10-Q

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 March 31, 2004

[   ]        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.
(Exact name of registration as specified in its charter)

Nevada	04-3010100
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
3355 Las Vegas Boulevard South, Room 1A
Las Vegas, Nevada	89109
(Address of principal executive offices)	(Zip Code)

(702) 414-1000

(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
[X] Yes [   ] No

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). [   ]Yes [X] No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of May 17, 2004

Class	Outstanding at May 17, 2004
Common Stock, $.10 par value	1,000,000 shares

	LAS VEGAS SANDS, INC.
	Table of Contents
	Part I
	FINANCIAL INFORMATION
Item 1	Financial Statments
	Consolidated Balance Sheets at March 31, 2004 and December 31, 2003 (unaudited)	1
	Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and March 31, 2003 (unaudited)	2
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and March 31, 2003 (unaudited)	3
	Notes to Consolidated Financial Statements	4
Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operation	24
Item 3	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4	Controls and Procedures	40
	Part II
	OTHER INFORMATION
Item 1	Legal Proceedings	41
Item 5	Other Information	41
Item 6	Exhibits and Reports on Form 8-K	41
	Signatures	42

INDEX

LAS VEGAS SANDS, INC.

Item 1. Financial Statements

Consolidated Balance Sheets
(Dollars in thousands, except per share data )
(Unaudited)

	March 31, 2004			December 31, 2003
ASSETS
Current assets:
Cash and cash equivalents	$	151,582		$	142,360
Restricted cash and cash equivalents		41,284			36,358
Accounts receivable, net		64,136			52,542
Inventories		6,029			6,093
Prepaid expenses		4,584			3,462
Total current assets		267,615			240,815
Property and equipment, net		1,510,874			1,432,176
Deferred offering costs, net		36,669			38,489
Restricted cash and cash equivalents		37,382			86,144
Other assets, net		39,543			34,270
	$	1,892,083		$	1,831,894
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable	$	16,142		$	14,991
Construction payables		43,862			42,155
Construction payables-contested		7,232			7,232
Accrued interest payable		28,187			4,809
Other accrued liabilities		85,247			95,940
Current maturities of long-term debt		14,067			12,633
Total current liabilities		194,737			177,760
Other long-term liabilities		6,346			6,445
Redeemable Preferred Interest in Venetian
Casino Resort, LLC, a wholly owned subsidiary		245,477			–
Long-term debt		1,432,625			1,426,350
		1,879,185			1,610,555
Redeemable Preferred Interest in Venetian
Casino Resort, LLC, a wholly owned subsidiary		–			238,328
Stockholders' equity (deficit):
Common stock, $.10 par value, 3,000,000 shares
authorized, 1,000,000 shares issued and outstanding		100			100
Notes receivable from stockholders		(851	)		(843	)
Capital in excess of par value		128,653			136,562
Accumulated deficit		(115,004	)		(152,808	)
		12,898			(16,989	)
	$	1,892,083		$	1,831,894

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

INDEX

LAS VEGAS SANDS, INC.

Consolidated Statements of Operations
(Dollars in thousands, except per share data )
(Unaudited)

	Three Months Ended March 31,
	2004			2003
Revenues:
Casino	$	94,708		$	73,313
Rooms		85,367			57,491
Food and beverage		33,455			20,068
Retail and other		21,031			17,797
		234,561			168,669
Less-promotional allowances		(13,760	)		(10,004	)
Net revenues		220,801			158,665
Operating expenses:
Casino		36,628			32,918
Rooms		20,041			14,527
Food and beverage		15,498			9,442
Retail and other		9,506			7,824
Provision for doubtful accounts		3,244			3,721
General and administrative		31,962			26,612
Corporate expense		2,660			2,601
Rental expense		2,451			2,543
Pre-opening and developmental expense		8,379			1,827
Depreciation and amortization		14,781			10,737
		145,150			112,752
Operating income		75,651			45,913
Other income (expense):
Interest income		358			446
Interest expense, net of amounts capitalized		(31,046	)		(27,536	)
Preferred return on Redeemable Preferred Interest
in Venetian Casino Resort, LLC		(7,150	)		–
Other income (expense)		(9	)		560
Income before preferred return		37,804			19,383
Preferred return on Redeemable Preferred Interest
in Venetian Casino Resort, LLC		–			(6,363	)
Net income	$	37,804		$	13,020
Basic earnings per share	$	37.80		$	13.02
Diluted earnings per share	$	37.78		$	12.98
Dividends declared per share	$	7.91		$	–

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

INDEX

LAS VEGAS SANDS, INC.

Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

	Three Months Ended March 31,
	2004			2003
Cash flows from operating activities:
Net income	$	37,804		$	13,020
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		14,781			10,737
Amortization of debt offering costs and original
issue discount		2,008			1,583
Non-cash preferred return on Redeemable
Preferred Interest in Venetian		7,150			6,363
Loss on disposition of fixed asset		23			156
Provision for doubtful accounts		3,244			3,721
Changes in operating assets and liabilities:
Accounts receivable		(14,838	)		(761	)
Inventories		64			(96	)
Prepaid expenses		(1,122	)		594
Other assets		(5,273	)		(997	)
Accounts payable		1,151			1,570
Accrued interest payable		23,378			23,352
Other accrued liabilities		(13,698	)		(6,626	)
Net cash provided by operating activities		54,672			52,616
Cash flows from investing activities:
Decrease in restricted cash		43,836			51,870
Notes receivable from stockholders		(8	)		–
Capital expenditures		(91,795	)		(87,810	)
Net cash used in investing activities		(47,967	)		(35,940	)
Cash flows from financing activities:
Dividends paid to shareholders		(5,003	)		–
Repayments on senior secured credit facility-term A		(1,667	)		–
Repayments on senior secured credit facility-term B		(625	)		(625	)
Proceeds from Venetian Intermediate credit facility		10,000			–
Repayments on bank credit facility-revolver		–			(58	)
Proceeds from bank credit facility-revolver		–			58
Payments of debt offering costs		(188	)		(433	)
Net cash provided by (used in) financing activities		2,517			(1,058	)
Increase in cash and cash equivalents		9,222			15,618
Cash and cash equivalents at beginning of period		142,360			93,742
Cash and cash equivalents at end of period	$	151,582		$	109,360
Supplemental disclosure of cash flow information:
Cash payments for interest	$	6,266		$	3,914
Declared and unpaid dividends included in accrued liablities	$	7,104		$	–
Property and equipment asset acquisitions included in
accounts payable	$	51,094		$	49,387

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

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements

Note 1 Organization and Business of Company

        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, 2003. 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 2003 financial statements have been reclassified to conform with the 2004 presentation. In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the interim period have been included. The interim results reflected in the unaudited financial statements are not necessarily indicative of expected results for the full year.

        Las Vegas Sands, Inc. (“LVSI”) and its subsidiaries (collectively, the “Company”) own and operate the Venetian Casino Resort (the “Casino Resort”), a Renaissance Venice-themed resort situated at one of the premier locations on the Las Vegas Strip (the “Strip”). The Casino Resort is located across from The Mirage and the Treasure Island Hotel and Casino. The Casino Resort includes the only all-suites hotel on the Strip with 4,049 suites (the “Hotel”); a gaming facility of approximately 116,000 square feet (the “Casino”); an enclosed retail, dining and entertainment complex of approximately 446,000 net leasable square feet (the “Mall”); and a meeting and conference facility of approximately 650,000 square feet (the “Congress Center”).

        The Company has begun extensive design and planning work and has commenced demolition and clearing work on the site of a second similarly sized theme resort on a 15-acre site situated between the Casino Resort and Wynn Las Vegas (the “Phase II Resort”).

        On April 12, 2004, the Company entered into an agreement with General Growth Properties (the “Mall Purchaser”) to sell the Mall and certain other restaurant and retail assets of the Casino Resort for approximately $766.0 million (the “Mall Sale”) and the multi-level retail space of the Phase II Resort for approximately $250.0 million subject to an upward adjustment based on operating income performance. The Mall Sale is subject to customary conditions and is expected to close on May 17, 2004. See “Note 5 – Commitments and Contingencies.”

        The Company is involved in significant litigation relating to the cost of construction of the Casino Resort. See “Note 5 – Commitments and Contingencies”.

        One of the Company’s indirect wholly owned subsidiaries, Venetian Macau, S.A. (“Venetian Macau”), has commenced construction of the Sands Macau casino, a Las Vegas style casino, in the Macau Special Administrative Zone of the People’s Republic of China (the “Macau Casino”). Venetian Macau expects to open the main casino portion of the Macau Casino on May 18, 2004 with the remainder to be opened in June 2004.

        The consolidated financial statements include the accounts of LVSI and its subsidiaries (the “Subsidiaries”), including Venetian Casino Resort, LLC (“Venetian”), Mall Intermediate Holding Company, LLC (“Mall Intermediate”), Grand Canal Shops Mall Subsidiary, LLC (the “New Mall Subsidiary”), Grand Canal Shops II, LLC (the “Mall II Subsidiary”), Grand Canal Shops Mall MM Subsidiary, Inc., Venetian Hotel Operations, LLC (“Mall Construction”), Lido Intermediate Holding Company, LLC (“Lido Intermediate”), Lido Casino Resort Holding Company, LLC, Lido Casino Resort, LLC (the “Phase II Subsidiary”), Lido Casino Resort MM, Inc., Venetian Transport, LLC (“Venetian Transport”), Venetian Venture Development, LLC (“Venetian Venture”), Venetian Venture Development Intermediate Limited (“Venetian Intermediate”), Venetian Venture Development Intermediate I, Venetian Venture Development Intermediate II, Venetian Macau Finance Company, VI Limited, Las Vegas Sands (UK) Limited, Las Vegas Sands (Ibrox) Limited, Las Vegas Sands (Sheffield) Limited, Venetian Macau Limited (“Venetian Macau”), Venetian Macau Holdings Limited, Venetian Marketing, Inc. (“Venetian Marketing”), Venetian Far East Limited and Venetian Operating Company, LLC (“Venetian Operating”) (collectively, and including all other direct and indirect subsidiaries of LVSI, 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, except to the extent of guarantees on indebtedness. See “Note 4- Long-Term Debt”.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 1 Organization and Business of Company (Continued)

        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 principal stockholder (the “Principal Stockholder”).

        Various Subsidiaries are guarantors or co-obligors of certain indebtedness related to the Casino Resort. See “Note 4 – Long-Term Debt.”

        The Mall II Subsidiary is an indirect, wholly owned subsidiary of LVSI, and owns and operates the Mall. The Mall II Subsidiary was formed on May 31, 2002 and became a successor to the Mall Subsidiary in connection with the refinancing of the Mall’s indebtedness. See “Note 4 – Long-Term Debt.”

        Venetian Macau is an indirect, wholly owned subsidiary of LVSI, and owns and will operate the Macau Casino. See “Note 4 – Long-Term Debt.”

        The Casino Resort is physically connected to the approximately 1.15 million square feet Sands Expo and Convention Center (the “Expo Center”). Interface Group-Nevada, Inc. (“Interface”), the owner of the Expo Center, is beneficially owned by the Principal Stockholder. Venetian, the Mall II Subsidiary, and Interface transact business with each other and are parties to certain agreements.

Note 2 Stockholders’Equity and Per Share Data

        The Company established a nonqualified stock option plan, which provides for the granting of stock options pursuant to the applicable provisions of the Internal Revenue Code and regulations. The stock option plan provides that the Principal Stockholder may assume the obligations of the Company under the plan and provides for the granting of up to 75,000 shares of common stock to officers and other key employees of the Company.

        During the first quarter of 2002, the Company entered into a stockholders’ agreement (the “Stockholders’ Agreement”) with the employees to whom options were granted (the “Additional Stockholders”) and the Principal Stockholder. The Stockholders’ Agreement restricts the ability of the Additional Stockholders and any of their permitted transferees who have agreed to be bound by the terms and conditions of the agreement to sell, assign, pledge, encumber, or otherwise dispose of any shares of common stock of LVSI, except in accordance with the provisions of the Stockholders’ Agreement. If at any time before LVSI completes an initial public offering, the Principal Stockholder wishes to sell 20% or more of his ownership interest in LVSI to any third party transferee, each Additional Stockholder shall have the right to participate in such sale on the same terms as those offered to the Principal Stockholder. The Additional Stockholders also have certain piggyback registration rights. Finally, if at any time prior to the completion by LVSI of an initial public offering LVSI wishes to issue any new securities, the Additional Stockholders will have the right to purchase that number of shares of LVSI common stock, at the proposed purchase price of the new securities, such that the Additional Stockholders’ percentage ownership of LVSI would remain the same following such issuance.

        Basic and diluted income per share are calculated based upon the weighted average number of shares outstanding. In the first quarter of 2002, the Company completed a stock split whereby the number of shares of common stock outstanding was increased from 925,000 to 1,000,000. At the time of the stock split, the Principal Stockholder maintained 100% ownership of the Company’s common stock. All references to share and per share data herein have been adjusted retroactively to give effect to the increase in shares of common stock outstanding to 1,000,000. As of March 31, 2004, there were unexercised options to purchase 2,000 shares of the Company’s common stock. The impact of the unexercised options to purchase shares of the Company’s common stock have been included in the computation of diluted earnings per share for the three months ended March 31, 2004 and March 31, 2003.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 2 Stockholders' Equity and Per Share Data (Continued)

        The Company has elected to follow Accounting Principles Board Opinion No. 25 entitled “Accounting For Stock Issued to Employees” and accounts for its stock-based compensation to employees using the intrinsic value method. Under this method, compensation expense is the difference between the market value of the Company’s stock and the stock option’s exercise price at the measurement date. Under APB 25, if the exercise price of the stock options is equal to or less than the market price of the underlying stock on the date of grant, no compensation expense is recognized.

        Had the Company accounted for the plan under the fair value method allowed by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS 123”), the Company’s net income and earnings per share would have been reduced to the following pro forma amounts:

	For the Three Months Ended March 31, 2004		For the Three Months Ended March 31, 2003
Net income, as reported	$	37,804	$	13,020
Deduct: Total stock-based employee
compensation expense determined under
the minimum value method for all
awards, net of related tax effects		–		–
Pro forma net income	$	37,804	$	13,020
Basic earnings per share, as reported	$	37.80	$	13.02
Basic earnings per share, pro-forma	$	37.80	$	13.02
Diluted earnings per share, as reported	$	37.78	$	12.98
Diluted earnings per share, pro-forma	$	37.78	$	12.98

Note 3 Property and Equipment

        Property and equipment consists of the following (in thousands):

	March 31, 2004			December 31, 2003
Land and land improvements	$	121,214		$	121,195
Building and improvements		1,168,756			1,157,784
Equipment, furniture, fixtures and leasehold improvements		191,866			186,485
Construction in progress		244,271			167,235
		1,726,107			1,632,699
Less: accumulated depreciation and amortization		(215,233	)		(200,523	)
	$	1,510,874		$	1,432,176

        During the three month period ended March 31, 2004 and March 31, 2003, the Company capitalized interest expense of $1.2 million and $2.0 million, respectively.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 3 Property and Equipment (Continued)

        As of March 31, 2004, construction in progress represented design, pre-development, and construction costs for the Macau Casino, design and shared facilities cost for the Phase II Resort and on-going capital improvement projects at the Casino Resort.

Note 4 Long-Term Debt

        Long-term debt consists of the following (in thousands):

	March 31, 2004			December 31, 2003
Indebtedness of the Company and its Subsidiaries
other than the Mall II and Macau Subsidiaries:
11% Mortgage Notes, due June 15, 2010	$	850,000		$	850,000
Senior Secured Credit Facility - Term B		245,625			246,250
Senior Secured Credit Facility - Term A		46,667			48,333
FF&E Credit Facility		14,400			14,400
Indebtedness of the Mall II Subsidiary:
Secured Mall Facility		120,000			120,000
Indebtedness of the Macau Subsidiaries:
Venetian Macau Senior Secured Notes - Tranche A		75,000			75,000
Venetian Macau Senior Secured Notes - Tranche B		45,000			45,000
Venetian Intermediate Credit Facility		50,000			40,000
		1,446,692			1,438,983
Less: current maturities		(14,067	)		(12,633	)
Total long-term debt	$	1,432,625		$	1,426,350

        On June 4, 2002, the Company completed a series of refinancing transactions (collectively, the “Refinancing Transactions”) including: (1) the issuance of $850.0 million in aggregate principal amount of 11% mortgage notes due 2010 (the “Mortgage Notes”) in a private placement; (2) entering into a new senior secured credit facility (the “Senior Secured Credit Facility”) with a syndicate of lenders in an aggregate amount of $375.0 million; and (3) entering into a secured mall facility (the “Secured Mall Facility”) in an aggregate amount of $105.0 million, which was subsequently increased to $120.0 million on June 28, 2002. The Company used the proceeds of the Refinancing Transactions to repay, redeem, or repurchase all of its previously outstanding indebtedness, to finance the construction and development of the Phase IA Addition and to pay all fees and expenses associated with the Refinancing Transactions.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4 Long-Term Debt (Continued)

Mortgage Notes

        The Mortgage Notes bear interest at 11%, payable each June 15th and December 15th. The Mortgage Notes are secured by second priority liens on certain assets of the Company (the personal property and the real estate improvements that comprise the hotel, the casino, and the convention space, with certain exceptions). The Mortgage Notes are redeemable at the option of LVSI and Venetian at prices ranging from 100% to 105.5% commencing on or after June 15, 2006, as set forth in the Mortgage Notes and the indenture pursuant to which the Mortgage Notes were issued (the “Indenture”). Prior to June 15, 2006, LVSI and Venetian may redeem the Mortgage Notes at their principal amount plus an applicable make-whole premium. Upon a change of control (as defined in the Indenture), each Mortgage Note holder may require LVSI and Venetian to repurchase such Mortgage Notes at 101% of the principal amount thereof plus accrued interest and other amounts which are then due, if any. On or prior to June 15, 2005, the Company may redeem up to 35% of the Mortgage Notes with the net cash proceeds of one or more offerings of equity securities at a redemption price of 111% of the principal amount of the Mortgage Notes, plus accrued and unpaid interest. Upon an event of loss or certain asset sales, the Company may also be required to offer to purchase all or a portion of the Mortgage Notes with the proceeds of such event of loss or sale. The Mortgage Notes are not subject to a sinking fund requirement. The Mortgage Notes have been registered under the Securities Act of 1933, as amended (the “Securities Act”).

        As a result of the consummation of the Mall Sale, which is currently expected to occur on May 17, 2004, LVSI and Venetian will be obligated to use the Excess Proceeds (as defined under the Indenture) from the Mall Sale to make an offer to purchase the maximum principal amount of Mortgage Notes that may be purchased out of the Excess Proceeds of the Mall Sale at an offer price in cash equal to 100% of the principal amount of the Mortgage Notes, plus accrued and unpaid interest and liquidated damages, if any, to the closing date of the offer (the “Asset Sale Offer”). The Company currently intends to make such an Asset Sale Offer as soon as practicable following the consummation of the Mall Sale.

Senior Secured Credit Facility

        The Senior Secured Credit Facility provides for a $250.0 million single draw senior secured term loan facility (the “Term B Facility”), a $50.0 million senior secured delayed draw facility (the Term A Facility”), and a $75.0 million senior secured revolving facility (the “Revolving Facility”). The net proceeds from the Term A and Term B Facilities of $235.0 million were deposited into a disbursement account for the Phase IA Addition, invested in cash or permitted investments, pledged to a disbursement agent for the Senior Secured Credit Facility lenders and used as required for Phase IA Addition project costs under disbursement terms specified in the Senior Secured Credit Facility. As of March 31, 2004 all funds had been drawn.

        The Term B Facility matures on June 4, 2008 and is subject to quarterly amortization payments in the amount of $625,000 from September 30, 2002 until September 30, 2007, followed by four equal quarterly amortization payments of $59.4 million until the maturity date. The Term A Facility was drawn in full on May 26, 2003, matures on June 4, 2007, and is subject to quarterly amortization payments commencing on March 31, 2004 in the amount of $1,666,667 for three quarters, $2,500,000 for the succeeding four quarters, $3,750,000 for the next four quarters and $5,000,000 for the final four quarters.

        The Revolving Facility matures on June 4, 2007 and has no interim amortization. No amounts had been drawn under the Revolving Facility as of March 31, 2004. However, as described below, LVSI has guaranteed borrowings under a $50 million credit facility of its wholly owned subsidiary Venetian Intermediate, to fund construction and development costs of the Macau Casino. These guarantees are supported by $50 million of letters of credit to be issued under the Revolving Facility, all of which had been issued as of March 31, 2004. In addition, LVSI guaranteed funding of certain cost overruns of the Macau Casino as further described in Note 5. This guaranty is supported by a $10 million letter of credit, which was issued under the Revolving Facility during January 2004. As a result of the issuance of these letters of credit, the amount available for working capital loans under the Revolving Facility is $15.0 million as of March 31, 2004.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4 Long-Term Debt (Continued)

        All amounts outstanding under the Senior Secured Credit Facility bear interest at the option of the Company at the prime rate plus 2% per annum, or at the reserve adjusted Eurodollar rate plus 3% per annum. Since the substantial completion of the Phase IA Addition, the applicable margin for amounts outstanding under the Term A Facility and the Revolving Facility is determined by a grid based upon a leverage ratio. The leverage ratio is calculated as the ratio of consolidated total debt as of the last day of each fiscal quarter to EBITDA (as defined in the Senior Secured Credit Facility) for the four-fiscal quarter period ending on such date. Commitment fees equal to 0.50% per annum of the daily average unused portion of the commitment under the Revolving Facility are payable quarterly in arrears. The average interest rate for the Senior Secured Credit Facility was 4.2% during the three months ended March 31, 2004.

        The Senior Secured Credit Facility is secured by a first priority lien on certain assets of the Company (the personal property and the real estate improvements that comprise the hotel, the casino, and the convention space, with certain exceptions). The Senior Secured Credit Facility contains affirmative, negative, and financial covenants including limitations on indebtedness, liens, investments, guarantees, restricted junior payments, mergers and acquisitions, sales of assets, leases, transactions with affiliates and scope-changes and modifications to material contracts. Additionally, the Company is required to comply with certain financial ratios and other financial covenants including total debt to EBITDA ratios, EBITDA to interest coverage ratios, minimum net worth covenants and maximum capital expenditure limitations. At March 31, 2004, the Company was in compliance with all required covenants and ratios under the Senior Secured Credit Facility.

        Pursuant to the terms of the Senior Secured Credit Facility, the Company is also required to maintain certain funds in escrow for insurance and property taxes. At March 31, 2004, $2.1 million was held by the lenders’ agent in escrow for these purposes. The amounts in escrow are classified as restricted cash in the accompanying financial statements.

        The Company has obtained an amendment or waiver to its Senior Secured Credit Facility (the “Bank Amendment”) to, among other things; permit the consummation of the Mall Sale, the purchase of a parcel of real property adjacent to the Casino Resort and waiving any events of default resulting therefrom. The parcel will be used either as a parking lot for the Phase II Resort or for constructing additional convention space. The Bank Amendment also permit the Company to use the proceeds from the Mall Sale to repurchase Mortgage Notes tendered pursuant to the Asset Sale Offer.

FF&E Financing

        In September 2003, the Company and a lender entered into a credit facility (the “FF&E Credit Facility”) to provide $15.0 million of financing for the Phase IA Addition. The proceeds from the FF&E Credit Facility were used to finance certain furniture, fixtures and equipment (the “Specified FF&E”) for the Phase IA Addition and the facility is secured by the specified FF&E. The FF&E Credit Facility provides for a 60-month basic term loan. Interest on the term loan is three month LIBOR plus 3.00% and is payable quarterly. The FF&E Credit Facility is subject to nineteen quarterly amortization payments of $600,000 beginning January 1, 2004, and one final payment of $3,600,000 on October 1, 2008. The average interest rate for the FF&E Credit Facility was 4.1% during the three months ended March 31, 2004.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4 Long-Term Debt (Continued)

Secured Mall Facility

        In June 2002, the Company also entered into an agreement (the “Secured Mall Facility”) with certain lenders to provide for a $105.0 million loan (subsequently increased to $120.0 million on June 28, 2002) to the Mall II Subsidiary. The initial $105.0 million of proceeds (net of financing costs) from the Secured Mall Facility, along with the proceeds of a $37.9 million capital contribution in Mall II Subsidiary by Venetian, were used to repay certain Mall indebtedness pursuant to the Refinancing Transactions and costs previously owed by the Mall Subsidiary. Upon the consummation of the Refinancing Transactions, the assets of the Mall were transferred to the Mall II Subsidiary, the borrower under the Secured Mall Facility. The additional $15.0 million of proceeds (net of financing costs) were distributed to Venetian and used for general corporate purposes. The indebtedness under the Secured Mall Facility is secured by a first priority lien on the assets that comprise the Mall (the “Mall Assets”). The average interest rate for the Secured Mall Facility was 3.0% during the three months ended March 31, 2004.

        The amounts outstanding under the Secured Mall Facility bear interest at the adjusted one month Eurodollar rate plus 1.875% per annum. Interest is paid monthly and there is no scheduled principal amortization. The Secured Mall Facility is due in full on June 10, 2005 and provides for two one-year extensions at the option of the Company, subject to certain criteria. The Secured Mall Facility contains affirmative, negative, and financial covenants including net operating income performance standards. Failure to meet these financial covenants in certain circumstances allows the lenders’ agent to control collection of rents, to approve operating budgets and provides for a cash sweep of excess cash flow to reduce amounts outstanding under the Secured Mall Facility.

        The Company is required to maintain an interest rate cap agreement to limit the impact of increases in interest rates on its floating rate debt derived from the Secured Mall Facility. To meet the requirements of the Secured Mall Facility, the Company entered into a cap agreement during June 2002 (the “Mall Cap Agreement”) that resulted in a premium payment to counterparties based upon notional principal amounts for a term equal to the term of the Secured Mall Facility. The provisions of the Mall Cap Agreement entitle the Company to receive from the counterparties the amounts, if any, by which the selected market interest rates exceed the strike rates stated in such agreement. There was no net effect on interest expense as a result of the Mall Cap Agreement for the three months ended March 31, 2004. The notional amount of the Mall Cap Agreement (which expires on June 28, 2005) at March 31, 2004 was $120.0 million.

        The Secured Mall Facility will be fully paid off with the proceeds from the Mall Sale.

Venetian Intermediate Credit Facility

        As further described in Note 5, Venetian Macau is currently constructing the Macau Casino, which it expects to complete by June 2004. On March 27, 2003, Venetian Intermediate entered into a credit agreement (“Venetian Intermediate Credit Agreement”) with a lender to provide $50.0 million of financing for the Macau Casino. Venetian Intermediate owns 100% of Venetian Macau. The obligations under the loans to be made under the Venetian Intermediate Credit Agreement are guaranteed by the Company and Venetian and supported by letters of credit to be issued under the Revolving Facility in favor of the Venetian Intermediate Credit Agreement lenders. As a result of the issuance of the letters of credit, the amounts available for working capital loans under the Revolving Facility have been reduced on a dollar for dollar basis. The amounts outstanding under the Venetian Intermediate Credit Facility bear interest at the base rate or the adjusted Eurodollar rate plus 0.5% per annum. Interest is payable on the base rate loans on a quarterly basis and is payable on Eurodollar loans at the end of the applicable interest period, and there is no scheduled principal amortization. The credit facility is due in full on March 27, 2006. As of March 31, 2004, $50.0 million was outstanding under the Venetian Intermediate Credit Agreement and was supported by $50.0 million of letters of credit issued under the Revolving Facility. The average interest rate was 1.7% for the three months ended March 31, 2004.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 4 Long-Term Debt (Continued)

Venetian Macau Senior Secured Notes

        On August 21, 2003, a wholly owned subsidiary of Venetian Macau, Venetian Macau Finance Company issued $120.0 million in aggregate principal amount of floating rate senior secured notes due August 2008 (the “Venetian Macau Senior Secured Notes”). The Venetian Macau Senior Secured Notes issued by Venetian Macau Finance Company are guaranteed by Venetian Macau. All assets of Venetian Macau and its subsidiaries secure the Venetian Macau Senior Secured Notes and restrictions have been placed on the payment of dividends to LVSI from Venetian Macau and its subsidiaries. As a result of the restrictions, approximately $73.9 in net assets for the Venetian Macau at March 31, 2004 are not available at the parent level and are considered to be restricted net assets of subsidiaries at such date.

        $75.0 million in aggregate principal amount of the Venetian Macau Senior Secured Notes bear interest at the rate of three month U.S. dollar LIBOR plus 3.25%, payable quarterly (“Tranche A Notes”), and $45 million in aggregate principal amount of the Venetian Macau Senior Secured Notes bear interest at the rate of three month U.S. dollar LIBOR plus 4.00%, payable quarterly (“Tranche B Notes”). The Tranche A Notes have a mandatory redemption of $7.5 million on August 21, 2005, $11.2 million on August 21, 2006, $18.8 million on August 21, 2007, and $37.5 million on August 21, 2008. The Tranche B Notes have no interim amortization and are due in full on August 21, 2008. The average interest rate on the Venetian Macau Senior Secured Notes was 4.8% during the three months ended March 31, 2004.

        As of March 31, 2004, approximately $73.9 million of these proceeds remained unused. Venetian Macau is currently in the process of seeking consents from the holders of the Venetian Macau Senior Secured Notes to permit the creation of a junior lien on Venetian Macau’s rights over the land upon which the Macau Casino is being constructed in Macau to support the guarantee being issued by the Macau bank under Venetian Macau’s subconcession and described in Note 5 below.

Macau Revolver

        On December 18, 2003, Venetian Macau and Venetian Macau Finance Company entered into a $20.0 million revolving credit facility (“Macau Revolver”) with a group of lenders. The Macau Revolver is secured on a pari passu basis with the same collateral as the Venetian Macau Senior Secured Notes. The Macau Revolver matures December 18, 2006 and bears interest at Libor plus 3.75%. No amounts have been drawn under the Macau Revolver.

Redeemable Preferred Interest in Venetian Casino Resort, LLC

        Interface Holding owns $77.1 million Series B Preferred Interest in Venetian. The rights of the Series B Preferred Interest include the accrual of a preferred return of 12% from June 30, 1997. Until the indebtedness under the Senior Secured Credit Facility is repaid and cash payments are permitted under the restricted payment covenants of the Indenture, the preferred return on the Series B Preferred Interest will accrue but will not be paid in cash. Commencing June 30, 2011, 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 month period ended March 31, 2004 and March 31, 2003, $7.2 million and $6.4 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.

        In May 2003, the Financial Accounting Standards Board issued Statement No. 150 (“SFAS 150”) “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The Company is considered a non-public entity, as defined by SFAS 150 because its equity securities are not listed on a public exchange. Accordingly, for the Company, the provisions of SFAS 150 became effective during the quarter ending March 31, 2004. As a result of the adoption of SFAS 150, the Series B Preferred Interest in Venetian is now presented as a liability and dividends are presented as interest expense of the Company.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 5 Commitments and Contingencies

         Construction Litigation

        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 $645.0 million. The Construction Management Contract also established a required “substantial completion” date (the date on which the construction of the Casino Resort was sufficiently complete, including the receipt of necessary permits, licenses and approvals, so that all components of the Casino Resort could be open to the general public) of April 21, 1999 (subject to extensions on account of “scope changes” and force majeure events), with a per-day liquidated damages penalty for failure to meet such deadline.

        The obligations of the Construction Manager under the Construction Management Contract were guaranteed by Bovis, Inc. (“Bovis”), the Construction Manager’s direct parent at the time the Construction Management Contract was entered into (such guaranty, the “Bovis Guaranty”). Bovis’ obligations under the Bovis Guaranty were guaranteed by The Peninsula 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 the United States District Court for the District of Nevada (the “Federal Court Action”). 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. 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 “State Court Action”). The action alleges a breach of contract and quantum meruit claims 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 approximately $90.0 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. Simultaneously, commencing in March 2000, the Construction Manager and the Company engaged in arbitration proceedings ordered by the Federal Court to determine the cost and schedule impact of any changes in the scope of services of the Construction Manager under the Construction Management Contract (the “Arbitration Proceedings”).

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 5 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. The Company believes that a major reason these lien amounts exceeded the Construction Manager’s claims of $90.0 million is based upon a duplication of liens through the inclusion of lower-tier claims by subcontractors in the liens of higher-tier contractors, including the lien of the Construction Manager. 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 the 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.

        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 $45.0 million and the insurer will insure up to $80.0 million of any 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.

        On June 3, 2003, an approximate 10-month trial was concluded in the State Court Action when a jury returned a verdict, which awarded the Construction Manager approximately $44.0 million in additional costs under the Construction Management Contract and awarded the Company approximately $2.0 million in damages for defective and incomplete work performed by the Construction Manager. The verdict also returned a defense verdict in favor of the Company on the Construction Manager’s fraud claim, and denied the Construction Manager’s claim for punitive damages. The verdict did not address pre-judgment interest and reimbursement of attorney’s costs, which are being sought from the State Court by both parties.

        The judge in the State Court Action arguably entered judgment on the verdict on December 24, 2003. The Company has filed motions requesting that the State Court reconsider the entry of the judgment, and stay the verdict until the conclusion of the Arbitration Proceedings, which proceedings the Company contends must be considered in determination of any final award between the parties. The Company believes that results of the Arbitration Proceedings will result in the lowering of the verdict that was awarded to the Construction Manager in the State Court Action and will provide a basis to increase the amount that was awarded to the Company. As of May 13, 2004, the state court had not yet ruled on these motions.

        While there are pending subcontractor claims against the Construction Manager and the Company and related claims for indemnity by and against the Construction Manager, the Company believes that all such claims asserted against the Company in those actions will be subsumed within the verdict in the State Court Action and that the Company’s liability will be limited to the amount of any final judgment which may be ultimately entered in the State Court Action. If a judgment for the Construction Manager is entered on the verdict and such a judgment can be executed upon by the Construction Manager following the resolution of all appeals, the Company believes its payment of such a judgment shall be in satisfaction of and shall be capped at its $45.0 million self-insurance requirement under the Insurance Policy. The Company intends to seek an elimination or reduction of the Construction Manager’s and its subcontractors’ mechanic’s liens in an amount to be consistent with any final judgment on the verdict.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 5 Commitments and Contingencies (Continued)

        Notwithstanding the entry of judgment in the State Court Action, the Company has continued to pursue certain claims in the Arbitration Proceedings to determine, among other things, the impact of certain changes which determination by the arbitrator the Company believes may provide a basis for reducing the amount awarded to the Construction Manager in the State Court Action and raising the amount of the verdict for the Company or otherwise establishing offsetting claims for the Company against the Construction Manager. The Company also intends to pursue additional affirmative claims in the Federal Court Action and in other proceedings that were not resolved by the verdict in the State Court Action. Because of the magnitude of remaining open items in the Arbitration Proceedings, which the Company believes must be considered in any ultimate award between the parties the Company is not able to determine with any reasonable certainty the value of such claims or the probability of success on such claims at this time. Accordingly, no accrual for a liability has been reflected in the accompanying financial statements for this matter, other than approximately $7.2 million, which the Company had previously accrued in 1999 for unpaid construction costs and which have not yet been paid pending outcome of the litigation.

        Based on the recent judgment in the State Court Action and the remaining open items in the Arbitration Proceedings, the Company estimates that its range of loss in this matter is from none (or a gain if all remaining matters are determined in the Company’s favor and considering the existing accrual of approximately $7.2 million for unpaid construction costs) to approximately $70.0 million (see below) if the Company were to lose all remaining arbitration matters and related pending actions and appeals that counsel has advised are possible of loss, and which are not already included in the State Court Action.  Such range of loss is before attorney costs and interest, which have not yet been considered by the State Court and the total amounts of which cannot currently be quantified.  While the range of loss is possibly as high as $70.0 million, (the original verdict of $42.0 million plus $28.0 million, representing all remaining indemnity claims and arbitration matters), plus attorney’s fees and interest, the Company believes the Insurance Policy will provide coverage of in excess of the Company’s insured retention of $45.0 million and up to total loss of $125.0 million as further defined in the Insurance Policy. At this time, no amount within the range of loss can be reasonably determined as an estimated loss.  It is possible that the Arbitration Proceedings will be concluded (or interim decisions rendered) in the near future, at which time an estimate of loss could be determined.  Such loss could be material to the Company’s results of operations in the period that the estimate is recorded.

         Macau Casino Projects

        On June 26, 2002, the Macau government granted a provisional concession to operate casinos in Macau to the Company’s subsidiary Venetian Macau and to Galaxy Casino Company Limited, a consortium of Macau and Hong Kong-based investors (“Galaxy”). During December 2002, Venetian Macau and Galaxy entered into a subconcession agreement. The subconcession agreement with Galaxy was recognized and approved by the Macau government and allows Venetian Macau to develop and operate certain casino projects, including the Macau Casino, separately from Galaxy.

        In addition to the Macau Casino, the Company also intends to build in Macau a hotel, casino and convention center complex with a Venetian-style theme similar to the Company’s Las Vegas property (the “Macau Venetian Casino Resort”).

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued)

Note 5 Commitments and Contingencies (Continued)

        Under the subconcession agreement, Venetian Macau is obligated to develop and open the Macau Venetian Casino Resort by June 2006 and invest, or cause to be invested, at least 4.4 billion patacas (approximately $566.5 million at exchange rates in effect on March 31, 2004) in various development projects in Macau by June 2009. The construction and development costs of the Macau Casino will be applied to the fulfillment of this total investment obligation to the Macau government. The Company currently estimates the total cost of constructing, developing, and operating the Macau Casino, including design costs, construction costs, equipment costs, working capital and pre-opening expenses, will be approximately $257.9 million, all of which qualifies to meet the investment obligation to the Macau government. Assuming that all of the current estimated construction and development costs of the Macau Casino are applied towards fulfilling the investment obligations under the subconcession agreement, remaining investment obligations under the subconcession agreement will be approximately $308.6 million. It is expected that the construction and development costs of the Macau Venetian Casino Resort will satisfy the remainder of this obligation. To support this obligation, a Macau bank and a subsidiary of the Company, Lido Casino Resort Holding Company, LLC, have guaranteed 500 million patacas (approximately $64.4 million at exchange rates in effect on March 31, 2004) of Venetian Macau’s legal and contractual liabilities to the Macau government until March 31, 2007. Venetian Macau is currently in the process of seeking consents from the holders of the Venetian Macau Senior Secured Notes to permit the creation of a junior lien on Venetian Macau’s rights over the land upon which the Macau Casino is being constructed in Macau to support the guarantee being issued by the Macau bank under the Venetian Macau subconcession.

        Venetian Macau’s development and investment obligations under its subconcession agreement may be satisfied by Venetian Macau and/or its affiliates, including the Company.

        As of March 31, 2004, approximately $141.8 million of the costs relating to the Macau Casino had been expended. The Company anticipates funding the remaining estimated costs of construction from a combination of the following sources:

•  net proceeds from the issuance and sale of $120 million in aggregate principal amount of the Venetian Macau Senior Secured Notes. As of March 31, 2004, approximately $73.9 million of these proceeds remained unused;

•  operating cash flow of the Company (although the Senior Secured Credit Facility and the Indenture for the Mortgage Notes limit the Company’s ability to make investments in the Macau projects); as of March 31, 2004 the Company had the ability to invest approximately $55.8 million in unrestricted subsidiaries (including the Macau Subsidiaries);

• borrowings under the $20.0 million Macau Revolver. As of March 31, 2004, nothing had been drawn on the Macau Revolver;

•  a completion guaranty issued by LVSI and Venetian, guaranteeing payment of certain costs of the Macau Casino in excess of available funds (the “Completion Guaranty”). The Completion Guaranty is supported by a $10.0 million letter of credit issued in January 2004 under the Company’s Senior Secured Credit Facility (See Note 4 – Senior Secured Credit Facility). The remainder of the Completion Guaranty is expected to be funded by borrowings of up to $15.0 million under the Macau Revolver;

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued

Note 5 Commitments and Contingencies (continued)

•  borrowings under proposed furnishings, fixtures & equipment facilities and vendor financings which the Company expects to be able to enter into in the aggregate principal amount of $25.0 million (the “FF&E Facilities”) to finance certain equipment and other assets of the Macau Casino. If Venetian Macau is unable to obtain the FF&E Facilities or vendor financing, LVSI, Venetian or another of their subsidiaries have agreed to either:

—  purchase, or cause to be purchased assets with a cost of up to $25.0 million and enter into lease or other arrangements with Venetian Macau or

—  otherwise assist Venetian Macau in securing such facilities, including by issuing guarantees in connection with any such facilities or otherwise lending such amounts to Venetian Macau for purposes of securing such equipment

in each case, to the extent permitted under the Senior Secured Credit Facility and the Indenture for the Mortgage Notes.

        The Company expects the funds provided by these sources to be sufficient to construct, develop, and operate the Macau Casino, assuming there are no significant delay costs or construction cost overruns. If Venetian Macau incurs significant cost overruns, it may need to arrange for additional financing to pay for these costs. If it requires additional financing, the Company or its affiliates may incur additional bank borrowings or debt or equity financing. However, no assurance can be given that such funds will be available or that such funds will be on terms that will be favorable to the Company. In addition, the construction and development of the Macau Venetian Casino Resort will require significant additional debt and/or equity financing.

        Venetian Macau, Venetian Intermediate and the Company’s other Macau subsidiaries are not guarantors under the Mortgage Notes or the Senior Secured Credit Facility and, subject to certain limited exceptions, are not restricted subsidiaries under the Indenture for the Mortgage Notes or the Senior Secured Credit Facility. Restrictions have been placed on the payment of dividends to LVSI from Venetian Macau and its subsidiaries.

         Other Ventures and Commitments

        During 2003, the Company entered into three lease termination and asset purchase agreements with Mall tenants. The first agreement provided for payments by the Company to a tenant of $800,000 during 2003, with 27 additional annual payments of $400,000, thereafter. The second agreement provided for an initial deposit of $5.0 million, which was paid by the Company during May 2003 and 15 subsequent monthly payments totaling $10.0 million beginning January 2004 plus interest at 6% per annum. The lease termination and asset transfer is expected to be completed during May 2004. The subsequent monthly payments commenced beginning January 2004. The third agreement and asset purchase agreement provided for an initial payment of $500,000 during 2003 and subsequent quarterly payments of $62,500 for ten years. In each case, the Company has obtained title to leasehold improvements and other fixed assets, which were originally purchased by the Mall tenants, and which have been recorded at estimated fair market value, which approximated the discounted present value of the Company’s obligation to the former tenants.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (Continued

Note 5 Commitments and Contingencies (continued)

         Mall Sale and Related Matters

        On April 12, 2004, the Company entered into an agreement with the Mall Purchaser to sell the Mall and certain restaurant and other retail assets of the Casino Resort for approximately $766 million and the multi-level retail space of the Phase II Resort for approximately $250.0 million subject to an upward adjustment based on operating income performance. The Mall Sale is subject to customary conditions and is expected to close on May 17, 2004. As of March 31, 2004, the Mall II Subsidiary had total assets of $173.4 million and total liabilities of $130.3 million. In conjunction with the Mall Sale, the Company must pay off the existing $120.0 million Secured Mall Facility. The agreement also provides for the Casino Resort to lease nineteen spaces currently occupied by various tenants to the Mall Purchaser for 89 years with annual rent of one dollar per year and the Mall Purchaser will assume the various leases. In addition the Company will: (i) continue to be obligated to fulfill certain lease termination and asset purchase agreements; (ii) lease the C2K Showroom space located within the Mall from the Mall Purchaser for a period of 25 years with fixed minimum rent of $3.3 million per year with cost of living adjustments; (iii) operate the Gondola ride under an operating agreement for a period of 25 years for an annual fee of $3.5 million; and (iv) lease certain office space from the Mall Purchaser for a period of 10 years, subject to extension options for a period of up to 65 years, with annual rent of $860,350. The lease payments under clauses (ii) through (iv) above are subject to automatic increases beginning on the sixth lease year.

        As a result of the consummation of the Mall Sale, the Company will also be obligated to use the Excess Proceeds from the Mall Sale to make the Asset Sale Offer. The Company currently intends to make such an Asset Sale Offer as soon as practicable following the consummation of the Mall Sale.

         Other

        The Company entered into a joint venture to develop a new restaurant in the Casino Resort and has contributed $7.4 million of capital into the joint venture. Such contributions were comprised of $5.4 million of property, plant, and equipment and $2.0 million was comprised of leasehold improvements. The investment was funded during the fourth quarter of 2003 and the first quarter of 2004 through available cash flow provided by operating activities of the Casino Resort. The restaurant opened during January 2004.

Note 6 Summarized Financial Information

        LVSI and Venetian are co-obligors of the Mortgage Notes and the indebtedness under the Senior Secured Credit Facility and are jointly and severally liable for such indebtedness. Venetian, Mall Intermediate, Mall Construction, Lido Intermediate, Venetian Venture, Venetian Athens, Venetian Marketing and Venetian Operating (collectively, the “Subsidiary Guarantors”) are subsidiaries of LVSI, all of the capital stock of which is owned by LVSI and Venetian. The Subsidiary Guarantors have jointly and severally guaranteed (or are co-obligors of) such debt on a full and unconditional basis. The Mall is owned by the Mall II Subsidiary, a non-guarantor subsidiary which is the borrower under the Secured Mall Facility. The Macau Casino is owned by Venetian Macau, a non-guarantor subsidiary which is the guarantor for the Venetian Macau Senior Secured Notes.

        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. The following information represents the summarized financial information of LVSI, Venetian, the Subsidiary Guarantors and the non-guarantor subsidiaries on a combined basis as of March 31, 2004 and December 31, 2003, and for the three month periods ended March 31, 2004 and March 31, 2003. In addition, certain amounts in the 2003 information have been reclassified to conform with the 2004 presentation.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED BALANCE SHEETS March 31, 2004
	Las Vegas Sands, Inc.		Venetian Casino Resort LLC			Other Guarantor Subsidiaries		Other Non- Guarantor Subsidiaries		Consolidating/ Eliminating Entries			Total
Cash and cash equivalents	$	75,328	$	25,779		$	4	$	50,471	$	–		$	151,582
Restricted cash and cash equivalents		–		2,119			–		39,165		–			41,284
Intercompany receivable		–		56,387			–		–		(56,387	)		–
Accounts receivable, net		33,233		29,720			–		1,183		–			64,136
Inventories		–		6,029			–		–		–			6,029
Prepaid expenses		478		3,467			–		639		–			4,584
Total current assets		109,039		123,501			4		91,458		(56,387	)		267,615
Property and equipment, net		4,269		1,098,099			–		408,506		–			1,510,874
Investment in subsidiaries		1,106,192		170,881			–		–		(1,277,073	)		–
Deferred offering costs, net		–		29,191			–		7,478		–			36,669
Restricted cash and cash equivalents		–		–			–		37,382		–			37,382
Other assets, net		6,613		18,192			–		14,738		–			39,543
	$	1,226,113	$	1,439,864		$	4	$	559,562	$	(1,333,460	)	$	1,892,083
Accounts payable	$	8,982	$	5,850		$	–	$	1,310	$	–		$	16,142
Construction payables		–		6,542			–		37,320		–			43,862
Construction payables-contested		–		7,232			–		–		–			7,232
Intercompany payables		31,131		–			–		25,256		(56,387	)		–
Accrued interest payable		–		27,420			–		767		–			28,187
Other accrued liabilities		16,410		65,888			–		2,949		–			85,247
Current maturities of long-term debt(1)		14,067		14,067			–		–		(14,067	)		14,067
Total current liabilities		70,590		126,999			–		67,602		(70,454	)		194,737
Other long-term liabilities		–		833			–		5,513		–			6,346
Redeemable Preferred Interest in Venetian Casino
Resort, LLC a wholly owned subsidiary		–		245,477			–		–		–			245,477
Long-term debt(1)		1,142,625		1,142,625			–		290,000		(1,142,625	)		1,432,625
		1,213,215		1,515,934			–		363,115		(1,213,079	)		1,879,185
Stockholders' equity (deficit)		12,898		(76,070	)		4		196,447		(120,381	)		12,898
	$	1,226,113	$	1,439,864		$	4	$	559,562	$	(1,333,460	)	$	1,892,083

(1)     As more fully described in Note 4 Long-Term Debt, LVSI and Venetian are co-obligors of certain of the Company’s indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED BALANCE SHEETS December 31, 2003
	Las Vegas Sands, Inc.			Venetian Casino Resort LLC			Other Guarantor Subsidiaries		Other Non- Guarantor Subsidiaries		Consolidating/ Eliminating Entries			Total
Cash and cash equivalents	$	73,049		$	29,549		$	5	$	39,757	$	–		$	142,360
Restricted cash and cash equivalents		–			2,121			–		34,237		–			36,358
Intercompany receivable		–			48,016			–		–		(48,016	)		–
Accounts receivable, net		28,772			22,592			–		1,178		–			52,542
Inventories		–			6,093			–		–		–			6,093
Prepaid expenses		687			1,886			–		889		–			3,462
Total current assets		102,508			110,257			5		76,061		(48,016	)		240,815
Property and equipment, net		4,687			1,101,726			–		325,763		–			1,432,176
Investment in subsidiaries		1,078,595			152,494			–		–		(1,231,089	)		–
Deferred offering costs, net		–			30,513			–		7,976		–			38,489
Restricted cash and cash equivalents		–			–			–		86,144		–			86,144
Other assets, net		3,922			18,894			–		11,454		–			34,270
	$	1,189,712		$	1,413,884		$	5	$	507,398	$	(1,279,105	)	$	1,831,894
Accounts payable	$	2,076		$	11,778		$	–	$	1,137	$	–		$	14,991
Construction payables		–			10,330			–		31,825		–			42,155
Construction payables-contested		–			7,232			–		–		–			7,232
Intercompany payables		16,526			–			–		31,490		(48,016	)		–
Accrued interest payable		–			3,896			–		913		–			4,809
Other accrued liabilities		29,116			63,341			–		3,483		–			95,940
Current maturities of long-term debt(1)		12,633			12,633			–		–		(12,633	)		12,633
Total current liabilities		60,351			109,210			–		68,848		(60,649	)		177,760
Other long-term liabilities		–			883			–		5,562		–			6,445
Long-term debt(1)		1,146,350			1,146,350			–		280,000		(1,146,350	)		1,426,350
		1,206,701			1,256,443			–		354,410		(1,206,999	)		1,610,555
Redeemable Preferred Interest in Venetian Casino
Resort, LLC a wholly owned subsidiary		–			238,328			–		–		–			238,328
Stockholders' equity (deficit)		(16,989	)		(80,887	)		5		152,988		(72,106	)		(16,989	)
	$	1,189,712		$	1,413,884		$	5	$	507,398	$	(1,279,105	)	$	1,831,894

(1)     As more fully described in Note 4 Long-Term Debt, LVSI and Venetian are co-obligors of certain of the Company’s indebtedness. Accordingly, such indebtedness has been presented as an obligation of both entities in the above balance sheets.

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED STATEMENT OF OPERATIONS For the three months ended March 31, 2004
	Las Vegas Sands, Inc.			Venetian Casino Resort LLC			Other Guarantor Subsidiaries			Other Non- Guarantor Subsidiaries			Consolidating/ Eliminating Entries			Total
Revenues:
Casino	$	94,708		$	–		$	–		$	–		$	–		$	94,708
Rooms		–			85,367			–			–			–			85,367
Food and beverage		–			33,505			–			–			(50	)		33,455
Casino rental revenues from LVSI		–			10,824			–			–			(10,824	)		–
Retail and other		58			10,520			–			10,892			(439	)		21,031
Total revenues		94,766			140,216			–			10,892			(11,313	)		234,561
Less promotional allowances		–			(1,596	)		–			–			(12,164	)		(13,760	)
Net revenues		94,766			138,620			–			10,892			(23,477	)		220,801
Operating expenses:
Casino		55,203			–			–			–			(18,575	)		36,628
Rooms		–			22,050			–			–			(2,009	)		20,041
Food and beverage		–			17,867			–			–			(2,369	)		15,498
Retail and other		–			5,289			–			4,481			(264	)		9,506
Provision for doubtful accounts		3,344			(100	)		–			–			–			3,244
General and administrative		1,215			30,606			1			400			(260	)		31,962
Corporate expense		1,498			1,162			–			–			–			2,660
Rental expense		121			1,701			–			629			–			2,451
Pre-opening and developmental expense		–			1,354			–			7,025			–			8,379
Depreciation and amortization		525			12,847			–			1,409			–			14,781
		61,906			92,776			1			13,944			(23,477	)		145,150
Operating income (loss)		32,860			45,844			(1	)		(3,052	)		–			75,651
Other income (expense):
Interest income		74			337			–			940			(993	)		358
Interest expense, net of amounts capitalized		(17	)		(28,047	)		–			(3,975	)		993			(31,046	)
Preferred return on Redeemable Preferred
Interest in Venetian Casino Resort, LLC		(7,150	)		–			–			–			–			(7,150	)
Other income (expense)		–			–			–			(9	)		–			(9	)
Income from equity investment in Grand       Canal Shops II		70			2,268			–			–			(2,338	)		–
Income (loss) from equity investment in       VCR and subsidiaries		11,967			(8,435	)		–			–			(3,532	)		–
Net income	$	37,804		$	11,967		$	(1	)	$	(6,096	)	$	(5,870	)	$	37,804

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED STATEMENT OF OPERATIONS For the three months ended March 31, 2003
	Las Vegas Sands, Inc.			Venetian Casino Resort LLC			Other Guarantor Subsidiaries		Other Non- Guarantor Subsidiaries			Consolidating/ Eliminating Entries			Total
Revenues:
Casino	$	73,313		$	–		$	–	$	–		$	–		$	73,313
Rooms		–			57,491			–		–			–			57,491
Food and beverage		–			20,068			–		–			–			20,068
Casino rental revenue from LVSI		–			10,632			–		–			(10,632	)		–
Retail and other		(107	)		8,376			–		9,814			(286	)		17,797
Total revenue		73,206			96,567			–		9,814			(10,918	)		168,669
Less promotional allowances		–			(1,037	)		–		–			(8,967	)		(10,004	)
Net revenues		73,206			95,530			–		9,814			(19,885	)		158,665
Operating expenses:
Casino		48,874			–			–		–			(15,956	)		32,918
Rooms		–			15,992			–		–			(1,465	)		14,527
Food and beverage		–			11,513			–		–			(2,071	)		9,442
Retail and other		–			4,444			–		3,629			(249	)		7,824
Provision for doubtful accounts		3,421			300			–		–			–			3,721
General and administrative		1,059			25,165			–		532			(144	)		26,612
Corporate expense		1,338			1,263			–		–			–			2,601
Rental expense		188			1,709			–		646			–			2,543
Pre-opening and developmental expense		–			–			–		1,827			–			1,827
Depreciation and amortization		444			9,078			–		1,215			–			10,737
		55,324			69,464			–		7,849			(19,885	)		112,752
Operating income		17,882			26,066			–		1,965			–			45,913
Other income (expense):
Interest income		76			270			–		100			–			446
Interest expense, net of amounts capitalized		(52	)		(26,244	)		–		(1,240	)		–			(27,536	)
Other income		–			580			–		(20	)		–			560
Income from equity investment in Grand Canal Shops II		77			2,488			–		–			(2,565	)		–
Income (loss) from equity investment in VCR and        subsidiaries		1,400			(1,760	)		–		–			360			–
Income before preferred return		19,383			1,400			–		805			(2,205	)		19,383
Preferred return on Redeemable Preferred
Interest in Venetian Casino Resort, LLC		(6,363	)		–			–		–			–			(6,363	)
Net income	$	13,020		$	1,400		$	–	$	805		$	(2,205	)	$	13,020

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2004
	Las Vegas Sands, Inc.			Venetian Casino Resort LLC			Other Guarantor Subsidiaries			Other Non- Guarantor Subsidiaries			Consolidating/ Eliminating Entries			Total
Net cash provided by (used in) operating activities	$	12,812		$	49,461		$	(1	)	$	(7,600	)	$	–		$	54,672
Cash flows from investing activities:
Decrease in restricted cash		–			2			–			43,834			–			43,836
Notes receivable from stockholders		(8	)		–			–			–			–			(8	)
Capital expenditures		(130	)		(13,008	)		–			(78,657	)		–			(91,795	)
Capital contributions to subsidiaries		(25,000	)		(24,555	)		–			–			49,555			–
Net cash used in investing activities		(25,138	)		(37,561	)		–			(34,823	)		49,555			(47,967	)
Cash flows from financing activities:
Dividends paid to shareholders		–			(5,003	)		–			–			–			(5,003	)
Capital contribution from Venetian Casino Resort LLC		–			–			–			49,555			(49,555	)		–
Repayments on senior secured credit facility-term A		–			(1,667	)		–			–			–			(1,667	)
Repayments on senior secured credit facility-term B		–			(625	)		–			–			–			(625	)
Proceeds from Venetian Intermediate credit facility		–			–			–			10,000			–			10,000
Payments of deferred offering costs		–			(4	)		–			(184	)		–			(188	)
Net change in intercompany accounts		14,605			(8,371	)		–			(6,234	)		–			–
Net cash provided by (used in) financing activities		14,605			(15,670	)		–			53,137			(49,555	)		2,517
Increase (decrease) in cash and cash equivalents		2,279			(3,770	)		(1	)		10,714			–			9,222
Cash and cash equivalents at beginning of period		73,049			29,549			5			39,757			–			142,360
Cash and cash equivalents at end of period	$	75,328		$	25,779		$	4		$	50,471		$	–		$	151,582

INDEX

LAS VEGAS SANDS, INC.

Notes to Financial Statements (continued)

Note 6 Summarized Financial Information (continued)

	CONDENSED STATEMENTS OF CASH FLOWS For the three months ended March 31, 2003
	Las Vegas Sands, Inc.			Venetian Casino Resort LLC			Other Guarantor Subsidiaries		Other Non- Guarantor Subsidiaries			Consolidating/ Eliminating Entries			Total
Net cash provided by operating activities	$	9,334		$	35,422		$	–	$	7,860		$	–		$	52,616
Cash flows from investing activities:
(Increase) decrease in restricted cash		–			52,654			–		(784	)		–			51,870
Capital expenditures		(287	)		(74,084	)		–		(13,439	)		–			(87,810	)
Capital contributions to subsidiaries		–			(770	)		–		–			770			–
Net cash used in investing activities		(287	)		(22,200	)		–		(14,223	)		770			(35,940	)
Cash flows from financing activities:
Capital contribution from Venetian Casino Resort LLC		–			–			–		770			(770	)		–
Repayments on senior secured credit facility-term B		–			(625	)		–		–			–			(625	)
Repayments on bank credit facility-revolver		–			(58	)		–		–			–			(58	)
Proceeds from bank credit facility-revolver		–			58			–		–			–			58
Payments of deferred offering costs		–			(8	)		–		(425	)		–			(433	)
Net change in intercompany accounts		12,449			(12,941	)		–		492			–			–
Net cash provided by (used in) financing activity		12,449			(13,574	)		–		837			(770	)		(1,058	)
Increase (decrease) in cash and cash equivalents		21,496			(352	)		–		(5,526	)		–			15,618
Cash and cash equivalents at beginning of period		46,746			9,973			6		37,017			–			93,742
Cash and cash equivalents at end of period	$	68,242		$	9,621		$	6	$	31,491		$	–		$	109,360

INDEX

LAS VEGAS SANDS, INC.

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, 2003. 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 Venetian Casino Resort, a large-scale Renaissance Venice-themed hotel, casino, retail, meeting, and entertainment complex in Las Vegas, Nevada, a major expansion of which was completed and opened for business during the second quarter of 2003. Approximately 76.8% of the Company’s gross revenues in the first quarter of 2004 were derived from gaming and hotel rooms at the Casino Resort of which approximately 40.4% is derived from gaming and 36.4% is derived from hotel rooms. Las Vegas has continued to experience an upward trend in visitation, convention, and trade show attendees, and gaming win, hotel occupancy and hotel average daily room rates. The Casino Resort has benefited from these trends along with low interest rates during 2003 and the first quarter of 2004.

        The Company completed an expansion of the Casino Resort during the second quarter of 2003, which opened for business on June 26, 2003. The expansion included a 1,013-room hotel tower on top of the Casino Resort’s existing parking garage, an approximately 1,000-parking space expansion to the existing parking garage and approximately 150,000 square feet of additional meeting and conference space. Following its expansion, the Casino Resort includes the only all-suites hotel on the Las Vegas Strip with 4,049 suites; a gaming facility of approximately 116,000 square feet; an enclosed retail, dining and entertainment complex of approximately 446,000 net leasable square feet; and a meeting and conference facility of approximately 650,000 square feet. The total cost of the Phase IA Addition construction was approximately $285.0 million, including $9.0 million to expand the Casino Resort’s heating, ventilation and air conditioning facility (the “HVAC Plant Expansion”) to accommodate the Phase IA Addition.

        On April 12, 2004, the Company entered into an agreement with the Mall Purchaser to sell the Mall and certain restaurant and other retail assets of the Casino Resort for approximately $766 million and the multi-level retail space of the Phase II Resort for approximately $250.0 million subject to an upward adjustment based on operating income performance. The Mall Sale is subject to customary conditions and is expected to close on May 17, 2004. As of March 31, 2004, the Mall II Subsidiary had total assets of $173.4 million and total liabilities of $130.3 million. In conjunction with the Mall Sale, the Company must pay off the existing $120.0 million Secured Mall Facility. The agreement also provides for the Casino Resort to lease nineteen spaces currently occupied by various tenants to the Mall Purchaser for 89 years with annual rent of one dollar per year and the Mall Purchaser will assume the various leases. In addition the Company will: (i) continue to be obligated to fulfill certain lease termination and asset purchase agreements; (ii) lease the C2K Showroom space located within the Mall from the Mall Purchaser for a period of 25 years with fixed minimum rent of $3.3 million per year with cost of living adjustments; (iii) operate the Gondola ride under an operating agreement for a period of 25 years for an annual fee of $3.5 million; and (iv) lease certain office space from the Mall Purchaser for a period of 10 years, subject to extension options for a period of up to 65 years, with annual rent of $860,350. The lease payments under clauses (ii) through (iv) above are subject to automatic increases beginning on the sixth lease year.

        The Company has begun extensive design and planning work, and has commenced design, demolition and work on the site of, the Phase II Resort. During the first quarter of 2004, the Company invested $13.5 million toward the development of the Phase II Resort.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        During 2003, Venetian Macau, a subsidiary of the Company, commenced construction of the Macau Casino, a Las Vegas style casino on an approximately six-acre, waterfront parcel near the Macau-Hong Kong Ferry Terminal in the Macau Special Administrative Region of the People’s Republic of China under a subconcession agreement.

        Venetian Macau began construction of the Macau Casino in December 2002 and expects to open the main casino portion of the Macau Casino on May 18, 2004 and the remainder of the Macau Casino by June 2004. The Company currently estimates that the total cost of constructing, developing, and operating the Macau Casino, including design costs, construction costs, equipment costs, working capital and pre-opening expenses, will be approximately $257.9 million. Through March 31, 2004, the Company has expended pre-opening and developmental expenses and capital expenditures of $141.8 million, in connection with the Macau Casino project. In addition, under the subconcession agreement, Venetian Macau is obligated to develop and open the Macau Venetian Casino Resort by June 2006 and invest, or cause to be invested, at least 4.4 billion patacas (approximately $566.5 million at exchange rates in effect on March 31, 2004) in various development projects in Macau by June 2009. The cost of the Macau Casino and the Macau Venetian Casino Resort will be included towards the satisfaction of these investment obligations. See “–Liquidity and Capital Resources – Macau Casino Projects”.

        The Company is assessing the feasibility of, and developing, an Internet gaming site. Through March 31, 2004, the Company had invested $1.3 million in development costs of an Internet gaming site. The Company received an interactive gaming license and an electronic betting center license from the Alderney Gambling Control Commission during March 2003, but has not yet established any operations.

        The Company has entered into agreements in principle subject to the successful negotiation of final documentation, with two prominent football clubs in the United Kingdom to build entertainment and gaming facilities.

Critical Accounting Policies and Estimates

        Management has identified the following critical accounting policies that affect the Company’s more significant judgments and estimates used in the preparation of the Company’s consolidated financial statements. The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States of America requires the Company’s management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates those estimates, including those related to asset impairment, accruals for slot marketing points, self-insurance, compensation and related benefits, revenue recognition, allowance for doubtful accounts, contingencies, and litigation. The Company states these accounting policies in the notes to the consolidated financial statements and in relevant sections in this discussion and analysis. These estimates are based on the information that is currently available to the Company and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates.

        The Company believes that the following critical accounting policies affect significant judgments and estimates used in the preparation of its consolidated financial statements:

•  The Company maintains an allowance for doubtful accounts for estimated losses resulting from the failure of its customers to make required payments, which results in bad debt expense. Management determines the adequacy of this allowance by continually evaluating individual customer receivables, considering the customer’s financial condition, credit history and current economic conditions. If the financial condition of customers were to deteriorate, or if a customer refuses to pay or disputes any such payment, additional allowances may be required. The Company’s estimate of its provision for doubtful accounts was $3.2 million during the first quarter of 2004 as compared to $3.7 million during the first quarter of 2003. The Company has historically estimated its provision for doubtful accounts related to table games receivables both on a specific identification basis for high dollar accounts, and on a percentage of table games credit volume for the balance of the receivable portfolio.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

•  The Company maintains accruals for health and workers compensation self-insurance, slot club point redemption and group sales commissions, which are classified in other accrued liabilities in the consolidated balance sheets. Management determines the adequacy of these accruals by periodically evaluating the historical experience and projected trends related to these accruals. If such information indicates that the accruals are overstated or understated, or if business conditions indicate the Company should adjust the assumptions utilized in the methodologies, the Company will reduce or provide for additional accruals as appropriate.

•  The Company is subject to various claims and legal actions, including lawsuits with its construction manager, Lehrer McGovern Bovis, Inc., for the original construction of the Casino Resort. Some of these matters relate to personal injuries to customers and damage to customers’ personal assets. Management has established no accrual for any gain or loss in connection with the construction litigation because such gain or loss while reasonably possible has not been determined to be probable, nor can it be measured with any reasonable certainty. It is reasonably possible that this position could change in the near term as arbitration proceedings are concluded, and such amount could be material. Management estimates guest claims expense and accrues for such liabilities based upon historical experience in the other accrued liability category in its consolidated balance sheet.

•  At March 31, 2004, the Company had net property and equipment of $1.5 billion representing 79.9% of its total assets. The Company depreciates property and equipment on a straight-line basis over their estimated useful lives. The estimated useful lives are based on the nature of the assets as well as current operating strategy. Future events, such as property expansions, property developments, new competition, or new regulations, could result in a change in the manner in which the Company uses certain assets requiring a change in the estimated useful lives of such assets. In assessing the recoverability of the carrying value of property and equipment if events and circumstance warrant such an assessment, the Company must make assumptions regarding estimated future cash flows and other factors. If these estimates or the related assumptions change, the Company may be required to record an impairment loss for these assets. Such an impairment loss would be recognized as a non-cash component of operating income.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Summary Financial Results

        The Company currently offers hotel, gaming, dining, entertainment, retail and spa amenities at one location in the Casino Resort in Las Vegas and under one operating segment. Approximately 40.4% of the Company’s gross revenues are derived from gaming, while 36.4% are derived from hotel rooms during the first quarter of 2004. The percentage of gaming revenue is one of the lowest on the Las Vegas Strip because of the Company’s emphasis on the group convention and trade show business and the resulting higher occupancy and room rates during mid-week periods.

        The following table summarizes the Company’s results of operations:

	Three Months Ended March 31, (dollars in thousands)
	2004		Percent Change			2003
Net revenues	$	220,801		39	.2%	$	158,665
Operating income		75,651		64	.8%		45,913
General and administrative expenses		31,962		20	.1%		26,612
Net income (loss)		37,804		190	.4%		13,020

	Percent of Net Revenues
	2004			2003
Operating income		34	.3%		28	.9%
General and administrative expenses		14	.5%		16	.8%
Net income (loss)		17	.1%		8	.2%

Operating Results

      Three Months Ended March 31, 2004 compared to the Three Months Ended March 31, 2003

      Operating Revenues

      Key operating revenue measurements:

        The Casino Resort’s operating revenue is dependent upon the volume of customers that stay at the hotel, which affects the price that can be charged for hotel rooms and the volume of table games and slot machine play. Following are the key measurements the Company uses to evaluate operating revenue.

        Hotel revenue measurements: hotel occupancy is the average percentage of available hotel rooms occupied during a period. Average daily room rate (“ADR”) is the average price of occupied rooms per day. Revenue per available room (“Rev Par”) represents a summary of hotel average daily room rates and occupancy.

        Casino revenue measurements: table games drop and slot handle are volume measurements. Win or hold percentage represents the percentage of drop or handle that is won by the casino. Normal table games win percentage is 19% to 21% of table games drop and normal slot machine win percentage is 6% to 7% of slot handle. Generally, slot machine play is conducted on a cash basis, while the Casino Resort’s table games revenue is from higher wagering guests, generally on a credit basis.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        The Company’s net revenues consisted of the following:

	Three Months Ended March 31, (dollars in thousands)
	2004			2003			Percent Change
Net Revenues
Casino	$	94,708			73,313			29.2	%
Rooms		85,367			57,491			48.5	%
Food and beverage		33,455			20,068			66.7	%
Grand Canal Shops		10,621			9,528			11.5	%
Retail		2,208			1,887			17.0	%
Other		8,202			6,382			28.5	%
		234,561			168,669			39.1	%
Less - Promotional Allowances		(13,760	)		(10,004	)		(37.5	)%
Total net revenues	$	220,801		$	158,665			39.2	%

        Consolidated net revenues were $220.8 million during the first quarter of 2004 representing an increase of $62.1 million or 39.2% compared to $158.7 million for the first quarter of 2003. The increase in net revenues was due to: (1) an increase of casino revenue of $21.4 million, primarily as a result of increased table games and slot machine volumes and win percentages; (2) an increase in room revenue of $27.9 million as a result of (a) adding an additional 1,013 new hotel rooms during June 2003 as part of the Phase IA Addition project (b) an increase in average daily hotel room rates and (c) a slight increase in hotel room occupancy; (3) an increase in food and beverage revenue of $13.4 million which resulted from the additional rooms and the associated increased banquet revenues; and (4) an increase in Grand Canal Shops, retail and other revenues to $21.0 million during the first quarter of 2004 as compared to $17.8 million during the first quarter of 2003.

        Casino revenues were $94.7 million during the first quarter of 2004, an increase of $21.4 million or 29.2% compared to $73.3 million for the first quarter of 2003. The increase was attributable to several factors, including slot handle (volume) in the three months ended March 31, 2004 increase to $482.9 billion from $449.4 billion during the same period of 2003, primarily as a result of adding 1,013 new hotel rooms (slot machine win percentage as a percentage of slot handle was within a normal range during the first quarter of both 2004 and 2003). Table games drop (volume) increased to $259.5 million in the first quarter of 2004 from $220.8 million during the first quarter of 2003. Table game win as a percentage of table games drop was higher than normal during both the first quarter of 2004 and 2003 (casino win percentage is reasonably predictable over time, but may vary considerably during shorter periods).

        The Casino Resort maintained an average daily room rate of $235 for the first quarter of 2004 as compared to $217 in the first quarter of 2003. The Casino Resort generated revenue per available room of $233 during the first quarter of 2004 as compared to $211 during the first quarter of 2003. Room revenues during the first quarter of 2004 were $85.4 million, representing an increase of $27.9 million or 48.5% when compared to $57.5 million during the first quarter of 2003. The increase in room revenues was the result of an increase in the number of hotel rooms, after the opening of the Phase IA Addition on June 27, 2003, an increase in the average daily room rate and a slight increase in room occupancy.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        Food and beverage revenues were $33.5 million during the first quarter of 2004, representing an increase of $13.4 million or 66.7% compared to $20.1 million for the first quarter of 2003. The increase was attributable to the additional hotel rooms and higher room occupancy.

        Grand Canal Shops revenues, which are included in retail and other revenues, were $10.6 million during the first quarter of 2004, representing an increase of $1.1 million or 11.6% compared to $9.5 million during the first quarter of 2003. The increase was attributable to higher foot traffic, additional tenants, and increased proceeds from rents calculated on tenant gross revenues. The Company expects to consummate the Mall Sale on May 17, 2004.

        Retail and other revenues (excluding the Grand Canal Shops) were $10.4 million in the first quarter of 2004, representing an increase of $2.1 million or 25.3% compared to $8.3 million in the first quarter of 2003. The increase was primarily attributable to the new hotel rooms and associated increase in visitor volumes to the Casino Resort.

         Operating Expenses

        Variations in the Company’s operating expenses are generally based upon volume of guests staying in the hotel and utilizing the Casino Resort’s amenities, including the casino, food and beverage, spa and retail outlets. Operating expenses not related to the operations of the Casino Resort such as, corporate, pre-opening and developmental expenses are not based upon guests of the Casino Resort but on strategic decisions as to new opportunities for the Company such as in Macau and Internet gaming.

        The breakdown of operating expenses is as follows:

	Three Months Ended March 31, (dollars in thousands)
	2004		2003		Percent Change
Operating Expenses
Casino	$	36,628	$	32,918		11.3	%
Rooms		20,041		14,527		38.0	%
Food and beverage		15,498		9,442		64.1	%
Grand Canal Shops		6,856		6,022		13.8	%
Retail and other		2,650		1,802		47.1	%
Provision for doubtful accounts		3,244		3,721		(12.8	)%
General and administrative		31,962		26,612		20.1	%
Corporate		2,660		2,601		2.3	%
Rental expense		2,451		2,543		(3.6	)%
Pre-opening and developmental expense		8,379		1,827		358.6	%
Depreciation and amortization		14,781		10,737		37.7	%
Total operating expenses	$	145,150	$	112,752		28.7	%

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

        Operating expenses (including pre-opening, developmental, and corporate expenses) were $145.2 million during the first quarter of 2004, representing an increase of $32.4 million or 28.7% compared to $112.8 million during the first quarter of 2003. The increase in operating expenses was primarily attributable to higher operating revenues and business volumes in all departments of the Casino Resort due to the completion of the Phase IA Addition, increased pre-opening and development expense associated with the construction of the Macau Casino, increased general and administrative costs, partially offset by a decrease in the provision for doubtful accounts. Casino department expenses increased $3.7 million or 11.3% as a result of increased slot machine volume and increased table games marketing cost. Room’s department expense increased $5.5 million or 38.0% as a result of the addition of 1,013 hotel rooms and slightly higher room occupancy. Food and beverage expense increased $6.1 million or 64.1% as a result of increased food and beverage sales. General and administrative cost increased $5.4 million primarily as the result of increased utility cost, legal expense, management bonus program, and property taxes.

        Mall operating expenses were $6.9 million during the first quarter of 2004, representing an increase of $0.9 million or 15.0% compared to $6.0 million during the first quarter of 2003. The Company expects to consummate the Mall Sale on May 17, 2004.

        The provision for doubtful accounts was $3.2 million in the first quarter of 2004, representing a decrease of $.5 million or 13.5% compared to $3.7 million during the first quarter of 2003. The decrease was primarily the result of improved collections of table games receivables during the first quarter of 2004. Net casino receivables were $32.8 million as of March 31, 2004 as compared to $36.3 million as of March 31, 2003. Net hotel receivables were $28.5 million the first quarter of 2004 representing an increase of $17.1 million or 150.0% compared to $11.4 million the first quarter of 2003. The increase in hotel receivables was the result of the increase in the number of hotel rooms and group convention and banquet business. Hotel receivables are generally secured by credit cards or cash deposits, and therefore rarely have significant allowances associated with outstanding balances.

        Pre-opening and developmental expense was $8.4 million during the first quarter of 2004, representing an increase of $6.6 million or 366.7% compared to $1.8 million during the first quarter of 2003. The increase was primarily a result of the Company’s development of the Macau Casino and other projects at the Casino Resort.

         Interest Income (Expense)

        The following table summarizes information related to interest expense on long-term debt, excluding Redeemable Preferred Interest:

	Three Months Ended March 31, (in thousands, except percentages)
	2004		2003
Interest cost	$	32,256	$	29,487
Less: Capitalized interest		1,210		1,951
Interest expense, net	$	31,046	$	27,536
Cash paid for interest, net of amounts capitalized	$	6,266	$	3,914
Average total debt balance	$	1,448,219	$	1,218,750
Weighted average interest rate		8.1%		9.0%

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        Interest expense net of amounts capitalized was $31.0 million for the first quarter of 2004, representing an increase of $3.5 million or 12.7% compared to $27.5 million in the first quarter of 2003. Of the net interest expense incurred during the first quarter of 2004, $28.0 million was related to the Casino Resort (excluding the Mall), $1.7 million was related to the Mall, and $1.3 million was related to the Macau Casino. The increase in interest expense was attributable to increased borrowings associated with the construction of the Phase IA Addition and the Macau Casino.

        During the three months ended March 31, 2004 and March 31, 2003, $7.2 million and $6.4 million, respectively, were accrued on the Series B preferred interest in Venetian.

Liquidity and Capital Resources

Cash Flows – Summary

        The Company’s cash flows consist of the following:

	Three Months Ended March 31, (in thousands)
	2004			2003
Net cash provided by operations	$	54,672		$	52,616
Investing cash flows:
Capital expenditures		(91,795	)		(87,810	)
Decrease in restricted cash		43,836			51,870
Shareholder loans		(8	)		–
Net cash used in investing activities		(47,967	)		(35,940	)
Financing cash flows:
Dividends to shareholders		(5,003	)		–
Repayments of long-term debt		(2,292	)		(683	)
Issuance of long-term debt		10,000			58
Other		(188	)		(433	)
Net cash provided by (used in) financing activities		2,517			(1,058	)
Net increase in cash and cash equivalents	$	9,222		$	15,618

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

Cash Flows —Operating Activities

        The Casino Resort’s slot machine and retail hotel rooms business are generally conducted on a cash basis while the Casino Resort’s table games, group hotel, and banquet businesses are conducted on a credit basis resulting in operating cash flows being generally affected by changes in operating income and accounts receivables. As of March 31, 2004 and March 31, 2003, the Company held unrestricted cash and cash equivalents of $151.6 million and $142.4 million, respectively. Net cash provided by operating activities for the first quarter of 2004 was $54.7 million, compared to $52.6 million for the first quarter of 2003. The Company’s operating cash flow in the first quarter of 2004 was positively impacted as compared to the prior year primarily because of the $29.7 million increase in operating income. The increase in operating income was primarily the result of an increase of $22.4 million in the Casino Resort’s room division operating profit during the first quarter of 2004 as compared to the first quarter of 2003. Net trade receivables were $64.1 million as of March 31, 2004 compared to $52.5 million as of March 31, 2003.

         Capital Expenditures

        Capital expenditures during the first quarter of 2004 were $91.8 million, of which $64.3 million was attributable to the Macau Casino project with the balance having been incurred for capital expenditures at the Casino Resort. The Company expects capital expenditures (excluding the Phase II Resort) in 2004 to total approximately $240.0 million, including Macau Casino construction costs of approximately $190.0 million, and approximately $50.0 million for operating capital expenditures at the Casino Resort. The Phase II Resort design, planning, and other development costs during the first quarter of 2004 were $13.5 million. The Company has proceeded with Phase II design, demolition, and site work during the second quarter of 2004 and plans to continue development work on the Phase II Resort during 2004. The Company is pursuing and evaluating alternatives to finance the development and construction of the Phase II Resort. The construction and development of the Phase II Resort will require significant additional debt and/or equity financing and there can be no assurance that such funds will be available or that such funds will be on terms that will be favorable to the Company. The Company currently estimates the cost to develop and construct the Phase II Resort to be approximately $1.5 billion, excluding the cost of the land, capitalized interest, and pre-opening expenses.

        The Company also held restricted cash balances of $78.7 million as of March 31, 2004. Of this amount, $74.7 million was held in restricted accounts and invested in cash or permitted investments by a disbursement agent for the holders of the Venetian Macau Senior Secured Notes until required for the Macau Casino project costs under the disbursement terms of the Venetian Macau Senior Secured Notes.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

         Aggregate Indebtedness and Other Known Contractual Obligations

        The Company’s total long-term indebtedness and other known contractual obligations are summarized below as of March 31, 2004:

	Payments due by Period (dollars in thousands)
	Less than 1 Year		1-3 Years		3-5 Years		Thereafter		Total
Long - Term Indebtedness
Mortgage Notes	$	–	$	–	$	–	$	850,000	$	850,000
Senior Secured Credit Facility - Term A(1)		9,167		32,500		5,000		–		46,667
Senior Secured Credit Facility - Term B(1)		2,500		5,000		238,125		–		245,625
Secured Mall Facility(2)		–		120,000		–		–		120,000
FF&E Credit Facility(3)		2,400		4,800		7,200		–		14,400
Venetian Macau Senior Secured Notes Tranche A(3)		–		18,700		56,300		–		75,000
Venetian Macau Senior Secured Notes Tranche B(3)		–		–		45,000		–		45,000
Venetian Intermediate Credit Facility(4)		–		50,000		–		–		50,000
Redeemable Preferred Interest(5)		–		–		–		245,477		245,477
Other Contractual Obligations
HVAC Provider fixed payments(6)		7,657		15,314		15,314		1,914		40,199
Former Tenants(7)		8,650		1,300		1,300		9,514		20,764
Macau Casino Land Lease(8)		5,733		8,744		323		3,072		17,872
Macau Casino Operating Leases		458		618		328		–		1,404
Total	$	36,565	$	256,976	$	368,890	$	1,109,977	$	1,772,408

_________________

(1) The Senior Secured Credit Facility – Term A for draw down and amounts borrowed at March 31, 2004 will mature on June 4, 2007 and is subject to quarterly amortization payments commencing on March 31, 2004. The Senior Secured Credit Facility – Term B will mature on June 4, 2008 and will be subject to nominal quarterly amortization payments, beginning from September 30, 2002 through June 30, 2007, and equal quarterly amortization payments of the balance of this facility thereafter. Indebtedness under the senior secured revolving credit facility will mature on June 4, 2007 with no interim amortization.

(2) The $120.0 million Secured Mall Facility will mature on June 10, 2005 (subject to extension for two terms of one year each), with no amortization. The Company expects to consummate the Mall Sale on May 17, 2004. The Company is obligated to repay the Secured Mall Facility in full on the closing date with the proceeds from the Mall Sale.

(3) The $15.0 million FF&E Facility will mature on July 1, 2008 and is subject to quarterly amortization payments. The Venetian Macau Senior Secured Notes Tranche A will mature on August 21, 2008 and are subject to mandatory annual redemption. The Venetian Macau Senior Secured Noted Tranche B will mature on August 21, 2008 and are not subject to mandatory annual redemption. The Company currently intends to make an Asset Sale Offer for the Mortgage Notes with the Excess Proceeds of the Mall Sale as soon as practicable following the consummation of the Mall Sale.

(4) The $50.0 million Venetian Intermediate Credit Facility will mature on March 27, 2006, with no amortization.

(5) The Redeemable Preferred Interest is subordinated to all other secured indebtedness has no interim amortization, accrues interest semi-annually at 11.0% and is redeemable along with accrued interest in 2011.

(6) The Company and the New Mall Subsidiary are parties to a services agreement with a third party for thermal energy (heating, ventilating, and air conditioning) for the Casino Resort. The total remaining payment obligation under these arrangements was $40.2 million as of March 31, 2004, payable in equal monthly installments through July 1, 2009.

(7) The Company and the Mall Subsidiary are party to tenant lease termination and asset purchase agreements. The total remaining payment obligations under these arrangements was $23.2 million as of March 31, 2004. Under the agreement for the Mall Sale, the Company is obligated to fulfill the lease termination and asset purchase agreements.

(8) The Macau Subsidiary is party to a long-term land lease of 25 years; the total remaining payment obligation under this arrangement is $17.9 million as of March 31, 2004.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        Under the terms of its existing indebtedness, the Company has debt principal payments due aggregating $14.1 million during the next twelve months, representing principal payments on the Senior Secured Credit Facility and the FF&E Credit Facility. Based on current outstanding indebtedness and current interest rates on the Senior Secured Credit Facility, the Secured Mall Facility, the FF&E Facility, the Venetian Intermediate Credit Facility and the Venetian Macau Senior Secured Notes, the Company has estimated total interest payments during the next three months (excluding noncash amortization of debt offering costs) of approximately $105.9 million for indebtedness secured by the Casino Resort, (including the Venetian Intermediate Credit Facility), approximately $3.8 million for indebtedness secured by the Mall (See discussion of Mall Sale), and $6.4 million for indebtedness secured by the Macau Casino. In addition, Venetian Macau is required to obtain, and is in the process of seeking, an additional $25.0 million of FF&E indebtedness to complete the Macau Casino which would require additional interest expense. If Venetian Macau is unable to obtain this Financing, LVSI, Venetian or another of their subsidiaries is obligated to either purchase gaming equipment or other assets with a cost of up to $25.0 million or enter into lease or other arrangements with Venetian Macau or enter into other transactions with Venetian Macau that will enable it to purchase this gaming equipment or these assets. See “Item 1 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 4 – Long-Term Debt.”

        The Company also has fixed payments obligations due during the next twelve months of $7.7 million under its energy service agreements with the HVAC Provider. The total remaining payment obligation under this arrangement is $40.2 million, payable in equal monthly installments during the period from April 1, 2004 through July 1, 2009.

         Off – Balance Sheet Arrangements

        During 1997, the Company and the Mall Subsidiary entered into off-balance sheet arrangements with a heating and air conditioning (“HVAC”) provider (the “HVAC Provider”). Under the terms of these energy service agreements, HVAC energy and services will be purchased by the Company, the New Mall Subsidiary, its mall tenants and Interface over initial terms expiring in 2009 with an option to collectively extend the terms of their agreements for two consecutive five-year periods. The Company has fixed payments obligations due during the next three months of $7.7 million under its energy services agreements with the HVAC Provider. The total remaining payment obligations under these arrangements was $40.2 million as of March 31, 2004, payable in equal monthly installments through July 1, 2009. The Company has the right to terminate the agreement based upon the failure of the HVAC Provider to provide HVAC service. The Company has no other off-balance sheet arrangements.

         Capital and Liquidity

        For the next twelve months, the Company expects to fund Casino Resort operations, capital expenditures, the Macau Casino construction, the Phase II Resort development costs, and debt service requirements from existing cash balances, operating cash flow, borrowings under the Revolving Facility, proceeds from the Mall Sale and borrowings by the Phase II Subsidiary in each case, to the extent permitted under the terms of the Company’s indebtedness. In addition, the Company is pursuing and evaluating alternatives to finance the development and construction of the Phase II Resort. The construction and development of the Phase II Resort will require significant additional debt and/or equity financing and, there can be no assurance that such funds will be available or that such funds will be on terms that will be favorable to the Company. As of March 31, 2004, the Company had $151.6 million in cash and cash equivalents (plus $78.7 million in restricted cash for Macau and insurance and tax revenue) and there was $15.0 million available for borrowing under the Revolving Facility.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        The Company must use the proceeds from the Mall Sale to repay all outstanding indebtedness under its Secured Mall Facility. The Company is obligated to use the Excess Proceeds from the Mall Sale to make an offer to purchase the maximum principal amount of Mortgage Notes that may be purchased out of the Excess Proceeds of the Mall Sale at an offer price in cash equal to 100% of the principal amount of the Mortgage Notes, plus accrued and unpaid interest and liquidated damages, if any, to the closing date of the offer. The Company currently intends to make such an Asset Sale Offer as soon as practicable following the consummation of the Mall Sale. The Company is currently seeking an amendment or waiver to its Senior Secured Credit Facility to, among other things permits the Company to use the proceeds from the Mall Sale to repurchase Mortgage Notes tendered pursuant to the Assets Sale Offer. Following the consummation of the Asset Sale Offer, the Company will be entitled to use any remaining proceeds from the Mall Sale for general corporate purposes. The Company is currently reviewing its options as to the use of such remaining proceeds, including for the financing of a portion of the cost of the Phase II Resort.

         Debt Instruments

        The Company’s existing debt instruments contain certain restrictions that, among other things, limit the ability of the Company and/or certain subsidiaries to incur additional indebtedness, issue disqualified stock or equity interests, pay dividends or make other distributions, repurchase equity interests or certain indebtedness, create certain liens, enter into certain transactions with affiliates, enter into certain mergers or consolidations or sell assets of the Company without prior approval of the lenders or noteholders. Financial covenants included in the Senior Secured Credit Facility include total debt to EBITDA ratios, EBITDA to interest coverage ratios, minimum net worth covenants and maximum capital expenditure limitations. The financial covenants in the Senior Secured Credit Facility involving EBITDA are applied on a rolling four-quarter basis. For purposes of debt compliance, EBITDA is defined as net income plus interest expense, income taxes and depreciation and amortization expenses. The inability of the Company to incur additional indebtedness because it does not meet the financial ratios required to incur additional debt under such debt instruments could restrict the Company’s ability to develop the Phase II Resort, or invest additional funds in its Macau Subsidiaries. As of March 31, 2004, the Company was in compliance with all required covenants and ratios under its debt instruments. See ” Item 1 – Financial Statements and Supplementary Data – Notes to Financial Statements – Note 4 – Long-Term Debt.”

   Macau Casino Projects

        On June 26, 2002, the Macau government granted a provisional concession to operate casinos in Macau to the Company’s subsidiary Venetian Macau and to Galaxy, a consortium of Macau and Hong Kong-based investors. During December 2002, Venetian Macau and Galaxy entered into a subconcession agreement. The subconcession agreement with Galaxy was recognized and approved by the Macau government and allows Venetian Macau to develop and operate certain casino projects, including the Macau Casino, separately from Galaxy.

        In addition to the Macau Casino, the Company also intends to build in Macau the Macau Venetian Casino Resort, a hotel, casino and convention center complex with a Venetian-style theme similar to the Company’s Las Vegas property.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        Under the subconcession agreement, Venetian Macau is obligated to develop and open the Macau Venetian Casino Resort by June 2006 and invest, or cause to be invested, at least 4.4 billion patacas (approximately $566.5 million at exchange rates in effect on March 31, 2004) in various development projects in Macau by June 2009. The construction and development costs of the Macau Casino will be applied to the fulfillment of this total investment obligation to the Macau government. The Company currently estimates the total cost of constructing, developing, and operating the Macau Casino, including design costs, construction costs, equipment costs, working capital and pre-opening expenses, will be approximately $257.9 million, all of which qualifies to meet the investment obligation to the Macau government. Assuming that all of the current estimated construction and development costs of the Macau Casino are applied towards fulfilling the investment obligations under the subconcession agreement, remaining investment obligations under the subconcession agreement will be approximately $308.6 million. It is expected that the construction and development costs of the Macau Venetian Casino Resort will satisfy the remainder of this obligation. To support this obligation, a Macau bank and a subsidiary of the Company, Lido Casino Resort Holding Company, LLC, have guaranteed 500 million patacas (approximately $64.4 million at exchange rates in effect on March 31, 2004) of Venetian Macau’s legal and contractual liabilities to the Macau government until March 31, 2007. Venetian Macau is currently in the process of seeking consents from the holders of the Venetian Macau Senior Secured Notes to permit the creation of a junior lien on Venetian Macau’s rights over the land upon which the Macau Casino is being constructed in Macau to support the guarantee being issued by the Macau bank under the Venetian Macau subconcession. Venetian Macau’s development and investment obligations under its subconcession agreement may be satisfied by Venetian Macau and/or its affiliates, including the Company.

        As of March 31, 2004, approximately $141.8 million of the costs relating to the Macau Casino had been expended. The Company anticipates funding the remaining estimated costs of construction from a combination of the following sources:

•  net proceeds from the issuance and sale of $120 million in aggregate principal amount of the Venetian Macau Senior Secured Notes. As of March 31, 2004, approximately $73.9 million of these proceeds remained unused;

•  operating cash flow of the Company (although the Senior Secured Credit Facility and the Indenture for the Mortgage Notes limit the Company’s ability to make investments in the Macau projects); as of March 31, 2004 the Company had the ability to invest approximately $55.8 million in unrestricted subsidiaries (including the Macau Subsidiaries);

• borrowings under the $20.0 million. As of March 31, 2004, nothing had been drawn on the Macau Revolving Facility;

•  a completion guaranty issued by LVSI and Venetian, guaranteeing payment of certain costs of the Macau Casino in excess of available funds (the “Completion Guaranty”). The Completion Guaranty is supported by a $10.0 million letter of credit issued in January 2004 under the Company’s Senior Secured Credit Facility (See Note 4 – Senior Secured Credit Facility). The remainder of the Completion Guaranty is expected to be funded by borrowings of up to $15.0 million under the Macau Revolver;

•  borrowings under proposed furnishings, fixtures & equipment facilities and vendor financings which the Company expects to be able to enter into in the aggregate principal amount of $25.0 million (the “FF&E Facilities”) to finance certain equipment and other assets of the Macau Casino. If Venetian Macau is unable to obtain the FF&E Facilities or vendor financing, LVSI, Venetian or another of their subsidiaries have agreed to either:

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

—  purchase, or cause to be purchased assets with a cost of up to $25.0 million and enter into lease or other arrangements with Venetian Macau or

—  otherwise assist Venetian Macau in securing such facilities, including by issuing guarantees in connection with any such facilities or otherwise lending such amounts to Venetian Macau for purposes of securing such equipment

in each case, to the extent permitted under the Senior Secured Credit Facility and the Indenture for the Mortgage Notes.

        The Company expects the funds provided by these sources to be sufficient to construct, develop, and operate the Macau Casino, assuming there are no significant delay costs or construction cost overruns. If Venetian Macau incurs significant cost overruns, it may need to arrange for additional financing to pay for these costs. If it requires additional financing, the Company or its affiliates may incur additional bank borrowings or debt or equity financing. However, no assurance can be given that such funds will be available or that such funds will be on terms that will be favorable to the Company. In addition, the construction and development of the Macau Venetian Casino Resort will require significant additional debt and/or equity financing.

         Phase II Resort

        The Company has begun extensive design and site work on the Phase II Resort and has incurred demolition and clearing costs on the site of the Phase II Resort. During the first quarter of 2004, the Company invested $13.5 million toward the development of the Phase II Resort. The Company currently estimates the cost to develop and construct the Phase II Resort to be approximately $1.5 billion, excluding the cost of the land, capitalized interest, and pre-opening expenses. The Company has not yet set a date to begin construction of the Phase II Resort. If the Company determines to construct the Phase II Resort, it will be required to raise substantial debt and/or equity financings. The Company is currently exploring financing alternatives for the Phase II Resort and has no commitments to fund the hard construction costs of the Phase II Resort. In addition, the development of the Phase II Resort may also require obtaining additional regulatory approvals. The Phase II Subsidiary is an unrestricted subsidiary that is not subject to the terms of the Indenture or the Senior Secured Credit Facility and is not a guarantor under the Mortgage Notes or the Senior Secured Credit Facility.

         Litigation Contingencies and Available Resources

        The Company is a party to certain litigation matters and claims related to the construction of the Casino Resort and is subject to a $42.0 million net judgment awarded to the Construction Manager, pending the outcome of remaining arbitration and various appeals. If the Company is required to pay any of the Construction Manager’s judgment or contested construction costs (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 Construction Manager, Bovis and P&O pursuant to the Construction Management Contract, the Bovis Guarantee and the P&O Guaranty, respectively; (ii) third parties, pursuant to their liability to the Company under their agreements with the Company; (iii) borrowings under the Revolving Facility; (iv) additional debt or equity financings; and (v) operating cash flow.

INDEX

LAS VEGAS SANDS, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Continued)

        Based on the recent judgment in the State Court Action and the remaining open items in the Arbitration Proceedings, the Company estimates that its range of loss in this matter is from none (or a gain if all remaining matters are determined in the Company’s favor and considering the existing accrual of approximately $7.2 million for unpaid construction costs) to approximately $28.0 million if the Company were to lose all remaining arbitration matters and related pending actions and appeals that counsel has advised are possible of loss, and which are not already included in the State Court Action.  Such range of loss is before attorney costs and interest, which have not yet been considered by the State Court and the total amounts of which cannot currently be quantified.  While the range of loss is possibly as high as $70.0 million, (the original verdict of $42.0 million plus the above referenced arbitration matters) plus attorney’s fees and interest, the Insurance Policy is available to provide coverage of amounts, together with any other in excess of $45.0 million. At this time, no amount within the range of loss can be reasonably determined as an estimated loss.  It is possible that the Arbitration Proceedings will be concluded (or interim decisions be rendered) in the near future, at which time an estimate of loss could be determined.  Such loss could be material to the Company’s results of operations in the period that the estimate is recorded.

         Recent Accounting Pronouncements

        In May 2003, the Financial Accounting Standards Board issued Statement No. 150 (“SFAS 150”) “Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity.” The Company is considered a non-public entity, as defined by SFAS 150. Accordingly, for the Company, the provisions of SFAS 150 became effective during the quarter ending March 31, 2004. As a result of the adoption of SFAS 150, the Series B Preferred Interest in Venetian is no longer presented as “member’s interest” but rather has been reclassified as a liability and dividends have been classified as interest expenses.

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, in 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 new construction and new ventures, including the Phase II Resort and the Macau project, increased competition and other planned construction in Las Vegas, including the opening of a new casino resort on the site of the former Desert Inn and upcoming increases in meeting and convention space, the completion of infrastructure projects in Las Vegas, government regulation of the casino industry, including gaming license approvals and regulation in foreign jurisdictions, the legalization of gaming in certain jurisdictions, such as Native American reservations in the States of California and New York and regulation of gaming on the Internet, leverage and debt service (including sensitivity to fluctuations in interest rates and other capital markets trends), uncertainty of casino spending and vacationing at casino resorts in Las Vegas, disruptions or reductions in travel to Las Vegas due to the war with Iraq and any future terrorist incidents, outbreaks of SARS illness in the Company’s market areas, new taxes or changes to existing tax rates, fluctuations in 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, insurance risks (including the risk that the Company has not obtained sufficient coverage against acts of terrorism or will only be able to obtain additional coverage at significantly increased rates), 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, consumer spending and pricing of hotel rooms.

INDEX

LAS VEGAS SANDS, INC.

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, and by use of interest rate cap and floor agreements. The ability to enter into interest rate cap and floor agreements allows the Company to manage its interest rate risk associated with its variable rate debt.

        The Company does not hold or issue financial instruments for trading purposes and does not enter into derivative transactions that would be considered speculative positions. The Company’s derivative financial instruments consist exclusively of interest rate cap and floor agreements, which do not qualify for hedge accounting. Interest differentials resulting from these agreements are recorded on an accrual basis as an adjustment to interest expense.

        To manage exposure to counterparty credit risk in interest rate cap and floor agreements, the Company enters into agreements with highly rated institutions that can be expected to fully perform under the terms of such agreements. Frequently, these institutions are also members of the bank group providing the Company’s credit facility, which management believes further minimizes the risk of nonperformance.

        The table below provides information about the Company’s financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents notional amounts and weighted average interest rates by contractual maturity dates for the three month periods ended March 31:

																						FAIR
		2004			2005			2006			2007			2008		THEREAFTER			TOTAL			VALUE(1)
		(dollars in millions)
LIABILITIES
Short-term debt
Variable rate	$	14	.1		–			–			–			–			–		$	14	.1	$	14	.1
Average interest rate (2)		3	.8%		–			–			–			–			–			3	.8%		3	.8%
Long-term debt
Fixed rate		–			–			–			–			–		$	1,095	.5	$	1,095	.5	$	1,206	.0
Average interest rate (2)		–			–			–			–			–			11	.0%		11	.0%		11	.0%
Variable rate		–		$	196	.1	$	34	.9	$	205	.0	$	146	.6		–		$	582	.6	$	582	.6
Average interest rate (2)		–			3	.8%		4	.3%		4	.3%		4	.3%		–			4	.2%		4	.2%

_________________

(1) The fair values are based on the borrowing rates currently available for debt instruments with similar terms and maturities and market quotes of the Company’s publicly traded debt.

(2) Based upon contractual interest rates for fixed rate indebtedness or current LIBOR rates for variable rate indebtedness.

        Foreign currency translation gains and losses were not material to the Company’s results of operations for the quarter ended March 31, 2004, but may be in future periods in relation to activity associated with the Macau subsidiaries.

INDEX

LAS VEGAS SANDS, INC.

Item 4. Controls and Procedures

a)   Evaluation of Disclosure Controls and Procedures. Disclosure controls and procedures are designed to provide reasonable assurance that information required to be disclosed in the reports that the Company files or submits, is recorded, processed, summarized, and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. The Company’s Chief Executive Officer and its Vice President-Finance (its principal financial officer) have evaluated the disclosure controls and procedures of the Company as of March 31, 2004 and believe that they are effective within the reasonable assurance threshold described above.

b)   Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

        It should be noted that any system of controls however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control systems, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

INDEX

LAS VEGAS SANDS, INC.

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 March 31, 2003 and “Part I — Item 1 – Financial Statements – Notes to Financial Statements Note 5 – Commitments and Contingencies” of this Quarterly Report on Form 10-Q.

Item 5. Other Information

        The Company is not required to file this Quarterly Report on Form 10-Q pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. The filing is required, however, pursuant to the terms of the Indenture.

Item 6. Exhibits and Reports on Form 8-K

(a) List of Exhibits

31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

31.2 Certification of the Vice President-Finance (the principal financial officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.⁽¹⁾

⁽¹⁾         Filed herewith.

(b)     Reports on Form 8-K

    Current report on Form 8-K furnished to the Securities and Exchange Commission on April 27, 2004 regarding the Company’s results of operations for the quarter ended March 31, 2004.

INDEX

LAS VEGAS SANDS, INC.

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.
May 17, 2004	By:	/s/ Sheldon G. Adelson
		Sheldon G. Adelson
		Chairman of the Board
		Chief Executive Officer and Director

May 17, 2004	By:	/s/ Harry D. Miltenberger
		Harry D. Miltenberger
		Vice President-Finance
		(principal financial and accounting officer)

EX-31

Exhibit 31.1

LAS VEGAS SANDS, INC.

CERTIFICATIONS

I, Sheldon G. Adelson, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Las Vegas Sands, Inc. (the “Company”);

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

4.     The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and we have:

(a)         designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)         evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(c)         disclosed in this quarterly report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.     The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

(a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 17, 2004

 

By:       /s/Sheldon G. Adelson
             ——————————————
Name:   Sheldon G. Adelson
Title:     Chief Executive Officer

EX-31

Exhibit 31.2

LAS VEGAS SANDS, INC.

CERTIFICATIONS

I, Harry D. Miltenberger, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Las Vegas Sands, Inc. (the “Company”);

2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this quarterly report;

4.     The Company’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and we have:

(a)         designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)         evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and

(c)         disclosed in this quarterly report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of this quarterly report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and

5.     The Company’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent function):

(a)         all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)         any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

Date: May 17, 2004

 

By:       /s/Harry D. Miltenberger
             ——————————————
Name:   Harry D. Miltenberger
Title:     Vice President-Finance
              (principal financial and accounting officer)