UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM Form 10-Q
   
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2006
  For the quarterly period ended June 30, 2006
o
 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from           to
For the Transition period fromtoCommission File Number 001-32373
 
Commission File Number 001-32373
LAS VEGAS SANDS CORP.
(Exact name of registration as specified in its charter)
   
Nevada
 27-0099920
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
 
3355 Las Vegas Boulevard South

Las Vegas, Nevada
89109

(Address of principal executive offices)
 89109
(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)15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          Yes            Noo
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filerþLarge accelerated filer þAccelerated filero          Non-accelerated filer oNon-accelerated filero
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yeso          Noþ
Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as of MayAugust 1, 2006.
LAS VEGAS SANDS CORP.
   
Class Outstanding at MayAugust 1, 2006
Common Stock ($0.001 par value) 354,317,234354,365,124 shares
 
 


 

LAS VEGAS SANDS CORP.
Table of Contents
Part I
FINANCIAL INFORMATION
     
Part I
FINANCIAL INFORMATION
 Financial Statements (unaudited) 
 
   
 31
 
   
 42
 
   
 53
 
   
 46
 
Management’s Discussion and Analysis of Financial Condition and Results of Operations27
 20
45
 Controls and Procedures3446
 
Part II
OTHER INFORMATION
 
 35
Legal Proceedings 46
 
 Risk Factors 47
 
 36
36
47
 Submission of Matters to a Vote of Security Holders3647
Exhibits48
 
 Signatures 
37
3849
 EX-31.1Ex-10.1
 EX-31.2Ex-10.2
 EX-32.1Ex-10.3
EX-10.4
Ex-31.1
Ex-31.2
Ex-32.1
 EX-32.2
ii

2


ITEMItem 1 — CONDENSED CONSOLIDATED FINANCIAL STATEMENTSCondensed Consolidated Financial Statements
LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
          
  June 30, December 31,
  2006 2005
     
  (In thousands, except share data)
  (Unaudited)
ASSETS
Current assets:        
 Cash and cash equivalents $281,999  $456,846 
 Restricted cash  340,203   71,717 
 Accounts receivable, net  86,939   84,778 
 Inventories  10,820   9,967 
 Deferred income taxes  12,123   7,946 
 Prepaid income taxes  16,800    
 Prepaid expenses and other  28,464   13,452 
       
Total current assets  777,348   644,706 
Property and equipment, net  3,347,330   2,600,468 
Deferred financing costs, net  67,509   30,973 
Restricted cash  1,336,781   571,143 
Deferred income taxes     11,332 
Other assets, net  211,873   21,117 
       
Total assets $5,740,841  $3,879,739 
       
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:        
 Accounts payable $45,683  $34,803 
 Construction payables  231,702   163,932 
 Accrued interest payable  7,317   7,918 
 Other accrued liabilities  254,518   246,390 
 Current maturities of long-term debt  6,138   7,325 
       
Total current liabilities  545,358   460,368 
Other long-term liabilities  12,977   9,804 
Deferred income taxes  3,777    
Deferred gain on sale of The Grand Canal Shops mall  66,396   68,129 
Deferred rent from The Grand Canal Shops mall transaction  105,387   105,999 
Long-term debt  3,156,799   1,625,901 
       
Total liabilities  3,890,694   2,270,201 
       
Commitments and contingencies (Note 6)        
Stockholders’ equity:        
 Common stock, $.001 par value, 1,000,000,000 shares authorized, 354,365,124 and 354,179,580 shares issued and outstanding  354   354 
 Capital in excess of par value  974,921   964,660 
 Deferred compensation     (150)
 Accumulated other comprehensive income  812   1,726 
 Retained earnings  874,060   642,948 
       
   1,850,147   1,609,538 
       
 Total liabilities and stockholders’ equity $5,740,841  $3,879,739 
       
(In thousands, except share data)
(Unaudited)
         
  March 31,  December 31, 
  2006  2005 
ASSETS
        
Current assets:        
Cash and cash equivalents $317,277  $456,846 
Restricted cash and cash equivalents  113,221   71,717 
Accounts receivable, net  108,450   84,778 
Inventories  10,645   9,967 
Deferred income taxes  10,363   7,946 
Prepaid expenses and other  18,175   13,452 
       
         
Total current assets  578,131   644,706 
         
Property and equipment, net  2,887,413   2,600,468 
Deferred offering costs, net  28,956   30,973 
Restricted cash and cash equivalents  577,425   571,143 
Deferred income taxes  2,064   11,332 
Other assets, net  23,345   21,117 
       
         
  $4,097,334  $3,879,739 
       
         
LIABILITIES AND STOCKHOLDERS’ EQUITY
        
Current liabilities:        
Accounts payable $44,259  $34,803 
Construction payables  182,750   163,932 
Accrued interest payable  3,277   7,918 
Other accrued liabilities  249,953   246,390 
Income taxes payable  8,200    
Current maturities of long-term debt  7,490   7,325 
       
         
Total current liabilities  495,929   460,368 
         
Other long-term liabilities  11,775   9,804 
Deferred gain on sale of The Grand Canal Shops mall  67,263   68,129 
Deferred rent from The Grand Canal Shops mall transaction  105,693   105,999 
Long-term debt  1,679,846   1,625,901 
       
         
   2,360,506   2,270,201 
       
         
Commitments and contingencies (Note 6)        
         
Stockholders’ equity:        
Common stock, $.001 par value, 1,000,000,000 shares authorized, 354,317,234 and 354,179,580 shares issued and outstanding  354   354 
Capital in excess of par value  970,305   964,660 
Deferred compensation     (150)
Accumulated other comprehensive income  1,438   1,726 
Retained earnings  764,731   642,948 
       
         
   1,736,828   1,609,538 
       
         
Total liabilities and stockholders’ equity $4,097,334  $3,879,739 
       
The accompanying notes are an integral part of these condensed consolidated financial statements.

1

3


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
                  
  Three Months Ended June 30, Six Months Ended June 30,
     
  2006 2005 2006 2005
         
  (In thousands, except share and per share data)
  (Unaudited)
Revenues:                
 Casino $378,462  $274,808  $753,844  $540,594 
 Rooms  89,654   83,983   180,792   170,060 
 Food and beverage  44,023   34,698   95,839   78,187 
 Convention, retail and other  29,276   24,354   64,281   52,808 
             
   541,415   417,843   1,094,756   841,649 
Less-promotional allowances  (24,408)  (19,022)  (47,385)  (39,034)
             
 Net revenues  517,007   398,821   1,047,371   802,615 
             
Operating expenses:                
 Casino  217,244   146,546   422,586   278,499 
 Rooms  21,996   20,227   43,748   41,342 
 Food and beverage  22,813   17,879   46,871   38,844 
 Convention, retail and other  15,728   13,723   32,122   28,099 
 Provision for doubtful accounts  3,321   782   8,310   4,168 
 General and administrative  57,337   48,214   112,152   93,987 
 Corporate expense  12,251   6,620   25,205   17,502 
 Rental expense  3,803   3,682   7,510   7,387 
 Pre-opening expense  4,354   504   6,573   504 
 Development expense  7,861   5,562   17,029   10,737 
 Depreciation and amortization  24,428   21,097   49,433   41,062 
 (Gain) loss on disposal of assets  456   (158)  1,537   1,005 
             
   391,592   284,678   773,076   563,136 
             
Operating income  125,415   114,143   274,295   239,479 
Other income (expense):                
 Interest income  15,018   7,133   25,232   14,527 
 Interest expense, net of amounts capitalized  (23,685)  (17,969)  (45,100)  (45,052)
 Other income (expense)  (14)  (1,291)  150   (1,291)
 Loss on early retirement of debt     (4,166)     (137,000)
             
Income before income taxes  116,734   97,850   254,577   70,663 
Benefit (provision) for income taxes  (7,405)  (11,421)  (23,465)  22,878 
             
Net income $109,329  $86,429  $231,112  $93,541 
             
Basic earnings per share $0.31  $0.24  $0.65  $0.26 
             
Diluted earnings per share $0.31  $0.24  $0.65  $0.26 
             
Weighted average shares outstanding:                
 Basic  354,255,635   354,160,692   354,227,600   354,160,692 
             
 Diluted  355,259,487   354,795,833   354,803,220   354,853,970 
             
(In thousands, except share and per share data)
(Unaudited)
         
  Three Months Ended 
  March 31, 
  2006  2005 
Revenues:        
Casino $375,382  $265,786 
Rooms  91,138   86,077 
Food and beverage  51,816   43,489 
Convention, retail and other  35,005   28,454 
       
   553,341   423,806 
Less-promotional allowances  (22,977)  (20,012)
       
         
Net revenues  530,364   403,794 
       
         
Operating expenses:        
Casino  205,344   131,953 
Rooms  21,753   21,115 
Food and beverage  24,057   20,965 
Convention, retail and other  16,395   14,376 
Provision for doubtful accounts  4,989   3,386 
General and administrative  54,812   45,773 
Corporate expense  12,954   10,882 
Rental expense  3,707   3,705 
Pre-opening expense  2,219    
Development expense  9,168   5,175 
Depreciation and amortization  25,005   19,965 
Loss on disposal of assets  1,081   1,163 
       
   381,484   278,458 
       
         
Operating income  148,880   125,336 
         
Other income (expense):        
Interest income  10,214   7,394 
Interest expense, net of amounts capitalized  (21,415)  (27,083)
Other income  164    
Loss on early retirement of debt     (132,834)
       
         
Income (loss) before income taxes  137,843   (27,187)
         
Benefit (provision) for income taxes  (16,060)  34,299 
       
         
Net income $121,783  $7,112 
       
         
Basic earnings per share $0.34  $0.02 
       
Diluted earnings per share $0.34  $0.02 
       
         
Weighted average shares outstanding:        
Basic  354,199,253   354,160,692 
       
Diluted  354,592,597   355,029,968 
       
The accompanying notes are an integral part of these condensed consolidated financial statements.

2

4


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
           
  Six Months Ended
  June 30,
   
  2006 2005
     
  (Dollars in thousands)
  (Unaudited)
Cash flows from operating activities:
        
Net income $231,112  $93,541 
Adjustments to reconcile net income to net cash provided by operating activities:        
 Depreciation and amortization  49,433   41,062 
 Amortization of deferred financing costs and original issue discount  4,634   5,010 
 Amortization of deferred gain and rent  (2,345)  (2,346)
 Loss on early retirement of debt     137,000 
 Loss on disposal of assets  1,537   1,005 
 Stock-based compensation  5,724    
 Provision for doubtful accounts  8,310   4,168 
 Tax benefit from stock option exercises  (632)  7,424 
 Deferred income taxes  10,932   (30,302)
 Changes in operating assets and liabilities:        
  Accounts receivable  (10,471)  (13,972)
  Inventories  (853)  (759)
  Prepaid income taxes  (16,168)   
  Prepaid expenses and other  (205,612)  (3,355)
  Accounts payable  10,880   20,638 
  Accrued interest payable  (601)  (2,337)
  Other accrued liabilities  11,301   26,750 
       
Net cash provided by operating activities  97,181   283,527 
       
Cash flows from investing activities:
        
Change in restricted cash  (1,034,881)  (5,181)
Capital expenditures  (730,475)  (373,565)
       
Net cash used in investing activities  (1,765,356)  (378,746)
       
Cash flows from financing activities:
        
Dividends paid to shareholders     (21,052)
Proceeds from exercise of stock options  3,180    
Tax benefit from stock option exercises  632    
Repayments on 11% mortgage notes     (843,640)
Proceeds from 6.375% senior notes, net of discount     247,722 
Proceeds from senior secured credit facility-term B     305,000 
Proceeds from Macao credit facility  1,325,000    
Proceeds from senior secured credit facility-revolver  254,129    
Proceeds from phase II mall construction loan  30,000   10,500 
Proceeds from other long-term debt  75    
Repayments on Venetian Intermediate credit facility  (50,000)   
Repayment on senior secured credit facility-revolver  (25,000)   
Repayments on Interface mortgage note payable  (2,807)  (2,448)
Repayments on FF&E credit facility  (1,800)  (600)
Repayments on Venetian Macao senior secured notes — tranche A     (75,000)
Repayments on Venetian Macao senior secured notes — tranche B     (45,000)
Repurchase premiums incurred in connection with refinancing transactions     (113,311)
Transaction costs, initial public offering     (487)
Payments of deferred financing costs  (41,056)  (11,169)
       
Net cash provided by (used in) financing activities  1,492,353   (549,485)
       
Effect of exchange rate on cash  975    
       
Decrease in cash and cash equivalents  (174,847)  (644,704)
Cash and cash equivalents at beginning of period  456,846   1,294,898 
       
Cash and cash equivalents at end of period $281,999  $650,194 
       
Supplemental disclosure of cash flow information:
        
Cash payments for interest $69,725  $51,494 
       
Cash payments for taxes $28,000  $ 
       
Non-cash investing and financing activities:
        
Property and equipment acquisitions included in construction payables $231,702  $163,932 
       
(Dollars in thousands)
(Unaudited)
         
  Three Months Ended 
  March 31, 
  2006  2005 
Cash flows from operating activities:
        
Net income $121,783  $7,112 
Adjustments to reconcile net income to net cash provided by operating activities:        
Depreciation and amortization  25,005   19,965 
Amortization of debt offering costs and original issue discount  2,074   2,723 
Amortization of deferred revenue  (1,172)  (1,173)
Loss on early retirement of debt     132,834 
Loss on disposal of assets  1,081   1,163 
Stock-based compensation  2,862    
Provision for doubtful accounts  4,989   3,386 
Tax benefit from stock option exercises  (632)  7,424 
Changes in operating assets and liabilities:        
Accounts receivable  (28,661)  (22,563)
Inventories  (678)  (324)
Prepaid expenses and other  (6,857)  (4,361)
Deferred income taxes  6,851   (41,723)
Accounts payable  9,456   (5,856)
Accrued interest payable  (4,641)  (4,695)
Other accrued liabilities  5,534   (14,789)
Income taxes payable  8,832    
       
         
Net cash provided by operating activities  145,826   79,123 
       
Cash flows from investing activities:
        
Change in restricted cash and cash equivalents  (47,786)  (4,481)
Capital expenditures  (294,233)  (152,164)
       
         
Net cash used in investing activities  (342,019)  (156,645)
       
Cash flows from financing activities:
        
Dividends paid to shareholders     (21,052)
Proceeds from exercise of stock options  1,864    
Tax benefit from stock option exercises  632    
Repayments on 11% mortgage notes     (843,640)
Proceeds from 6.375% senior notes, net of discount     247,754 
Proceeds from senior secured credit facility-term B     305,000 
Proceeds from senior secured credit facility-revolver  92,129    
Proceeds from Phase II mall construction loan  14,000    
Proceeds from other long-term debt  75    
Repayments on Venetian Intermediate credit facility  (50,000)   
Repayments on FF&E credit facility  (1,200)   
Repayments on Interface mortgage note payable  (951)  (1,334)
Repurchase premiums incurred in connection with refinancing transactions     (93,289)
Transaction costs, initial public offering     (487)
Payments of debt offering costs     (10,717)
       
         
Net cash provided by (used in) financing activities  56,549   (417,765)
       
Effect of exchange rate on cash  75    
       
         
Decrease in cash and cash equivalents  (139,569)  (495,287)
Cash and cash equivalents at beginning of period  456,846   1,294,898 
       
         
Cash and cash equivalents at end of period $317,277  $799,611 
       
Supplemental disclosure of cash flow information:
        
Cash payments for interest $31,905  $33,139 
       
         
Non-cash investing and financing activities:
        
Property and equipment asset acquisitions included in construction payables $182,750  $89,501 
       
         
Property and equipment acquisitions included in accounts payable $  $1,000 
       
The accompanying notes are an integral part of these condensed consolidated financial Statementsstatements.

3

5


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — ORGANIZATION AND BUSINESS OF COMPANY
The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K of Las Vegas Sands Corp. and its subsidiaries (collectively the “Company”) for the year ended December 31, 2005. 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 the United States of America. In addition, certain amounts in the 2005 financial statements have been reclassified to conform to the 2006 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 condensed consolidated financial statements are not necessarily indicative of expected results for the full year.
Las Vegas Sands Corp. (“LVSC”) was incorporated in Nevada during August 2004 and completed an initial public offering of its common stock in December 2004. Immediately prior to the initial public offering LVSC acquired 100% of the capital stock of Las Vegas Sands, Inc., which was converted into a Nevada limited liability company, Las Vegas Sands, LLC (“LVSLLC”), in July 2005. The acquisition of LVSLLC by LVSC has been accounted for as a reorganization of entities under common control, in a manner similar to pooling-of-interests.pooling-of-interests. LVSC is traded on the New York Stock Exchange under the symbol “LVS.”
Las Vegas Properties
Las Vegas Properties
The Company owns and operates The Venetian Resort Hotel Casino (“The Venetian”), a Renaissance Venice-themed resort situated on the Las Vegas Strip (the “Strip”). The Venetian is located across from The Mirage and the Treasure Island Hotel and Casino and next to the Wynn Las Vegas Resort. The Venetian includes the first all-suites hotel on the Strip with 4,027 suites; a gaming facility of approximately 116,000 square feet; an enclosed retail, dining and entertainment complex of approximately 440,000 net leasable square feet (the “Grand Canal Shops” or the “Mall”);, which was sold to a third party in 2004,2004; a meeting and conference facility of approximately 1.1 million square feet; and an expo and convention center of approximately 1.2 million square feet (“The Sands Expo Center”). The Company has commenced construction work on the site of The Palazzo Resort Hotel Casino (“The Palazzo”), a second resort similar in size to The Venetian, which is situated on a 14 acre14-acre site next to The Venetian and The Sands Expo Center and next to the Wynn Las Vegas Resort. The Palazzo is expected to consist of an all-suites,50-floor luxury hotel tower with approximately 3,025 suites, a gaming facility of approximately 105,000 square feet and an enclosed shopping, dining and entertainment complex of approximately 450,000 square feet, which the Company has contracted to sell to a third party.
Macao Projects
Macao Projects
The Company also owns and operates The Sands Macao, a Las Vegas-style casino in Macao, China, which was opened on May 18, 2004. In addition to The Sands Macao, the Company is also constructing The Venetian Macao Resort Hotel Casino (“The Venetian Macao”), an approximately 3,000 all-suites hotel, casino, and convention center complex, with a Venetian-style theme similar to that of its Las Vegas property. Under its gaming subconcession in Macao, the Company was obligated to develop and open The Venetian Macao by June 2006 and a convention center by December 2006, and invest, or cause to be invested, at least 4.4 billion patacas (approximately $550.2 million at exchange rates in effect on March 31, 2006) in various development projects in Macao by June 2009. The Company has spent more than the required minimum amount.2006. In March 2006, the Company received an extension of the June and December 2006 construction deadlines for The Venetian Macao and the convention center to December 2007. The Company currently expects to open The Venetian Macao in mid-2007. If itthe Company fails to meet the December 2007 deadline and that deadline is not extended further, the Company could lose its right to continue to operate The Sands Macao or any other facilities developed under its Macao gaming subconcession and its investment to date in construction of The Venetian Macao could be lost. See Note 7 — Segment Information, for the total assets in Macao.

4

6


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)— (Continued)
The Company commenced construction of The Venetian Macao prior to obtaining a land concession from the Macao government, which holds title to the land. The Company has applied to the Macao government for a land concession for a portion of the west side of the Cotai StripTMtm, including the site of The Venetian Macao. The land concession will require the Company to pay certain premiums and rent. The Company is currently in negotiationnegotiations with the Macao government over the cost of the land concession. The Companyconcession and believes it will be successful in obtaining the land concession. However,The Company expects to have the negotiations complete in the latter part of the third quarter or early part of the fourth quarter of 2006, at which point the Company will be required to pay the negotiated amount. The land premium will be amortized over an extended period of time. The initial term of the lease will be 25 years with unlimited10-year renewals at the Company’s option. The Company expects to use the funds from the new Macao credit facility (see Note 4) to make the portion of the land concession payments that will be due upon receipt of the provisional land grant and will finance the remaining portion through financing permitted by the Macao government and certain payment guarantees to be issued by commercial banks. Under the credit facility, the Company is required to secure the concession in order to fully draw against the facility. If the Company is unable to complete the negotiations within a specified period of time, it will not be able to draw any further funds from the Macao credit facility (see Note 4) in order to fund construction activities and it will have to seek additional financing. In the event the Company is unable to successfully conclude its negotiations with the Macao government with regard to the land underlying The Venetian Macao, the Company could lose all or a substantial part of its investment in the creation of the land and in constructing The Venetian Macao and would not be able to open and operate the facility as planned. See Note 7 — Segment Information, for the total assets in Macao.
Recent Accounting Pronouncements
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Standards (“SFAS”) No. 123(R),123R, “Share-Based Payment”, which supersedes Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees”. This statement requires compensation costs related to stock-based payment transactions to be recognized in financial statements based on estimated fair values. This statement also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. The provisions of this statement are effective as of the first annual reporting period that begins after January 1, 2006. This statement requires publiccompanies entities to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). This cost will beis being recognized over the period during which an employee is required to provide service in exchange for the award. This statement also addresses the accounting for the tax effects of stock-based compensation awards. The Company adopted this standard as of January 1, 2006 using the modified prospective application transition method. Under the modified prospective application transition method, the Company will expenseis expensing the cost of stock-based compensation awards issued after January 1, 2006 based on their fair values. Additionally, the Company will recognizeis recognizing compensation cost for the portion of awards outstanding on January 1, 2006, based on their previously calculated fair values, for which the requisite service has not been rendered as the requisite service is to be rendered on or after January 1, 2006. During the three and six months ended March 31,June 30, 2006, the Company recorded $2.9 million and $5.7 million respectively, of stock-based compensation expense. Previous periods have not been restated. See “Note 5 — Stock-Based Employee Compensation” for additional information.
In May 2005,July 2006, the FASB issued SFASInterpretation (“FIN”) No. 154,48, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3,”for Uncertainty in Income Taxes”, which changes the requirements forclarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109, “Accounting for Income Taxes”. FIN No. 48 provides guidance on the financial statement recognition and reportingmeasurement of a changetax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting principle. SFASin interim periods, disclosures, and transition. FIN No. 154 applies48 will require entities to all voluntary changes in accounting principle, as well asassess the likelihood that uncertain tax positions will be accepted by the applicable taxing authority and then measure the amount of

7


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
benefit to changes required by an accounting pronouncement if the pronouncement does not include specific transition provisions. This statement requires retrospective applicationbe recognized for these purposes which are considered greater than 50% likely to prior periods’ financial statements of changes in accounting principle. SFASbe sustained. FIN No. 15448 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.2006. The adoption on January 1, 2006Company is currently evaluating the impact of SFAS No. 154 did not have a material effectthis standard on the Company’scondensed consolidated financial position, results of operations or cash flows.statements.
NOTE 2 — STOCKHOLDERS’ EQUITY AND EARNINGS PER SHARE
Changes in stockholders’ equity for the threesix months ended March 31,June 30, 2006 were as follows (in thousands):
     
Balance at December 31, 2005 $1,609,538 
Net income  231,112 
Stock-based compensation  6,599 
Proceeds from exercise of stock options  3,180 
Tax benefit from exercise of stock options  632 
Change in accumulated other comprehensive income  (914)
    
Balance at June 30, 2006 $1,850,147 
    
     
Balance at December 31, 2005 $1,609,538 
Net income  121,783 
Stock-based compensation  3,299 
Proceeds from exercise of stock options  1,864 
Tax benefit from exercise of stock options  632 
Change in accumulated other comprehensive income  (288)
    
     
Balance at March 31, 2006 $1,736,828 
    

5


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
      At June 30, 2006, the accumulated other comprehensive income balance consisted solely of foreign currency translation adjustments. For the three and six months ended June 30, 2006, comprehensive income amounted to $108.7 million and $230.2 million, respectively.
The weighted average number of common and common equivalent shares used in the calculation of basic and diluted earnings per share consisted of the following:
                 
  Three Months Ended June 30, Six Months Ended June 30,
     
  2006 2005 2006 2005
         
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)  354,255,635   354,160,692   354,227,600   354,160,692 
Potential dilution from stock options and restricted stock  1,003,852   635,141   575,620   693,278 
                 
Weighted-average common and common equivalent shares (used in the calculations of diluted earnings per share)  355,259,487   354,795,833   354,803,220   354,853,970 
                 
         
  Three Months Ended 
  March 31, 
  2006  2005 
Weighted-average common shares outstanding (used in the calculation of basic earnings per share)  354,199,253   354,160,692 
Potential dilution from stock options and restricted stock  393,344   869,276 
       
         
Weighted-average common and common equivalent shares (used in the calculations of diluted earnings per share)  354,592,597   355,029,968 
       
For the three and six months ended March 31,June 30, 2006, outstanding options to purchase 2,223,714432,500 shares and 2,057,894 shares of common stock, respectively, were not included in the calculation of diluted earnings per share because their effect was antidilutive. For the three and six months ended June 30, 2005, outstanding options to purchase 22,820 shares of common stock were not included in the calculation of diluted earnings per share because their effect was antidilutive.

8


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 3 — PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
         
  June 30, December 31,
  2006 2005
     
Land and land improvements $201,896  $202,285 
Building and improvements  1,544,771   1,454,462 
Equipment, furniture, fixtures and leasehold improvements  370,615   351,219 
Construction in progress  1,644,380   957,752 
       
   3,761,662   2,965,718 
Less: accumulated depreciation and amortization  (414,332)  (365,250)
       
  $3,347,330  $2,600,468 
       
         
  March 31,  December 31, 
  2006  2005 
Land and land improvements $201,841  $202,285 
Building and improvements  1,475,533   1,454,462 
Equipment, furniture, fixtures and leasehold improvements  357,560   351,219 
Construction in progress  1,242,459   957,752 
       
   3,277,393   2,965,718 
Less: accumulated depreciation and amortization  (389,980)  (365,250)
       
  $2,887,413  $2,600,468 
       
During the three and six months ended March 31,June 30, 2006 and the three and six months ended June 30, 2005, the Company capitalized interest expense of $8.3$20.9 million, $29.2 million, $5.0 million and $4.1$9.1 million, respectively.

6


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 — LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
         
  June 30, December 31,
  2006 2005
     
Indebtedness of the Company and its Subsidiaries other than the Macao Subsidiaries:
        
Senior Secured Credit Facility — Term B and Term B delayed $1,170,000  $1,170,000 
Senior Secured Credit Facility — Revolving Facility  260,129   31,000 
6.375% Senior Notes  248,039   247,925 
The Sands Expo Center Mortgage Loan  92,794   95,601 
Phase II Mall Construction Loan  58,500   28,500 
FF&E Credit Facility and other  8,475   10,200 
Indebtedness of the Macao Subsidiaries:
        
Macao Credit Facility — Term B  1,200,000    
Macao Credit Facility — Local Term  100,000    
Macao Credit Facility — Revolving Facility  25,000    
Venetian Intermediate Credit Facility     50,000 
       
   3,162,937   1,633,226 
Less: current maturities  (6,138)  (7,325)
       
Total long-term debt $3,156,799  $1,625,901 
       
         
  March 31,  December 31, 
  2006  2005 
Indebtedness of the Company and its Subsidiaries other than the Macao Subsidiaries:
        
Senior Secured Credit Facility — Term B $970,000  $970,000 
Senior Secured Credit Facility — Term B delayed  200,000   200,000 
Senior Secured Credit Facility — Revolving Facility  123,129   31,000 
6.375% Senior Notes  247,982   247,925 
Interface Mortgage Loan  94,650   95,601 
Phase II Mall Construction Loan  42,500   28,500 
FF&E Credit Facility and other  9,075   10,200 
         
Indebtedness of the Macao Subsidiaries:
        
Venetian Intermediate Credit Facility     50,000 
       
   1,687,336   1,633,226 
         
Less: current maturities  (7,490)  (7,325)
       
         
Total long-term debt $1,679,846  $1,625,901 
       
      On May 25, 2006, two subsidiaries of the Company, VML US Finance LLC (the “Borrower”) and Venetian Macau Limited, as guarantor, entered into a credit agreement (the “Macao Credit Facility”). The Macao Credit Facility consists of a $1.20 billion funded term B loan (the “Macao Term B Facility”), a $700.0 million delayed draw term B loan (the “Macao Term B Delayed Draw Facility”), a $100.0 million funded local currency term loan (the “Macao Local Term Facility”) and a $500.0 million revolving credit facility (the “Macao Revolving Facility”). As of June 30, 2006, $1.3 billion has been drawn under the Macao

9


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Term B Facility and Macao Local Term Facility and $25.0 million has been drawn under the Macao Revolving Facility. No amounts have been drawn under the Macao Term B Delayed Draw Facility as of June 30, 2006.
      The indebtedness under the Macao Credit Facility is guaranteed by Venetian Macau Limited, Venetian Cotai Limited and certain of the Company’s foreign subsidiaries (the “Macao Guarantors”). The obligations under the Macao Credit Facility and the guarantees of the Macao Guarantors are secured by a first-priority security interest in substantially all of the Borrower’s and the Macao Guarantors’ assets, other than (1) capital stock of the Borrower and the Macao Guarantors, (2) assets securing permitted furniture, fixtures and equipment financings, (3) Venetian Macau Limited’s gaming subconcession contract and (4) certain other assets.
      Borrowings under the Macao Credit Facility bear interest, at the Company’s option, at either an adjusted Eurodollar rate (or, in the case of the Macao Local Term Facility, adjusted HIBOR) or at an alternative base rate, plus a spread of 2.75% or 1.75%, respectively. These spreads will be decreased by 0.25% from the beginning of the first interest period following the substantial completion of The Venetian Macao.
      The Macao Revolving Facility and the Macao Local Term Facility have a five year maturity. The Macao Term B Delayed Draw Facility and the Macao Term B Facility mature in six and seven years, respectively. The Macao Term B Delayed Draw Facility and the Macao Term B Facility are subject to nominal amortization for the first five and six years, respectively, with the remainder of the loans payable in four equal installments in the last year immediately preceding their respective maturity dates. Following the substantial completion of The Venetian Macao, the Macao Local Term Facility is subject to annual amortization in an amount of approximately $6.3 million per annum, with the remainder of the loan payable in four equal installments in the last year immediately preceding the maturity date.
      The Macao Credit Facility contains affirmative and negative covenants customary for such financings, including, but not limited to, limitations on incurring additional liens, incurring additional indebtedness, making certain investments, paying dividends and other restricted payments, and acquiring and selling assets. The Macao Credit Facility also requires the Borrower and the Macao Guarantors to comply with financial covenants, including, but not limited to, minimum EBITDA for a period of time and, thereafter, ratios of EBITDA to interest expense and total indebtedness to EBITDA, as well as maximum capital expenditures. The Macao Credit Facility also contains events of default customary for such financings.
NOTE 5 — STOCK-BASED EMPLOYEE COMPENSATION
Effective January 1, 2006, the Company adopted the provisions of SFAS No. 123R, which establishes accounting for equity instruments exchanged for employee services. Under the provisions of SFAS No. 123R, stock-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized over the employee’s requisite service period (generally the vesting period of the equity grant). Prior to January 1, 2006, the Company accounted for stock-based compensation to employees in accordance with APB No. 25 “Accounting for Stock Issued to Employees,” and related interpretations. The Company also followed the disclosure requirements of SFAS No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS 148, “Accounting for Stock-Based Compensation—Compensation — Transition and Disclosure”. The Company elected to adopt the modified prospective application transition method as provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior periods presented in this Form 10-Q have not been restated to reflect the fair value method of recording stock-based compensation.
As of March 31,June 30, 2006, the Company has two stock-based compensation plans. The board of directors has agreed not to grant any additional stock options under one of these plans and there were no options outstanding under it during the threesix months ended March 31,June 30, 2006. The second plan is described below. The compensation cost that has been charged against income for the plans was $2.9 million for the three months

10


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
ended March 31,June 30, 2006, which is comprised of $2.6 million from stock options and $0.3 million from restricted stock. The compensation cost that has been charged against income for the plans was $5.7 million for the six months ended June 30, 2006, which is comprised of $5.1 million from stock options and $0.6 million from restricted stock. The total income tax benefit recognized in the condensed consolidated statement of operations for stock-based compensation arrangements was $0.7 million.million and $1.4 million for the three and six months ended June 30, 2006, respectively. Compensation cost associated with individuals responsible for construction activities was capitalized as part of property and equipment wasin the amount of $0.4 million and $0.9 million for the three and six months ended March 31, 2006.June 30, 2006, respectively. Basic and diluted earnings per share for the three and six months ended June 30, 2006 was $0.01 and $0.02 lower, respectively, than if the Company had continued to account for stock-based compensation under APB No. 25.
Las Vegas Sands Corp. 2004 Equity Award Plan
      The purpose of the Company’s 2004 Equity Award Plan
The purpose of the 2004 Plan (the “2004 Plan”) is to give the Company a competitive edge in attracting, retaining, and motivating employees, directors, officers and consultants and to provide the Company with a stock plan providing incentives directly related to increases in the value of its stockholder value.common stock.
Administration.The Company’s compensation committee administers the 2004 Plan. Except in the case of awards to non-employee directors which are administered by the Company’s board of directors, the compensation committee has the authority to determine the terms and conditions of any agreements

7


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
evidencing any awards granted under the 2004 Plan, and to adopt, alter and repeal rules, guidelines and practices relating to the 2004 Plan. The compensation committee has full discretion to administer and interpret the 2004 Plan, to adopt such rules, regulations, and procedures as it deems necessary or advisable and to determine, among other things, the time or times at which the awards may be exercised and whether and under what circumstances an award may be exercised. The compensation committee has formed a sub-committee to administer those portions of the 2004 Plan that require administration by directors meeting certain independence standards.
Eligibility.Any of the Company’s subsidiaries’ or affiliates’ employees,, directors, officers or consultants are eligible for awards under the 2004 Plan. The compensation committee has the sole and complete authority to determine who will be granted an award under the 2004 Plan (except in the case of awards to non-employee directors, which are made by the board of directors).
Number of Shares Authorized.The 2004 Plan provides for an aggregate of 26,344,000 shares of the Company’s common stock to be available for awards. No participant may be granted awards of options, restricted stock and stock appreciation rights with respect to more than 3,000,000 shares of common stock in any one year. If any award is forfeited, or if any option terminates, expires, or lapses without being exercised, shares of the Company’s common stock subject to such award will again be available for future grant. If there is any change in the Company’s corporate capitalization, the compensation committee, in its sole discretion, may make substitutions or adjustments to the number of shares reserved for issuance under the 2004 Plan, the number of shares covered by awards then outstanding under the 2004 Plan, the limitations on awards under the 2004 Plan, the exercise price of outstanding options and such other equitable substitution or adjustments as it may determine appropriate.
The 2004 Plan has a term of ten years and no further awards may be granted after the expiration of the term.
Awards Available for Grant.The compensation committee may grant awards of nonqualified stock options, incentive (qualified) stock options, stock appreciation rights, restricted stock awards, restricted stock units, stock bonus awards, performance compensation awards or any combination of the foregoing. As of March 31,June 30, 2006, there were 22,035,09721,746,797 shares available for grant under the 2004 Plan.

11


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Stock option awards are granted with an exercise price equal to the market price of the Company’s stock at the date of grant. The stock options generally vest based on four years of continuous service and have10-year contractual terms. Restricted stock awards generally vest over three years. Compensation cost for all stock option grants, which all have graded vesting, is net of estimated forfeitures and is recognized on a straight-line basis over the awards’ respective requisite service periods. The Company estimates the fair value of stock options using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatilities from a selection of companies from the Company’s peer group due to the Company’s lack of historical information. The Company used the simplified method for estimating expected option life, as the options qualify as “plain-vanilla” options. The risk-free interest rate for periods equal to the expected term of the stock option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company believes that the valuation technique and the approach utilized to develop the underlying assumptions are appropriate in calculating the fair values of the Company’s stock options granted during the three and six months ended March 31,June 30, 2006 and 2005.

8


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:
                 
  Three Months Ended Three Months Ended Six Months Ended Six Months Ended
  June 30, 2006 June 30, 2005 June 30, 2006 June 30, 2005
         
Weighted average volatility  30.44%  35.29%  31.42%  35.29%
Expected term (in years)  6.0   6.0   6.0   6.0 
Risk-free rate  5.16%  3.86%  4.53%  3.86%
Expected dividends            
         
  Three Months Ended Three Months Ended
  March 31, 2006 March 31, 2005
Weighted average volatility  31.61%  35.29%
Expected term (in years)  6.0   6.0 
Risk-free rate  4.40%  3.86%
Expected dividends      
The weighted average grant date fair value of 2,184,361432,200 options and 2,616,794 options granted during the three and six months ended March 31,June 30, 2006 was $17.36$26.90 and $18.93 per share, respectively, and the weighted average grant date fair value of 22,820 options granted during the three monthsand six month periods ended March 31,June 30, 2005 was $19.49 per share. The total intrinsic value of options exercised during the three and six months ended March 31,June 30, 2006 was $1.6 million.$1.7 million and $3.2 million, respectively. No options were exercised during the three monthsand six month periods ended March 31,June 30, 2005.
The      In accordance with APB No. 25, the Company did not recognize compensation expense for employee share-based awards for the three and six months ended March 31,June 30, 2005, when the exercise price of the Company’s employee stock awards equaled the market price of the underlying stock on the date of grant.

12


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company had previously adopted the provisions of SFAS No. 123, as amended by SFAS No. 148, for disclosure purposes only. Had the Company accounted for the plan under the fair value method allowed by SFAS No. 123, the Company’s net income, and earnings per share would have been adjusted to the following pro forma amounts (dollars in thousands, except per share data):
         
  Three Months Ended Six Months Ended
  June 30, 2005 June 30, 2005
     
Net income, as reported $86,429  $93,541 
Less: Stock-based employee compensation expense determined under the Black Scholes option-pricing model, net of tax  (818)  (1,624)
       
Pro forma net income $85,611  $91,917 
       
Basic earnings per share, as reported $0.24  $0.26 
       
Basic earnings per share, pro-forma $0.24  $0.26 
       
Diluted earnings per share, as reported $0.24  $0.26 
       
Diluted earnings per share, pro-forma $0.24  $0.26 
       
     
  Three Months Ended
  March 31, 2005
Net income, as reported $7,112 
Less: Stock-based employee compensation expense determined under the Black Scholes option-pricing model, net of tax  (806)
    
Pro forma net income $6,306 
    
Basic earnings per share, as reported $0.02 
    
Basic earnings per share, pro-forma $0.02 
    
Diluted earnings per share, as reported $0.02 
    
Diluted earnings per share, pro-forma $0.02 
    

9


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the status of the Company’s stock option plan is presented below:
                 
      Weighted  
    Weighted Average  
    Average Remaining Aggregate
    Exercise Contractual Intrinsic
  Shares Price Life (Years) Value
         
Outstanding at January 1, 2006  2,097,960  $29.83         
Granted  2,616,794   47.47         
Exercised  (107,715)  30.32         
Forfeited  (214,268)  32.83         
             
Outstanding at June 30, 2006  4,392,771  $40.20   9.18  $165,431,756 
             
Exercisable at June 30, 2006  205,382  $29.18   8.46  $9,997,996 
             
                 
          Weighted    
      Weighted  Average    
      Average  Remaining  Aggregate 
      Exercise  Contractual  Intrinsic 
  Shares  Price  Life (Years)  Value 
Outstanding at January 1, 2006  2,097,960   29.83         
Granted  2,184,294   43.72         
Exercised  (64,284)  29.00         
Forfeited  (65,609)  29.70         
               
                 
Outstanding at March 31, 2006  4,152,361   37.15   9.3   81,012,563 
             
                 
Exercisable at March 31, 2006  248,813   29.38   8.7   6,787,619 
             
A summary of the status of the Company’s nonvested restricted shares for the threesix months ended March 31,June 30, 2006:
         
    Weighted Average Grant
  Shares Date Fair Value
     
Nonvested at January 1, 2006  8,088  $37.09 
Granted  77,829   44.00 
Vested ��(8,088)  37.09 
Forfeited      
       
Nonvested at June 30, 2006  77,829  $44.00 
       
         
      Weighted Average Grant 
  Shares  Date Fair Value 
Nonvested at January 1, 2006  8,088  $37.09 
Granted  73,370   42.59 
Vested      
Forfeited      
       
         
Nonvested at March 31, 2006  81,458  $42.04 
       
As of March 31,June 30, 2006, there was $44.9$48.8 million of unrecognized compensation cost, net of estimated forfeitures of 8.0%, related to nonvested stock options and there was $2.9 million of unrecognized compensation cost related to nonvested restricted stock. The stock option and restricted stock costs are expected to be recognized over a weighted average period of 3.73.6 years and 2.72.4 years, respectively.

13


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
For the three and six months ended March 31,June 30, 2006, cash received from stock option exercises was $1.9$1.3 million and $3.2 million, respectively, and the tax benefit realized for the tax deductions from those exercises totaled $0 and $0.6 million.million, respectively. There were no stock option exercises for the three and six months ended March 31,June 30, 2005.
NOTE 6 — COMMITMENTS AND CONTINGENCIES
Singapore Development
      In May 2006, the Company was selected by the Singapore government to build and operate an integrated resort called the Marina Bay Sands in Singapore, which will be a large integrated resort, including a casino. As a result of being selected to build the project, the Company is required to pay the Singapore government $1.20 billion Singapore dollars (approximately US$751.1 million at exchange rates in effect on June 30, 2006) in premium payments for use of the land on which the resort will be built plus an additional $298.2 million Singapore dollars (approximately US$186.7 million at exchange rates in effect on June 30, 2006) for various taxes and other fees. As of June 30, 2006, the Company had paid $300.0 million Singapore dollars (approximately US$187.8 million at exchange rates in effect on June 30, 2006) related to the land premium payments. The Palazzo Construction Litigationremaining amount due of approximately $1.20 billion Singapore dollars (approximately US$750.0 million at exchange rates in effect on June 30, 2006) is due on August 24, 2006. The Company is currently in the process of obtaining bridge financing in the amount of $1.4 billion to cover the above payments as well as the initial development costs for the project.
      At the time these remaining amounts are paid, the Company will enter into the development agreement, which will require the Company to construct and operate the Marina Bay Sands in accordance with the Company’s proposal for this integrated resort and in accordance with that agreement. Based on the proposal submitted by the Company to the Singapore government, the Company will develop and construct the Marina Bay Sands Resort for approximately $3.6 billion, inclusive of the land premium, taxes and other fees discussed above. Upon completion of the bridge financing, the Company will immediately focus its efforts on lining up long-term financing in an amount necessary to fund the construction of Marina Bay Sands.
The Palazzo Construction Litigation
Lido Casino Resort, LLC (“Lido”), a wholly-owned subsidiary of the Company, (“Lido”), and its construction manager, Taylor International Corp. (“Taylor”), filed suit onin March 14, 2006 in the United States District Court for the District of Nevada (the “District Court”) against Malcolm Drilling Company, Inc. (“Malcolm”), the contractor on The Palazzo project responsible for completing certain foundation work (the “District Court Case”). Lido and Taylor claim in the District Court Case that Malcolm was in default of its contract for performing defective work, failing to correct defective work, failing to complete its work and causing delay to the project. Malcolm responded by filing a Notice of a Lien with the Clerk of Clark County, onNevada in March 23, 2006 in the amount of approximately $19.0 million (the “Lien”). OnIn April 11, 2006, as amended on April 26, 2006, Lido and Taylor moved in the District Court Case to strike or, in the alternative, to reduce the amount of, the Lien, claiming, among other things, that the Lien was excessive asfor including claims for disruption and delay, which Lido and Taylor claim are not lienable under Nevada law.law (the “Lien Motion”). Malcolm responded onin April 26, 2006 by filing a complaint against Lido and Taylor in District Court inof Clark County, Nevada seeking to foreclose on the Lien against Taylor, claiming breach of contract, a cardinal change in the underlying contract, and unjust enrichment against Lido and Taylor and claiming bad faith and fraud against Taylor (the “State Court Case”). Also on April 26, 2006, Malcolm, and simultaneously filed a motion in the District Court case,Case, seeking

10


LAS VEGAS SANDS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to dismiss the District Court Case on abstention grounds.grounds (the “Abstention Motion”). In response, in June 2006, Lido filed a motion to dismiss the State Court Case based on the principle of the “prior pending” District Court Case (the “Motion to Dismiss”). In June 2006, the Abstention Motion was granted in part by the United States District Court, the District Court Case was stayed pending the outcome of the Motion to Dismiss in the State Court Case and the Lien Motion was

14


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
denied without prejudice. Lido and Malcolm then entered into a stipulation under which Lido withdrew the Motion to Dismiss, and in July 2006 filed a replacement lien motion in the State Court Case. This matter is in the preliminary stages. Lido intends to defend itself against the claims pending in the State Court Case and to prosecute the District Court Case vigorously.
Litigation Relating to Macao Casino
Litigation Relating to Macao Casino
The following disclosure summarizes our previous disclosure regarding this matter and discusses recent developments since the filing of our Annual Report on Form 10-K for the year ended December 31, 2005.
On October 15, 2004, Richard Suen and Round Square Company Limited filed an action against Las Vegas Sands Corp., Las Vegas Sands Inc., Sheldon G. Adelson and William P. Weidner in the District Court of Clark County, Nevada, asserting a breach of an alleged agreement to pay a success fee of $5.0 million and 2.0% of the net profit from ourthe Company’s Macao resort operations to the plaintiffs as well as other related claims. In March 2005, Las Vegas Sands Corp. was dismissed as a party without prejudice based on a stipulation to do so between the parties. On May 17, 2005, the plaintiffs filed their First Amended Complaint.first amended complaint. On February 2, 2006, defendants filed a motion for partial summary judgment with respect to plaintiffs’ fraud claims against all the defendants. On March 16, 2006, an Orderorder was filed by the Courtcourt granting defendants’ motion for partial summary judgment. Pursuant to the order filed March 16, 2006, Order, plaintiffs’ fraud claims set forth in the First Amended Complaintfirst amended complaint were dismissed with prejudice as against all defendants. The Orderorder also dismissed with prejudice the First Amended Complaintfirst amended complaint against defendants Sheldon GG. Adelson and William P. Weidner. This action is in a preliminary stage and ourbased upon the advice of legal counsel, management has adviseddetermined that based on proceedings to date, the probability of recovery by the plaintiffs is remote. We intend to defend this matter vigorously.
On January 26, 2006, Clive Basset Jones, Darryl Steven Turok a/(a/k/a Dax Turok,Turok) and Cheong Jose Vai Chi a/(a/k/a Cliff Cheong,Cheong), filed an action against Las Vegas Sands Corp., Las Vegas Sands, LLC, Venetian Venture Development, LLC and various unspecified individuals and companies in the District Court of Clark County, Nevada. The plaintiffs assert breach of an agreement to pay a success fee in an amount equal to 5% of the ownership interest in the entity that owns and operates the Macau SAR gaming concessionsubconcession as well as other related claims. In April 2006, Las Vegas Sands Corp. was dismissed as a party without prejudice based on a stipulation to do so between the parties. Other than the complaint which has been filed, and our answer, there is currently no pending activity in the matter. This action is in a preliminary stage and ourbased upon the advice of legal counsel, management has adviseddetermined that based on proceedings to date, the probability of recovery by the plaintiffs is remote. We intend to defend this matter vigorously.
Interface Nevada Litigation
      On October 17, 2003, Bear Stearns Funding, Inc. filed a lawsuit against our subsidiary, Interface Group-Nevada, Inc., the Company’s subsidiary that owns The Sands Expo Center. The plaintiff is seeking damages against Interface Group-Nevada for alleged breach of contract in the amount of approximately $1.5 million, plus interest and costs. The claim asserts that the amount is due as an agreed-upon additional fee in connection with Interface Group-Nevada’s prior $141.0 million mortgage loan, which was paid off in July 2004. Interface Group-Nevada has asserted six counter-claims against the plaintiff. The counterclaims against Bear Stearns allege that Bear Stearns’ sale of a subordinated component of the loan to a competitor constituted a breach of the loan agreement and a related agreement, that its transmission of information in connection with that sale constituted a misappropriation of Interface Group-Nevada’s trade secrets, and that it misrepresented to Interface Group-Nevada certain facts regarding the purchaser of the subordinated component. The counterclaims also allege that the Bear Stearns’ demand that Interface Group-Nevada purchase insurance not required by the loan agreement was motivated by Bear Stearns’ exclusion from participating in another financing, and that this action constituted a prima facie tort under New York law, and together with the other actions alleged in the counterclaims, constituted a breach of Bear Stearns’ duty of good faith and fair dealing. The counterclaims sought damages in an amount to be determined at trial but not less than $1.5 million, plus punitive damages of not less than $3.0 million on the fraud and prima facie tort causes

15


Other LitigationLAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
of action. Plaintiff filed a motion for summary judgment on the complaint seeking (i) judgment on the complaint in the approximate amount of $1.5 million plus interest, costs and attorneys fees and (ii) dismissal of the counterclaims other than the two breach of contract counterclaims (the “Motion”). By Opinion and Order dated March 21, 2005, the Motion was denied in part and granted in part. The Court denied Bear Stearns’ motion for summary judgment on the complaint, granted Bear Stearns’ motion to dismiss the counterclaims alleging misappropriation of trade secrets, prima facie tort, and fraud, and granted the request to dismiss one of the two bases of the counterclaim alleging a breach of the covenant of good faith and fair dealing. This matter is now in the discovery phase. Pretrial discovery is largely complete and both Interface Group-Nevada and Bear Stearns have filed motions for summary judgment. The briefing on the motions is not yet complete. Interface Group-Nevada and its legal counsel are currently not able to determine the probability of the outcome of these matters.
Other Litigation
The Company is involved in other litigation arising in the normal course of business. Management has made certain estimates for potential litigation costs based upon consultation with legal counsel. Actual results could differ from these estimates; however, in the opinion of management, such litigation and claims will not have a material effect on the Company’s financial position, results of operations or cash flows.
NOTE 7 — SEGMENT INFORMATION
      The Company reviews the results of operations based on the following geographic segments: (1) Las Vegas, which includes The Venetian, The Sands Expo and The Palazzo (currently under construction), and (2) Macao, which includes The Sands Macao, The Venetian Macao (currently under construction) and other development projects. Effective April 1, 2006, the Company changed its segments based upon changes in the information used by the chief operating decision maker to include The Sands Expo Center within the Las Vegas segment. The information for the three and six months ended June 30, 2005 has been reclassified to conform to the current presentation. The Company’s segment information is as follows for the three and six months ended June 30, 2006 and 2005 (in thousands):
                 
  Three Months Ended Six Months Ended
  June 30, June 30,
     
  2006 2005 2006 2005
         
Net Revenues
                
Las Vegas $206,575  $193,748  $455,302  $422,486 
Macao  310,432   205,073   592,069   380,129 
             
Total net revenues $517,007  $398,821  $1,047,371  $802,615 
             
Adjusted EBITDAR
                
Las Vegas $62,234  $70,439  $162,374  $168,860 
Macao  116,334   81,011   219,208   148,816 
             
   178,568   151,450   381,582   317,676 
             

11

16


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)— (Continued)
NOTE 7 — SEGMENT INFORMATION
The Company reviews the results of operations based on the following distinct segments, which are The Venetian on the Strip, The Sands Expo Center in Las Vegas, and The Sands Macao in Macao. The Company’s segments are based on geographic locations (Las Vegas and Macao) or on the type of business (casino resort operations or convention operations). The Company’s segment information is as follows for the three months ended March 31, 2006 and 2005 (in thousands):
         
  Three Months Ended March 31, 
  2006  2005 
Net Revenues
        
The Venetian $226,640  $209,905 
The Sands Macao  281,637   175,056 
The Sands Expo Center  22,087   18,833 
       
         
Total net revenues $530,364  $403,794 
       
         
Adjusted EBITDA(1)
        
The Venetian $87,704  $87,206 
The Sands Macao  102,686   67,602 
The Sands Expo Center  8,917   7,713 
       
Total segment adjusted EBITDA  199,307   162,521 
       
         
Other Operating Costs and Expenses
        
Corporate expense  (12,954)  (10,882)
Depreciation and amortization  (25,005)  (19,965)
Loss on disposal of assets  (1,081)  (1,163)
Pre-opening expense  (2,219)   
Development expense  (9,168)  (5,175)
       
         
Operating income  148,880   125,336 
         
Other Non-Operating Costs and Expenses
        
Interest income  10,214   7,394 
Interest expense, net of amounts capitalized  (21,415)  (27,083)
Other income  164    
Loss on early retirement of debt     (132,834)
Benefit (provision) for income taxes  (16,060)  34,299 
       
         
Net income $121,783  $7,112 
       
(1)Adjusted EBITDA is earnings before interest, income taxes, depreciation and amortization, pre-opening expense, development expense, other income, loss on disposal of assets, loss on early retirement of debt, and corporate expense. Adjusted EBITDA is used by management as the primary measure of operating performance of the Company’s properties and to compare the operating performance of the Company’s properties with those of its competitors.
                 
  Three Months Ended Six Months Ended
  June 30, June 30,
     
  2006 2005 2006 2005
         
Other Operating Costs and Expenses
                
Corporate expense  (12,251)  (6,620)  (25,205)  (17,502)
Rental expense  (3,803)  (3,682)  (7,510)  (7,387)
Depreciation and amortization  (24,428)  (21,097)  (49,433)  (41,062)
(Gain) loss on disposal of assets  (456)  158   (1,537)  (1,005)
Pre-opening expense  (4,354)  (504)  (6,573)  (504)
Development expense  (7,861)  (5,562)  (17,029)  (10,737)
             
Operating income  125,415   114,143   274,295   239,479 
Other Non-Operating Costs and Expenses
                
Interest income  15,018   7,133   25,232   14,527 
Interest expense, net of amounts capitalized  (23,685)  (17,969)  (45,100)  (45,052)
Other income (expense)  (14)  (1,291)  150   (1,291)
Loss on early retirement of debt     (4,166)     (137,000)
Benefit (provision) for income taxes  (7,405)  (11,421)  (23,465)  22,878 
             
Net income $109,329  $86,429  $231,112  $93,541 
             
           
  Six Months Ended
  June 30,
   
  2006 2005
     
Capital Expenditures
        
Las Vegas:        
 The Venetian $58,720  $53,066 
 The Palazzo  203,703   172,188 
Macao:        
 The Sands Macao  41,192   29,835 
 The Venetian Macao  406,839   118,476 
 Other Development Projects  20,021    
       
  Total capital expenditures $730,475  $373,565 
       

12

17


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)— (Continued)
         
  Three Months Ended March 31, 
  2006  2005 
Capital Expenditures
        
The Venetian $22,394  $25,890 
Macao Projects  196,034   48,614 
The Palazzo  75,453   77,495 
The Sands Expo Center  352   165 
       
         
Total capital expenditures $294,233  $152,164 
       
         
  March 31,  December 31, 
  2006  2005 
Total Assets
        
Las Vegas Sands Corp $158,904  $307,679 
The Venetian  2,051,958   2,004,427 
Macao Projects  1,114,170   885,809 
The Palazzo  690,841   605,320 
The Sands Expo Center  81,461   76,504 
       
         
Total consolidated assets $4,097,334  $3,879,739 
       
           
  June 30, December 31,
  2006 2005
     
Total Assets
        
Las Vegas Sands Corp.  $139,159  $307,679 
Las Vegas:        
 The Venetian  2,118,504   2,080,931 
 The Palazzo  813,446   605,320 
Macao:        
 The Sands Macao  473,899   425,597 
 The Venetian Macao  1,945,745   459,333 
 Other Development Projects  250,088   879 
       
  Total consolidated assets $5,740,841  $3,879,739 
       
NOTE 8 — CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In accordance with Rule 3-10 of Regulation S-X of the Securities and Exchange Commission, condensed consolidating financial information of the Company, the Guarantor Subsidiaries (as defined below) and the non-guarantor subsidiaries on a combined basis as of March 31,June 30, 2006 and December 31, 2005, and for the three and six months ended March 31,June 30, 2006 and 2005, is as follows (in thousands).
LVSC is the obligor ofunder the 6.375% Senior Notes.Notes issued by LVSC on February 10, 2005. LVSLLC, Venetian Casino Resort, LLC, Mall Intermediate Holding Company, LLC, Venetian Venture Development, LLC, Venetian Transport, LLC, Venetian Marketing, Inc., Venetian Operating Company, LLC, Lido Intermediate Holding Company, LLC and Lido Casino Resort, LLC (collectively, the “Guarantor Subsidiaries”) have jointly and severally guaranteed the 6.375% Senior Notes on a full and unconditional basis.

13

18


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
March 31,
June 30, 2006
                     
          Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
   
Cash and cash equivalents $72,053  $86,556  $158,668  $  $317,277 
Restricted cash and cash equivalents  50,521      62,700      113,221 
Intercompany receivable  86,030   62,947   3,305   (152,282)   
Accounts receivable, net  138   103,465   4,847      108,450 
Notes receivable  188,219         (188,219)   
Inventories     8,895   1,750      10,645 
Deferred income taxes  57   10,392      (86)  10,363 
Prepaid expenses  1,799   7,324   9,052      18,175 
   
                     
Total current assets  398,817   279,579   240,322   (340,587)  578,131 
                     
Property and equipment, net  37,990   1,814,384   1,035,039      2,887,413 
Investment in subsidiaries  1,567,849   577,602      (2,145,451)   
Deferred offering costs, net  1,285   25,166   2,505      28,956 
Restricted cash and cash equivalents     577,425         577,425 
Deferred income taxes     4,248   2,834   (5,018)  2,064 
Other assets, net  79   14,849   8,417      23,345 
   
                     
Total assets $2,006,020  $3,293,253  $1,289,117  $(2,491,056) $4,097,334 
   
                     
Accounts payable $38  $22,722  $21,499  $  $44,259 
Construction payables     59,480   123,270      182,750 
Intercompany payables  496   45,742   106,044   (152,282)   
Accrued interest payable  1,992   711   574      3,277 
Other accrued liabilities  3,463   116,164   130,326      249,953 
Income taxes payable  8,200            8,200 
Deferred income taxes        86   (86)   
Notes payable        188,219   (188,219)   
Current maturities of long-term debt     2,400   5,090      7,490 
   
                     
Total current liabilities  14,189   247,219   575,108   (340,587)  495,929 
                     
Other long-term liabilities  2,003   178,456   4,272      184,731 
Deferred income taxes  5,018         (5,018)   
Long-term debt  247,982   1,299,729   132,135      1,679,846 
   
                     
   269,192   1,725,404   711,515   (345,605)  2,360,506 
   
                     
Stockholders’ equity  1,736,828   1,567,849   577,602   (2,145,451)  1,736,828 
   
                     
Total liabilities and stockholders’ equity $2,006,020  $3,293,253  $1,289,117  $(2,491,056) $4,097,334 
   
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Cash and cash equivalents $19,236  $77,678  $185,085  $  $281,999 
Restricted cash  50,842   56,575   232,786      340,203 
Intercompany receivable  214,128   10,353      (224,481)   
Accounts receivable, net  146   81,934   4,859      86,939 
Inventories     8,968   1,852      10,820 
Deferred income taxes  68   12,172      (117)  12,123 
Prepaid income taxes  16,800            16,800 
Prepaid expenses and other  6,622   8,258   13,584      28,464 
                
 Total current assets  307,842   255,938   438,166   (224,598)  777,348 
Property and equipment, net  44,087   1,937,840   1,365,403      3,347,330 
Investment in subsidiaries  1,692,543   687,562      (2,380,105)   
Deferred financing costs, net  1,249   23,888   42,372      67,509 
Restricted cash     527,697   809,084      1,336,781 
Deferred income taxes     667   2,751   (3,418)   
Intercompany notes receivable  72,899   50,851      (123,750)   
Other assets, net  79   13,550   198,244      211,873 
                
Total assets $2,118,699  $3,497,993  $2,856,020  $(2,731,871) $5,740,841 
                
Accounts payable $139  $23,936  $21,608  $  $45,683 
Construction payables     56,575   175,127      231,702 
Intercompany payables        224,481   (224,481)   
Accrued interest payable  5,977   430   910      7,317 
Other accrued liabilities  4,873   108,782   140,863      254,518 
Deferred income taxes        117   (117)   
Current maturities of long-term debt     1,800   4,338      6,138 
                
 Total current liabilities  10,989   191,523   567,444   (224,598)  545,358 
Other long-term liabilities  2,329   177,198   5,233      184,760 
Deferred income taxes  7,195         (3,418)  3,777 
Intercompany notes payable        123,750   (123,750)   
Long-term debt  248,039   1,436,729   1,472,031      3,156,799 
                
Total liabilities  268,552   1,805,450   2,168,458   (351,766)  3,890,694 
                
Stockholders’ equity  1,850,147   1,692,543   687,562   (2,380,105)  1,850,147 
                
Total liabilities and stockholders’ equity $2,118,699  $3,497,993  $2,856,020  $(2,731,871) $5,740,841 
                

14

19


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2005
                     
          Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
   
Cash and cash equivalents $202,196  $87,173  $167,477  $  $456,846 
Restricted cash and cash equivalents  50,052   3   21,662      71,717 
Intercompany receivable  2,207   3,373   4,195   (9,775)   
Accounts receivable, net  245   81,204   3,329      84,778 
Notes receivable  121,784         (121,784)   
Inventories     8,584   1,383      9,967 
Deferred income taxes  11,748   (2,871)  (931)     7,946 
Prepaid expenses  436   6,141   6,875      13,452 
   
                     
Total current assets  388,668   183,607   203,990   (131,559)  644,706 
                     
Property and equipment, net  38,471   1,744,352   817,645      2,600,468 
Investment in subsidiaries  1,441,500   480,619      (1,922,119)   
Deferred offering costs, net  1,322   26,442   3,209      30,973 
Restricted cash and cash equivalents     571,143         571,143 
Deferred income taxes  3,130   5,852   2,350      11,332 
Other assets, net  79   12,485   8,553      21,117 
   
                     
Total assets $1,873,170  $3,024,500  $1,035,747  $(2,053,678) $3,879,739 
   
                     
Accounts payable $50  $20,614  $14,139  $  $34,803 
Construction payables     54,234   109,698      163,932 
Intercompany payables        9,775   (9,775)   
Accrued interest payable  5,977   1,157   784      7,918 
Other accrued liabilities  8,053   116,029   122,308      246,390 
Notes payable        121,784   (121,784)   
Current maturities of long-term debt     2,400   4,925      7,325 
   
                     
Total current liabilities  14,080   194,434   383,413   (131,559)  460,368 
                     
Other long-term liabilities  1,627   179,766   2,539      183,932 
Long-term debt  247,925   1,208,800   169,176      1,625,901 
   
                     
   263,632   1,583,000   555,128   (131,559)  2,270,201 
   
                     
Stockholders’ equity  1,609,538   1,441,500   480,619   (1,922,119)  1,609,538 
   
 
Total liabilities and stockholders’ equity $1,873,170  $3,024,500  $1,035,747  $(2,053,678) $3,879,739 
   
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Cash and cash equivalents $202,196  $87,173  $167,477  $  $456,846 
Restricted cash  50,052   3   21,662      71,717 
Intercompany receivable  2,207   3,373   4,195   (9,775)   
Accounts receivable, net  245   81,204   3,329      84,778 
Intercompany notes receivable  121,784         (121,784)   
Inventories     8,584   1,383      9,967 
Deferred income taxes  11,748   (2,871)  (931)     7,946 
Prepaid expenses and other  436   6,141   6,875      13,452 
                
 Total current assets  388,668   183,607   203,990   (131,559)  644,706 
Property and equipment, net  38,471   1,744,352   817,645      2,600,468 
Investment in subsidiaries  1,441,500   480,619      (1,922,119)   
Deferred financing costs, net  1,322   26,442   3,209      30,973 
Restricted cash     571,143         571,143 
Deferred income taxes  3,130   5,852   2,350      11,332 
Other assets, net  79   12,485   8,553      21,117 
                
Total assets $1,873,170  $3,024,500  $1,035,747  $(2,053,678) $3,879,739 
                
Accounts payable $50  $20,614  $14,139  $  $34,803 
Construction payables     54,234   109,698      163,932 
Intercompany payables        9,775   (9,775)   
Accrued interest payable  5,977   1,157   784      7,918 
Other accrued liabilities  8,053   116,029   122,308      246,390 
Intercompany notes payable        121,784   (121,784)   
Current maturities of long-term debt     2,400   4,925      7,325 
                
 Total current liabilities  14,080   194,434   383,413   (131,559)  460,368 
Other long-term liabilities  1,627   179,766   2,539      183,932 
Long-term debt  247,925   1,208,800   169,176      1,625,901 
                
Total liabilities  263,632   1,583,000   555,128   (131,559)  2,270,201 
                
Stockholders’ equity  1,609,538   1,441,500   480,619   (1,922,119)  1,609,538 
                
Total liabilities and stockholders’ equity $1,873,170  $3,024,500  $1,035,747  $(2,053,678) $3,879,739 
                

15

20


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the three months ended March 31,June 30, 2006
                     
          Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
   
Revenues:                    
Casino $  $97,136  $278,246  $  $375,382 
Rooms     89,569   1,569      91,138 
Food and beverage     41,946   11,088   (1,218)  51,816 
Convention, retail and other  6,597   12,347   23,061   (7,000)  35,005 
   
Total revenues  6,597   240,998   313,964   (8,218)  553,341 
Less-promotional allowances  (190)  (15,278)  (7,509)     (22,977)
   
Net revenues  6,407   225,720   306,455   (8,218)  530,364 
   
                     
Operating expenses:                    
Casino     46,053   159,291      205,344 
Rooms     21,715   38      21,753 
Food and beverage     18,176   5,946   (65)  24,057 
Convention, retail and other     7,756   10,195   (1,556)  16,395 
Provision for doubtful accounts     4,739   250      4,989 
General and administrative     41,981   19,428   (6,597)  54,812 
Corporate expense  12,825      129      12,954 
Rental expense     3,316   391      3,707 
Pre-opening expense     256   1,963      2,219 
Development expense  340      8,828      9,168 
Depreciation and amortization  516   15,942   8,547      25,005 
Loss on disposal of assets     12   1,069      1,081 
   
   13,681   159,946   216,075   (8,218)  381,484 
   
                     
Operating income (loss)  (7,274)  65,774   90,380      148,880 
 
Other income (expense):                    
Interest income  3,696   7,084   985   (1,551)  10,214 
Interest expense, net of amounts capitalized  (445)  (16,695)  (5,826)  1,551   (21,415)
Other income     156   8      164 
Income from equity investment in subsidiaries  120,852   84,574      (205,426)   
   
                     
Income before income taxes  116,829   140,893   85,547   (205,426)  137,843 
                     
Benefit (provision) for income taxes  4,954   (20,041)  (973)     (16,060)
   
                     
Net income $121,783  $120,852  $84,574  $(205,426) $121,783 
   
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Revenues:                    
 Casino $  $71,322  $307,140  $  $378,462 
 Rooms     88,014   1,640      89,654 
 Food and beverage     33,261   11,864   (1,102)  44,023 
 Convention, retail and other  7,489   13,390   16,805   (8,408)  29,276 
                
 Total revenues  7,489   205,987   337,449   (9,510)  541,415 
Less-promotional allowances  (166)  (16,152)  (8,090)     (24,408)
                
 Net revenues  7,323   189,835   329,359   (9,510)  517,007 
                
Operating expenses:                    
 Casino     43,485   173,877   (118)  217,244 
 Rooms     21,939   57      21,996 
 Food and beverage     17,249   6,264   (700)  22,813 
 Convention, retail and other     8,863   8,028   (1,163)  15,728 
 Provision for doubtful accounts     3,542   (221)     3,321 
 General and administrative     43,084   21,782   (7,529)  57,337 
 Corporate expense  12,215   15   21      12,251 
 Rental expense     3,545   258      3,803 
 Pre-opening expense     171   4,183      4,354 
 Development expense  777   38   7,046      7,861 
 Depreciation and amortization  531   15,006   8,891      24,428 
 Loss on disposal of assets        456      456 
                
   13,523   156,937   230,642   (9,510)  391,592 
                
Operating income (loss)  (6,200)  32,898   98,717      125,415 
Other income (expense):                    
 Interest income  2,978   8,704   6,068   (2,732)  15,018 
 Interest expense, net of amounts capitalized  (8,031)  (16,637)  (1,749)  2,732   (23,685)
 Other income (expense)  (7)  (15)  8      (14)
 Income from equity investment in subsidiaries  119,725   103,675      (223,400)   
                
Income before income taxes  108,465   128,625   103,044   (223,400)  116,734 
 Benefit (provision) for income taxes  864   (8,900)  631      (7,405)
                
Net income $109,329  $119,725  $103,675  $(223,400) $109,329 
                

16

21


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the three months ended March 31,June 30, 2005
                     
          Non-  Consolidating/    
  Las Vegas  Guarantor  Guarantor  Eliminating    
  Sands Corp.  Subsidiaries  Subsidiaries  Entries  Total 
Revenues:                    
Casino $  $94,748  $171,038  $  $265,786 
Rooms     85,429   648      86,077 
Food and beverage     36,201   8,237   (949)  43,489 
Convention, retail and other  3,087   5,374   21,071   (1,078)  28,454 
         
Total revenues  3,087   221,752   200,994   (2,027)  423,806 
Less-promotional allowances  (224)  (13,799)  (5,989)     (20,012)
         
Net revenues  2,863   207,953   195,005   (2,027)  403,794 
         
                     
Operating expenses:                    
Casino     40,909   91,044      131,953 
Rooms     21,069   46      21,115 
Food and beverage     17,156   3,850   (41)  20,965 
Convention, retail and other     6,617   9,145   (1,386)  14,376 
Provision for doubtful accounts     3,386         3,386 
General and administrative     31,265   15,108   (600)  45,773 
Corporate expense  10,792      90      10,882 
Rental expense     3,299   406      3,705 
Pre-opening expense               
Development expense     1,807   3,368      5,175 
Depreciation and amortization     12,940   7,025      19,965 
Loss on disposal of assets     1,163         1,163 
         
   10,792   139,611   130,082   (2,027)  278,458 
         
                     
Operating income (loss)  (7,929)  68,342   64,923      125,336 
 
Other income (expense):                    
Interest income  2,823   4,363   1,769   (1,561)  7,394 
Interest expense, net of amounts capitalized  (2,212)  (20,215)  (6,217)  1,561   (27,083)
Loss on early retirement of debt     (132,834)        (132,834)
Income from equity investment in subsidiaries  4,260   58,973      (63,233)   
         
                     
Income (loss) before income taxes  (3,058)  (21,371)  60,475   (63,233)  (27,187)
                     
Benefit (provision) for income taxes  10,170   25,631   (1,502)     34,299 
         
                     
Net income $7,112  $4,260  $58,973  $(63,233) $7,112 
         
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Revenues:                    
 Casino $  $73,719  $201,089  $  $274,808 
 Rooms     82,981   1,002      83,983 
 Food and beverage     28,574   6,853   (729)  34,698 
 Convention, retail and other  3,554   5,997   15,618   (815)  24,354 
                
 Total revenues  3,554   191,271   224,562   (1,544)  417,843 
Less-promotional allowances  (287)  (13,448)  (5,287)     (19,022)
                
 Net revenues  3,267   177,823   219,275   (1,544)  398,821 
                
Operating expenses:                    
 Casino     38,711   107,835      146,546 
 Rooms     20,116   111      20,227 
 Food and beverage     14,649   3,285   (55)  17,879 
 Convention, retail and other     7,112   7,500   (889)  13,723 
 Provision for doubtful accounts     659   123      782 
 General and administrative     33,417   15,397   (600)  48,214 
 Corporate expense  6,619      1      6,620 
 Rental expense     3,308   374      3,682 
 Pre-opening expense     504         504 
 Development expense  147   2,283   3,132      5,562 
 Depreciation and amortization     13,850   7,247      21,097 
 (Gain) loss on disposal of assets     (165)  7      (158)
                
   6,766   134,444   145,012   (1,544)  284,678 
                
Operating income (loss)  (3,499)  43,379   74,263      114,143 
Other income (expense):                    
 Interest income  2,766   4,110   2,281   (2,024)  7,133 
 Interest expense, net of amounts capitalized  (4,073)  (10,507)  (5,413)  2,024   (17,969)
 Other expense     (1,220)  (71)     (1,291)
 Loss on early retirement of debt        (4,166)     (4,166)
 Income from equity investment in subsidiaries  89,999   66,859      (156,858)   
                
Income before income taxes  85,193   102,621   66,894   (156,858)  97,850 
 Benefit (provision) for income taxes  1,236   (12,622)  (35)     (11,421)
                
Net income $86,429  $89,999  $66,859  $(156,858) $86,429 
                

17

22


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the six months ended June 30, 2006
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Revenues:                    
 Casino $  $168,458  $585,386  $  $753,844 
 Rooms     177,583   3,209      180,792 
 Food and beverage     75,207   22,952   (2,320)  95,839 
 Convention, retail and other  14,086   25,737   39,866   (15,408)  64,281 
                
 Total revenues  14,086   446,985   651,413   (17,728)  1,094,756 
Less-promotional allowances  (356)  (31,430)  (15,599)     (47,385)
                
 Net revenues  13,730   415,555   635,814   (17,728)  1,047,371 
                
Operating expenses:                    
 Casino     89,538   333,166   (118)  422,586 
 Rooms     43,654   94      43,748 
 Food and beverage     35,425   12,211   (765)  46,871 
 Convention, retail and other     16,619   18,222   (2,719)  32,122 
 Provision for doubtful accounts     8,281   29      8,310 
 General and administrative     85,065   41,213   (14,126)  112,152 
 Corporate expense  25,040   15   150      25,205 
 Rental expense     6,861   649      7,510 
 Pre-opening expense     427   6,146      6,573 
 Development expense  1,117   38   15,874      17,029 
 Depreciation and amortization  1,047   30,948   17,438      49,433 
 Loss on disposal of assets     12   1,525      1,537 
                
   27,204   316,883   446,717   (17,728)  773,076 
                
Operating income (loss)  (13,474)  98,672   189,097      274,295 
Other income (expense):                    
 Interest income  6,674   15,788   7,053   (4,283)  25,232 
 Interest expense, net of amounts capitalized  (8,476)  (33,332)  (7,575)  4,283   (45,100)
 Other income (expense)  (7)  141   16      150 
 Income from equity investment in subsidiaries  240,577   188,249      (428,826)   
                
Income before income taxes  225,294   269,518   188,591   (428,826)  254,577 
 Benefit (provision) for income taxes  5,818   (28,941)  (342)     (23,465)
                
Net income $231,112  $240,577  $188,249  $(428,826) $231,112 
                

23


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
For the six months ended June 30, 2005
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Revenues:                    
 Casino $  $168,467  $372,127  $  $540,594 
 Rooms     168,410   1,650      170,060 
 Food and beverage     64,775   15,090   (1,678)  78,187 
 Convention, retail and other  6,641   11,371   36,689   (1,893)  52,808 
                
 Total revenues  6,641   413,023   425,556   (3,571)  841,649 
Less-promotional allowances  (511)  (27,247)  (11,276)     (39,034)
                
 Net revenues  6,130   385,776   414,280   (3,571)  802,615 
                
Operating expenses:                    
 Casino     79,620   198,879      278,499 
 Rooms     41,185   157      41,342 
 Food and beverage     31,805   7,135   (96)  38,844 
 Convention, retail and other     13,729   16,645   (2,275)  28,099 
 Provision for doubtful accounts     4,045   123      4,168 
 General and administrative     64,682   30,505   (1,200)  93,987 
 Corporate expense  17,411      91      17,502 
 Rental expense     6,607   780      7,387 
 Pre-opening expense     504         504 
 Development expense  147   4,090   6,500      10,737 
 Depreciation and amortization     26,790   14,272      41,062 
 Loss on disposal of assets     998   7      1,005 
                
   17,558   274,055   275,094   (3,571)  563,136 
                
Operating income (loss)  (11,428)  111,721   139,186      239,479 
Other income (expense):                    
 Interest income  5,589   8,473   4,050   (3,585)  14,527 
 Interest expense, net of amounts capitalized  (6,285)  (30,722)  (11,630)  3,585   (45,052)
 Other expense     (1,220)  (71)     (1,291)
 Loss on early retirement of debt  ��  (132,834)  (4,166)     (137,000)
 Income from equity investment in subsidiaries  94,259   125,831      (220,090)   
                
Income before income taxes  82,135   81,249   127,369   (220,090)  70,663 
 Benefit (provision) for income taxes  11,406   13,010   (1,538)     22,878 
                
Net income $93,541  $94,259  $125,831  $(220,090) $93,541 
                

24


LAS VEGAS SANDS CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the threesix months ended March 31,June 30, 2006
                     
          Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
   
Net cash provided by (used in) operating activities $(19,426) $55,386  $109,866  $  $145,826 
   
                     
Cash flows from investing activities:                    
Change in restricted cash and cash equivalents  (469)  (6,279)  (41,038)     (47,786)
Capital expenditures  (35)  (84,818)  (209,380)     (294,233)
Notes receivable to subsidiaries  (66,435)        66,435    
Intercompany receivables to subsidiaries  (39,818)  (56,460)     96,278    
Capital contributions to subsidiaries  (6,456)  (8,649)     15,105    
   
                     
Net cash used in investing activities  (113,213)  (156,206)  (250,418)  177,818   (342,019)
   
                     
Cash flows from financing activities:                    
Proceeds from exercise of stock options  1,864            1,864 
Tax benefit from stock option exercises  632            632 
Capital contributions received     6,456   8,649   (15,105)   
Borrowings from Las Vegas Sands Corp.        66,435   (66,435)   
Proceeds from senior secured credit facility-revolver     92,129         92,129 
Proceeds from Phase II mall construction loan        14,000      14,000 
Proceeds from other long-term debt        75      75 
Repayments on Venetian Intermediate credit facility        (50,000)     (50,000)
Repayments on FF&E credit facility     (1,200)        (1,200)
Repayments on Interface mortgage note payable        (951)     (951)
Increase in intercompany payables     2,818   93,460   (96,278)   
   
Net cash provided by (used in) financing activities  2,496   100,203   131,668   (177,818)  56,549 
   
                     
Effect of foreign exchange rate on cash        75      75 
   
                     
Decrease in cash and cash equivalents  (130,143)  (617)  (8,809)     (139,569)
Cash and cash equivalents at beginning of period  202,196   87,173   167,477      456,846 
   
                     
Cash and cash equivalents at end of period $72,053  $86,556  $158,668  $  $317,277 
   
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Net cash provided by (used in) operating activities $(36,402) $79,446  $57,654  $(3,517) $97,181 
                
Cash flows from investing activities:                    
 Change in restricted cash  (790)  (13,126)  (1,020,965)     (1,034,881)
 Capital expenditures  (6,663)  (226,057)  (497,755)     (730,475)
 Notes receivable to non-guarantor subsidiaries  (115,000)  (75,000)     190,000    
 Repayment of notes receivable from non- guarantor subsidiaries  165,000   25,000      (190,000)   
 Intercompany receivable to Las Vegas Sands Corp.      (20,000)     20,000    
 Intercompany receivables to subsidiaries  (200,930)  (3,517)     204,447    
 Capital contributions to subsidiaries  (11,987)  (15,557)     27,544    
                
Net cash used in investing activities  (170,370)  (328,257)  (1,518,720)  251,991   (1,765,356)
                
Cash flows from financing activities:                    
 Proceeds from exercise of stock options  3,180            3,180 
 Tax benefit from stock option exercises  632            632 
 Capital contributions received     11,987   15,557   (27,544)   
 Borrowings from Las Vegas Sands Corp.         115,000   (115,000)   
 Borrowings from Guarantor Subsidiaries  20,000      75,000   (95,000)   
 Repayment on borrowings from Las Vegas Sands Corp.         (165,000)  165,000    
 Repayment on borrowings from Guarantor Subsidiaries        (25,000)  25,000    
 Proceeds from Macao credit facility        1,325,000      1,325,000 
 Proceeds from senior secured credit facility-revolver     254,129         254,129 
 Proceeds from phase II mall construction loan        30,000      30,000 
 Proceeds from other long-term debt        75      75 
 Repayments on Venetian Intermediate credit facility        (50,000)     (50,000)
 Repayment on senior secured credit facility-revolver     (25,000)        (25,000)
 Repayments on FF&E credit facility     (1,800)        (1,800)
 Repayments on Interface mortgage note payable        (2,807)     (2,807)
 Payments of deferred financing costs        (41,056)     (41,056)
 Increase in Intercompany payable        200,930   (200,930)   
                
Net cash provided by financing activities  23,812   239,316   1,477,699   (248,474)  1,492,353 
                
Effect of foreign exchange rate on cash        975      975 
                
Increase (decrease) in cash and cash equivalents  (182,960)  (9,495)  17,608      (174,847)
Cash and cash equivalents at beginning of period  202,196   87,173   167,477      456,846 
                
Cash and cash equivalents at end of period $19,236  $77,678  $185,085  $  $281,999 
                

18

25


LAS VEGAS SANDS CORP. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
Note 8NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — Condensed Consolidating Financial Information (continued)(Continued)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
For the threesix months ended March 31,June 30, 2005
                     
          Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
Net cash provided by (used in) operating activities $(6,366) $16,903  $68,586  $  $79,123 
            
                     
Cash flows from investing activities:                    
Change in restricted cash and cash equivalents     (2,241)  (2,240)     (4,481)
Capital expenditures     (92,112)  (60,052)     (152,164)
Capital contributions to subsidiaries  (558,570)  (8,281)     566,851    
Intercompany payment for airplane transfer  (40,000)  40,000          
            
                     
Net cash used in investing activities  (598,570)  (62,634)  (62,292)  566,851   (156,645)
            
                     
Cash flows from financing activities:                    
Transaction cost, initial public offering  (487)           (487)
Dividends paid to shareholders     (21,052)        (21,052)
Capital contribution from Las Vegas Sands Corp.     558,570      (558,570)   
Capital contribution from Venetian Casino Resort LLC        8,281   (8,281)   
Repayments on 11% mortgage notes     (843,640)        (843,640)
Proceeds from 6.375% senior note, net of discount  247,754            247,754 
Proceeds from senior secured credit facility-term B     305,000         305,000 
Repayments on Interface mortgage note payable        (1,334)     (1,334)
Repurchase premiums incurred in connection with refinancing transactions     (93,289)        (93,289)
Payments of debt offering costs  (1,158)  (9,559)        (10,717)
Net change in intercompany accounts  (5,577)  8,291   (2,714)      
            
                     
Net cash provided by (used in) financing activities  240,532   (95,679)  4,233   (566,851)  (417,765)
            
                     
Increase (decrease) in cash and cash equivalents  (364,404)  (141,410)  10,527      (495,287)
Cash and cash equivalents at beginning of period  744,927   388,338   161,633      1,294,898 
            
                     
Cash and cash equivalents at end of period $380,523  $246,928  $172,160  $  $799,611 
            
                      
      Non- Consolidating/  
  Las Vegas Guarantor Guarantor Eliminating  
  Sands Corp. Subsidiaries Subsidiaries Entries Total
           
Net cash provided by (used in) operating activities $(75,666) $93,891  $265,302  $  $283,527 
                
Cash flows from investing activities:                    
 Change in restricted cash     (4,838)  (343)     (5,181)
 Capital expenditures     (202,193)  (171,372)     (373,565)
 Capital contributions to subsidiaries  (558,570)  (9,837)     568,407    
 Intercompany payment for airplane transfer  (40,000)  40,000          
                
Net cash used in investing activities  (598,570)  (176,868)  (171,715)  568,407   (378,746)
                
Cash flows from financing activities:                    
 Transaction cost, initial public offering  (487)           (487)
 Dividends paid to shareholders     (21,052)        (21,052)
 Capital contributions received     558,570   9,837   (568,407)   
 Dividend to Las Vegas Sands, Inc.                
 Repayments on 11% mortgage notes     (843,640)        (843,640)
 Repayments on senior subordinated notes               
 Proceeds from 6.375% senior note, net of discount  247,722            247,722 
 Proceeds from senior secured credit facility-term B     305,000         305,000 
 Proceeds from phase II mall construction loan        10,500      10,500 
 Repayments on Venetian Macau senior secured notes — tranche A        (75,000)     (75,000)
 Repayments on Venetian Macau senior secured notes — tranche B        (45,000)     (45,000)
 Repayments on FF&E credit facility     (600)        (600)
 Repayments on Interface mortgage note payable        (2,448)     (2,448)
 Repurchase premiums incurred in connection with refinancing transactions     (113,311)        (113,311)
 Payments of deferred financing costs  (1,401)  (9,755)  (13)     (11,169)
 Net change in intercompany accounts  (3,356)  4,189   (833)      
                
Net cash provided by (used in) financing activities  242,478   (120,599)  (102,957)  (568,407)  (549,485)
                
Decrease in cash and cash equivalents  (431,758)  (203,576)  (9,370)     (644,704)
Cash and cash equivalents at beginning of period  744,927   388,338   161,633      1,294,898 
                
Cash and cash equivalents at end of period $313,169  $184,762  $152,263  $  $650,194 
                

19

26


LAS VEGAS SANDS CORP.
ITEMItem 2MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSManagement’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements, and the notes thereto and other financial information included in this Form 10-Q. Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements. See “—Special Note Regarding Forward—Forward — Looking Statements.”
General
We own and operate The Venetian Resort Hotel Casino (“The Venetian”) and The Sands Expo and Convention Center (“The Sands Expo Center”) in Las Vegas, Nevada and The Sands Macao Casino (“The Sands Macao”) in Macao, China. We are also developing two other casino resorts: The Palazzo Resort Hotel Casino (“The Palazzo”), which will be next to and connected with The Venetian and The Sands Expo Center, and The Venetian Macao Resort Hotel Casino (“The Venetian Macao”) in Macao, China.
We currently offer hotel, gaming, dining, entertainment, retail, and spa and other amenities at The Venetian, convention and trade show space at The Sands Expo Center and gaming, dining and VIP suites at The Sands Macao. Approximately 40.1%37.5% of our gross revenuesrevenue at The Venetian for the first threesix months of 2006 was derived from gaming and 37.0%39.5% was derived from hotel rooms. The percentage of gaming revenue for The Venetian reflects the resort’s emphasis on the group convention and trade show business and the resulting higher occupancy and room rates during mid-week periods. Approximately 96.2%96.3% of The Sands Macao’s gross revenue for the first threesix months of 2006 was derived from gaming activities, with the remainder primarily derived from food and beverage services.
Las Vegas Projects
The Palazzo is currently under construction and is expected to open during the summer of 2007. The Palazzo, a second resort similar in size to The Venetian, is situated on a14-acre site next to The Venetian and The Sands Expo Center and next to the Wynn Las Vegas Resort. The Palazzo is expected to consist of an all-suites, 50-floor luxury hotel tower with approximately 3,025 suites, a gaming facility of approximately 105,000 square feet and an enclosed shopping, dining and entertainment complex of approximately 450,000 square feet, which the Company has contracted to sell to a third party. The cost of The Palazzo could reach as high as $1.8 billion (exclusive of land), of which the mall (the “Phase II mall”) is expected to cost approximately $280.0 million (exclusive of certain incentive payments to executives made in July 2004). In addition, we expect that tenants will make significant additional capital expenditures to build out stores and restaurants to be located in The Palazzo. In connection with the sale of The Grand Canal Shops mall, we entered into an agreement with General Growth Partners (“GGP”), the purchaser of The Grand Canal Shops mall, to sell them the Phase II mall upon completion of construction. The purchase price that GGP has agreed to pay for the Phase II mall is the greater of (i) $250.0 million and (ii) the Phase II mall’s net operating income for months 19 through 30 of its operations divided by a capitalization rate. The capitalization rate is 6.0% on the first $38.0 million of net operating income and 8.0% on the net operating income above $38.0 million.
Macao Projects
      We are building The Venetian Macao, an approximately 3,000 all-suites hotel, casino and convention center complex, with a Venetian-style theme similar to that of The Venetian in Las Vegas. Under our gaming subconcession in Macao, we are obligated to develop and open The Venetian Macao and a convention center by December 2007. We currently expect to open The Venetian Macao in mid-2007. If we fail to meet the December 2007 deadline and that deadline is not extended further, we could lose our right to continue to operate The Sands Macao or any other facilities developed under our Macao gaming subconcession, and our investment to date in The Venetian Macao could be lost.

27


      In addition, we are constructing The Venetian Macao on land for which we have not yet been granted a concession. The land concession will require us to pay certain premiums and rent. We are currently in negotiations with the Macao government over the cost of the land concession and believe we will be successful in obtaining the land concession. We expect to have the negotiations complete in the latter part of the third quarter or early part of the fourth quarter of 2006, at which point we will be required to pay the negotiated amount. The land premium will be amortized over an extended period of time. The initial term of the lease will be 25 years with unlimited 10-year renewals at the Company’s option. We expect to use the funds from the new Macao credit facility to make the portion of the land concession payments that will be due upon receipt of the provisional land grant and will finance the remaining portion through financing permitted by the Macao government and certain payment guarantees to be issued by commercial banks. Under the credit facility, the Company is required to secure the land concession in order to fully draw against the facility. If we are unable to complete the negotiations within a specified period of time, we will not be able to draw any further funds from the Macao credit facility in order to fund construction activities and we will have to seek additional financing. In the event we are unable to successfully conclude our negotiations with the Macao government with regard to the land underlying The Venetian Macao, we could lose all or a substantial part of our investment in the creation of the land and in constructing The Venetian Macao and would not be able to open and operate that facility as planned.
      In addition, we broke ground in October 2005 on an expansion of The Sands Macao that will enhance the size and scope of the property and increase gaming capacity by more than 30.0%. Construction of The Venetian Macao and the expansion of The Sands Macao are progressing according to plan.
      In connection with the development of The Venetian Macao, we are sponsoring a master plan for the development of multiple properties on the Cotai Striptm. We have submitted development plans to the Macao government for six casino-resort developments in addition to The Venetian Macao on an area of approximately 200 acres located on the Cotai Strip. The developments are expected to include hotels, exhibition and conference facilities, casinos, showrooms, shopping malls, spas, world-class restaurants and entertainment facilities and other attractions and amenities, as well as common public areas. The Company is in the early stages of developing these properties, including land preparation and certain foundation work. We plan to own and operate all of the casinos in these developments under our Macao gaming subconcession.
      We intend to develop the other Cotai Strip properties as follows:
• One of them is intended to be a Four Seasons hotel and casino, which will be adjacent to The Venetian Macao and is expected to open duringbe a boutique hotel with 400 luxury hotel rooms, up to 800 Four Seasons-serviced vacation suites, distinctive dining experiences, a full service spa and other amenities, a 45,000 square foot casino and a 190,000 square foot mall with upscale retail offerings. We will own the summer of 2007. The cost of The Palazzo could reach as high as $1.8 billion (exclusive of land), of which the mall (the “Phase II mall”) is expected to cost approximately $280.0 million (exclusive of certain incentive payments to executives made in July 2004). In addition, we expect tenants will make significant additional capital expenditures to build out storeshotel and restaurants in The Palazzo. In connection with the sale of The Grand Canal Shops mall, wevacation suites. We have entered into an agreement with General Growth Partners (“GGP”),exclusive non-binding letter of intent and are currently negotiating definitive agreements under which Four Seasons Hotels Inc. will manage the purchaser ofhotel and vacation suites. The Grand Canal Shops mall, to construct and sell the Phase II mall. The purchase price that GGP has agreed to pay for the Phase II mall is the greater of (i) $250.0 million and (ii) the Phase II mall’s net operating income for months 19 through 30 of its operations divided by a capitalization rate. The capitalization rate is 6.0% up to $38.0 million of net operating income and 8.0% above $38.0 million.
Macao Projects
We are building The Venetian Macao, an approximately 3,000 all-suites hotel, casino and convention center complex, with a Venetian-style theme similar to that of our Las Vegas property. Under our gaming subconcession in Macao, we are obligated to develop and open The Venetian Macao and a convention center by December 2007. We are also obligated to invest at least 4.4 billion patacas (approximately $550.2 million at exchange rates in effect on March 31, 2006) in various development projects in Macao by June 2009. As of March 31, 2006, we had spent more than the required minimum amount. We currently expect to open The Venetian Macao in mid-2007. If we fail to meet the December 2007 deadline we could lose our right to continue to operate The Sands Macao or any other facilities development under our Macao gaming subconcession and our investment to date in The Venetian Macao could be lost. In addition, we are constructing The Venetian Macao on land for which we have not yet been granted a concession. If we do not obtain a land concession, we could forfeit all or a part of our investment in the site and construction of The Venetian Macao and would not be able to open and operate that facility as planned.
In addition, we broke ground in October 2005 on an expansion of The Sands Macao that will enhance the size and scope of the property and increase gaming capacity by more than 65.0%. Constructioncompletion of The Venetian Macao and the expansionFour Seasons is not dependent upon the Macao government’s overall approval of The Sands Macao are progressing accordingour Cotai Strip master development plan.
• One of them is intended to plan. In connectioninclude a two hotel complex with 1,500 luxury and mid-sized hotel rooms as part of its initial phase, luxury vacation suites, a casino and a retail shopping mall. We will own the entire development, and we have entered into a management agreement with Shangri-La Hotels and Resorts to manage the hotels and vacation suites under its Shangri-La and Traders brands.
• One of The Venetian Macao,them is intended to include a two-hotel complex with 1,500 luxury and mid-sized hotel rooms as part of its initial phase, luxury vacation suites, a casino and a retail shopping mall physically connected to the mall in the Shangri-La/ Traders hotel podium. We will own the entire development, and we are sponsoring a master plan fornegotiating with Starwood Hotel and Resorts to manage the development of multiple properties on the Cotai Strip.

20


LAS VEGAS SANDS CORP.

ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
hotels and vacation suites under its brands.
• We have submitted development plans to the Macao government for six casino-resort developments in addition to The Venetian Macao on an area of approximately 200 acres on the Cotai Strip. The developments are expected to include hotels, exhibition and conference facilities, casinos, showrooms, shopping malls, spas, world-class restaurants and entertainment facilities and other attractions, as well as common public areas. We plan to own and operate all of the casinos in these developments under our Macao gaming subconcession.
We intendexpect to develop theand own two other Cotai Strip developments, as follows:
One of them is intended to be a Four Seasons hotel and casino, which will be adjacent to The Venetian Macao and is expected to be a boutique hotel with 400 luxury hotel rooms, up to 600 Four Seasons-serviced vacation suites, distinctive dining experiences, full service spas and other amenities, a 25,000 square foot casino and a 190,000 square foot mall with upscale retail offerings. We will own the hotel and vacation suites. We have entered into an exclusive nonbinding letter of intent and are currently negotiating definitive agreements under which Four Seasons Hotels Inc. will manage the hotel and vacation suites. The completion of The Venetian Macao and the Four Seasons is not dependent upon the Macao government’s overall approval of our Cotai Strip master development plan.
One of them is intended to include a two hotel complex with 1,500 luxury and mid-sized hotel rooms, luxury vacation suites, a casino and a retail shopping mall. We will own the entire development, and we have entered into a management agreement with Shangri-La Hotels and Resorts to manage the hotels and vacation suites under its Shangri-La and Traders brands.
One of them is intended to include a two-hotel complex with luxury and mid-sized hotel rooms, luxury vacation suites, a casino and a retail shopping mall physically connected to the mall in the Shangri-La/Traders hotel podium. We will own the entire development, and we are negotiating with Starwood Hotel and Resorts to manage the hotels and vacation suites under its brands.
We expect to develop and own two other Cotai Strip developments, each of which is intended to include a two-hotel complex with 1,500 luxury and mid-sized hotel rooms in their initial phases, luxury vacation suites, a casino and a retail shopping mall. We will own the entire development. We have entered into a non-binding agreement with Hilton Hotels to manage one of the hotel complexes and are in discussions with experienced and well-known hotel management companies to manage the hotel portions of the other resort for us under their brands.
We have signed a non-binding memorandum of agreement with an independent developer for another Cotai Strip Development. We are currently negotiating definitive agreements pursuant to which we plan to partner with this developer to build a multi-hotel complex under several hotel brands.
We do not yet have all the Macao government approvals that we will need in order to develop the Cotai Strip developments.
We expect to make land premium payments relating to The Venetian Macao and other Macao properties under development in amounts to be determined. We currently estimate that the cost for The Venetian Macao will be approximately $2.3 billion (exclusive of land) and the cost for The Sands Macao expansion will be approximately $99.0 million. Venetian Macau Limited and its subsidiaries (“VML”) are finalizing commitments for a $2.5 billion senior secured credit facility to partially fund The Sands Macao expansion and the design, development, construction and pre-opening costs for The Venetian Macao, the Four Seasons Hotel and some of our other development projects on the Cotai Strip, and to pay related fees and expenses. We have not yet finalized our estimate of the cost of our other Cotai Strip developments; however, we will need to arrange additional debt financing to finance those costs as well.

21

28


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
entered into a non-binding agreements with Hilton Hotels and Fairmont Raffles to manage the hotel complexes under their respective brands.
• We have signed a non-binding memorandum of agreement with an independent developer for another Cotai Strip Development. We are currently negotiating definitive agreements pursuant to which we plan to partner with this developer to build a multi-hotel complex under several hotel brands.
      We do not yet have all the necessary Macao government approvals that we will need in order to develop these other Cotai Strip developments.
      We expect to make land premium payments relating to The Venetian Macao and other Macao properties under development in amounts that will be determined based on negotiations with the Macao government. We currently estimate that the cost of developing and building The Venetian Macao will be approximately $2.3 billion (exclusive of the land concession payment) and the cost for The Sands Macao expansion will be approximately $99.0 million for the expansion to increase gaming capacity and approximately $85.0 million for the hotel tower expansion. During May 2006, our subsidiary Venetian Macau Limited and its subsidiaries (“VML”) obtained a $2.5 billion credit facility to fund The Sands Macao expansion and partially fund the design, development, construction and pre-opening costs for The Venetian Macao, the Four Seasons Hotel and some of our other development projects on the Cotai Strip, and to pay related fees and expenses. We have not yet finalized our estimate of the cost of our other Cotai Strip developments; however, we will need to arrange additional debt financing to finance those costs as well.
Singapore Project
      In May 2006, we were selected by the Singapore government to build and operate an integrated resort called the Marina Bay Sands in Singapore, which will be a large integrated resort, including a casino. As a result of being selected to build the project, we are required to pay the Singapore government $1.20 billion Singapore dollars (approximately US$751.1 million at exchange rates in effect on June 30, 2006) in premium payments for use of the land on which the resort will be built plus an additional $298.2 million Singapore dollars (approximately US$186.7 million at exchange rates in effect on June 30, 2006) for various taxes and other fees. As of June 30, 2006, we had paid $300.0 million Singapore dollars (approximately US$187.8 million at exchange rates in effect on June 30, 2006) related to the land premium payments. The remaining amount due of approximately $1.20 billion Singapore dollars (approximately US$750.0 million at exchange rates in effect on June 30, 2006) is due on August 24, 2006. We are currently in the process of obtaining bridge financing in the amount of $1.4 billion to cover the above payments as well as the initial development costs for the project.
      At the time these remaining amounts are paid, we will enter into the development agreement, which will require us to construct and operate the Marina Bay Sands in accordance with the Company’s proposal for this integrated resort and in accordance with that agreement. Based on the proposal we submitted to the Singapore government, we will develop and construct the Marina Bay Sands Resort for approximately $3.6 billion, inclusive of the land premium, taxes and other fees discussed above. Upon completion of the bridge financing, the Company will immediately focus its efforts on lining up long-term financing in an amount necessary to fund the construction of Marina Bay Sands.
Other Development Projects
Following the Singapore government’s adoption of gaming legislation in 2005, we submitted a proposal to the Singapore government for a license to develop a large integrated resort, including a casino, in Singapore. There are currently three competing proposals for this resort/casino license. The Singapore government is expected to award this license in mid-2006.
We have entered into a non-binding agreement with the Zhuhai Municipal People’s Government of the People’s Republic of China to work with it to create a master plan for, and develop, a leisure and convention destination resort on Hengqin Island, located approximately one mile from the Cotai Strip. We are actively preparing preliminary design concepts for presentation to the government. This development is subject to a number of conditions, including receiving further governmental approvals.
On December 3, 2004, following the enactment of legislation legalizing slot machine gaming in Pennsylvania, we entered into a contribution agreement with Bethworks Now, LLC, the owner of an approximately 124 acre site located in Bethlehem, Pennsylvania. We have submitted a proposal to obtain one mile from the Cotai Strip. We are actively preparing preliminary design concepts for presentation to the government. This development is subject to a number of conditions, including receiving further governmental approvals.
      On December 3, 2004, following the enactment of legislation legalizing slot machine gaming in Pennsylvania, we entered into a contribution agreement with Bethworks Now, LLC, the owner of an approximately 124-acre site located in Bethlehem, Pennsylvania. We have submitted a proposal to obtain one

29


of two “at large” gaming licenses currently available in Pennsylvania. There are several competing proposals for these licenses. If our proposal is accepted and a slot machine license under the new legislation is granted for the site, we intend to jointly own and develop the property for use as a casino complex including a hotel with meeting rooms and retail, restaurant, movie theater, office and other commercial spaces. The Bethlehem development is subject to a number of conditions, including obtaining the gaming license.
We have also entered into agreements to develop and lease gaming and entertainment facilities with two prominent football clubs in the United Kingdom and are in discussions with several others to build entertainment and gaming facilities in major cities in the United Kingdom. There are several competing proposals for the single “regional” casino license currently authorized by statute. Our agreements to develop and lease gaming and entertainment facilities are subject to a number of conditions, including obtaining a gaming license.
We are currently exploring the possibility of operating casino resorts in additional Asian jurisdictions, the United States and Europe.
Critical Accounting Policies and Estimates
The preparation of our condensed 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. On an ongoing basis, management evaluates those estimates, including those related to allowance for doubtful accounts and discounts, accruals for slot marketing points, self-insurance and litigation, asset impairment, stock-based compensation, and income taxes. We state these accounting policies in the notes to theour consolidated financial statements and in relevant sections in this discussion and analysis. These estimates 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.
Allowance for Doubtful Accounts and Discounts
Allowance for Doubtful Accounts and Discounts
We maintain an allowance, or reserve, for doubtful accounts and discounts at our operating casino resorts, The Venetian and The Sands Macao. The provision for doubtful accounts, an operating expense, increases the allowance for doubtful accounts and discounts, while specific write-offs decrease the allowance for doubtful accounts and discounts. We regularly evaluate the allowance for doubtful accounts and discounts. At The Venetian, where credit or marker play is significant, we apply standard reserve percentages to aged account balances under a specified dollar amount and specifically analyze the collectibility of each account with a balance over the specified dollar amount, based upon the age of the account, the customer’s financial condition, collection history and any other known information. We also

22


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
monitor regional and global economic conditions and forecasts to determine if reserve levels are adequate. At The Sands Macao, where credit or marker play is not significant, we apply a standard reserve percentage to aged account balances. The mix of credit play as a percentage of total casino play has decreased significantly since 2004 because The Sands Macao table games play is primarily cash play, while The Venetian credit table games play represents approximately 66.9%62.3% of total table games play.play at The Venetian. Our allowance for doubtful accounts and discounts was $53.8$56.0 million and $49.0 million, or 33.2%39.2% and 36.6% of gross accounts receivable, as of March 31,June 30, 2006 and December 31, 2005, respectively.
Self-Insurance and Slot Club Point Accruals
Self-Insurance and Slot Club Point Accruals
We maintain accruals for health and workers compensation self-insurance and slot club point redemption, which are classified in other accrued liabilities in the condensed consolidated balance sheets. We determine the adequacy of these accruals by periodically evaluating the historical experience and projected trends related to these accruals and in consultation with outside actuarial experts for the self-insurance accruals. If such information indicates that the accruals are overstated or understated, or if business conditions indicate we should adjust the assumptions utilized, we will reduce or provide for additional accruals as appropriate.

30


Litigation Accrual
Litigation Accrual
We are subject to various claims and legal actions. We estimate the accruals for these claims and legal actions in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 5, “Accounting for Contingencies,” and include such accruals in the other accrued liability category in our condensed consolidated balance sheets.
Property and Equipment
Property and Equipment
At March 31,June 30, 2006, we had net property and equipment of $2.89$3.35 billion, representing 70.5%58.3% 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. In assessing the recoverability of the carrying value of property and equipment if events and circumstance warrant such an assessment, we must make assumptions regarding estimated future cash flows and other factors. If these estimates or the related assumptions change, we 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.
Stock-Based Compensation
Stock-Based Compensation
SFAS No. 123R, “Share-Based Payment” requires the recognition of compensation expense in the condensed 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 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. 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. Prior to adopting SFAS No. 123R, we applied Accounting Principles Board Opinion (“APB”) No. 25, “Accounting for Stock Issued to Employees”, and related Interpretations, in accounting for its stock-based compensation plans. All employee stock options were granted at or above the grant date market price. Accordingly, no compensation cost was recognized for fixed stock option grants in prior periods.

23


Income Taxes

LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Income Taxes
We are subject to income taxes in the United States, and in several states and foreign jurisdictions in which we operate. We account for income taxes in accordance with SFAS No. 109, “Accounting for Income Taxes.” Under SFAS No. 109, deferred tax assets and liabilities are recognized based on differences between financial statement and tax basis of assets and liabilities using enacted tax rates. SFAS No. 109 requires the recognition of deferred tax assets, net of any applicable valuation allowances, related to net operating loss carryforwards, tax credits and other temporary differences. The standard requires recognition of a future tax benefit to the extent that realization of such benefit is more likely than not; otherwise, a valuation allowance is applied.
Our income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities. While positions taken in tax returns are sometimes subject to uncertainty in the tax laws, we do not take such positions unless we have “substantial authority” to do so under the Internal Revenue Code and applicable regulations. We may take positions on our tax returns based on substantial authority that are not ultimately accepted by the IRS. The IRS is currently examining our federal income tax returns for the years ended December 31, 1998, 1999, and 2000.

31


We assess potential unfavorable outcomes based on the criteria of SFAS No. 5. We establish a tax reserve if an unfavorable outcome is probable and the amount of the unfavorable outcome can be reasonably estimated. We assess the potential outcomes of tax uncertainties on a quarterly basis. In determining whether the probable criterion of SFAS No. 5 is met, we presume that the taxing authority will focus on the exposure and we assess the probable outcome of a particular issue based upon the relevant legal and technical merits. We also apply our judgment regarding the potential actions by the tax authorities and resolution through the settlement process.
We maintain required tax reserves until such time as the underlying issue is resolved. When actual results differ from reserve estimates, we will adjust the income tax provision and our tax reserves in the period resolved. For tax years that are examined by taxing authorities, we will adjust tax reserves in the year the tax examinations are settled. For tax years that are not examined by taxing authorities, we will adjust tax reserves in the year that the statute of limitations expires. Our estimate of the potential outcome for any uncertain tax issue is highly judgmental, and we believe we have adequately provided for any reasonable and foreseeable outcomes related to uncertain tax matters.
Recent Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 123R, which supersedes APB Opinion No. 25. This statement requires compensation costs related to stock-based transactions to be recognized in financial statements. This statement also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow. The provisions of this statement are effective as of the first annual reporting period that begins after January 1, 2006. This statement requires public entitiescompanies to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). This cost will beis being recognized over the period during which an employee is required to provide service in exchange for the award. This statement also addresses the accounting for the tax effects of stock-based compensation awards. We adopted this standard as of January 1, 2006 using the modified prospective application; accordingly, prior periods have not been restated. Under the modified prospective application we will expenseare expensing the cost of stock-based compensation awards issued after January 1, 2006. Additionally, we will recognizeare recognizing compensation cost for the portion of awards outstanding on January 1, 2006 for which the requisite service has not been rendered as the requisite service is to be rendered on or after January 1, 2006. We have chosen to continue to use the Black-Scholes option-pricing model to calculate the fair value of itsour stock option grants.options. During the three and six months ended March 31,June 30, 2006, we recorded $2.9 million and $5.7 million of stock-based compensation expense.expense, respectively. No amounts for stock-based compensation were recorded for the three and six months ended March 31, 2006.June 30, 2005. As of March 31,June 30, 2006, there was $44.9$48.8 million of unrecognized compensation cost, net of estimated forfeitures of 8.0%, related to nonvested stock options and there was $2.9 million of unrecognized compensation cost related to nonvested restricted stock. The stock option and restricted stock costs are expected to be recognized over a weighted average period of 3.73.6 years and 2.72.4 years, respectively.

24


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
In May 2005,July 2006, the FASB issued SFASInterpretation (“FIN”) No. 154,48, “Accounting Changes and Error Corrections—a replacement of APB Opinion No. 20 and FASB Statement No. 3,”for Uncertainty in Income Taxes”, which changes the requirements forclarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. FIN No. 48 provides guidance on the financial statement recognition and reportingmeasurement of a changetax position taken or expected to be taken in a tax return. FIN No. 48 also provides guidance on derecognition, classification, interest and penalties, accounting principle. SFASin interim periods, disclosures, and transition. FIN No. 154 applies48 will require entities to all voluntary changes in accounting principle, as well asassess the likelihood that uncertain tax positions will be accepted by the applicable taxing authority and then measure the amount of benefit to changes required by an accounting pronouncement if the pronouncement does not include specific transition provisions. This statement requires retrospective applicationbe recognized for these purposes which are considered greater than 50% likely to prior periods’ financial statements of changes in accounting principle. SFASbe sustained. FIN No. 15448 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption on January 1, 20062006. We are currently evaluating the impact of SFAS No. 154 did not have a material effectthis standard on our condensed consolidated financial position, results of operations, or cash flows.statements.

32


Summary Financial Results
The following table summarizes our results of operations:
             
  Three Months Ended March 31,
  (in thousands, except for percentages)
          Percent
  2006 2005 Change
Net revenues $530,364  $403,794   31.3%
Operating expenses  381,484   278,458   37.0%
Operating income  148,880   125,336   18.8%
Income (loss) before income taxes  137,843   (27,187)  607.0%
Net income  121,783   7,112   1,612.4%
         
  Three Months Ended March 31,
  Percent of Net Revenues
  2006 2005
Operating expenses  71.9%  69.0%
Operating income  28.0%  31.0%
Income (loss) before income taxes  26.0%  -6.7%
Net income  23.0%  1.8%
                         
  Three Months Ended June 30, Six Months Ended June 30,
     
    Percent   Percent
  2006 2005 Change 2006 2005 Change
             
  (In thousands, except for percentages) (In thousands, except for percentages)
Net revenues $517,007  $398,821   29.6%  $1,047,371  $802,615   30.5% 
Operating expenses  391,592   284,678   37.6%   773,076   563,136   37.3% 
Operating income  125,415   114,143   9.9%   274,295   239,479   14.5% 
Income before income taxes  116,734   97,850   19.3%   254,577   70,663   260.3% 
Net income  109,329   86,429   26.5%   231,112   93,541   147.1% 
                 
  Three Months Ended Six Months Ended
  June, June,
     
  2006 2005 2006 2005
         
  Percent of Net Percent of Net
  Revenues Revenues
Operating expenses  75.7%   71.4%   73.8%   70.2% 
Operating income  24.3%   28.6%   26.2%   29.8% 
Income before income taxes  22.6%   24.5%   24.3%   8.8% 
Net income  21.1%   21.7%   22.1%   11.7% 
Operating Results
Key operating revenue measurements
Key operating revenue measurements
The Venetian’s operating revenue is 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. The Sands Macao is almost wholly dependent on casino customers that visit the casino on a daily basis. Hotel revenues are not expected to be material for The Sands Macao. Visitors to The Sands Macao arrive by ferry, automobile, airplane or helicopter from Hong Kong, cities in China, and other Southeast Asian cities in close proximity to Macao.
The following are the key measurements we use to evaluate operating revenue:
Hotel revenue measurements include 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. 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 higher than revenue per available room.
      Hotel revenue measurements include 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. 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 higher than revenue per available room.
Casino revenue measurements for Las Vegas: Table games drop and slot handle are volume measurements. Win or hold percentage represents the percentage of drop or handle, respectively, 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 or coin placed into slot machines in aggregate for the period cited. Drop and handle are abbreviations for table games drop and slot handle. Based upon our mix of table games, our table games produce a statistical average table win percentage (calculated before discounts) as measured as a percentage of table game drop of 20.0% to 22.0%, and slot machines produce a statistical average slot machine win percentage (calculated before slot club cash incentives) as measured as a percentage of slot machine handle generally between 6.0% and 7.0%.
Casino revenue measurements for Macao: We view Macao table games as being segregated into two groups, consistent with the Macao market’s convention: Rolling Chip play (all VIP play) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-

25

33


negotiable gaming chips wagered. The volume measurement for Non-Rolling Chip play is table games drop as described above. Rolling Chip volume and Non-Rolling Chip volume are not equivalent because, since Rolling Chip volume is a measure of amounts wagered versus dropped, Rolling Chip volume is substantially higher than drop. Slot handle at The Sands Macao is the gross amount wagered or coins placed into slot machines in aggregate for the period cited.
      We view Rolling Chip table games win as a percentage of Rolling Chip volume and we view Non-Rolling Chip table games win as a percentage of drop. 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 in Macao, our Rolling Chip table games win percentage (calculated before discounts and commissions) as measured as a percentage of Rolling Chip volume is expected to be 2.5% to 2.8% and our Non-Rolling Chip play table games are expected to produce a statistical average table win percentage as measured as a percentage of table game drop (before discounts and commissions) of 17.0% to 19.0%. Like in Las Vegas, our Macao slot machines produce a statistical average slot machine win percentage as measured as a percentage of slot machine handle of generally between 6.0% and 7.0%.

LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Casino revenue measurements for Las Vegas: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 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 or coin placed into slot machines in aggregate for the period cited. Drop and handle are abbreviations for table games drop and slot handle. Based upon our mix of table games, our table games produce a statistical average table win percentage (calculated before discounts) as measured as a percentage of table game drop of 20.0% to 22.0% and slot machines produce a statistical average slot machine win percentage (calculated before slot club cash incentives) as measured as a percentage of slot machine handle generally between 6.0% and 7.0%.
Casino revenue measurements for Macao:We view Macao table games as being segregated into two groups, consistent with the Macao market’s convention: Rolling Chip play (all VIP play) and Non-Rolling Chip play (mostly non-VIP players). The volume measurement for Rolling Chip play is non-negotiable gaming chips wagered. The volume measurement for Non-Rolling Chip is table games drop as described above. Rolling Chip volume and Non-Rolling Chip volume are not equivalent because, since Rolling Chip volume is a measure of amounts wagered versus dropped, Rolling Chip volume is substantially higher than drop. Slot handle at The Sands Macao is the gross amount wagered or coins placed into slot machines in aggregate for the period cited.
We view Rolling Chip table games win as a percentage of Rolling Chip volume and we view Non-Rolling Chip table games win as a percentage of drop. 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 in Macao, our Rolling Chip table games win percentage (calculated before discounts and commissions) as measured as a percentage of Rolling Chip volume is expected to be 2.5% to 2.8% and our Non-Rolling Chip play table games are expected to produce a statistical average table win percentage as measured as a percentage of table game drop (before discounts and commissions) of 17.0% to 19.0%. Like in Las Vegas, our Macao slot machines produce a statistical average slot machine win percentage as measured as a percentage of slot machine handle of generally between 6.0% and 7.0%.
Actual win may vary from the statistical average. Generally, slot machine play at The Venetian and The Sands Macao is conducted on a cash basis,basis. The Venetian’s table games revenue is approximately 66.9%62.3% from credit based guests wagering for the six months ended June 30, 2006 and The Sands Macao’s table game play is conducted primarily on a cash basis.
Three Months Ended March 31,June 30, 2006 compared to the Three Months Ended March 31,June 30, 2005
Operating Revenues
Operating Revenues
Our net revenues consisted of the following:
             
  Three Months Ended June 30,
   
    Percent
  2006 2005 Change
       
  (In thousands, except for percentages)
Net Revenues
            
Casino $378,462  $274,808   37.7%
Rooms  89,654   83,983   6.8%
Food and beverage  44,023   34,698   26.9%
Convention, retail and other  29,276   24,354   20.2%
          
   541,415   417,843   29.6%
Less — promotional allowances  (24,408)  (19,022)  -28.3%
          
Total net revenues $517,007  $398,821   29.6%
          
             
  Three Months Ended March 31, 
  (in thousands, except for percentages) 
          Percent 
  2006  2005  Change 
Net Revenues
            
Casino $375,382  $265,786   41.2%
Rooms  91,138   86,077   5.9%
Food and beverage  51,816   43,489   19.1%
Convention, retail and other  35,005   28,454   23.0%
          
   553,341   423,806   30.6%
Less — promotional allowances  (22,977)  (20,012)  -14.8%
          
             
Total net revenues $530,364  $403,794   31.3%
          

26


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Consolidated net revenues were $530.4$517.0 million for the three months ended March 31,June 30, 2006, an increase of $126.6$118.2 million compared to $403.8$398.8 million for the three months ended March 31,June 30, 2005. The increase in net revenues was due primarily to an increase in casino revenue of $109.6$103.7 million. This increase is primarily attributable to the growth of our casino operations at The Sands Macao and the formal introduction of our Rolling Chip program in March 2005.Macao.
Casino revenues were $375.4$378.5 million for the three months ended March 31,June 30, 2006, an increase of $109.6$103.7 million as compared to $265.8$274.8 million for the three months ended March 31,June 30, 2005. Of the increase, $107.2$106.1 million was attributable to the growth of our casino operations at The Sands Macao and the formal introduction of our Rolling Chip program in March 2005.Macao. For the three months ended March 31,June 30, 2006, table games drop (the Non-Rolling chip segment)portion) at The Sands Macao increased $203.6$121.0 million to $1.04 billion and the related win percentage increased 1.42.1 percentage points to 18.6% as compared to the three months ended March 31,June 30, 2005. In addition, the Rolling Chip volume increased $2.84$2.27 billion to $4.26 billion and the related win percentage increased from 2.1%2.6% to 2.5%3.0% as compared to the three months ended March 31,June 30, 2005. For the three months ended June 30, 2006, The Venetian’s casino revenues decreased $2.4 million to $71.3 million. Table games drop increased $1.0 million to $254.2 million; however,

34


the related win percentage dropped 1.0 percentage points to 17.6% as compared to the three months ended June 30, 2005. Slot handle at The Venetian increased from $496.0 million to $522.7 million; however, the related win percentage decreased from 6.8% to 6.2% as compared to the three months ended June 30, 2005. 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 for the three months ended March 31,June 30, 2006 were $91.1$89.7 million, an increase of $5.0$5.7 million as compared to $86.1$84.0 million for the three months ended March 31,June 30, 2005. The increase was attributable to the increase in average daily room rate from $243$231 for the three months ended March 31,June 30, 2005 to $249$242 for the three months ended March 31,June 30, 2006, as well as an increase in occupancy rate from 97.8%98.7% for the three months ended March 31,June 30, 2005 to 99.9%99.5% for the three months ended March 31,June 30, 2006 at The Venetian. The Venetian generated revenue per available room of $248$241 for the three months ended March 31,June 30, 2006, as compared to $237$228 for the three months ended March 31,June 30, 2005. The impact on revenues of the increase in the average daily room rate was partially offset by an increased percentage of rooms being occupied by groups at a slightly lower rate, which was driven by our strategy to emphasize The Venetian as a destination for tradeshows and groups, including filling our new meeting room space with group business.
Food and beverage revenues were $51.8$44.0 million for the three months ended March 31,June 30, 2006, an increase of $8.3$9.3 million as compared to $43.5$34.7 million for the three months ended March 31,June 30, 2005. The increase was primarily attributable to food and beverage revenues at The Venetian, which increased $8.1$7.4 million due to increased hotel occupancy and banquet business at the property.driven by our strategy discussed above.
Convention, retail and other revenues were $35.0$29.3 million for the three months ended March 31,June 30, 2006, an increase of $6.5$4.9 million as compared to $28.5$24.4 million for the three months ended March 31,June 30, 2005. The increase is primarily attributable to $3.3$1.8 million of additional revenues from The Sands Expo Center due to a strong quarter for conventionsresulting from our strategy discussed above and $2.1$1.7 million in revenues associated with the Blue Man Group performances, which began during the fourth quarter of 2005.

27


Operating Expenses

LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Operating Expenses
The breakdown of operating expenses is as follows:
             
  Three Months Ended June 30,
   
    Percent
  2006 2005 Change
       
  (In thousands, except for percentages)
Operating Expenses
            
Casino $217,244  $146,546   48.2%
Rooms  21,996   20,227   8.7%
Food and beverage  22,813   17,879   27.6%
Convention, retail and other  15,728   13,723   14.6%
Provision for doubtful accounts  3,321   782   324.7%
General and administrative  57,337   48,214   18.9%
Corporate expense  12,251   6,620   85.1%
Rental expense  3,803   3,682   3.3%
Pre-opening expense  4,354   504   763.9%
Development expense  7,861   5,562   41.3%
Depreciation and amortization  24,428   21,097   15.8%
(Gain) loss on disposal of assets  456   (158)  388.6%
          
Total operating expenses $391,592  $284,678   37.6%
          

35


             
  Three Months Ended March 31, 
  (in thousands, except for percentages) 
          Percent 
  2006  2005  Change 
Operating Expenses
            
Casino $205,344  $131,953   55.6%
Rooms  21,753   21,115   3.0%
Food and beverage  24,057   20,965   14.7%
Convention, retail and other  16,395   14,376   14.0%
Provision for doubtful accounts  4,989   3,386   47.3%
General and administrative  54,812   45,773   19.7%
Corporate expense  12,954   10,882   19.0%
Rental expense  3,707   3,705   0.1%
Pre-opening expense  2,219       
Development expense  9,168   5,175   77.2%
Depreciation and amortization  25,005   19,965   25.2%
Loss on disposal of assets  1,081   1,163   -7.1%
          
             
Total operating expenses $381,484  $278,458   37.0%
          
Operating expenses were $381.5$391.6 million for the three months ended March 31,June 30, 2006, an increase of $103.0$106.9 million as compared to $278.5$284.7 million for the three months ended March 31,June 30, 2005. The increase in operating expenses was primarily attributable to the higher operating revenues and growth of our operating businessesbusiness in Macao and to a lesser extent in Las Vegas, and Macao.as more fully described below.
Casino department expenses were $205.3$217.2 million for the three months ended March 31,June 30, 2006, an increase of $73.3$70.7 million as compared to $132.0$146.5 million for the three months ended March 31,June 30, 2005. The increase was primarily attributable to the additional casino expenses, including higher payroll and benefits, commissions, casino advertising and gross win taxes, related to the growth of our operations at The Sands Macao and increased slot machine and table games volume at The Venetian.Macao. Of the $73.3$70.7 million increase in casino expenses, $51.9$47.9 million was due to the 39.0% gross win tax on casino revenues in Macao. Despite the higher gross win tax, casino operating margins at The Sands Macao are similar to those at The Venetian primarily because of lower labor, marketing and sales expenses in Macao. For the three months ended June 30, 2006, casino expenses at The Venetian were higher than in the prior year due to higher payroll and related benefit costs, resulting from increased headcount associated with our targeted investments at the property, which include the poker room and the Blue Man and Phantom of the Opera productions, and a spike in high dollar medical claims during the quarter. Food and beverage expense increased $3.1$4.9 million, primarily related to the increased food and beverage revenue noted above.
The provision for doubtful accounts was $5.0$3.3 million for the three months ended March 31,June 30, 2006, compared to $3.4$0.8 million for the three months ended March 31,June 30, 2005. The prior year amount includes a $1.8 million recovery that did not occur during the three months ended June 30, 2006. 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 were $54.8$57.3 million for the three months ended March 31,June 30, 2006, an increase of $9.0$9.1 million as compared to $45.8$48.2 million for the three months ended March 31,June 30, 2005. The increase was attributable to the growth of our operating businesses in Las Vegas and Macao.Macao as discussed in the casino expense section above.
Corporate expense for the three months ended March 31,June 30, 2006 was $13.0$12.3 million, an increase of $2.1$5.7 million as compared to $10.9$6.6 million for the three months ended March 31,June 30, 2005. The increase was primarily attributable to $4.4$4.6 million of corporate general and administrative costs as we buildincrease our headcount in the corporate infrastructure,area to support our continued expansion activities, and $1.1 million related to stock-based compensation recorded in connection with the adoption of SFAS No. 123R.
      Pre-opening and development expenses were $4.4 million and $7.9 million, respectively, for the three months ended June 30, 2006, compared to $0.5 million and $5.6 million, respectively, for the three months ended June 30, 2005. Pre-opening expenses for the three months ended June 30, 2006 were primarily related to The Venetian Macao project and the casino expansion at The Sands Macao. We expect that pre-opening expense will increase as The Venetian Macao and The Palazzo projects approach their anticipated 2007 opening dates. The increase in development expenses was primarily related to our increased activities in Singapore, Macao, Pennsylvania and Europe.
      Depreciation and amortization expense for the three months ended June 30, 2006 was $24.4 million, an increase of $3.3 million as compared to $21.1 million for the three months ended June 30, 2005. The increase was primarily the result of placing into service various assets at The Venetian since the second quarter of 2005, including the Blue Man Group Theater, new meeting rooms and the renovation of the pool deck.

36


Interest Expense
      The following table summarizes information related to interest expense on long-term debt:
          
  Three Months Ended
  June 30,
   
  2006 2005
     
  (In thousands, except for
  percentages)
Interest cost $44,585  $23,001 
Less: Capitalized interest  (20,900)  (5,032)
       
 Interest expense, net $23,685  $17,969 
       
Cash paid for interest $37,820  $18,355 
Average total debt balance $2,301,277  $1,503,242 
Weighted average interest rate  7.8%  4.8%
      Interest expense, net of amounts capitalized, was $23.7 million for the three months ended June 30, 2006, an increase of $5.7 million as compared to $18.0 million for the three months ended June 30, 2005. Interest expense increased during the three months ended June 30, 2006 as compared to the three months ended June 30, 2005 due to an increase in interest rates and an increase in our average long-term debt balances resulting primarily from the completion of the $2.50 billion Macao credit facility, in late May 2006, to support our expansion activities in Macao. We expect that the interest expense amount will continue to increase as our long-term debt balances and interest rates increase. This increase was offset by the capitalization of $20.9 million of interest during the three months ended June 30, 2006, compared to $5.0 million of capitalized interest during the three months ended June 30, 2005. We expect that the capitalized interest amount will continue to increase as The Venetian Macao and The Palazzo projects approach their anticipated 2007 opening dates.
Other Factors Effecting Earnings
      Interest income for the three months ended June 30, 2006 was $15.0 million, an increase of $7.9 million as compared to $7.1 million for the three months ended June 30, 2005. The increase was attributable to an increase in interest rates and the increase in invested cash and cash equivalent balances, primarily from our borrowings under the Macao Credit Facility.
      Our effective income tax rate for the three months ended June 30, 2006 was 6.3%. The effective tax rate for the 2006 period was significantly lower than the United States federal statutory rate due primarily to a zero effective tax rate on our Macao net income as a result of an income tax holiday in Macao on gaming operations, which is set to expire at the end of 2008. The effective income tax rate was 11.7% for the three months ended June 30, 2005. The income tax rate was lower in the current quarter compared to the prior year quarter, primarily as a result of an increase in the mix of Macao income compared to US income.

37


Six Months Ended June 30, 2006 compared to the Six Months Ended June 30, 2005
Operating Revenues
      Our net revenues consisted of the following:
             
  Six Months Ended June 30,
   
    Percent
  2006 2005 Change
       
  (In thousands, except for percentages)
Net Revenues
            
Casino $753,844  $540,594   39.4%
Rooms  180,792   170,060   6.3%
Food and beverage  95,839   78,187   22.6%
Convention, retail and other  64,281   52,808   21.7%
          
   1,094,756   841,649   30.1%
Less — promotional allowances  (47,385)  (39,034)  -21.4%
          
Total net revenues $1,047,371  $802,615   30.5%
          
      Consolidated net revenues were $1.05 billion for the six months ended June 30, 2006, an increase of $244.8 million compared to $802.6 million for the six months ended June 30, 2005. The increase in net revenues was due primarily to an increase in casino revenue of $213.2 million. This increase is primarily attributable to the growth of our casino operations at The Sands Macao and the formal introduction of our Rolling Chip program in March 2005.
      Casino revenues were $753.8 million for the six months ended June 30, 2006, an increase of $213.2 million as compared to $540.6 million for the six months ended June 30, 2005. Of the increase, $213.3 million was attributable to the growth of our casino operations at The Sands Macao and the formal introduction of our Rolling Chip program in March 2005. For the six months ended June 30, 2006, table games drop (the Non-Rolling chip portion) at The Sands Macao increased $171.4 million to $2.10 billion and the related win percentage increased 3.1 percentage points to 18.6% as compared to the six months ended June 30, 2005. In addition, the Rolling Chip volume increased $5.11 billion to $7.96 billion and the related win percentage increased from 2.5% to 2.8% as compared to the six months ended June 30, 2005. For the six months ended June 30, 2006, The Venetian’s casino revenues decreased $0.1 million to $168.5 million. Table games drop increased $55.3 million to $617.7 million; however, the related win percentage dropped 1.2 percentage points to 20.3% as compared to the six months ended June 30, 2005. Slot handle at The Venetian increased from $1.00 billion to $1.05 billion; however, the related win percentage decreased from 6.5% to 6.3% as compared to the six months ended June 30, 2005. 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 for the six months ended June 30, 2006 were $180.8 million, an increase of $10.7 million as compared to $170.1 million for the six months ended June 30, 2005. The increase was attributable to the increase in average daily room rate from $237 for the six months ended June 30, 2005 to $246 for the six months ended June 30, 2006, as well as an increase in occupancy rate from 98.3% for the six months ended June 30, 2005 to 99.7% for the six months ended June 30, 2006 at The Venetian. The Venetian generated revenue per available room of $245 for the six months ended June 30, 2006, as compared to $233 for the six months ended June 30, 2005. The increase in the average daily room rate was partially offset by an increased percentage of rooms being occupied by groups at a slightly lower rate, which was driven by our strategy to emphasize The Venetian as a destination for tradeshows and groups, including filling our new meeting room space with group business.
      Food and beverage revenues were $95.8 million for the six months ended June 30, 2006, an increase of $17.6 million as compared to $78.2 million for the six months ended June 30, 2005. The increase was primarily

38


attributable to food and beverage revenues at The Venetian, which increased $15.5 million due to increased hotel occupancy and banquet business at the property driven by our strategy discussed above.
      Convention, retail and other revenues were $64.3 million for the six months ended June 30, 2006, an increase of $11.5 million as compared to $52.8 million for the six months ended June 30, 2005. The increase is primarily attributable to $5.1 million of additional revenues from The Sands Expo Center resulting from our strategy discussed above and $3.8 million in revenues associated with the Blue Man Group performances, which began during the fourth quarter of 2005.
Operating Expenses
      The breakdown of operating expenses is as follows:
             
  Six Months Ended June 30,
   
    Percent
  2006 2005 Change
       
  (In thousands, except for percentages)
Operating Expenses
            
Casino $422,586  $278,499   51.7%
Rooms  43,748   41,342   5.8%
Food and beverage  46,871   38,844   20.7%
Convention, retail and other  32,122   28,099   14.3%
Provision for doubtful accounts  8,310   4,168   99.4%
General and administrative  112,152   93,987   19.3%
Corporate expense  25,205   17,502   44.0%
Rental expense  7,510   7,387   1.7%
Pre-opening expense  6,573   504   1,204.2%
Development expense  17,029   10,737   58.6%
Depreciation and amortization  49,433   41,062   20.4%
Loss on disposal of assets  1,537   1,005   52.9%
          
Total operating expenses $773,076  $563,136   37.3%
          
      Operating expenses were $773.1 million for the six months ended June 30, 2006, an increase of $210.0 million as compared to $563.1 million for the six months ended June 30, 2005. The increase in operating expenses was primarily attributable to the higher operating revenues and growth of our operating businesses in Macao and to a lesser extent in Las Vegas, as more fully described below:
      Casino department expenses were $422.6 million for the six months ended June 30, 2006, an increase of $144.1 million as compared to $278.5 million for the six months ended June 30, 2005. The increase was primarily attributable to the additional casino expenses related to the growth of our operations at The Sands Macao and increased slot machine and table games volume at The Venetian. Of the $144.1 million increase in casino expenses, $99.7 million was due to the 39.0% gross win tax on casino revenues in Macao. Despite the higher gross win tax, casino operating margins at The Sands Macao are similar to those at The Venetian primarily because of lower labor, marketing and sales expenses in Macao. For the six months ended June 30, 2006, casino expenses at The Venetian were higher than in the prior year due to higher payroll and related benefit costs, resulting from increased headcount associated with our targeted investments at the property, which include the poker room and the Blue Man and Phantom of the Opera productions, and a spike in high dollar medical claims during the six months ended June 30, 2006. Food and beverage expense increased $8.0 million, primarily related to the increased food and beverage revenue noted above.
      The provision for doubtful accounts was $8.3 million for the six months ended June 30, 2006, compared to $4.2 million for the six months ended June 30, 2005. The prior year amount includes a $1.8 million recovery that did not occur during the three months ended June 30, 2006. The amount of this provision can vary over

39


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 were $112.2 million for the six months ended June 30, 2006, an increase of $18.2 million as compared to $94.0 million for the six months ended June 30, 2005. The increase was attributable to the growth of our operating businesses in Las Vegas and Macao as discussed in the casino section above.
      Corporate expense for the six months ended June 30, 2006 was $25.2 million, an increase of $7.7 million as compared to $17.5 million for the six months ended June 30, 2005. The increase was primarily attributable to $9.3 million of corporate general and administrative costs as we increase our headcount in the corporate area to support our continued expansion activities, $1.3 million related to stock offering costs associated with a sale by certain trusts established for the benefit of our principal stockholder and his family in a secondary public offering of stock in March 2006 and $1.1$2.1 million related to stock-based compensation recorded in connection

28


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
with the adoption of SFAS No. 123R, partially offset by a $5.0 million charitable contribution that was made in the first quarter of 2005 that did not recur in 2006.
Pre-opening and development expenses were $2.2$6.6 million and $9.2$17.0 million, respectively, for the threesix months ended March 31,June 30, 2006, compared to $0.0$0.5 million and $5.2$10.7 million, respectively, for the threesix months ended March 31,June 30, 2005. Pre-opening expenses for the threesix months ended March 31,June 30, 2006 were primarily related to The Venetian Macao project and the openingexpansion of the poker room at The Venetian.Sands Macao. We expect that pre-opening expense will increase as The Venetian Macao and The Palazzo projects approach their anticipated 2007 opening dates. The increase in development expenses was primarily related to our increased activities in Singapore, Macao, Pennsylvania, and Pennsylvania.Europe.
Depreciation and amortization expense for the threesix months ended March 31,June 30, 2006 was $25.0$49.4 million, an increase of $5.0$8.4 million as compared to $20.0$41.0 million for the threesix months ended March 31,June 30, 2005. The increase was primarily the result of placing into service various assets at The Venetian since the firstsecond quarter of 2005, including the Blue Man Group Theater, new meeting rooms and the renovation of the pool deck.
Interest Expense
Interest Expense
The following table summarizes information related to interest expense on long-term debt:
          
  Six Months Ended June 30,
   
  2006 2005
     
  (In thousands, except
  for percentages)
Interest cost $74,313  $54,189 
Less: Capitalized interest  (29,213)  (9,137)
       
 Interest expense, net $45,100  $45,052 
       
Cash paid for interest $69,725  $51,494 
Average total debt balance $1,978,690  $1,563,938 
Weighted average interest rate  7.5%  5.2%
         
  Three Months Ended March 31, 
  (in thousands, except for percentages) 
  2006  2005 
Interest cost $29,728  $31,188 
Less: Capitalized interest  (8,313)  (4,105)
       
         
Interest expense, net $21,415  $27,083 
       
         
Cash paid for interest, net of amounts capitalized $31,905  $33,139 
Average total debt balance $1,652,519  $1,625,309 
Weighted average interest rate  7.1%  7.7%
Interest expense, net of amounts capitalized, was $21.4$45.1 million for each of the threesix months ended March 31,June 30, 2006 a decrease of $5.7 millionand June 30, 2005. Interest expense increased during the six months ended June 30, 2006 as compared to $27.1 million for the threesix months ended March 31, 2005.June 30, 2005 due to an increase in interest rates and an increase in our average long-term debt balances resulting primarily from the completion of the $2.50 billion Macao credit facility, in late May 2006, to support our expansion activities in Macao. We expect that the interest expense amount will continue to increase as our long-term debt balances and interest rates increase. This decrease is primarily attributable to the redemption of our subsidiaries’ 11% mortgage notes, which were replaced during the quarter ended March 31, 2005 with a combination of senior notes bearing interest at a rate of 6.375% and lower cost bank debt, and the redemption of Venetian Macau Limited’s $120.0 million floating rate notes during the second quarter of 2005. The decreaseincrease was also due tooffset by the capitalization of $8.3$29.2 million of interest during the first quartersix months of 2006 compared to $4.1$9.1 million of

40


capitalized interest in the first quartersix months of 2005. We expect that the capitalized interest amount will continue to increase as The Venetian Macao and The Palazzo projects approach their 2007 opening dates.
Other Factors Effecting Earnings
Interest income for the threesix months ended March 31,June 30, 2006 was $10.2$25.2 million, an increase of $2.8$10.7 million as compared to $7.4$14.5 million for the threesix months ended March 31,June 30, 2005. The increase was primarily attributable to thean increase in interest rates thatand the Company’sincrease in invested cash and cash equivalent balances, were earning as compared toprimarily from our borrowings under the first quarter of 2005.Macao Credit Facility.
The loss on early retirement of debt of $132.8 million for the three months ended March 31, 2005 was the result of the redemption and repurchase of our subsidiaries’ 11% mortgage notes.
Our effective income tax rate for the threesix months ended March 31,June 30, 2006 was 11.7%9.2%. The effective income tax rate for the 2006 period was significantly lower than the United States federal statutory rate due primarily

29


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
to a zero effective tax rate on our Macao net income as a result of an income tax holiday in Macao on gaming operations, which is set to expire at the end of 2008. The effective tax rate was - -126.2%-32.4% for the threesix months ended March 31,June 30, 2005 primarily due to the tax benefit associated with the loss on early retirement of debt in the 2005 period, as well as the application of the aforementioned Macao income tax holiday.
Liquidity and Capital Resources
Cash Flows — Summary
Cash FlowsSummary
Our cash flows consisted of the following:
          
  Six Months Ended June 30,
   
  2006 2005
     
  (In thousands)
Net cash provided by operations $97,181  $283,527 
       
Investing cash flows:        
 Capital expenditures  (730,475)  (373,565)
 Change in restricted cash  (1,034,881)  (5,181)
       
Net cash used in investing activities  (1,765,356)  (378,746)
       
Financing cash flows:        
 Dividends to shareholders     (21,052)
 Repayments of long-term debt  (79,607)  (966,688)
 Proceeds of long term-debt  1,609,204   563,222 
 Other  (37,244)  (124,967)
       
Net cash provided by (used in) financing activities  1,492,353   (549,485)
       
Effect of exchange rate on cash  975    
       
Net decrease in cash and cash equivalents $(174,847) $(644,704)
       
         
  Three Months Ended March 31, 
  (in thousands) 
  2006  2005 
Net cash provided by operations $145,826  $79,123 
       
         
Investing cash flows:        
Capital expenditures  (294,233)  (152,164)
Change in restricted cash  (47,786)  (4,481)
       
         
Net cash used in investing activities  (342,019)  (156,645)
       
         
Financing cash flows:        
Dividends to shareholders     (21,052)
Repayments of long-term debt  (52,151)  (844,974)
Proceeds of long term-debt  106,204   552,754 
Other  2,496   (104,493)
       
         
Net cash provided by (used in) financing activities  56,549   (417,765)
       
         
Effect of exchange rate on cash  75    
       
         
Net decrease in cash and cash equivalents $(139,569) $(495,287)
       
Cash Flows — Operating Activities
Cash Flows — Operating Activities
The Venetian’s slot machine and retail hotel rooms businesses are generally conducted on a cash basis, its table games and group hotel businesses are conducted on a cash and credit basis and its banquet business is conducted primarily on a credit basis resulting in operating cash flows being generally affected by changes in operating income and accounts receivables. The Sands Macao table games and slot machine play is currently conducted primarily on a cash basis. As of March 31, 2006 and December 31, 2005, we held unrestricted cash and cash equivalents of $317.2 million and $456.8 million, respectively. Net cash provided by operating activities for the threesix months ended March 31,June 30, 2006 was $145.8$97.2 million, an increasea decrease of $66.7$186.3 million as compared with $79.1$283.5 million for the threesix months ended March 31,June 30, 2005. FactorsThe main factor contributing to the increasedecrease in cash flowflows provided by operating activities were primarily anwas a significant increase in prepaid expenses and other assets, primarily as a result of payments made to the operating results at TheSingapore government for deposits on the Marina Bay Sands Macao and certain positive changesdevelopment project in our working capital assets and liabilities.Singapore.

30

41


Cash Flows — Investing Activities
LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Cash Flows — Investing Activities
Capital expenditures for the threesix months ended March 31,June 30, 2006 totaled $294.2$730.5 million, including $22.7$58.7 million on expansions, improvements and maintenance capital expenditures at The Venetian and The Sands Expo Center in Las Vegas; $196.0$468.1 million for construction and development activities in Macao (including The Sands Macao and The Venetian Macao on the Cotai Strip); and $75.5$203.7 million for The Palazzo.
Restricted cash increased $47.8 million$1.03 billion for the six months ended June 30, 2006, primarily as a result of depositing $37.0adding $984.2 million in anet restricted account as part ofcash and cash equivalents from the Company’s applicationMacao Credit Facility to be used for a gaming license in Singapore.Macao related construction.
Cash Flows — Financing Activities
Cash Flows — Financing Activities
For the threesix months ended March 31,June 30, 2006, net cash flows provided from financing activities were $56.5 million.$1.49 billion. The net increase was primarily attributable to the borrowing of $92.1$1.33 billion under the Macao credit facility, $229.1 million from the senior secured revolving facility and $14.0$30.0 million from the Phase II Mall Construction Loan, offset by the repayment of the $50.0 million credit facility of Venetian Venture Development Intermediate credit facility.Limited.
Capital and Liquidity
      As of June 30, 2006 and Liquidity
December 31, 2005, we held unrestricted cash and cash equivalents of $282.0 million and $456.8 million, respectively. We expect to fund our operations, capital expenditures at The Venetian, The Sands Expo Center and The Sands Macao (other than The Sands Macao expansion construction, The Palazzo, the Phase II mall, The Venetian Macao, our other Cotai Strip developments and related Cotai Strip infrastructure development and construction costs)construction) and debt service requirements from existing cash balances, operating cash flow and borrowings under our Las Vegas and Macao revolving credit facility.facilities. We have a $450.0 million senior secured revolving credit facility in Las Vegas and a senior secured $500.0 million revolving credit facility in Macao for working capital needs, of which $326.9$189.9 million wasand $475.0 million, respectively, were available as of March 31,June 30, 2006.
We have commenced construction of The Palazzo and plan to continue work on The Palazzo during 2006. We currently estimate that construction will be completed in the fall of 2007 and that our cost to develop and construct The Palazzo could reach as high as approximately $1.8 billion (exclusive of land), of which the Phase II mall is expected to cost approximately $280.0 million (exclusive of certain incentive payments to executives made in July 2004). In addition, we expect that tenants will make significant additional capital expenditures to build out stores and restaurants located in The Palazzo. As of March 31,June 30, 2006, we had paid $581.5$710.1 million in design, development and construction costs for The Palazzo. We intend to use $361.8 million (plus the interest earnings) of the proceeds from the $970.0 million Term B Facility and $200.0 million from the Term B Delayed Draw Facility from the Senior Secured Credit Facility, $221.5$191.5 million of proceeds from the Phase II Mall Construction Loan, cash on hand, borrowings under the Revolving Facility under the Senior Secured Credit Facility and operating cash flow to fund the development and construction costs for The Palazzo (including the Phase II mall) and to pay related fees and expenses.
We currently estimate that the cost for The Venetian Macao will be approximately $2.3 billion (exclusive of land) and that we will need to arrange additional debt financing to finance these costs. We have not yet finalized our estimate      On May 25, 2006, two subsidiaries of the cost of our other Cotai Strip developments. We are in the process of obtainingCompany, VML US Finance LLC (the “Borrower”) and Venetian Macau Limited, as guarantor, entered into a new $2.5 billion senior secured credit facilityagreement (the “Macao Credit Facility”) for the partial funding of The Sands Macao expansion, and partial funding for the construction of The Venetian Macao and some of our other Cotai Strip developments. The documentation forMacao Credit Facility consists of a $1.20 billion funded term B loan (the “Macao Term B Facility”), a $700.0 million delayed draw term B loan (the “Macao Term B Delayed Draw Facility”), a $100.0 million local currency term loan (the “Macao Local Term Facility”) and a $500.0 million revolving credit facility (the “Macao Revolving Facility”). As of June 30, 2006, $1.3 billion has been drawn under the new facility is being finalizedMacao Term B Facility and the potential lenders are not yet legally committed to lendMacao Local Term Facility and $25.0 million has been drawn under the funds. The credit facility is expected to close in MayMacao Revolving Facility. No amounts have been drawn under the Macao Term B Delayed Draw Facility as of June 30, 2006. In addition, all of The Sands Macao’s cash flows are expected to be used to finance a portion of the construction of The Venetian Macao and certain other Macao developments. Therefore,

42


      We currently estimate that the cost of developing and building The Venetian Macao will be approximately $2.3 billion (exclusive of land); however, we may needhave not yet finalized our estimate of the costs of our other Cotai Strip developments. We will have to incur additional debt to finance The Venetian Macao, and other Macao developments and our Cotai Strip developments if The Sands Macao’s cash flows, existing cash balances, and available borrowings are not sufficient. We also expect that our other Cotai Strip developmentsUnder the Macao credit facility, the Company is required to secure the land concession in order to fully draw against the facility. If we are unable to complete The Venetian Macao land concession negotiations within a specified period of time, we will not be able to draw any further funds from the Macao credit facility in order to fund construction activities and we will have to seek additional financing.
      In May 2006, the Company was selected by the Singapore government to build and operate the Marina Bay Integrated Resort (IR) in Singapore, which will be financeda large integrated resort, including a casino. As a result of being selected to build the project, the Company is required to pay the Singapore government $1.20 billion Singapore dollars (approximately $751.1 million at exchange rates in large part by additional debt.effect on June 30, 2006) in premiums for use of the land where the resort will be built and $298.2 million Singapore dollars (approximately $186.7 million at exchange rates in effect on June 30, 2006) for various taxes and other fees. As of June 30, 2006, the Company had paid $300.0 million Singapore dollars (approximately $187.8 million at exchange rates in effect on June 30, 2006) related to the land premium payments. The remaining amount of $1.20 billion Singapore dollars (approximately $751.1 million at exchange rates in effect on June 30, 2006) is due on August 24, 2006. The Company is currently in the process of obtaining bridge financing to cover the above payments as well as the initial development costs for the project.
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 straightforwardsimple interest rate caps. During 1997, we entered into off-balance sheetoperating lease arrangements with the HVAC provider. Under the terms of these energy service agreements, we will purchase HVAC energy and services over initial terms expiring in 2009 with an

31


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
option to collectively extend the terms of these agreements for two consecutive five-year periods. We have fixed payment obligations due during the next twelve months of $6.8 million under the energy services agreements with the HVAC provider. The total remaining payment obligations under these arrangements was $22.2$20.5 million as of March 31,June 30, 2006, payable in equal monthly installments through July 1, 2009. We have the right to terminate the agreement based upon the failure of the HVAC provider to provide HVAC services. Upon the sale of The Grand Canal Shops mall on May 17, 2004, GGP assumed the responsibility for $1.6 million of annual payments to the HVAC provider. We have no other off-balance sheet arrangements.
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 Las Vegas Sands, LLC contain significant restrictions on the payment of dividends and distributions to us by Las Vegas Sands, LLC. In particular, the Senior Secured Credit Facility prohibits Las Vegas Sands, LLC from paying dividends or making distributions to us, or investing in us, with limited exceptions. Las Vegas Sands, LLC may distributemake certain distributions to us up to cover taxes and certain reasonable and customary operating costs. In addition, Las Vegas Sands, LLC may make distributions to us in order to enable us to pay dividends on our common stock so long as construction of The Palazzo is substantially complete and certain financial leverage tests are satisfied, which distributions may not exceed $25.0 million or $50.0 million in dividend payments in aduring any twelve-month period after the substantial completion of The Palazzo, depending on whether certainour financial tests are met.leverage ratio at the time of such distributions.
In addition, the debt instrument of our subsidiary, Phase II Mall Subsidiary, LLC (the “Phase II Mall Subsidiary”), also restricts the payment of dividends and distributions to us. Subject to limited exceptions, the Phase II Mall Construction Loan prohibits the Phase II Mall Subsidiary from paying dividends or making distributions to us, or making investments in us, other than tax distributions and a limited basket amount.

43


The debt instruments of our subsidiaries, also contain, andincluding the proposed new Macao credit facility for the construction of The Venetian Macao is expected to contain certain restrictions that, among other things, limit the ability of our 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 our assets of our company without prior approval of the lenders or noteholders. Financial covenants included in our Senior Secured Credit Facility and our Macao credit facility include a minimum interest coverage ratio, a maximum leverage ratio, a minimum net worth covenant and maximum capital expenditure limitations.
Inflation
We believe that inflation and changing prices have not had a material impact on our net sales, revenues or income from continuing operations during the past year.
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 its 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:
  general economic and business conditions which may impact levels of disposable income, consumer spending and pricing of hotel rooms;
 
  the uncertainty of tourist behavior related to spending and vacationing at casino resorts in Las Vegas and Macao;

32


LAS VEGAS SANDS CORP.
ITEM 2 — MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
  disruptions or reductions in travel due to conflicts with Iraq and any future terrorist incidents;
 
  outbreaks of infectious diseases, such as severe acute respiratory syndrome or avian flu, in our market areas;
 
  our dependence upon three properties in two markets for all of our cash flow;
 
  new developments, construction and ventures, including The Palazzo, The Venetian Macao and other Cotai Strip developments;developments, and the development in Singapore;
 
  the passage of new legislation and receipt of governmental approvals for our proposed developments in Macao, Singapore, the United Kingdom and other jurisdictions where we are planning to operate;
 
  our substantial leverage and debt service (including sensitivity to fluctuations in interest rates and other capital markets trends);
 
  our insurance coverage, including the risk that we have not obtained sufficient coverage against acts of terrorism or will only be able to obtain additional coverage at significantly increased rates;
 
  government regulation of the casino industry, including gaming license regulation, the legalization of gaming in certain domestic jurisdictions, including Native American reservations, and regulation of gaming on the Internet;
 
  increased competition and additional construction in Las Vegas, including recent and upcoming increases in hotel rooms, meeting and convention space and retail space;

44


  fluctuations in the demand for all-suites rooms, occupancy rates and average daily room rates in Las Vegas;
 
  the popularity of Las Vegas as a convention and trade show destination;
 
  new taxes or changes to existing tax rates;
 
  our ability to meet certain development deadlines in Macao;Macao and Singapore;
 
  our ability to maintain our gaming subconcession in Macao;
 
  the completion of infrastructure projects in Macao;
 
  increased competition and other planned construction projects in Macao; and
 
  any 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.

33


LAS VEGAS SANDS CORP.
ITEMItem 3 — QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKQuantitative 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. Our primary exposure to market risk is interest rate risk associated with our long-term debt. We attempt to manage our interest rate risk by managing the mix of our long-term fixed-rate borrowings and variable rate borrowings, and by use of interest rate cap agreements. The ability to enter into interest rate cap agreements allows us to manage our interest rate risk associated with our variable rate debt. We do not hold or issue financial instruments for trading purposes and do not enter into derivative transactions that would be considered speculative positions. Our derivative financial instruments consist exclusively of interest rate cap 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 agreements, we enter 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 our credit facilities, which management believes further minimizes the risk of nonperformance.

45


The table below provides information about our 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 years ending March 31:June 30:
                                 
                              Fair 
  2007  2008  2009  2010  2011  Thereafter  Total  Value(1) 
  (dollars in millions) 
LIABILITIES
                                
Short-term debt
                                
Variable rate $7.5                 $7.5  $7.5 
Average interest rate (2)  8.5%                 8.5%  8.5%
Long-term debt
                                
Fixed rate                $250.0  $250.0  $241.9 
Average interest rate (2)                 6.4%  6.4%  6.4%
Variable rate    $140.2  $15.9  $134.9  $856.3  $284.5  $1,431.8  $1,431.8 
Average interest rate (2)     8.1%  7.1%  6.8%  6.8%  6.8%  6.9%  6.9%
Cap Agreement (3)
           0.8         0.8   0.8 
Average interest rate                        
                                 
                Fair
  2007 2008 2009 2010 2011 Thereafter Total Value(1)
                 
  (Dollars in millions)
LIABILITIES
                                
Short-term debt
                                
Variable rate $6.1                 $6.1  $7.5 
Average interest rate(2)  9.0%                 9.0%  8.5%
Long-term debt
                                
Fixed rate                $250.0  $250.0  $233.8 
Average interest rate(2)                 6.4%  6.4%  6.4%
Variable rate    $158.2  $52.9  $308.9  $1,224.8  $1,164.0  $2,908.8  $2,908.8 
Average interest rate(2)     8.4%  7.6%  7.3%  7.3%  8.3%  7.7%  7.7%
Cap Agreement(3)
          $1.1        $1.1  $1.1 
Average interest rate                        
 
1. The fair values are based on the borrowing rates currently available for debt instruments with similar terms and maturities and market quotes of our publicly traded debt.
 
2. Based upon contractual interest rates for fixed rate indebtedness or current LIBOR rates for variable rate indebtedness.
 
3. As of March 31,June 30, 2006, we have threefour interest rate cap agreements with a fair value of $0.8$1.1 million based on a quoted market value from the institution holding the agreement.
Borrowings under the Senior Secured Credit Facility bear interest at our election at either LIBOR plus 1.75% or the base rate plus 0.75% per annum, subject to downward adjustments based upon our credit rating. Borrowings under the $250.0 million Phase II Mall Construction Loan facility bear interest at our election at either a base rate plus 0.75% per annum or at LIBOR plus 1.75% per annum. Borrowings under the Interface Mortgage Loan bear interest at an interest rate equal to LIBOR plus 3.75%. Borrowings under the Macao Credit facility bear interest at our election, at either an adjusted Eurodollar rate (or in the case of the Local Term Loan, adjusted HIBOR) plus 2.75% per annum or at an alternative base rate plus 1.75% per annum, and is subject to a downward adjustment of 0.25% per annum from the beginning of the first interest period following the substantial completion of the Venetian Macao.
Foreign currency transaction gains and losses were not material to our results of operations for the threesix months ended March 31,June 30, 2006, but may be in future periods in relation to activity associated with our Macao subsidiaries. We do not hedge our exposure to foreign currency; however, we maintain a significant amount of our operating funds in the same currencies in which we have obligations thereby reducing our exposure to currency fluctuations.
See also “Liquidity and Capital Resources”.

34


LAS VEGAS SANDS CORP.
ITEMItem 4CONTROLS AND PROCEDURESControls and Procedures
Evaluation of Disclosure Controls and Procedures
Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. The Company’s Chief Executive Officer and its Chief Financial Officer have evaluated the disclosure controls and procedures (as defined in the Securities Exchange Act of 1934

46


Rules 13a-15(e) and15d-15(e)) of the Company as of March 31,June 30, 2006 and have concluded that they are effective.effective to provide reasonable assurance that the desired control objectives were achieved.
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.
Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

35


LAS VEGAS SANDS CORP.
Part II
OTHER INFORMATION
ITEMItem 1LEGAL PROCEEDINGSLegal Proceedings
The Company is party to litigation matters and claims related to its operations. For more information, see the Company’s Annual Report on Form 10-K for the year ended December 31, 2005 and “Part I  Item 1  Notes to Condensed Consolidated Financial Statements  Note 6  Commitments and Contingencies” of this Quarterly Report on Form 10-Q.
ITEMItem 1ARISK FACTORSRisk Factors
There have been no material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005.
ITEMItem 2UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDSUnregistered Sales of Equity Securities and Use of Proceeds
Uses of Proceeds from Registered Securities
On December 20, 2004, we issued all of the 27,380,953 shares of our common stock we registered in an initial public offering at an offering price of $29.00 per share (Reg. No. 333-118827), effective December 14, 2004. The aggregate offering price of the common stock sold (including the exercise by the managing underwriters of their over-allotment option) resulted in gross proceeds of $794.0 million and net proceeds of approximately $738.7 million to us after deducting underwriting discounts and commissions of $49.6 million and related offering expenses of $5.7 million none of which was paid to the underwriters. The managing underwriters for the offering were Goldman, Sachs & Co., Citigroup, JP Morgan, Lehman Brothers, Merrill Lynch & Co, UBS Investment Bank, and Jeffries & Company, Inc. None of the expenses we incurred in connection with the offering were direct or indirect payments to our directors, officers, general partners or their associates, to persons owning 10% or more of our equity securities or to our affiliates (collectively “Related Parties”).
During the first quarter of 2005, we used $327.3 million of the approximately $738.7 million in net proceeds from our initial public offering to redeem approximately $291.1 million in principal amount of the 11% mortgage notes issued by Las Vegas Sands, Inc. and Venetian Casino Resort, LLC and to pay $36.2 million in related premiums and accrued interest and expenses. During the second quarter of 2005, we used $70.0 million of the net proceeds to redeem the VML senior secured notes. None of the amounts paid to redeem the 11% mortgage notes or the VML senior secured notes were paid to Related Parties. In addition, during 2005, we used approximately $149.4 million (net of interest income) of the net proceeds for other general corporate purposes. During the first quarter of 2006, we used approximately $128.0 million of the net proceeds for other general corporate purposes, including an amount for a gaming license, which is recoverable

47


if the license is not awarded.

36


LAS VEGAS SANDS CORP. During the second quarter of 2006, we used approximately $64.0 million of the net proceeds for other general corporate purposes, including an amount for a deposit on our development project in Singapore, which will be reimbursed when financing is obtained for the project. As of June 30, 2006, all of the net proceeds from the initial public offering had been used.
ITEM 6Item 4 EXHIBITSSubmission of Matters to a Vote of Security Holders
      The Company’s annual meeting of stockholders was held on June 7, 2006. At the annual meeting, votes were taken for: (1) the election of directors and (2) the ratification of the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.
      The Company’s stockholders elected William P. Weidner and Michael A. Leven to serve on the Board of Directors as Class II directors for three-year terms, which will expire in 2009. The service of Charles D. Forman and Irwin A. Siegel as Class I directors and Sheldon G. Adelson, Irwin A. Chafetz and James L. Purcell as Class III directors continued after the meeting. Stockholders also ratified the selection of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm.
      The following tables provide details regarding the number of votes cast by the Company’s stockholders with respect to each of the matters indicated above.
      Election of directors:
         
Nominees for Director Votes For Votes Withheld
     
William P. Weidner  322,274,733   22,449,967 
Michael A. Leven  338,857,296   5,867,404 
      Ratification of Independent Registered Public Accounting Firm:
               
Votes For Votes Against Abstentions Broker Non-Votes
       
 344,655,041   47,743   21,915   0 
Item 6 —Exhibits
List of Exhibits
   
Exhibit No. Description of Document
10.1Credit Agreement, dated as of May 25, 2006, by and among VML US Finance LLC, Venetian Macau Limited, the financial institutions listed therein as lenders, The Bank of Nova Scotia, Banco Nacional Ultramarino, S.A., Sumitomo Mitsui Banking Corporation, Goldman Sachs Credit Partners L.P., Lehman Brothers Inc. and Citigroup Global Markets, Inc.
10.2Disbursement Agreement, dated as of May 25, 2006, by and among VML US Finance LLC, Venetian Cotai Limited, Venetian Macau Limited and The Bank of Nova Scotia.
10.3Employment Agreement, dated as of June 1, 2006, among Las Vegas Sands Corp., Las Vegas Sands, LLC and Robert Rozek.
10.4Amendment No. 1, dated as of June 20, 2006 and effective as of June 8, 2006, to Employment Agreement, dated as of November 18, 2004, among Las Vegas Sands Corp., Las Vegas Sands, LLC and Scott D. Henry.
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 31.2
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 32.1
32.1 Certification of Chief Executive Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 32.2
32.2 Certification of Chief Financial Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

37

48


LAS VEGAS SANDS CORP.
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 CORP.
 By: /s/ Sheldon G. Adelson
  
 LAS VEGAS SANDS CORP.
May 10, 2006By:/s/ Sheldon G. Adelson
Sheldon G. Adelson
 Chairman of the Board and
Chief Executive Officer
August 9, 2006
By: /s/ Robert P. Rozek
  
 Chief Executive OfficerRobert P. Rozek
May 10, 2006By:/s/ Scott Henry
Scott Henry
 Senior Vice President and
Chief Financial Officer
August 9, 2006

38

49


LAS VEGAS SANDS CORP.
EXHIBIT INDEX
   
Exhibit No. Description of Document
10.1Credit Agreement, dated as of May 25, 2006, by and among VML US Finance LLC, Venetian Macau Limited, the financial institutions listed therein as lenders, The Bank of Nova Scotia, Banco Nacional Ultramarino, S.A., Sumitomo Mitsui Banking Corporation, Goldman Sachs Credit Partners L.P., Lehman Brothers Inc. and Citigroup Global Markets, Inc.
10.2Disbursement Agreement, dated as of May 25, 2006, by and among VML US Finance LLC, Venetian Cotai Limited, Venetian Macau Limited and The Bank of Nova Scotia.
10.3Employment Agreement, dated as of June 1, 2006, among Las Vegas Sands Corp., Las Vegas Sands, LLC and Robert Rozek.
10.4Amendment No. 1, dated as of June 20, 2006 and effective as of June 8, 2006, to Employment Agreement, dated as of November 18, 2004, among Las Vegas Sands Corp., Las Vegas Sands, LLC and Scott D. Henry.
31.1 Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 31.2
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 32.1
32.1 Certification of Chief Executive Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 32.2
32.2 Certification of Chief Financial Officer of Las Vegas Sands Corp. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.