC
----------- ------------
Net cash provided by (used in) operating
activities .................................... $ -- $ --
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investments ............. -- --
Investment in subsidiaries .................... -- --
Construction of Casino Resort ................. -- --
----------- -----------
Net cash used in investing activities ........... -- --
----------- -----------
Cash flows from financing activities:
Proceeds from preferred interest in
Venetian .................................... -- --
Proceeds from mall construction loan
facility .................................... -- --
Repayments on bank credit facility-
tranche-A term loan ......................... -- --
Proceeds from bank credit facility-
tranche-A term loan ......................... -- --
Repayments on bank credit facility-
revolver .................................... -- --
Proceeds from bank credit facility-
revolver .................................... -- --
Repayments on FF&E credit facility ............ -- --
Proceeds from FF&E credit facility ............ -- --
Payments of deferred offering costs ........... -- --
Net increase and (decrease) in
intercompany accounts ....................... -- --
Proceeds from investment by parent
company ..................................... -- --
----------- -----------
Net cash provided by financing activities ....... -- --
----------- -----------
Increase (decrease) in cash and cash
equivalents ................................... -- --
Cash and cash equivalents at beginning
of period ..................................... 5 5
----------- -----------
Cash and cash equivalents at end of period ...... $ 5 $ 5
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 1999
(Unaudited)
GUARANTOR
SUBSIDIARY
------------
Grand Canal
Shops Mall Non-
Construction Guarantor
LLC Subsidiaries
------------ -----------
Net cash provided by (used in) operating
activities $ (12,545) $ 8,493
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investments .............. -- --
Investment in subsidiaries ..................... -- --
Construction of Casino Resort .................. (45,431) (45,710)
----------- -----------
Net cash used in investing activities ............ (45,431) (45,710)
----------- -----------
Cash flows from financing activities:
Proceeds from preferred interest in
Venetian ..................................... -- --
Proceeds from mall construction loan
facility ..................................... 37,287 --
Repayments on bank credit facility-
tranche-A term loan .......................... -- --
Proceeds from bank credit facility-
tranche-A term loan .......................... -- --
Repayments on bank credit facility-
revolver ..................................... -- --
Proceeds from bank credit facility-
revolver ..................................... -- --
Repayments on FF&E credit facility ............. -- --
Proceeds from FF&E credit facility ............. -- --
Payments of deferred offering costs ............ (16) --
Net increase and (decrease) in
intercompany accounts ........................ 21,107 88
Proceeds from investment by parent
company ...................................... -- 37,262
----------- -----------
Net cash provided by financing activities ........ 58,378 37,350
----------- -----------
Increase (decrease) in cash and cash
equivalents .................................... 402 133
Cash and cash equivalents at beginning
of period ...................................... 5 29
----------- -----------
Cash and cash equivalents at end of period ....... $ 407 $ 162
=========== ===========
================================================================================
<PAGE>
================================================================================
LAS VEGAS SANDS, INC.
Notes to Financial Statements (Continued)
Note 7 Summarized Financial Information (Continued)
================================================================================
CONDENSED STATEMENTS OF CASH FLOWS, (Continued)
For the nine months ended September 30, 1999
(Unaudited)
Consolidating/
Eliminating
Entries Total
----------- -----------
Net cash provided by (used in) operating
activities ................................... $ -- $ (19,937)
----------- -----------
Cash flows from investing activities:
Proceeds from sale of investments ............ -- 115,547
Investment in subsidiaries ................... 37,262 --
Construction of Casino Resort ................ -- (283,020)
----------- -----------
Net cash used in investing activities .......... 37,262 (167,473)
----------- -----------
Cash flows from financing activities:
Proceeds from preferred interest in
Venetian ................................... -- 44,431
Proceeds from mall construction loan
facility ................................... -- 37,287
Repayments on bank credit facility-
tranche-A term loan ........................ -- (5,625)
Proceeds from bank credit facility-
tranche-A term loan ........................ -- 34,000
Repayments on bank credit facility-
revolver ................................... -- (9,609)
Proceeds from bank credit facility-
revolver ................................... -- 32,006
Repayments on FF&E credit facility ........... -- (2,931)
Proceeds from FF&E credit facility ........... -- 83,842
Payments of deferred offering costs .......... -- (617)
Net increase and (decrease) in
intercompany accounts ...................... -- --
Proceeds from investment by parent
company .................................... (37,262) --
----------- -----------
Net cash provided by financing activities ...... (37,262) 212,784
----------- -----------
Increase (decrease) in cash and cash
equivalents .................................. -- 25,374
Cash and cash equivalents at beginning
of period .................................... -- 2,285
----------- -----------
Cash and cash equivalents at end of period ..... $ -- $ 27,659
=========== ===========
================================================================================
<PAGE>
================================================================================
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 consolidated financial statements and the
notes thereto and other financial information included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1999. 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."
General
-------
The Company owns and operates the Casino Resort, a large-scale
Venetian-themed hotel, casino, retail, meeting and entertainment complex in Las
Vegas, Nevada which opened on May 4, 1999.
Substantial completion of the construction of the Casino Resort was
achieved on November 12, 1999, meaning all components of the Casino Resort were
fully constructed and operational with the exception of "punchlist" items. As of
September 30, 2000, all of the punchlist items had been completed and
construction of the Casino Resort was complete.
Operating Results
-----------------
Third Quarter Ended September 30, 2000 compared to Third Quarter Ended
September 30, 1999.
Operating Revenues
------------------
Consolidated net revenues for the third quarter of 2000 were $146.6
million, representing an increase of $46.3 million when compared with $100.3
million of consolidated net revenues during the third quarter of 1999. The
increase in net revenues was due to growth in every revenue segment of the
Casino Resort and the Mall.
The Casino Resort's casino revenues totaled $81.9 million in the third
quarter of 2000, an increase of $29.2 million when compared to $52.7 million
during the third quarter of 1999. Table games revenues were $53.0 million during
the third quarter of 2000 compared to $29.7 million during the third quarter of
1999. The increase was primarily attributable to increased table games volume of
$294.1 million during the third quarter of 2000 compared to $181.9 million in
the third quarter of 1999, or an increase of 62%. The overall table games win
percentage was 18% during the third quarter of 2000, compared to an overall
table games win percentage of 21.4% for the nine months ended September 30,
2000. The table games win percentage is reasonably predictable over time, but
may vary considerably during shorter periods. Slot revenue in the third quarter
of 2000 increased to $28.1 million from the $22.5 million reported during the
third quarter of 1999, or an increase of 25%. The increase resulted from an
increase in slot volume to $505.3 million in the third quarter of 2000 compared
to $382.2 million during the third quarter of 1999. Management anticipates a
further increase in slot machine volumes upon completion of a cross-over
pedestrian bridge to the Mirage/Treasure Island complex expected to be completed
in the first quarter of 2001, resulting in ease of transit from the west side of
the Strip to the Casino Resort.
The Casino Resort's room rates and occupancy levels continued to
increase during the third quarter of 2000. The Casino Resort achieved room
revenues during the third quarter of 2000 of $45.0 million compared to $35.5
million during the third quarter of 1999. The Casino Resort's average daily room
rate increased to $168 in the third quarter of 2000 compared to $145 during the
third quarter of 1999. The occupancy of available guestrooms was 96.0% during
the third quarter of 2000 compared to 89.7% during the third quarter of 1999.
Food and beverage, retail and other revenues were $22.8 million during
the third quarter of 2000 compared to $19.5 million during the third quarter of
1999. The increase of $3.3 million was attributable to an increase in hotel
guests and convention and meeting room rentals.
The Mall generated rental and related revenues of $8.9 million during
the third quarter of 2000 compared to $3.2 million during the third quarter of
1999. The Mall opened on June 19, 1999 with approximately 40 tenants opening
throughout the third quarter and fourth quarter of 1999. The increase in Mall
rental revenues was attributed to these tenant openings throughout and after the
third quarter of 1999.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
Operating Expenses
------------------
Consolidated operating expenses were $121.1 million in the third
quarter of 2000, representing an increase of $28.8 million when compared with
$92.3 million during the third quarter of 1999. The increase was a result of
substantially increased operating volumes in all segments of the Casino Resort's
business during the third quarter of 2000 as compared to the third quarter of
1999. The corporate division was created upon substantial completion of the
Casino Resort in the fourth quarter of 1999 and corporate expenses totaled $1.7
million during the third quarter of 2000.
Rental expenses primarily related to the Casino Resort's heating,
ventilation and air conditioning plant (the "HVAC Plant") for the third quarter
of 2000 were $3.1 million, including $2.5 million for the Casino Resort and $0.6
million for the Mall. Rental expenses were $2.7 million in the third quarter of
1999.
The Mall incurred operating expenses of $6.0 million during the third
quarter of 2000 compared to $3.9 million during the third quarter of 1999. The
increase in Mall operating expenses was attributed to tenant openings throughout
and after the third quarter of 1999.
Interest Income (Expense)
-------------------------
Reflecting the investments in the Casino Resort's hotel, casino and
convention space and the Mall, the Company's debt levels and associated interest
costs have risen significantly. With the opening of these new facilities, the
Company's capitalization of interest costs has ceased. Net interest expense was
$30.6 million in the third quarter of 2000, compared to $26.6 million in the
same period of 1999. Of the $30.6 million, $25.9 million was related to the
Casino Resort (excluding the Mall) and $4.7 million was related to the Mall. The
increase in interest expense was attributed to increases in interest rates
during the past four quarters, and final project borrowings during the fourth
quarter of 1999.
Interest income for the quarter ended September 30, 2000 was $0.4
million compared to $0.4 million in the same period in 1999.
Nine Months Ended September 30, 2000 compared to Nine Months Ended
September 30, 1999
------------------------------------------------------------------
The Casino Resort began operations on May 4, 1999; therefore references
to the nine months of 1999 only include 150 out of 270 days of operating
revenues and expenses during such period.
Operating Revenues
------------------
Consolidated net revenues for the nine months ended September 30, 2000
were $468.6 million compared to $143.3 million for the nine months ended
September 30, 1999. The increase was a result of two factors: (1) the opening of
the Casino Resort on May 4, 1999, resulting in fewer days of operations during
the nine months ended September 30, 1999, and (2) the increase in operating
revenues in all segments of the Casino Resort during the third quarter of 2000
as compared to the third quarter of 1999. Casino revenues during the nine months
ended September 30, 2000 were $264.0 million and room revenues totaled $140.5
million during the same period. During the 150 days of operations of the Casino
Resort during the nine months ended September 30, 1999, casino revenues were
$77.4 million and room revenues were $49.0 million. Combined food and beverage,
retail and other revenues for the nine months ended September 30, 2000 were
$75.7 million compared to $28.9 million during the 150 days of operations during
the nine months ended September 30, 1999. Mall rental and related revenues for
the nine months ended September 30, 2000 were $23.0 million compared to
operating revenues of $3.4 million during the nine months ended September 30,
1999.
Operating Expenses
------------------
The Company's consolidated operating expenses were $366.5 million for
the nine months ended September 30, 2000 compared to $138.9 million during the
150 days of operations of the Casino Resort in the nine months ended September
30, 1999. Operating expenses for the nine months ended September 30, 2000
increased in every segment of the Casino Resort as the result of two factors:
(1) the opening of the Casino Resort on May 4, 1999, resulting in fewer days of
operations during the nine months ended September 30, 1999, and (2) the increase
in operating revenues and related operating expenses in all segments of the
Casino Resort during the third quarter of 2000 as compared to the third quarter
of 1999.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
Other Factors Affecting Earnings
--------------------------------
During the second quarter of 2000, the Casino Resort recorded an
extraordinary item of $2.8 million for loss on early retirement of debt relating
to the restructuring of the Bank Credit Facility. See Part I, Item 1. Financial
Statements - Notes to Financial Statements - Note 4, Long-Term Debt.
For the first nine months of 2000, interest expense and depreciation
expense each increased over the prior year's same period due to interest being
capitalized prior to the opening of the Casino and certain suites and facilities
at the Casino Resort on May 4, 1999, and depreciation beginning on that date.
The increase in interest expense was also attributed to increases in interest
rates during the past four quarters and final project borrowings during the
fourth quarter of 1999. LIBOR, the interest index from which all of the Casino
Resort's variable rate debt is calculated, increased from approximately 5.4%
during the third quarter of 1999 to approximately 6.7% during the third quarter
of 2000. In addition, the restructuring of the Bank Credit Facility, including
the addition of the Tranche B Term Loan, and the closing of the Mall Take-out
Financing, resulted in an increase of the margins over LIBOR.
During early 2000, the Company modified its business strategy as it
relates to premium casino customers and marketing to foreign premium casino
customers. The Company has generally raised its betting limits for table games
to be competitive with other premium resorts on the Strip. There are additional
risks associated with this change in strategy, including risk of bad debts,
risks to profitability margins in a highly competitive market and the need for
additional working capital to accommodate possible higher levels of trade
receivables and foreign currency fluctuations associated with collection of
trade receivables in other countries. The Company has opened domestic and
foreign marketing offices as well as bank collection accounts in several foreign
countries to accommodate this change in business strategy, thereby increasing
marketing costs.
Liquidity and Capital Resources
-------------------------------
Venetian Hotel, Casino and Congress Center
------------------------------------------
As of September 30, 2000 and December 31, 1999, the Company held cash
and cash equivalents of $49.4 million and $26.3 million, respectively. On these
dates, the Company also held restricted cash and investments of $2.2 million and
$11.0 million, respectively. Net cash provided by operating activities for the
first nine months of 2000 was $76.4 million, compared with $19.9 million used in
operating activities for the same period in 1999. The Company's operating cash
flow in the first nine months of 2000 was negatively impacted by an increase in
trade receivables. Net trade receivables were $43.2 million as of December 31,
1999 and $56.9 million as of September 30, 2000. Hotel receivables increased
$0.7 million during the first nine months of 2000 and casino receivables
increased $14.0 million during the first nine months of 2000. The net increase
in casino receivables is related to the substantial increase in table games
revenues during the first nine months of 2000 compared to the first nine months
of 1999. The overall rate of increase is consistent with the increase in the
Company's revenues. The Company expects a continued increase in trade
receivables during 2000 in connection with the extension of casino credit.
Capital expenditures paid from operating cash flow during the first
nine months of 2000 were $10.6 million, and capital expenditures for
construction of the Casino Resort paid from restricted project funds were $12.8
million. Capital expenditures for construction of the Casino Resort for the same
period in 1999 were $283.0 million. During the first nine months of 2000, the
Company paid principal payments of $27.0 million on the Bank Credit Facility
(exclusive of payments made from the $50.0 million of proceeds from the Tranche
B Term Loan) and $11.2 million on the FF&E Credit Facility.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
On September 19, 2000, the Company announced plans to construct the
Guggenheim Exhibition Hall, a 63,000 square foot structure adjacent to the
Casino Resort (the "Exhibition Hall"), to house various exhibits in conjunction
with the Guggenheim Museum Foundation. The Exhibition Hall is presently under
construction and is expected to be completed in late spring of 2001, at an
estimated cost of $20.0 million. In addition, the Company announced plans to
construct 8,000 square feet of display space within the Casino Resort to display
art masterworks from the Guggenheim Museum and the State Hermitage Museum in St.
Petersburg, Russia. The cost of the construction of the display space has yet to
be determined. The Bank Credit Facility and the FF&E Credit Facility each
currently allow the Company to spend up to $25.0 million per year for capital
expenditures along with unused amounts from previous years. If the cost of these
facilities and other previously announced improvements exceed such capital
expenditure limitation in any one year period, the Company will need to either
defer certain capital expenditures or seek approval from the lenders under the
Bank Credit Facility and the FF&E Credit Facility to modify such capital
expenditure limitations. The Company does not expect to exceed its capital
expenditure limitation in 2000.
The Company has also announced that it is in the preliminary
feasibility and design stages of a capital improvement project to add
approximately 1,000 all-suite hotel rooms to the Casino Resort (the "Phase I-A
Room Addition"). The preliminary plan provides for construction of the room
addition above the Casino Resort's parking structure. For the Company to proceed
with this project would require the Company to incur additional indebtedness.
Depending upon the structure of such indebtedness, this may require the consent
of certain existing lenders and modifications to certain existing lender
financial covenants. As of this date, no final budget for this project has been
determined and the Company has not entered into any agreements to fund such
project.
The Company is reviewing approximately $1.0 million of proposed vendor
change orders and claims not related to the Construction Manager's contested
construction costs (the "Contested Construction Costs") that are the subject of
the litigations and claims described in Part I, Item 1. Financial Statements -
Notes to Financial Statements- Note 6, Commitments and Contingencies -
Litigation. To the extent any of them are approved, the Company will pay these
amounts from remaining restricted cash and other project funds as described
below. In addition, the Phase II Subsidiary has outstanding project payables in
the amount of $2.9 million to be funded from future equity contributions or
borrowings by the Phase II Subsidiary.
If the Company is required to pay any of the Contested Construction
Costs which are not covered by the Insurance Policy, the Company may use cash
received from the following sources to fund such costs: (i) the LD Policy, (ii)
the Construction Manager, Bovis and P&O pursuant to the Construction Management
Contract, the Bovis Guaranty and the P&O Guaranty, respectively, (iii) third
parties, pursuant to their liability to the Company under their agreements with
the Company, (iv) amounts received from the Phase II Subsidiary for shared
facilities designed and constructed to accommodate the operations of the Casino
Resort and the Phase II Resort, (v) the Sole Stockholder, pursuant to his
liability under the Completion Guaranty, (vi) borrowings under the Revolver,
(vii) additional debt or equity financings, and (viii) operating cash flow. The
Sole Stockholder has remaining liability of approximately $5.0 million under the
Completion Guaranty to fund excess construction costs (which liability is
collateralized with cash and cash equivalents). If the Company were required to
pay substantial Contested Construction Costs, and if it were unable to raise or
obtain the funds from the sources described above, there could be a material
adverse effect on the Company's financial position, results of operations or
cash flows.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
For the next twelve months, the Company expects to fund its operations,
capital expenditures (that are unrelated to the Phase I-A Room Addition) and
debt service requirements from existing cash balances, operating cash flow and
borrowings under the Revolver of the Bank Credit Facility. The Revolver loan
commitment will expire on March 15, 2001. As of September 30, 2000, none of the
$40.0 million Revolver availability under the Bank Credit Facility was drawn.
The Company plans to request an extension of the availability date of the
Revolver from the lenders under the Bank Credit Facility prior to its
expiration. The Company has significant debt service payments due during the
next twelve months, including principal payments on its Bank Credit Facility and
FF&E Credit Facility aggregating $38.9 million and estimated total interest
payments (excluding noncash amortization of debt offering costs) of
approximately $89.5 million for indebtedness secured by the Casino Resort and
$16.6 million for indebtedness secured by the Mall. In addition, the Company
estimates total capital expenditures for the Casino Resort of approximately
$20.0 million during 2000. By obtaining the Tranche B Term Loan in June 2000,
the Company deferred $50.0 million of scheduled amortization under the Bank
Credit Facility until March and June 2004, significantly improving near term
liquidity. The Company anticipates that its existing cash balances, operating
cash flow and available borrowing capacity will continue to provide it with
sufficient resources to meet existing debt obligations and foreseeable capital
expenditures requirements, however, no assurance can be given that the Company's
improved operating results will continue.
If the Company is required to pay certain significant Contested
Construction Costs, or if the Company is unable to meet its debt service
requirements, the Company will seek, if necessary and to the extent permitted
under the Indentures and the terms of the Bank Credit Facility, additional
financing through bank borrowings or debt or equity financings. Also, there can
be no assurance that new business developments (such as the Phase I-A Room
Addition) or unforeseen events will not occur resulting in the need to raise
additional funds. There can be no assurance that additional or replacement
financing, if needed, will be available to the Company, and, if available, that
the financing will be on terms favorable to the Company, or that the Sole
Stockholder or any of his affiliates will provide any such financing.
New Mall Subsidiary and Transfer of Mall Assets
-----------------------------------------------
On November 12, 1999, Mall Construction transferred the Mall Assets to
the Mall Subsidiary. Upon such transfer, (i) the Mall Assets were released by
the trustee under the Mortgage Notes and the agent under the Bank Credit
Facility and so were no longer security to the holders of the Mortgage Notes or
for the indebtedness under the Bank Credit Facility, (ii) the indebtedness under
the Mall Construction Loan Facility was assumed by the Mall Subsidiary, and
(iii) all entities comprising the Company, other than the Mall Subsidiary, were
released from all obligations under the Mall Construction Loan Facility.
On December 20, 1999, the Mall Construction Loan Facility was paid off
in full with the proceeds of (a) the Tranche A Take-out Loan made by the Tranche
A Take-out Lenders and (b) the Tranche B Take-out Loan made by an entity wholly
owned by the Sole Stockholder. Also on December 20, 1999, the Mall Assets were
transferred from the Mall Subsidiary to the New Mall Subsidiary, the obligor
under the Mall Take-out Financing.
Because the New Mall Subsidiary is not a guarantor of any indebtedness
of the Venetian Entities (other than the Mall Take-out Financing), creditors of
the Venetian Entities (including the holders of the Notes) do not have a direct
claim against the Mall Assets. As a result, indebtedness of the Venetian
Entities (including the Notes) is now, with respect to the Mall Assets,
effectively subordinated to indebtedness of the New Mall Subsidiary. The New
Mall Subsidiary is not restricted by any of the debt instruments of LVSI,
Venetian or the Company's other subsidiary guarantors (including the Indentures)
from incurring any indebtedness. The terms of the Tranche A Take-out Loan
prohibit the New Mall Subsidiary from paying dividends or making distributions
to any of the Venetian Entities unless payments under the Tranche A Take-out
Loan are current, and, with certain limited exceptions, prohibit the New Mall
Subsidiary from making any loans to such entities. Any additional indebtedness
incurred by the New Mall Subsidiary may include additional restrictions on the
ability of the New Mall Subsidiary to pay any such dividends and make any such
distributions or loans.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
Phase II Resort and Transfer of Phase II Land
---------------------------------------------
If the Phase II Subsidiary determines to construct the Phase II Resort,
the Phase II Subsidiary will be required to raise substantial debt and/or equity
financings. Currently, there are no commitments to fund any portion of the
construction and development costs of the Phase II Resort. The Phase II Land was
transferred to the Phase II Subsidiary in October 1998. On December 31, 1999, an
additional 1.75 acres of land was contributed indirectly by the Sole Stockholder
to the Phase II Subsidiary.
The development of the Phase II Resort may require obtaining additional
regulatory approvals. The Company has not yet set a date to begin construction
of the Phase II Resort.
Because the Phase II Subsidiary is not a guarantor of the Company's
indebtedness, creditors of the Company (including the holders of the Notes) do
not have a direct claim against the assets of the Phase II Subsidiary. As a
result, the indebtedness of the Company (including the Notes) is effectively
subordinated to indebtedness of the Phase II Subsidiary. The Phase II Subsidiary
is not subject to any of the restrictive covenants of the debt instruments of
the Company (including, without limitation, the covenants with respect to the
limitations on indebtedness and restrictions on the ability to pay dividends or
to make distributions or loans to the Company and its subsidiaries). Any
indebtedness incurred by the Phase II Subsidiary may include material
restrictions on the ability of the Phase II Subsidiary to pay dividends or make
distributions or loans to the Company and its subsidiaries.
The debt instruments of the Company limit the ability of LVSI, Venetian
or any of their subsidiaries to guarantee or otherwise become liable for any
indebtedness of the Phase II Subsidiary. Such debt instruments also restrict the
sale or other disposition by the Company and its subsidiaries of capital stock
of the Phase II Subsidiary, including the sale of any such capital stock to the
Sole Stockholder or any affiliate of the Sole Stockholder. In addition, prior to
commencement of construction of the Phase II Resort, Venetian has the right to
approve the plans and specifications for the Phase II Resort.
Risk Related to the Subordination Structure of the Mortgage Notes
-----------------------------------------------------------------
The Mortgage Notes represent senior secured debt obligations of LVSI
and Venetian, secured by second priority liens on the collateral securing the
Mortgage Notes (the "Note Collateral"). However, the guarantees of the Mortgage
Notes by its subsidiaries, Mall Intermediate and Lido Intermediate
(collectively, the "Subordinated Guarantors"), are unsecured, subordinated debt
obligations of the guarantors. The structure of these guarantees present certain
risks for holders of the Mortgage Notes. For example, if the Note Collateral
were insufficient to pay the debt secured by such liens, or such liens were
found to be invalid, then holders of the Mortgage Notes would have a senior
claim against any remaining assets of LVSI and Venetian. In contrast, because of
the subordination provision with respect to the Subordinated Guarantors, holders
of the Mortgage Notes will always be fully subordinated to the claims of holders
of senior indebtedness of the Subordinated Guarantors.
Other Matters
-------------
In June 1998, the Financial Accounting Standards Board adopted
Statement of Financial Accounting Standards No. 133 ("SFAS 133") entitled
"Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. If specific conditions are met, a derivative
may be specifically designated as a hedge of specific financial exposures. The
accounting for changes in the fair value of a derivative depends on the intended
use of the derivative and, if it used in hedging activities, it depends on its
effectiveness as a hedge. SFAS 133 as amended is effective for all fiscal
quarters of fiscal years beginning after December 31, 2000. SFAS 133 should not
be applied retroactively to financial statements of prior periods. The Company
will adopt SFAS 133 when required. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of SFAS 133 will
have a significant effect on the Company's earnings or financial position.
<PAGE>
================================================================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
================================================================================
Special Note Regarding Forward-Looking Statements
Certain statements in this section and elsewhere in this Quarterly
Report on Form 10-Q (as well as information included in oral statements or other
written statements made or to be made by the Company) constitute
"forward-looking statements." Such forward-looking statements include the
discussions of the business strategies of the Company and expectations
concerning future operations, margins, profitability, liquidity and capital
resources. In addition, certain portions of this Form 10-Q, the words:
"anticipates", "believes", "estimates", "seeks", "expects", "plans", "intends"
and similar expressions, as they relate to the Company or its management, are
intended to identify forward-looking statements. Although the Company believes
that such forward-looking statements are reasonable, it can give no assurance
that any forward-looking statements will prove to be correct. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results, performance or achievements
of the Company to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the risks associated with entering into a new
venture and new construction, competition and other planned construction in Las
Vegas, government regulation related to the casino industry (including the
legalization of gaming in certain jurisdictions, such as Native American
reservations in the State of California), leverage and debt service (including
sensitivity to fluctuations in interest rates), uncertainty of casino spending
and vacationing in casino resorts in Las Vegas, occupancy rates and average
daily room rates in Las Vegas, demand for all-suites rooms, the popularity of
Las Vegas as a convention and trade show destination, the completion of
infrastructure projects in Las Vegas, including the current expansion of the
LVCC and the recent expansion of McCarran International Airport, litigation
risks, including the outcome of the pending disputes with the Construction
Manager and its subcontractors, and general economic and business conditions
which may impact levels of disposable income of consumers and pricing of hotel
rooms.
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. The Company's primary exposure to market risk is interest rate
risk associated with its long-term debt. The Company attempts to manage its
interest rate risk by managing the mix of its long-term fixed-rate borrowings
and variable rate borrowings under the Bank Credit Facility, the Mall Take-out
Financing and the FF&E Credit Facility, and by use of interest rate cap and
floor agreements.
<PAGE>
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
------- -----------------
The Company is party to litigation matters and claims related to its
operations and the construction of the Casino Resort. For more information, see
the Company's Annual Report on Form 10-K for the year ended December 31, 1999
and Part I, Item 1. Financial Statements-Notes to Financial Statements-Note 6,
Commitments and Contingencies-Litigation.
<PAGE>
Part II
OTHER INFORMATION
Items 2 through 5 of Part II are not applicable.
Item 6. Exhibits and Reports on Form 8-K
------- --------------------------------
(a) List of Exhibits
(b) Reports on Form 8-K
No report on Form 8-K was filed during the quarter ended September 30,
2000.
<PAGE>
================================================================================
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<CAPTION>
LAS VEGAS SANDS, INC.
<S> <C>
November 13, 2000 By: /s/ Sheldon G. Adelson
---------------------------
Sheldon G. Adelson
Chairman of the Board, Chief
Executive Officer and Director
November 13, 2000 By: /s/ Harry D. Miltenberger
--------------------------
Harry D. Miltenberger
Vice President-Finance
(principal financial and
accounting officer)
</TABLE>
================================================================================
