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EX-32.2 - EXHIBIT 32.2 - LAS VEGAS SANDS CORPlvs-ex322x09302016.htm
EX-32.1 - EXHIBIT 32.1 - LAS VEGAS SANDS CORPlvs-ex321x09302016.htm
EX-31.2 - EXHIBIT 31.2 - LAS VEGAS SANDS CORPlvs-ex312x09302016.htm
EX-31.1 - EXHIBIT 31.1 - LAS VEGAS SANDS CORPlvs-ex311x09302016.htm
EX-10.2 - EXHIBIT 10.2 - LAS VEGAS SANDS CORPlvs_ex102x09302016.htm
EX-10.1 - EXHIBIT 10.1 - LAS VEGAS SANDS CORPlvs_ex101x09302016.htm

UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________ 
Form 10-Q
____________________________________________________ 
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number 001-32373
____________________________________________________ 
LAS VEGAS SANDS CORP.
(Exact name of registration as specified in its charter)
____________________________________________________ 
Nevada
 
27-0099920
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
3355 Las Vegas Boulevard South
 
 
Las Vegas, Nevada
 
89109
(Address of principal executive offices)
 
(Zip Code)
(702) 414-1000
(Registrant’s telephone number, including area code)
 ____________________________________________________
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
 
ý
 
Accelerated filer
 
¨
 
 
 
 
Non-accelerated filer
 
¨ (Do not check if a smaller reporting company)
 
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  ý
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of the latest practicable date.
Class
  
Outstanding at 11/2/2016
Common Stock ($0.001 par value)
  
794,793,918 shares



LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Table of Contents
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
 
 
 
 
 
Item 1.
Item 1A.
Item 2.
Item 6.

2


PART 1 FINANCIAL INFORMATION
ITEM 1 — FINANCIAL STATEMENTS

LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
 
September 30,
2016
 
December 31,
2015
 
(In thousands, except share
and per share data)
(Unaudited)
ASSETS
Current assets:
 
 
 
Cash and cash equivalents
$
1,790,400

 
$
2,179,490

Restricted cash and cash equivalents
9,080

 
7,901

Accounts receivable, net
868,090

 
1,267,848

Inventories
43,764

 
42,573

Prepaid expenses and other
127,349

 
111,438

Total current assets
2,838,683

 
3,609,250

Property and equipment, net
16,304,695

 
15,731,638

Deferred income taxes, net

 
23,681

Leasehold interests in land, net
1,267,548

 
1,262,132

Intangible assets, net
108,784

 
71,586

Other assets, net
160,950

 
165,170

Total assets
$
20,680,660

 
$
20,863,457

LIABILITIES AND EQUITY
Current liabilities:
 
 
 
Accounts payable
$
123,218

 
$
110,408

Construction payables
500,448

 
364,136

Accrued interest payable
1,097

 
1,863

Other accrued liabilities
1,813,344

 
1,694,305

Income taxes payable
172,021

 
198,056

Current maturities of long-term debt
163,825

 
95,367

Total current liabilities
2,773,953

 
2,464,135

Other long-term liabilities
125,601

 
113,368

Deferred income taxes
207,645

 
201,734

Deferred proceeds from sale of The Shoppes at The Palazzo
267,849

 
268,427

Deferred gain on sale of The Grand Canal Shoppes
33,001

 
35,130

Deferred rent from mall sale transactions
112,885

 
113,995

Long-term debt
9,593,099

 
9,248,681

Total liabilities
13,114,033

 
12,445,470

Commitments and contingencies (Note 9)

 

Equity:
 
 
 
Common stock, $0.001 par value, 1,000,000,000 shares authorized, 830,199,867 and 830,051,259 shares issued, 794,793,918 and 794,645,310 shares outstanding
830

 
830

Treasury stock, at cost, 35,405,949 shares
(2,443,036
)
 
(2,443,036
)
Capital in excess of par value
6,504,177

 
6,484,843

Accumulated other comprehensive loss
(3,252
)
 
(66,283
)
Retained earnings
2,285,163

 
2,840,387

Total Las Vegas Sands Corp. stockholders’ equity
6,343,882

 
6,816,741

Noncontrolling interests
1,222,745

 
1,601,246

Total equity
7,566,627

 
8,417,987

Total liabilities and equity
$
20,680,660

 
$
20,863,457

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands, except share and per share data)
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Casino
$
2,306,534

 
$
2,242,571

 
$
6,405,866

 
$
6,920,757

Rooms
402,392

 
379,878

 
1,123,432

 
1,102,550

Food and beverage
183,415

 
188,073

 
558,677

 
555,902

Mall
147,368

 
140,556

 
421,888

 
403,652

Convention, retail and other
141,004

 
129,761

 
389,041

 
389,412

 
3,180,713


3,080,839

 
8,898,904

 
9,372,273

Less — promotional allowances
(212,171
)
 
(187,156
)
 
(564,041
)
 
(545,547
)
Net revenues
2,968,542

 
2,893,683

 
8,334,863

 
8,826,726

Operating expenses:
 
 
 
 
 
 
 
Casino
1,197,453

 
1,249,861

 
3,530,613

 
3,900,258

Rooms
66,768

 
67,360

 
197,586

 
197,991

Food and beverage
101,636

 
99,956

 
306,153

 
295,740

Mall
15,696

 
14,739

 
43,920

 
45,217

Convention, retail and other
65,828

 
67,418

 
184,259

 
205,640

Provision for doubtful accounts
51,030

 
32,757

 
138,620

 
126,163

General and administrative
330,112

 
314,117

 
930,686

 
954,197

Corporate
39,110

 
37,488

 
208,114

 
127,276

Pre-opening
85,861

 
9,627

 
127,700

 
29,860

Development
2,371

 
3,147

 
6,758

 
7,028

Depreciation and amortization
277,751

 
247,698

 
792,498

 
750,212

Amortization of leasehold interests in land
9,728

 
9,737

 
28,623

 
29,060

Loss on disposal of assets
5,621

 
709

 
15,425

 
18,590

 
2,248,965

 
2,154,614

 
6,510,955

 
6,687,232

Operating income
719,577

 
739,069

 
1,823,908

 
2,139,494

Other income (expense):
 
 
 
 
 
 
 
Interest income
2,299

 
2,158

 
6,328

 
12,598

Interest expense, net of amounts capitalized
(65,189
)
 
(66,962
)
 
(197,874
)
 
(199,018
)
Other income (expense)
21,514

 
16,275

 
(33,075
)
 
31,589

Loss on modification or early retirement of debt
(3,416
)
 

 
(3,416
)
 

Income before income taxes
674,785

 
690,540

 
1,595,871

 
1,984,663

Income tax expense
(69,272
)
 
(72,347
)
 
(187,008
)
 
(173,941
)
Net income
605,513

 
618,193

 
1,408,863

 
1,810,722

Net income attributable to noncontrolling interests
(92,156
)
 
(98,835
)
 
(247,373
)
 
(310,268
)
Net income attributable to Las Vegas Sands Corp.
$
513,357

 
$
519,358

 
$
1,161,490

 
$
1,500,454

Earnings per share:
 
 
 
 
 
 
 
Basic
$
0.65

 
$
0.65

 
$
1.46

 
$
1.88

Diluted
$
0.65

 
$
0.65

 
$
1.46

 
$
1.88

Weighted average shares outstanding:
 
 
 
 
 
 
 
Basic
794,659,426

 
796,559,738

 
794,576,430

 
797,400,090

Diluted
795,136,252

 
797,302,248

 
795,144,575

 
798,263,294

Dividends declared per common share
$
0.72

 
$
0.65

 
$
2.16

 
$
1.95

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
 
(In thousands)
(Unaudited)
Net income
$
605,513

 
$
618,193

 
$
1,408,863

 
$
1,810,722

Currency translation adjustment, net of reclassification adjustment and before and after tax
(24,652
)
 
(112,314
)
 
62,362

 
(160,902
)
Total comprehensive income
580,861

 
505,879

 
1,471,225

 
1,649,820

Comprehensive income attributable to noncontrolling interests
(92,771
)
 
(99,264
)
 
(246,704
)
 
(311,807
)
Comprehensive income attributable to Las Vegas Sands Corp.
$
488,090

 
$
406,615

 
$
1,224,521

 
$
1,338,013

The accompanying notes are an integral part of these condensed consolidated financial statements.


5


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY 
 
Las Vegas Sands Corp. Stockholders’ Equity
 
 
 
 
 
Common
Stock
 
Treasury
Stock
 
Capital in
Excess of
Par Value
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Retained
Earnings
 
Noncontrolling
Interests
 
Total
 
(In thousands)
(Unaudited)
Balance at January 1, 2015
$
829

 
$
(2,237,952
)
 
$
6,428,762

 
$
76,101

 
$
2,945,846

 
$
1,806,996

 
$
9,020,582

Net income

 

 

 

 
1,500,454

 
310,268

 
1,810,722

Currency translation adjustment, net of reclassification adjustment

 

 

 
(162,441
)
 

 
1,539

 
(160,902
)
Exercise of stock options
1

 

 
11,325

 

 

 
1,983

 
13,309

Tax shortfall from stock-based compensation

 

 
(17
)
 

 

 

 
(17
)
Conversion of equity awards to liability awards

 

 
(4,282
)
 

 

 
(1,825
)
 
(6,107
)
Stock-based compensation

 

 
33,114

 

 

 
5,129

 
38,243

Repurchase of common stock

 
(145,020
)
 

 

 

 

 
(145,020
)
Dividends declared

 

 

 

 
(1,555,191
)
 
(619,120
)
 
(2,174,311
)
Distributions to noncontrolling interests

 

 

 

 

 
(10,148
)
 
(10,148
)
Balance at September 30, 2015
$
830

 
$
(2,382,972
)
 
$
6,468,902

 
$
(86,340
)
 
$
2,891,109

 
$
1,494,822

 
$
8,386,351

Balance at January 1, 2016
$
830

 
$
(2,443,036
)
 
$
6,484,843

 
$
(66,283
)
 
$
2,840,387

 
$
1,601,246

 
$
8,417,987

Net income

 

 

 

 
1,161,490

 
247,373

 
1,408,863

Currency translation adjustment

 

 

 
63,031

 

 
(669
)
 
62,362

Exercise of stock options

 

 
4,013

 

 

 
1,463

 
5,476

Tax shortfall from stock-based compensation

 

 
(7,610
)
 

 

 

 
(7,610
)
Conversion of equity awards to liability awards

 

 
(1,134
)
 

 

 
(484
)
 
(1,618
)
Stock-based compensation

 

 
24,065

 

 

 
3,926

 
27,991

Dividends declared

 

 

 

 
(1,716,714
)
 
(619,236
)
 
(2,335,950
)
Distributions to noncontrolling interests

 

 

 

 

 
(10,874
)
 
(10,874
)
Balance at September 30, 2016
$
830

 
$
(2,443,036
)
 
$
6,504,177

 
$
(3,252
)
 
$
2,285,163

 
$
1,222,745

 
$
7,566,627

The accompanying notes are an integral part of these condensed consolidated financial statements.


6


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
(In thousands)
(Unaudited)
Cash flows from operating activities:
 
 
 
Net income
$
1,408,863

 
$
1,810,722

Adjustments to reconcile net income to net cash generated from operating activities:
 
 
 
Depreciation and amortization
792,498

 
750,212

Amortization of leasehold interests in land
28,623

 
29,060

Amortization of deferred financing costs and original issue discount
33,422

 
33,135

Amortization of deferred gain on and rent from mall sale transactions
(3,239
)
 
(3,239
)
Non-cash change in deferred proceeds from sale of The Shoppes at The Palazzo
71

 
419

Non-cash loss on modification or early retirement of debt
1,640

 

Loss on disposal of assets
15,425

 
18,590

Stock-based compensation expense
27,628

 
36,533

Provision for doubtful accounts
138,620

 
126,163

Foreign exchange (gain) loss
20,400

 
(24,312
)
Excess tax benefits from stock-based compensation
(91
)
 
(2,345
)
Deferred income taxes
24,071

 
(1,523
)
Changes in operating assets and liabilities:
 
 
 
Accounts receivable
279,517

 
23,348

Inventories
(953
)
 
1,405

Prepaid expenses and other
(18,088
)
 
15,801

Leasehold interests in land
(3,331
)
 
(4,395
)
Accounts payable
11,778

 
(14,886
)
Accrued interest payable
(776
)
 
2,456

Income taxes payable
(32,754
)
 
(32,993
)
Other accrued liabilities
106,694

 
(323,665
)
Net cash generated from operating activities
2,830,018

 
2,440,486

Cash flows from investing activities:
 
 
 
Change in restricted cash and cash equivalents
(1,184
)
 
(941
)
Capital expenditures
(1,103,240
)
 
(1,112,967
)
Proceeds from disposal of property and equipment
4,094

 
823

Acquisition of intangible assets
(47,315
)
 

Net cash used in investing activities
(1,147,645
)
 
(1,113,085
)
Cash flows from financing activities:
 
 
 
Proceeds from exercise of stock options
5,476

 
13,309

Excess tax benefits from stock-based compensation
91

 
2,345

Repurchase of common stock

 
(138,418
)
Dividends paid
(2,336,981
)
 
(2,174,223
)
Distributions to noncontrolling interests
(10,874
)
 
(10,148
)
Proceeds from long-term debt (Note 3)
2,260,218

 
1,759,277

Repayments of long-term debt (Note 3)
(1,962,963
)
 
(2,373,703
)
Payments of deferred financing costs
(30,960
)
 
(11,745
)
Net cash used in financing activities
(2,075,993
)
 
(2,933,306
)
Effect of exchange rate on cash
4,530

 
(44,948
)
Decrease in cash and cash equivalents
(389,090
)
 
(1,650,853
)
Cash and cash equivalents at beginning of period
2,179,490

 
3,506,319

Cash and cash equivalents at end of period
$
1,790,400

 
$
1,855,466



7


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
(In thousands)
(Unaudited)
Supplemental disclosure of cash flow information:
 
 
 
Cash payments for interest, net of amounts capitalized
$
153,845

 
$
152,660

Cash payments for taxes, net of refunds
$
193,942

 
$
196,202

Change in construction payables
$
136,312

 
$
60,921

Non-cash investing and financing activities:
 
 
 
Capitalized stock-based compensation costs
$
363

 
$
253

Change in dividends payable included in other accrued liabilities
$
(1,031
)
 
$
(88
)
Property and equipment acquired under capital lease
$
5,509

 
$
373

Change in common stock repurchase payable included in other accrued liabilities
$

 
$
(6,602
)
Conversion of equity awards to liability awards
$
1,618

 
$
6,107


The accompanying notes are an integral part of these condensed consolidated financial statements.

8


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 — ORGANIZATION AND BUSINESS OF COMPANY
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Las Vegas Sands Corp. (“LVSC”), a Nevada corporation, and its subsidiaries (collectively the “Company”) for the year ended December 31, 2015, and have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations; however, the Company believes that the disclosures herein are adequate to make the information presented not misleading. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the interim period have been included. The interim results reflected in the unaudited condensed consolidated financial statements are not necessarily indicative of expected results for the full year. The Company’s common stock is traded on the New York Stock Exchange under the symbol “LVS.”
The ordinary shares of the Company’s subsidiary, Sands China Ltd. (“SCL,” the indirect owner and operator of the majority of the Company’s operations in the Macao Special Administrative Region (“Macao”) of the People’s Republic of China), are listed on The Main Board of The Stock Exchange of Hong Kong Limited (“SEHK”). The shares were not, and will not be, registered under the Securities Act of 1933, as amended, and may not be offered or sold in the U.S. absent a registration under the Securities Act of 1933, as amended, or an applicable exception from such registration requirements.
Operations
Macao
The Company currently owns 70.1% of SCL, which includes the operations of The Venetian Macao Resort Hotel ("The Venetian Macao"); Sands Cotai Central; The Parisian Macao, as further described below; Four Seasons Hotel Macao, Cotai Strip (the "Four Seasons Hotel Macao") and the Plaza Casino (together with the Four Seasons Hotel Macao, the "Four Seasons Macao"); Sands Macao; and other ancillary operations that support these properties. The Company operates the gaming areas within these properties pursuant to a 20-year gaming subconcession agreement, which expires in June 2022.
On September 13, 2016, the Company opened The Parisian Macao, an integrated resort connected to The Venetian Macao and Four Seasons Macao, which includes a 253,000 square foot casino. The Parisian Macao also features approximately 3,000 rooms and suites; approximately 340,000 square feet of retail and dining space; a meeting room complex of approximately 63,000 square feet; and a 1,200-seat theater. During the three and nine months ended September 30, 2016, the Company recorded pre-opening costs at The Parisian Macao of $86.1 million and $124.9 million, respectively.
Singapore
The Company owns and operates the Marina Bay Sands in Singapore. In April 2016, the Company paid 66.0 million Singapore dollars ("SGD," approximately $48.4 million at exchange rates in effect on September 30, 2016) to the Singapore Casino Regulatory Authority as part of the process to renew its gaming license at Marina Bay Sands for a three-year term and such license now expires in April 2019.
United States
The Company owns and operates The Venetian Resort Hotel Casino (“The Venetian Las Vegas”), The Palazzo Resort Hotel Casino (“The Palazzo”) and an expo and convention center (the “Sands Expo Center”) in Las Vegas, Nevada, and the Sands Casino Resort Bethlehem (the “Sands Bethlehem”) in Bethlehem, Pennsylvania.

9





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Development Projects
Macao
The Company is completing the development of certain open areas surrounding its Cotai Strip properties. Under the Company’s land concessions for Sands Cotai Central and The Parisian Macao, the Company is required to complete these developments by December 2016 and January 2017 (which was extended by the Macao government from November 2016), respectively. Should the Company determine it is unable to complete Sands Cotai Central or The Parisian Macao by their respective deadlines, the Company would then expect to apply for another extension from the Macao government to the extent necessary. If the Company is unable to meet the current deadlines and the deadlines for either development are not extended, the Company could lose its land concessions for Sands Cotai Central or The Parisian Macao, which would prohibit the Company from operating any facilities developed under the respective land concessions. As a result, the Company could record a charge for all or some portion of its $4.90 billion or $2.62 billion in capitalized construction costs and land premiums (net of amortization), as of September 30, 2016, related to Sands Cotai Central and The Parisian Macao, respectively.
United States
The Company was constructing a high-rise residential condominium tower (the “Las Vegas Condo Tower”), located on the Las Vegas Strip between The Palazzo and The Venetian Las Vegas. The Company suspended construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. The Company is evaluating the highest return opportunity for the project and intends to recommence construction when demand and conditions improve. The impact of the suspension on the estimated overall cost of the project is currently not determinable with certainty. Should demand and conditions fail to improve or management decides to abandon the project, the Company could record a charge for some portion of the $178.6 million in capitalized construction costs as of September 30, 2016.
Other
The Company continues to pursue new development opportunities globally.
Capital Financing Overview
Through September 30, 2016, the Company has funded its development projects primarily through borrowings under its credit facilities, operating cash flows, proceeds from its equity offerings and proceeds from the disposition of non-core assets.
The Company held unrestricted cash and cash equivalents of $1.79 billion and restricted cash and cash equivalents of $9.1 million as of September 30, 2016. The Company believes the cash on hand and cash flow generated from operations will be sufficient to maintain compliance with the financial covenants of its credit facilities. In the normal course of its activities, the Company will continue to evaluate its capital structure and opportunities for enhancements thereof. In June 2016, the Company entered into an agreement to amend its Macao credit facility, which became effective in August 2016. This agreement extended the maturity of a portion of the term loans under the facility to May 2022 and provides for additional term loan commitments of $1.0 billion (see "— Note 3 — Long-Term Debt — 2016 VML Credit Facility”). In August 2016, the Company entered into an agreement to amend its U.S. credit facility, which extended the maturity of a portion of the revolving credit commitments under the facility to September 2020 (see "— Note 3 — Long-Term Debt —2013 U.S. Credit Facility).

10





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standard update on revenue recognition that will be applied to all contracts with customers. The update requires an entity to recognize revenue when it transfers promised goods or services to customers in an amount that reflects what it expects in exchange for the goods or services. It also requires more detailed disclosures to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. In April 2016, the FASB issued an additional update that adds clarifying guidance to assist an entity with identifying performance obligations in contracts with customers and implementing licensing contracts with customers. The guidance will be required to be applied on a retrospective basis, using one of two methodologies, and will be effective for fiscal years beginning after December 15, 2017, with early application permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently assessing the impact that the guidance will have on the Company's financial condition and results of operations.
In July 2015, the FASB issued an accounting standard update that requires inventory measured using any method other than last-in, first-out or the retail inventory method, to be measured at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. If the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss during the period in which it occurs. The guidance is effective for fiscal years beginning after December 15, 2016, and should be applied prospectively, with early adoption permitted. The adoption of this guidance will not have a material effect on the Company’s financial condition, results of operations and cash flows.
In February 2016, the FASB issued an accounting standard update on leases, which requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under the new guidance. The guidance is effective for fiscal years beginning after December 15, 2018, including interim reporting periods within that reporting period, with early adoption permitted. A modified retrospective approach must be applied for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently assessing the impact that the guidance will have on the Company's financial condition and results of operations.
In March 2016, the FASB issued an accounting standard update to simplify several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within that annual period, with early adoption permitted. The guidance should be applied on a prospective, retrospective or modified retrospective approach depending on the specific portion of the guidance being applied. The Company is currently assessing the impact that the guidance will have on the Company's financial condition and results of operations.
In August 2016, the FASB issued an accounting standard update to reduce the diversity on how cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within that reporting period, and should be applied retrospectively, with early adoption permitted. The adoption of this guidance will not have a material effect on the Company’s financial condition, results of operations and cash flows.
Reclassification
The Company adopted the accounting standard update to simplify the presentation of debt issuance costs as of January 1, 2016, on a retrospective basis. As a result, debt issuance costs, net of amortization, of $169.7 million were reclassified from deferred financing costs, net to long-term debt and other assets, net. Debt issuance costs, net of amortization, of $124.0 million related to the Company's term loans were reclassified to long-term debt and debt issuance costs, net of amortization, of $45.7 million related to the Company's revolving debt were reclassified to other assets, net in the accompanying condensed consolidated balance sheet as of December 31, 2015. The reclassification did not have an effect on the Company's financial condition, results of operations and cash flows.

11





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 2 — PROPERTY AND EQUIPMENT, NET
Property and equipment consists of the following (in thousands):
 
September 30,
2016
 
December 31,
2015
Land and improvements
$
629,000

 
$
556,947

Building and improvements
17,667,275

 
15,308,791

Furniture, fixtures, equipment and leasehold improvements
3,664,703

 
3,281,161

Transportation
454,087

 
456,942

Construction in progress
1,174,915

 
2,633,340

 
23,589,980

 
22,237,181

Less — accumulated depreciation and amortization
(7,285,285
)
 
(6,505,543
)
 
$
16,304,695

 
$
15,731,638

Construction in progress consists of the following (in thousands):
 
September 30,
2016
 
December 31,
2015
Four Seasons Macao (principally the Four Seasons Apartments)
$
425,487

 
$
424,273

Sands Cotai Central
283,823

 
270,472

The Parisian Macao
86,785

 
1,588,474

Other
378,820

 
350,121

 
$
1,174,915

 
$
2,633,340

The $378.8 million in other construction in progress as of September 30, 2016, consists primarily of construction of the Las Vegas Condo Tower and various projects at The Venetian Macao.
In accordance with the April 2004 purchase and sale agreement, as amended, between Venetian Casino Resort, LLC (“VCR”) and GGP Limited Partnership ("GGP") (the “Amended Agreement”), the Company sold the portion of the Grand Canal Shoppes located within The Palazzo (formerly referred to as "The Shoppes at the Palazzo"). Under the terms of the settlement with GGP on June 24, 2011, the Company retained the $295.4 million of proceeds previously received and participates in certain potential future revenues earned by GGP. Under generally accepted accounting principles, the transaction has not been accounted for as a sale because the Company’s participation in certain potential future revenues constitutes continuing involvement. Therefore, $266.2 million of the proceeds allocated to the mall sale transaction has been recorded as deferred proceeds (a long-term financing obligation), which will accrue interest at an imputed rate and will be offset by (i) imputed rental income and (ii) rent payments made to GGP related to spaces leased back from GGP by the Company. The property and equipment legally sold to GGP totaling $203.7 million (net of $96.3 million of accumulated depreciation) as of September 30, 2016, will continue to be recorded on the Company’s condensed consolidated balance sheet and will continue to be depreciated in the Company’s condensed consolidated statement of operations.
During the three and nine months ended September 30, 2016 and the three and nine months ended September 30, 2015, the Company capitalized interest expense of $11.4 million, $32.6 million, $7.1 million and $16.8 million, respectively. During the three and nine months ended September 30, 2016 and the three and nine months ended September 30, 2015, the Company capitalized approximately $7.2 million, $21.6 million, $7.0 million and $22.6 million, respectively, of internal costs, consisting primarily of compensation expense for individuals directly involved with the development and construction of property.

12





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 3 — LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
 
September 30,
2016
 
December 31,
2015
Corporate and U.S. Related(1):
 
 
 
2013 U.S. Credit Facility — Term B (net of unamortized original issue discount and deferred financing costs of $13,666 and $16,102, respectively)
$
2,174,459

 
$
2,188,898

2013 U.S. Credit Facility — Revolving

 
630,000

Airplane Financings (net of unamortized deferred financing costs of $22 and $65, respectively)
57,197

 
59,918

HVAC Equipment Lease
14,092

 
15,155

Other
52

 
140

Macao Related(1):
 
 
 
2016 VML Credit Facility — Term (net of unamortized deferred financing costs of $72,846)
4,045,999

 

2016 VML Credit Facility — Non-Extended Term (net of unamortized deferred financing costs of $4,209)
265,134

 

2011 VML Credit Facility — Extended Term (net of unamortized deferred financing costs of $46,943)

 
2,342,608

2011 VML Credit Facility — Accordion Term (net of unamortized deferred financing costs of $10,147)

 
989,792

Other
8,538

 
4,353

Singapore Related(1):
 
 
 
2012 Singapore Credit Facility — Term (net of unamortized deferred financing costs of $49,990 and $58,743, respectively)
3,191,453

 
3,113,184

 
9,756,924

 
9,344,048

Less — current maturities
(163,825
)
 
(95,367
)
Total long-term debt
$
9,593,099

 
$
9,248,681

____________________
(1)
Unamortized deferred financing costs of $37.2 million and $45.7 million as of September 30, 2016 and December 31, 2015, respectively, related to the U.S., Macao and Singapore revolving credit facilities are included in other assets, net in the accompanying condensed consolidated balance sheets.

2013 U.S. Credit Facility
During August 2016, the Company entered into an agreement (the "Amendment Agreement") to amend the existing 2013 U.S. Credit Facility, to among other things, obtain revolving credit commitments in the aggregate amount of $1.15 billion (the "2013 Extended U.S. Revolving Facility"), which mature on September 19, 2020, and were used to replace the commitments under, and refinance all amounts outstanding under, the existing 2013 U.S. Revolving Facility and to pay fees and expenses incurred in connection with the amendment. Borrowings under the 2013 Extended U.S. Revolving Facility will be used for general corporate purposes and working capital needs. As of September 30, 2016, the Company had $1.15 billion of available borrowing capacity under the 2013 Extended U.S. Revolving Facility, net of outstanding letters of credit.
The revolving loans bear interest, at the Company's option, at either an adjusted Eurodollar rate, plus a credit spread, or an alternative base rate, plus a credit spread, which credit spread in each case is determined based on the Company's corporate family rating as set forth in the pricing grid in the Amendment Agreement (the "Corporate Rating"). The credit spread ranges from 0.125% to 0.625% per annum for loans accruing interest at the base rate and from 1.125% to 1.625% per annum for loans accruing interest at an adjusted Eurodollar rate. The initial credit spread is 0.45% per

13





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

annum for loans accruing interest at a base rate and 1.45% per annum for loans accruing interest at an adjusted Eurodollar rate. 
The Company pays a commitment fee on the undrawn amounts under the 2013 Extended U.S. Revolving Facility. The commitment fee is determined based on the Corporate Rating and ranges from 0.125% to 0.25% per annum. The initial commitment fee is 0.20% per annum. Other than the items noted above, the terms and conditions of the existing 2013 U.S. Credit Facility remain unchanged.
The Company recorded a $1.6 million loss on early retirement of debt during the three and nine months ended September 30, 2016, in connection with the Amendment Agreement.
2016 VML Credit Facility
During June 2016, the Company entered into an agreement (the "VML Amendment Agreement") to amend its 2011 VML Credit Facility to, among other things, extend the maturity of a portion of the then existing term loans, modify the scheduled amortization payment dates of such term loans and obtain new term loan commitments (as so amended and restated, the "Restated VML Credit Agreement"). The Restated VML Credit Agreement became effective on August 31, 2016, upon satisfaction of all closing conditions (the "Restatement Date"). Pursuant to the Restated VML Credit Agreement and as of the Restatement Date, certain lenders extended the maturity of existing term loans (the "Extended Initial VML Term Loans") to May 31, 2022, the balance of which is $3.12 billion in aggregate principal amount consisting of $2.12 billion related to the Extended 2011 VML Term Facility and $1.0 billion related to the 2011 VML Accordion Term. In addition, certain lenders provided $1.0 billion in aggregate principal amount of new term loan commitments with a maturity date of May 31, 2022 (the “New VML Term Loans,” and together with the Extended Initial VML Term Loans, the "2016 VML Term Loans," an aggregate principal amount of $4.12 billion). The terms and the maturity date of the balance of the term loans under the 2011 VML Credit Facility that are not 2016 VML Term Loans (the “2016 Non-Extended VML Term Loans”) in the amount of $269.3 million and the $2.0 billion Extended 2011 VML Revolving Facility remain unchanged (the "2016 VML Revolving Facility," and together with the 2016 VML Term Loans and the 2016 Non-Extended VML Term Loans, the "2016 VML Credit Facility"). Borrowings under the 2016 VML Term Loans will be used for working capital requirements and general corporate purposes, including to make any investment or payment not specifically prohibited by the terms of the loan documents. As of September 30, 2016, the Company had $2.0 billion of available borrowing capacity under the 2016 VML Revolving Facility.
Commencing with the quarterly period ending March 31, 2020, and at the end of each subsequent quarter through December 31, 2020, the Restated VML Credit Agreement requires the borrower to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to 2.5% of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on March 31 through June 30, 2021, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to 5.0% of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly periods ending on September 30 through December 31, 2021, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to 12.5% of the aggregate principal amount outstanding as of the Restatement Date. For the quarterly period ending on March 31, 2022, the borrower is required to repay the outstanding 2016 VML Term Loans on a pro rata basis in an amount equal to 20.0% of the aggregate principal amount outstanding as of the Restatement Date. The remaining balance on the 2016 VML Term Loans is due on the maturity date.
The 2016 VML Term Loans and the 2016 Non-Extended VML Term Loans both bear interest, at the Company's option, at either the adjusted Eurodollar rate or Hong Kong Inter-bank Offered Rate (“HIBOR”), plus a credit spread, or an alternative base rate, plus a credit spread, which credit spread in each case is determined based on the consolidated total leverage ratio as set forth in the Restated VML Credit Agreement. The credit spread ranges from 0.25% to 1.125% per annum for loans accruing interest at the base rate and from 1.25% to 2.125% per annum for loans accruing interest at an adjusted Eurodollar or HIBOR rate. The initial credit spread is 0.875% per annum for loans accruing interest at a base rate and 1.875% per annum for loans accruing interest at an adjusted Eurodollar or HIBOR rate. 
The Company recorded a $1.8 million loss on modification of debt during the three and nine months ended September 30, 2016, in connection with the VML Amendment Agreement.

14





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

2012 Singapore Credit Facility
As of September 30, 2016, the Company had SGD 494.5 million (approximately $362.9 million at exchange rates in effect on September 30, 2016) of available borrowing capacity under the 2012 Singapore Revolving Facility, net of outstanding letters of credit. 
Cash Flows from Financing Activities
Cash flows from financing activities related to long-term debt and capital lease obligations are as follows (in thousands):
 
Nine Months Ended 
 September 30,
 
2016
 
2015
Proceeds from 2011 VML Credit Facility
$
1,000,591

 
$
999,277

Proceeds from 2016 VML Credit Facility
999,627

 

Proceeds from 2013 U.S. Credit Facility
260,000

 
760,000

 
$
2,260,218

 
$
1,759,277

Repayments on 2011 VML Credit Facility
$
(1,000,564
)
 
$
(820,188
)
Repayments on 2013 U.S. Credit Facility
(906,875
)
 
(1,496,874
)
Repayments on 2012 Singapore Credit Facility
(50,286
)
 
(51,001
)
Repayments on Airplane Financings
(2,766
)
 
(2,766
)
Repayments on HVAC Equipment Lease and Other Long-Term Debt
(2,472
)
 
(2,874
)
 
$
(1,962,963
)
 
$
(2,373,703
)
Fair Value of Long-Term Debt
The estimated fair value of the Company’s long-term debt as of September 30, 2016 and December 31, 2015, was approximately $9.70 billion and $9.22 billion, respectively, compared to its carrying value of $9.87 billion and $9.46 billion, respectively. The estimated fair value of the Company’s long-term debt is based on level 2 inputs (quoted prices in markets that are not active).
NOTE 4 — EQUITY AND EARNINGS PER SHARE
Common Stock
Dividends
On March 31, June 30 and September 30, 2016, the Company paid a dividend of $0.72 per common share as part of a regular cash dividend program. During the nine months ended September 30, 2016, the Company recorded $1.72 billion as a distribution against retained earnings (of which $932.6 million related to the Principal Stockholder and his family and the remaining $784.2 million related to all other shareholders).
On March 31, June 30 and September 30, 2015, the Company paid a dividend of $0.65 per common share as part of a regular cash dividend program. During the nine months ended September 30, 2015, the Company recorded $1.56 billion as a distribution against retained earnings (of which $841.8 million related to the Principal Stockholder and his family and the remaining $713.4 million related to all other shareholders).
In November 2016, the Company’s Board of Directors declared a quarterly dividend of $0.72 per common share (a total estimated to be approximately $572 million) to be paid on December 30, 2016, to shareholders of record on December 21, 2016.
Repurchase Program
In October 2014, the Company's Board of Directors authorized the repurchase of $2.0 billion of its outstanding common stock, which expired in October 2016. In November 2016, the Company's Board of Directors authorized the repurchase of $1.56 billion of its outstanding common stock, which expires in November 2018. Repurchases of the

15





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Company’s common stock are made at the Company’s discretion in accordance with applicable federal securities laws in the open market or otherwise. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including the Company’s financial position, earnings, legal requirements, other investment opportunities and market conditions. During the nine months ended September 30, 2016, there were no share repurchases under this program. During the nine months ended September 30, 2015, the Company repurchased 3,036,121 shares of its common stock for $145.0 million (including commissions) under this program. All share repurchases of the Company's common stock are recorded as treasury stock.
Noncontrolling Interests
On February 26 and June 24, 2016, SCL paid a dividend of 0.99 Hong Kong dollars ("HKD") and HKD 1.00 per share, respectively, to SCL shareholders (a total of $2.07 billion, of which the Company retained $1.45 billion during the nine months ended September 30, 2016). On February 27 and July 15, 2015, SCL paid a dividend of HKD 0.99 and HKD 1.00 per share, respectively, to SCL shareholders (a total of $2.07 billion, of which the Company retained $1.45 billion).
During the nine months ended September 30, 2016 and 2015, the Company distributed $10.9 million and $10.1 million, respectively, to certain of its noncontrolling interests.
Earnings Per Share
The weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)
794,659,426

 
796,559,738

 
794,576,430

 
797,400,090

Potential dilution from stock options and restricted stock and stock units
476,826

 
742,510

 
568,145

 
863,204

Weighted-average common and common equivalent shares (used in the calculation of diluted earnings per share)
795,136,252

 
797,302,248

 
795,144,575

 
798,263,294

Antidilutive stock options excluded from the calculation of diluted earnings per share
6,750,242

 
6,140,784

 
6,710,242

 
6,103,786

Accumulated Other Comprehensive Loss
As of September 30, 2016 and December 31, 2015, accumulated other comprehensive loss consisted solely of foreign currency translation adjustments. During the nine months ended September 30, 2015, a $5.3 million gain related to the dissolution of a wholly owned foreign subsidiary was reclassified from accumulated other comprehensive income and comprehensive income to net income. The amount is included in other income (expense) in the accompanying condensed consolidated statements of operations.
NOTE 5 — VARIABLE INTEREST ENTITIES
The Company consolidates any variable interest entities (“VIEs”) in which it is the primary beneficiary and discloses significant variable interests in VIEs for which it is not the primary beneficiary, if any, which designation is determined based on accounting standards for VIEs.
The Company has entered into various joint venture agreements with independent third parties. The operations of these joint ventures have been consolidated by the Company due to the Company’s significant investment in these joint ventures, its power to direct the activities of the joint ventures that would significantly impact their economic performance and the obligation to absorb potentially significant losses or the rights to receive potentially significant

16





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

benefits from these joint ventures. The Company evaluates its primary beneficiary designation on an ongoing basis and assesses the appropriateness of the VIE’s status when events have occurred that would trigger such an analysis.
As of September 30, 2016 and December 31, 2015, the Company’s consolidated joint ventures had total assets of $79.6 million and $79.4 million, respectively, and total liabilities of $167.8 million and $148.4 million, respectively.
NOTE 6 — INCOME TAXES
The Company’s major tax jurisdictions are the U.S., Macao and Singapore. The Company is subject to examination for tax years beginning 2010 in the U.S. and Singapore, and tax years beginning in 2011 in Macao. The Inland Revenue Authority of Singapore is performing a compliance review of the Marina Bay Sands tax return for tax years 2010 through 2012. The Company believes it has adequately reserved for its uncertain tax positions; however, there is no assurance that the taxing authorities will not propose adjustments that are different from the Company’s expected outcome, which may impact the provision for income taxes.
The Company does not consider current year’s tax earnings and profits of its foreign subsidiaries to be permanently reinvested. Beginning with the year ended December 31, 2015, the Company’s major foreign subsidiaries distributed, and may continue to distribute, earnings in excess of their current year’s tax earnings and profits in order to meet the Company’s liquidity needs. The Company has not provided deferred taxes for foreign earnings that are indefinitely reinvested in the applicable foreign jurisdictions. The Company expects there will be sufficient creditable foreign taxes to offset any U.S. income tax that would result from the repatriation of these foreign earnings. The Company recorded valuation allowances on certain net deferred tax assets of its U.S. operations and certain foreign jurisdictions. Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period and to the extent it becomes “more-likely-than-not” that the deferred tax assets are realizable, the Company will reduce the valuation allowance in the period such determination is made.
In October 2013, the Company received a 5-year income tax exemption in Macao that exempts the Company from paying corporate income tax on profits generated by gaming operations. The Company will continue to benefit from this tax exemption through the end of 2018. In May 2014, the Company entered into an agreement with the Macao government, effective through the end of 2018, that provides for an annual payment of 42.4 million patacas (approximately $5.3 million at exchange rates in effect on September 30, 2016) that is a substitution for a 12% tax otherwise due from Venetian Macau Limited (“VML”) shareholders on dividend distributions paid from VML gaming profits.

17





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 7 — STOCK-BASED EMPLOYEE COMPENSATION
Stock-based compensation activity under the LVSC 2004 and SCL Equity Plans is as follows (in thousands, except weighted average grant date fair values):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Compensation expense:
 
 
 
 
 
 
 
Stock options
$
5,336

 
$
5,010

 
$
19,804

 
$
20,302

Restricted stock and stock units
1,689

 
4,332

 
8,481

 
16,231

 
$
7,025

 
$
9,342

 
$
28,285

 
$
36,533

Compensation cost (adjustment to compensation cost) capitalized as part of property and equipment
$
114

 
$
(72
)
 
$
363

 
$
253

LVSC 2004 Plan:
 
 
 
 
 
 
 
Stock options granted
200

 

 
1,311

 
435

Weighted average grant date fair value
$
8.65

 
$

 
$
8.54

 
$
12.04

Restricted stock granted

 
10

 
62

 
49

Weighted average grant date fair value
$

 
$
76.72

 
$
42.50

 
$
59.57

SCL Equity Plan:
 
 
 
 
 
 
 
Stock options granted
661

 

 
18,407

 
2,744

Weighted average grant date fair value
$
0.73

 
$

 
$
0.73

 
$
0.95

Restricted stock units granted

 

 

 
119

Weighted average grant date fair value
$

 
$

 
$

 
$
4.90


There were no cash-settled awards paid on vested restricted stock units during the three months ended September 30, 2016. During the nine months ended September 30, 2016, SCL paid $1.4 million to settle vested restricted stock units that were previously classified as equity awards. During the three and nine months ended September 30, 2015, SCL paid $0.4 million and $3.3 million, respectively, to settle vested restricted stock units that were previously classified as equity awards.
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
LVSC 2004 Plan:
 
 
 
 
 
 
 
Weighted average volatility
31.3
%
 
%
 
34.7
%
 
37.3
%
Expected term (in years)
5.5

 
0.0

 
5.8

 
5.8

Risk-free rate
1.2
%
 
%
 
1.5
%
 
1.3
%
Expected dividends
5.3
%
 
%
 
5.9
%
 
4.7
%
SCL Equity Plan:
 
 
 
 
 
 
 
Weighted average volatility
38.0
%
 
%
 
40.8
%
 
44.8
%
Expected term (in years)
4.4

 
0.0

 
4.4

 
4.0

Risk-free rate
0.6
%
 
%
 
1.2
%
 
0.7
%
Expected dividends
6.5
%
 
%
 
5.5
%
 
6.0
%
NOTE 8 — FAIR VALUE MEASUREMENTS
Under applicable accounting guidance, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance also establishes a valuation hierarchy for inputs in measuring fair value that maximizes the use of observable inputs (inputs market participants would use based on market data obtained from

18





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

sources independent of the Company) and minimizes the use of unobservable inputs (inputs that reflect the Company’s assumptions based upon the best information available in the circumstances) by requiring that the most observable inputs be used when available. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the assets or liabilities, either directly or indirectly. Level 3 inputs are unobservable inputs for the assets or liabilities. Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The Company currently uses certain derivatives as effective economic hedges to offset foreign currency forward contracts to manage its foreign currency exposure. Foreign currency forward contracts involve the purchase and sale of a designated currency at an agreed upon rate for settlement on a specified date. The aggregate notional value of these foreign currency contracts was $497.6 million and $672.7 million as of September 30, 2016 and December 31, 2015, respectively. As these derivatives have not been designated and/or do not qualify for hedge accounting, the changes in fair value are recognized as other income (expense) in the accompanying condensed consolidated statements of operations.
The following table provides the assets and liabilities carried at fair value (in thousands):
 
 
 
Fair Value Measurements Using:
 
Total Carrying
Value
 
Quoted Market
Prices in Active
Markets (Level 1)
 
Significant Other
Observable
Inputs (Level 2)
 
Significant
Unobservable
Inputs (Level 3)
As of September 30, 2016
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents(1)
$
694,644

 
$
694,644

 
$

 
$

Liabilities
 
 
 
 
 
 
 
Forward contracts(2)
$
15,414

 
$

 
$
15,414

 
$

As of December 31, 2015
 
 
 
 
 
 
 
Assets
 
 
 
 
 
 
 
Cash equivalents(1)
$
905,276

 
$
905,276

 
$

 
$

Forward contracts(2)
$
4,197

 
$

 
$
4,197

 
$

Interest rate caps(3)
$

 
$

 
$

 
$

____________________
(1)
The Company has short-term investments classified as cash equivalents as the original maturities are less than 90 days.
(2)
As of September 30, 2016 and December 31, 2015, the Company had 20 and 19 foreign currency forward contracts, respectively, with fair values based on recently reported market transactions of forward rates. Assets were included in prepaid expenses and other and liabilities were included in other accrued liabilities in the accompanying condensed consolidated balance sheets. For the three and nine months ended September 30, 2016, the Company recorded a $10.0 million gain and $18.1 million loss, respectively, related to the change in fair value of the forward contracts. The Company did not have forward contracts during the three and nine months ended September 30, 2015.
(3)
As of September 30, 2016, the Company had no interest rate cap agreements. As of December 31, 2015, the Company had one interest rate cap agreement with a nominal aggregate fair value based on recently reported market transactions of interest rates, which was recorded in prepaid expenses and other in the accompanying condensed consolidated balance sheet.

19





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

NOTE 9 — COMMITMENTS AND CONTINGENCIES
Litigation
The Company is involved in other litigation in addition to those noted below, arising in the normal course of business. Management has made certain estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material effect on the Company’s financial condition, results of operations and cash flows.
On October 15, 2004, Richard Suen and Round Square Company Limited (“Roundsquare”) filed an action against LVSC, Las Vegas Sands, Inc. (“LVSI”), Sheldon G. Adelson and William P. Weidner in the District Court of Clark County, Nevada (the “District Court”), asserting a breach of an alleged agreement to pay a success fee of $5.0 million and 2.0% of the net profit from the Company’s Macao resort operations to the plaintiffs as well as other related claims. In March 2005, LVSC was dismissed as a party without prejudice based on a stipulation to do so between the parties. Pursuant to an order filed March 16, 2006, plaintiffs’ fraud claims set forth in the first amended complaint were dismissed with prejudice against all defendants. The order also dismissed with prejudice the first amended complaint against defendants Sheldon G. Adelson and William P. Weidner. On May 24, 2008, the jury returned a verdict for the plaintiffs in the amount of $43.8 million. On June 30, 2008, a judgment was entered in this matter in the amount of $58.6 million (including pre-judgment interest). The Company appealed the verdict to the Nevada Supreme Court. On November 17, 2010, the Nevada Supreme Court reversed the judgment and remanded the case to the District Court for a new trial. In its decision reversing the monetary judgment against the Company, the Nevada Supreme Court also made several other rulings, including overturning the pre-trial dismissal of the plaintiffs’ breach of contract claim and deciding several evidentiary matters, some of which confirmed and some of which overturned rulings made by the District Court. On February 27, 2012, the District Court set a date of March 25, 2013, for the new trial. On June 22, 2012, the defendants filed a request to add experts and plaintiffs filed a motion seeking additional financial data as part of their discovery. The District Court granted both requests. The retrial began on March 27 and on May 14, 2013, the jury returned a verdict in favor of Roundsquare in the amount of $70.0 million. On May 28, 2013, a judgment was entered in the matter in the amount of $101.6 million (including pre-judgment interest). On June 7, 2013, the Company filed a motion with the District Court requesting that the judgment be set aside as a matter of law or in the alternative that a new trial be granted. On July 30, 2013, the District Court denied the Company’s motion. On October 17, 2013, the District Court entered an order granting plaintiff's request for certain costs and fees associated with the litigation in the amount of approximately $1.0 million. On December 6, 2013, the Company filed a notice of appeal of the jury verdict with the Nevada Supreme Court. The Company filed its opening appellate brief with the Nevada Supreme Court on June 16, 2014. On August 19, 2014, the Nevada Supreme Court issued an order granting plaintiffs additional time until September 15, 2014, to file their answering brief. On September 15, 2014, Roundsquare filed a request to the Nevada Supreme Court to file a brief exceeding the maximum number of words, which was granted. On October 10, 2014, Roundsquare filed their answering brief. On January 12, 2015, the defendants filed their reply brief. On January 27, 2015, Roundsquare filed their reply brief. The Nevada Supreme Court set oral argument for December 17, 2015, before a panel of justices only to reset it for January 26, 2016, en banc. Oral arguments were presented to the Nevada Supreme Court as scheduled. On March 11, 2016, the Nevada Supreme Court issued an order affirming the judgment of liability, but reversing the damages award and remanding for a new trial on damages. On March 29, 2016, Roundsquare filed a petition for rehearing. The Nevada Supreme Court ordered an answer by the Company, which the Company filed on May 4, 2016. On May 12, 2016, Roundsquare filed a motion for leave to file a reply brief in support of their petition for rehearing, and on May 19, 2016, the Company filed an opposition to that motion. On June 24, 2016, the Nevada Supreme Court issued an order granting Roundsquare's petition for rehearing and submitting the appeal for decision on rehearing without further briefing or oral argument. On July 22, 2016, the Nevada Supreme Court once again ordered a new trial on the issue of damages. A pre-trial hearing has been set in District Court for December 12, 2016. The Company believes that the amount of any loss cannot be reasonably estimated at this time and has not recorded any reserves or contingencies related to this legal matter. In the event that the Company’s assumptions used to evaluate this matter as neither probable nor estimable change in future periods, it may be required to record a liability for an adverse outcome.
On February 9, 2011, LVSC received a subpoena from the Securities and Exchange Commission (the “SEC”) requesting that the Company produce documents relating to its compliance with the Foreign Corrupt Practices Act (the

20





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

“FCPA”). The Company was also advised by the Department of Justice (the “DOJ”) that it is conducting a similar investigation. As previously disclosed by LVSC, on April 7, 2016, the SEC announced a comprehensive civil administrative settlement with LVSC in which LVSC neither admitted nor denied allegations related to the internal controls and books and records provisions of the FCPA pursuant to Section 21(c) of the Securities Exchange Act of 1934, as amended (the “SEC Order”).
The Company continues to respond to all remaining government inquiries. Based on the proceedings to date, management is currently unable to determine the probability of the outcome of the remaining inquiries, the extent of materiality, or the range of reasonably possible loss, if any.
On May 24, 2010, Frank J. Fosbre, Jr. filed a purported class action complaint in the U.S. District Court, against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 1, 2007 through November 6, 2008. The complaint sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On July 21, 2010, Wendell and Shirley Combs filed a purported class action complaint in the U.S. District Court, against LVSC, Sheldon G. Adelson, and William P. Weidner. The complaint alleged that LVSC, through the individual defendants, disseminated or approved materially false information, or failed to disclose material facts, through press releases, investor conference calls and other means from June 13, 2007 through November 11, 2008. The complaint, which was substantially similar to the Fosbre complaint, discussed above, sought, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On August 31, 2010, the U.S. District Court entered an order consolidating the Fosbre and Combs cases, and appointed lead plaintiffs and lead counsel. As such, the Fosbre and Combs cases are reported as one consolidated matter. On November 1, 2010, a purported class action amended complaint was filed in the consolidated action against LVSC, Sheldon G. Adelson and William P. Weidner. The amended complaint alleges that LVSC, through the individual defendants, disseminated or approved materially false and misleading information, or failed to disclose material facts, through press releases, investor conference calls and other means from August 2, 2007 through November 6, 2008. The amended complaint seeks, among other relief, class certification, compensatory damages and attorneys’ fees and costs. On January 10, 2011, the defendants filed a motion to dismiss the amended complaint, which, on August 24, 2011, was granted in part, and denied in part, with the dismissal of certain allegations. On November 7, 2011, the defendants filed their answer to the allegations remaining in the amended complaint. On July 11, 2012, the U.S. District Court issued an order allowing defendants’ Motion for Partial Reconsideration of the U.S. District Court's order dated August 24, 2011, striking additional portions of the plaintiffs' complaint and reducing the class period to a period of February 4 to November 6, 2008. On August 7, 2012, the plaintiffs filed a purported class action second amended complaint (the “Second Amended Complaint”) seeking to expand their allegations back to a time period of 2007 (having previously been cut back to 2008 by the U.S. District Court) essentially alleging very similar matters that had been previously stricken by the U.S. District Court. On October 16, 2012, the defendants filed a new motion to dismiss the Second Amended Complaint. The plaintiffs responded to the motion to dismiss on November 1, 2012, and defendants filed their reply on November 12, 2012. On November 20, 2012, the U.S. District Court granted a stay of discovery under the Private Securities Litigation Reform Act pending a decision on the new motion to dismiss and therefore, the discovery process was suspended. On April 16, 2013, the case was reassigned to a new judge. On July 30, 2013, the U.S. District Court heard the motion to dismiss and took the matter under advisement. On November 7, 2013, the judge granted in part and denied in part defendants' motions to dismiss. On December 13, 2013, the defendants filed their answer to the Second Amended Complaint. Discovery in the matter resumed. On January 8, 2014, plaintiffs filed a motion to expand the certified class period, which was granted by the U.S. District Court on June 15, 2015. Fact discovery closed on July 31, 2015, and expert discovery closed on December 18, 2015. On January 22, 2016, defendants filed motions for summary judgment. Plaintiffs filed an opposition to the motions for summary judgment on March 11, 2016. Defendants filed their replies in support of summary judgment on April 8, 2016. No hearing date for the summary judgment has been set. Management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.

21





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

On March 9, 2011, Benyamin Kohanim filed a shareholder derivative action (the “Kohanim action”) on behalf of the Company in the District Court against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint alleges, among other things, breach of fiduciary duties in failing to properly implement, oversee and maintain internal controls to ensure compliance with the FCPA. The complaint seeks to recover for the Company unspecified damages, including restitution and disgorgement of profits, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On April 18, 2011, Ira J. Gaines, Sunshine Wire and Cable Defined Benefit Pension Plan Trust dated 1/1/92 and Peachtree Mortgage Ltd. filed a shareholder derivative action (the “Gaines action”) on behalf of the Company in the District Court against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint raises substantially similar claims as alleged in the Kohanim action. The complaint seeks to recover for the Company unspecified damages, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiffs. The Kohanim and Gaines actions have been consolidated and are reported as one consolidated matter. On July 25, 2011, the plaintiffs filed a first verified amended consolidated complaint. The plaintiffs have twice agreed to stay the proceedings. A 120-day stay was entered by the District Court in October 2011. It was extended for another 90 days in February 2012 and expired in May 2012. The parties agreed to an extension of the May 2012 deadline that expired on October 30, 2012. The defendants filed a motion to dismiss on November 1, 2012, based on the fact that the plaintiffs have suffered no damages. On January 23, 2013, the District Court denied the motion to dismiss in part, deferred the remainder of the motion to dismiss and stayed the proceedings until July 22, 2013. The District Court has granted several successive stays since that time, with the case currently stayed until April 18, 2017. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
On April 1, 2011, Nasser Moradi, Richard Buckman, Douglas Tomlinson and Matt Abbeduto filed a shareholder derivative action (the “Moradi action”), as amended on April 15, 2011, on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time. The complaint raises substantially similar claims as alleged in the Kohanim and Gaines actions. The complaint seeks to recover for the Company unspecified damages, including exemplary damages and restitution, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiffs. On April 18, 2011, the Louisiana Municipal Police Employees Retirement System filed a shareholder derivative action (the “LAMPERS action”) on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time, and Wing T. Chao, a former member of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim, Moradi and Gaines actions. The complaint seeks to recover for the Company unspecified damages, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On April 22, 2011, John Zaremba filed a shareholder derivative action (the “Zaremba action”) on behalf of the Company in the U.S. District Court, against Sheldon G. Adelson, Jason N. Ader, Irwin Chafetz, Charles D. Forman, George P. Koo, Michael A. Leven, Jeffrey H. Schwartz and Irwin A. Siegel, the members of the Board of Directors at the time, and Wing T. Chao, a former member of the Board of Directors. The complaint raises substantially similar claims as alleged in the Kohanim, Moradi, Gaines and LAMPERS actions. The complaint seeks to recover for the Company unspecified damages, including restitution, disgorgement of profits and injunctive relief, and also seeks to recover attorneys’ fees, costs and related expenses for the plaintiff. On August 25, 2011, the U.S. District Court consolidated the Moradi, LAMPERS and Zaremba actions and such actions are reported as one consolidated matter. On November 17, 2011, the defendants filed a motion to dismiss or alternatively to stay the federal action due to the parallel District Court action described above. On May 25, 2012, the case was transferred to a new judge. On August 27, 2012, the U.S. District Court granted the motion to stay pending a further update of the Special Litigation Committee due on October 30, 2012. On October 30, 2012, the defendants filed the update asking the judge to determine whether to continue the stay until January 31, 2013, or to address motions to dismiss. On November 7, 2012, the U.S. District Court denied defendants request for an extension of the stay but asked the parties to brief the motion to dismiss. On November 21, 2012, defendants filed their motion

22





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

to dismiss. On December 21, 2012, plaintiffs filed their opposition and on January 18, 2013, defendants filed their reply. On May 31, 2013, the case was reassigned to a new judge. On April 11, 2014, the judge denied the motion to dismiss without prejudice and ordered the case stayed pending the outcome of the District Court action in Kohanim described above. Following a January 22, 2016, status report by the parties, on January 27, 2016, the judge ordered another status report on May 16, 2016. Following the May 16, 2016 status report by the parties, on May 17, 2016, the judge ordered another status report on December 16, 2016. This consolidated action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
On July 5, 2016, W.A. Sokolowski filed a shareholder derivative action (“Sokolowski III”) on purported behalf of the Company in the District Court, Clark County Nevada, against Sheldon G. Adelson, Michael A. Leven, Jason N. Ader, Irwin Chafetz, Charles D. Forman, Irwin A. Siegel, George P. Koo, Charles A. Koppelman, Jeffrey H. Schwartz, Robert G. Goldstein, Micheline Chau, Steven L. Gerard, George Jamieson, David Levi, and George P. Koo, each of whom is serving or previously served on the Board of Directors (collectively, the “Directors”); as well as against PricewaterhouseCoopers LLP (“PwC”), the Company’s former auditor, and a partner of PwC. On September 16, 2016, Sokolowski filed an amended complaint ("Sokolowski IV") with additional nominal plaintiff Curtis Acton, adding former Director Wing T. Chau as a defendant. The amended complaint alleges, among other things, that the Directors breached their fiduciary duties to the Company by failing to prevent certain alleged misrepresentations and wrongdoing by the Company’s management, wasting corporate assets in litigating the Jacobs lawsuit, and concealing certain alleged facts in connection with audits performed by PwC. The amended complaint seeks, among other things the appointment of a conservator or special master to oversee the Company’s discussions with governmental agencies as well as to recover for the Company unspecified damages, including restitution and disgorgement of compensation, and also seeks to recover attorneys’ fees, costs and related expenses for the nominal plaintiffs. Many of the allegations duplicate allegations Sokolowski made in a previous case, Sokolowski v. Adelson, No. 2:14-cv-00111-JCM-NJK (D. Nev.) (“Sokolowski I and II”), in which final judgment was entered against him. In Sokolowski IV, nominal plaintiffs also complain that the Company wrongfully caused Sokolowski to lose Sokolowski I and II. The Company filed a motion to dismiss on October 24, 2016. This matter is in a preliminary stage and management has determined that it is currently unable to determine the probability of the outcome of this matter, whether this matter will result in litigation or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
On March 6, 2014, the Board of Directors of the Company received a shareholder demand letter from a purported shareholder named the John F. Scarpa Foundation ("Scarpa"). This letter recites substantially the same allegations as the complaint filed in the Sokolowski I and II actions and demands that the same claims be asserted by the Company, which was delivered to the Company by the same counsel representing Mr. Sokolowski. The Company acknowledged, through its counsel, on March 26, 2014. Scarpa then sent a revised demand letter to the Board of Directors on March 31, 2014. The Company acknowledged, through its counsel, on April 8, 2014. Scarpa then sent an additional demand letter dated August 14, 2014, which the Company acknowledged on August 22, 2014. The Company responded to the demand by letters dated June 4, 2015. This matter is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter, whether this matter will result in litigation or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
On January 19, 2012, Asian American Entertainment Corporation, Limited (“AAEC”) filed a claim (the “Macao action”) with the Macao Judicial Court (Tribunal Judicial de Base) against VML, LVS (Nevada) International Holdings, Inc. (“LVS (Nevada)”), Las Vegas Sands, LLC (“LVSLLC”) and VCR (collectively, the “Defendants”). The claim is for 3.0 billion patacas (approximately $375.6 million at exchange rates in effect on September 30, 2016) as compensation for damages resulting from the alleged breach of agreements entered into between AAEC and LVS (Nevada), LVSLLC and VCR (collectively, the "U.S. Defendants") for their joint presentation of a bid in response to the public tender held by the Macao government for the award of gaming concessions at the end of 2001. On July 4, 2012, the Defendants filed their defense to the Macao action with the Macao Judicial Court. AAEC then filed a reply that included several amendments to the original claim, although the amount of the claim was not amended. On January 4, 2013, the

23





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

Defendants filed an amended defense to the amended claim with the Macao Judicial Court. On September 23, 2013, the U.S. Defendants filed a motion with the Macao Second Instance Court, seeking recognition and enforcement of the U.S. Court of Appeals ruling in the Prior Action, referred to below, given on April 10, 2009, which partially dismissed AAEC’s claims against the U.S. Defendants. On April 24, 2014, the Macao Judicial Court issued a Decision (Despacho Seneador) holding that AAEC’s claim against VML is unfounded and that VML be removed as a party to the proceedings, and that the claim should proceed exclusively against the U.S. Defendants. On May 8, 2014, AAEC lodged an appeal against that decision. The Macao Judicial Court further held that the existence of the pending application for recognition and enforcement of the U.S. Court of Appeals ruling before the Macao Second Instance Court did not justify a stay of the proceedings against the U.S. Defendants at the present time, although in principle an application for a stay of the proceedings against the U.S. Defendants could be reviewed after the Macao Second Instance Court had issued its decision. On June 25, 2014, the Macao Second Instance Court delivered a decision, which gave formal recognition to and allowed enforcement in Macao of the judgment of the U.S. Court of Appeals, dismissing AAEC's claims against the U.S. Defendants. AAEC appealed against the recognition decision to the Macao Court of Final Appeal, which, on May 6, 2015, dismissed the appeal and held the U.S. judgment to be final and have preclusive effect. The Macao Court of Final Appeal's decision became final on May 21, 2015. On June 5, 2015, the U.S. Defendants applied to the Macao Judicial Court to dismiss the claims against them as res judicata. AAEC filed its response to that application on June 30, 2015. The U.S. Defendants filed their reply on July 23, 2015. On September 14, 2015, the Macao Judicial Court admitted two further legal opinions from Portuguese and U.S. law experts. On March 16, 2016, the Macao Judicial Court dismissed the defense of res judicata. An appeal against that decision was lodged on April 7, 2016, together with a request that the appeal be heard immediately. By a decision dated April 13, 2016, the Macao Judicial Court accepted that the appeal be heard immediately. Legal arguments were submitted May 23, 2016. AAEC replied to the legal arguments on or about July 14, 2016, which was three days late, upon payment of a penalty. The U.S. Defendants submitted a response on September 20, 2016. On March 25, 2015, application was made by the U.S. Defendants to the Macao Judicial Court to revoke the legal aid granted to AAEC, accompanied by a request for evidence taking from AAEC, relating to the fees and expenses that they incurred and paid in the U.S. subsequent action referred to below. The Macao Public Prosecutor has opposed the action on the ground of lack of evidence that AAEC's financial position has improved. No decision has been issued in respect to that application up to the present time. A complaint against AAEC's Macao lawyer arising from certain conduct in relation to recent U.S. proceedings was submitted to the Macao Lawyer's Association on October 19, 2015. A letter dated February 26, 2016, has been received from the Conselho Superior de Advocacia of the Macao Bar Association advising that disciplinary proceedings have commenced. A further letter dated April 5, 2016, was received from the Conselho Superior de Advocacia requesting confirmation that the signatories of the complaint were acting within their corporate authority. By a letter dated April 14, 2016, such confirmation has been provided. On September 28, 2016, the Conselho Superior de Advocacia invited comments on the defense which had been lodged by AAEC's Macao lawyer. On July 9, 2014, the plaintiff filed yet another action in the U.S. District Court against LVSC, LVSLLC, VCR (collectively, the "LVSC entities"), Sheldon G. Adelson, William P. Weidner, David Friedman and Does 1-50 for declaratory judgment, equitable accounting, misappropriation of trade secrets, breach of confidence and conversion based on a theory of copyright law. The claim is for $5.0 billion. On November 4, 2014, plaintiff finally effected notice on the LVSC entities which was followed by a motion to dismiss by the LVSC entities on November 10, 2014. Plaintiff failed to timely respond and on December 2, 2014, the LVSC entities moved for immediate dismissal and sanctions against plaintiff and his counsel for bringing a frivolous lawsuit. On December 19, 2014, plaintiff filed an incomplete and untimely response, which was followed by plaintiff's December 27, 2014 notice of withdrawal of the lawsuit and the LVSC entities' December 29, 2014, reply in favor of sanctions and dismissal with prejudice. On August 31, 2015, the judge dismissed the U.S. action and the LVSC entities' sanctions motion. The Macao action is in a preliminary stage and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of this matter or the range of reasonably possible loss, if any. The Company intends to defend this matter vigorously.
As previously disclosed by the Company, on February 5, 2007, AAEC brought a similar claim (the “Prior Action”) in the U.S. District Court, against LVSI (now known as LVSLLC), VCR and Venetian Venture Development, LLC, which are subsidiaries of the Company, and William P. Weidner and David Friedman, who are former executives of the Company. The U.S. District Court entered an order on April 16, 2010, dismissing the Prior Action. On April 20,

24





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

2012, LVSLLC, VCR and LVS (Nevada) filed an injunctive action (the “Nevada Action”) against AAEC in the U.S. District Court seeking to enjoin AAEC from proceeding with the Macao Action based on AAEC’s filing, and the U.S. District Court’s dismissal, of the Prior Action. On June 14, 2012, the U.S. District Court issued an order that denied the motions requesting the Nevada Action, thereby effectively dismissing the Nevada Action.
On February 11, 2014, the Company disclosed that it was the victim of a sophisticated cyber-attack on its computer networks in the United States. As a result of this criminal attack, the U.S. government has commenced investigations into the source of the attack. In addition, the Company is working with internal and external forensic information technology systems experts in connection with this effort. As a result of the investigations and the Company’s efforts, which are ongoing, the Company has learned that certain customer and employee data was compromised at its Bethlehem facility and other data may have been stolen in the attack as well as that the attack may have destroyed certain other Company data. The Company is cooperating fully with the investigations. Based on the information available to date and the absence of claims asserted thus far, management is currently unable to determine the probability of the outcome of any matters relating to the cyber-attack, the extent of materiality or the range of reasonably possible loss, if any.
NOTE 10 — SEGMENT INFORMATION
The Company’s principal operating and developmental activities occur in three geographic areas: Macao, Singapore and the U.S. The Company reviews the results of operations for each of its operating segments: The Venetian Macao; Sands Cotai Central; The Parisian Macao, which opened in September 2016; Four Seasons Macao; Sands Macao; Ferry Operations and Other, which includes various other operations that are ancillary to the Company’s properties in Macao; Marina Bay Sands; The Venetian Las Vegas, which includes the Sands Expo Center; The Palazzo; and Sands Bethlehem. The Venetian Las Vegas and The Palazzo operating segments are managed as a single integrated resort and have been aggregated as one reportable segment (the “Las Vegas Operating Properties”), considering their similar economic characteristics, types of customers, types of services and products, the regulatory business environment of the operations within each segment and the Company’s organizational and management reporting structure. The Company also reviews construction and development activities for each of its primary projects under development, in addition to its reportable segments noted above. The Company’s primary projects under development are the remainder of Sands Cotai Central and The Parisian Macao, and the Four Seasons Apartment Hotel Macao, Cotai Strip (the "Four Seasons Apartments") in Macao, and the Las Vegas Condo Tower (which construction currently is suspended and is included in Corporate and Other) in the U.S. The corporate activities of the Company are also included in Corporate and Other. The Company’s segment information as of September 30, 2016 and December 31, 2015, and for the three and nine months ended September 30, 2016 and 2015, is as follows (in thousands):
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Net Revenues
 
 
 
 
 
 
 
Macao:
 
 
 
 
 
 
 
The Venetian Macao
$
772,482

 
$
699,553

 
$
2,187,538

 
$
2,226,198

Sands Cotai Central
517,540

 
550,159

 
1,520,499

 
1,676,154

The Parisian Macao
68,608

 

 
68,608

 

Four Seasons Macao
161,213

 
167,947

 
434,486

 
533,314

Sands Macao
167,376

 
207,364

 
527,426

 
674,289

Ferry Operations and Other
46,400

 
43,422

 
126,076

 
117,428

 
1,733,619

 
1,668,445

 
4,864,633

 
5,227,383

Marina Bay Sands
762,606

 
750,677

 
2,076,394

 
2,248,535

United States:
 
 
 
 
 
 
 
Las Vegas Operating Properties
383,234

 
385,472

 
1,124,642

 
1,107,871

Sands Bethlehem
146,342

 
144,003

 
431,545

 
409,204

 
529,576

 
529,475

 
1,556,187

 
1,517,075

Intersegment eliminations
(57,259
)
 
(54,914
)
 
(162,351
)
 
(166,267
)
Total net revenues
$
2,968,542

 
$
2,893,683

 
$
8,334,863

 
$
8,826,726

 

25





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Intersegment Revenues
 
 
 
 
 
 
 
Macao:
 
 
 
 
 
 
 
The Venetian Macao
$
1,539

 
$
1,563

 
$
4,606

 
$
4,822

Sands Cotai Central
112

 
134

 
336

 
290

The Parisian Macao
19

 

 
19

 

Ferry Operations and Other
10,272

 
10,237

 
28,529

 
30,138

 
11,942

 
11,934

 
33,490

 
35,250

Marina Bay Sands
1,983

 
2,320

 
6,188

 
7,578

Las Vegas Operating Properties
43,334

 
40,660

 
122,673

 
123,439

Total intersegment revenues
$
57,259

 
$
54,914

 
$
162,351

 
$
166,267


 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2016
 
2015
 
2016
 
2015
Adjusted Property EBITDA
 
 
 
 
 
 
 
Macao:
 
 
 
 
 
 
 
The Venetian Macao
$
314,801

 
$
256,381

 
$
827,004

 
$
781,313

Sands Cotai Central
176,606

 
170,457

 
484,167

 
490,577

The Parisian Macao
19,190

 

 
19,190

 

Four Seasons Macao
62,527

 
58,785

 
154,401

 
177,591

Sands Macao
45,725

 
51,132

 
125,272

 
174,794

Ferry Operations and Other
9,662

 
8,427

 
24,457

 
16,780

 
628,511

 
545,182

 
1,634,491

 
1,641,055

Marina Bay Sands
390,660

 
389,717

 
1,022,565

 
1,168,243

United States:
 
 
 
 
 
 
 
Las Vegas Operating Properties
85,307

 
79,790

 
244,690

 
208,065

Sands Bethlehem
38,129

 
37,530

 
113,531

 
101,522

 
123,436

 
117,320

 
358,221

 
309,587

Consolidated adjusted property EBITDA(1)
1,142,607

 
1,052,219

 
3,015,277

 
3,118,885

Other Operating Costs and Expenses
 
 
 
 
 
 
 
Stock-based compensation
(2,588
)
 
(4,744
)
 
(12,251
)
 
(17,365
)
Corporate
(39,110
)
 
(37,488
)
 
(208,114
)
 
(127,276
)
Pre-opening
(85,861
)
 
(9,627
)
 
(127,700
)
 
(29,860
)
Development
(2,371
)
 
(3,147
)
 
(6,758
)
 
(7,028
)
Depreciation and amortization
(277,751
)
 
(247,698
)
 
(792,498
)
 
(750,212
)
Amortization of leasehold interests in land
(9,728
)
 
(9,737
)
 
(28,623
)
 
(29,060
)
Loss on disposal of assets
(5,621
)
 
(709
)
 
(15,425
)
 
(18,590
)
Operating income
719,577

 
739,069

 
1,823,908

 
2,139,494

Other Non-Operating Costs and Expenses
 
 
 
 
 
 
 
Interest income
2,299

 
2,158

 
6,328

 
12,598

Interest expense, net of amounts capitalized
(65,189
)
 
(66,962
)
 
(197,874
)
 
(199,018
)
Other income (expense)
21,514

 
16,275

 
(33,075
)
 
31,589

Loss on modification or early retirement of debt
(3,416
)
 

 
(3,416
)
 

Income tax expense
(69,272
)
 
(72,347
)
 
(187,008
)
 
(173,941
)
Net income
$
605,513

 
$
618,193

 
$
1,408,863

 
$
1,810,722

 ____________________
(1)
Consolidated adjusted property EBITDA, which is a non-GAAP financial measure, is net income before stock-based compensation expense, corporate expense, pre-opening expense, development expense, depreciation and amortization, amortization of leasehold interests in land, gain or loss on disposal of assets, interest, other income or expense, gain or loss on modification or early retirement of debt and income taxes. Consolidated adjusted property EBITDA is a supplemental non-GAAP financial measure used by management, as well as industry

26





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

analysts, to evaluate operations and operating performance. In particular, management utilizes consolidated adjusted property EBITDA to compare the operating profitability of its operations with those of its competitors, as well as a basis for determining certain incentive compensation.
 
Nine Months Ended 
 September 30,
 
2016
 
2015
Capital Expenditures
 
 
 
Corporate and Other
$
5,942

 
$
9,404

Macao:
 
 
 
The Venetian Macao
50,299

 
54,615

Sands Cotai Central
97,657

 
333,373

The Parisian Macao
797,923

 
519,794

Four Seasons Macao
9,150

 
12,097

Sands Macao
12,739

 
16,592

Ferry Operations and Other
2,896

 
1,916

 
970,664

 
938,387

Marina Bay Sands
49,954

 
96,665

United States:
 
 
 
Las Vegas Operating Properties
56,762

 
55,047

Sands Bethlehem
19,918

 
13,464

 
76,680

 
68,511

Total capital expenditures
$
1,103,240

 
$
1,112,967

 
 
September 30,
2016
 
December 31,
2015
Total Assets
 
 
 
Corporate and Other
$
536,821

 
$
463,272

Macao:
 
 
 
The Venetian Macao
2,308,839

 
2,949,533

Sands Cotai Central
4,155,037

 
4,393,716

The Parisian Macao
2,685,436

 
1,648,562

Four Seasons Macao
965,285

 
1,038,573

Sands Macao
314,073

 
373,113

Ferry Operations and Other
275,714

 
288,178

Other Development Projects
39

 
82

 
10,704,423

 
10,691,757

Marina Bay Sands
5,339,838

 
5,497,556

United States:
 
 
 
Las Vegas Operating Properties
3,409,906

 
3,517,816

Sands Bethlehem
689,672

 
693,056

 
4,099,578

 
4,210,872

Total assets
$
20,680,660

 
$
20,863,457

 

27





LAS VEGAS SANDS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

 
September 30,
2016
 
December 31,
2015
Total Long-Lived Assets
 
 
 
Corporate and Other
$
317,111

 
$
334,540

Macao:
 
 
 
The Venetian Macao
1,724,415

 
1,795,042

Sands Cotai Central
3,772,449

 
3,943,966

The Parisian Macao
2,600,548

 
1,645,881

Four Seasons Macao
878,356

 
903,649

Sands Macao
254,663

 
266,399

Ferry Operations and Other
159,550

 
167,540

 
9,389,981

 
8,722,477

Marina Bay Sands
4,490,687

 
4,476,064

United States:
 
 
 
Las Vegas Operating Properties
2,824,777

 
2,909,294

Sands Bethlehem
549,687

 
551,395

 
3,374,464

 
3,460,689

Total long-lived assets
$
17,572,243

 
$
16,993,770



28


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto, and other financial information included in this Form 10-Q. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “—Special Note Regarding Forward-Looking Statements.”
Operations
We view each of our casino properties as an operating segment. Our operating segments in the Macao Special Administrative Region (“Macao”) of the People’s Republic of China consist of The Venetian Macao Resort Hotel (“The Venetian Macao”); Sands Cotai Central; The Parisian Macao, which opened on September 13, 2016; the Four Seasons Hotel Macao, Cotai Strip and the Plaza Casino (collectively, the “Four Seasons Macao”); the Sands Macao; and various other operations that are ancillary to our properties in that region (“Ferry Operations and Other”). Our operating segment in Singapore is the Marina Bay Sands. Our operating segments in the United States consist of The Venetian Resort Hotel Casino (“The Venetian Las Vegas”), The Palazzo Resort Hotel Casino (“The Palazzo”) and the Sands Casino Resort Bethlehem (the “Sands Bethlehem”). The Venetian Las Vegas and The Palazzo operating segments are managed as a single integrated resort and have been aggregated into one reportable segment (the “Las Vegas Operating Properties”), considering their similar economic characteristics, types of customers, types of services and products, the regulatory business environment of the operations within each segment and our organizational and management reporting structure. For the nine months ended September 30, 2016 and 2015, gross revenue at our reportable segments was derived as follows:
At The Venetian Macao, approximately 82.3% and 81.3%, respectively, was derived from gaming activities, with the remainder derived from mall, room, food and beverage and other non-gaming sources.
At Sands Cotai Central, approximately 79.2% and 80.9%, respectively, was derived from gaming activities, with the remainder derived from room, food and beverage, mall and other non-gaming sources.
At The Parisian Macao, for the 18-day period ended September 30, 2016, approximately 78.7% was derived from gaming activities, with the remainder derived primarily from room, mall and food and beverage operations.
At Four Seasons Macao, approximately 69.7% and 74.1%, respectively, was derived from gaming activities, with the remainder derived primarily from mall, room and food and beverage operations.