01—Abstract
Summary
Summary of the 10-K filed March 2, 2009. Cited figures are marked; the original filing is the authoritative source.
Las Vegas Sands Corp. (NYSE: LVS) reported a net loss of $163.6 milliona for 2008, compared with net income of $116.7 million in 2007.
Net revenues rose to $4.39 billionb from $2.95 billion, driven mainly by the first full year of The Venetian Macao, the opening of The Palazzo in late 2007, and the Four Seasons Macao in August 2008. Operating income fell to $163.7 million from $330.0 million, as operating expenses grew to $4.23 billion, including $507.0 million of depreciation and amortization and a $37.6 million impairment loss. Interest expense, net of capitalized interest, rose to $421.8 million, and the company recorded a $59.7 million income tax benefit.
The company's balance sheet and liquidity were reshaped in late 2008. Long-term debt was $10.36 billionc at year-end, and cash and cash equivalents were $3.04 billion. Management suspended portions of its development program under a revised plan announced November 10, 2008, including the St. Regis Residences, phases of the Cotai Strip parcels 5 and 6, and parts of Sands Bethlehem.
The filing states that the Las Vegas properties did not meet the maximum leverage covenant for the quarters ended September 30 and December 31, 2008, which led to a $475.0 milliond convertible note sale in September 2008 and a $2.1 billion common and preferred stock and warrants offering in November 2008. Management believes the measures described will allow the company to comply with its covenants throughout 2009, but the filing notes uncertainty about credit market access and the ability to complete suspended projects. The filing also flags material risks for investors.
Las Vegas gross gaming and room metrics declined in 2008, and Macao gaming revenue grew 31.0% for the year but fell 2.5% in the fourth quarter. Chairman and CEO Sheldon G.
Adelson and related family trusts control about 52% of common stock. The company faces a pending $58.6 million judgment in the Suen litigation, which management does not consider probable of affirmance, and a February 19, 2009 Macao court ruling that voided the Cotai Waterjets ferry concession, which the company intends to appeal.
02—Key points
Key Highlights
- Net loss of $163.6 million in 2008 versus net income of $116.7 million in 2007; net loss attributable to common stockholders was $188.8 million, or $(0.48) per share.
- Net revenues rose 48.8% to $4.39 billion, led by The Venetian Macao, The Palazzo and the Four Seasons Macao, while operating income fell to $163.7 million from $330.0 million.
- Adjusted EBITDAR increased to $1.06 billion from $874.8 million, with The Venetian Macao contributing $499.0 million and Sands Macao declining to $214.6 million from $373.5 million.
- Long-term debt of $10.36 billion at December 31, 2008, with cash and cash equivalents of $3.04 billion; domestic leverage was 6.2x against a 7.5x covenant maximum.
- Development plan revised in November 2008 to suspend portions of Cotai Strip, St. Regis Residences, and Sands Bethlehem projects, with some capitalized costs at risk of impairment if financing is not obtained.
- Raised $475.0 million of convertible notes and $2.1 billion of common and preferred stock and warrants in 2008 to address covenant compliance.
- Controlling stockholder Sheldon G. Adelson and related trusts own about 52% of common stock; the Macao ferry concession was voided by a February 19, 2009 court ruling that the company will appeal.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2008filed March 2, 2009Financial Statements
| Revenue | $4.39B |
| R&D Expenses | $12.79M |
| SG&A Expenses | $550.53M |
| Operating Expenses | $4.23B |
| Operating Income | $163.66M |
| Interest Expense | $421.82M |
| Net Income | -$163.56M |
| EPS (Basic) | $-0.48 |
| EPS (Diluted) | $-0.48 |
| Shares Outstanding (Basic) | 392.13M |
| Shares Outstanding (Diluted) | 392.13M |
05—Questions
Frequently Asked Questions
Why did Las Vegas Sands report a net loss in 2008 after a profit in 2007?
Operating expenses rose to $4.23 billion from $2.62 billion, driven by full-year operations of The Venetian Macao and The Palazzo, the Four Seasons Macao opening, $507.0 million of depreciation and amortization, and $37.6 million of impairment losses. Interest expense, net of capitalized interest, increased to $421.8 million from $244.8 million, pushing the pre-tax result to a loss of $228.0 million.
Why did the company raise equity and convertible debt in late 2008?
The filing states that the Las Vegas properties did not achieve the Adjusted EBITDA needed to meet the maximum leverage ratio for the quarters ended September 30 and December 31, 2008. The company completed a $475.0 million convertible note placement in September 2008 and a $2.1 billion common and preferred stock and warrants offering in November 2008 to reduce net debt and maintain compliance.
What development projects did the company suspend, and what is at risk?
Under the revised plan, construction was suspended on the St. Regis Residences, phase I and II of Cotai Strip parcels 5 and 6, and the hotel, retail and event center components of Sands Bethlehem. The filing states that if financing is not obtained or projects are abandoned, all or part of the investment in suspended projects could be lost and result in an impairment charge. Capitalized costs cited include $1.77 billion for parcels 5 through 8 and $3.53 billion for parcels 1 through 3.
What are the main legal and regulatory risks disclosed?
The company reports a $58.6 million judgment in the Suen litigation, which it is appealing and believes is not probable of affirmance. A Macao Court of Second Instance ruling on February 19, 2009 voided the Cotai Waterjets ferry concession, which the company intends to appeal to the Court of Final Appeal. The Macao subconcession expires June 26, 2022, and the Macao government has redemption rights beginning December 26, 2017.
How much control does the principal stockholder have?
Sheldon G. Adelson, family members and related trusts beneficially own approximately 52% of outstanding common stock as of December 31, 2008, excluding unexercised warrants for 87.5 million shares. The company is therefore a controlled company under NYSE rules, so the NYSE requirements for a majority-independent board and a fully independent compensation committee do not apply.
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