01—Abstract
Summary
Summary of the 10-K filed February 22, 2019. Cited figures are marked; the original filing is the authoritative source.
Las Vegas Sands Corp. (NYSE: LVS) reported net revenues of $13.73 billiona for the year ended December 31, 2018, up 7.9% from $12.73 billion in 2017, and operating income of $3.75 billion, up 8.3%.
Net income attributable to Las Vegas Sands Corp. was $2.41 billionb, compared with $2.81 billion in 2017; the filing attributes the decrease in total net income (down 9.6%) primarily to a $526 million nonrecurring tax benefit recorded in 2017 from U.S. tax reform and to higher tax expense in 2018, which included a $57 million discrete charge. Adjusted property EBITDA rose 7.7% to $5.28 billion, driven mainly by Macao, where segment EBITDA increased 18.1% to $3.08 billion while Marina Bay Sands declined 3.7% to $1.69 billion. The company generated $4.70 billion of cash from operations and spent $949 million on capital expenditures.
It returned capital through $2.98 billionc of dividends paid and $905 million of share repurchases. Long-term debt rose to $11.87 billion (from $9.34 billion) after SCL issued $5.50 billion of senior notes in August 2018, and cash and cash equivalents stood at $4.65 billion at year-end. The company declared a quarterly dividend of $0.77 per share in January 2019, estimated at about $597 million, and expects that level to continue through 2019.
Key risks highlighted include the Macao subconcession expiring June 26, 2022 (with a government redemption right), dependence on Macao, Singapore and Las Vegas for all cash flow, the planned $1.30 billiond sale of Sands Bethlehem to PCI Gaming Authority, and a valuation allowance of $4.50 billion against U.S. deferred tax assets. Development spending on The Londoner Macao and related projects is expected to total about $2.2 billion.
02—Key points
Key Highlights
- Net revenues rose 7.9% to $13.73 billion in 2018; operating income rose 8.3% to $3.75 billion.
- Net income attributable to Las Vegas Sands Corp. fell to $2.41 billion from $2.81 billion, reflecting the absence of a $526 million 2017 U.S. tax reform benefit and higher 2018 tax expense.
- Adjusted property EBITDA increased 7.7% to $5.28 billion, led by Macao segment EBITDA growth of 18.1% to $3.08 billion.
- Operating cash flow of $4.70 billion funded $949 million of capital expenditures, $2.98 billion of dividends and $905 million of share repurchases.
- Long-term debt increased to $11.87 billion, including $5.50 billion of SCL Senior Notes issued in August 2018.
- The Macao subconcession expires June 26, 2022, and the Macao government may redeem it with at least one year's notice.
- Sands Bethlehem is to be sold to PCI Gaming Authority for a total enterprise value of $1.30 billion, subject to regulatory review and closing conditions.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 22, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $13.73B$12.88B | +6.6% |
| SG&A Expenses | $1.48B$1.42B | +4.7% |
| Operating Expenses | $9.98B$9.26B | +7.7% |
| Operating Income | $3.75B$3.46B | +8.3% |
| Interest Expense | $446.00M$327.00M | +36.4% |
| Net Income | $2.41B$2.81B | −14.1% |
| EPS (Basic) | $3.07$3.55 | −13.5% |
| EPS (Diluted) | $3.07$3.55 | −13.5% |
| Shares Outstanding (Basic) | 786.00M792.00M | −0.8% |
| Shares Outstanding (Diluted) | 786.00M792.00M | −0.8% |
05—Questions
Frequently Asked Questions
Why did net income decline in 2018 even though operating income grew?
The filing attributes the decline primarily to a nonrecurring non-cash income tax benefit of $526 million recorded in 2017 from U.S. tax reform, which was not repeated in 2018. Operating income rose 8.3% to $3.75 billion, but 2018 income tax expense was $375 million, including a $57 million one-time discrete charge and a $670 million Q1 2018 benefit offset by a $727 million Q4 2018 discrete expense as described in the quarterly results.
How much cash does the company have and how is it deploying capital?
The company held $4.65 billion of unrestricted cash and cash equivalents at December 31, 2018, of which about $3.0 billion was held by non-U.S. subsidiaries. It paid $2.98 billion in dividends and repurchased $905 million of common stock during 2018, and it declared a $0.77 quarterly dividend in January 2019.
What is the company's debt position and near-term maturities?
Long-term debt was $11.87 billion at year-end 2018 (carrying value of $12.08 billion before adjustments for the fair value estimate). The filing lists principal maturities of $98 million in each of 2019, 2020 and 2021, $520 million in 2022 and $3.68 billion in 2023. Covenant leverage ratios were 0.6x for the U.S., 1.9x for Macao and 1.9x for Singapore, versus maximums of 5.5x, 4.0x and 4.0x.
What is the main risk to the Macao business?
The Macao subconcession expires June 26, 2022. Unless it is extended, the casinos and gaming equipment transfer to the Macao government without compensation, and the government may redeem the subconcession beginning December 26, 2017 with at least one year's notice. The filing also notes that the income tax exemption and the agreement on dividend taxes are tied to that date and that no assurance of extension has been obtained.
What is happening with Sands Bethlehem and the Las Vegas condominium project?
The company agreed on March 8, 2018 to sell Sands Bethlehem to PCI Gaming Authority for a total enterprise value of $1.30 billion, subject to regulatory review and other closing conditions. Construction of the Las Vegas Condo Tower has been suspended since 2008, and the company carries $129 million of capitalized costs for it, with a possible charge if the project is abandoned.
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