-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UiS02kIWqK15hknhuS7dRLT44Ww5RsEu6K1Y6/oeVE1dKXRmsCm8/7QfMbFLfkEM lB71NBhgq5I1XofXbV6wrg== /in/edgar/work/0000850994-00-000006/0000850994-00-000006.txt : 20001114 0000850994-00-000006.hdr.sgml : 20001114 ACCESSION NUMBER: 0000850994-00-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LAS VEGAS SANDS INC CENTRAL INDEX KEY: 0000850994 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 043010100 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-42147 FILM NUMBER: 760730 BUSINESS ADDRESS: STREET 1: 3355 LAS VEGAS BLVD SOUTH RM 1A CITY: LAS VEGAS STATE: NV ZIP: 89109 BUSINESS PHONE: 702414452 MAIL ADDRESS: STREET 1: 3355 LAS VEGAS BOULEVARD SOUTH CITY: LAS VEGAS STATE: NV ZIP: 89109 10-Q 1 0001.txt QUARTERLY REPORT FOR LAS VEGAS SANDS, INC. ================================================================================ UNITED STATES SECURITIES & EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition period from to -------------- Commission File Number 333-42147 LAS VEGAS SANDS, INC. Incorporated pursuant to the Laws of Nevada State ---------- IRS -- Employer Identification No. 04-3010100 3355 Las Vegas Boulevard South, Room 1A, Las Vegas, Nevada 89109 (702) 414-1000 ---------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of November 13, 2000. Class Outstanding at November 13, 2000 Common Stock, $.10 par value 925,000 shares ================================================================================ LAS VEGAS SANDS, INC. Table of Contents Part I FINANCIAL INFORMATION Item 1. Consolidated Balance Sheets at September 30, 2000 (unaudited) and December 31, 1999 ..........................................1 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2000 (unaudited)and Three and Nine Months Ended September 30, 1999 (unaudited).....................2 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2000 (unaudited)and September 30, 1999 (unaudited) ....................................................3 Notes to Consolidated Financial Statements .....................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations .....................................15 Item 3. Quantitative and Qualitative Disclosures About Market Risk ....22 Part II OTHER INFORMATION Item 1. Legal Proceedings .............................................23 Item 6. Exhibits and Reports on Form 8-K ..............................24 Signatures ....................................................25 Part I Financial Information ================================================================================ Item 1. Financial Statements ================================================================================ LAS VEGAS SANDS, INC. Consolidated Balance Sheets (In thousands, except share data) ================================================================================ September 30, December 31, 2000 1999 ----------- ----------- Unaudited ASSETS Current assets: Cash and cash equivalents .................. $ 49,427 $ 26,252 Restricted cash and investments ............ 2,172 10,980 Accounts receivable, net ................... 56,905 43,203 Inventories ................................ 3,662 4,516 Prepaid expenses ........................... 4,071 4,072 ----------- ----------- Total current assets ........................... 116,237 89,023 Property and equipment, net .................... 1,066,306 1,079,192 Deferred offering costs, net ................... 23,900 29,865 Other assets, net .............................. 26,578 11,522 ----------- ----------- $ 1,233,021 $ 1,209,602 =========== =========== LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable ........................... $ 21,915 $ 18,128 Construction payables ...................... 5,103 10,178 Construction payables-contested ............ 7,232 7,232 Accrued interest payable ................... 35,699 12,490 Other accrued liabilities .................. 61,490 43,392 Current maturities of long-term debt ....... 38,869 42,859 ----------- ----------- Total current liabilities ...................... 170,308 134,279 Other long-term liabilities .................... 10,419 2,333 Long-term debt ................................. 876,254 907,754 ----------- ----------- 1,056,981 1,044,366 ----------- ----------- Redeemable Preferred Interest in Venetian Casino Resort, LLC, a wholly owned subsidiary .................. 163,257 149,530 ----------- ----------- Commitments and contingencies Stockholder's equity: Common stock, $.10 par value, 3,000,000 shares authorized, 925,000 shares issued and outstanding .................. 92 92 Capital in excess of par value ............. 98,995 112,722 Accumulated deficit since June 30, 1996 .... (86,304) (97,108) ----------- ----------- 12,783 15,706 ----------- ----------- $ 1,233,021 $ 1,209,602 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) ================================================================================ Three Months Ended September 30, 2000 1999 --------- ---------- Revenues: Casino ............................................ $ 81,912 $ 52,718 Rooms ............................................. 45,038 35,541 Food and beverage ................................. 13,873 12,007 Retail and other .................................. 17,758 10,718 --------- --------- 158,581 110,984 Less-promotional allowances .......................... (11,971) (10,646) --------- --------- Net revenues ...................................... 146,610 100,338 --------- --------- Operating expenses: Casino ............................................ 48,909 33,281 Rooms ............................................. 13,244 9,301 Food and beverage ................................. 6,673 7,381 Retail and other .................................. 9,065 5,126 Provision for doubtful accounts ................... 3,214 3,502 General and administrative ........................ 24,789 20,678 Corporate expense ................................. 1,657 -- Rental expense .................................... 3,080 2,744 Pre-opening expense ............................... -- -- Depreciation and amortization ..................... 10,456 10,290 --------- --------- 121,087 92,303 --------- --------- Operating income (loss) .............................. 25,523 8,035 --------- --------- Other income (expense): Interest income .................................... 359 371 Interest expense, net of amounts capitalized ....... (30,558) (26,596) --------- --------- Income (loss) before extraordinary item .............. (4,676) (18,190) Extraordinary item-loss on early retirement of debt -- -- --------- --------- Net income (loss) .................................... $ (4,676) $ (18,190) ========= ========= Basic and diluted loss per share before extraordinary item ................................... $ (10.20) $ (24.07) ========= ========= Basic and diluted loss per share ..................... $ (10.20) $ (24.07) ========= ========= The accompanying notes are an integral part of these consolidated financial statements. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) ================================================================================ Nine Months Ended September 30, 2000 1999 --------- ---------- Revenues: Casino ............................................ $ 264,040 $ 77,362 Rooms ............................................. 140,549 48,969 Food and beverage ................................. 49,472 17,876 Retail and other .................................. 49,154 14,442 --------- --------- 503,215 158,649 Less-promotional allowances .......................... (34,597) (15,337) --------- --------- Net revenues ...................................... 468,618 143,312 --------- --------- Operating expenses: Casino ............................................ 154,037 51,876 Rooms ............................................. 36,587 13,632 Food and beverage ................................. 24,575 11,606 Retail and other .................................. 23,031 6,586 Provision for doubtful accounts ................... 14,554 4,594 General and administrative ........................ 68,970 32,191 Corporate expense ................................. 4,501 -- Rental expense .................................... 8,966 3,517 Pre-opening expense ............................... -- 21,484 Depreciation and amortization ..................... 31,245 14,853 --------- --------- 366,466 160,339 --------- --------- Operating income (loss) .............................. 102,152 (17,027) --------- --------- Other income (expense): Interest income .................................... 1,199 2,169 Interest expense, net of amounts capitalized ....... (89,762) (43,342) --------- --------- Income (loss) before extraordinary item .............. 13,589 (58,200) Extraordinary item-loss on early retirement of debt (2,785) -- --------- --------- Net income (loss) .................................... $ 10,804 $ (58,200) ========= ========= Basic and diluted loss per share before extraordinary item ................................... $ (0.15) $ (73.88) ========= ========= Basic and diluted loss per share ..................... $ (3.16) $ (73.88) ========= ========= The accompanying notes are an integral part of these consolidated financial statements. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) ================================================================================ Nine Months Ended September 30, 2000 1999 -------- --------- Cash flows from operating activities: Net income (loss) .................................... $ 10,804 $ (58,200) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization ................ 31,245 14,853 Amortization of debt offering costs and original issue discount .................... 6,296 4,985 Loss on early retirement of debt ............. 2,785 Provision for doubtful accounts .............. 14,554 4,594 Changes in operating assets and liabilities: Accounts receivable ........................ (28,256) (37,621) Inventories ................................ 854 (3,772) Prepaid expenses ........................... 1 (5,283) Other assets ............................... (15,056) (22,073) Accounts payable ........................... 3,787 26,597 Accrued interest payable ................... 23,209 17,428 Other accrued liabilities .................. 26,184 38,555 -------- --------- Net cash provided by (used in) operating activities .. 76,407 (19,937) -------- --------- Cash flows from investing activities: Proceeds from sale of investments .................... 8,808 115,547 Capital expenditures ................................. (10,607) Construction of Casino Resort ........................ (12,827) (283,020) -------- --------- Net cash used in investing activities ................ (14,626) (167,473) -------- --------- Cash flows from financing activities: Proceeds from preferred interest in Venetian ......... -- 44,431 Proceeds from mall construction loan facility ........ -- 37,287 Repayments on bank credit facility-tranche A term loan (35,625) (5,625) Proceeds from bank credit facility-tranche A term loan -- 34,000 Repayments on bank credit facility-tranche B term loan (125) -- Proceeds from bank credit facility-tranche B term loan 50,000 -- Repayments on bank credit facility-revolver .......... (50,160) (9,609) Proceeds from bank credit facility-revolver .......... 11,000 32,006 Repayments on FF&E credit facility ................... (11,236) (2,931) Proceeds from FF&E credit facility ................... -- 83,842 Payments of deferred offering costs .................. (2,460) (617) -------- --------- Net cash provided by (used in) financing activities .. (38,606) 212,784 -------- --------- Increase in cash and cash equivalents ................ 23,175 25,374 Cash and cash equivalents at beginning of period ..... 26,252 2,285 -------- --------- Cash and cash equivalents at end of period ........... $ 49,427 $ 27,659 ======== ========= Supplemental disclosure of cash flow information: Cash payments for interest ......................... $ 60,053 $ 51,509 ======== ========= The accompanying notes are an integral part of these consolidated financial statements. ================================================================================ Notes to Financial Statements Note 1 Organization and Basis of Presentation - ------ -------------------------------------- The accompanying consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The year end balance sheet data was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles. In addition, certain amounts in the 1999 financial statements have been reclassified to conform with the 2000 presentation. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair presentation of the results for the interim period have been included. The interim results reflected in the unaudited financial statements are not necessarily indicative of expected results for the full year. Las Vegas Sands, Inc. ("LVSI") is a Nevada corporation. On April 28, 1989, LVSI commenced gaming operations in Las Vegas, Nevada, by acquiring the Sands Hotel and Casino (the "Sands"). On June 30, 1996, LVSI closed the Sands and subsequently demolished the facility to make way for a planned two-phase hotel-casino resort. The first phase of the hotel-casino resort (the "Casino Resort") includes 3,036 suites, casino space approximating 116,000 square feet (the "Casino"), approximately 500,000 square feet of convention space and approximately 475,000 gross leasable square feet of retail shops and restaurants (the "Mall"). Construction of the Casino Resort commenced in April 1997. The Casino and certain suites and facilities at the Casino Resort opened on May 4, 1999 and the Mall opened on June 19, 1999. The consolidated financial statements include the accounts of LVSI and its wholly owned subsidiaries (the "Subsidiaries"), including Venetian Casino Resort, LLC ("Venetian"), Grand Canal Shops Mall, LLC (the "Mall Subsidiary"), Grand Canal Shops Mall Subsidiary, LLC (the "New Mall Subsidiary"), Lido Casino Resort, LLC (the "Phase II Subsidiary"), Mall Intermediate Holding Company, LLC ("Mall Intermediate"), Grand Canal Shops Mall Construction, LLC ("Mall Construction"), Lido Intermediate Holding Company, LLC ("Lido Intermediate"), Grand Canal Shops Mall Holding Company, LLC, Grand Canal Shops Mall MM Subsidiary, Inc., Lido Casino Resort Holding Company, LLC, Grand Canal Shops Mall MM, Inc. and Lido Casino Resort MM, Inc. (collectively, the "Company"). Each of LVSI and the Subsidiaries is a separate legal entity and the assets of each such entity are intended to be available only to the creditors of such entity. Venetian was formed on March 20, 1997 to own and operate certain portions of the Casino Resort. LVSI is the managing member and owns 100% of the common voting equity in Venetian. The entire preferred interest in Venetian is owned by Interface Group Holding Company, Inc. ("Interface Holding"), which is wholly owned by LVSI's sole stockholder (the "Sole Stockholder") . Mall Intermediate and Lido Intermediate are special purpose companies, which are wholly owned subsidiaries of Venetian. They are guarantors or co-obligors of certain indebtedness related to the construction of the Casino Resort. The New Mall Subsidiary, an indirect wholly-owned subsidiary of LVSI, was formed on December 9, 1999 and owns and operates the Mall. Note 2 Per Share Data - ------ -------------- Basic and diluted income (loss) per share are calculated based upon the weighted average number of shares outstanding. The weighed average number of shares outstanding used in the computation of income (loss) per share of common stock was 925,000 for all periods presented. The net income (loss) available to common stockholders used in computing the basic and diluted loss per share includes accrued preferred dividends of approximately $4.7 million and $13.7 million, respectively, for the three and nine month periods ended September 30, 2000 and $4.0 million and $10.1 million, respectively, for the three and nine month periods ended September 30, 1999. The accrued dividends have been reflected as a charge against capital in excess of par value in the accompanying financial statements. Notes to Financial Statements (Continued) Note 3 Property and Equipment - ------ ---------------------- Property and equipment consists of the following (in thousands):
September 30, December 31, 2000 1999 ----------- ----------- Land and land improvements ...................... $ 105,528 $ 105,425 Building and improvements ....................... 821,650 816,826 Equipment, furniture, fixtures and leasehold improvements ........................ 142,047 139,147 Construction in progress ........................ 53,000 42,649 ----------- ----------- 1,122,225 1,104,047 Less: accumulated depreciation and amortization ............................. (55,919) (24,855) ----------- ----------- $ 1,066,306 $ 1,079,192 =========== ===========
During the three and nine month periods ended September 30, 1999, the Company capitalized interest expense of $0.0 and $31.2 million, respectively. No interest has been capitalized in 2000 because the Company was not engaged in active construction or development during such period. As of September 30, 2000, construction in progress represented project design and shared facilities costs for the planned second phase of the Casino Resort, to be owned by a subsidiary of the Company (the "Phase II Resort"), and ongoing capital improvement projects at the Casino Resort. Note 4 Long-Term Debt - ------ -------------- Long-term debt consists of the following (in thousands):
September 30, December 31, 2000 1999 --------- --------- Indebtedness of the Company and its Subsidiaries other than the New Mall Subsidiary: - ----------------------------------- 12 1/4% Mortgage Notes, due November 15, 2004 ....... $ 425,000 $ 425,000 14 1/4% Senior Subordinated Notes, due November 15, 2005 (Net of unamortized discount of $4,482 in 2000 and $5,138 in 1999) .......................... 93,018 92,362 Bank Credit Facility-Revolver ....................... -- 39,160 Bank Credit Facility-Tranche A Term Loan ............ 103,125 138,750 Bank Credit Facility-Tranche B Term Loan ............ 49,875 FF&E Credit Facility ................................ 80,602 91,838 Subordinated Owner Indebtedness: - -------------------------------- Completion Guaranty Loan ............................ 23,503 23,503 Indebtedness of the New Mall Subsidiary: - ---------------------------------------- Mall Tranche A Take-out Loan ........................ 105,000 105,000 Mall Tranche B Take-out Loan ........................ 35,000 35,000 Less: current maturities ............................ (38,869) (42,859) --------- --------- Total long-term debt ................................ $ 876,254 $ 907,754 ========= =========
Notes to Financial Statements (Continued) Note 4 Long-Term Debt (Continued) - ------ -------------------------- In connection with the financing for the Casino Resort, the Company entered into a series of transactions during 1997 to provide for the development and construction of the Casino Resort. In November 1997, the Company issued $425.0 million aggregate principal amount of Mortgage Notes (the "Mortgage Notes") and $97.5 million aggregate principal amount of Senior Subordinated Notes (the "Senior Subordinated Notes" and, together with the Mortgage Notes, the "Notes") in a private placement. On June 1, 1998, LVSI and Venetian completed an exchange offer to exchange the Notes for other notes with substantially the same terms. In November 1997, LVSI, Venetian and a syndicate of lenders entered into a Bank Credit Facility (the "Bank Credit Facility") providing for up to $150.0 million in multiple draw term loans (the "Tranche A Term Loan") to the Company for construction and development of the Casino Resort. Up to $40.0 million of additional credit in the form of revolving loans under the Bank Credit Facility (the "Revolver") is available generally for working capital. In June 2000, the Company amended certain terms of the Bank Credit Facility in order to (i) add a new senior secured tranche B term loan (the "Tranche B Term Loan") in the amount of $50.0 million, the proceeds of which were applied to (x) prepay the Tranche A Term Loan in forward order of maturity in the amount of $30.0 million and (y) reduce outstanding loans under the Revolver by $20.0 million (net of fees and expenses) without decreasing available commitments of the Revolver and (ii) adjust certain financial covenants provided for in the Bank Credit Facility. The Company recorded a $2.8 million extraordinary loss on early retirement of debt in connection with this transaction. The purpose of the June 2000 modifications to the Bank Credit Facility was to refinance a portion of the Tranche A Term Loan and to provide additional flexibility and the ability to fund capital expenditures and possible working capital requirements associated with the Company's premium gaming business. The Tranche B Term Loan has a four year maturity, and an interest rate of LIBOR plus 350 basis points. In December 1997, the Company also entered into an agreement (the "FF&E Credit Facility") with certain lenders to provide for $97.7 million of financing for certain furniture, fixtures and equipment to be secured under the FF&E Credit Facility and an electrical substation. Financial covenant modifications similar to those made to the Bank Credit Facility were made in June 2000 to the FF&E Credit Facility, which has substantially identical financial covenants. On November 12, 1999, an advance of approximately $23.5 million was made under the Sole Stockholder's completion guaranty (the "Completion Guaranty"). Advances made under the Completion Guaranty up to $25.0 million are treated as a junior loan from the Sole Stockholder to Venetian that is subordinated in right of payment to the indebtedness under the Bank Credit Facility, the FF&E Credit Facility and the Notes. In November 1997, LVSI, Venetian, Mall Construction and a major non-bank lender entered into a Mall Construction Loan Facility to provide up to $140.0 million in financing for the retail mall in the Casino Resort (the "Mall Construction Loan Facility"). On December 20, 1999, Goldman Sachs Mortgage Company, the Bank of Nova Scotia and other lenders (collectively, the "Tranche A Take-out Lender") funded a $105.0 million tranche A take-out loan to the New Mall Subsidiary (the "Tranche A Take-out Loan"). The indebtedness under the Tranche A Take-out Loan is secured by first priority liens on the assets that comprise the Mall (the "Mall Assets"). Also, on December 20, 1999, an entity wholly owned by the Sole Stockholder funded a tranche B take-out loan to provide $35.0 million in financing to the New Mall Subsidiary (the "Tranche B Take-out Loan" and, together with the Tranche A Take-out Loan, the "Mall Take-out Financing"). The proceeds, along with $105.0 million of proceeds from the Tranche A Take-out Loan, were used to repay the Mall Construction Loan Facility in full. Note 5 Redeemable Preferred Interest in Venetian Casino Resort, LLC - ------ ------------------------------------------------------------ During 1997, Interface Holding contributed $77.1 million in cash to Venetian in exchange for a Series A preferred interest (the "Series A Preferred Interest") in Venetian. By its terms, the Series A Preferred Interest was convertible at any time into a Series B preferred interest in Venetian (the "Series B Preferred Interest"). In August 1998, the Series A Preferred Interest was converted into the Series B Preferred Interest. The rights of the Series B Preferred Interest include the accrual of a preferred return of 12% from the date of contribution in respect of the Series A Preferred Interest. Until the indebtedness under the Bank Credit Facility is repaid and cash payments are permitted under the restricted payment covenants of the indentures entered into in connection with the Notes (the "Indentures"), the preferred return on the Notes to Financial Statements (Continued) Note 5 Redeemable Preferred Interest in Venetian Casino Resort, LLC (Continued) - ------ ------------------------------------------------------------ Series B Preferred Interest will accrue and will not be paid in cash. Commencing in November 2009, distributions must be made to the extent of the positive capital account of the holder. During the second and third quarters of 1999, Interface Holding contributed $37.3 million and $7.1 million, respectively, in cash in exchange for an additional Series B Preferred Interest. During the three and nine month periods ended September 30, 2000 and September 30, 1999, $4.7 million and $13.7 million, and $4.0 million and $10.1 million, respectively, were accrued on the Series B Preferred Interest related to the contributions made. Since 1997, no distributions of preferred interest or preferred return have been paid on the Series B Preferred Interest. Note 6 Commitments and Contingencies - ------ ----------------------------- Litigation ---------- The Company is party to litigation matters and claims related to its operations and the construction of the Casino Resort. Except as described below, the Company does not expect that the final resolution of these matters will have a material impact on the financial position, results of operation or cash flows of the Company. The construction of the principal components of the Casino Resort was undertaken by Lehrer McGovern Bovis, Inc. (the "Construction Manager") pursuant to a construction management agreement and certain amendments thereto (as so amended, the "Construction Management Contract"). The Construction Management Contract established a final guaranteed maximum price (the "Final GMP") of $645.0 million, so that, subject to certain exceptions (including an exception for cost overruns due to "scope changes"), the Construction Manager was responsible for any costs of the work covered by the Construction Management Contract in excess of the Final GMP. The obligations of the Construction Manager under the Construction Management Contract are guaranteed by Bovis, Inc. ("Bovis" and such guaranty, the "Bovis Guaranty"), the Construction Manager's direct parent at the time the Construction Management Contract was entered into. Bovis' obligations under the Bovis Guaranty are guaranteed by The Peninsular and Oriental Steam Navigation Company ("P&O"), a British public company and the Construction Manager's ultimate parent at the time the Construction Management Contract was entered into (such guaranty, the "P&O Guaranty"). On July 30, 1999, Venetian filed a complaint against the Construction Manager and Bovis in United States District Court for the District of Nevada. The action alleges breach of contract by the Construction Manager of its obligations under the Construction Management Contract and a breach of contract by Bovis of its obligations under the Bovis Guaranty, including failure to fully pay trade contractors and vendors and failure to meet the April 21, 1999 guaranteed completion date. The Company amended this complaint on November 23, 1999 to add P&O as an additional defendant. The suit is intended to ask the courts, among other remedies, to require the Construction Manager and its guarantors to pay its contractors, to compensate Venetian for the Construction Manager's failure to perform its duties under the Construction Management Contract and to pay the Company the agreed upon liquidated damages penalty for failure to meet the guaranteed substantial completion date. Venetian seeks total damages in excess of $50.0 million. The Construction Manager subsequently filed motions to dismiss the Company's complaint on various grounds, which the Company opposed. The Construction Manager's principal motions to date have either been denied by the court or voluntarily withdrawn. In response to Venetian's breach of contract claims against the Construction Manager, Bovis and P&O, the Construction Manager filed a complaint on August 3, 1999 against Venetian in the District Court of Clark County, Nevada. The action alleges a breach of contract and quantum meruit claim under the Construction Management Contract and also alleges that Venetian defrauded the Construction Manager in connection with the construction of the Casino Resort. The Construction Manager seeks damages, attorney's fees and costs and punitive damages. In the lawsuit, the Construction Manager claims that it is owed $145.6 million from Venetian and its affiliates. This complaint was subsequently amended by the Construction Manager, which also filed an additional complaint against the Company relating to work done and funds advanced with respect to the contemplated development of the Phase II Resort. Based upon its preliminary review of the complaints, the fact that the Construction Manager has not provided Venetian with reasonable documentation to support such claims, and the Company's belief that the Construction Manager has materially breached its agreements with the Company, the Company believes that the Construction Manager's claims are without merit and intends to vigorously defend itself and pursue its claims against the Construction Manager in any litigation. Notes to Financial Statements (Continued) Note 6 Commitments and Contingencies (Continued) - ------ ----------------------------------------- In connection with these disputes, as of December 31, 1999 the Construction Manager and its subcontractors filed mechanics liens against the Casino Resort for $145.6 million and $182.2 million, respectively. As of December 31, 1999, the Company had purchased surety bonds for virtually all of the claims underlying these liens (other than approximately $15.0 million of claims with respect to which the Construction Manager purchased bonds). As a result, there can be no foreclosure of the Casino Resort in connection with the claims of Construction Manager and its subcontractors. However, the Company will be required to pay or immediately reimburse the bonding company if and to the extent that the underlying claims are judicially determined to be valid. If such claims are not settled, it is likely to take a significant amount of time for their validity to be judicially determined. The Company believes that these claims are, in general, unsubstantiated, without merit, overstated and/or duplicative. The Construction Manager itself has publicly acknowledged that at least some of the claims of its subcontractors are without merit. In addition, the Company believes that pursuant to the Construction Management Contract and the Final GMP, the Construction Manager is responsible for payment of any subcontractors' claims to the extent they are determined to be valid. The Company may also have a variety of other defenses to the liens that have been filed, including, for example, the fact that the Construction Manager and its subcontractors previously waived or released their right to file liens against the Casino Resort. The Company intends to vigorously defend itself in any lien proceedings. On August 9, 1999, the Company notified the insurance companies providing coverage under its liquidated damages insurance policy (the "LD Policy") that it has a claim under the LD Policy. The LD Policy provides insurance coverage for the failure of the Construction Manager to achieve substantial completion of the portions of the Casino Resort covered by the Construction Management Contract within 30 days of the April 21, 1999 deadline, with a maximum liability under the LD Policy of approximately $24.1 million and with coverage being provided, on a per-day basis, for days 31-120 of the delay in the achievement of substantial completion. Because the Company believes that substantial completion was not achieved until November 12, 1999, the Company's claim under the LD Policy is likely to be for the above-described maximum liability of $24.1 million. The Company expects the LD Policy insurers to assert many of the same claims and defenses that the Construction Manager has or will assert in the above-described litigations. Liability under the LD Policy may ultimately be determined by binding arbitration. In June 2000, the Company purchased an insurance policy (the "Insurance Policy") for loss coverage in connection with all litigation relating to the construction of the Casino Resort (the "Construction Litigation"). Under the Insurance Policy, the Company will self-insure the first $45.0 million and the insurer will insure up to the next $80.0 million of any possible covered losses. The Insurance Policy provides coverage for any amounts determined in the Construction Litigation to be owed to the Construction Manager or its subcontractors relating to claimed delays, inefficiencies, disruptions, lack of productivity/unauthorized overtime or schedule impact, allegedly caused by the Company during construction of the Casino Resort, as well as any defense costs. The insurance is in addition to, and does not affect, any scope change guarantees provided by the Sole Stockholder pursuant to the Completion Guaranty. On July 8, 1999, the Company and other competitors filed an action in the Eighth Judicial District Court for the State of Nevada challenging the actions of the Board of the Las Vegas Convention and Visitors Authority (the "LVCVA") with respect to the Las Vegas Convention Center (the "LVCC") expansion, as well as the LVCVA's financing through proposed sale of "revenue bonds." In that litigation, the Company and others alleged inter alia that the LVCVA engaged in violations of Nevada's Open Meeting Law, and further alleged that the proposed bonds were not "revenue" bonds and thus could not be issued without prior approval of the voters of Clark County, Nevada. After a trial on the merits of that case, the court rendered a decision in favor of the LVCVA and against the plaintiffs. On December 22, 1999, the Company filed a Notice of Appeal of the State Court Action to the Supreme Court of the State of Nevada. All of the pending litigation described above is in preliminary stages and it is not yet possible to determine its ultimate outcome. If any litigation or other proceedings concerning the claims of the Construction Manager or its subcontractors were decided adversely to the Company, such litigation or other lien proceedings could have a material effect on the financial position, results of operations or cash flows of the Company to the extent such litigation is not covered by the Insurance Policy. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information - ------ -------------------------------- Venetian and LVSI are co-obligors of the Notes and certain other indebtedness related to construction of the Casino Resort and are jointly and severally liable for such indebtedness (including the Notes). Venetian, Mall Intermediate, Mall Construction, and Lido Intermediate (collectively, the "Subsidiary Guarantors") are wholly owned subsidiaries of LVSI. The Subsidiary Guarantors have jointly and severally guaranteed (or are co-obligors of) such debt on a full and unconditional basis. No other subsidiary of LVSI is an obligor or guarantor of any of the Casino Resort financing. Because the New Mall Subsidiary is not a guarantor of any indebtedness of the Company or any of its other subsidiaries (collectively, the "Venetian Entities") (other than the Mall Take-out Financing), creditors of the Venetian Entities (including the holders of the Notes) do not have a direct claim against the Mall Assets. As a result, indebtedness of the Venetian Entities (including the Notes) is, with respect to the Mall Assets, effectively subordinated to indebtedness of the New Mall Subsidiary. The New Mall Subsidiary is not restricted by any of the debt instruments of LVSI, Venetian or the Subsidiary Guarantors (including the Indentures) from incurring any indebtedness. The terms of the Tranche A Take-out Loan prohibit the New Mall Subsidiary from paying dividends or making distributions to any of the Venetian Entities unless payments under the Tranche A Take-out Loan are current, and, with certain limited exceptions, prohibit the New Mall Subsidiary from making any loans to such entities. Any additional indebtedness incurred by the New Mall Subsidiary may include additional restrictions on the ability of the New Mall Subsidiary to pay any such dividends and make any such distributions or loans. Prior to October 1998, Venetian owned approximately 44 acres of land on or near the Las Vegas Strip (the "Strip"), on the site of the former Sands. Such property includes the site on which the Casino Resort was constructed. Approximately 14 acres of such land was transferred to the Phase II Subsidiary in October 1998. On December 31, 1999, an additional 1.75 acres of land was contributed indirectly by the Sole Stockholder to the Phase II Subsidiary. The Phase II Resort is planned to be constructed adjacent to the Casino Resort. Because the Phase II Subsidiary will not be a guarantor of the Company's indebtedness, creditors of the Company (including the holders of the Notes) will not have a direct claim against the assets of the Phase II Subsidiary. As a result, the indebtedness of the Company (including the Notes) will be effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase II Subsidiary is not subject to any of the restrictive covenants of the debt instruments of the Company (including the Notes). Any indebtedness incurred by the Phase II Subsidiary is expected to include material restrictions on the ability of the Phase II Subsidiary to pay dividends or make distributions or loans to the Company and its subsidiaries. Separate financial statements and other disclosures concerning each of Venetian and the Subsidiary Guarantors are not presented below because management believes that they are not material to investors. Summarized financial information of LVSI, Venetian, the Subsidiary Guarantors and the non-guarantor subsidiaries on a combined basis as of September 30, 2000 and December 31, 1999 and for the three and nine month periods ended September 30, 2000 and September 30, 1999 is as follows (in thousands): ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS September 30, 2000 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Cash and cash equivalents ......................... $ 34,479 $ 14,602 Restricted cash and investments ................... -- 1,110 Intercompany receivable ........................... 34,585 -- Accounts receivable, net .......................... 36,252 17,610 Inventories ....................................... -- 3,662 Prepaid expenses .................................. 1,176 2,824 ----------- ----------- Total current assets ............................ 106,492 39,808 Property and equipment, net ....................... -- 844,209 Investment in Subsidiaries ........................ 126,022 67,116 Deferred offering costs, net ...................... -- 19,442 Other assets, net ................................. 3,835 19,616 ----------- ----------- $ 236,349 $ 990,191 =========== =========== Accounts payable .................................. $ 3,307 $ 17,179 Construction payable .............................. -- 2,187 Construction payable-contested .................... -- 7,232 Intercompany payables ............................. -- 15,992 Accrued interest payable .......................... -- 30,720 Other accrued liabilities ......................... 21,707 39,243 Current maturities of long term debt ................................... -- 38,869 ----------- ----------- Total current liabilities ....................... 25,014 151,422 Other long-term liabilities ....................... -- 10,419 Long-term debt .................................... -- 736,254 ----------- ----------- 25,014 898,095 Redeemable Preferred Interest in Venetian ...................................... -- 163,257 ----------- ----------- Stockholder's equity .............................. 211,335 (71,161) ----------- ----------- $ 236,349 $ 990,191 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) September 30, 2000 (Unaudited) GUARANTOR SUBSIDIARIES ------------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC ----------- ----------- Cash and cash equivalents ......................... $ 4 $ 4 Restricted cash and investments ................... -- -- Intercompany receivable ........................... -- -- Accounts receivable, net .......................... -- -- Inventories ....................................... -- -- Prepaid expenses .................................. -- -- ----------- ----------- Total current assets ............................ 4 4 Property and equipment, net ....................... -- -- Investment in Subsidiaries ........................ -- -- Deferred offering costs, net ...................... -- -- Other assets, net ................................. -- -- ----------- ----------- $ 4 $ 4 =========== =========== Accounts payable .................................. $ -- $ -- Construction payable .............................. -- -- Construction payable-contested .................... -- -- Intercompany payables ............................. -- -- Accrued interest payable .......................... -- -- Other accrued liabilities ......................... -- -- Current maturities of long term debt ................................... -- -- ----------- ----------- Total current liabilities ....................... -- -- Other long-term liabilities ....................... -- -- Long-term debt .................................... -- -- ----------- ----------- Redeemable Preferred Interest in Venetian ...................................... -- -- ----------- ----------- Stockholder's equity .............................. 4 4 ----------- ----------- $ 4 $ 4 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) September 30, 2000 (Unaudited) NON-GUARANTOR SUBSIDIARIES ------------------------------ Grand Canal Other Shops Mall Non- Subsidiary Guarantor LLC (1) Subsidiaries (2) ----------- ----------- Cash and cash equivalents ................. $ 288 $ 50 Restricted cash and investments ........... 1,062 -- Intercompany receivable ................... -- -- Accounts receivable, net .................. 2,998 45 Inventories ............................... -- -- Prepaid expenses .......................... 71 -- ----------- ----------- Total current assets .................... 4,419 95 Property and equipment, net ............... 141,152 80,945 Investment in Subsidiaries ................ -- -- Deferred offering costs, net .............. 4,458 -- Other assets, net ......................... 3,127 -- ----------- ----------- $ 153,156 $ 81,040 =========== =========== Accounts payable .......................... $ 1,429 $ -- Construction payable ...................... -- 2,916 Construction payable-contested ............ -- -- Intercompany payables ..................... 18,593 -- Accrued interest payable .................. 4,979 -- Other accrued liabilities ................. 489 51 Current maturities of long term debt ........................... -- -- ----------- ----------- Total current liabilities ............... 25,490 2,967 Other long-term liabilities ............... -- -- Long-term debt ............................ 140,000 -- ----------- ----------- 165,490 2,967 Redeemable Preferred Interest in Venetian .............................. -- -- ----------- ----------- Stockholder's equity ...................... (12,334) 78,073 ----------- ----------- $ 153,156 $ 81,040 =========== =========== [FN] - ---------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of September 30, 2000. (2) Land with a historical cost basis of $29,169 was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Sole Stockholder during December 1999. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) September 30, 2000 (Unaudited) Consolidating/ Eliminating Entries Total ----------- ----------- Cash and cash equivalents ....................... $ -- $ 49,427 Restricted cash and investments ................. -- 2,172 Intercompany receivable ......................... (34,585) -- Accounts receivable, net ........................ -- 56,905 Inventories ..................................... -- 3,662 Prepaid expenses ................................ -- 4,071 ----------- ----------- Total current assets .......................... (34,585) 116,237 Property and equipment, net ..................... -- 1,066,306 Investment in Subsidiaries ...................... (193,138) -- Deferred offering costs, net .................... -- 23,900 Other assets, net ............................... -- 26,578 ----------- ----------- $ (227,723) $ 1,233,021 =========== =========== Accounts payable ................................ $ -- $ 21,915 Construction payable ............................ -- 5,103 Construction payable-contested .................. -- 7,232 Intercompany payables ........................... (34,585) -- Accrued interest payable ........................ -- 35,699 Other accrued liabilities ....................... -- 61,490 Current maturities of long term debt ................................. -- 38,869 ----------- ----------- Total current liabilities ..................... (34,585) 170,308 Other long-term liabilities ..................... -- 10,419 Long-term debt .................................. -- 876,254 ----------- ----------- (34,585) 1,056,981 Redeemable Preferred Interest in Venetian .................................... -- 163,257 ----------- ----------- Stockholder's equity ............................ (193,138) 12,783 ----------- ----------- $ (227,723) $ 1,233,021 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS December 31, 1999 Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Cash and cash equivalents ....................... $ 23,961 $ 2,237 Restricted cash and investments ................. -- 8,789 Intercompany receivable ......................... -- 24,736 Accounts receivable, net ........................ 22,279 17,519 Inventories ..................................... -- 4,516 Prepaid expenses ................................ 629 3,229 ----------- ----------- Total current assets .......................... 46,869 61,026 Property and equipment, net ..................... -- 853,282 Investment in Subsidiaries ...................... 126,016 67,091 Deferred offering costs, net .................... -- 24,441 Other assets, net ............................... 3,804 4,651 ----------- ----------- $ 176,689 $ 1,010,491 =========== =========== Accounts payable ................................ $ 834 $ 15,843 Construction payable ............................ -- 6,262 Construction payable-contested .................. -- 7,232 Intercompany payables ........................... 2,051 -- Accrued interest payable ........................ -- 12,327 Other accrued liabilities ....................... 19,848 22,580 Current maturities of long term debt ...................................... -- 42,859 ----------- ----------- Total current liabilities ..................... 22,733 107,103 Other long-term liabilities ..................... -- 2,333 Long-term debt .................................. -- 767,754 ----------- ----------- 22,733 877,190 Redeemable Preferred Interest in Venetian .................................... -- 149,530 ----------- ----------- Stockholder's equity ............................ 153,956 (16,229) ----------- ----------- $ 176,689 $ 1,010,491 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) December 31, 1999 GUARANTOR SUBSIDIARIES ------------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC ----------- ----------- Cash and cash equivalents ......................... $ 4 $ 5 Restricted cash and investments ................... -- -- Intercompany receivable ........................... -- -- Accounts receivable, net .......................... -- -- Inventories ....................................... -- -- Prepaid expenses .................................. -- -- ----------- ----------- Total current assets ............................ 4 5 Property and equipment, net ....................... -- -- Investment in Subsidiaries ........................ -- -- Deferred offering costs, net ...................... -- -- Other assets, net ................................. -- -- ----------- ----------- $ 4 $ 5 =========== =========== Accounts payable .................................. $ -- $ -- Construction payable .............................. -- -- Construction payable-contested .................... -- -- Intercompany payables ............................. -- -- Accrued interest payable .......................... -- -- Other accrued liabilities ......................... -- -- Current maturities of long term debt ........................................ -- -- ----------- ----------- Total current liabilities ....................... -- -- Other long-term liabilities ....................... -- -- Long-term debt .................................... -- -- ----------- ----------- Redeemable Preferred Interest in Venetian ...................................... -- -- ----------- ----------- Stockholder's equity .............................. 4 5 ----------- ----------- $ 4 $ 5 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) December 31, 1999 NON-GUARANTOR SUBSIDIARIES -------------------------- Grand Canal Other Shops Mall Non- Subsidiary Guarantor LLC (1) Subsidiaries(2) ----------- ----------- Cash and cash equivalents .................... $ -- $ 45 Restricted cash and investments .............. 2,191 -- Intercompany receivable ...................... -- -- Accounts receivable, net ..................... 3,405 -- Inventories .................................. -- -- Prepaid expenses ............................. 214 -- ----------- ----------- Total current assets ....................... 5,810 45 Property and equipment, net .................. 143,965 81,945 Investment in Subsidiaries ................... -- -- Deferred offering costs, net ................. 5,424 -- Other assets, net ............................ 3,067 -- ----------- ----------- $ 158,266 $ 81,990 =========== =========== Accounts payable ............................. $ 1,451 $ -- Construction payable ......................... -- 3,916 Construction payable-contested ............... -- -- Intercompany payables ........................ 22,685 -- Accrued interest payable ..................... 163 -- Other accrued liabilities .................... 964 -- Current maturities of long term debt ................................... -- -- ----------- ----------- Total current liabilities .................. 25,263 3,916 Other long-term liabilities .................. -- -- Long-term debt ............................... 140,000 -- ----------- ----------- 165,263 3,916 Redeemable Preferred Interest in Venetian ................................. -- -- ----------- ----------- Stockholder's equity ......................... (6,997) 78,074 ----------- ----------- $ 158,266 $ 81,990 =========== =========== [FN] (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no assets or liabilities as of December 31, 1999. (2) Land with a historical cost basis of $29,169 was transferred from Venetian, a co-obligor of the Notes, to the Phase II Subsidiary, a non-guarantor subsidiary, in October 1998 and land with a value of $11.8 million was indirectly contributed by the Sole Stockholder during December 1999. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED BALANCE SHEETS, (Continued) December 31, 1999 Consolidating/ Eliminating Entries Total ----------- ----------- Cash and cash equivalents ....................... $ -- $ 26,252 Restricted cash and investments ................. -- 10,980 Intercompany receivable ......................... (24,736) -- Accounts receivable, net ........................ -- 43,203 Inventories ..................................... -- 4,516 Prepaid expenses ................................ -- 4,072 ----------- ----------- Total current assets .......................... (24,736) 89,023 Property and equipment, net ..................... -- 1,079,192 Investment in Subsidiaries ...................... (193,107) -- Deferred offering costs, net .................... -- 29,865 Other assets, net ............................... -- 11,522 ----------- ----------- $ (217,843) $ 1,209,602 =========== =========== Accounts payable ................................ $ -- $ 18,128 Construction payable ............................ -- 10,178 Construction payable-contested .................. -- 7,232 Intercompany payables ........................... (24,736) -- Accrued interest payable ........................ -- 12,490 Other accrued liabilities ....................... -- 43,392 Current maturities of long term debt ...................................... -- 42,859 ----------- ----------- Total current liabilities ..................... (24,736) 134,279 Other long-term liabilities ..................... -- 2,333 Long-term debt .................................. -- 907,754 ----------- ----------- (24,736) 1,044,366 Redeemable Preferred Interest in Venetian .................................... -- 149,530 ----------- ----------- Stockholder's equity ............................ (193,107) 15,706 ----------- ----------- $ (217,843) $ 1,209,602 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS For the three months ended September 30, 2000 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Revenues: Casino ........................................... $ 81,912 $ -- Room ............................................. -- 45,038 Food and beverage ................................ -- 13,873 Retail and other ................................. 337 19,730 ----------- ----------- Total revenue .................................... 82,249 78,641 Less promotional allowance ....................... -- (11,971) ----------- ----------- Net revenues ..................................... 82,249 66,670 ----------- ----------- Operating expenses: Casino ........................................... 60,068 -- Room ............................................. -- 13,244 Food and beverage ................................ -- 6,673 Retail and other ................................. -- 4,687 Provision for doubtful accounts .................. 2,614 600 General and administrative ....................... 1,136 23,622 Corporate expense ................................ 655 1,002 Rental expense ................................... 1,056 1,462 Depreciation and amortization .................... -- 9,324 ----------- ----------- 65,529 60,614 ----------- ----------- Operating income (loss) .......................... 16,720 6,056 ----------- ----------- Other income (expense): Interest income .............................. 147 192 Interest expense ............................. -- (25,873) ----------- ----------- Income (loss) before extraordinary item .......... 16,867 (19,625) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ 16,867 $ (19,625) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the three months ended September 30, 2000 (Unaudited) GUARANTOR SUBSIDIARIES -------------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC ----------- ----------- Revenues: Casino ........................................... $ -- $ -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. -- -- ----------- ----------- Total revenue .................................... -- -- Less promotional allowance ....................... -- -- ----------- ----------- Net revenues ..................................... -- -- ----------- ----------- Operating expenses: Casino ........................................... -- -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. -- -- Provision for doubtful accounts .................. -- -- General and administrative ....................... -- 5 Corporate expense ................................ -- -- Rental expense ................................... -- -- Depreciation and amortization .................... -- -- ----------- ----------- -- 5 ----------- ----------- Operating income (loss) .......................... -- (5) ----------- ----------- Other income (expense): Interest income .............................. -- -- Interest expense ............................. -- -- ----------- ----------- Income (loss) before extraordinary item .......... -- (5) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ -- $ (5) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS,(Continued) For the three months ended September 30, 2000 (Unaudited) NON-GUARANTOR SUBSIDIARIES -------------------------- Grand Canal Other Shops Mall Non- Subsidiary Guarantor LLC (1) Subsidiaries ----------- ----------- Revenues: Casino ........................................... $ -- $ -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. 8,850 -- ----------- ----------- Total revenue .................................... 8,850 -- Less promotional allowance ....................... -- -- ----------- ----------- Net revenues ..................................... 8,850 -- ----------- ----------- Operating expenses: Casino ........................................... -- -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. 4,378 -- Provision for doubtful accounts .................. -- -- General and administrative ....................... 5 21 Corporate expense ................................ -- -- Rental expense ................................... 562 -- Depreciation and amortization .................... 1,132 -- ----------- ----------- 6,077 21 ----------- ----------- Operating income (loss) .......................... 2,773 (21) ----------- ----------- Other income (expense): Interest income .............................. 20 -- Interest expense ............................. (4,685) -- ----------- ----------- Income (loss) before extraordinary item .......... (1,892) (21) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ (1,892) $ (21) =========== =========== [FN] - ---------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of September 30, 2000. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the three months ended September 30, 2000 (Unaudited) Consolidating/ Eliminating Entries Total ----------- ----------- Revenues: Casino ........................................... $ -- $ 81,912 Room ............................................. -- 45,038 Food and beverage ................................ -- 13,873 Retail and other ................................. (11,159) 17,758 ----------- ----------- Total revenue .................................... (11,159) 158,581 Less promotional allowance ....................... -- (11,971) ----------- ----------- Net revenues ..................................... (11,159) 146,610 ----------- ----------- Operating expenses: Casino ........................................... (11,159) 48,909 Room ............................................. -- 13,244 Food and beverage ................................ -- 6,673 Retail and other ................................. -- 9,065 Provision for doubtful accounts .................. -- 3,214 General and administrative ....................... -- 24,789 Corporate expense ................................ -- 1,657 Rental expense ................................... -- 3,080 Depreciation and amortization .................... -- 10,456 ----------- ----------- (11,159) 121,087 ----------- ----------- Operating income (loss) .......................... -- 25,523 ----------- ----------- Other income (expense): Interest income .............................. -- 359 Interest expense ............................. -- (30,558) ----------- ----------- Income (loss) before extraordinary item .......... -- (4,676) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ -- $ (4,676) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS For the three months ended September 30, 1999 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Revenues: Casino ....................................... $ 52,718 $ -- Room ......................................... -- 35,541 Food and beverage ............................ -- 12,007 Retail and other ............................. 210 18,453 -------- -------- Total revenue ................................ 52,928 66,001 Less promotional allowance ................... -- (10,646) -------- -------- Net revenues ................................. 52,928 55,355 -------- -------- Operating expenses: Casino ....................................... 44,440 -- Room ......................................... -- 9,301 Food and beverage ............................ -- 7,381 Retail and other ............................. -- 2,940 Provision for doubtful accounts .............. 2,902 600 General and administrative ................... 1,618 19,060 Rental Expense ............................... 548 1,535 Depreciation and amortization ................ 2 9,219 -------- -------- 49,510 50,036 -------- -------- Operating income (loss) ...................... 3,418 5,319 -------- -------- Other income (expense): Interest income .......................... 53 318 Interest expense ......................... -- (23,201) -------- -------- Net (loss) ................................... $ 3,471 $(17,564) ======== ======== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the three months ended September 30, 1999 (Unaudited) GUARANTOR SUBSIDIARIES ---------------------------------------- Lido Mall Grand Canal Intermediate Intermediate Shops Mall Holding Holding Construction Company LLC Company LLC LLC ----------- ----------- ----------- Revenues: Casino ........................ $ -- $ -- $ -- Room .......................... -- -- -- Food and beverage ............. -- -- -- Retail and other .............. -- -- 3,214 ----------- ----------- ----------- Total revenue ................. -- -- 3,214 Less promotional allowance .... -- -- -- ----------- ----------- ----------- Net revenues .................. -- -- 3,214 ----------- ----------- ----------- Operating expenses: Casino ........................ -- -- -- Room .......................... -- -- -- Food and beverage ............. -- -- -- Retail and other .............. -- -- 2,186 Provision for doubtful accounts -- -- -- General and administrative .... -- -- -- Rental Expense ................ -- -- 661 Depreciation and amortization . -- -- 1,069 ----------- ----------- ----------- -- -- 3,916 ----------- ----------- ----------- Operating income (loss) ....... -- -- (702) ----------- ----------- ----------- Other income (expense): Interest income ........... -- -- -- Interest expense .......... -- -- (3,395) ----------- ----------- ----------- Net (loss) .................... $ -- $ -- $ (4,097) =========== =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS,(Continued) For the three months ended September 30, 1999 (Unaudited) Non- Consolidating/ Guarantor Eliminating Subsidiaries Entries Total ----------- ----------- ----------- Revenues: Casino ........................ $ -- $ -- $ 52,718 Room .......................... -- -- 35,541 Food and beverage ............. -- -- 12,007 Retail and other .............. -- (11,159) 10,718 ----------- ----------- ----------- Total revenue ................. -- (11,159) 110,984 Less promotional allowance .... -- -- (10,646) ----------- ----------- ----------- Net revenues .................. -- (11,159) 100,338 ----------- ----------- ----------- Operating expenses: Casino ........................ -- (11,159) 33,281 Room .......................... -- -- 9,301 Food and beverage ............. -- -- 7,381 Retail and other .............. -- -- 5,126 Provision for doubtful accounts -- -- 3,502 General and administrative .... -- -- 20,678 Rental Expense ................ -- -- 2,744 Depreciation and amortization . -- -- 10,290 ----------- ----------- ----------- -- (11,159) 92,303 ----------- ----------- ----------- Operating income (loss) ....... -- -- 8,035 ----------- ----------- ----------- Other income (expense): Interest income ........... -- -- 371 Interest expense .......... -- -- (26,596) ----------- ----------- ----------- Net (loss) .................... $ -- $ -- $ (18,190) =========== =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS For the nine months ended September 30, 2000 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Revenues: Casino ........................................... $ 264,040 $ -- Room ............................................. -- 140,549 Food and beverage ................................ -- 49,472 Retail and other ................................. 947 58,727 ----------- ----------- Total revenue .................................... 264,987 248,748 Less promotional allowance ....................... -- (34,597) ----------- ----------- Net revenues ..................................... 264,987 214,151 ----------- ----------- Operating expenses: Casino ........................................... 187,514 -- Room ............................................. -- 36,587 Food and beverage ................................ -- 24,575 Retail and other ................................. -- 13,428 Provision for doubtful accounts .................. 12,954 1,200 General and administrative ....................... 2,898 66,040 Corporate expense ................................ 1,798 2,703 Rental expense ................................... 2,870 4,428 Depreciation and amortization .................... -- 27,836 ----------- ----------- 208,034 176,797 ----------- ----------- Operating income (loss) .......................... 56,953 37,354 ----------- ----------- Other income (expense): Interest income .............................. 426 717 Interest expense ............................. -- (76,492) ----------- ----------- Income (loss) before extraordinary item .......... 57,379 (38,421) Loss on early retirement of debt ............. -- (2,785) ----------- ----------- Net income (loss) ................................ $ 57,379 $ (41,206) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the nine months ended September 30, 2000 (Unaudited) GUARANTOR SUBSIDIARIES -------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC --------- -------------- Revenues: Casino ........................................... $ -- $ -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. -- -- ----------- ----------- Total revenue .................................... -- -- Less promotional allowance ....................... -- -- ----------- ----------- Net revenues ..................................... -- -- ----------- ----------- Operating expenses: Casino ........................................... -- -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. -- -- Provision for doubtful accounts .................. -- -- General and administrative ....................... -- 6 Corporate expense ................................ -- -- Rental expense ................................... -- -- Depreciation and amortization .................... -- -- ----------- ----------- -- 6 ----------- ----------- Operating income (loss) .......................... -- (6) ----------- ----------- Other income (expense): Interest income .............................. -- -- Interest expense ............................. -- -- ----------- ----------- Income (loss) before extraordinary item .......... -- (6) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ -- $ (6) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the nine months ended September 30, 2000 (Unaudited) NON-GUARANTOR SUBSIDIARIES --------------------------- Grand Canal Other Shops Mall Non- Subsidiary Guarantor LLC (1) Subsidiaries --------------------------- Revenues: Casino ........................................... $ -- $ -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. 22,957 -- ----------- ----------- Total revenue .................................... 22,957 -- Less promotional allowance ....................... -- -- ----------- ----------- Net revenues ..................................... 22,957 -- ----------- ----------- Operating expenses: Casino ........................................... -- -- Room ............................................. -- -- Food and beverage ................................ -- -- Retail and other ................................. 9,603 -- Provision for doubtful accounts .................. 400 -- General and administrative ....................... 5 21 Corporate expense ................................ -- -- Rental expense ................................... 1,668 -- Depreciation and amortization .................... 3,409 -- ----------- ----------- 15,085 21 ----------- ----------- Operating income (loss) .......................... 7,872 (21) ----------- ----------- Other income (expense): Interest income .............................. 56 -- Interest expense ............................. (13,270) -- ----------- ----------- Income (loss) before extraordinary items ......... (5,342) (21) Loss on early retirement of debt ............. -- -- ----------- ----------- Net income (loss) ................................ $ (5,342) $ (21) =========== =========== [FN] - ---------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no revenues or expenses as of September 30, 2000. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the nine months ended September 30, 2000 (Unaudited) Consolidating/ Eliminating Entries Total ----------- ----------- Revenues: Casino ........................................... $ -- $ 264,040 Room ............................................. -- 140,549 Food and beverage ................................ -- 49,472 Retail and other ................................. (33,477) 49,154 ----------- ----------- Total revenue .................................... (33,477) 503,215 Less promotional allowance ....................... -- (34,597) ----------- ----------- Net revenues ..................................... (33,477) 468,618 ----------- ----------- Operating expenses: Casino ........................................... (33,477) 154,037 Room ............................................. -- 36,587 Food and beverage ................................ -- 24,575 Retail and other ................................. -- 23,031 Provision for doubtful accounts .................. -- 14,554 General and administrative ....................... -- 68,970 Corporate expense ................................ -- 4,501 Rental expense ................................... -- 8,966 Depreciation and amortization .................... -- 31,245 ----------- ----------- (33,477) 366,466 ----------- ----------- Operating income (loss) .......................... -- 102,152 ----------- ----------- Other income (expense): Interest income .............................. -- 1,199 Interest expense ............................. -- (89,762) ----------- ----------- Income (loss) before extraordinary item .......... -- 13,589 Loss on early retirement of debt ............. -- (2,785) ----------- ----------- Net income (loss) ................................ $ -- $ 10,804 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS For the nine months ended September 30, 1999 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Revenues: Casino ............................................ $ 77,362 $ -- Room .............................................. -- 48,969 Food and beverage ................................. -- 17,876 Retail and other .................................. 968 28,419 ----------- ----------- Total revenue ..................................... 78,330 95,264 Less promotional allowance ........................ -- (15,337) ----------- ----------- Net revenues ...................................... 78,330 79,927 ----------- ----------- Operating expenses: Casino ............................................ 70,184 -- Room .............................................. -- 13,632 Food and beverage ................................. -- 11,606 Retail and other .................................. -- 4,238 Provision for doubtful accounts ................... 3,764 830 General and administrative ........................ 2,168 30,023 Rental Expense .................................... 725 2,079 Pre-opening expense ............................... 143 21,341 Depreciation and amortization ..................... 52 13,588 ----------- ----------- 77,036 97,337 ----------- ----------- Operating income (loss) ........................... 1,294 (17,410) ----------- ----------- Other income (expense): Interest income ............................... 141 2,028 Interest expense .............................. -- (39,438) ----------- ----------- Net (loss) ........................................ $ 1,435 $ (54,820) =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the nine months ended September 30, 1999 (Unaudited) GUARANTOR SUBSIDIARIES ---------------------------------------- Lido Mall Grand Canal Intermediate Intermediate Shops Mall Holding Holding Construction Company LLC Company LLC LLC ----------- ------------ ------------ Revenues: Casino ........................... $ -- $ -- $ -- Room ............................. -- -- -- Food and beverage ................ -- -- -- Retail and other ................. -- -- 3,363 ----------- ----------- ----------- Total revenue .................... -- -- 3,363 Less promotional allowance ....... -- -- -- ----------- ----------- ----------- Net revenues ..................... -- -- 3,363 ----------- ----------- ----------- Operating expenses: Casino ........................... -- -- -- Room ............................. -- -- -- Food and beverage ................ -- -- -- Retail and other ................. -- -- 2,348 Provision for doubtful accounts .. -- -- -- General and administrative ....... -- -- -- Rental Expense ................... -- -- 713 Pre-opening expense .............. -- -- -- Depreciation and amortization .... -- -- 1,213 ----------- ----------- ----------- -- -- 4,274 ----------- ----------- ----------- Operating income (loss) .......... -- -- (911) ----------- ----------- ----------- Other income (expense): Interest income .............. -- -- -- Interest expense ............. -- -- (3,904) ----------- ----------- ----------- Net (loss) ....................... $ -- $ -- $ (4,815) =========== =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF OPERATIONS, (Continued) For the nine months ended September 30, 1999 (Unaudited) Non- Consolidating/ Guarantor Eliminating Subsidiaries Entries Total ----------- ----------- ----------- Revenues: Casino ........................... $ -- $ -- $ 77,362 Room ............................. -- -- 48,969 Food and beverage ................ -- -- 17,876 Retail and other ................. -- (18,308) 14,442 ----------- ----------- ----------- Total revenue .................... -- (18,308) 158,649 Less promotional allowance ....... -- -- (15,337) ----------- ----------- ----------- Net revenues ..................... -- (18,308) 143,312 ----------- ----------- ----------- Operating expenses: Casino ........................... -- (18,308) 51,876 Room ............................. -- -- 13,632 Food and beverage ................ -- -- 11,606 Retail and other ................. -- -- 6,586 Provision for doubtful accounts .. -- -- 4,594 General and administrative ....... -- -- 32,191 Rental Expense ................... -- -- 3,517 Pre-opening expense .............. -- -- 21,484 Depreciation and amortization .... -- -- 14,853 ----------- ----------- ----------- -- (18,308) 160,339 ----------- ----------- ----------- Operating income (loss) .......... -- -- (17,027) ----------- ----------- ----------- Other income (expense): Interest income .............. -- -- 2,169 Interest expense ............. -- -- (43,342) ----------- ----------- ----------- Net (loss) ....................... $ -- $ -- $ (58,200) =========== =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 2000 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC ----------- ----------- Net cash provided by (used in) operating activities ................................... $ 47,154 $ 25,351 ----------- ----------- Cash flows from investing activities: Proceeds from purchases of investments ....... -- 7,679 Capital expenditures ......................... -- (10,011) Construction of Casino Resort ................ -- (12,827) ----------- ----------- Net cash provided by (used in) investing activities ................................... -- (15,159) ----------- ----------- Cash flows from financing activities: Proceeds from capital contributions .......... -- (30) Repayments on bank credit facility-tranche -A term loan ............................... (35,625) Repayments on bank credit facility-tranche -B term loan ............................... -- (125) Proceeds from bank credit facility-tranche -B term loan ............................... 50,000 Repayments on bank credit facility -revolver .................................. (50,160) Proceeds from bank credit facility-revolver... -- 11,000 Repayments on FF&E credit facility ........... -- (11,236) Payments of deferred offering costs .......... -- (2,379) Net increase (decrease) in intercompany accounts .................................... (36,636) 40,728 ----------- ----------- Net cash provided by (used in) financing activities .................................. (36,636) 2,173 ----------- ----------- Increase (decrease) in cash and cash equivalents ................................... 10,518 12,365 Cash and cash equivalents at beginning of period ........................................ 23,961 2,237 ----------- ----------- Cash and cash equivalents at end of period ..... $ 34,479 $ 14,602 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 2000 (Unaudited) GUARANTOR SUBSIDIARIES ------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC ----------- ----------- Net cash provided by (used in) operating activities ...................................... $ -- $ (6) ----------- ----------- Cash flows from investing activities: Proceeds from purchases of investments .......... -- -- Capital expenditures ............................ -- -- Construction of Casino Resort ................... -- -- ----------- ----------- Net cash provided by (used in) investing activities ...................................... -- -- ----------- ----------- Cash flows from financing activities: Proceeds from capital contributions ............. -- 5 Repayments on bank credit facility-tranche -A term loan .................................. -- -- Repayments on bank credit facility-tranche -B term loan .................................. -- -- Proceeds from bank credit facility-tranche -B term loan .................................. -- -- Repayments on bank credit facility -revolve ...................................... -- -- Proceeds from bank credit facility-revolve ...... -- -- Repayments on FF&E credit facility .............. -- -- Payments of deferred offering costs ............. -- -- Net increase (decrease) in intercompany accounts ....................................... -- -- ----------- ----------- Net cash provided by (used in) financing activities ..................................... -- 5 ----------- ----------- Increase (decrease) in cash and cash equivalents ...................................... -- (1) Cash and cash equivalents at beginning of period ........................................... 4 5 ----------- ----------- Cash and cash equivalents at end of period ........ $ 4 $ 4 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 2000 (Unaudited) NON-GUARANTOR SUBSIDIARIES --------------------------- Grand Canal Other Shops Mall Non- Subsidiary Guarantor LLC (1) Subsidiaries ----------- ----------- Net cash provided by (used in) operating activities ................................... $ 3,923 $ (15) ----------- ----------- Cash flows from investing activities: Proceeds from purchases of investments ....... 1,129 -- Capital expenditures ......................... (596) -- Construction of Casino Resort ................ -- -- ----------- ----------- Net cash provided by (used in) investing activities ................................... 533 -- ----------- ----------- Cash flows from financing activities: Proceeds from capital contributions .......... 5 20 Repayments on bank credit facility-tranche -A term loan ............................... -- -- Repayments on bank credit facility-tranche -B term loan ............................... -- -- Proceeds from bank credit facility-tranche -B term loan ............................... -- -- Repayments on bank credit facility -revolve ................................... -- -- Proceeds from bank credit facility-revolve ... -- -- Repayments on FF&E credit facility ........... -- -- Payments of deferred offering costs .......... (81) -- Net increase (decrease) in intercompany accounts .................................... (4,092) -- ----------- ----------- Net cash provided by (used in) financing activities .................................. (4,168) 20 ----------- ----------- Increase (decrease) in cash and cash equivalents ................................... 288 5 Cash and cash equivalents at beginning of period ........................................ -- 45 ----------- ----------- Cash and cash equivalents at end of period ..... $ 288 $ 50 =========== =========== [FN] - ---------- (1) The assets and liabilities of Mall Construction, a guarantor, were transferred to the Mall Subsidiary, a non-guarantor subsidiary, upon substantial completion of the Casino Resort on November 12, 1999, and subsequently transferred to the New Mall Subsidiary on December 20, 1999. As a result, Mall Construction had no cash flows as of September 30, 2000. ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 2000 (Unaudited) Consolidating/ Eliminating Entries Total ----------- ----------- Net cash provided by (used in) operating activities ..................................... $ -- $ 76,407 ----------- ----------- Cash flows from investing activities: Proceeds from purchases of investments ......... -- 8,808 Capital expenditures ........................... -- (10,607) Construction of Casino Resort .................. -- (12,827) ----------- ----------- Net cash provided by (used in) investing activities ..................................... -- (14,626) ----------- ----------- Cash flows from financing activities: Proceeds from capital contributions ............ -- -- Repayments on bank credit facility-tranche -A term loan ................................. -- (35,625) Repayments on bank credit facility-tranche -B term loan ................................. -- (125) Proceeds from bank credit facility-tranche -B term loan ................................. -- 50,000 Repayments on bank credit facility -revolve ..................................... -- (50,160) Proceeds from bank credit facility-revolve ..... -- 11,000 Repayments on FF&E credit facility ............. -- (11,236) Payments of deferred offering costs ............ -- (2,460) Net increase (decrease) in intercompany accounts ...................................... -- -- ----------- ----------- Net cash provided by (used in) financing activities .................................... -- (38,606) ----------- ----------- Increase (decrease) in cash and cash equivalents ..................................... -- 23,175 Cash and cash equivalents at beginning of period .......................................... -- 26,252 ----------- ----------- Cash and cash equivalents at end of period ....... $ -- $ 49,427 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS For the nine months ended September 30, 1999 (Unaudited) Venetian Las Vegas Casino Sands, Inc. Resort LLC --------- --------- Net cash provided by (used in) operating activities ......................................... $ (6,119) $ (9,766) --------- --------- Cash flows from investing activities: Proceeds from sale of investments .................. -- 115,547 Investment in subsidiaries ......................... -- (37,262) Construction of Casino Resort ...................... -- (191,879) --------- --------- Net cash used in investing activities ................ -- (113,594) --------- --------- Cash flows from financing activities: Proceeds from preferred interest in Venetian ......................................... -- 44,431 Proceeds from mall construction loan facility ......................................... -- -- Repayments on bank credit facility- tranche-A term loan .............................. -- (5,625) Proceeds from bank credit facility- tranche-A term loan .............................. -- 34,000 Repayments on bank credit facility- revolver ......................................... -- (9,609) Proceeds from bank credit facility- revolver ......................................... -- 32,006 Repayments on FF&E credit facility ................. -- (2,931) Proceeds from FF&E credit facility ................. -- 83,842 Payments of deferred offering costs ................ -- (601) Net increase and (decrease) in intercompany accounts ............................ 22,429 (43,624) Proceeds from investment by parent company .......................................... -- -- --------- --------- Net cash provided by financing activities ............ 22,429 131,889 --------- --------- Increase (decrease) in cash and cash equivalents ........................................ 16,310 8,529 Cash and cash equivalents at beginning of period .......................................... 1,216 1,025 --------- --------- Cash and cash equivalents at end of period ........... $ 17,526 $ 9,554 ========= ========= ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 1999 (Unaudited) GUARANTOR SUBSIDIARIES -------------------------- Lido Mall Intermediate Intermediate Holding Holding Company LLC Company LLC ----------- ------------ Net cash provided by (used in) operating activities .................................... $ -- $ -- ----------- ----------- Cash flows from investing activities: Proceeds from sale of investments ............. -- -- Investment in subsidiaries .................... -- -- Construction of Casino Resort ................. -- -- ----------- ----------- Net cash used in investing activities ........... -- -- ----------- ----------- Cash flows from financing activities: Proceeds from preferred interest in Venetian .................................... -- -- Proceeds from mall construction loan facility .................................... -- -- Repayments on bank credit facility- tranche-A term loan ......................... -- -- Proceeds from bank credit facility- tranche-A term loan ......................... -- -- Repayments on bank credit facility- revolver .................................... -- -- Proceeds from bank credit facility- revolver .................................... -- -- Repayments on FF&E credit facility ............ -- -- Proceeds from FF&E credit facility ............ -- -- Payments of deferred offering costs ........... -- -- Net increase and (decrease) in intercompany accounts ....................... -- -- Proceeds from investment by parent company ..................................... -- -- ----------- ----------- Net cash provided by financing activities ....... -- -- ----------- ----------- Increase (decrease) in cash and cash equivalents ................................... -- -- Cash and cash equivalents at beginning of period ..................................... 5 5 ----------- ----------- Cash and cash equivalents at end of period ...... $ 5 $ 5 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 1999 (Unaudited) GUARANTOR SUBSIDIARY ------------ Grand Canal Shops Mall Non- Construction Guarantor LLC Subsidiaries ------------ ----------- Net cash provided by (used in) operating activities $ (12,545) $ 8,493 ----------- ----------- Cash flows from investing activities: Proceeds from sale of investments .............. -- -- Investment in subsidiaries ..................... -- -- Construction of Casino Resort .................. (45,431) (45,710) ----------- ----------- Net cash used in investing activities ............ (45,431) (45,710) ----------- ----------- Cash flows from financing activities: Proceeds from preferred interest in Venetian ..................................... -- -- Proceeds from mall construction loan facility ..................................... 37,287 -- Repayments on bank credit facility- tranche-A term loan .......................... -- -- Proceeds from bank credit facility- tranche-A term loan .......................... -- -- Repayments on bank credit facility- revolver ..................................... -- -- Proceeds from bank credit facility- revolver ..................................... -- -- Repayments on FF&E credit facility ............. -- -- Proceeds from FF&E credit facility ............. -- -- Payments of deferred offering costs ............ (16) -- Net increase and (decrease) in intercompany accounts ........................ 21,107 88 Proceeds from investment by parent company ...................................... -- 37,262 ----------- ----------- Net cash provided by financing activities ........ 58,378 37,350 ----------- ----------- Increase (decrease) in cash and cash equivalents .................................... 402 133 Cash and cash equivalents at beginning of period ...................................... 5 29 ----------- ----------- Cash and cash equivalents at end of period ....... $ 407 $ 162 =========== =========== ================================================================================ ================================================================================ LAS VEGAS SANDS, INC. Notes to Financial Statements (Continued) Note 7 Summarized Financial Information (Continued) ================================================================================ CONDENSED STATEMENTS OF CASH FLOWS, (Continued) For the nine months ended September 30, 1999 (Unaudited) Consolidating/ Eliminating Entries Total ----------- ----------- Net cash provided by (used in) operating activities ................................... $ -- $ (19,937) ----------- ----------- Cash flows from investing activities: Proceeds from sale of investments ............ -- 115,547 Investment in subsidiaries ................... 37,262 -- Construction of Casino Resort ................ -- (283,020) ----------- ----------- Net cash used in investing activities .......... 37,262 (167,473) ----------- ----------- Cash flows from financing activities: Proceeds from preferred interest in Venetian ................................... -- 44,431 Proceeds from mall construction loan facility ................................... -- 37,287 Repayments on bank credit facility- tranche-A term loan ........................ -- (5,625) Proceeds from bank credit facility- tranche-A term loan ........................ -- 34,000 Repayments on bank credit facility- revolver ................................... -- (9,609) Proceeds from bank credit facility- revolver ................................... -- 32,006 Repayments on FF&E credit facility ........... -- (2,931) Proceeds from FF&E credit facility ........... -- 83,842 Payments of deferred offering costs .......... -- (617) Net increase and (decrease) in intercompany accounts ...................... -- -- Proceeds from investment by parent company .................................... (37,262) -- ----------- ----------- Net cash provided by financing activities ...... (37,262) 212,784 ----------- ----------- Increase (decrease) in cash and cash equivalents .................................. -- 25,374 Cash and cash equivalents at beginning of period .................................... -- 2,285 ----------- ----------- Cash and cash equivalents at end of period ..... $ -- $ 27,659 =========== =========== ================================================================================ ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ================================================================================ The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto and other financial information included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. Certain statements in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" are forward-looking statements. See "-Special Note Regarding Forward-Looking Statements." General - ------- The Company owns and operates the Casino Resort, a large-scale Venetian-themed hotel, casino, retail, meeting and entertainment complex in Las Vegas, Nevada which opened on May 4, 1999. Substantial completion of the construction of the Casino Resort was achieved on November 12, 1999, meaning all components of the Casino Resort were fully constructed and operational with the exception of "punchlist" items. As of September 30, 2000, all of the punchlist items had been completed and construction of the Casino Resort was complete. Operating Results - ----------------- Third Quarter Ended September 30, 2000 compared to Third Quarter Ended September 30, 1999. Operating Revenues ------------------ Consolidated net revenues for the third quarter of 2000 were $146.6 million, representing an increase of $46.3 million when compared with $100.3 million of consolidated net revenues during the third quarter of 1999. The increase in net revenues was due to growth in every revenue segment of the Casino Resort and the Mall. The Casino Resort's casino revenues totaled $81.9 million in the third quarter of 2000, an increase of $29.2 million when compared to $52.7 million during the third quarter of 1999. Table games revenues were $53.0 million during the third quarter of 2000 compared to $29.7 million during the third quarter of 1999. The increase was primarily attributable to increased table games volume of $294.1 million during the third quarter of 2000 compared to $181.9 million in the third quarter of 1999, or an increase of 62%. The overall table games win percentage was 18% during the third quarter of 2000, compared to an overall table games win percentage of 21.4% for the nine months ended September 30, 2000. The table games win percentage is reasonably predictable over time, but may vary considerably during shorter periods. Slot revenue in the third quarter of 2000 increased to $28.1 million from the $22.5 million reported during the third quarter of 1999, or an increase of 25%. The increase resulted from an increase in slot volume to $505.3 million in the third quarter of 2000 compared to $382.2 million during the third quarter of 1999. Management anticipates a further increase in slot machine volumes upon completion of a cross-over pedestrian bridge to the Mirage/Treasure Island complex expected to be completed in the first quarter of 2001, resulting in ease of transit from the west side of the Strip to the Casino Resort. The Casino Resort's room rates and occupancy levels continued to increase during the third quarter of 2000. The Casino Resort achieved room revenues during the third quarter of 2000 of $45.0 million compared to $35.5 million during the third quarter of 1999. The Casino Resort's average daily room rate increased to $168 in the third quarter of 2000 compared to $145 during the third quarter of 1999. The occupancy of available guestrooms was 96.0% during the third quarter of 2000 compared to 89.7% during the third quarter of 1999. Food and beverage, retail and other revenues were $22.8 million during the third quarter of 2000 compared to $19.5 million during the third quarter of 1999. The increase of $3.3 million was attributable to an increase in hotel guests and convention and meeting room rentals. The Mall generated rental and related revenues of $8.9 million during the third quarter of 2000 compared to $3.2 million during the third quarter of 1999. The Mall opened on June 19, 1999 with approximately 40 tenants opening throughout the third quarter and fourth quarter of 1999. The increase in Mall rental revenues was attributed to these tenant openings throughout and after the third quarter of 1999. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ Operating Expenses ------------------ Consolidated operating expenses were $121.1 million in the third quarter of 2000, representing an increase of $28.8 million when compared with $92.3 million during the third quarter of 1999. The increase was a result of substantially increased operating volumes in all segments of the Casino Resort's business during the third quarter of 2000 as compared to the third quarter of 1999. The corporate division was created upon substantial completion of the Casino Resort in the fourth quarter of 1999 and corporate expenses totaled $1.7 million during the third quarter of 2000. Rental expenses primarily related to the Casino Resort's heating, ventilation and air conditioning plant (the "HVAC Plant") for the third quarter of 2000 were $3.1 million, including $2.5 million for the Casino Resort and $0.6 million for the Mall. Rental expenses were $2.7 million in the third quarter of 1999. The Mall incurred operating expenses of $6.0 million during the third quarter of 2000 compared to $3.9 million during the third quarter of 1999. The increase in Mall operating expenses was attributed to tenant openings throughout and after the third quarter of 1999. Interest Income (Expense) ------------------------- Reflecting the investments in the Casino Resort's hotel, casino and convention space and the Mall, the Company's debt levels and associated interest costs have risen significantly. With the opening of these new facilities, the Company's capitalization of interest costs has ceased. Net interest expense was $30.6 million in the third quarter of 2000, compared to $26.6 million in the same period of 1999. Of the $30.6 million, $25.9 million was related to the Casino Resort (excluding the Mall) and $4.7 million was related to the Mall. The increase in interest expense was attributed to increases in interest rates during the past four quarters, and final project borrowings during the fourth quarter of 1999. Interest income for the quarter ended September 30, 2000 was $0.4 million compared to $0.4 million in the same period in 1999. Nine Months Ended September 30, 2000 compared to Nine Months Ended September 30, 1999 ------------------------------------------------------------------ The Casino Resort began operations on May 4, 1999; therefore references to the nine months of 1999 only include 150 out of 270 days of operating revenues and expenses during such period. Operating Revenues ------------------ Consolidated net revenues for the nine months ended September 30, 2000 were $468.6 million compared to $143.3 million for the nine months ended September 30, 1999. The increase was a result of two factors: (1) the opening of the Casino Resort on May 4, 1999, resulting in fewer days of operations during the nine months ended September 30, 1999, and (2) the increase in operating revenues in all segments of the Casino Resort during the third quarter of 2000 as compared to the third quarter of 1999. Casino revenues during the nine months ended September 30, 2000 were $264.0 million and room revenues totaled $140.5 million during the same period. During the 150 days of operations of the Casino Resort during the nine months ended September 30, 1999, casino revenues were $77.4 million and room revenues were $49.0 million. Combined food and beverage, retail and other revenues for the nine months ended September 30, 2000 were $75.7 million compared to $28.9 million during the 150 days of operations during the nine months ended September 30, 1999. Mall rental and related revenues for the nine months ended September 30, 2000 were $23.0 million compared to operating revenues of $3.4 million during the nine months ended September 30, 1999. Operating Expenses ------------------ The Company's consolidated operating expenses were $366.5 million for the nine months ended September 30, 2000 compared to $138.9 million during the 150 days of operations of the Casino Resort in the nine months ended September 30, 1999. Operating expenses for the nine months ended September 30, 2000 increased in every segment of the Casino Resort as the result of two factors: (1) the opening of the Casino Resort on May 4, 1999, resulting in fewer days of operations during the nine months ended September 30, 1999, and (2) the increase in operating revenues and related operating expenses in all segments of the Casino Resort during the third quarter of 2000 as compared to the third quarter of 1999. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ Other Factors Affecting Earnings -------------------------------- During the second quarter of 2000, the Casino Resort recorded an extraordinary item of $2.8 million for loss on early retirement of debt relating to the restructuring of the Bank Credit Facility. See Part I, Item 1. Financial Statements - Notes to Financial Statements - Note 4, Long-Term Debt. For the first nine months of 2000, interest expense and depreciation expense each increased over the prior year's same period due to interest being capitalized prior to the opening of the Casino and certain suites and facilities at the Casino Resort on May 4, 1999, and depreciation beginning on that date. The increase in interest expense was also attributed to increases in interest rates during the past four quarters and final project borrowings during the fourth quarter of 1999. LIBOR, the interest index from which all of the Casino Resort's variable rate debt is calculated, increased from approximately 5.4% during the third quarter of 1999 to approximately 6.7% during the third quarter of 2000. In addition, the restructuring of the Bank Credit Facility, including the addition of the Tranche B Term Loan, and the closing of the Mall Take-out Financing, resulted in an increase of the margins over LIBOR. During early 2000, the Company modified its business strategy as it relates to premium casino customers and marketing to foreign premium casino customers. The Company has generally raised its betting limits for table games to be competitive with other premium resorts on the Strip. There are additional risks associated with this change in strategy, including risk of bad debts, risks to profitability margins in a highly competitive market and the need for additional working capital to accommodate possible higher levels of trade receivables and foreign currency fluctuations associated with collection of trade receivables in other countries. The Company has opened domestic and foreign marketing offices as well as bank collection accounts in several foreign countries to accommodate this change in business strategy, thereby increasing marketing costs. Liquidity and Capital Resources - ------------------------------- Venetian Hotel, Casino and Congress Center ------------------------------------------ As of September 30, 2000 and December 31, 1999, the Company held cash and cash equivalents of $49.4 million and $26.3 million, respectively. On these dates, the Company also held restricted cash and investments of $2.2 million and $11.0 million, respectively. Net cash provided by operating activities for the first nine months of 2000 was $76.4 million, compared with $19.9 million used in operating activities for the same period in 1999. The Company's operating cash flow in the first nine months of 2000 was negatively impacted by an increase in trade receivables. Net trade receivables were $43.2 million as of December 31, 1999 and $56.9 million as of September 30, 2000. Hotel receivables increased $0.7 million during the first nine months of 2000 and casino receivables increased $14.0 million during the first nine months of 2000. The net increase in casino receivables is related to the substantial increase in table games revenues during the first nine months of 2000 compared to the first nine months of 1999. The overall rate of increase is consistent with the increase in the Company's revenues. The Company expects a continued increase in trade receivables during 2000 in connection with the extension of casino credit. Capital expenditures paid from operating cash flow during the first nine months of 2000 were $10.6 million, and capital expenditures for construction of the Casino Resort paid from restricted project funds were $12.8 million. Capital expenditures for construction of the Casino Resort for the same period in 1999 were $283.0 million. During the first nine months of 2000, the Company paid principal payments of $27.0 million on the Bank Credit Facility (exclusive of payments made from the $50.0 million of proceeds from the Tranche B Term Loan) and $11.2 million on the FF&E Credit Facility. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ On September 19, 2000, the Company announced plans to construct the Guggenheim Exhibition Hall, a 63,000 square foot structure adjacent to the Casino Resort (the "Exhibition Hall"), to house various exhibits in conjunction with the Guggenheim Museum Foundation. The Exhibition Hall is presently under construction and is expected to be completed in late spring of 2001, at an estimated cost of $20.0 million. In addition, the Company announced plans to construct 8,000 square feet of display space within the Casino Resort to display art masterworks from the Guggenheim Museum and the State Hermitage Museum in St. Petersburg, Russia. The cost of the construction of the display space has yet to be determined. The Bank Credit Facility and the FF&E Credit Facility each currently allow the Company to spend up to $25.0 million per year for capital expenditures along with unused amounts from previous years. If the cost of these facilities and other previously announced improvements exceed such capital expenditure limitation in any one year period, the Company will need to either defer certain capital expenditures or seek approval from the lenders under the Bank Credit Facility and the FF&E Credit Facility to modify such capital expenditure limitations. The Company does not expect to exceed its capital expenditure limitation in 2000. The Company has also announced that it is in the preliminary feasibility and design stages of a capital improvement project to add approximately 1,000 all-suite hotel rooms to the Casino Resort (the "Phase I-A Room Addition"). The preliminary plan provides for construction of the room addition above the Casino Resort's parking structure. For the Company to proceed with this project would require the Company to incur additional indebtedness. Depending upon the structure of such indebtedness, this may require the consent of certain existing lenders and modifications to certain existing lender financial covenants. As of this date, no final budget for this project has been determined and the Company has not entered into any agreements to fund such project. The Company is reviewing approximately $1.0 million of proposed vendor change orders and claims not related to the Construction Manager's contested construction costs (the "Contested Construction Costs") that are the subject of the litigations and claims described in Part I, Item 1. Financial Statements - Notes to Financial Statements- Note 6, Commitments and Contingencies - Litigation. To the extent any of them are approved, the Company will pay these amounts from remaining restricted cash and other project funds as described below. In addition, the Phase II Subsidiary has outstanding project payables in the amount of $2.9 million to be funded from future equity contributions or borrowings by the Phase II Subsidiary. If the Company is required to pay any of the Contested Construction Costs which are not covered by the Insurance Policy, the Company may use cash received from the following sources to fund such costs: (i) the LD Policy, (ii) the Construction Manager, Bovis and P&O pursuant to the Construction Management Contract, the Bovis Guaranty and the P&O Guaranty, respectively, (iii) third parties, pursuant to their liability to the Company under their agreements with the Company, (iv) amounts received from the Phase II Subsidiary for shared facilities designed and constructed to accommodate the operations of the Casino Resort and the Phase II Resort, (v) the Sole Stockholder, pursuant to his liability under the Completion Guaranty, (vi) borrowings under the Revolver, (vii) additional debt or equity financings, and (viii) operating cash flow. The Sole Stockholder has remaining liability of approximately $5.0 million under the Completion Guaranty to fund excess construction costs (which liability is collateralized with cash and cash equivalents). If the Company were required to pay substantial Contested Construction Costs, and if it were unable to raise or obtain the funds from the sources described above, there could be a material adverse effect on the Company's financial position, results of operations or cash flows. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ For the next twelve months, the Company expects to fund its operations, capital expenditures (that are unrelated to the Phase I-A Room Addition) and debt service requirements from existing cash balances, operating cash flow and borrowings under the Revolver of the Bank Credit Facility. The Revolver loan commitment will expire on March 15, 2001. As of September 30, 2000, none of the $40.0 million Revolver availability under the Bank Credit Facility was drawn. The Company plans to request an extension of the availability date of the Revolver from the lenders under the Bank Credit Facility prior to its expiration. The Company has significant debt service payments due during the next twelve months, including principal payments on its Bank Credit Facility and FF&E Credit Facility aggregating $38.9 million and estimated total interest payments (excluding noncash amortization of debt offering costs) of approximately $89.5 million for indebtedness secured by the Casino Resort and $16.6 million for indebtedness secured by the Mall. In addition, the Company estimates total capital expenditures for the Casino Resort of approximately $20.0 million during 2000. By obtaining the Tranche B Term Loan in June 2000, the Company deferred $50.0 million of scheduled amortization under the Bank Credit Facility until March and June 2004, significantly improving near term liquidity. The Company anticipates that its existing cash balances, operating cash flow and available borrowing capacity will continue to provide it with sufficient resources to meet existing debt obligations and foreseeable capital expenditures requirements, however, no assurance can be given that the Company's improved operating results will continue. If the Company is required to pay certain significant Contested Construction Costs, or if the Company is unable to meet its debt service requirements, the Company will seek, if necessary and to the extent permitted under the Indentures and the terms of the Bank Credit Facility, additional financing through bank borrowings or debt or equity financings. Also, there can be no assurance that new business developments (such as the Phase I-A Room Addition) or unforeseen events will not occur resulting in the need to raise additional funds. There can be no assurance that additional or replacement financing, if needed, will be available to the Company, and, if available, that the financing will be on terms favorable to the Company, or that the Sole Stockholder or any of his affiliates will provide any such financing. New Mall Subsidiary and Transfer of Mall Assets ----------------------------------------------- On November 12, 1999, Mall Construction transferred the Mall Assets to the Mall Subsidiary. Upon such transfer, (i) the Mall Assets were released by the trustee under the Mortgage Notes and the agent under the Bank Credit Facility and so were no longer security to the holders of the Mortgage Notes or for the indebtedness under the Bank Credit Facility, (ii) the indebtedness under the Mall Construction Loan Facility was assumed by the Mall Subsidiary, and (iii) all entities comprising the Company, other than the Mall Subsidiary, were released from all obligations under the Mall Construction Loan Facility. On December 20, 1999, the Mall Construction Loan Facility was paid off in full with the proceeds of (a) the Tranche A Take-out Loan made by the Tranche A Take-out Lenders and (b) the Tranche B Take-out Loan made by an entity wholly owned by the Sole Stockholder. Also on December 20, 1999, the Mall Assets were transferred from the Mall Subsidiary to the New Mall Subsidiary, the obligor under the Mall Take-out Financing. Because the New Mall Subsidiary is not a guarantor of any indebtedness of the Venetian Entities (other than the Mall Take-out Financing), creditors of the Venetian Entities (including the holders of the Notes) do not have a direct claim against the Mall Assets. As a result, indebtedness of the Venetian Entities (including the Notes) is now, with respect to the Mall Assets, effectively subordinated to indebtedness of the New Mall Subsidiary. The New Mall Subsidiary is not restricted by any of the debt instruments of LVSI, Venetian or the Company's other subsidiary guarantors (including the Indentures) from incurring any indebtedness. The terms of the Tranche A Take-out Loan prohibit the New Mall Subsidiary from paying dividends or making distributions to any of the Venetian Entities unless payments under the Tranche A Take-out Loan are current, and, with certain limited exceptions, prohibit the New Mall Subsidiary from making any loans to such entities. Any additional indebtedness incurred by the New Mall Subsidiary may include additional restrictions on the ability of the New Mall Subsidiary to pay any such dividends and make any such distributions or loans. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ Phase II Resort and Transfer of Phase II Land --------------------------------------------- If the Phase II Subsidiary determines to construct the Phase II Resort, the Phase II Subsidiary will be required to raise substantial debt and/or equity financings. Currently, there are no commitments to fund any portion of the construction and development costs of the Phase II Resort. The Phase II Land was transferred to the Phase II Subsidiary in October 1998. On December 31, 1999, an additional 1.75 acres of land was contributed indirectly by the Sole Stockholder to the Phase II Subsidiary. The development of the Phase II Resort may require obtaining additional regulatory approvals. The Company has not yet set a date to begin construction of the Phase II Resort. Because the Phase II Subsidiary is not a guarantor of the Company's indebtedness, creditors of the Company (including the holders of the Notes) do not have a direct claim against the assets of the Phase II Subsidiary. As a result, the indebtedness of the Company (including the Notes) is effectively subordinated to indebtedness of the Phase II Subsidiary. The Phase II Subsidiary is not subject to any of the restrictive covenants of the debt instruments of the Company (including, without limitation, the covenants with respect to the limitations on indebtedness and restrictions on the ability to pay dividends or to make distributions or loans to the Company and its subsidiaries). Any indebtedness incurred by the Phase II Subsidiary may include material restrictions on the ability of the Phase II Subsidiary to pay dividends or make distributions or loans to the Company and its subsidiaries. The debt instruments of the Company limit the ability of LVSI, Venetian or any of their subsidiaries to guarantee or otherwise become liable for any indebtedness of the Phase II Subsidiary. Such debt instruments also restrict the sale or other disposition by the Company and its subsidiaries of capital stock of the Phase II Subsidiary, including the sale of any such capital stock to the Sole Stockholder or any affiliate of the Sole Stockholder. In addition, prior to commencement of construction of the Phase II Resort, Venetian has the right to approve the plans and specifications for the Phase II Resort. Risk Related to the Subordination Structure of the Mortgage Notes - ----------------------------------------------------------------- The Mortgage Notes represent senior secured debt obligations of LVSI and Venetian, secured by second priority liens on the collateral securing the Mortgage Notes (the "Note Collateral"). However, the guarantees of the Mortgage Notes by its subsidiaries, Mall Intermediate and Lido Intermediate (collectively, the "Subordinated Guarantors"), are unsecured, subordinated debt obligations of the guarantors. The structure of these guarantees present certain risks for holders of the Mortgage Notes. For example, if the Note Collateral were insufficient to pay the debt secured by such liens, or such liens were found to be invalid, then holders of the Mortgage Notes would have a senior claim against any remaining assets of LVSI and Venetian. In contrast, because of the subordination provision with respect to the Subordinated Guarantors, holders of the Mortgage Notes will always be fully subordinated to the claims of holders of senior indebtedness of the Subordinated Guarantors. Other Matters - ------------- In June 1998, the Financial Accounting Standards Board adopted Statement of Financial Accounting Standards No. 133 ("SFAS 133") entitled "Accounting for Derivative Instruments and Hedging Activities," which establishes accounting and reporting standards for derivative instruments and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. If specific conditions are met, a derivative may be specifically designated as a hedge of specific financial exposures. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and, if it used in hedging activities, it depends on its effectiveness as a hedge. SFAS 133 as amended is effective for all fiscal quarters of fiscal years beginning after December 31, 2000. SFAS 133 should not be applied retroactively to financial statements of prior periods. The Company will adopt SFAS 133 when required. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of SFAS 133 will have a significant effect on the Company's earnings or financial position. ================================================================================ Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ================================================================================ Special Note Regarding Forward-Looking Statements Certain statements in this section and elsewhere in this Quarterly Report on Form 10-Q (as well as information included in oral statements or other written statements made or to be made by the Company) constitute "forward-looking statements." Such forward-looking statements include the discussions of the business strategies of the Company and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, certain portions of this Form 10-Q, the words: "anticipates", "believes", "estimates", "seeks", "expects", "plans", "intends" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. Although the Company believes that such forward-looking statements are reasonable, it can give no assurance that any forward-looking statements will prove to be correct. Such forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the risks associated with entering into a new venture and new construction, competition and other planned construction in Las Vegas, government regulation related to the casino industry (including the legalization of gaming in certain jurisdictions, such as Native American reservations in the State of California), leverage and debt service (including sensitivity to fluctuations in interest rates), uncertainty of casino spending and vacationing in casino resorts in Las Vegas, occupancy rates and average daily room rates in Las Vegas, demand for all-suites rooms, the popularity of Las Vegas as a convention and trade show destination, the completion of infrastructure projects in Las Vegas, including the current expansion of the LVCC and the recent expansion of McCarran International Airport, litigation risks, including the outcome of the pending disputes with the Construction Manager and its subcontractors, and general economic and business conditions which may impact levels of disposable income of consumers and pricing of hotel rooms. Item 3. Quantitative and Qualitative Disclosures about Market Risk - ------- ---------------------------------------------------------- Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. The Company's primary exposure to market risk is interest rate risk associated with its long-term debt. The Company attempts to manage its interest rate risk by managing the mix of its long-term fixed-rate borrowings and variable rate borrowings under the Bank Credit Facility, the Mall Take-out Financing and the FF&E Credit Facility, and by use of interest rate cap and floor agreements. Part II OTHER INFORMATION Item 1. Legal Proceedings - ------- ----------------- The Company is party to litigation matters and claims related to its operations and the construction of the Casino Resort. For more information, see the Company's Annual Report on Form 10-K for the year ended December 31, 1999 and Part I, Item 1. Financial Statements-Notes to Financial Statements-Note 6, Commitments and Contingencies-Litigation. Part II OTHER INFORMATION Items 2 through 5 of Part II are not applicable. Item 6. Exhibits and Reports on Form 8-K - ------- -------------------------------- (a) List of Exhibits (b) Reports on Form 8-K No report on Form 8-K was filed during the quarter ended September 30, 2000. ================================================================================ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
LAS VEGAS SANDS, INC. November 13, 2000 By: /s/ Sheldon G. Adelson --------------------------- Sheldon G. Adelson Chairman of the Board, Chief Executive Officer and Director November 13, 2000 By: /s/ Harry D. Miltenberger -------------------------- Harry D. Miltenberger Vice President-Finance (principal financial and accounting officer)
================================================================================ EX-27 2 0002.txt FDS --
5 9-MOS DEC-31-2000 SEP-30-2000 49,427 2,172 77,493 20,588 3,662 116,237 1,122,225 55,919 1,233,021 170,308 518,018 163,257 0 92 12,691 1,233,021 468,618 468,618 0 366,466 0 0 89,762 13,589 0 13,589 0 2,785 0 10,804 (3) (3)
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