Item 7. — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 7. — 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 audited consolidated financial statements, and the notes thereto and other financial information included in this Form 10-K. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “— Special Note Regarding Forward-Looking Statements.”

Operations

We view each of our casino properties as an operating segment. Our operating segments in the U.S. consist of The Venetian Las Vegas, The Palazzo and Sands Bethlehem. The Venetian Las Vegas and The Palazzo operating segments are managed as a single integrated resort and have been aggregated into our Las Vegas Operating Properties, considering their similar economic characteristics, types of customers, types of services and products, the regulatory business environment of the operations within each segment and the Company’s organizational and management reporting structure. Approximately 63.8% and 62.9% of gross revenue at our Las Vegas Operating Properties for the years ended December 31, 2010 and 2009, respectively, was derived from room revenues, food and beverage services, and other non-gaming sources, and 36.2% and 37.1%, respectively, was derived from gaming activities. The percentage of non-gaming revenue reflects the integrated resort’s emphasis on the group convention and trade show business and the resulting high occupancy and room rates throughout the week, including during mid-week periods. Approximately 92.1% and 89.9% of gross revenue at Sands Bethlehem for the year ended December 31, 2010 and the period ended December 31, 2009, respectively, was derived from gaming activities, with the remainder derived from food and beverage services, and other non-gaming sources.

Our Macau operating segments consist of Sands Macao, The Venetian Macao, Four Seasons Macao and other ancillary operations that support these properties and will support our remaining Cotai Strip development projects. Approximately 94.2% and 93.6% of the gross revenue at the Sands Macao for the years ended December 31, 2010 and 2009, respectively, was derived from gaming activities, with the remainder primarily derived from room revenues and food and beverage services. Approximately 82.7% and 81.3% of the gross revenue at The Venetian Macao for years ended December 31, 2010 and 2009, respectively, was derived from gaming activities, with the remainder derived from room revenues, food and beverage services, and other non-gaming sources. Approximately 82.0% and 73.8% of the gross revenue at the Four Seasons Macao for the years ended December 31, 2010 and 2009, respectively, was derived from gaming activities, with the remainder derived from retail and other non-gaming sources.

Our Singapore operating segment consists of the Marina Bay Sands, which partially opened on April 27, 2010, with additional portions opened progressively throughout 2010. Approximately 79.8% of the gross revenue at the Marina Bay Sands for the period ended December 31, 2010, was derived from gaming activities, with the remainder derived from room revenues, food and beverage services, and other non-gaming sources.

Development Projects

We have suspended portions of our development projects to focus our efforts on those projects with the highest expected rates of return on invested capital. Should general economic conditions fail to improve, if we are unable to obtain sufficient funding or applicable government approvals such that completion of our suspended projects is not probable, or should management decide to abandon certain projects, all or a portion of our investment to date on our suspended projects could be lost and would result in an impairment charge. In addition, we may be subject to penalties under the termination clauses in our construction contracts or termination rights under our management contracts with certain hotel management companies.

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United States

We were constructing the Las Vegas Condo Tower, which is located on the Las Vegas Strip between The Palazzo and The Venetian Las Vegas. We suspended our construction activities for the project due to reduced demand for Las Vegas Strip condominiums and the overall decline in general economic conditions. We intend to recommence construction when demand and conditions improve and expect that it will take approximately 18 months thereafter to complete construction of the project. As of December 31, 2010, we have capitalized construction costs of $176.4 million for this project.

Macau

We submitted plans to the Macau government for our other Cotai Strip developments, which represent three integrated resort developments, in addition to The Venetian Macao and Four Seasons Macao, on an area of approximately 200 acres (which we refer to as parcels 3, 5 and 6, and 7 and 8). Subject to the approval from the Macau government, as discussed further below, the developments are expected to include hotels, exhibition and conference facilities, gaming areas, showrooms, spas, dining, retail and entertainment facilities and other amenities. We commenced construction or pre-construction activities on these developments and plan to operate the related gaming areas under our Macau gaming subconcession.

We are staging the construction of the integrated resort on parcels 5 and 6. Phases I and II of the integrated resort are expected to feature approximately 6,000 Shangri-La-, Traders- and Sheraton-branded hotel rooms, approximately 300,000 square feet of gaming space, approximately 1.2 million square feet of retail, entertainment and dining facilities, exhibition and conference facilities and a multipurpose theater. Phase III of the project is expected to include a fourth St. Regis-branded hotel and mixed-use tower. In connection with entering into the $1.75 billion VOL credit facility to be used together with $500.0 million of proceeds from the SCL Offering, we have recommenced construction activities. We are currently working with the Macau government to obtain sufficient construction labor for the project. Until adequate labor quotas are received, the timing of the completion of phases I and II is currently not determinable; however, we are progressing on alternative scenarios for completion of selected portions of phases I and II with the construction labor currently onsite. We intend to commence construction of phase III of the project as demand and market conditions warrant it. As of December 31, 2010, we have capitalized construction costs of $2.01 billion for the entire project (including $135.1 million in outstanding construction payables).

We had commenced pre-construction activities on parcels 7 and 8 and 3, and intend to commence construction after the integrated resort on parcels 5 and 6 is complete, necessary government approvals are obtained (including the land concession for parcels 7 and 8), regional and global economic conditions improve, future demand warrants it and additional financing is obtained. As of December 31, 2010, we have capitalized construction costs of $102.1 million and $34.3 million for parcels 7 and 8 and 3, respectively. During December 2010, we received notice from the Macau government that our application for a land concession for parcels 7 and 8 was not approved and we applied to the Chief Executive of Macau for a review of the decision. Subsequent to December 31, 2010, we filed an appeal with the Court of Second Instance in Macau, which has yet to issue a decision. Should we win our appeal, it is still possible for the Chief Executive of Macau to again deny the land concession based upon public policy considerations. If we do not obtain the land concession or do not receive full reimbursement of our capitalized investment in this project, we would record a charge for all or some portion of the $102.1 million in capitalized construction costs, as of December 31, 2010, related to our development on parcels 7 and 8.

Other

When the current economic environment and access to capital improve, we may continue exploring the possibility of developing and operating additional properties, including integrated resorts, in additional Asian and U.S. jurisdictions, and in Europe.

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Summary Financial Results

The following table summarizes our results of operations:

Year Ended December 31,
PercentPercent
2010Change2009Change2008
(Dollars in thousands)
Net revenues$6,853,18250.2%$4,563,1053.9%$4,389,946
Operating expenses5,672,59623.5%4,591,8458.6%4,226,283
Operating income (loss)1,180,5864,207.8%(28,740)(117.6)%163,663
Income (loss) before income taxes855,905329.7%(372,627)(63.4)%(228,025)
Net income (loss)781,603312.0%(368,743)(119.1)%(168,325)
Net income (loss) attributable to Las Vegas Sands Corp.599,394269.1%(354,479)(116.7)%(163,558)
Percent of Net Revenues
Year Ended December 31,
201020092008
Operating expenses82.8%100.6%96.3%
Operating income (loss)17.2%(0.6)%3.7%
Income (loss) before income taxes12.5%(8.2)%(5.2)%
Net income (loss)11.4%(8.1)%(3.8)%
Net income (loss) attributable to Las Vegas Sands Corp8.7%(7.8)%(3.7)%

Our historical financial results will not be indicative of our future results as we continue to develop and open new properties, including our Cotai Strip integrated resort on parcels 5 and 6.

Key Operating Revenue Measurements

Operating revenues at our Las Vegas Operating Properties, The Venetian Macao, Four Seasons Macao and Marina Bay Sands are dependent upon the volume of customers who 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. Operating revenues at Sands Macao and Sands Bethlehem are principally driven by casino customers who visit the properties on a daily basis.

The following are the key measurements we use to evaluate operating revenues:

Casino revenue measurements for the U.S.: Table games drop (“drop”) and slot handle (“handle”) are volume measurements. Win or hold percentage represents the percentage of drop or handle that is won by the casino and recorded as casino revenue. Table games drop represents the sum of markers issued (credit instruments) less markers paid at the table, plus cash deposited in the table drop box. Slot handle is the gross amount wagered for the period cited. We view table games win as a percentage of drop and slot hold as a percentage of slot handle. Based upon our mix of table games, our table games in Las Vegas have produced a trailing 12-month win percentage (calculated before discounts) of 18.1%. Slot machines in Las Vegas and Pennsylvania have produced a trailing 12-month win percentage (calculated before slot club cash incentives) of 7.8% and 6.8%, respectively. Actual win may vary from the trailing 12-month win percentage. Generally, slot machine play is conducted on a cash basis. In Las Vegas, approximately 64.2% of our table games play, for the year ended December 31, 2010, was conducted on a credit basis. In Pennsylvania, our table games play, which commenced in July 2010, is primarily conducted on a cash basis. We expect to increase the credit extended to our players as operations ramp up at Sands Bethlehem.

Casino revenue measurements for Macau and Singapore: Macau and Singapore table games are segregated into two groups, consistent with the Macau and Singapore market’s convention: Rolling Chip play (all VIP players) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-negotiable gaming chips wagered and lost. The volume measurement for Non-Rolling Chip play is table games drop as previously described. Rolling Chip and Non-Rolling Chip volume measurements are not comparable as the amounts wagered and lost are substantially higher than the amounts dropped. Slot handle is the gross amount wagered for the period cited.

We view Rolling Chip win as a percentage of Rolling Chip volume, Non-Rolling Chip win as a percentage of drop and slot hold as a percentage of slot handle. Win or hold percentage represents the percentage of Rolling Chip volume, Non-Rolling Chip drop or slot handle that is won by the casino and recorded as casino revenue. Based upon our mix of table games, our Rolling Chip win percentage (calculated before discounts and commissions) is expected to be 2.7% to 3.0% and our Non-Rolling Chip table games have produced a trailing 12-month win percentage of 25.3%, 20.5% and 26.5% at The Venetian Macao, Sands Macao and Four Seasons Macao, respectively. Our Macau slot machines produced a trailing 12-month win percentage of 7.0%, 5.9% and 5.7%, at The Venetian Macao, Sands Macao and Four Seasons Macao, respectively. In Macau, 36.9% of our table games play was conducted on a credit basis for the year ended December 31, 2010. This percentage is expected to increase as we continue to extend credit to our premium players and junket operators for table games play. In Singapore, 35.2% of table games play was conducted on a credit basis for the period ended December 31, 2010. This percentage is expected to increase as we increase the credit extended to our premium players and as our operations ramp up at Marina Bay Sands.

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Hotel revenue measurements: Hotel occupancy rate, which is the average percentage of available hotel rooms occupied during a period, and average daily room rate, which is the average price of occupied rooms per day, are used as performance indicators. Revenue per available room represents a summary of hotel average daily room rates and occupancy. Because not all available rooms are occupied, average daily room rates are normally higher than revenue per available room. Reserved rooms where the guests do not show up for their stay and lose their deposit may be re-sold to walk-in guests. These rooms are considered to be occupied twice for statistical purposes due to obtaining the original deposit and the walk-in guest revenue. In cases where a significant number of rooms are resold, occupancy rates may be in excess of 100% and revenue per available room may be higher than the average daily room rate.

Year Ended December 31, 2010 compared to the Year Ended December 31, 2009

Operating Revenues

Our net revenues consisted of the following:

Year Ended December 31,
20102009Percent Change
(Dollars in thousands)
Casino$5,533,088$3,524,79857.0%
Rooms797,499657,78321.2%
Food and beverage446,558327,69936.3%
Convention, retail and other540,792419,16429.0%
7,317,9374,929,44448.5%
Less — promotional allowances(464,755)(366,339)26.9%
Total net revenues$6,853,182$4,563,10550.2%

Consolidated net revenues were $6.85 billion for the year ended December 31, 2010, an increase of $2.29 billion compared to $4.56 billion for the year ended December 31, 2009. The increase in net revenues was driven by $1.26 billion of net revenues at Marina Bay Sands, which opened in April 2010, as well an increase of $849.5 million across all of our Macau properties and $106.8 million at our Las Vegas Operating Properties.

Casino revenues increased $2.01 billion as compared to the year ended December 31, 2009. Of the increase, $1.06 billion was attributable to Marina Bay Sands and $778.4 million was due to our Macau properties, primarily driven by an increase in Rolling Chip activity. The following table summarizes the results of our casino activity:

Year Ended December 31,
20102009Change
(Dollars in thousands)
Macau Operations:
The Venetian Macao
Total casino revenues$2,086,668$1,699,59922.8%
Non-Rolling Chip drop$3,737,693$3,362,78011.1%
Non-Rolling Chip win percentage26.2%23.6%2.6pts
Rolling Chip volume$42,650,092$37,701,02713.1%
Rolling Chip win percentage3.07%2.80%0.27pts
Slot handle$2,926,606$2,362,68023.9%
Slot hold percentage7.1%7.4%(0.3)pts
Sands Macao
Total casino revenues$1,168,117$1,003,04216.5%
Non-Rolling Chip drop$2,512,122$2,413,4464.1%
Non-Rolling Chip win percentage20.3%19.5%0.8pts
Rolling Chip volume$27,415,476$21,920,18625.1%
Rolling Chip win percentage3.06%3.01%0.05pts
Slot handle$1,599,199$1,256,85727.2%
Slot hold percentage5.9%6.6%(0.7)pts
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Year Ended December 31,
20102009Change
(Dollars in thousands)
Four Seasons Macao
Total casino revenues$433,424$207,191109.2%
Non-Rolling Chip drop$391,554$335,65516.7%
Non-Rolling Chip win percentage29.0%23.7%5.3pts
Rolling Chip volume$17,890,832$7,059,450153.4%
Rolling Chip win percentage2.56%2.35%0.21pts
Slot handle$510,392$240,358112.3%
Slot hold percentage5.9%5.9%—pts
U.S. Operations:
Las Vegas Operating Properties
Total casino revenues$496,637$473,1765.0%
Table games drop$1,904,004$1,769,1307.6%
Table games win percentage18.8%17.3%1.5pts
Slot handle$2,549,722$2,705,309(5.8)%
Slot hold percentage7.9%7.5%0.4pts
Sands Bethlehem
Total casino revenues$285,856$141,790101.6%
Table games drop$174,587$——%
Table games win percentage13.9%—%—pts
Slot handle$3,644,250$2,030,52979.5%
Slot hold percentage7.1%7.0%0.1pts
Singapore Operations:
Marina Bay Sands
Total casino revenues$1,062,386$——%
Non-Rolling Chip drop$2,372,451$——%
Non-Rolling Chip win percentage22.2%—%—pts
Rolling Chip volume$22,277,677$——%
Rolling Chip win percentage2.74%—%—pts
Slot handle$3,676,402$——%
Slot hold percentage5.8%—%—pts

In our experience, average win percentages remain steady when measured over extended periods of time, but can vary considerably within shorter time periods as a result of the statistical variances that are associated with games of chance in which large amounts are wagered.

Room revenues increased $139.7 million as compared to the year ended December 31, 2009. The increase in room revenues was attributable to $98.6 million at Marina Bay Sands, as well as increases at The Venetian Macao, Four Seasons Macao and at our Las Vegas Operating Properties driven by increased visitation, as well as an increase in average daily room rates at The Venetian Macao and Four Seasons Macao. The suites at Sands Macao are primarily provided to casino patrons on a complimentary basis. The following table summarizes the results of our room activity:

Year Ended December 31,
20102009Change
(Room revenues in thousands)
Macau Operations:
The Venetian Macao
Total room revenues$199,277$173,31915.0%
Average daily room rate$213$2053.9%
Occupancy rate90.9%83.6%7.3pts
Revenue per available room$194$17113.5%
Sands Macao
Total room revenues$24,495$26,558(7.8)%
Average daily room rate$251$260(3.5)%
Occupancy rate93.2%97.7%(4.5)pts
Revenue per available room$234$254(7.9)%
Four Seasons Macao
Total room revenues$29,675$20,27646.4%
Average daily room rate$309$2954.7%
Occupancy rate70.8%52.3%18.5pts
Revenue per available room$219$15442.2%
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Year Ended December 31,
20102009Change
(Room revenues in thousands)
U.S. Operations:
Las Vegas Operating Properties
Total room revenues$445,458$437,6301.8%
Average daily room rate$191$195(2.1)%
Occupancy rate90.7%87.4%3.3pts
Revenue per available room$173$1701.8%
Singapore Operations:
Marina Bay Sands
Total room revenues$98,594$——%
Average daily room rate$250$——%
Occupancy rate73.4%—%—pts
Revenue per available room$184$——%

Food and beverage revenues increased $118.8 million as compared to the year ended December 31, 2009. The increase was primarily attributable to $83.6 million in revenues at Marina Bay Sands and $19.6 million at our Macau properties.

Convention, retail and other revenues increased $121.6 million as compared to the year ended December 31, 2009. The increase was primarily attributable to $87.5 million in revenues at Marina Bay Sands.

Operating Expenses

The breakdown of operating expenses is as follows:

Year Ended December 31,
20102009Percent Change
(Dollars in thousands)
Casino$3,249,227$2,349,42238.3%
Rooms143,326121,09718.4%
Food and beverage207,956165,97725.3%
Convention, retail and other274,678240,37714.3%
Provision for doubtful accounts97,762103,802(5.8)%
General and administrative683,298526,19929.9%
Corporate expense108,848132,098(17.6)%
Rental expense41,30229,89938.1%
Pre-opening expense114,833157,731(27.2)%
Development expense1,783533234.5%
Depreciation and amortization694,971586,04118.6%
Impairment loss16,057169,468(90.5)%
Loss on disposal of assets38,5559,201319.0%
Total operating expenses$5,672,596$4,591,84523.5%

Operating expenses were $5.67 billion for the year ended December 31, 2010, an increase of $1.08 billion as compared to $4.59 billion for the year ended December 31, 2009. The increase in operating expenses was primarily attributable to the opening of Marina Bay Sands, increased casino activity across all properties and an increase in general and administrative expenses and depreciation and amortization expense, partially offset by decreases due to a $169.5 million impairment charge and a $42.5 million legal settlement included in corporate expense that were recorded during the year ended December 31, 2009.

Casino expenses increased $899.8 million as compared to the year ended December 31, 2009. Of the increase, $408.2 million was due to the 39.0% gross win tax on increased casino revenues across our Macau properties, $359.0 million was attributable to Marina Bay Sands, which opened on April 27, 2010, as well as an increase of $93.5 million at Sands Bethlehem, which was only open for part of 2009.

Rooms expense increased $22.2 million and food and beverage expense increased $42.0 million as compared to the year ended December 31, 2009. These increases were driven by the associated increases in the related revenues described above.

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Convention, retail and other expense increased $34.3 million, as compared to the year ended December 31, 2009. The increase is primarily attributable to $26.8 million in expenses at Marina Bay Sands.

The provision for doubtful accounts was $97.8 million for the year ended December 31, 2010, compared to $103.8 million for the year ended December 31, 2009. The decrease was attributable to an overall decrease in provision for receivables across all properties as a result of a higher provision during the year ended December 31, 2009, due to the economic conditions during 2009, partially offset by a $27.5 million provision for casino receivables at Marina Bay Sands. The amount of this provision can vary over short periods of time because of factors specific to the customers who owe us money at any given time. We believe that the amount of our provision for doubtful accounts in the future will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.

General and administrative expenses increased $157.1 million as compared to the year ended December 31, 2009. The increase was primarily attributable to $157.9 million in expenses at Marina Bay Sands.

Corporate expense decreased $23.3 million as compared to the year ended December 31, 2009. The decrease was attributable to a $42.5 million legal settlement that was recorded during the year ended December 31, 2009, partially offset by an increase of $22.4 million in corporate payroll-related expenses.

Pre-opening expenses were $114.8 million for the year ended December 31, 2010, as compared to $157.7 million for the year ended December 31, 2009. Pre-opening expense represents personnel and other costs incurred prior to the opening of new ventures, which are expensed as incurred. Pre-opening expenses for the year ended December 31, 2010, were primarily related to activities at Marina Bay Sands and at the Cotai Strip parcels 5 and 6. Development expenses, which were not material for the years ended December 31, 2010 and 2009, include the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are also expensed as incurred.

Depreciation and amortization expense increased $108.9 million as compared to the year ended December 31, 2009. The increase was primarily a result of the opening of Marina Bay Sands and a full year of depreciation expense at Sands Bethlehem, which contributed $119.1 million and $10.6 million, respectively.

Impairment loss was $16.1 million for the year ended December 31, 2010, compared to $169.5 million for the year ended December 31, 2009. The impairment loss for the year ended December 31, 2010, related to equipment in Macau that is expected to be disposed of.

Loss on disposal of assets was $38.6 million for the year ended December 31, 2010, as compared to $9.2 million for the year ended December 31, 2009. The loss for the year ended December 31, 2010, related to the disposition of construction materials in Macau and Las Vegas.

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Adjusted Property EBITDA

Adjusted property EBITDA is used by management as the primary measure of the operating performance of our segments. Adjusted property EBITDA is net income (loss) attributable to Las Vegas Sands Corp. before stock-based compensation expense, corporate expense, rental expense, pre-opening expense, development expense, depreciation and amortization, impairment loss, loss on disposal of assets, interest, other expense, loss on modification or early retirement of debt, income taxes and net (income) loss attributable to noncontrolling interests. The following table summarizes information related to our segments (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 18 — Segment Information” for discussion of our operating segments and a reconciliation of adjusted property EBITDA to net income (loss) attributable to Las Vegas Sands Corp.):

Year Ended December 31,
20102009Percent Change
(Dollars in thousands)
Macau:
The Venetian Macao$809,798$556,54745.5%
Sands Macao318,519244,92530.0%
Four Seasons Macao113,69240,527180.5%
Other Asia(24,429)(32,610)25.1%
United States:
Las Vegas Operating Properties310,113259,20619.6%
Sands Bethlehem58,98217,566235.8%
Marina Bay Sands641,898——%
Total adjusted property EBITDA$2,228,573$1,086,161105.2%

Adjusted property EBITDA from our Macau operations increased $408.2 million as compared to the year ended December 31, 2009, led by an increase of $253.3 million at The Venetian Macao. As previously described, the increase across the properties was primarily attributable to a combined increase in net revenues of $849.5 million, partially offset by an increase of $408.2 million in gross win tax on increased casino revenues, as well as increases in the associated operating expenses.

Adjusted property EBITDA at our Las Vegas Operating Properties increased $51.0 million as compared to the year ended December 31, 2009. The increase was primarily attributable to an increase in net revenues of $106.8 million, partially offset by increases in the associated operating expenses.

Adjusted property EBITDA at Sands Bethlehem, which opened in May 2009, and Marina Bay Sands, which opened in April 2010, do not have a comparable prior-year period. Results of the operations of Sands Bethlehem and Marina Bay Sands are as previously described.

Interest Expense

The following table summarizes information related to interest expense on long-term debt:

Year Ended December 31,
20102009
(Dollars in thousands)
Interest cost (which includes the amortization of deferred financing costs and original issue discounts)$412,879$387,319
Less — capitalized interest(106,066)(65,449)
Interest expense, net$306,813$321,870
Cash paid for interest$343,298$353,002
Weighted average total debt balance$10,608,335$10,994,928
Weighted average interest rate3.9%3.5%

Interest cost increased $25.6 million as compared to the year ended December 31, 2009. The increase was primarily attributable to an increase in our weighted average interest rate driven by our new VOL credit facility and the amendment to our U.S. credit facility, partially offset by a decrease in our weighted average debt balance as a result of repayments on our U.S. and VML credit facilities. The increase in capitalized interest was driven by the recommencement of activities at our Cotai Strip parcels 5 and 6 in Macau during 2010.

Other Factors Effecting Earnings

Other expense was $8.3 million for the year ended December 31, 2010, as compared to $9.9 million for the year ended December 31, 2009. The expense during the year ended December 31, 2010, was primarily attributable to foreign exchange losses and decreases in the fair value of our interest rate cap agreements in Macau and Singapore.

The loss on modification or early retirement of debt was $18.6 million for the year ended December 31, 2010, and primarily related to a $21.1 million loss related to the amendment of our U.S. credit facility in August 2010, partially offset by a gain on early retirement of debt of $3.4 million, which related to the repurchase of $60.3 million of the outstanding principal of our senior notes (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt”).

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Our effective income tax rate was 8.7% for the year ended December 31, 2010, as compared to a beneficial rate of 1.0% for the year ended December 31, 2009. The effective income tax rate for the year ended December 31, 2010, reflects a 17% statutory tax rate on our Singapore operations; a zero percent tax rate from our Macau gaming operations due to our income tax exemption in Macau, which is set to expire in 2013; and non-realizable deferred tax assets in the U.S. and certain foreign jurisdictions, which unfavorably impacted our effective income tax rate. The effective income tax rate for the year ended December 31, 2009, includes the recording of a valuation allowance on the net deferred tax assets of our U.S. operations. Management does not anticipate recording an income tax benefit related to deferred tax assets generated by operations in the U.S. and certain foreign jurisdictions; however, to the extent that the financial results of these operations improve and it becomes more likely than not that these deferred tax assets are realizable, we will be able to reduce the valuation allowances.

The net income attributable to our noncontrolling interests was $182.2 million for the year ended December 31, 2010, compared to a net loss of $14.3 million for the year ended December 31, 2009. These amounts are primarily related to the noncontrolling interest of SCL.

Year Ended December 31, 2009 compared to the Year Ended December 31, 2008

Operating Revenues

Our net revenues consisted of the following:

Year Ended December 31,
20092008Percent Change
(Dollars in thousands)
Casino$3,524,798$3,192,09910.4%
Rooms657,783767,129(14.3)%
Food and beverage327,699369,062(11.2)%
Convention, retail and other419,164406,8363.0%
4,929,4444,735,1264.1%
Less — promotional allowances(366,339)(345,180)6.1%
Total net revenues$4,563,105$4,389,9463.9%

Consolidated net revenues were $4.56 billion for the year ended December 31, 2009, an increase of $173.2 million compared to $4.39 billion for the year ended December 31, 2008. The increase in net revenues was due primarily to a full year of operations of Four Seasons Macao, which opened in August 2008, and the opening of Sands Bethlehem in May 2009.

Casino revenues increased $332.7 million as compared to the year ended December 31, 2008. Of the increase, $161.1 million was attributable to a full year of operations of Four Seasons Macao, $141.8 million was attributable to the opening of Sands Bethlehem and $89.1 million at The Venetian Macao was primarily due to the increase in Non-Rolling Chip win percentage. These increases were partially offset by decreases at our Las Vegas Operating Properties and Sands Macao. The following table summarizes the results of our casino activity:

Year Ended December 31,
20092008Change
(Dollars in thousands)
Macau Operations:
The Venetian Macao
Total casino revenues$1,699,599$1,610,5055.5%
Non-Rolling Chip drop$3,362,780$3,530,065(4.7)%
Non-Rolling Chip win percentage23.6%19.9%3.7pts
Rolling Chip volume$37,701,027$36,893,8312.2%
Rolling Chip win percentage2.80%2.97%(0.17)pts
Slot handle$2,362,680$1,941,89521.7%
Slot hold percentage7.4%8.0%(0.6)pts
Sands Macao
Total casino revenues$1,003,042$1,013,063(1.0)%
Non-Rolling Chip drop$2,413,446$2,626,877(8.1)%
Non-Rolling Chip win percentage19.5%18.9%0.6pts
Rolling Chip volume$21,920,186$25,182,225(13.0)%
Rolling Chip win percentage3.01%2.64%0.37pts
Slot handle$1,256,857$1,039,43020.9%
Slot hold percentage6.6%7.8%(1.2)pts
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Year Ended December 31,
20092008Change
(Dollars in thousands)
Four Seasons Macao
Total casino revenues$207,191$46,094349.5%
Non-Rolling Chip drop$335,655$99,849236.2%
Non-Rolling Chip win percentage23.7%21.1%2.6pts
Rolling Chip volume$7,059,450$630,0881,020.4%
Rolling Chip win percentage2.35%4.45%(2.1)pts
Slot handle$240,358$38,238528.6%
Slot hold percentage5.9%5.6%0.3pts
U.S. Operations:
Las Vegas Operating Properties
Total casino revenues$473,176$522,437(9.4)%
Table games drop$1,769,130$1,846,394(4.2)%
Table games win percentage17.3%19.8%(2.5)pts
Slot handle$2,705,309$3,666,072(26.2)%
Slot hold percentage7.5%5.7%1.8pts
Sands Bethlehem
Total casino revenues$141,790$——%
Slot handle$2,030,529$——%
Slot hold percentage7.0%—%—pts

In our experience, average win percentages remain steady when measured over extended periods of time but can vary considerably within shorter time periods as a result of the statistical variances that are associated with games of chance in which large amounts are wagered.

Room revenues decreased $109.3 million as compared to the year ended December 31, 2008. Room revenues decreased as room rates were reduced to maintain occupancy at our Las Vegas Operating Properties and at The Venetian Macao. This decrease was partially offset by a $16.6 million increase in revenues attributable to a full year of operations of Four Seasons Macao. The suites at Sands Macao are primarily provided to casino patrons on a complimentary basis. The following table summarizes the results of our room activity:

Year Ended December 31,
20092008Change
(Room revenues in thousands)
Macau Operations:
The Venetian Macao
Total room revenues$173,319$200,594(13.6)%
Average daily room rate$205$226(9.3)%
Occupancy rate83.6%85.3%(1.7)pts
Revenue per available room$171$193(11.4)%
Sands Macao
Total room revenues$26,558$27,074(1.9)%
Average daily room rate$260$266(2.3)%
Occupancy rate97.7%98.4%(0.7)pts
Revenue per available room$254$261(2.7)%
Four Seasons Macao
Total room revenues$20,276$3,664453.4%
Average daily room rate$295$344(14.2)%
Occupancy rate52.3%32.0%20.3pts
Revenue per available room$154$11040.0%
U.S. Operations:
Las Vegas Operating Properties
Total room revenues$437,630$535,797(18.3)%
Average daily room rate$195$232(15.9)%
Occupancy rate87.4%91.3%(3.9)pts
Revenue per available room$170$212(19.8)%

Food and beverage revenues decreased $41.4 million as compared to the year ended December 31, 2008. The decrease is due to a $66.2 million decrease across our operating properties driven by a decrease in banquet and in-suite dining operations resulting from lower occupancy at our properties, as noted above, and a lower proportion of group and corporate businesses. This decrease was offset by $13.3 million attributable to Sands Bethlehem and an increase of $11.5 million attributable to a full year of operations of Four Seasons Macao.

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Convention, retail and other revenues increased $12.3 million as compared to the year ended December 31, 2008. The increase is primarily due to an increase of $24.2 million attributable to the mall at Four Seasons Macao due to a full year of operations and $21.1 million in our Other Asia segment driven by our passenger ferry service operations in Macau as we increased the frequency of sailings and commenced night sailings in the summer of 2008. These increases were partially offset by a decrease of $27.0 million at our Las Vegas Operating Properties and $7.9 million at The Venetian Macao, primarily driven by the decrease in our convention operations resulting from the decline in global economic conditions.

Operating Expenses

The breakdown of operating expenses is as follows:

Year Ended December 31,
20092008Percent Change
(Dollars in thousands)
Casino$2,349,422$2,214,2356.1%
Rooms121,097154,615(21.7)%
Food and beverage165,977186,551(11.0)%
Convention, retail and other240,377213,35112.7%
Provision for doubtful accounts103,80241,865147.9%
General and administrative526,199550,529(4.4)%
Corporate expense132,098104,35526.6%
Rental expense29,89933,540(10.9)%
Pre-opening expense157,731162,322(2.8)%
Development expense53312,789(95.8)%
Depreciation and amortization586,041506,98615.6%
Impairment loss169,46837,568351.1%
Loss on disposal of assets9,2017,57721.4%
Total operating expenses$4,591,845$4,226,2838.6%

Operating expenses were $4.59 billion for the year ended December 31, 2009, an increase of $365.6 million as compared to $4.23 billion for the year ended December 31, 2008. The increase in operating expenses was primarily attributable to a full year of operations of Four Seasons Macao, the opening of Sands Bethlehem, recognizing impairment losses and a legal settlement included in corporate expense, and increases in our provision for doubtful accounts, and depreciation and amortization, partially offset by a decrease in operating expenses driven by decreased revenues as well as our cost-cutting measures.

Casino expenses increased $135.2 million as compared to the year ended December 31, 2008. Of the increase, $103.2 million was attributable to Sands Bethlehem and $95.1 million was due to the 39.0% gross win tax on our casino revenues at our Macau properties, driven primarily by increases at Four Seasons Macao and The Venetian Macao, as previously described, as well as a $36.5 million (exclusive of the 39.0% gross win tax on casino revenues) attributable to a full year of operations of Four Seasons Macao. These increases were partially offset by a combined decrease of $99.6 million at our operating properties driven by our cost-cutting measures.

Rooms expense decreased $33.5 million and food and beverage expense decreased $20.6 million as compared to the year ended December 31, 2008. These decreases were driven by the associated decreases in the related revenues described above, as well as our cost-cutting measures.

Convention, retail and other expense increased $27.0 million, as compared to the year ended December 31, 2008. The increase was primarily attributable to a $43.4 million increase in our passenger ferry service operations in Macau, partially offset by a $15.3 million decrease at our Las Vegas Operating Properties driven by the associated decrease in the related revenues, as well as our cost-cutting measures.

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The provision for doubtful accounts was $103.8 million for the year ended December 31, 2009, compared to $41.9 million for the year ended December 31, 2008. Of the increase, $39.0 million related to our casino operations as we granted more credit to our premium players in Macau in response to the opening of new properties and $16.6 million related to our mall operations as some of our tenants experienced difficulties driven by reduced visitation and consumer spending as a result of the economic downturn. The amount of this provision can vary over short periods of time because of factors specific to the customers who owe us money from gaming activities at any given time. We believe that the amount of our provision for doubtful accounts in the future will depend upon the state of the economy, our credit standards, our risk assessments and the judgment of our employees responsible for granting credit.

General and administrative expenses decreased $24.3 million as compared to the year ended December 31, 2008. The decrease was primarily attributable to a $55.8 million decrease across our operating properties driven by our cost-cutting measures, with $25.6 million, $19.3 million and $10.9 million at our Las Vegas Operating Properties, The Venetian Macao, and Sands Macao, respectively, as well as a $17.7 million decrease in Other Asia. The decrease was partially offset by expenses of $25.0 million and $24.2 million attributable to Sands Bethlehem and Four Season Macao, respectively.

Corporate expense increased $27.7 million as compared to the year ended December 31, 2008. The increase was attributable to a $42.5 million legal settlement, partially offset by a decrease $14.8 million of other corporate costs driven by our cost-cutting measures.

Pre-opening expenses were $157.7 million for the year ended December 31, 2009, as compared to $162.3 million for the year ended December 31, 2008. Pre-opening expense represents personnel and other costs incurred prior to the opening of new ventures, which are expensed as incurred. Pre-opening expenses for the year ended December 31, 2009, were primarily related to activities at Marina Bay Sands and Sands Bethlehem, as well as costs associated with suspension activities at our Cotai Strip developments. Development expenses, which were not material for the years ended December 31, 2009 and 2008, include the costs associated with the Company’s evaluation and pursuit of new business opportunities, which are also expensed as incurred.

Depreciation and amortization expense increased $79.1 million as compared to the year ended December 31, 2008. The increase was primarily attributable to a full year of depreciation expense related to the Four Seasons Macao and the opening of Sands Bethlehem, which contributed $37.6 million and $17.5 million, respectively. Additionally, increases of $11.8 million and $7.9 million were attributable to The Venetian Macao and The Palazzo, respectively, as both properties had unopened areas during the entire year ended December 31, 2008.

Impairment loss was $169.5 million for the year ended December 31, 2009, consisting primarily of $94.0 million related to a reduction in the expected proceeds to be received from the sale of The Shoppes at The Palazzo, $57.2 million related to our indefinite suspension of plans to expand the Sands Expo Center and $15.0 million related to certain real estate that was previously utilized in connection with marketing activities in Asia.

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Adjusted Property EBITDA

Adjusted property EBITDA is used by management as the primary measure of the operating performance of our segments. Adjusted property EBITDA is net loss attributable to Las Vegas Sands Corp. before interest, income taxes, depreciation and amortization, pre-opening expense, development expense, other income (expense), loss on modification or early retirement of debt, impairment loss, loss on disposal of assets, rental expense, corporate expense, stock-based compensation expense and net loss attributable to noncontrolling interests. The following table summarizes information related to our segments (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 18 — Segment Information” for discussion of our operating segments and a reconciliation of adjusted property EBITDA to net loss attributable to Las Vegas Sands Corp.):

Year Ended December 31,
20092008Percent Change
(Dollars in thousands)
Macau:
The Venetian Macao$556,547$499,02511.5%
Sands Macao244,925214,57314.1%
Four Seasons Macao40,5277,567435.6%
Other Asia(32,610)(49,465)(34.1)%
United States:
Las Vegas Operating Properties259,206392,139(33.9)%
Sands Bethlehem17,566——%
Total adjusted property EBITDA$1,086,161$1,063,8392.1%

Adjusted property EBITDA at The Venetian Macao increased $57.5 million as compared to the year ended December 31, 2008. The increase was primarily due to an increase in net revenues of $47.4 million as well as reduced expenses driven by our cost-cutting measures, as previously described.

Adjusted property EBITDA at Sands Macao increased $30.4 million as compared to the year ended December 31, 2008. The increase was primarily due to a decrease in operating expenses driven by our cost-cutting measures, with a $31.7 million decrease in casino expenses (exclusive of the 39% gross win tax on casino revenues) and a $10.9 million decrease in general and administrative expenses. These decreases in expenses were partially offset by an increase of $17.7 million in the provision for doubtful accounts.

Adjusted property EBITDA in our Other Asia segment increased $16.9 million as compared to the year ended December 31, 2008. As previously described, our passenger ferry service operations increased due to the increased number of sailings.

Adjusted property EBITDA at our Las Vegas Operating Properties decreased $132.9 million as compared to the year ended December 31, 2008. The decrease was primarily due to a decrease in net revenues of $234.7 million, partially offset by decreases in the associated operating expenses and a decrease of $25.6 million in general and administrative expenses driven by our cost-cutting measures, of which $10.8 million were payroll-related expenses.

Adjusted property EBITDA at Four Seasons Macao and Sands Bethlehem do not have a comparable prior-year period. Results of the operations of Four Seasons Macao and Sands Bethlehem are as previously described.

Interest Expense

The following table summarizes information related to interest expense on long-term debt:

Year Ended December 31,
20092008
(Dollars in thousands)
Interest cost (which includes the amortization of deferred financing costs and original issue discounts)$387,319$553,040
Less — capitalized interest(65,449)(131,215)
Interest expense, net$321,870$421,825
Cash paid for interest$353,002$516,912
Weighted average total debt balance$10,994,928$9,081,135
Weighted average interest rate3.5%6.1%

Interest cost decreased $165.7 million as compared to the year ended December 31, 2008, resulting from a decrease in the weighted average interest rate, partially offset by an increase in our weighted average long-term debt balances. Capitalized interest decreased $65.8 million as compared to the year ended December 31, 2008, primarily due to the suspension of our Cotai Strip developments, the completion of Four Seasons Macao and Sands Bethlehem, and the decrease in the weighted average interest rate.

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Other Factors Effecting Earnings

Other expense was $9.9 million for the year ended December 31, 2009, as compared to other income of $19.5 million for the year ended December 31, 2008. The expense during the year ended December 31, 2009, was primarily attributable to a decrease in the fair value of our interest rate cap agreements held in Singapore.

The loss on modification or early retirement of debt was $23.2 million for the year ended December 31, 2009, as compared to $9.1 million for the year ended December 31, 2008. During the year ended December 31, 2009, a $17.1 million loss resulted from the early retirement of the $600.0 million exchangeable bonds (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt — Macau Related Debt — Exchangeable Bonds”) and a $6.0 million loss resulted from the write-off of deferred financing costs related to a $500.0 million required pay down of the VML credit facility in connection with the SCL Offering (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt — Macau Related Debt — VML Credit Facility”).

Our effective income tax rate was a beneficial rate of 1.0% for the year ended December 31, 2009, as compared to a beneficial rate of 26.2% for the year ended December 31, 2008. The effective income tax rate for the year ended December 31, 2009, includes the recording of a valuation allowance on the net deferred tax assets of our U.S. operations and a zero percent tax rate from our Macau gaming operations due to our income tax exemption in Macau, which is set to expire in 2013. The non-deductible pre-opening expenses of foreign subsidiaries and the non-realizable deferred tax assets in the U.S. and foreign jurisdictions unfavorably impacted our effective income tax rate. Management does not anticipate recording an income tax benefit related to deferred tax assets generated by our U.S. operations; however, to the extent that the financial results of our U.S. operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance through earnings.

Liquidity and Capital Resources

Cash Flows — Summary

Our cash flows consisted of the following:

Year Ended December 31,
201020092008
(In thousands)
Net cash generated from operating activities$1,870,151$638,613$124,872
Cash flows from investing activities:
Change in restricted cash and cash equivalents(688,266)78,630218,044
Capital expenditures(2,023,981)(2,092,896)(3,789,008)
Proceeds from disposal of property and equipment49,7354,203—
Purchases of investments(173,774)——
Proceeds from investments173,774——
Acquisition of intangible assets(45,303)——
Net cash used in investing activities(2,707,815)(2,010,063)(3,570,964)
Cash flows from financing activities:
Proceeds from exercise of stock options16,455516,834
Proceeds from exercise of warrants225,514——
Proceeds from sale of and contribution from noncontrolling interest, net of transaction costs—2,386,4282,914
Dividends paid to preferred stockholders(93,400)(94,697)—
Proceeds from common stock issued, net of transaction costs——1,053,695
Proceeds from convertible senior notes from Principal Stockholder’s family——475,000
Proceeds from preferred stock and warrants issued to Principal Stockholder’s family, net of transaction costs——523,720
Proceeds from preferred stock and warrants issued, net of transaction costs——503,625
Proceeds from long-term debt1,397,2931,831,5284,616,201
Repayments of long-term debt(2,600,875)(776,972)(1,725,908)
Proceeds from the sale of The Shoppes at The Palazzo——243,928
Payments of preferred stock inducement premium(6,579)——
Other(65,965)(40,365)(91,856)
Net cash generated from (used in) financing activities(1,127,557)3,305,9735,608,153
Effect of exchange rate on cash46,886(17,270)18,952
Increase (decrease) in cash and cash equivalents$(1,918,335)$1,917,253$2,181,013
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Cash Flows — Operating Activities

Table games play at our U.S., Macau and Singapore properties is conducted on a cash and credit basis. Slot machine play is primarily conducted on a cash basis. The retail hotel rooms business is generally conducted on a cash basis, the group hotel rooms business is conducted on a cash and credit basis, and banquet business is conducted primarily on a credit basis resulting in operating cash flows being generally affected by changes in operating income and accounts receivable. Net cash provided by operating activities increased $1.23 billion as compared to the year ended December 31, 2009. The increase was attributable primarily to the increase in our operating income during the year ended December 31, 2010, as previously described, and favorable changes in our working capital.

Cash Flows — Investing Activities

Capital expenditures for the year ended December 31, 2010, totaled $2.02 billion, including $1.53 billion for construction and development activities in Singapore; $414.2 million for construction and development activities in Macau (primarily for our Cotai Strip development on parcels 5 and 6); $45.7 million for construction activities at Sands Bethlehem; and $33.9 million at our Las Vegas Operating Properties and for corporate and other activities.

During the year ended December 31, 2010, we paid $28.2 million for our Singapore gaming license and $16.5 million for our Pennsylvania table games certificate.

Cash Flows — Financing Activities

Net cash flows used in financing activities were $1.13 billion for the year ended December 31, 2010, which was primarily attributable to the repayments of $1.81 billion on our U.S credit facility, $572.3 million on our VML credit facility, and $121.1 million on our FF&E credit facility, payments of $56.7 million to purchase a portion of our senior notes and dividends paid to preferred stockholders of $93.4 million, offset by proceeds of $749.3 million from our VOL credit facility and $648.0 million from our Singapore credit facility.

As of December 31, 2010, we had $1.60 billion available for borrowing under the revolving portions of our U.S., Macau and Singapore credit facilities, net of letters of credit, outstanding banker’s guarantees and undrawn amounts committed to be funded by Lehman Brothers-related subsidiaries.

Development Financing Strategy

Through December 31, 2010, we have funded our development projects primarily through borrowings from our U.S., Macau and Singapore credit facilities (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt”), operating cash flows, proceeds from our recent equity offerings and proceeds from the disposition of non-core assets.

The U.S. credit facility, as amended in August 2010, requires our Las Vegas operations to comply with certain financial covenants at the end of each quarter, including maintaining a maximum leverage ratio of net debt, as defined, to trailing twelve-month adjusted earnings before interest, income taxes, depreciation and amortization, as defined (“Adjusted EBITDA”). The maximum leverage ratio is 6.5x for the quarterly periods ended December 31, 2010 through June 30, 2011, decreases to 6.0x for the quarterly periods ended September 30 and December 31, 2011, decreases to 5.5x for the quarterly periods ended March 31 and June 30, 2012, and then decreases to 5.0x for all quarterly periods thereafter through maturity. The VML credit facility, as amended in August 2009, requires certain of our Macau operations to comply with similar financial covenants, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 3.5x for the quarterly period ended December 31, 2010, and then decreases to 3.0x for all quarterly periods thereafter through maturity. We can elect to contribute up to $50 million and $20 million of cash on hand to our Las Vegas and relevant Macau operations, respectively, on a bi-quarterly basis; such contributions having the effect of increasing Adjusted EBITDA by the corresponding amount during the applicable quarter for purposes of calculating compliance with the maximum leverage ratio (the “EBITDA true-up”). The Singapore credit facility requires operations of Marina Bay Sands to comply with similar financial covenants commencing with the quarterly period ending September 30, 2011, including maintaining a maximum leverage ratio of debt to Adjusted EBITDA. The maximum leverage ratio is 5.5x for the quarterly period ending September 30, 2011, and then decreases by 0.25x every other quarter until it decreases to, and remains at, 3.75x for all quarterly periods thereafter through maturity (commencing with the quarterly period ending September 30, 2014). If we are unable to maintain compliance with the financial covenants under these credit facilities, we would be in default under the respective credit facilities. A default under the U.S. credit facility would trigger a cross-default under our airplane financings, which, if the respective lenders chose to accelerate the indebtedness outstanding under these agreements, would result in a default under our senior notes. A default under the VML credit facility would trigger a cross-default under our ferry financing. Any defaults or cross-defaults under these agreements would allow the lenders, in each case, to exercise their rights and remedies as defined under their respective agreements. If the lenders were to exercise their rights to accelerate the due dates of the indebtedness outstanding, there can be no assurance that we would be able to repay or refinance any amounts that may become due and payable under such agreements, which could force us to restructure or alter our operations or debt obligations.

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In 2008, we completed a $475.0 million convertible senior notes offering and a $2.1 billion common and preferred stock and warrants offering, of which the preferred stock becomes redeemable at our option in November 2011. In 2009, we completed a $600.0 million exchangeable bond offering and the $2.5 billion SCL Offering (see “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt — Macau Related Debt — Exchangeable Bonds” and “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 10 — Equity”). A portion of the proceeds from these offerings was used in the U.S. to pay down $775.9 million under the revolving portion of the U.S. credit facility in March 2010 and $1.0 billion under the term loan portions of the U.S. credit facility in August 2010, and to exercise the EBITDA true-up provision during the quarterly periods ended March 31 and September 30, 2010, and was contributed to Las Vegas Sands, LLC to reduce its net debt in order to maintain compliance with the maximum leverage ratio for the quarterly periods during the year ended December 31, 2010. As of December 31, 2010, our U.S. leverage ratio was 5.2x, compared to the maximum leverage ratio allowed of 6.5x, and our Macau leverage ratio was 1.6x, compared to the maximum leverage ratio allowed of 3.5x.

We held unrestricted and restricted cash and cash equivalents of approximately $3.04 billion and $809.9 million, respectively, as of December 31, 2010. Management believes that the cash on hand, cash flow from operations and available borrowings under our credit facilities will be sufficient to fund our development plan, as described in “Item 1 — Business — Development Projects,” and maintain compliance with the financial covenants of our U.S., Macau and Singapore credit facilities. In the normal course of our activities, we will continue to evaluate our capital structure and opportunities for enhancements thereof. In August 2010, we completed an amendment to our U.S. credit facility, which included a $1.0 billion pay down of the term loans and a reduction of the revolving credit facility commitments in exchange for the extension of certain maturities and other modifications to the credit agreement, thereby increasing our financial flexibility. Additionally, in connection with the $1.75 billion VOL credit facility to be used together with $500.0 million of proceeds from the SCL Offering, we had recommenced construction activities on our Cotai Strip development on parcel 5 and 6.

Aggregate Indebtedness and Other Known Contractual Obligations

Our total long-term indebtedness and other known contractual obligations are summarized below as of December 31, 2010:

Payments Due by Period Ending December 31, 2010(11)
Less thanMore than
1 Year2-3 Years4-5 Years5 YearsTotal
(In thousands)
Long-Term Debt Obligations(1)
Senior Secured Credit Facility — Term B$21,695$43,389$753,326$1,338,789$2,157,199
Senior Secured Credit Facility — Delayed Draw I4,3928,783154,430269,077436,682
Senior Secured Credit Facility — Delayed Draw II2,85180,094200,705—283,650
6.375% Senior Notes——189,712—189,712
Airplane Financings3,6887,3757,37559,98478,422
U.S. Other9101,8201,138—3,868
VML Credit Facility — Term B18,0001,465,789——1,483,789
VML Credit Facility — Term B Delayed290,264286,765——577,029
VOL Credit Facility — Term—149,861600,069—749,930
Ferry Financing35,00270,00470,005—175,011
Macau Other303337——640
Singapore Credit Facility387,578775,1592,817,698—3,980,435
Singapore Other7161,454——2,170
Fixed Interest Payments12,18924,27014,110—50,569
Variable Interest Payments(2)316,510481,966244,40846,6831,089,567
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Payments Due by Period Ending December 31, 2010(11)
Less thanMore than
1 Year2-3 Years4-5 Years5 YearsTotal
(In thousands)
HVAC Equipment Lease(3)
HVAC Equipment Lease1,6693,1972,98515,15523,006
HVAC Equipment Lease Interest Payments1,6672,9672,5033,36810,505
Contractual Obligations
Former Tenants(4)6501,2278006,0008,677
Employment Agreements(5)7,0004,392——11,392
Macau Leasehold Interests in Land(6)49,43299,14610,01691,497250,091
Mall Leases(7)8,81217,69416,926108,621152,053
Macau Annual Premium(8)32,52565,05065,050211,414374,039
Parking Lot Lease(9)1,2002,4002,400105,900111,900
Other Operating Leases(10)9,31413,0046,8307,93137,079
Total$1,206,367$3,606,143$5,160,486$2,264,419$12,237,415
(1)See “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 9 — Long-Term Debt” for further details on these financing transactions.
(2)Based on December 31, 2010, London Inter-Bank Offered Rate (“LIBOR”) of 0.30%, Hong Kong Inter-Bank Offered Rate (“HIBOR”) of 0.30% and Singapore Swap Offer Rate (“SOR”) of 0.28% plus the applicable interest rate spread in accordance with the respective debt agreements.
(3)In July 2009, the Company entered into a capital lease agreement with its current heating, ventilation and air conditioning (“HVAC”) provider (the “HVAC Equipment Lease”) to provide the operation and maintenance services for the HVAC equipment in Las Vegas. The lease has a 10-year term with a purchase option at the third, fifth, seventh and tenth anniversary dates. The Company is obligated under the agreement to make monthly payments of approximately $300,000 for the first year with automatic decreases of approximately $14,000 per month on every anniversary date. The HVAC Equipment Lease has been capitalized at the present value of the future minimum lease payments at lease inception.
(4)We are party to tenant lease termination and asset purchase agreements. Under the agreement for The Grand Canal Shoppes sale, we are obligated to fulfill the lease termination and asset purchase agreements.
(5)We are party to employment agreements with five of our executive officers, with remaining terms of one to two years.
(6)We are party to long-term land leases of 25 years with automatic extensions at our option of 10 years thereafter in accordance with Macau law.
(7)We are party to certain leaseback agreements for the Blue Man Group Theater, gondola and certain office and retail space related to the sales of The Grand Canal Shoppes and The Shoppes at the Palazzo.
(8)In addition to the 39% gross gaming win tax in Macau (which is not included in this table as the amount we pay is variable in nature), we are required to pay an annual premium with a fixed portion and a variable portion, which is based on the number and type of gaming tables and gaming machines we operate. Based on the gaming tables and gaming machines in operation as of December 31, 2010, the annual premium is approximately $32.5 million payable to the Macau government through the termination of the gaming subconcession in June 2022.
(9)We are party to a long-term lease agreement of 99 years for a parking structure located adjacent to The Venetian Las Vegas.
(10)We are party to certain operating leases for real estate, various equipment and service arrangements.
(11)As of December 31, 2010, we had a $35.8 million liability related to unrecognized tax benefits and related interest expense. We are unable to reasonably estimate the timing of the liability and interest payments in individual years beyond 12 months due to uncertainties in the timing of the effective settlement of tax positions.

Off-Balance Sheet Arrangements

We have not entered into any transactions with special purpose entities, nor have we engaged in any derivative transactions other than interest rate caps.

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Restrictions on Distributions

We are a parent company with limited business operations. Our main asset is the stock and membership interests of our subsidiaries. The debt instruments of our U.S., Macau and Singapore subsidiaries contain certain restrictions that, among other things, limit the ability of 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 our assets of our company without prior approval of the lenders or noteholders.

Inflation

We believe that inflation and changing prices have not had a material impact on our sales, revenues or income from continuing operations during the past three fiscal years.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements that are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include the discussions of our business strategies and expectations concerning future operations, margins, profitability, liquidity and capital resources. In addition, in certain portions included in this report, the words: “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to our company or management, are intended to identify forward-looking statements. Although we believe that these forward-looking statements are reasonable, we cannot assure you that any forward-looking statements will prove to be correct. These forward-looking statements involve known and unknown risks, uncertainties and other factors, which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These factors include, among others, the risks associated with:

•our substantial leverage, debt service and debt covenant compliance (including sensitivity to fluctuations in interest rates, as a significant portion of our debt is variable-rate debt, and other capital markets trends);
•disruptions in the global financing markets and our ability to obtain sufficient funding for our current and future developments, including our Cotai Strip, Singapore, Pennsylvania and Las Vegas developments;
•general economic and business conditions which may impact levels of disposable income, consumer spending, group meeting business, pricing of hotel rooms and retail and mall sales;
•increased competition for labor and materials due to other planned construction projects in Macau;
•the impact of the suspensions of certain of our development projects and our ability to meet certain development deadlines;
•the uncertainty of tourist behavior related to spending and vacationing at casino-resorts in Las Vegas, Macau and Singapore;
•regulatory policies in mainland China or other countries in which our customers reside, including visa restrictions limiting the number of visits or the length of stay for visitors from mainland China to Macau and restrictions on foreign currency exchange or importation of currency;
•our dependence upon properties primarily in Las Vegas, Macau and Singapore for all of our cash flow;
•our relationship with GGP or any successor owner of The Shoppes at The Palazzo and The Grand Canal Shoppes, and the ability of GGP to perform under the purchase and sale agreement for The Shoppes at The Palazzo, as amended;
•new developments, construction and ventures, including our Cotai Strip developments, Marina Bay Sands and Sands Bethlehem;
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•the passage of new legislation and receipt of governmental approvals for our proposed developments in Macau and other jurisdictions where we are planning to operate;
•our insurance coverage, including the risk that we have not obtained sufficient coverage or will only be able to obtain additional coverage at significantly increased rates;
•disruptions or reductions in travel due to acts of terrorism;
•disruptions or reductions in travel, as well as disruptions in our operations, due to outbreaks of infectious diseases, such as severe acute respiratory syndrome, avian flu or swine flu;
•government regulation of the casino industry, including gaming license regulation, the legalization of gaming in other jurisdictions and regulation of gaming on the Internet;
•increased competition in Las Vegas and Macau, including recent and upcoming increases in hotel rooms, meeting and convention space, and retail space;
•fluctuations in the demand for all-suites rooms, occupancy rates and average daily room rates in Las Vegas, Macau and Singapore;
•the popularity of Las Vegas, Macau and Singapore as convention and trade show destinations;
•new taxes, changes to existing tax rates or proposed changes in tax legislation;
•our ability to maintain our gaming licenses, certificates and subconcession;
•the completion of infrastructure projects in Macau and Singapore; and
•the outcome of any ongoing and future litigation.

All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. Readers are cautioned not to place undue reliance on these forward-looking statements. We assume no obligation to update any forward-looking statements after the date of this report as a result of new information, future events or developments, except as required by federal securities laws.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires our 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. These estimates and judgments are based on historical information, information that is currently available to us and on various other assumptions that management believes to be reasonable under the circumstances. Actual results could vary from those estimates and we may change our estimates and assumptions in future evaluations. Changes in these estimates and assumptions may have a material effect on our results of operations and financial condition. We believe that the critical accounting policies discussed below affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

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Allowance for Doubtful Casino Accounts

We maintain an allowance, or reserve, for doubtful casino accounts at our operating casino resorts in the U.S., Macau and Singapore, which we regularly evaluate. We specifically analyze the collectability of each account with a balance over a specified dollar amount, based upon the age of the account, the customer’s financial condition, collection history and any other known information, and we apply standard reserve percentages to aged account balances under the specified dollar amount. We also monitor regional and global economic conditions and forecasts in our evaluation of the adequacy of the recorded reserves. Credit or marker play was 64.2%, 36.9% and 35.2% of table games play at our Las Vegas properties, Macau properties and Marina Bay Sands, respectively, during the year ended December 31, 2010. Our allowance for doubtful casino accounts was 25.1% and 29.9% of gross casino receivables from customers for the years ended December 31, 2010 and 2009, respectively. As the credit extended to our junkets can be offset by the commissions payable to said junkets, the allowance for doubtful accounts related to receivables from junkets is not material. Our allowance for doubtful accounts from our hotel and other receivables is also not material.

Litigation Accrual

We are subject to various claims and legal actions. We estimate the accruals for these claims and legal actions in accordance with accounting standards regarding contingencies and include such accruals in other accrued liabilities in the consolidated balance sheets.

Property and Equipment

At December 31, 2010, we had net property and equipment of $14.50 billion, representing 68.9% of our total assets. We depreciate 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 and legal considerations such as contractual life. Future events, such as property expansions, property developments, new competition, or new regulations, could result in a change in the manner in which we use certain assets requiring a change in the estimated useful lives of such assets.

For assets to be held and used (including projects under development), fixed assets are reviewed for impairment whenever indicators of impairment exist. If an indicator of impairment exists, we first group our assets with other assets and liabilities at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities (the “asset group”). Secondly, we estimate the undiscounted future cash flows that are directly associated with and expected to arise from the completion, use and eventual disposition of such asset group. We estimate the undiscounted cash flows over the remaining useful life of the primary asset within the asset group. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is measured based on fair value compared to carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.

To estimate the undiscounted cash flows of our asset groups, we consider all potential cash flows scenarios, which are probability weighted based on management’s estimates given current conditions. Determining the recoverability of our asset groups is judgmental in nature and requires the use of significant estimates and assumptions, including estimated cash flows, probability weighting of potential scenarios, costs to complete construction for assets under development, growth rates and future market conditions, among others. Future changes to our estimates and assumptions based upon changes in macro-economic factors, regulatory environments, operating results or management’s intentions may result in future changes to the recoverability of our asset groups.

For assets to be held for sale, the fixed assets (the “disposal group”) are measured at the lower of their carrying amount or fair value less cost to sell. Losses are recognized for any initial or subsequent write-down to fair value less cost to sell, while gains are recognized for any subsequent increase in fair value less cost to sell, but not in excess of the cumulative loss previously recognized. Any gains or losses not previously recognized that result from the sale of the disposal group shall be recognized at the date of sale. Fixed assets are not depreciated while classified as held for sale.

Capitalized Interest

Interest costs associated with our major construction projects are capitalized and included in the cost of the projects. When no debt is incurred specifically for construction projects, we capitalize interest on amounts expended using the weighted-average cost of our outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or construction activity is suspended for more than a brief period.

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Leasehold Interests in Land

Leasehold interests in land represent payments made for the use of land over an extended period of time. The leasehold interests in land are amortized on a straight-line basis over the expected term of the related lease agreements.

Indefinite Useful Life Assets

As of December 31, 2010, the Company had a $50.0 million asset related to its Sands Bethlehem gaming license and a $16.5 million asset related to its Sands Bethlehem table games certificate, both of which were determined to have indefinite useful lives. Assets with indefinite useful lives are not subject to amortization and are tested for impairment and recoverability annually or more frequently if events or circumstances indicate that the assets might be impaired. The impairment test consists of a comparison of the fair value of the asset with its carrying amount. If the carrying amount of the asset is not recoverable and exceeds its fair value, an impairment will be recognized in an amount equal to that excess. If the carrying amount of the asset does not exceed the fair value, no impairment is recognized.

The fair value of our Sands Bethlehem gaming license and table games certificate was estimated using our expected adjusted property EBITDA, combined with estimated future tax-affected cash flows and a terminal value using the Gordon Growth Model, which were discounted to present value at rates commensurate with our capital structure and the prevailing borrowing rates within the casino industry in general. Adjusted property EBITDA and discounted cash flows are common measures used to value cash-incentive businesses such as casinos. Determining the fair value of the gaming license and table games certificate is judgmental in nature and requires the use of significant estimates and assumptions, including adjusted property EBITDA, growth rates, discount rates and future market conditions, among others. Future changes to our estimates and assumptions based upon changes in macro-economic factors, operating results, or management’s intentions may result in future changes to the fair value of the gaming license and table games certificate.

Stock-Based Compensation

Accounting standards regarding share-based payments require the recognition of compensation expense in the consolidated statements of operations related to the fair value of employee stock-based compensation. Determining the fair value of stock-based awards at the grant date requires judgment, including estimating the expected term that stock options will be outstanding prior to exercise, the associated volatility and the expected dividends. Expected volatilities are based on a combination of our historical volatility and the historical volatilities from a selection of companies from our peer group due to our lack of historical information. We used the simplified method for estimating expected option life, as the options qualify as “plain-vanilla” options and we will continue to use the simplified method beyond December 31, 2010, due to the lack of historical information as allowed under related accounting standards. We believe that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of our stock options granted. Judgment is also required in estimating the amount of stock-based awards expected to be forfeited prior to vesting. If actual forfeitures differ significantly from these estimates, stock-based compensation expense could be materially impacted. All employee stock options were granted with an exercise price equal to the fair market value (as defined in the Company’s 2004 Equity Award Plan).

During the years ended December 31, 2010 and 2009, we recorded stock-based compensation expense of $58.0 million and $45.5 million, respectively. As of December 31, 2010, under the 2004 plan there was $79.1 million of unrecognized compensation cost, net of estimated forfeitures of 10.0% per year, related to unvested stock options and there was $16.1 million of unrecognized compensation cost related to unvested restricted stock. The stock option and restricted stock costs are expected to be recognized over a weighted average period of 2.7 years and 1.9 years, respectively.

As of December 31, 2010, under the SCL Equity Plan there was $15.1 million of unrecognized compensation cost, net of estimated forfeitures of 8.8% per year, related to unvested stock options that are expected to be recognized over a weighted average period of 3.4 years.

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Income Taxes

We are subject to income taxes in the U.S. (including federal and state) and numerous foreign jurisdictions in which we operate. We record income taxes under the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and attributable to operating loss and tax credit carryforwards. Accounting standards regarding income taxes requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance, if based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed at each reporting period based on a more-likely-than-not realization threshold. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability, the duration of statutory carryforward periods, our experience with operating loss and tax credit carryforwards not expiring unused, and tax planning alternatives.

Our U.S. operations were in a cumulative loss position for the three-year period ended December 31, 2009. For purposes of assessing the realization of the U.S. deferred tax assets, we considered the scheduled reversal of deferred tax liabilities, sources of taxable income and tax planning strategies. Based on related accounting standards, our cumulative loss position caused management to conclude that it is more likely than not that its U.S. deferred tax assets will not be fully realized. As such, we recorded a valuation allowance on the net deferred tax assets of our U.S. operations of $114.9 million and $96.9 million as of December 31, 2010 and 2009, respectively.

Management will reassess the realization of deferred tax assets based on the accounting standards for income taxes each reporting period. To the extent that the financial results of these operations improve and it becomes more likely than not that the deferred tax assets are realizable, we will be able to reduce the valuation allowance.

Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. Accounting standards regarding uncertainty in income taxes provides a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount which is more than 50% likely, based solely on the technical merits, of being sustained on examinations. We consider many factors when evaluating and estimating our tax positions and tax benefits, which may require periodic adjustments and which may not accurately anticipate actual outcomes.

Our major tax jurisdictions are the U.S., Macau, and Singapore. In the U.S., we are currently under examination for the 2009 year and we are participating in the Internal Revenue Service appeals process for years 2005 through 2008. We are subject to examination for years after 2005 in Macau and Singapore.

Recent Accounting Pronouncements

See related disclosure at “Item 8 — Financial Statements and Supplementary Data — Notes to Consolidated Financial Statements — Note 2 — Summary of Significant Accounting Policies.”

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