Table of Contents
FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a–16 OR 15d–16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of September 2012
Commission File Number: 001-33178
MELCO CROWN ENTERTAINMENT LIMITED
36th Floor, The Centrium
60 Wyndham Street
Central
Hong Kong
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20–F or Form 40–F. Form 20-F x Form 40-F ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3–2(b) under the Securities Exchange Act of 1934. Yes ¨ No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3–2(b): 82– N/A
Table of Contents
MELCO CROWN ENTERTAINMENT LIMITED
Form 6–K
TABLE OF CONTENTS
Table of Contents
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.
| MELCO CROWN ENTERTAINMENT LIMITED | ||
| By: | /s/ Geoffrey Davis | |
| Name: | Geoffrey Davis, CFA | |
| Title: | Chief Financial Officer | |
Date: September 21, 2012
3
Table of Contents
EXHIBIT INDEX
| Exhibit |
Description | |
| 99.1 | 2012 Interim Report, filed with The Stock Exchange of Hong Kong Limited on September 21, 2012 | |
Melco Crown Entertainment
Melco Crown Entertainment Limited
Contents
| 2 |
|
Financial Highlights |
| 3 |
|
Market Overview and Key Highlights |
| 6 |
|
Business Overview |
10 Management Discussion and Analysis
30 Other Information
54 Report on Review of Unaudited Condensed
Consolidated Financial Statements
56 Unaudited Condensed Consolidated Balance Sheet
58 Unaudited Condensed Consolidated
Statement of Operations
60 Unaudited Condensed Consolidated
Statement of Comprehensive Income
61 Unaudited Condensed Consolidated
Statement of Shareholders’ Equity
63 Unaudited Condensed Consolidated
Statement of Cash Flows
65 Notes to Unaudited Condensed Consolidated
Financial Statements
93 Corporate Information
96 De? nitions and Glossary
This interim report is prepared in both English and Chinese and in the event of inconsistency, the
English text of this interim report shall prevail over the Chinese text.
FINANCIAL HIGHLIGHTS
Net revenues US$1.97 billion
Net revenues for the six months ended June 30, 2012 were US$1.97 billion, an
increase of US$198.8 million, or 11.3%, as compared with US$1.77 billion for the six
months ended June 30, 2011.
Net income US$204.4 million
Net income attributable to Melco Crown Entertainment was US$204.4 million for the
six months ended June 30, 2012, as compared with net income of US$73.8 million for
the six months ended June 30, 2011.
Basic net income per Share US$0.124
Basic net income per Share attributable to Melco Crown Entertainment was US$0.124
for the six months ended June 30, 2012, as compared to basic net income per Share
of US$0.046 for the six months ended June 30, 2011.
Adjusted EBITDA US$446.4 million
Adjusted EBITDA for the six months ended June 30, 2012 was US$446.4 million,
representing an increase of US$108.8 million, or 32.2%, as compared to US$337.6
million for the six months ended June 30, 2011.
| 2 |
|
INTERIM REPORT 2012 Melco Crown Entertainment Limited |
MARKET OVERVIEW AND
KEY HIGHLIGHTS
Macau Market
In the ? rst six months of 2012, market-wide gross gaming revenues in Macau grew
by 19.8% over the comparable period of 2011, primarily driven by the strength of the
mass market table games segment which grew at 35.7% over this same period. The
rolling chip segment continues to contribute the majority of gross gaming revenues
in Macau, with 71% of the total during the ? rst six months of 2012, with mass market
table games and gaming machine segments contributing 25% and 4% over the same
period, respectively.
Despite challenges in the global economy, Macau continues to deliver meaningful
growth, particularly in the mass market table games segment. We remain con? dent in
the future of Macau and believe our outlook is well supported by the long term growth,
and increasing consumerism, in its core feeder market, China, as well as a progressive
and stable regulatory environment. Moreover, the exciting infrastructure and
development blueprint for Macau and the broader region, including the Intercity Mass
Rapid Transit rail network in China, Hong Kong-Zhuhai-Macau Bridge, the permanent
ferry terminal in Taipa, Hengqin Island development and the Macau Light Rail, provide
further support in making Macau the leading leisure and tourism destination in Asia.
Visitors to Macau increased modestly, growing 2.5% in the ? rst six months of 2012,
compared to the same period of 2011. During this same period, visitors from China
increased 8.5%, highlighting the importance of China in driving overall visitation
levels. China accounted for approximately 60% of all visitors to Macau in the ? rst six
months of 2012, while visitors from Hong Kong and Taiwan contributed 26% and 4%,
respectively.
Melco Crown Entertainment Limited INTERIM REPORT 2012 3
MARKET OVERVIEW AND KEY HIGHLIGHTS
Studio City
In July 2012, an amendment to the Studio City land grant was published in the Macau
Of? cial Gazette and we received the permit to restart construction from the Macau
Government, enabling us to move forward with the development of Studio City, a
large-scale integrated entertainment, retail and gaming resort which will include
signi? cant gaming capacity, ? ve-star hotel offerings and various entertainment,
retail and food and beverage outlets to attract a diverse range of customers, with a
particular focus on the mass market segment in Asia and, in particular, from Greater
China.
In addition to its anticipated diverse range of gaming and non-gaming offerings,
we believe Studio City’s location in the fast growing Cotai region of Macau, directly
adjacent to the Lotus Bridge immigration checkpoint and a proposed light rail
station, is a major competitive advantage, particularly as it relates to the increasingly
important mass market segments.
City of Dreams
Opening of Hard Rock Cafe: In February 2012, we opened the ? rst Hard Rock Cafe in
Macau, bringing an exciting and differentiated entertainment and food and beverage
offering to the market.
City of Dreams, Signature Club: During the second quarter of 2012, we opened our
new premium mass gaming area at City of Dreams, located in the lobby of Grand
Hyatt Macau, delivering to our key customers a customized and luxurious gaming
experience, solidifying our dominance in this key segment and setting a new standard
for premium mass gaming in Macau.
Taboo show: In July 2012, City of Dreams delivered another unique entertainment
offering to Macau, with a limited-run, cabaret style show at Club Cubic. This Franco
Dragone inspired show demonstrates our commitment to further diversify the leisure
and entertainment options available to visitors to Macau.
Philippines Development
In July 2012, we, through our wholly-owned subsidiary, entered into a memorandum
of agreement with certain Philippine parties for the development and operation of a
casino, hotel, retail and entertainment resort in Manila, which will further diversify our
exposure in the expanding Asian gaming market and deliver an incremental source
of earnings and cash? ow. Please refer to our announcement dated July 5, 2012 for
further details.
| 4 |
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INTERIM REPORT 2012 Melco Crown Entertainment Limited |
MARKET OVERVIEW AND KEY HIGHLIGHTS
Our share of contribution towards the cost of this project up to the time of opening is
estimated to be approximately US$580 million, consisting of funds primarily for capital
expenditures, working capital for initial opening, pre-funded interest, and other pre-
opening expenses, contributed by a combination of cash, Group cash ? ows and debt
? nancing. It is expected that a loan facility of approximately US$320 million may be
made available to us to partially ? nance the project. Further details on this project will
be made available when the terms and conditions of the de? nitive agreements with
our counterparties in the Philippines are ? nalized.
Melco Crown Entertainment Limited INTERIM REPORT 2012 5
BUSINESS OVERVIEW
We are a developer, owner and, through our subsidiary Melco Crown Gaming, operator of casino gaming and entertainment resort facilities.
We currently have two major casino based operations, namely, City of Dreams and Altira Macau, and non-casino based operations at our Mocha Clubs. Our operations cater to a broad spectrum of gaming patrons, from high-stakes rolling chip gaming patrons to gaming patrons seeking a broader entertainment experience. We seek to attract patrons from throughout Asia and, in particular, from Greater China.
We currently focus on the Macau gaming market, which we believe will continue to be one of the largest gaming destinations in the world. In 2011, Macau generated approximately US$33.4 billion of gaming revenues, according to the DICJ, representing a 42% increase from that generated in 2010. In addition, Macau is currently the only market in Greater China, and one of only several in Asia, to offer legalized casino gaming.
Our Company’s ADSs were listed on the NASDAQ Global Market in December 2006 and were upgraded to be traded on the NASDAQ Global Select Market in January 2009. Our Company also successfully completed a dual primary listing on the Hong Kong Stock Exchange in December 2011.
| 6 |
|
INTERIM REPORT 2012 Melco Crown Entertainment Limited |
BUSINESS OVERVIEW
City of Dreams
City of Dreams is an integrated casino resort in Cotai, Macau which opened in June
2009. City of Dreams targets the premium mass gaming market and VIP players
from regional markets across Asia. City of Dreams currently features a casino area
of approximately 420,000 square feet with approximately 440 gaming tables and
approximately 1,400 gaming machines.
The Crown Towers hotel and the Hard Rock Hotel each offers approximately 300
guest rooms, and the Grand Hyatt Macau hotel offers approximately 800 guest rooms.
City of Dreams includes over 20 restaurants and bars, approximately 70 retail outlets,
an audio visual multimedia experience, recreation and leisure facilities, including
health and ? tness clubs, three swimming pools, spas and salons, and banquet and
meeting facilities. The Club Cubic nightclub, with approximately 26,210 square feet of
live entertainment space, opened at City of Dreams in April 2011.
The Dancing Water Theater, a wet stage performance theater with approximately
2,000 seats, opened in September 2010 and features the internationally acclaimed
and award winning “The House of Dancing Water” show.
Our Company continues to evaluate the next phase of our development plan at City
of Dreams. Subject to government approvals, we currently expect the next phase of
development to include a luxury hotel and anticipate that we will ? nance this phase
separately from the rest of City of Dreams.
Altira Macau
Altira Macau opened in May 2007 and is designed to provide a casino and hotel
experience that caters to Asian rolling chip customers and players sourced primarily
through gaming promoters, as well as mass gaming customers.
Melco Crown Entertainment Limited INTERIM REPORT 2012 7
BUSINESS OVERVIEW
Altira Macau currently features a casino area of approximately 173,000 square feet
with approximately 180 gaming tables. Our multi-? oor layout comprises primarily
designated gaming areas and private gaming rooms for rolling chip players, together
with a general gaming area for the mass market that offers various table limits to cater
to a wide range of mass market patrons.
The 38-storey hotel comprises approximately 200 guest rooms and has a number
of non-gaming entertainment venues, including restaurants, several bars, a spa,
gymnasium, outdoor garden podium and a sky terrace lounge.
Mocha Clubs
Our Mocha Clubs comprise the largest non-casino based operations of electronic
gaming machines in Macau and are located in areas with strong pedestrian traf? c,
typically within three-star, four-star and ? ve-star hotels. Mocha Clubs ? rst opened in
September 2003 and have grown to ten Mocha Clubs with gaming space ranging from
approximately 3,000 square feet to 21,500 square feet. Mocha Clubs currently have
more than approximately 2,100 gaming machines in operation. Mocha Clubs focus on
general mass market players, including day-trip customers, outside the conventional
casino setting.
Studio City
We are currently developing Studio City to be a large-scale integrated entertainment,
retail and gaming resort. It has a completion schedule of 36 months after
commencement of construction and is currently expected to open around mid-2015.
Studio City upon completion will include signi? cant gaming capacity, ? ve-star hotel
offerings and various entertainment, retail and food and beverage outlets to attract
a diverse range of customers. Studio City is designed to capture the increasingly
important mass market segment, with its destination themeing, unique and innovative
interactive attractions, and strong Asian focus.
The Studio City site is located on a plot of land in Cotai, Macau of 130,789 square
meters (approximately 1.4 million square feet) and is located directly adjacent to
the Lotus Bridge immigration checkpoint and one of the proposed light rail stations.
The location of Studio City, in addition to its vast array of entertainment and leisure
offerings, is a key competitive advantage, in our view.
| 8 |
|
INTERIM REPORT 2012 Melco Crown Entertainment Limited |
BUSINESS OVERVIEW
Studio City has an approved gross ? oor area (“GFA”) of 707,078 square meters,
approximately 7.6 million square feet. We currently estimate on a preliminary basis
that the construction cost for Studio City will be approximately US$1.9 billion,
however this cost estimate may be revised depending on a range of variables,
including receipt of all necessary government approvals, the ? nal design and
development plans, funding costs, the availability of ? nancing on terms acceptable to
us, and prevailing market conditions. We are currently working through the ? nancing
plans in relation to Studio City, which are anticipated to include a bank loan and other
forms of debt ? nancing.
On July 25, 2012, an amendment was published in the Macau Of? cial Gazette to
the Studio City land concession contract, entered into between the Macau SAR
and Studio City Developments Limited (“Studio City Developments”), an indirect
subsidiary of our Company (“Land Concession Contract”). In accordance with the
Land Concession Contract, which was originally published in the Macau Of? cial
Gazette on October 17, 2001, Studio City Developments will lease the Studio City land
for 25 years from such date with the right to successively renew the Land Concession
Contract for additional periods, subject to applicable legislation.
On July 25, 2012, Studio City Developments was granted a permit to enable the
recommencement of construction work on site.
Melco Crown Entertainment Limited INTERIM REPORT 2012 9
MANAGEMENT DISCUSSION
AND ANALYSIS
Summary of Financial Results
For the six months ended June 30, 2012, our total net revenues were US$1.97 billion,
an increase of 11.3% from US$1.77 billion of net revenues for the six months ended
June 30, 2011. Net income attributable to Melco Crown Entertainment for the six
months ended June 30, 2012 was US$204.4 million, as compared to net income
of US$73.8 million for the six months ended June 30, 2011. Our improvement in
pro? tability was primarily attributable to the substantial increase in mass table games
and gaming machine revenues together with strict cost control focus, partially offset
by lower group-wide rolling chip revenue.
Six Months Ended June 30,
2012 2011
(in thousands of US$)
Net revenues $ 1,965,370 $ 1,766,542
Total operating costs and expenses (1,719,593) (1,602,740)
Operating income 245,777 163,802
Net income attributable to
Melco Crown Entertainment $ 204,353 $ 73,808
10 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
Our results of operations for the periods presented are not comparable given our
acquisition of 60% equity interest in SCI, the developer of Studio City on July 27,
2011.
Factors Affecting Our Current and Future Results
Our results of operations are and will be affected most signi? cantly by:
• the growth of the gaming and leisure market in Macau, which is facilitated
by a number of key drivers and initiatives including, among others, favorable
population demographics and economic growth in major Asian tourism markets,
substantial private capital investment in Macau, particularly in developing
diversi? ed destination resort properties, and the commitment and support of
central and local governments to improve and develop infrastructure both within,
and connecting to, Macau;
• the current economic and operating environment, including the impact of
global and local economic conditions, changes in capital market conditions
as well as the impact of visa and other regulatory policies of central and local
governments;
• the competitive landscape in Macau, which is expected to evolve as more
gaming and non-gaming facilities are developed in Macau, including the
expected new supply of integrated resorts in the Cotai region of Macau, as well
as the impact of recent or future expansion of gaming markets throughout Asia;
Melco Crown Entertainment Limited INTERIM REPORT 2012 11
MANAGEMENT DISCUSSION AND ANALYSIS
• our casino mix in terms of the different mix of table and machine games and
customer playing habits, such as the mix between rolling chip and mass market
table game segments, as well as changes in the mix of rolling chip business
sourced through gaming promoters or via our direct VIP relationships;
• our relationships with gaming promoters, which contribute a signifi cant portion
of our casino revenues, expose us to credit risk (given the majority of these
gaming promoters are provided credit as part of the ordinary course of business)
and to any change in the gaming promoter commission environment in Macau.
For the six months ended June 30, 2012 and 2011, approximately 53.8% and
61.6% of our casino revenues were derived from customers sourced through
our rolling chip gaming promoters, respectively. For the six months ended
June 30, 2012, our top ? ve customers and the largest customer were gaming
promoters and accounted for approximately 22.6% and 6.2% of our casino
revenues, respectively. We believe we have good relationships with our gaming
promoters and our commission levels broadly have remained stable throughout
our operating history. Commissions paid to our rolling chip gaming promoters
(net of amounts indirectly rebated to customers) amounted to US$148.0 million,
and US$154.1 million for the six months ended June 30, 2012 and 2011,
respectively;
• our exposure to interest rate risk is associated with our substantial indebtedness
bearing interest based on ? oating rates. We have and may continue to hedge
our exposure to ? oating interest rates. As of June 30, 2012 and December 31,
2011, approximately 55% and 57%, respectively, of our total debt was based
on ? xed rates due to the issuance of the RMB Bonds and the drawdown of the
Deposit-Linked Loan in May 2011. Based on June 30, 2012 debt, an assumed
100 basis point change in the Hong Kong Interbank Offered Rate (“HIBOR”) and
London Interbank Offered Rate (“LIBOR”) would cause our annual interest cost
to change by approximately US$10.6 million; and
• our exposure to foreign exchange rate risk is associated with the currency
of our operations and our indebtedness and as a result of the presentation
of our ? nancial statements in U.S. dollars. The majority of our revenues are
denominated in H.K. dollars, given H.K. dollar is the predominant currency
used in gaming transactions in Macau and is often used interchangeably
with Pataca in Macau, while our expenses are denominated predominantly in
Patacas. In addition, a signi? cant portion of our indebtedness, as a result of the
Senior Notes, and certain expenses, are denominated in U.S. dollars, and the
costs associated with servicing and repaying such debt will be denominated
in U.S. dollars. We also have a signi? cant portion of our assets and liabilities
denominated in Renminbi, as a result of our RMB Bonds and the associated
restricted cash balances. The costs incurred with servicing and repaying such
debt will be denominated in Renminbi.
12 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
The value of the H.K. dollar and Patacas against the U.S. dollar may ? uctuate
and may be affected by, among other things, changes in political and economic
conditions. While the H.K. dollar is pegged to the U.S. dollar within a narrow
range and the Pataca is in turn pegged to the H.K. dollar and the exchange rates
between these currencies has remained relatively stable over the past several
years, we cannot assure you that the current peg or linkages between the U.S.
dollar, H.K. dollar and Pataca will not be broken or modi? ed and subjected to
? uctuation. Any signi? cant ? uctuations in the exchange rates between H.K.
dollars or Patacas to U.S. dollars may have a material adverse effect on our
revenues and ? nancial condition.
We accept foreign currencies from our customers, and, as at June 30, 2012,
in addition to H.K. dollars and Patacas, we hold varying amount of foreign
currencies from time to time. However, any foreign exchange risk exposure
associated with those currencies is expected to be minimal.
We have not engaged in hedging transactions with respect to foreign exchange
exposure of our revenues and expenses in our day-to-day operations during
the six months ended June 30, 2012 and 2011. Instead, we maintain a certain
amount of our operating funds in the same currencies in which we have
obligations, thereby reducing our exposure to currency ? uctuations. However,
we occasionally enter into foreign exchange transactions as part of ? nancing
transactions and capital expenditure programs.
See note 8 to our unaudited
condensed consolidated ? nancial
statements included in this interim
report for further details related
to our indebtedness and foreign
currency exposure.
Based on the balances of total
debts and restricted cash
denominated in currencies other
than U.S. dollars as of June
30, 2012 and June 30, 2011,
an assumed 1% change in the
exchange rates between H.K. dollar
or Renminbi against the U.S. dollar
would cause a foreign transaction
gain or loss of approximately
US$13.7 million for both periods.
Our historical ? nancial results may not be characteristic of our potential future results
as we continue to expand and re? ne our service offerings at our properties and
develop and open new properties.
Melco Crown Entertainment Limited INTERIM REPORT 2012 13
MANAGEMENT DISCUSSION AND ANALYSIS
Key Performance Indicators (KPIs)
We use the following KPIs to evaluate our casino operations, including table games
and gaming machines:
• Rolling chip volume: the amount of non-negotiable chips wagered and lost by
the rolling chip market segment.
• Rolling chip win rate: rolling chip table games win as a percentage of rolling chip
volume.
• Mass market table games drop: the amount of table games drop in the mass
market table games segment.
• Mass market table games hold percentage: mass market table games win as a
percentage of mass market table games drop.
• Table games win: the amount of wagers won net of wagers lost on gaming
tables that is retained and recorded as casino revenues.
• Gaming machine handle (volume): the total amount wagered in gaming
machines.
• Gaming machine win rate: gaming machine win expressed as a percentage of
gaming machine handle.
14 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
In the rolling chip market segment, customers purchase identi? able chips known as non-negotiable chips, or rolling chips, from the casino cage, and there is no deposit into a gaming table’s drop box of rolling chips purchased from the cage. Rolling chip volume and mass market table games drop are not equivalent. Rolling chip volume is a measure of amounts wagered and lost. Mass market table games drop measures buy in. Rolling chip volume is generally substantially higher than mass market table games drop. As these volumes are the denominator used in calculating win rate or hold percentage, with the same use of gaming win as the numerator, the win rate is generally lower in the rolling chip market segment than the hold percentage in the mass market table games segment.
Our combined expected rolling chip win rate (calculated before discounts and commissions) across our properties is in the range of 2.7% to 3.0%. Our combined expected mass market table games hold percentage is in the range of 24% to 28%, which is based on the mix of table games at our casino properties as each table game has its own theoretical hold percentage. Our combined expected gaming machine win rate is in the range of 5% to 6%.
We use the following KPIs to evaluate our hotel operations:
• Average daily rate: calculated by dividing total room revenues (less service charges, if any) by total rooms occupied, i.e., average price of occupied rooms per day.
• Occupancy rate: the average percentage of available hotel rooms occupied during a period.
Melco Crown Entertainment Limited INTERIM REPORT 2012 15
MANAGEMENT DISCUSSION AND ANALYSIS
• Revenue per available room, or REVPAR: calculated by dividing total room
revenues (less service charges, if any) by total rooms available, thereby
representing a combination of hotel average daily room rates and occupancy.
Complimentary rooms, for which rates are set at a discount from standard walk-in
rates, are included in the calculation of these measures. As not all available rooms
are occupied, average daily room rates are normally higher than revenue per available
room.
Six Months Ended June 30, 2012 Compared to Six Months
Ended June 30, 2011
Revenues
Our total net revenues for the six months ended June 30, 2012 were US$1.97 billion,
an increase of US$198.8 million, or 11.3%, from US$1.77 billion for the six months
ended June 30, 2011. The increase in total net revenues was primarily driven by
substantially improved group-wide mass table games and gaming machines revenues,
partially offset by lower group-wide rolling chip revenue.
Our total net revenues for the six months ended June 30, 2012 comprised of US$1.90
billion of casino revenues, representing 96.5% of our total net revenues, and US$68.5
million of net non-casino revenues (total non-casino revenues after deduction of
promotional allowances). Our total net revenues for the six months ended June 30,
2011 comprised of US$1.69 billion of casino revenues, representing 95.8% of our total
net revenues, and US$74.2 million of net non-casino revenues.
Casino. Casino revenues for the six months ended June 30, 2012 were US$1.90
billion, representing a US$204.5 million, or 12.1%, increase from casino revenues of
US$1.69 billion for the six months ended June 30, 2011, primarily due to an increase
in casino revenues at City of Dreams of US$298.9 million, or 28.7%, which was
partially offset by a decrease in casino revenues at Altira Macau of US$107.6 million,
or 18.9%. This increase was primarily attributable to a substantial growth in the mass
market table games segment, particularly at City of Dreams, driven by improvements
in both the mass table games hold percentage together with increased mass market
table games drop. Our mass table games revenues continue to improve re? ecting the
success of a range of gaming ? oor ef? ciency initiatives, improved casino visitation and
casino marketing initiatives, together with a strong overall market growth environment
in the segment.
Altira Macau. Altira Macau’s rolling chip volume for the six months ended June 30,
2012 was US$21.1 billion, representing a decrease of US$4.9 billion, or 18.7%, from
US$25.9 billion for the six months ended June 30, 2011. Altira Macau’s rolling chip
volumes were impacted by the recent slow-down in the market-wide rolling chip
segment as well as various group-wide table ef? ciency initiatives which, among
16 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
other things, resulted in a reduction in the number of rolling chip gaming tables in
operation in Altira Macau during the six months ended June 30, 2012 when compared
to the same period in 2011. The rolling chip win rate (calculated before discounts
and commissions) was 2.91% for the six months ended June 30, 2012, within our
expected level of 2.7% to 3.0%, and decreased slightly from 2.96% for the six
months ended June 30, 2011. In the mass market table games segment, mass market
table games drop was US$289.5 million for the six months ended June 30, 2012,
representing an increase of 0.8% from US$287.3 million for the six months ended
June 30, 2011. The mass market table games hold percentage was 17.4% for the six
months ended June 30, 2012, which is slightly higher than our expected range for
that period of 15% to 17% and represented a slight increase from 16.7% for the six
months ended June 30, 2011.
City of Dreams. City of Dreams’ rolling chip volume for the six months ended June
30, 2012 of US$38.3 billion increased US$198.2 million, or 0.5%, from US$38.1 billion
for the six months ended June 30, 2011. The rolling chip win rate (calculated before
discounts and commissions) was 3.0% for the six months ended June 30, 2012, in-
line with our expected range of 2.7% to 3.0%, and re? ected an improvement from
2.69% for the six months ended June 30, 2011. In the mass market table games
segment, mass market table games drop was US$1,687.8 million for the six months
ended June 30, 2012, which represented an increase of US$290.3 million, or 20.8%,
from US$1,397.5 million for the six months ended June 30, 2011. The increase in
mass market table games drop was positively impacted by an increase in casino
visitation and improvements in casino marketing initiatives, together with the overall
market growth in the mass market table games segment. The mass market table
games hold percentage was 28.9% in the six months ended June 30, 2012, which
is within our expected range for that period of 25.0% to 30.0% and demonstrated
a signi? cant increase from 23.1% for the six months ended June 30, 2011. Average
net win per gaming machine per day was US$320 for the six months ended June 30,
2012, an increase of US$34, or 11.9%, from US$286 for the six months ended June
30, 2011.
Mocha Clubs. Mocha Clubs’ average net win per gaming machine per day for the six
months ended June 30, 2012 was US$187, a decrease of approximately US$42, or
18.3%, from US$229 for the six months ended June 30, 2011. The average net win
per gaming machine was impacted by the addition of over 500 gaming machines as
a result of the opening of two new Mocha Clubs venues in late 2011 and early 2012.
The number of gaming machines in operation at Mocha Clubs averaged approximately
2,100 during the six months ended June 30, 2012, compared to approximately 1,600
in the comparable period in 2011.
Rooms. Room revenues for the six months ended June 30, 2012 were US$57.5
million, representing a US$8.1 million, or 16.5%, increase from room revenues of
US$49.3 million for the six months ended June 30, 2011. This increase was primarily
due to improved occupancy and the positive impact from the increase in average daily
rate. Altira Macau’s average daily rate, occupancy rate and REVPAR were US$221,
Melco Crown Entertainment Limited INTERIM REPORT 2012 17
MANAGEMENT DISCUSSION AND ANALYSIS
97% and US$214, respectively, for the
six months ended June 30, 2012, as
compared to US$198, 97% and US$192,
respectively, for the six months ended
June 30, 2011. City of Dreams’ average
daily rate, occupancy rate and REVPAR
were US$185, 90% and US$167,
respectively for the six months ended
June 30, 2012, as compared to US$170,
89% and US$151, respectively, for the
six months ended June 30, 2011.
Food, beverage and others. Other non-
casino revenues for the six months
ended June 30, 2012 included food and
beverage revenues of US$32.7 million
and entertainment, retail and other
revenues of approximately US$43.0
million. Other non-casino revenues for
the six months ended June 30, 2011 included food and beverage revenues of US$29.3
million and entertainment, retail and other revenues of approximately US$41.2 million.
The increase of US$5.2 million in food, beverage and other revenues from the six
months ended June 30, 2011 to the six months ended June 30, 2012 was primarily
due to higher business volumes associated with an increase in visitation during the
period as well as the improved yield of rental income at City of Dreams.
Operating costs and expenses
Total operating costs and expenses were US$1.72 billion for the six months ended
June 30, 2012, representing an increase of US$116.9 million, or 7.3%, from US$1.60
billion for the six months ended June 30, 2011. The increase in operating costs was
primarily due to an increase in operating costs at City of Dreams which were in-
line with the increased gaming volume and associated increase in revenues, as well
as the increase in associated costs in connection with the Studio City after MCE’s
acquisition of a 60% interest in Studio City, including amortization of land use rights
and pre-opening costs.
Casino. Casino expenses increased by US$87.9 million, or 6.9%, to US$1.36 billion
for the six months ended June 30, 2012 from US$1.27 billion for the six months ended
June 30, 2011 primarily due to additional gaming tax and other levies and commission
expenses of US$65.4 million as well as other operating costs, such as payroll and
promotional expenses of US$22.5 million, which increased as a result of increased
casino revenues.
18 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
Rooms. Room expenses, which represent the costs in operating the hotel facilities at
Altira Macau and City of Dreams, decreased by 15.9% to US$7.6 million for the six
months ended June 30, 2012 from US$9.0 million for the six months ended June 30,
2011, primarily due to a higher level of complimentary hotel rooms offered to gaming
customers for which the associated costs are included as casino expenses, partially
offset by an increase in the operating costs as a result of increased occupancy.
Food, beverage and others. Food, beverage and others expenses remained stable
at US$45.1 million and US$45.7 million for the six months ended June 30, 2012 and
2011, respectively.
General and administrative. General and administrative expenses increased by US$4.3
million, or 4.1%, to US$108.6 million for the six months ended June 30, 2012 from
US$104.3 million for the six months ended June 30, 2011, primarily due to an increase
in payroll expenses, marketing expenses as well as repair and maintenance costs to
support continuing and expanding operations.
Pre-opening costs. Pre-opening costs were US$3.3 million for the six months ended
June 30, 2012 as compared to US$1.3 million for the six months ended June 30,
2011. Such costs relate primarily to personnel training, marketing, advertising and
other administrative costs in connection with new or start-up operations. Pre-opening
costs for the six months ended June 30, 2012 related to the administrative costs in
connection with the Studio City after MCE’s acquisition of a 60% interest in SCI on
July 27, 2011, the opening of The Tasting Room and Signature Club Lounge at City
of Dreams, and the introduction of Taboo at Club Cubic. The pre-opening costs for
the six months ended June 30, 2011 related to the opening of Club Cubic at City of
Dreams in April 2011.
Amortization of gaming subconcession. Amortization of our gaming subconcession
continued to be recognized on a straight-line basis at US$28.6 million for each of the
six months ended June 30, 2012 and 2011.
Amortization of land use rights. The increase in amortization of land use rights
expenses to US$28.3 million for the six months ended June 30, 2012 from US$9.8
million for the six months ended June 30, 2011 was primarily due to the inclusion of
amortization of land use rights expenses associated with Studio City.
Depreciation and amortization. Depreciation and amortization expense increased
by US$4.0 million, or 3.1%, to US$132.1 million for the six months ended June 30,
2012 from US$128.1 million for the six months ended June 30, 2011 primarily due to
depreciation of assets progressively added to City of Dreams since the third quarter of
2011.
Melco Crown Entertainment Limited INTERIM REPORT 2012 19
MANAGEMENT DISCUSSION AND ANALYSIS
Property charges and others. Property
charges and others for the six months
ended June 30, 2012 were US$3.6
million, which mainly related to costs
incurred for implementing our streamlined
management structure in February 2012.
Property charges and others for the
six months ended June 30, 2011 were
US$1.0 million, which were related to a
donation made to support relief efforts for
the Japan earthquake.
Non-operating expenses
Non-operating expenses consist of
interest income, interest expenses, net
of capitalized interest, amortization
of deferred ? nancing costs, loan
commitment fees, net foreign exchange
gain, change in fair value of interest rate swap agreements, loss on extinguishment
of debt, and reclassi? cation of accumulated losses of interest rate swap agreements
from accumulated other comprehensive losses, as well as other non-operating
income, net.
Interest income was US$5.3 million for the six months ended June 30, 2012, as
compared to US$0.9 million for the six months ended June 30, 2011. The signifi cant
increase is primarily driven by effective cash management and improvements in our
operating cash ? ows as a result of the improvements in operating performance during
the six months ended June 30, 2012.
Interest expenses were US$51.4 million, net of capitalized interest of US$4.5 million
for the six months ended June 30, 2012, compared to US$54.9 million with no interest
capitalized for the six months ended June 30, 2011. The decrease in net interest
expenses (net of interest capitalization) of US$3.5 million was primarily due to higher
interest capitalization of US$4.5 million associated with the Studio City construction
and development project which resumed after our acquisition of 60% interest in SCI
on July 27, 2011, together with decreases of interest charges of US$6.3 million and
US$2.4 million, associated with the expiration of interest rate swaps agreements
throughout the six months ended June 30, 2012, as well as a lower interest rate
margin and lower outstanding balance on our 2011 Credit Facilities as a result of a
repayment made during the six months ended June 30, 2011. This decrease in net
interest expenses was offset in part by US$8.9 million due to a full half year of interest
charges incurred on the RMB Bonds and the Deposit-Linked Loan issued in May
2011.
20 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
Other ? nance costs for the six months ended June 30, 2012 of US$7.0 million,
included US$6.3 million of amortization of deferred fi nancing costs and loan
commitment fees of US$0.7 million. Other fi nance costs for the six months ended
June 30, 2011 of US$8.7 million, included US$8.2 million of amortization of deferred
? nancing costs and loan commitment fees of US$0.5 million. The decrease in
amortization of deferred ? nancing costs compared to the six months ended June 30,
2011 was primarily due to lower deferred costs incurred with the amendment of our
City of Dreams Project Facility on June 30, 2011 as the 2011 Credit Facilities, which
were offset in part by the recognition of a full half year of amortization of additional
costs capitalized as deferred ? nancing costs relating to the RMB Bonds issued in May
2011. The amendment of the City of Dreams Project Facility completed on June 30,
2011 was primarily accounted for as an extinguishment of debt resulting in a loss on
extinguishment of US$25.2 million for the six months ended June 30, 2011. There was
no loss on extinguishment of debt for the six months ended June 30, 2012.
The reclassi? cation of US$4.3 million related to the accumulated losses of interest
rate swap agreements from accumulated other comprehensive losses to consolidated
statement of operations for the six months ended June 30, 2011 was required as
such swap agreements no longer quali? ed for hedge accounting immediately after the
amendment of the City of Dreams Project Facility on June 30, 2011.
Income tax credit (expenses)
The effective tax rate for the six months ended June 30, 2012 was a negative rate of
0.5%, as compared to a positive rate of 0.1% for the six months ended June 30, 2011.
Such rates for the six months ended June 30, 2012 and 2011 differ from the statutory
Macau Complementary Tax rate of 12% primarily due to the effect of change in
valuation allowance on the net deferred tax assets for the six months ended June 30,
2012 and 2011 and the effect of a tax holiday of US$41.6 million and US$25.3 million
on the net income of our Macau gaming operations during the six months ended June
30, 2012 and 2011, respectively, due to our income tax exemption in Macau, which is
set to expire in 2016. Our management does not anticipate recording an income tax
bene? t related to deferred tax assets generated by our Macau operations; however, to
the extent that the ? nancial results of our Macau operations improve and it becomes
more likely than not that the deferred tax assets are realizable, we will be able to
reduce the valuation allowance through earnings.
Net loss attributable to noncontrolling interests
Our net loss attributable to noncontrolling interest of US$7.4 million for the six months
ended June 30, 2012 was due to the share of the Studio City expenses by the minority
shareholder for the six months ended June 30, 2012.
Melco Crown Entertainment Limited INTERIM REPORT 2012 21
MANAGEMENT DISCUSSION AND ANALYSIS
Net income attributable to Melco Crown Entertainment
As a result of the foregoing, we had net income of US$204.4 million for the six months
ended June 30, 2012, compared to net income of US$73.8 million for the six months
ended June 30, 2011.
Adjusted Property EBITDA and Adjusted EBITDA
Our Adjusted property EBITDA were US$481.8 million and US$372.9 million for the
six months ended June 30, 2012 and 2011, respectively. Adjusted property EBITDA
of Altira Macau, City of Dreams and Mocha Clubs were US$81.1 million, US$382.3
million and US$18.6 million, respectively, for the six months ended June 30, 2012
and US$114.1 million, US$237.4 million and US$21.4 million, respectively, for the
six months ended June 30, 2011. Our Adjusted EBITDA were US$446.4 million and
US$337.6 million for the six months ended June 30, 2012 and 2011, respectively. Our
management uses Adjusted property EBITDA to measure the operating performance
of our Altira Macau, City of Dreams and Mocha Clubs businesses, and to compare
the operating performance of our properties with those of our competitors. Adjusted
EBITDA and Adjusted property EBITDA are also presented as supplemental
disclosures because management believes they are widely used to measure
performance and as a basis for valuation of gaming companies. Our management
also uses Adjusted property EBITDA and Adjusted EBITDA because they are used by
some investors as a way to measure a company’s ability to incur and service debt,
make capital expenditures and meet working capital requirements. Gaming companies
have historically reported similar measures as a supplement to ? nancial measures in
accordance with generally accepted accounting principles, in particular, U.S. GAAP or
IFRS.
However, Adjusted property EBITDA or Adjusted EBITDA should not be considered
in isolation, construed as an alternative to pro? t or operating pro? t, treated as an
indicator of our U.S. GAAP operating performance, other operating operations or
cash ? ow data, or interpreted as an alternative to cash ? ow as a measure of liquidity.
Adjusted property EBITDA and Adjusted EBITDA presented in this interim report may
not be comparable to other similarly titled measures of other companies’ operating in
the gaming or other business sectors. While our management believes these ? gures
may provide useful additional information to investors when considered in conjunction
with our U.S. GAAP ? nancial statements and other information in this interim report,
less reliance should be placed on Adjusted property EBITDA or Adjusted EBITDA as a
measure in assessing our overall ? nancial performance.
22 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
Liquidity and Capital Resources
We have relied and intend to rely on our cash generated from our operations and our
debt and equity ? nancings to meet our ? nancing needs and repay our indebtedness,
as the case may be.
As of June 30, 2012, we held unrestricted and restricted cash and cash equivalents
of approximately US$1,472.7 million and US$361.1 million, respectively, and HK$1.47
billion (approximately US$188.6 million) of the 2011 Credit Facilities remained
available for future drawdown. The current portion of restricted cash as of June 30,
2012 of RMB2.3 billion (approximately US$361.1 million) represents the RMB Bonds
proceeds deposited into a bank account for securing the Deposit-Linked Loan, which
will be utilized for the future RMB Bonds repayments.
We have been able to meet our working capital needs, and we believe that our
operating cash ? ow, existing cash balances, funds available under the 2011 Credit
Facilities and additional equity or debt ? nancings will be adequate to satisfy our
current and anticipated operating, debt and capital commitments, including our
development project plans, as described in “— Other Financing and Liquidity Matters”
below. For any additional ? nancing requirements, we cannot provide assurance that
future borrowings will be available. We have signi? cant indebtedness and we will
continue to evaluate our capital structure and opportunities to enhance it in the normal
course of our activities.
Cash Flows
The following table sets forth a summary of our cash ? ows for the periods indicated:
Six Months Ended June 30,
2012 2011
(in thousands of US$)
Net cash provided by operating activities $ 394,770 $ 320,820
Net cash used in investing activities (186,308) (295,717)
Net cash provided by ? nancing activities 105,453 559,651
Effect of foreign exchange on cash and
cash equivalents 787 174
Net increase in cash and
cash equivalents 314,702 584,928
Cash and cash equivalents at
beginning of period 1,158,024 441,923
Cash and cash equivalents
at end of period $ 1,472,726 $ 1,026,851
Melco Crown Entertainment Limited INTERIM REPORT 2012 23
MANAGEMENT DISCUSSION AND ANALYSIS
Operating Activities
Operating cash ? ows are generally affected by changes in operating income and
accounts receivable with VIP table games play and hotel operations conducted on
a cash and credit basis and the remainder of the business including mass market
table games play, gaming machine play, food and beverage, and entertainment are
conducted primarily on a cash basis.
Net cash provided by operating activities was US$394.8 million for the six months
ended June 30, 2012, compared to US$320.8 million for the six months ended
June 30, 2011. The increase in net cash provided by operating activities was mainly
attributable to improvement in casino revenues as described in the foregoing section.
Investing Activities
Net cash used in investing activities was US$186.3 million for the six months ended
June 30, 2012, compared to US$295.7 million for the six months ended June 30,
2011. There was an increase in restricted cash of US$198.5 million and a deposit
payment of US$65.0 million for the acquisition of a 60% equity interest in SCI during
the six months ended June 30, 2011, whereas there were no such investing cash
? ows during the six months ended June 30, 2012.
The net increase of US$198.5 million in the amount of restricted cash for the six
months ended June 30, 2011 was primarily due to the deposit of proceeds from
issuance of the RMB Bonds of US$353.3 million pledged for the Deposit-Linked
Loan, offset in part by settlement of US$10.3 million of City of Dreams project costs,
settlement of interest and principal repayments of US$133.7 million in accordance
with the City of Dreams Project Facility, and release of US$10.8 million to unrestricted
cash upon the completion of an amendment of the City of Dreams Project Facility on
June 30, 2011.
Our total capital expenditures payments for the six months ended June 30, 2012
were US$79.9 million in comparison to US$22.9 million paid in the six months ended
June 30, 2011. Such expenditures were mainly associated with enhancements to our
integrated resort offerings and for the development of Studio City. In addition, we paid
US$59.4 million for the acquisition of property and equipment, including an aircraft to
be used primarily by rolling chip players to enhance our competitive positioning in the
higher-end rolling chip market. We also paid US$35.4 million and US$7.9 million for
the scheduled installment of City of Dreams’ and Studio City’s land premium payment,
respectively, during the six months ended June 30, 2012, compared to US$7.6 million
for the scheduled installment of City of Dreams’ land premium payment during the six
months ended June 30, 2011.
24 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
The following table sets forth our capital expenditures by segment for the six months
ended June 30, 2012 and 2011.
Six Months Ended June 30,
2012 2011
(in thousands of US$)
Mocha Clubs $ 3,687 $ —
Altira Macau 2,090 3,462
City of Dreams 52,970 12,296
Studio City 41,326 —
Corporate and Others 260 67
Total capital expenditures $ 100,333 $ 15,825
Our capital expenditures for the six months ended June 30, 2012 increased
signi? cantly primarily due to the development of City of Dreams and Studio City.
Financing Activities
Net cash provided by ? nancing activities amounted to US$105.5 million for the six
months ended June 30, 2012, primarily due to the proceeds from the drawdown of
US$43.0 million from our Aircraft Term Loan in June 2012 and the capital injection of
US$60.0 million in January 2012 from SCI minority shareholder, in accordance with
our shareholder agreement.
Net cash provided by ? nancing activities amounted to US$559.7 million for the six
months ended June 30, 2011, primarily due to proceeds from the issuance of the
RMB Bonds and draw down of the Deposit-Linked Loan totaling US$706.6 million
in May 2011, offset in part by the repayment of the City of Dreams Project Facility
of US$117.1 million and payment of debt issuance costs primarily associated with
the RMB Bonds, the Deposit-Linked Loan and the 2011 Credit Facilities of US$34.0
million.
Indebtedness
The following table presents a summary of our indebtedness as of June 30, 2012:
As of June 30, 2012
(in thousands of US$)
2011 Credit Facilities $ 1,014,729
Senior Notes, net(1) 593,556
RMB Bonds 361,082
Deposit-Linked Loan 353,278
Aircraft Term Loan 43,000
$ 2,365,645
Note:
| (1) |
|
Net of unamortized issue discount. |
Melco Crown Entertainment Limited INTERIM REPORT 2012 25
MANAGEMENT DISCUSSION AND ANALYSIS
Major changes in our indebtedness during the six months ended June 30, 2012 are
summarized below.
In June 2012, our indirect wholly-owned subsidiary entered into a term loan credit
facility for US$43 million, with an interest rate of LIBOR plus a margin of 2.80% per
annum and maturity date of June 27, 2019, to ? nance part of the acquisition of an
aircraft. As of June 30, 2012, the Aircraft Term Loan facility has been fully drawn
down.
During the six months ended June 30, 2012, all outstanding interest rate swap
agreements in connection with our City of Dreams Project Facility, expired.
In May 2012, we entered into a RMB forward exchange rate contract for future
settlement of interest on the RMB Bonds to hedge our exchange rate exposure.
For further details of the above indebtedness, please refer to note 11 to the
consolidated ? nancial statements included in our 2011 annual report dated April
19, 2012, and note 8 of our unaudited condensed consolidated ? nancial statements
contained herein, which include information regarding the type of debt and equity
facilities used, the maturity pro? le of debt, the currency and interest rate structure,
assets charged and the nature and extent of any restrictions on the ability of our
subsidiaries to transfer funds to our Company in form of cash dividends, loans or
advance.
Our 2011 Credit Facilities, Senior Notes, RMB Bonds and Aircraft Term Loan contain
obligations regarding our Share ownership, including obligations regarding a change
of control of our Shares owned collectively by Melco and Crown and could result
in our inability to draw loans or cause events of default under our indebtedness, or
an obligation to prepay the facility in full, or could require MCE Finance to make an
offer to repurchase the Senior Notes or require us to make an offer to redeem the
RMB Bonds. Please refer to page 42 of our 2011 annual report dated April 19, 2012
and note 8 to our unaudited condensed consolidated ? nancial statements herein for
further details.
Other Financing and Liquidity Matters
We may obtain ? nancing in the form of, among other things, equity or debt, including
additional bank loans or high yield, mezzanine or other debt, or rely on our operating
cash ? ow to fund the development of our projects.
We are a growing company with signi? cant ? nancial needs. We expect to have
signi? cant capital expenditures in the future as we continue to develop our Macau
properties, in particular, Studio City and the next phase of City of Dreams as well as
our Philippines project.
We have relied and intend in the future to rely on our operating cash ? ow and different
forms of ? nancing to meet our funding needs and repay our indebtedness, as the case
may be.
26 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
The timing of any future debt and equity ? nancing activities will be dependent on
our funding needs, our development and construction schedule, the availability of
funds on acceptable terms to us, and prevailing market conditions. We may carry out
activities from time to time to strengthen our ? nancial position and ability to better
fund our business expansion. Such activities may include re? nancing existing debt,
monetizing assets, sale-and-leaseback transactions or other similar activities.
On July 27, 2011, we acquired a 60% equity interest in SCI. We currently estimate
on a preliminary basis that the construction cost for Studio City will be approximately
US$1.9 billion. However, this preliminary cost estimate may be revised depending
on a number of variables, including receipt of all necessary government approvals,
the ? nal design and development plan, funding costs, the availability of ? nancing
on terms acceptable to us, and prevailing market conditions. As of June 30, 2012,
we had incurred approximately US$66.2 million (excluding the cost of land) for the
development of Studio City since our acquisition of a 60% equity interest in SCI on
July 27, 2011, primarily for site preparation costs and design and consultation fees.
On July 5, 2012, we entered into a memorandum of agreement whereby we
agreed with certain Philippine parties to negotiate in good faith, and sign upon the
satisfaction of various conditions, the Consortium Agreement, which would include
the agreed form of certain de? nitive agreements for the leasing, development,
operation and management of certain parcels of land located in the Philippines as a
casino, hotel, retail and entertainment resort. Please refer to our announcement dated
July 5, 2012 for further details.
Our share of contribution towards the cost of this project up to the time of opening is
estimated to be approximately US$580 million, consisting of funds primarily for capital
expenditures, working capital for initial opening, pre-funded interest, and other pre-
opening expenses, contributed by a combination of cash, Group cash ? ows and debt
Melco Crown Entertainment Limited INTERIM REPORT 2012 27
MANAGEMENT DISCUSSION AND ANALYSIS
? nancing. It is expected that a loan facility of approximately US$320 million may be
made available to us to partially ? nance the project.
We continue to evaluate and progress the design and development plan for the next
phase of our development plan at City of Dreams, which we currently expect to
include, subject to government approvals, a luxury hotel.
Both Studio City and the next phase of City of Dreams are subject to further ? nancing.
Our investment plans are preliminary and subject to change based upon the execution
of our business plan, the progress of our capital projections, market conditions and
outlook on future business.
As of June 30, 2012, we had capital commitments contracted for but not provided
mainly for the construction and acquisition of property and equipment for City of
Dreams and Studio City totaling US$115.2 million. In addition, we have contingent
liabilities arising in the ordinary course of business. For further details for our
commitments and contingencies, please refer to note 13 to our unaudited condensed
consolidated ? nancial statements included in this interim report.
As of June 30, 2012 and December 31, 2011, our gearing ratios (total debts divided by
total assets) were 35.5% and 37.1%, respectively. Our gearing ratio decreased slightly
as of June 30, 2012, primarily as a result of increased cash and cash equivalents due
to the growth of our business.
Melco Crown Gaming has a rating of “BB” by Standard & Poor’s and a rating of “Ba3”
by Moody’s Investors Service. For future borrowings, any decrease in our corporate
rating could result in an increase in borrowing costs.
Human Resources
We had 11,336 and 11,071 employees as of June 30, 2012 and December 31, 2011,
respectively. The following table sets forth the number of employees categorized by
the areas of operations and as a percentage of our workforce as of June 30, 2012 and
December 31, 2011. Staff remuneration packages are determined taken into account
of market conditions and the performance of the individuals concerned and are
subject to review from time to time.
June 30, 2012 December 31, 2011
Mocha Clubs 822 7.2% 777 7.0%
Altira Macau 2,369 20.9% 2,351 21.3%
City of Dreams(1) 7,670 67.7% 7,532 68.0%
Corporate and centralized
services(1) 475 4.2% 411 3.7%
Total 11,336 100.0% 11,071 100.0%
Note: (1) Includes project management staff for Studio City.
28 INTERIM REPORT 2012 Melco Crown Entertainment Limited
MANAGEMENT DISCUSSION AND ANALYSIS
We are not a party to any collective bargaining or similar agreement with our
employees. We believe that our relationship with our employees is good.
We have implemented a number of human resource initiatives over recent years
for the bene? t of our employees and their families. These initiatives include unique
in-house learning academy, an on-site high school diploma program, scholarship
awards, and corporate management trainee programs, as well as fast track promotion
training initiatives jointly coordinated with the School of Continuing Study of Macau
University of Science & Technology and Macao Technology Committee.
Melco Crown Entertainment Limited INTERIM REPORT 2012 29
OTHER INFORMATION
Corporate Governance Practices
Our Company is committed to conduct our business consistent with the highest
standards of corporate governance practices and procedures and has adopted our
own corporate governance principles and guidelines (the “Company’s Code”) to
deliver these commitments. The Company’s Code has been amended to fully address
the principles and code provisions as set out in the Corporate Governance Code
and Corporate Governance Report (the “Corporate Governance Code”) as stated in
Appendix 14 to the Listing Rules. The guidelines contained in the Company’s Code
were also developed by the Board taking into consideration the applicable corporate
governance standards of NASDAQ. In addition, our Company has also adopted
a number of other policies and guidelines, developed internally, to enhance our
corporate governance practices and procedures.
Our Company has complied with all provisions in the Corporate Governance Code for
the six months ended June 30, 2012, except for the following deviations:
Pursuant to the code provision A.2.1 of the Corporate Governance Code, the roles
of chairman and chief executive of? cer of a listed company should be separate and
should not be performed by the same individual. However, in view of the present
composition of the Board, the in depth knowledge of Mr. Lawrence Yau Lung Ho of
the operations of our Group and of the gaming and entertainment sector in Macau
in general, his extensive business network and connections in that sector and the
scope of operations of our Group, the Board believes it is in the best interests of our
Company for Mr. Lawrence Yau Lung Ho to assume the roles of Co-Chairman and
Chief Executive Of? cer at this time and that such arrangement be subject to review by
the Board from time to time.
Pursuant to the code provision A.4.1 of the Corporate Governance Code, non-
executive directors should be appointed for speci? c term, subject to re-election. Our
Company has deviated from this provision in that all non-executive Directors are not
appointed for speci? c term. They are, however, subject to retirement and re-election
every three years. The reason for the deviation is that our Company does not believe
that arbitrary term limits on Directors’ services are appropriate given that the Directors
ought to be committed to representing the long term interests of our Shareholders and
the retirement and re-election requirements of non-executive Directors have given the
Shareholders the right to approve continuation of non-executive Directors’ offi ces.
30 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
The Company has established the following Board committees to support the
Company in maintaining a high corporate governance standard:
• Audit Committee
• Compensation Committee
• Nominating and Corporate Governance Committee
Other details of the roles and functions of the above Board committees are available
in the charters of the respective Board committees, which can be found on our
Company’s website and the Hong Kong Stock Exchange’s website.
Board of Directors
The Board comprises ten Directors, of whom one is an executive Director, ? ve are
non-executive Directors and the remaining four are independent non-executive
Directors. Three of our Directors were nominated by Melco and three were nominated
by Crown. The following table provides information about our Directors.
Name Position
Lawrence Yau Lung Ho Co-Chairman, Chief Executive Of? cer and
executive Director
James Douglas Packer Co-Chairman and non-executive Director
John Peter Ben Wang Non-executive Director
Yuk Man Chung Non-executive Director
William Todd Nisbet Non-executive Director
Rowen Bruce Craigie Non-executive Director
James Andrew Charles MacKenzie Independent non-executive Director
Thomas Jefferson Wu Independent non-executive Director
Yiu Wa Alec Tsui Independent non-executive Director
Robert Wason Mactier Independent non-executive Director
Melco Crown Entertainment Limited INTERIM REPORT 2012 31
OTHER INFORMATION
Changes in Information of Directors
Pursuant to Rule 13.51(B)(1) of the Listing Rules, the changes in information of our
Directors are set out below:
Name Changes in information
Lawrence Mr. Ho resigned as director of each of Melco Crown (Macau
Yau Lung Ho Peninsula) Developments Limited and Melco Crown (Macau
Peninsula) Hotel Limited with effect from May 18, 2012.
Mr. Ho’s annual salary payable by the Company was increased
from US$1,050,000 to US$1,500,000 with effect from April 1,
2012.
John Peter Mr. Wang resigned as non-executive director of Carnival Group
Ben Wang International Holdings Limited (formerly known as Oriental Ginza
Holdings Limited) with effect from March 1, 2012.
James Andrew Mr. MacKenzie resigned as chairman of Paci? c Brands Limited
Charles with effect from June 30, 2012 but remains as a non-executive
MacKenzie director.
Mr. Mackenzie was appointed as a director of Yancoal
Australia Limited on June 26, 2012 and serves as the co-vice
chairman. Following the merger of Yancoal Australia Limited
and Gloucester Coal Ltd, Mr. Mackenzie ceased to become a
director and chairman of Gloucester Coal Ltd after July 6, 2012.
Thomas Mr. Wu was a council member of The Hong Kong Polytechnic
Jefferson Wu University from April 2009 to March 2012 and a member of the
Court of The Hong Kong University of Science and Technology
from July 2009 to July 2012.
Yiu Wa Alec Tsui Mr. Tsui retired as independent non-executive director of China
BlueChemical Ltd. with effect from June 5, 2012.
Save as disclosed above, as at June 30, 2012, there were no other changes to the
Directors’ information as required to be disclosed pursuant to Rule 13.51B(1) of the
Listing Rules.
32 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Directors’ Interests in Shares, Underlying Shares and
Debentures
As at June 30, 2012, the interests and short positions of each Director and chief
executive of our Company in the Shares, underlying Shares, debentures and
convertible loan notes of our Company or any of its associated corporations (within
the meaning of Part XV of the SFO) which (a) were required to be noti? ed to our
Company and the Hong Kong Stock Exchange pursuant to Divisions 7 and 8 of Part
XV of the SFO (including interests and short positions which the Director is taken or
deemed to have under such provisions of the SFO); or (b) were required, pursuant
to section 352 of the SFO, to be entered in the register maintained by our Company
referred to therein; or (c) were required, pursuant to the Model Code to be noti? ed to
our Company and the Hong Kong Stock Exchange were as follows:
| (a) |
|
Directors’ long positions in the Shares of our Company |
Approximate
Total percentage of
number of shareholding
Name of Nature of Shares as at as at
Name of Director corporation interest June 30, 2012 June 30, 2012(8)
Lawrence Melco Interest of 1,118,458,086 67.494%
Yau Lung Ho(1)(6) Melco controlled
Leisure(2)(6) corporation
— Personal interest 2,980,682 0.180%
James Douglas Crown Interest of 1,118,458,086 67.494%
Packer(3)(6) Crown controlled
Entertainment corporation
Group
Holdings(4)
Crown Asia
Investments(5)(6)
John Peter Ben Wang — Personal interest 65,179 0.004%
Yuk Man Chung — Personal interest 65,179 0.004%
William Todd Nisbet(7) — Founder of 45,000 0.003%
a discretionary
trust
Rowen Bruce Craigie — Personal interest 15,800 0.001%
James Andrew Charles — Personal interest 46,820 0.003%
MacKenzie
Thomas Jefferson Wu — Personal interest 49,379 0.003%
Yiu Wa Alec Tsui — Personal interest 49,379 0.003%
Robert Wason Mactier — Personal interest 49,379 0.003%
Melco Crown Entertainment Limited INTERIM REPORT 2012 33
OTHER INFORMATION
Notes:
| (1) |
|
As at June 30, 2012, Mr. Lawrence Yau Lung Ho personally holds 13,912,612 |
shares of Melco, representing approximately 1.13% of Melco’s shares. In addition,
115,509,024 shares of Melco are held by Lasting Legend Ltd., 288,532,606 shares
of Melco are held by Better Joy Overseas Ltd., 18,587,447 shares of Melco are
held by Mighty Dragon Developments Limited and 7,294,000 shares of Melco are
held by The L3G Capital Trust, representing approximately 9.36%, 23.38%, 1.51%
and 0.59% of Melco’s shares, all of which companies are owned by persons and/
or trusts af? liated with Mr. Lawrence Yau Lung Ho. Mr. Lawrence Yau Lung Ho also
has interest in Great Respect Limited, a company controlled by a discretionary trust,
the bene? ciaries of which include Mr. Lawrence Yau Lung Ho and his immediate
family members. Under the amended convertible loan notes issued by Melco held
by Great Respect Limited, a total number of 298,982,188 new shares may be issued
by Melco, representing approximately 24.23% of the existing issued share capital
and approximately 19.50% of the enlarged issued share capital of Melco as a result
of any future exercise in full of the conversion rights attaching to the amended
convertible loan notes by Great Respect Limited. Melco Leisure is a wholly-owned
subsidiary of Melco and accordingly, Mr. Lawrence Yau Lung Ho is deemed or
taken to be interested in 1,118,458,086 Shares in which Melco Leisure is interested
in or is deemed or taken to be interested in. Mr. Lawrence Yau Lung Ho is also
interested in 9,516,368 Shares, of which 6,535,686 Shares are subject to the share
options and restricted Shares granted as at June 30, 2012.
| (2) |
|
Melco Leisure is a direct wholly-owned subsidiary of Melco and is interested in or is |
deemed or taken to be interested in 1,118,458,086 Shares.
| (3) |
|
Mr. James Douglas Packer and his controlled corporations are interested in 48.09% |
of the issued share capital of Crown, which in turn is interested in the entire
issued share capital of Crown Entertainment Group Holdings and which in turn is
interested in the entire issued share capital of Crown Asia Investments. Accordingly,
Mr. James Douglas Packer is deemed or taken to be interested in 1,118,458,086
Shares in which Crown Asia Investments is interested in or is deemed or taken to be
interested in.
| (4) |
|
Crown Entertainment Group Holdings is a direct wholly-owned subsidiary of Crown |
and is deemed or taken to be interested in 1,118,458,086 Shares.
| (5) |
|
Crown Asia Investments is a direct wholly-owned subsidiary of Crown Entertainment |
Group Holdings and is interested in or is deemed or taken to be interested in
1,118,458,086 Shares.
| (6) |
|
SPV is owned as to 50% by Melco Leisure and 50% by Crown Asia Investments |
and 2,004,360 ADSs (representing 6,013,080 Shares) are held by SPV. Pursuant to
the terms of the Exchangeable Bonds issued by SPV, holders of the Exchangeable
Bonds are entitled to exchange such bonds for ADSs. Based on 1,657,115,300
Shares in issue as at June 30, 2012, if at that date, all the outstanding
Exchangeable Bonds were exchanged into ADSs at 100% of their principal
amount, this would amount to 2,006,980 ADSs, representing 6,020,940 Shares and
approximately 0.36% of the existing issued share capital of our Company.
| (7) |
|
Founder of a discretionary trust and is deemed or taken to be interested in 15,000 |
ADSs, representing 45,000 Shares.
| (8) |
|
The percentages are calculated on the basis of 1,657,115,300 Shares in issue as at |
June 30, 2012.
34 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
| (b) |
|
Directors’ long position in the underlying Shares of our Company |
Total number of
Shares subject
to the share
options granted Approximate
and restricted percentage of
Shares granted shareholding
Name of as at as at
Name of Director corporation June 30, 2012(1) June 30, 2012(2)
Lawrence Yau Lung Ho Company 6,535,686 0.394%
John Peter Ben Wang Company 264,984 0.016%
Yuk Man Chung Company 305,646 0.018%
Thomas Jefferson Wu Company 324,831 0.020%
Yiu Wa Alec Tsui Company 324,831 0.020%
Robert Wason Mactier Company 324,831 0.020%
James Andrew Charles Company 241,698 0.015%
MacKenzie
Notes:
| (1) |
|
These are restricted Shares and share options granted under the 2006 Share |
Incentive Plan and the 2011 Share Incentive Plan. Awards granted before the year
of 2012 are under the 2006 Share Incentive Plan and awards granted during or after
the year of 2012 are and will be under the 2011 Share Incentive Plan.
| (2) |
|
The percentages are calculated on the basis of 1,657,115,300 Shares in issue as at |
June 30, 2012.
Interests in other members of our Group
Number of Percentage of
shares as at interest as at
Name of subsidiary Name of Shareholder June 30, 2012 June 30, 2012
Melco Crown Gaming Lawrence Yau Lung Ho 1,000,000 10%(1)
Note:
| (1) |
|
The 1,000,000 class A shares carry 10% of the total voting rights in Melco Crown Gaming. |
Melco Crown Entertainment Limited INTERIM REPORT 2012 35
OTHER INFORMATION
Substantial Interests in the Share Capital of our Company
As at June 30, 2012, the following persons/corporations had interests in ? ve per cent or more of the issued share capital of our Company as recorded in the register required to be kept under Section 336 of the SFO. Details of the interests in the Shares or underlying Shares of our Company as noti? ed to our Company are set out below:
Approximate percentage of Number of shareholding Capacity/ Shares as at as at Name nature of interest June 30, 2012 June 30, 2012(12) Lawrence Bene? cial owner, 1,127,974,454 68.07% Yau Lung Ho(1)(10) interest of controlled corporation and deemed interest
Sharen Sau Yan Lo(2) Interest of spouse 1,127,974,454 68.07%
Melco Leisure(3)(10) Bene? cial owner, 1,118,458,086 67.49% interest of controlled corporation and deemed interest
Melco(4) Interest of controlled 1,118,458,086 67.49% corporation
James Douglas Interest of controlled 1,118,458,086 67.49% Packer(5)(10) corporation and deemed interest
Erica Louise Packer(6) Interest of spouse 1,118,458,086 67.49%
Crown Asia Bene? cial owner, 1,118,458,086 67.49% Investments(7)(10) interest of controlled corporation and deemed interest
Crown Entertainment Interest of controlled 1,118,458,086 67.49% Group Holdings(8) corporation
Crown(9) Interest of controlled 1,118,458,086 67.49% corporation
Capital Research and Investment Manager 100,332,102 6.05% Management Company(11)
36 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Notes:
| (1) |
|
As at June 30, 2012, Mr. Lawrence Yau Lung Ho personally holds 13,912,612 shares of |
Melco, representing approximately 1.13% of Melco’s shares. In addition, 115,509,024
shares of Melco are held by Lasting Legend Ltd., 288,532,606 shares of Melco are held
by Better Joy Overseas Ltd., 18,587,447 shares of Melco are held by Mighty Dragon
Developments Limited and 7,294,000 shares of Melco are held by The L3G Capital Trust,
representing approximately 9.36%, 23.38%, 1.51% and 0.59% of Melco’s shares, all
of which companies are owned by persons and/or trusts af? liated with Mr. Lawrence
Yau Lung Ho. Mr. Lawrence Yau Lung Ho also has interest in Great Respect Limited,
a company controlled by a discretionary trust, the bene? ciaries of which include
Mr. Lawrence Yau Lung Ho and his immediate family members. Under the amended
convertible loan notes issued by Melco held by Great Respect Limited, a total number of
298,982,188 new shares may be issued by Melco, representing approximately 24.23% of
the existing issued share capital and approximately 19.50% of the enlarged issued share
capital of Melco as a result of any future exercise in full of the conversion rights attaching
to the amended convertible loan notes by Great Respect Limited. Melco Leisure is a
wholly-owned subsidiary of Melco and accordingly, Mr. Lawrence Yau Lung Ho is deemed
or taken to be interested in 1,118,458,086 Shares in which Melco Leisure is interested in
or is deemed or taken to be interested in. Mr. Lawrence Yau Lung Ho is also interested
in 9,516,368 Shares, of which 6,535,686 Shares are subject to the share options and
restricted Shares granted as at June 30, 2012.
| (2) |
|
Ms. Sharen Sau Yan Lo is the spouse of Mr. Lawrence Yau Lung Ho and is deemed or |
taken to be interested in the Shares through the interest of her spouse, Mr. Lawrence Yau
Lung Ho, under the SFO.
| (3) |
|
Melco Leisure is the bene? cial owner of 556,222,503 Shares and is deemed or taken to be |
interested in 556,222,503 Shares owned by Crown Asia Investments pursuant to rights of
? rst refusal over such Shares granted by Crown Asia Investments in favor of Melco Leisure
under the new shareholders’ deed, which became effective in December 2007 (“New
Shareholders’ Deed”), entered into between Melco and Crown. SPV is owned as to 50%
by Melco Leisure and 50% by Crown Asia Investments and 2,004,360 ADSs (representing
6,013,080 Shares) are held by SPV.
| (4) |
|
Melco Leisure is a direct wholly-owned subsidiary of Melco and Melco is deemed or taken |
to be interested in 1,118,458,086 Shares in which Melco Leisure is interested in as referred
to in note (3) above.
| (5) |
|
Mr. James Douglas Packer and his controlled corporations are interested in 48.09% of |
the issued share capital of Crown, which in turn is interested in the entire issued share
capital of Crown Entertainment Group Holdings and which in turn is interested in the
entire issued share capital of Crown Asia Investments. Accordingly, Mr. James Douglas
Packer is deemed or taken to be interested in 1,118,458,086 Shares in which Crown Asia
Investments is interested in or is deemed or taken to be interested in.
| (6) |
|
Ms. Erica Louise Packer is the spouse of Mr. James Douglas Packer and is deemed or |
taken to be interested in the Shares through the interest of her spouse, Mr. James Douglas
Packer, under the SFO.
| (7) |
|
Crown Asia Investments is the bene? cial owner of 556,222,503 Shares and is deemed or |
taken to be interested in 556,222,503 Shares owned by Melco Leisure pursuant to rights of
? rst refusal over such Shares granted by Melco Leisure in favor of Crown Asia Investments
under the New Shareholders’ Deed. SPV is owned as to 50% by Melco Leisure and 50%
by Crown Asia Investments and 2,004,360 ADSs (representing 6,013,080 Shares) are held
by SPV.
Melco Crown Entertainment Limited INTERIM REPORT 2012 37
OTHER INFORMATION
| (8) |
|
Crown Asia Investments is a direct wholly-owned subsidiary of Crown Entertainment |
Group Holdings and Crown Entertainment Group Holdings is deemed or taken to be
interested in 1,118,458,086 Shares in which Crown Asia Investments is interested in as
referred to in note (7) above.
| (9) |
|
Crown Entertainment Group Holdings is a direct wholly-owned subsidiary of Crown and |
Crown is deemed or taken to be interested in 1,118,458,086 Shares in which Crown Asia
Investments is interested in as referred to in note (7) above.
| (10) |
|
SPV is owned as to 50% by Melco Leisure and 50% by Crown Asia Investments and |
2,004,360 ADSs (representing 6,013,080 Shares) are held by SPV. Pursuant to the terms of
the Exchangeable Bonds issued by SPV, holders of the Exchangeable Bonds are entitled
to exchange such bonds for ADSs. Based on 1,657,115,300 Shares in issue as at June 30,
2012, if at that date, all the outstanding Exchangeable Bonds were exchanged into ADSs
at 100% of their principal amount, this would amount to 2,006,980 ADSs, representing
6,020,940 Shares and approximately 0.36% of the existing issued share capital of our
Company.
| (11) |
|
Capital Research and Management Company is a U.S. based investment adviser that |
manages the American Funds, a family of mutual funds.
| (12) |
|
The percentages are calculated on the basis of 1,657,115,300 Shares in issue as at June |
30, 2012.
38 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
2006 Share Incentive Plan and 2011 Share Incentive Plan
Please refer to Appendix I to the 2011 annual report of our Company for details of the
terms of the 2006 Share Incentive Plan and the 2011 Share Incentive Plan.
A summary of the outstanding awards granted under the 2006 Share Incentive Plan
and the 2011 Share Incentive Plan as of June 30, 2012 is presented below:
Exercise Number of
price/grant unvested
date fair value share options/
per ADS (US$) restricted Shares Vesting period
Share Options
2009 Cancel and
Re-issue Program 4.28 1,037,751 4 years
2009 Long Term Incentive Plan 3.04–3.26 1,129,125 4 years
2010 Long Term Incentive Plan 3.75–3.98 616,266 3 to 4 years
2011 Long Term Incentive Plan 7.57 3,009,831 3 years
2012 Long Term Incentive Plan(1) 14.09 1,901,136(2)(3) 3 years
7,694,109
Restricted Shares
2009 Long Term Incentive Plan 3.26 310,596 4 years
2010 Long Term Incentive Plan 3.75 308,142 3 to 4 years
2011 Long Term Incentive Plan 7.57 1,695,147 3 years
2012 Long Term Incentive Plan(1) 13.28 1,153,890(2)(3) 3 years
3,467,775
Notes:
| (1) |
|
Awards granted before the year of 2012 are under the 2006 Share Incentive Plan and |
awards granted during or after the year of 2012 are and will be under the 2011 Share
Incentive Plan.
| (2) |
|
11,859 share options and 5,931 restricted Shares were granted to a then newly joined |
employee on March 29, 2012 pursuant to the 2011 Share Incentive Plan.
| (3) |
|
33,438 share options and 16,722 restricted Shares granted under the 2011 Share |
Incentive Plan were cancelled between April and May 2012 due to resignations of certain
employees.
Melco Crown Entertainment Limited INTERIM REPORT 2012 39
OTHER INFORMATION
Details of the movement in share options granted under the 2006 Share Incentive Plan and the 2011 Share Incentive Plan during the six months ended June 30, 2012
are as follows:
Number of share options
Exercise Share
price of price at
share date of
options grant of Outstanding Outstanding
Name or (per share as at Granted Reclassi? ed Exercised Cancelled Lapsed as at
category Date of grant of Share) options January 1, during during during during during June 30,
of participants share options(2) Exercisable period US$ US$ 2012 the period the period the period(3) the period the period 2012
Directors:
Lawrence March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 724,692 — — — — — 724,692
Yau Lung Ho March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 724,692 — — — — — 724,692
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 724,692 — — — — — 724,692
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 724,698 — — — — — 724,698
November 25, 2009 November 25, 2010 to March 17, 2018 1.43 1.43 188,763 — — — — — 188,763
November 25, 2009 November 25, 2011 to March 17, 2018 1.43 1.43 188,763 — — — — — 188,763
November 25, 2009 November 25, 2012 to March 17, 2018 1.43 1.43 188,763 — — — — — 188,763
November 25, 2009 November 25, 2013 to March 17, 2018 1.43 1.43 188,769 — — — — — 188,769
March 23, 2011 March 23, 2012 to March 22, 2021 2.52 2.52 482,115 — — — — — 482,115
March 23, 2011 March 23, 2013 to March 22, 2021 2.52 2.52 482,115 — — — — — 482,115
March 23, 2011 March 23, 2014 to March 22, 2021 2.52 2.52 482,268 — — — — — 482,268
March 29, 2012 March 29, 2013 to March 28, 2022 4.70 4.43 — 158,133(18) — — — — 158,133
March 29, 2012 March 29, 2014 to March 28, 2022 4.70 4.43 — 158,133(18) — — — — 158,133
March 29, 2012 March 29, 2015 to March 28, 2022 4.70 4.43 — 158,133(18) — — — — 158,133
Sub-total: 5,100,330 474,399 — — — — 5,574,729
40 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Number of share options
Exercise Share
price of price at
share date of
options grant of Outstanding Outstanding
Name or (per share as at Granted Reclassi? ed Exercised Cancelled Lapsed as at
category Date of grant of Share) options January 1, during during during during during June 30,
of participants share options(2) Exercisable period US$ US$ 2012 the period the period the period(3) the period the period 2012
Yuk Man March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
Chung March 18, 2008 March 18, 2010 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2011 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2012 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Sub-total: 194,664 — — — — — 194,664
Yiu Wa September 10, 2007 September 10, 2008 to September 9, 2017 5.06 4.42 5,982 — — — — — 5,982
Alec Tsui September 10, 2007 September 10, 2009 to September 9, 2017 5.06 4.42 11,967 — — — — — 11,967
September 10, 2007 September 10, 2010 to September 9, 2017 5.06 4.42 17,952 — — — — — 17,952
September 10, 2007 September 10, 2011 to September 9, 2017 5.06 4.42 23,946 — — — — — 23,946
March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2010 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2011 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2012 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Sub-total: 254,511 — — — — — 254,511
Melco Crown Entertainment Limited INTERIM REPORT 2012 41
42
Number of share options
INTERIM Exercise Share
OTHER
price of price at
REPORT share date of
options grant of Outstanding Outstanding
2012 Name or (per share as at Granted Reclassi? ed Exercised Cancelled Lapsed as at
category Date of grant of Share) options January 1, during during during during during June 30,
Melco of participants share options(2) Exercisable period US$ US$ 2012 the period the period the period(3) the period the period 2012 INFORMATION
John Peter March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
Crown Ben Wang March 18, 2008 March 18, 2010 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2011 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2012 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Entertainment March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Limited Sub-total: 194,664 — — — — — 194,664
Robert Wason September 10, 2007 September 10, 2008 to September 9, 2017 5.06 4.42 5,982 — — — — — 5,982
Mactier September 10, 2007 September 10, 2009 to September 9, 2017 5.06 4.42 11,967 — — — — — 11,967
September 10, 2007 September 10, 2010 to September 9, 2017 5.06 4.42 17,952 — — — — — 17,952
September 10, 2007 September 10, 2011 to September 9, 2017 5.06 4.42 23,946 — — — — — 23,946
March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2010 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2011 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2012 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Sub-total: 254,511 — — — — — 254,511
42 INTERIM REPORT 2012
Melco Crown Entertainment Limited
OTHER
Number of share options
Exercise Share
price of price at
share date of
options grant of Outstanding Outstanding
Name or (per share as at Granted Reclassi? ed Exercised Cancelled Lapsed as at
category Date of grant of Share) options January 1, during during during during during June 30,
of participants share options(2) Exercisable period US$ US$ 2012 the period the period the period(3) the period the period 2012
Thomas September 10, 2007 September 10, 2008 to September 9, 2017 5.06 4.42 5,982 — — — — — 5,982
Jefferson September 10, 2007 September 10, 2009 to September 9, 2017 5.06 4.42 11,967 — — — — — 11,967
Wu September 10, 2007 September 10, 2010 to September 9, 2017 5.06 4.42 17,952 — — — — — 17,952
September 10, 2007 September 10, 2011 to September 9, 2017 5.06 4.42 23,946 — — — — — 23,946
March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2010 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2011 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 18, 2008 March 18, 2012 to March 17, 2018 4.01 4.01 14,157 — — — — — 14,157
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Sub-total: 254,511 — — — — — 254,511
James Andrew September 30, 2008 April 24, 2009 to September 29, 2018 4.69 1.33 8,334 — — — — — 8,334
Charles September 30, 2008 April 24, 2010 to September 29, 2018 4.69 1.33 8,336 — — — — — 8,336
MacKenzie September 30, 2008 April 24, 2011 to September 29, 2018 4.69 1.33 8,336 — — — — — 8,336
September 30, 2008 April 24, 2012 to September 29, 2018 4.69 1.33 8,336 — — — — — 8,336
March 17, 2009 March 17, 2010 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2011 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2012 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
March 17, 2009 March 17, 2013 to March 16, 2019 1.09 1.09 34,509 — — — — — 34,509
Sub-total: 171,378 — — — — — 171,378
Sub-total: 6,424,569 474,399 — — — — 6,898,968
Melco Crown Entertainment Limited INTERIM REPORT 2012 43
OTHER INFORMATION
Number of share options
Exercise Share
price of price at
share date of
options grant of Outstanding Outstanding
Name or (per share as at Granted Reclassi? ed Exercised Cancelled Lapsed as at
category Date of grant of Share) options January 1, during during during during during June 30,
of participants share options(2) Exercisable period US$ US$ 2012 the period the period the period(3) the period the period 2012
Employees(4) September 10, 2007 September 10, 2008 to September 9, 2017 5.06 4.42 77,211 — — — — — 77,211
Employees(5) March 18, 2008 March 18, 2009 to March 17, 2018 4.01 4.01 36,117 — — — — — 36,117
Employees(6) November 25, 2008 November 25, 2010 to November 24, 2018 1.01 1.01 6,715,125 — (256,470) (1,209,342) — — 5,249,313
Employees(7) January 20, 2009 January 20, 2010 to January 19, 2019 1.01 1.01 789,474 — — — — — 789,474
Employees(8) November 25, 2009 November 25, 2010 to September 9, 2017 1.43 1.43 773,043 — (59,844) (52,851) (59,850) — 600,498
Employees(9) November 25, 2009 November 25, 2010 to March 17, 2018 1.43 1.43 674,478 — (51,735) (46,278) (54,057) — 522,408
Employees(10) November 25, 2009 November 25, 2010 to April 10, 2018 1.43 1.43 140,400 — — — — — 140,400
Employees(11) May 26, 2010 May 26, 2013 to May 25, 2020 1.25 1.25 156,624 — — — — — 156,624
Employees(12) May 26, 2010 May 26, 2012 to May 25, 2020 1.25 1.25 304,290 — — (9,552) 14,976(16) — 309,714
Employees July 28, 2010 July 28, 2011 to July 27, 2020 1.28 1.28 1,033,944 — (1,033,944) — — — —
Employees(13) August 16, 2010 August 16, 2012 to August 15, 2020 1.33 1.25 300,000 — — — — — 300,000
Employees(14) March 23, 2011 March 23, 2012 to March 22, 2021 2.52 2.52 3,491,187 — (87,681) (142,221) (220,506) — 3,040,779
Employees(15) March 29, 2012 March 29, 2013 to March 28, 2022 4.70 4.43 — 1,460,175(18)(19) (15,834) — (17,604)(20) — 1,426,737
Sub-total: 14,491,893 1,460,175 (1,505,508) (1,460,244) (337,041) — 12,649,275
Others(17) November 25, 2008 November 25, 2010 to November 24, 2018 1.01 1.01 — — 256,470 (250,926) — (5,544) —
Others(17) November 25, 2009 November 25, 2010 to September 9, 2017 1.43 1.43 — — 59,844 (43,884) (15,960) — —
Others(17) November 25, 2009 November 25, 2010 to March 17, 2018 1.43 1.43 — — 51,735 (44,724) (7,011) — —
Others(17) July 28, 2010 July 28, 2011 to July 27, 2020 1.28 1.28 — — 1,033,944 (344,646) (689,298) — —
Others(17) March 23, 2011 March 23, 2012 to March 22, 2021 2.52 2.52 — — 87,681 (8,544) (79,137) — —
Others(17) March 29, 2012 March 29, 2013 to March 28, 2022 4.70 4.43 — — 15,834 — (15,834)(20) — —
Sub-total: — — 1,505,508 (692,724) (807,240) (5,544) —
Total 20,916,462 1,934,574 — (2,152,968) (1,144,281) (5,544) 19,548,243
44 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Notes:
| (1) |
|
The vesting period of the share options is from the date of grant until the commencement |
of exercisable period.
| (2) |
|
Awards granted before the year of 2012 are under the 2006 Share Incentive Plan and |
awards granted during or after the year of 2012 are, and will be, under the 2011 Share
Incentive Plan.
| (3) |
|
In respect of the share options exercised during the period, the weighted average closing |
price of the Shares immediately before and at the dates on which the options were
exercised was US$4.33.
| (4) |
|
Among the 77,211 share options, 7,185 share options may be exercised during the period |
from September 10, 2008 to September 9, 2017, 15,561 share options may be exercised
during the period from September 10, 2009 to September 9, 2017, 23,340 share options
may be exercised during the period from September 10, 2010 to September 9, 2017 and
31,125 share options may be exercised during the period from September 10, 2011 to
September 9, 2017.
| (5) |
|
Among the 36,117 share options, 9,027 share options may be exercised during the period |
from March 18, 2009 to March 17, 2018, 9,027 share options may be exercised during the
period from March 18, 2010 to March 17, 2018, 9,027 share options may be exercised
during the period from March 18, 2011 to March 17, 2018 and 9,036 share options may be
exercised during the period from March 18, 2012 to March 17, 2018.
| (6) |
|
Among the 5,249,313 share options, 2,404,179 share options may be exercised during the |
period from November 25, 2010 to November 24, 2018 and 2,845,134 share options may
be exercised during the period from November 25, 2011 to November 24, 2018.
| (7) |
|
Among the 789,474 share options, 197,367 share options may be exercised during |
the period from January 20, 2010 to January 19, 2019, 197,367 share options may be
exercised during the period from January 20, 2011 to January 19, 2019, 197,367 share
options may be exercised during the period from January 20, 2012 to January 19, 2019
and 197,373 share options may be exercised during the period from January 20, 2013 to
January 19, 2019.
| (8) |
|
Among the 600,498 share options, 131,145 share options may be exercised during the |
period from November 25, 2010 to September 9, 2017, 115,203 share options may be
exercised during the period from November 25, 2011 to September 9, 2017, 177,027 share
options may be exercised during the period from November 25, 2012 to September 9,
2017 and 177,123 share options may be exercised during the period from November 25,
2013 to September 9, 2017.
| (9) |
|
Among the 522,408 share options, 105,318 share options may be exercised during |
the period from November 25, 2010 to March 17, 2018, 107,589 share options may be
exercised during the period from November 25, 2011 to March 17, 2018, 154,716 share
options may be exercised during the period from November 25, 2012 to March 17, 2018
and 154,785 share options may be exercised during the period from November 25, 2013 to
March 17, 2018.
Melco Crown Entertainment Limited INTERIM REPORT 2012 45
OTHER INFORMATION
| (10) |
|
Among the 140,400 share options, 35,100 share options may be exercised during the |
period from November 25, 2010 to April 10, 2018, 35,100 share options may be exercised
during the period from November 25, 2011 to April 10, 2018, 35,100 share options may be
exercised during the period from November 25, 2012 to April 10, 2018 and 35,100 share
options may be exercised during the period from November 25, 2013 to April 10, 2018.
| (11) |
|
The 156,624 share options may be exercised during the period from May 26, 2013 to May |
25, 2020.
| (12) |
|
Among the 309,714 share options, 150,072 share options may be exercised during the |
period from May 26, 2012 to May 25, 2020 and 159,642 share options may be exercised
during the period from May 26, 2013 to May 25, 2020.
| (13) |
|
Among the 300,000 share options, 150,000 share options may be exercised during the |
period from August 16, 2012 to August 15, 2020 and 150,000 share options may be
exercised during the period from August 16, 2014 to August 15, 2020.
| (14) |
|
Among the 3,040,779 share options, 995,334 share options may be exercised during the |
period from March 23, 2012 to March 22, 2021, 1,022,493 share options may be exercised
during the period from March 23, 2013 to March 22, 2021 and 1,022,952 share options
may be exercised during the period from March 23, 2014 to March 22, 2021.
| (15) |
|
Among the 1,426,737 share options, 475,488 share options may be exercised during the |
period from March 29, 2013 to March 28, 2022, 475,596 share options may be exercised
during the period from March 29, 2014 to March 28, 2022 and 475,653 share options may
be exercised during the period from March 29, 2015 to March 28, 2022.
| (16) |
|
Reversal of share options cancelled in 2011 due to withdrawal of resignation of our |
employee.
| (17) |
|
The category “Others” represents the former employees of our Group. |
| (18) |
|
Closing price of the Share immediately before the date of grant of share option was |
US$4.65.
| (19) |
|
11,859 share options were granted to a then newly joined employee on March 29, 2012 |
pursuant to the 2011 Share Incentive Plan.
| (20) |
|
33,438 share options granted under 2011 Share Incentive Plan were cancelled between |
April and May 2012 due to resignations of certain employees.
46 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Details of the movement in restricted Shares granted under the 2006 Share Incentive Plan and the 2011 Share Incentive Plan during the six months ended June 30,
2012 are as follows:
Number of restricted Shares
Share price
at date of grant of Outstanding Granted Reclassi? ed Vested Cancelled Outstanding
Name or category Date of grant of restricted Shares as at during during during during the as at
of participants restricted Shares(1) Vesting date US$ January 1, 2012 the period the period the period period June 30, 2012
Directors:
Lawrence Yau Lung Ho March 18, 2008 March 18, 2012 4.01 62,292 — — (62,292) — —
March 17, 2009 March 17, 2013 1.09 241,566 — — — — 241,566
March 23, 2011 March 23, 2012 2.52 241,056 — — (241,056) — —
March 23, 2011 March 23, 2013 2.52 241,056 — — — — 241,056
March 23, 2011 March 23, 2014 2.52 241,137 — — — — 241,137
March 29, 2012 March 29, 2013 4.43 — 79,065 — — — 79,065
March 29, 2012 March 29, 2014 4.43 — 79,065 — — — 79,065
March 29, 2012 March 29, 2015 4.43 — 79,068 — — — 79,068
Sub-total: 1,027,107 237,198 — (303,348) — 960,957
Yuk Man Chung March 18, 2008 March 18, 2012 4.01 3,114 — — (3,114) — —
March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 22,590 — — — 22,590
March 29, 2012 March 29, 2014 4.43 — 22,590 — — — 22,590
March 29, 2012 March 29, 2015 4.43 — 22,590 — — — 22,590
Sub-total: 62,175 67,770 — (18,963) — 110,982
Melco Crown Entertainment Limited INTERIM REPORT 2012 47
OTHER INFORMATION
Number of restricted Shares
Share price
at date of grant of Outstanding Granted Reclassi? ed Vested Cancelled Outstanding
Name or category Date of grant of restricted Shares as at during during during during the as at
of participants restricted Shares(1) Vesting date US$ January 1, 2012 the period the period the period period June 30, 2012
Yiu Wa Alec Tsui March 18, 2008 March 18, 2012 4.01 3,114 — — (3,114) — —
March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2014 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2015 4.43 — 9,036 — — — 9,036
Sub-total: 62,175 27,108 — (18,963) — 70,320
John Peter Ben Wang March 18, 2008 March 18, 2012 4.01 3,114 — — (3,114) — —
March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2014 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2015 4.43 — 9,036 — — — 9,036
Sub-total: 62,175 27,108 — (18,963) — 70,320
48 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Number of restricted Shares
Share price
at date of grant of Outstanding Granted Reclassi? ed Vested Cancelled Outstanding
Name or category Date of grant of restricted Shares as at during during during during the as at
of participants restricted Shares(1) Vesting date US$ January 1, 2012 the period the period the period period June 30, 2012
Robert Wason Mactier March 18, 2008 March 18, 2012 4.01 3,114 — — (3,114) — —
March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2014 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2015 4.43 — 9,036 — — — 9,036
Sub-total: 62,175 27,108 — (18,963) — 70,320
Thomas Jefferson Wu March 18, 2008 March 18, 2012 4.01 3,114 — — (3,114) — —
March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2014 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2015 4.43 — 9,036 — — — 9,036
Sub-total: 62,175 27,108 — (18,963) — 70,320
Melco Crown Entertainment Limited INTERIM REPORT 2012 49
OTHER INFORMATION
Number of restricted Shares
Share price
at date of grant of Outstanding Granted Reclassi? ed Vested Cancelled Outstanding
Name or category Date of grant of restricted Shares as at during during during during the as at
of participants restricted Shares(1) Vesting date US$ January 1, 2012 the period the period the period period June 30, 2012
James Andrew Charles September 30, 2008 April 24, 2012 1.33 1,835 — — (1,835) — —
MacKenzie March 17, 2009 March 17, 2013 1.09 11,505 — — — — 11,505
March 23, 2011 March 23, 2012 2.52 15,849 — — (15,849) — —
March 23, 2011 March 23, 2013 2.52 15,849 — — — — 15,849
March 23, 2011 March 23, 2014 2.52 15,858 — — — — 15,858
March 29, 2012 March 29, 2013 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2014 4.43 — 9,036 — — — 9,036
March 29, 2012 March 29, 2015 4.43 — 9,036 — — — 9,036
Sub-total: 60,896 27,108 — (17,684) — 70,320
Sub-total: 1,398,878 440,508 — (415,847) — 1,423,539
Employees March 18, 2008 March 18, 2012 4.01 56,919 — — (56,919) — —
Employees April 11, 2008 April 11, 2012 4.32 11,583 — — (11,583) — —
Employees April 1, 2010 April 1, 2012 1.55 64,410 — — (64,410) — —
Employees May 26, 2010 May 26, 2013 1.25 78,315 — — — — 78,315
Employees May 26, 2010 May 26, 2012 1.25 76,059 — — (79,803) 3,744(3) —
Employees May 26, 2010 May 26, 2013 1.25 76,083 — — — 3,744(3) 79,827
Employees July 28, 2010 July 28, 2012 1.28 172,323 — (172,323) — — —
Employees July 28, 2010 July 28, 2013 1.28 172,326 — (172,326) — — —
Employees August 16, 2010 August 16, 2012 1.25 75,000 — — — — 75,000
Employees August 16, 2010 August 16, 2014 1.25 75,000 — — — — 75,000
Employees March 23, 2011 March 23, 2012 2.52 581,799 — (8,727) (573,072) — —
Employees March 23, 2011 March 23, 2013 2.52 581,799 — (15,414) — (55,116) 511,269
Employees March 23, 2011 March 23, 2014 2.52 582,009 — (13,014) — (57,552) 511,443
Employees March 29, 2012 March 29, 2013 4.43 — 243,288(4) (2,637) — (2,934)(5) 237,717
Employees March 29, 2012 March 29, 2014 4.43 — 243,366(4) (2,640) — (2,934)(5) 237,792
Employees March 29, 2012 March 29, 2015 4.43 — 243,450(4) (2,640) — (2,937)(5) 237,873
Sub-total: 2,603,625 730,104 (389,721) (785,787) (113,985) 2,044,236
50 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Number of restricted Shares
Share price
at date of grant of Outstanding Granted Reclassi? ed Vested Cancelled Outstanding
Name or category Date of grant of restricted Shares as at during during during during the as at
of participants restricted Shares(1) Vesting date US$ January 1, 2012 the period the period the period period June 30, 2012
Others(2) July 28, 2010 July 28, 2012 1.28 — — 172,323 — (172,323) —
Others(2) July 28, 2010 July 28, 2013 1.28 — — 172,326 — (172,326) —
Others(2) March 23, 2011 March 23, 2012 2.52 — — 8,727 — (8,727) —
Others(2) March 23, 2011 March 23, 2013 2.52 — — 15,414 — (15,414) —
Others(2) March 23, 2011 March 23, 2014 2.52 — — 13,014 — (13,014) —
Others(2) March 29, 2012 March 29, 2013 4.43 — — 2,637 — (2,637)(5) —
Others(2) March 29, 2012 March 29, 2014 4.43 — — 2,640 — (2,640)(5) —
Others(2) March 29, 2012 March 29, 2015 4.43 — — 2,640 — (2,640)(5) —
Sub-total: — — 389,721 — (389,721) —
Total 4,002,503 1,170,612 — (1,201,634) (503,706) 3,467,775
Notes:
(1) Awards granted before the year of 2012 are under the 2006 Share Incentive Plan and awards granted during or after the year of 2012 are, and will be, under the 2011 Share
Incentive Plan.
| (2) |
|
The category “Others” represents the former employees of our Group. |
| (3) |
|
Reversal of restricted Shares cancelled in 2011 due to withdrawal of resignation of our employee. |
(4) 5,931 restricted Shares were granted to a then newly joined employee on March 29, 2012 pursuant to the 2011 Share Incentive Plan.
(5) 16,722 restricted Shares granted under the 2011 Share Incentive Plan were cancelled between April and May 2012 due to resignations of certain employees.
Melco Crown Entertainment Limited INTERIM REPORT 2012 51
OTHER INFORMATION
Securities Dealings by Directors and Relevant Employees
The Directors and relevant employees are subject to the rules set forth in our
Company’s Policy for the Prevention of Insider Trading, the terms therein are no less
exacting than those contained in the Model Code set out in Appendix 10 to the Listing
Rules. The Listing Rules require an express Model Code compliance con? rmation
from the directors and that the con? rmation be given following a speci? c enquiry.
All Directors have con? rmed that they have complied with the required standard of
dealings and code of conduct regarding securities dealings by directors as set out in
the Model Code for the six months ended June 30, 2012.
Purchase, Sale or Redemption of our Company’s Listed
Securities
During the six months ended June 30, 2012, neither our Company nor any of its
subsidiaries had purchased, sold or redeemed any of our Company’s listed securities.
Investors Relations
The last Shareholders’ meeting of our Company was the annual general meeting
which was held at Salon III, Level 2, Grand Hyatt Macau, City of Dreams, Estrada do
Istmo, Cotai, Macau on Wednesday, May 23, 2012 at 4:00 p.m. (Hong Kong time),
at which resolutions were duly passed in respect of major items, among others,
| (i) |
|
adopting the ? nancial statements and the directors’ and auditors’ reports for |
the year ended December 31, 2011; (ii) re-appointment of the independent auditor;
(iii) granting of the general mandate and repurchase mandate; (iv) re-election of
Directors; (v) adoption of the Chinese Company name; and (vi) amendment of the
then existing Amended and Restated Memorandum of Association and Articles of
Association.
Financial Reporting
The Board is accountable to the Shareholders and is committed to presenting
comprehensive and timely information to the Shareholders on assessment of our
Company’s performance, fi nancial position and prospects. Our Company voluntarily
publishes quarterly unaudited ? nancial results for the three months ended March
31 and September 30 and key performance indicators of our Group for each ? scal
quarter generally within 45 days after the end of the relevant quarter to enable its
Shareholders, investors and the public to better appraise the position and business
performance of our Group. Such ? nancial information is prepared in accordance with
U.S. GAAP using the accounting policies applied to our Company’s interim and annual
? nancial statements and there is no reconciliation of such information to IFRS.
52 INTERIM REPORT 2012 Melco Crown Entertainment Limited
OTHER INFORMATION
Review of unaudited interim ? nancial information
The Group’s unaudited condensed consolidated fi nancial statements have been
reviewed and approved by the Company’s audit committee, comprised of three
independent non-executive Directors, namely Mr. Thomas Jefferson Wu, Mr. Yiu Wa
Alec Tsui and Mr. James Andrew Charles MacKenzie and reviewed by the Groups’
external auditors in accordance with Hong Kong Standard on Review Engagements
2410, “Review of Interim Financial Information Performed by the Independent Auditor
of the Entity” issued by the Hong Kong Institute of Certifi ed Public Accountants.
This 2012 interim report is printed in English and Chinese languages and will be
available on the website of the Hong Kong Stock Exchange at www.hkex.com.hk and
our website at www.melco-crown.com from September 21, 2012.
For and on behalf of the Board
Ho, Lawrence Yau Lung
Co-Chairman and Chief Executive Of? cer
Macau, August 27, 2012
Melco Crown Entertainment Limited INTERIM REPORT 2012 53
REPORT ON REVIEW OF
UNAUDITED CONDENSED
CONSOLIDATED FINANCIAL
STATEMENTS
To the Board of Directors of Melco Crown Entertainment Limited:
Introduction
We have reviewed the condensed consolidated ? nancial statements of Melco Crown
Entertainment Limited (the “Company”) and its subsidiaries (collectively referred to as
the “Group”) set out on pages 56 to 92, which comprises the condensed consolidated
balance sheet as of June 30, 2012 and the related condensed consolidated statement
of operations, statement of comprehensive income, statement of shareholders’
equity and statement of cash ? ows for the six-month period then ended, and certain
explanatory notes. The Directors of the Company are responsible for the preparation
and presentation of these condensed consolidated ? nancial statements in conformity
with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). Our responsibility is to express a conclusion on these condensed
consolidated ? nancial statements based on our review, and to report our conclusion
solely to you, as a body, in accordance with our agreed terms of engagement, and for
no other purpose. We do not assume responsibility towards or accept liability to any
other person for the contents of this report.
54 INTERIM REPORT 2012 Melco Crown Entertainment Limited
REPORT ON REVIEW OF UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Scope of review
We conducted our review in accordance with Hong Kong Standard on Review
Engagements 2410 “Review of Interim Financial Information Performed by the
Independent Auditor of the Entity” issued by the Hong Kong Institute of Certifi ed
Public Accountants. A review of these condensed consolidated ? nancial statements
consists of making inquiries, primarily of persons responsible for ? nancial and
accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with Hong Kong
Standards on Auditing and consequently does not enable us to obtain assurance that
we would become aware of all signi? cant matters that might be identi? ed in an audit.
Accordingly we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe
that the condensed consolidated ? nancial statements are not prepared, in all material
respects, in conformity with U.S. GAAP.
Deloitte Touche Tohmatsu
Certi? ed Public Accountants
Hong Kong
August 27, 2012
Melco Crown Entertainment Limited INTERIM REPORT 2012 55
(In thousands of U.S. dollars, except share and per share data)
UNAUDITED CONDENSED
CONSOLIDATED
BALANCE SHEET
June 30, December 31,
2012 2011
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,472,726 $ 1,158,024
Restricted cash 361,082 —
Accounts receivable, net (Note 3) 311,101 306,500
Amounts due from af? liated companies 790 1,846
Amount due from a shareholder 6 6
Inventories 15,545 15,258
Prepaid expenses and other
current assets 32,595 23,882
Total current assets 2,193,845 1,505,516
PROPERTY AND EQUIPMENT, NET
(Note 4) 2,626,501 2,655,429
GAMING SUBCONCESSION, NET 570,886 599,505
INTANGIBLE ASSETS, NET 4,220 4,220
GOODWILL 81,915 81,915
LONG-TERM PREPAYMENT,
DEPOSITS AND OTHER ASSETS 128,127 72,858
RESTRICTED CASH — 364,807
DEFERRED TAX ASSETS 84 24
DEFERRED FINANCING COSTS 36,414 42,738
LAND USE RIGHTS, NET (Note 5) 1,021,577 942,968
TOTAL $ 6,663,569 $ 6,269,980
LIABILITIES AND SHAREHOLDERS’
EQUITY
CURRENT LIABILITIES
Accounts payable (Note 6) $ 9,631 $ 12,023
Accrued expenses and other
current liabilities (Note 7) 642,449 588,719
Income tax payable 1,788 1,240
Current portion of long-term debt
(Note 8) 719,919 —
Amounts due to af? liated companies 1,450 1,137
Total current liabilities $ 1,375,237 $ 603,119
56 INTERIM REPORT 2012 Melco Crown Entertainment Limited
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
June 30, December 31,
2012 2011
LONG-TERM DEBT (Note 8) $ 1,645,726 $ 2,325,980
OTHER LONG-TERM LIABILITIES 29,174 27,900
DEFERRED TAX LIABILITIES 68,259 70,028
LAND USE RIGHTS PAYABLE 93,994 55,301
COMMITMENTS AND CONTINGENCIES
(Note 13)
SHAREHOLDERS’ EQUITY
Ordinary shares at
US$0.01 par value per share
(Authorized — 7,300,000,000 shares
as of June 30, 2012 and
December 31, 2011 and
issued — 1,657,115,300 and
1,653,101,002 shares as of
June 30, 2012 and December 31, 2011,
respectively) (Note 10) 16,571 16,531
Treasury shares, at
US$0.01 par value per share
(11,212,024 and 10,552,328 shares
as of June 30, 2012 and
December 31, 2011, respectively)
(Note 10) (112) (106)
Additional paid-in capital 3,229,853 3,223,274
Accumulated other comprehensive
losses (1,031) (1,034)
Accumulated losses (78,157) (282,510)
Total Melco Crown Entertainment
Limited shareholders’ equity 3,167,124 2,956,155
Noncontrolling interests 284,055 231,497
Total equity 3,451,179 3,187,652
TOTAL $ 6,663,569 $ 6,269,980
NET CURRENT ASSETS $ 818,608 $ 902,397
TOTAL ASSETS LESS CURRENT
LIABILITIES $ 5,288,332 $ 5,666,861
The accompanying notes are an integral part of the unaudited condensed
consolidated ? nancial statements.
Melco Crown Entertainment Limited INTERIM REPORT 2012 57
(In thousands of U.S. dollars, except share and per share data)
UNAUDITED CONDENSED
CONSOLIDATED
STATEMENT OF OPERATIONS
Six Months Ended June 30,
2012 2011
OPERATING REVENUES
Casino $ 1,896,834 $ 1,692,361
Rooms 57,468 49,323
Food and beverage 32,696 29,329
Entertainment, retail and others 43,027 41,179
Gross revenues 2,030,025 1,812,192
Less: promotional allowances (64,655) (45,650)
Net revenues 1,965,370 1,766,542
OPERATING COSTS AND EXPENSES
Casino (1,361,698) (1,273,763)
Rooms (7,586) (9,024)
Food and beverage (14,365) (16,543)
Entertainment, retail and others (30,764) (29,158)
General and administrative (108,631) (104,314)
Pre-opening costs (3,300) (1,285)
Development costs (568) (1,110)
Amortization of gaming subconcession (28,619) (28,619)
Amortization of land use rights (28,318) (9,763)
Depreciation and amortization (132,128) (128,136)
Property charges and others (3,616) (1,025)
Total operating costs and expenses (1,719,593) (1,602,740)
OPERATING INCOME 245,777 163,802
NON-OPERATING EXPENSES
Interest income 5,314 864
Interest expenses, net of capitalized
interest (51,376) (54,860)
Reclassi? cation of accumulated losses
of interest rate swap agreements from
accumulated other comprehensive
losses — (4,310)
Change in fair value of interest rate
swap agreements 363 —
Amortization of deferred ? nancing costs (6,324) (8,220)
Loan commitment fees (658) (461)
Foreign exchange gain, net 1,639 191
Other income, net 1,134 2,064
Loss on extinguishment of debt — (25,193)
Total non-operating expenses $ (49,908) $ (89,925)
58 INTERIM REPORT 2012 Melco Crown Entertainment Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Six Months Ended June 30,
2012 2011
INCOME BEFORE INCOME TAX $ 195,869 $ 73,877
INCOME TAX CREDIT (EXPENSE)
(Note 11) 1,042 (69)
NET INCOME 196,911 73,808
NET LOSS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS 7,442 —
NET INCOME ATTRIBUTABLE TO
MELCO CROWN ENTERTAINMENT
LIMITED $ 204,353 $ 73,808
NET INCOME ATTRIBUTABLE TO
MELCO CROWN ENTERTAINMENT
LIMITED PER SHARE:
Basic $ 0.124 $ 0.046
Diluted $ 0.123 $ 0.046
WEIGHTED AVERAGE SHARES USED
IN NET INCOME ATTRIBUTABLE TO
MELCO CROWN ENTERTAINMENT
LIMITED PER SHARE CALCULATION:
Basic 1,644,388,593 1,599,631,942
Diluted 1,657,367,600 1,611,770,624
The accompanying notes are an integral part of the unaudited condensed
consolidated ? nancial statements.
Melco Crown Entertainment Limited INTERIM REPORT 2012 59
(In thousands of U.S. dollars, except share and per share data)
UNAUDITED CONDENSED
CONSOLIDATED
STATEMENT OF
COMPREHENSIVE INCOME
Six Months Ended June 30,
2012 2011
Net income $ 196,911 $ 73,808
Other comprehensive income:
Foreign currency translation
adjustment 55 6
Change in fair value of interest rate
swap agreements — 6,111
Change in fair value of forward
exchange rate contracts 15 —
Reclassi? cation to earnings upon
discontinuance of hedge accounting — 4,310
Reclassi? cation to earnings upon
settlement of forward exchange
rate contracts (67) —
Other comprehensive income 3 10,427
Comprehensive income 196,914 84,235
Comprehensive loss attributable to
noncontrolling interests 7,442 —
Comprehensive income attributable to
Melco Crown Entertainment Limited $ 204,356 $ 84,235
The accompanying notes are an integral part of the unaudited condensed
consolidated ? nancial statements.
60 INTERIM REPORT 2012 Melco Crown Entertainment Limited
UNAUDITED CONDENSED CONSOLIDATED STATEMENT
OF SHAREHOLDERS’ EQUITY
Melco Crown Entertainment Limited Shareholders’ Equity
Accumulated Other
Ordinary Shares Treasury Shares Additional Comprehensive Accumulated Noncontrolling
Shares Amount Shares Amount Paid-in Capital Losses Losses Interests Total Equity
BALANCE AT JANUARY 1, 2011 1,605,658,111 $ 16,056 (8,409,186) $ (84) $ 3,095,730 $ (11,345) $ (577,166) $ — $ 2,523,191 (In
Net income for the period — — — — — — 73,808 — 73,808
Foreign currency translation adjustment — — — — — 6 — — 6
Melco Change in fair value of interest rate
swap agreements — — — — — 6,111 — — 6,111thousands
Reclassi? cation to earnings upon of
Crown . U
discontinuance of hedge accounting — — — — — 4,310 — — 4,310 S
.
Share-based compensation (Note 12) — — — — 3,856 — — — 3,856
Shares issued upon restricted shares dollars,
Entertainment vested (Note 10) 310,575 3 — — (3) — — — —
Shares issued for future exercise of except
share options (Note 10) 931,746 10 (931,746) (10) — — — — —
Limited Issuance of shares for restricted share
shares vested (Note 10) — — 79,788 1 (1) — — — — and
Exercise of share options (Note 10) — — 3,439,650 35 3,510 — — — 3,545
INTERIM
BALANCE AT JUNE 30, 2011 1,606,900,432 $ 16,069 (5,821,494) $ (58) $ 3,103,092 $ (918) $ (503,358) $ — $ 2,614,827 per
share
REPORT data)
2012
61
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY
Melco Crown Entertainment Limited Shareholders’ Equity
Accumulated Other
Ordinary Shares Treasury Shares Additional Comprehensive Accumulated Noncontrolling
Shares Amount Shares Amount Paid-in Capital Losses Losses Interests Total Equity
BALANCE AT JANUARY 1, 2012 1,653,101,002 $ 16,531 (10,552,328) $ (106) $ 3,223,274 $ (1,034) $ (282,510) $ 231,497 $ 3,187,652
Net income for the period — — — — — — 204,353 (7,442) 196,911
Capital contribution from
noncontrolling shareholder — — — — — — — 60,000 60,000
Foreign currency translation adjustment — — — — — 55 — — 55
Change in fair value of forward
exchange rate contracts — — — — — 15 — — 15
Reclassi? cation to earnings upon
settlement of forward exchange
rate contracts — — — — — (67) — — (67)
Share-based compensation (Note 12) — — — — 4,032 — — — 4,032
Shares issued for future vesting of
restricted shares and exercise of
share options (Note 10) 4,014,298 40 (4,014,298) (40) — — — — —
Issuance of shares for restricted
shares vested (Note 10) — — 1,201,634 12 (12) — — — —
Exercise of share options (Note 10) — — 2,152,968 22 2,559 — — — 2,581
BALANCE AT JUNE 30, 2012 1,657,115,300 $ 16,571 (11,212,024) $ (112) $ 3,229,853 $ (1,031) $ (78,157) $ 284,055 $ 3,451,179
Note: The treasury shares represent new shares issued by the Company and held by the depository bank to facilitate the administration and operations of the Company’s share incentive
plans. These shares are to be delivered to the Directors, eligible employees and consultants on the vesting of restricted shares and upon the exercise of share options.
The accompanying notes are an integral part of the unaudited condensed consolidated ? nancial statements.
62 INTERIM REPORT 2012 Melco Crown Entertainment Limited
UNAUDITED CONDENSED
CONSOLIDATED STATEMENT
OF CASH FLOWS
Six Months Ended June 30,
2012 2011
CASH FLOWS FROM OPERATING
ACTIVITIES
Net cash provided by operating activities $ 394,770 $ 320,820
CASH FLOWS FROM INVESTING
ACTIVITIES
Acquisition of property and equipment (79,946) (22,864)
Deposits for acquisition of property and
equipment (59,444) (1,893)
Payment for land use rights (43,310) (7,582)
Payment for acquisition of assets and
liabilities (2,509) —
Payment for entertainment
production costs (1,180) —
Proceeds from sale of property and
equipment 81 113
Changes in restricted cash — (198,491)
Deposit for acquisition of assets and
liabilities — (65,000)
Net cash used in investing activities (186,308) (295,717)
CASH FLOWS FROM FINANCING
ACTIVITIES
Capital contribution from noncontrolling
shareholder 60,000 —
Proceeds from long-term debt 43,000 706,556
Proceeds from exercise of share options 2,710 4,199
Payment of deferred ? nancing costs (257) (34,028)
Principal payments on long-term debt — (117,076)
Net cash provided by ? nancing activities 105,453 559,651
EFFECT OF FOREIGN EXCHANGE ON
CASH AND CASH EQUIVALENTS 787 174
NET INCREASE IN CASH AND
CASH EQUIVALENTS 314,702 584,928
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,158,024 441,923
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,472,726 $ 1,026,851
Melco Crown Entertainment Limited INTERIM REPORT 2012 63
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended June 30,
2012 2011
SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS
Cash paid for interest
(net of capitalized interest) $ (44,767) $ (53,673)
Cash paid for tax (net of refunds) $ (235) $ (189)
NON-CASH INVESTING ACTIVITIES
Construction costs and property and
equipment funded through
accrued expenses and
other current liabilities and
other long-term liabilities $ 24,472 $ 1,777
Land use right costs funded through
accrued expenses and
other current liabilities and
land use rights payable $ 71,499 $ —
The accompanying notes are an integral part of the unaudited condensed
consolidated ? nancial statements.
64 INTERIM REPORT 2012 Melco Crown Entertainment Limited
(In thousands of U.S. dollars, except share and per share data)
NOTES TO UNAUDITED
CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
1. COMPANY INFORMATION
Melco Crown Entertainment Limited (the “Company”) was incorporated in
the Cayman Islands on December 17, 2004 and completed an initial public
offering of its ordinary shares in the United States of America in December
2006. The Company’s American depository shares (“ADS”) are traded on the
NASDAQ Global Select Market under the symbol “MPEL”. On December 7,
2011, the Company completed a dual primary listing in the Hong Kong Special
Administrative Region of the People’s Republic of China (“Hong Kong”) and
listed its ordinary shares on the Main Board of The Stock Exchange of Hong
Kong Limited (the “Hong Kong Stock Exchange”) by way of introduction, under
the stock code of “6883”.
The Company together with its subsidiaries (collectively referred to as the
“Group”) is a developer, owner and, through its indirect subsidiary, Melco Crown
Gaming (Macau) Limited (“Melco Crown Gaming”), operator of casino gaming
and entertainment resort facilities focused on the Macau Special Administrative
Region of the People’s Republic of China (“Macau”) market. The Group currently
owns and operates City of Dreams — an integrated casino resort which opened
in June 2009, Taipa Square Casino which opened in June 2008, Altira Macau
(formerly known as Crown Macau) — a casino and hotel resort which opened in
May 2007, Mocha Clubs — non-casino-based operations of electronic gaming
machines which have been in operation since September 2003, and has a 60%
interest in Studio City, an integrated resort comprising entertainment, retail and
gaming facilities, being developed in Macau.
As of June 30, 2012, the major shareholders of the Company are Melco
International Development Limited (“Melco”), a company listed in Hong Kong,
and Crown Limited (“Crown”), an Australian-listed corporation.
Melco Crown Entertainment Limited INTERIM REPORT 2012 65
(In thousands of U.S. dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| (a) |
|
Basis of Preparation and Principles of Consolidation |
The unaudited condensed consolidated ? nancial statements have been
prepared in conformity with the accounting principles generally accepted
in the United States of America (“U.S. GAAP”) for interim fi nancial
reporting and include applicable disclosures required by the Rules
Governing the Listing of Securities on the Hong Kong Stock Exchange (the
“Listing Rules”).
The results of operations for the six months ended June 30, 2012 are
not necessarily indicative of the results for the full year. The ? nancial
information as of December 31, 2011 presented in the unaudited
condensed consolidated ? nancial statements are derived from the
Company’s audited consolidated fi nancial statements as of December 31,
2011.
The accompanying unaudited condensed consolidated ? nancial
statements should be read in conjunction with the Company’s audited
consolidated ? nancial statements for the year ended December 31,
2011. In the opinion of the management, the accompanying unaudited
condensed consolidated ? nancial statements re? ect all adjustments
consisting only of normal recurring adjustments, which are necessary for a
fair presentation of ? nancial results of such periods.
| (b) |
|
Gaming Tax |
The Group is subject to taxes based on gross gaming revenue in Macau.
These gaming taxes are determined from an assessment of the Group’s
gaming revenue and are recorded as an expense within the “Casino” line
item in the unaudited condensed consolidated statement of operations.
These taxes totaled $974,304 and $912,664 for the six months ended June
30, 2012 and 2011, respectively.
66 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —
continued
| (c) |
|
Net income attributable to the Company per share |
Basic net income attributable to the Company per share is calculated by
dividing the net income attributable to the Company by the weighted-
average number of ordinary shares outstanding during the period.
Diluted net income attributable to the Company per share is calculated
by dividing the net income attributable to the Company by the weighted-
average number of ordinary shares outstanding adjusted to include the
potentially dilutive effect of outstanding share-based awards.
The weighted-average number of ordinary and ordinary equivalent shares
used in the calculation of basic and diluted net income attributable to the
Company per share consisted of the following:
Six Months Ended June 30,
2012 2011
Weighted-average number of
ordinary shares outstanding
used in the calculation of
basic net income
attributable to the Company
per share 1,644,388,593 1,599,631,942
Incremental weighted-average
number of ordinary shares
from assumed exercise of
restricted shares and
share options using the
treasury stock method 12,979,007 12,138,682
Weighted-average number of
ordinary shares outstanding
used in the calculation of
diluted net income
attributable to the Company
per share 1,657,367,600 1,611,770,624
During the six months ended June 30, 2012 and 2011, 2,191,230 and
621,492 outstanding share options as at June 30, 2012 and 2011,
respectively, were excluded from the computation of diluted net income
attributable to the Company per share as their effect would have been
anti-dilutive.
Melco Crown Entertainment Limited INTERIM REPORT 2012 67
(In thousands of U.S. dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —
continued
| (d) |
|
Accounts Receivable and Credit Risk |
Financial instruments that potentially subject the Group to concentrations
of credit risk consist principally of casino receivables. The Group issues
credit in the form of markers to approved casino customers following
investigations of creditworthiness including to its gaming promoters in
Macau, which receivable can be offset against commissions payable and
any other value items held by the Group to the respective customer and
for which the Group intends to set-off when required. As of June 30, 2012
and December 31, 2011, a substantial portion of the Group’s markers were
due from customers residing in foreign countries. Business or economic
conditions, the legal enforceability of gaming debts, or other signi? cant
events in foreign countries could affect the collectability of receivables
from customers and gaming promoters residing in these countries.
Accounts receivable, including casino, hotel and other receivables, are
typically non-interest bearing and are initially recorded at cost. Accounts
are written off when management deems it is probable the receivable is
uncollectible. Recoveries of accounts previously written off are recorded
when received. An estimated allowance for doubtful debts is maintained
to reduce the Group’s receivables to their carrying amounts, which
approximates fair value. The allowance is estimated based on speci? c
review of customer accounts as well as management’s experience with
collection trends in the casino industry and current economic and business
conditions. Management believes that as of June 30, 2012 and December
31, 2011, no signi? cant concentrations of credit risk existed for which an
allowance had not already been recorded.
68 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —
continued
| (e) |
|
Accounting for Derivative Instruments and Hedging |
Activities
The Group uses derivative ? nancial instruments such as ? oating-for-? xed
interest rate swap agreements and forward exchange rate contracts to
manage its risks associated with interest rate ? uctuations, in accordance
with lenders’ requirements under the Group’s senior secured credit facility
(the “City of Dreams Project Facility”), and exchange rate fl uctuations,
for the interest payment of the RMB2,300,000,000 3.75% bonds, due
2013 (the “RMB Bonds”). The Group accounts for derivative fi nancial
instruments in accordance with applicable accounting standards. All
derivative instruments are recognized in the unaudited condensed
consolidated ? nancial statements at fair value at the balance sheet date.
Any changes in fair value are recorded in the unaudited condensed
consolidated statement of operations or in the unaudited condensed
consolidated statement of comprehensive income, depending on whether
the derivative is designated and quali? es for hedge accounting, the type
of hedge transaction and the effectiveness of the hedge. The estimated
fair values of interest rate swap agreements and forward exchange rate
contracts are based on a standard valuation model that projects future
cash ? ows and discounts those future cash ? ows to a present value using
market-based observable inputs such as interest rate yields and market
forward exchange rates.
All outstanding interest rate swap agreements expired during the six
months ended June 30, 2012.
Melco Crown Entertainment Limited INTERIM REPORT 2012 69
(In thousands of U.S. dollars, except share and per share data)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —
continued
| (f) |
|
Recent Changes in Accounting Standards |
Newly adopted accounting pronouncements
In May 2011, the Financial Accounting Standards Board (“FASB”) issued
an accounting standard update to align the principles for fair value
measurements and the related disclosure requirements under U.S.
GAAP and International Financial Reporting Standards (“IFRS”). The
FASB update clari? ed existing fair value measurement and disclosure
requirements, and expanded disclosure requirements for fair value
measurements. The adoption of this amended standard was effective
for the Group as of January 1, 2012 and did not have a material impact
on the Group’s unaudited condensed consolidated fi nancial results or
disclosures.
In June 2011, the FASB issued an accounting standard update to revise
the manner in which entities present comprehensive income in their
? nancial statements, most signi? cantly by requiring that comprehensive
income be presented with net income in a continuous statement, or
in a separate but consecutive statement and not within a statement
of changes in equity and amending other presentation and disclosure
requirements concerning comprehensive income. In December 2011, the
FASB issued an accounting standard update to defer the requirement to
present reclassi? cations between other comprehensive income or loss and
net income or loss. This accounting standard update (as modi? ed) was
effective for the Group as of January 1, 2012 and did not have a material
impact on the Group’s unaudited condensed consolidated fi nancial results
or disclosures. Refer to unaudited condensed consolidated statement of
comprehensive income for the required presentation.
In September 2011, the FASB issued amended accounting guidance
related to goodwill impairment testing. The amended guidance permits an
entity to ? rst assess qualitative factors before calculating the fair value of
a reporting unit in the annual two-step quantitative goodwill impairment
test required under current accounting standards. If it is determined that
it is “more-likely-than-not” that the fair value of a reporting unit is not
less than its carrying value, further testing is not needed. The amended
guidance was effective for the Group as of January 1, 2012 and did not
have a material impact on the Group’s unaudited condensed consolidated
? nancial results or disclosures.
70 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES —
continued
| (f) |
|
Recent Changes in Accounting Standards — |
continued
Recent accounting pronouncement not yet adopted
In July 2012, the FASB issued amended accounting guidance to
simplify testing inde? nite-lived intangible assets, other than goodwill,
for impairment. The amended guidance allows companies to perform a
qualitative assessment to determine whether further impairment testing of
inde? nite-lived intangible assets is necessary. An entity is not required to
calculate the fair value of an inde? nite-lived intangible asset and perform
the quantitative impairment test unless the entity determines that it is
“more-likely-than-not” that the asset is impaired. The amended guidance
is effective for interim and annual impairment tests performed for ? scal
years beginning after September 15, 2012, with early adoption permitted.
The adoption of this amended guidance is not expected to have a material
impact on the Group’s unaudited condensed consolidated fi nancial results
or disclosures.
3. ACCOUNTS RECEIVABLE, NET
Components of accounts receivable, net are as follows:
June 30, December 31,
2012 2011
Casino $ 406,515 $ 385,898
Hotel 1,816 3,691
Other 2,648 3,686
Sub-total $ 410,979 $ 393,275
Less: allowance for doubtful debts (99,878) (86,775)
$ 311,101 $ 306,500
The Group grants unsecured credit lines to gaming promoters based on pre-
approved credit limits. The Group typically issues markers to gaming promoters
with a credit period of 30 days. There are some gaming promoters for whom
credit is granted on a revolving basis based on the Group’s monthly credit
risk assessment of such gaming promoters. Credit lines granted to all gaming
promoters are subject to monthly review and settlement procedures. For
other approved casino customers, the Group typically allows a credit period
of 14 days to 28 days on issuance of markers following investigations of
creditworthiness. An extended repayment term of typically 90 days may be
offered to casino customers with large gaming losses and established credit
history.
Melco Crown Entertainment Limited INTERIM REPORT 2012 71
(In thousands of U.S. dollars, except share and per share data)
3. ACCOUNTS RECEIVABLE, NET — continued
The following is an analysis of accounts receivable by age presented based on
payment due date, net of allowance:
June 30, December 31,
2012 2011
Current $ 206,726 $ 220,141
1–30 days 54,540 41,571
31–60 days 5,781 3,344
61–90 days 7,191 2,573
Over 90 days 36,863 38,871
$ 311,101 $ 306,500
4. PROPERTY AND EQUIPMENT, NET
June 30, December 31,
2012 2011
Cost
Buildings $ 2,439,083 $ 2,439,117
Furniture, ? xtures and equipment 418,158 403,577
Plant and gaming machinery 150,803 147,084
Leasehold improvements 214,158 179,089
Motor vehicles 4,280 4,273
Sub-total $ 3,226,482 $ 3,173,140
Less: accumulated depreciation (854,921) (730,313)
Sub-total $ 2,371,561 $ 2,442,827
Construction in progress 254,940 212,602
Property and equipment, net $ 2,626,501 $ 2,655,429
5. LAND USE RIGHTS, NET
June 30, December 31,
2012 2011
Altira Macau — Medium-term lease
(“Taipa Land”) $ 143,985 $ 141,543
City of Dreams — Medium-term lease
(“Cotai Land”) 376,122 376,122
Studio City — Medium-term lease
(“Studio City Land”) 653,564 549,079
$ 1,173,671 $ 1,066,744
Less: accumulated amortization (152,094) (123,776)
Land use rights, net $ 1,021,577 $ 942,968
72 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5. LAND USE RIGHTS, NET — continued
Land use rights are recorded at cost less accumulated amortization.
Amortization is provided over the estimated lease term of the land on a straight-
line basis. The expiry dates of the leases of the land use rights of Altira Macau,
City of Dreams and Studio City are March 2031, August 2033 and October 2026,
respectively.
6. ACCOUNTS PAYABLE
The following is an aged analysis of accounts payable presented based on
payment due date:
June 30, December 31,
2012 2011
Within 30 days $ 8,121 $ 9,551
31–60 days 422 755
61–90 days 210 1,196
Over 90 days 878 521
$ 9,631 $ 12,023
7. ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES
June 30, December 31,
2012 2011
Construction costs payable $ 33,537 $ 13,316
Customer deposits and ticket sales 61,237 42,832
Gaming tax accruals 152,041 169,576
Interest expenses payable 11,879 12,180
Interest rate swap liabilities — 363
Land use rights payable 38,442 15,960
Operating expense and
other accruals 83,106 100,161
Other gaming related accruals 18,781 19,643
Outstanding gaming chips and
tokens 218,540 187,978
Payable for acquisition of
assets and liabilities 24,886 26,710
$ 642,449 $ 588,719
Melco Crown Entertainment Limited INTERIM REPORT 2012 73
(In thousands of U.S. dollars, except share and per share data)
8. LONG-TERM DEBT
Long-term debt consisted of the following:
June 30, December 31,
2012 2011
The City of Dreams Project Facility
amended on June 30, 2011
(the “2011 Credit Facilities”) $ 1,014,729 $ 1,014,729
$600,000 10.25% senior notes,
due 2018 (the “Senior Notes”)(1) 593,556 593,166
RMB Bonds 361,082 364,807
Hong Kong dollar deposit-linked
loan facility
(the “Deposit-Linked Loan”) 353,278 353,278
$43,000 term loan facility for
aircraft purchase
(the “Aircraft Term Loan”) 43,000 —
$ 2,365,645 $ 2,325,980
Current portion of long-term debt (719,919) —
$ 1,645,726 $ 2,325,980
Aircraft Term Loan
On June 25, 2012, MCE Transportation Limited (“MCE Transportation”,
formerly known as MCE Designs and Brands Limited), an indirect wholly-
owned subsidiary of the Company, entered into a $43,000 term loan facility
agreement to partly ? nance the acquisition of an aircraft. Principal and interest
repayments are payable quarterly in arrears commencing September 27, 2012
until maturity on June 27, 2019, interest is calculated based on the London
Interbank Offered Rate plus a margin of 2.80% per annum and the loan may
be prepaid in whole or in part of not less than $1,000 and 10 days’ prior notice
given. The loan is guaranteed by the Company and security includes a ? rst
priority mortgage on the aircraft itself; pledge over the MCE Transportation bank
accounts; assignment of insurances (other than third party liability insurance);
and an assignment of airframe and engine warranties. The loan must be prepaid
in full if any of the following events occurs: (i) a change of control; (ii) the sale
of all or substantially all of the components of the aircraft; (iii) the loss, damage
or destruction of the entire or substantially the entire aircraft. Other covenants
include lender’s approval for any capital expenditure not incurred in the ordinary
course of business or any subsequent indebtedness exceeding $1,000 by
MCE Transportation. As of June 30, 2012, the Aircraft Term Loan facility has
been fully drawn down and utilized with other Group funds, to fund a deposit
of $54,292 towards the purchase of the aircraft. The aircraft was delivered on
July 2, 2012. MCE Transportation has also entered into an agreement for the
operation and management of the aircraft with a third party.
74 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8. LONG-TERM DEBT — continued
Total interest on long-term debt consisted of the following:
Six Months Ended June 30,
2012 2011
Interest for City of Dreams
Project Facility $ — $ 13,269
Interest for 2011 Credit Facilities 10,841 —
Interest for Senior Notes 30,750 30,750
Amortization of discount in
connection with issuance of
Senior Notes 390 353
Interest for RMB Bonds 6,794 1,852
Interest for Deposit-Linked Loan 5,073 1,143
$ 53,848 $ 47,367
Interest capitalized (4,465) —
$ 49,383 $ 47,367
During the six months ended June 30, 2012 and 2011, the Group’s average
borrowing rates were approximately 4.93% and 5.83% per annum, respectively.
Scheduled maturities of the Group’s long-term debt as of June 30, 2012 are as
follows:
Six months ending December 31, 2012 $ 2,757
Year ending December 31, 2013 848,370
Year ending December 31, 2014 262,555
Year ending December 31, 2015 262,748
Year ending December 31, 2016 379,166
Over 2016(2) 610,049
$ 2,365,645
Notes:
| (1) |
|
Net of unamortized issue discount for the Senior Notes of approximately $6,444 and |
$6,834 as of June 30, 2012 and December 31, 2011, respectively.
| (2) |
|
Net of unamortized issue discount for the Senior Notes of approximately $6,444 as |
of June 30, 2012.
Melco Crown Entertainment Limited INTERIM REPORT 2012 75
(In thousands of U.S. dollars, except share and per share data)
9. FAIR VALUE MEASUREMENTS
The carrying values of the Group’s fi nancial instruments, including cash
and cash equivalents, restricted cash, accounts receivable, other current
assets, long-term receivables, amounts due from (to) af? liated companies
and a shareholder, accounts payable, other current liabilities, the 2011 Credit
Facilities, the Deposit-Linked Loan, the Aircraft Term Loan, land use rights
payable, forward exchange rate contract and debt instruments approximate their
fair values, except for the Senior Note and the RMB Bond. The estimated fair
values, based on quoted market price, of the Senior Notes were approximately
$687,324 and $651,630 as of June 30, 2012 and December 31, 2011,
respectively, and of the RMB Bonds were approximately $359,468 and $352,079
as of June 30, 2012 and December 31, 2011, respectively.
As of June 30, 2012, the Group did not have any non-? nancial assets or
liabilities that are recognized or disclosed at fair value in the unaudited
condensed consolidated ? nancial statements. The Group’s fi nancial assets and
liabilities recorded at fair value have been categorized based upon the fair value
in accordance with the accounting standards.
| 10. |
|
CAPITAL STRUCTURE |
In connection with the Company’s restricted shares granted as disclosed in
Note 12, nil and 310,575 ordinary shares were vested and issued during the six
months ended June 30, 2012 and 2011, respectively.
The Company issued 4,014,298 and 931,746 ordinary shares to its depository
bank for issuance to employees upon their future vesting of restricted shares
and exercise of share options during the six months ended June 30, 2012
and 2011, respectively. 1,201,634 and 79,788 of these ordinary shares have
been issued to employees upon vesting of restricted shares and 2,152,968
and 3,439,650 of these ordinary shares have been issued to employees upon
exercise of share options during the six months ended June 30, 2012 and 2011,
respectively. The balance of 11,212,024 ordinary shares continues to be held by
the Company for future issuance as of June 30, 2012.
As of June 30, 2012, the Company had 1,645,903,276 ordinary shares issued
and outstanding.
76 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 11. |
|
INCOME TAX (CREDIT) EXPENSE |
The Company and certain subsidiaries are exempt from tax in the Cayman
Islands or British Virgin Islands, where they are incorporated, however, the
Company is subject to Hong Kong Pro? ts Tax on pro? ts from its activities
conducted in Hong Kong. Certain subsidiaries incorporated or conducting
businesses in Hong Kong, Macau, the United States of America and other
jurisdictions are subject to Hong Kong Pro? ts Tax, Macau Complementary
Tax, income tax in the United States of America and in other jurisdictions,
respectively, during the six months ended June 30, 2012 and 2011.
Pursuant to the approval notices issued by Macau Government dated June 7,
2007, Melco Crown Gaming has been exempted from Macau Complementary
Tax on income generated from gaming operations for ? ve years commencing
from 2007 to 2011 and will continue to bene? t from this exemption for another
? ve years from 2012 to 2016 pursuant to the approval notices issued by Macau
Government in April 2011.
During the six months ended June 30, 2012 and 2011, Melco Crown Gaming
reported net income and had the Group been required to pay such taxes, the
Group’s unaudited consolidated net income attributable to the Company for
the six months ended June 30, 2012 and 2011 would have been decreased
by $41,625 and $25,293, respectively, and basic and diluted net income
attributable to the Company per share would have reported reduced income of
$0.025 per share for the six months ended June 30, 2012 and $0.016 per share
for the six months ended June 30, 2011. Melco Crown Gaming’s non-gaming
pro? ts remain subject to the Macau Complementary Tax and its casino revenues
remain subject to the Macau special gaming tax and other levies in accordance
with its subconcession agreement.
The provision for income tax consisted of:
Six Months Ended June 30,
2012 2011
Income tax provision for
current period:
Macau Complementary Tax $ 99 $ 103
Hong Kong Pro? ts Tax 497 516
Pro? ts tax in other jurisdictions 187 106
Sub-total $ 783 $ 725
(Over) under provision of
income tax in prior years:
Hong Kong Profi ts Tax $ (1) $ —
Pro? ts tax in other jurisdictions 5 4
Sub-total $ 4 $ 4
Deferred tax credit:
Macau Complementary Tax $ (1,767) $ (577)
Hong Kong Pro? ts Tax (60) (82)
Pro? ts tax in other jurisdictions (2) (1)
Sub-total $ (1,829) $ (660)
Total income tax (credit) expense $ (1,042) $ 69
Melco Crown Entertainment Limited INTERIM REPORT 2012 77
(In thousands of U.S. dollars, except share and per share data)
| 11. |
|
INCOME TAX (CREDIT) EXPENSE — continued |
The effective tax rates for the six months ended June 30, 2012 and 2011 were
negative rate of 0.5% and positive rate of 0.1%, respectively. Such rates differ
from the statutory Macau Complementary Tax rate of 12% primarily due to the
effect of change in valuation allowance for the six months ended June 30, 2012
and 2011, and the effect of tax holiday granted by the Macau Government as
described in the preceding paragraphs.
| 12. |
|
SHARE-BASED COMPENSATION |
2006 Share Incentive Plan
The Group’s 2006 Share Incentive Plan was superseded by the 2011 Share
Incentive Plan on December 7, 2011 and no further awards may be granted
under the 2006 Share Incentive Plan on or after such date as all subsequent
awards will be issued under the 2011 Share Incentive Plan. Refer below for
further details of the 2011 Share Incentive Plan.
Share Options
A summary of share options activity under the 2006 Share Incentive Plan as of
June 30, 2012, and changes during the six months ended June 30, 2012 are
presented below:
Weighted- Weighted-
Average Average
Number Exercise Remaining Aggregate
of Share Price Contractual Intrinsic
Options per Share Term Value
Outstanding at
January 1, 2012 20,916,462 $ 1.55
Exercised (2,152,968) $ 1.20
Forfeited (1,110,843) $ 1.63
Expired (5,544) $ 1.01
Outstanding at
June 30, 2012 17,647,107 $ 1.59 7.01 $ 40,072
Exercisable at
June 30, 2012 11,854,134 $ 1.43 6.68 $ 28,908
78 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 12. |
|
SHARE-BASED COMPENSATION — continued |
2006 Share Incentive Plan — continued
Share Options — continued
A summary of share options vested and expected to vest under the 2006 Share
Incentive Plan at June 30, 2012 are presented below:
Vested
Weighted- Weighted-
Average Average
Number Exercise Remaining Aggregate
of Share Price Contractual Intrinsic
Options per Share Term Value
Range of exercise
prices per share
($1.01–$5.06)
(Note) 11,854,134 $ 1.43 6.68 $ 28,908
Note: 3,005,105 share options vested and 5,544 vested share options expired during the
six months ended June 30, 2012.
Expected to Vest
Weighted- Weighted-
Average Average
Number Exercise Remaining Aggregate
of Share Price Contractual Intrinsic
Options per Share Term Value
Range of exercise
prices per share
($1.01–$2.52) 5,792,973 $ 1.91 7.69 $ 11,164
No share option was granted under 2006 Share Incentive Plan during the six
months ended June 30, 2012. 2,152,968 share options were exercised and
proceeds amounted to $2,581 were received during the six months ended June
30, 2012. The total intrinsic value of share options exercised for the six months
ended June 30, 2012 were $5,687.
As of June 30, 2012, there was $5,993 unrecognized compensation costs
related to unvested share options and the costs were expected to be recognized
over a weighted-average period of 1.58 years.
Melco Crown Entertainment Limited INTERIM REPORT 2012 79
(In thousands of U.S. dollars, except share and per share data)
| 12. |
|
SHARE-BASED COMPENSATION — continued |
2006 Share Incentive Plan — continued
Restricted Shares
A summary of the status of the 2006 Share Incentive Plan’s restricted shares as
of June 30, 2012, and changes during the six months ended June 30, 2012 are
presented below:
Weighted-
Number of Average
Restricted Grant Date
Shares Fair Value
Unvested at January 1, 2012 4,002,503 $ 2.22
Vested (1,201,634) 2.57
Forfeited (486,984) 1.66
Unvested at June 30, 2012 2,313,885 $ 2.16
The total fair values at date of grant of the restricted shares vested during the six
months ended June 30, 2012 were $3,087.
As of June 30, 2012, there was $3,996 of unrecognized compensation costs
related to restricted shares and the costs were expected to be recognized over a
weighted-average period of 1.69 years.
2011 Share Incentive Plan
On October 6, 2011, the Group adopted the 2011 Share Incentive Plan to
promote the success and enhance the value of the Company by linking
personal interests of the members of the Board, employees and consultants
to those of the shareholders and by providing such individuals with incentive
for outstanding performance to generate superior returns to the shareholders
and such adoption was conditional upon the listing of the Company’s ordinary
shares on the Main Board of the Hong Kong Stock Exchange on December 7,
2011. Under the 2011 Share Incentive Plan, the Group may grant various share-
based awards, including but not limited to, options to purchase the Company’s
ordinary shares, share appreciation rights, restricted shares, etc. The term of
such awards shall not exceed 10 years from the date of the grant. The maximum
aggregate number of shares which may be issued pursuant to all awards under
the 2011 Share Incentive Plan is 100,000,000 over 10 years, which could be
raised up to 10% of the issued share capital upon shareholders’ approval. As
of June 30, 2012, 96,944,974 shares remain available for the grant of various
share-based awards under the 2011 Share Incentive Plan.
80 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 12. |
|
SHARE-BASED COMPENSATION — continued |
2011 Share Incentive Plan — continued
The Group granted share options to certain personnel under the 2011 Share
Incentive Plan during the six months ended June 30, 2012 with the exercise
price determined at the closing price on the date of grant. These share options
became exercisable over a vesting period of three years. The share options
granted expire 10 years after the date of grant.
The Group has also granted restricted shares to certain personnel under the
2011 Share Incentive Plan during the six months ended June 30, 2012. These
restricted shares have a vesting period of three years. The grant date fair value
is determined with reference to the market closing price at date of grant.
Share Options
A summary of share options activity under the 2011 Share Incentive Plan as of
June 30, 2012, and changes during the six months ended June 30, 2012 are
presented below:
Weighted- Weighted-
Average Average
Number Exercise Remaining Aggregate
of Share Price Contractual Intrinsic
Options per Share Term Value
Outstanding at
January 1, 2012 — $ —
Granted 1,934,574 $ 4.70
Forfeited (33,438) $ 4.70
Outstanding at
June 30, 2012 1,901,136 $ 4.70 9.75 $ —
As of June 30, 2012, no share options granted under 2011 Share Incentive Plan
were vested and exercisable.
Melco Crown Entertainment Limited INTERIM REPORT 2012 81
(In thousands of U.S. dollars, except share and per share data)
| 12. |
|
SHARE-BASED COMPENSATION — continued |
2011 Share Incentive Plan — continued
Share Options — continued
A summary of share options expected to vest under the 2011 Share Incentive
Plan at June 30, 2012 are presented below:
Expected to Vest
Weighted- Weighted-
Average Average
Number Exercise Remaining Aggregate
of Share Price Contractual Intrinsic
Options per Share Term Value
Exercise price
per share ($4.70) 1,901,136 $ 4.70 9.75 $ —
As of June 30, 2012, there was $4,247 unrecognized compensation costs
related to unvested share options and the costs were expected to be recognized
over a weighted-average period of 2.74 years.
Restricted Shares
A summary of the status of the 2011 Share Incentive Plan’s restricted shares as
of June 30, 2012, and changes during the six months ended June 30, 2012 are
presented below:
Weighted-
Number of Average
Restricted Grant Date
Shares Fair Value
Unvested at January 1, 2012 — $ —
Granted 1,170,612 4.43
Forfeited (16,722) 4.43
Unvested at June 30, 2012 1,153,890 $ 4.43
The total fair values at date of grant of the restricted shares vested during the six
months ended June 30, 2012 were $5,182.
As of June 30, 2012, there was $4,669 of unrecognized compensation costs
related to restricted shares and the costs were expected to be recognized over a
weighted-average period of 2.74 years.
82 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 12. |
|
SHARE-BASED COMPENSATION — continued |
The Group uses the Black-Scholes valuation model to determine the estimated
fair value for each option grant issued, with highly subjective assumptions,
changes in which could materially affect the estimated fair value. Expected
volatility is based on the historical volatility of the Company’s shares trading on
the NASDAQ Global Select Market. Expected term is based upon the vesting
term or the historical of expected term of publicly traded companies. The risk-
free interest rate used for each period presented is based on the United States
of America Treasury yield curve at the time of grant for the period equal to the
expected term.
The fair value per option was estimated at the date of grant using the following
weighted-average assumptions for options granted during the six months ended
June 30, 2012:
Expected dividend yield —
Expected stock price volatility 67.82%
Risk-free interest rate 1.01%
Expected average life of options (years) 5.1
The impact of share options and restricted shares for the six months ended
June 30, 2012 and 2011 recognized in the unaudited condensed consolidated
? nancial statements were as follows:
Six Months Ended June 30,
2012 2011
2006 Share Incentive Plan
Share options $ 1,967 $ 2,557
Restricted shares 1,228 1,299
2011 Share Incentive Plan
Share options 399 —
Restricted shares 438 —
Total share-based compensation
expenses $ 4,032 $ 3,856
| 13. |
|
COMMITMENTS AND CONTINGENCIES |
| (a) |
|
Capital Commitments |
As of June 30, 2012, the Group had capital commitments contracted for
but not provided mainly for the construction and acquisition of property
and equipment for Mocha Clubs, City of Dreams and Studio City totaling
$115,198.
Melco Crown Entertainment Limited INTERIM REPORT 2012 83
(In thousands of U.S. dollars, except share and per share data)
| 13. |
|
COMMITMENTS AND CONTINGENCIES — continued |
| (b) |
|
Other Commitments |
Land Concession Contracts
On July 25, 2012, an amendment to the land concession contract was
published in the Macau of? cial gazette. This amendment re? ects an
increase in the gross ? oor area for construction and the extension of the
development period to 72 months from the date of publication of such
amendment contract. The amendment also revised the land premium to
$174,954 and revised the government land use fees to $490 per annum
during the development period of Studio City and $1,131 per annum after
the development period. Studio City Developments Limited had accepted
the ? nal amendment proposal on June 13, 2012, paid a $490 additional
guarantee deposit to the Macau Government on June 12, 2012 and
$35,316 additional land premium on June 6, 2012. Apart from $23,561
land premium paid in 2006, the remaining amount of revised land premium
of $116,077 will be due in fi ve biannual installments, accrued with 5%
interest per annum, with the ? rst installment to be paid within six months
from the above mentioned date of publication of the amended contract in
the Macau of? cial gazette.
As of June 30, 2012, the total outstanding balance of the land premium
was included in accrued expenses and other current liabilities in an
amount of $22,083 and in land use rights payable in an amount of
$93,994; and the Group’s total commitment for government land use fees
for the Studio City site to be paid during the remaining term of the land
concession contract was $12,227.
| (c) |
|
Guarantees |
As of June 30, 2012, Melco Crown Gaming has issued a promissory
note (“Livrança”) of $68,635 (MOP550,000,000) to a bank in respect of
bank guarantees issued to the Macau Government as the bene? ciary
in a maximum amount of $62,365 (MOP500,000,000) from September
8, 2006 to September 8, 2011 and a maximum amount of $37,437
(MOP300,000,000) from September 8, 2011 until the 180th day after the
termination date of the gaming subconcession.
As of June 30, 2012, the Group has entered into two deeds of guarantee
with third parties amounted to $35,000 to guarantee certain payment
obligations of the City of Dreams’ operations.
As of June 30, 2012, the Company has provided a guarantee up to
$43,000 to the lender of the Aircraft Term Loan for MCE Transportation’s
payment obligation of such loan.
84 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 13. |
|
COMMITMENTS AND CONTINGENCIES — continued |
| (d) |
|
Litigation |
As of June 30, 2012, the Group is currently a party to certain legal
proceedings which relate to matters arising out of the ordinary course
of its business. Management does not believe that the outcome of such
proceedings will have a material effect on the Group’s fi nancial position,
results of operations or cash ? ows.
| 14. |
|
RELATED PARTY TRANSACTIONS |
During the six months ended June 30, 2012 and 2011, the Group entered into
the following signi? cant related party transactions:
Six Months Ended June 30,
Related companies Nature of transactions 2012 2011
Transactions with af? liated companies that constituted connected transactions under Chapter
14A of the Listing Rules
Crown’s subsidiary Consultancy fee expense $ 215 $ 257
Purchase of property and
equipment 159 —
Software license fee
expense 156 —
Other service fee income 21 22
Lisboa Holdings Limited(1) Of? ce rental expense 578 746
Melco’s subsidiaries and
its associated companies Advertising and promotional
expenses — 7
Consultancy fee expense 231 227
Management fees expense 7 7
Of? ce rental expense 293 266
Operating and of? ce
supplies expenses — 2
Purchase of property and
equipment 490 171
Service fee expense(2) 289 261
Other service fee income 157 145
Rooms and food and
beverage income 72 18
Shun Tak Holdings Limited
and its subsidiaries(1) Of? ce rental expense 68 62
Operating and of? ce
supplies expenses 13 10
Purchase of property and
equipment — 6
Traveling expense(3)(4) 1,477 1,243
Rooms and food and
beverage income 35 160
Sky Shuttle Helicopters
Limited(1) Traveling expense 737 993
Melco Crown Entertainment Limited INTERIM REPORT 2012 85
(In thousands of U.S. dollars, except share and per share data)
| 14. |
|
RELATED PARTY TRANSACTIONS — continued |
Six Months Ended June 30,
Related companies Nature of transactions 2012 2011
Transactions with af? liated companies that constituted connected transactions under Chapter
14A of the Listing Rules — continued
Sociedade de Jogos de
Macau S.A.(1) Traveling expense
capitalized in
construction in
progress(3) $ 1 $ 1
Traveling expense
recognized as
expense(3) 178 313
Sociedade de Turismo
e Diversões de Macau,
S.A. and its subsidiaries(1) Advertising and
promotional expenses 38 39
Of? ce rental expense 701 130
Service fee expense 89 —
Traveling expense
capitalized in
construction in
progress(3) 3 —
Traveling expense
recognized as expense(3) 19 97
Transactions with shareholders that constituted connected transactions under Chapter 14A of
the Listing Rules
Crown Interest charges expense — 50
Other service fee income — 4
Rooms and food and
beverage income — 39
Melco Interest charges expense — 89
Rooms and food and
beverage income — 15
Notes:
| (1) |
|
Companies in which a relative/relatives of Mr. Lawrence Yau Lung Ho, the |
Company’s Chief Executive Offi cer, has/have bene? cial interests.
| (2) |
|
The amounts mainly represent the Company’s reimbursement to Melco’s subsidiary |
for service fees incurred on its behalf for rental, of? ce administration, travel and
security coverage for the operation of the of? ce of the Company’s Chief Executive
Of? cer.
| (3) |
|
Traveling expenses including ferry and hotel accommodation services within Hong |
Kong and Macau.
| (4) |
|
The transaction constituted continuing connected transaction which was subject |
to reporting, announcement and annual review, but exempt from independent
shareholders’ approval requirements under Chapter 14A.34 of the Listing Rules.
86 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 15. |
|
SEGMENT INFORMATION |
The Group is principally engaged in the gaming and hospitality business. The
chief operating decision maker monitors its operations and evaluates earnings
by reviewing the assets and operations of Mocha Clubs, Altira Macau, City of
Dreams and Studio City, which was acquired by the Group in July 2011. Taipa
Square Casino is included within Corporate and Others. All revenues were
generated in Macau.
Total Assets
June 30, December 31,
2012 2011
Mocha Clubs $ 176,473 $ 174,404
Altira Macau 660,140 577,145
City of Dreams 3,256,956 3,103,458
Studio City 927,108 713,637
Corporate and Others 1,642,892 1,701,336
Total consolidated assets $ 6,663,569 $ 6,269,980
Capital Expenditures
Six Months Ended June 30,
2012 2011
Mocha Clubs $ 3,687 $ —
Altira Macau 2,090 3,462
City of Dreams 52,970 12,296
Studio City 41,326 —
Corporate and Others 260 67
Total capital expenditures $ 100,333 $ 15,825
For the six months ended June 30, 2012 and 2011, there was no single
customer that contributed more than 10% of the total revenues.
Melco Crown Entertainment Limited INTERIM REPORT 2012 87
(In thousands of U.S. dollars, except share and per share data)
| 15. |
|
SEGMENT INFORMATION — continued |
The Group’s segment information on its results of operations for the following
periods is as follows:
Six Months Ended June 30,
2012 2011
NET REVENUES
Mocha Clubs $ 72,446 $ 66,142
Altira Macau 469,368 576,952
City of Dreams 1,401,033 1,108,276
Studio City — —
Corporate and Others 22,523 15,172
Total net revenues $ 1,965,370 $ 1,766,542
ADJUSTED PROPERTY EBITDA(1)
Mocha Clubs $ 18,646 $ 21,389
Altira Macau 81,064 114,132
City of Dreams 382,282 237,352
Studio City (202) —
Total adjusted property EBITDA 481,790 372,873
OPERATING COSTS AND
EXPENSES
Pre-opening costs (3,300) (1,285)
Development costs (568) (1,110)
Amortization of
gaming subconcession (28,619) (28,619)
Amortization of land use rights (28,318) (9,763)
Depreciation and amortization (132,128) (128,136)
Share-based compensation (4,032) (3,856)
Property charges and others (3,616) (1,025)
Corporate and others expenses (35,432) (35,277)
Total operating costs and
expenses (236,013) (209,071)
OPERATING INCOME 245,777 163,802
NON-OPERATING EXPENSES
Interest income 5,314 864
Interest expenses, net of
capitalized interest (51,376) (54,860)
Reclassi? cation of accumulated
losses of interest rate swap
agreements from accumulated
other comprehensive losses — (4,310)
Change in fair value of
interest rate swap agreements 363 —
Amortization of deferred
? nancing costs (6,324) (8,220)
Loan commitment fees (658) (461)
Foreign exchange gain, net 1,639 191
Other income, net 1,134 2,064
Loss on extinguishment of debt — (25,193)
Total non-operating expenses $ (49,908) $ (89,925)
88 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 15. |
|
SEGMENT INFORMATION — continued |
Six Months Ended June 30,
2012 2011
INCOME BEFORE INCOME TAX $ 195,869 $ 73,877
INCOME TAX CREDIT (EXPENSE) 1,042 (69)
NET INCOME 196,911 73,808
NET LOSS ATTRIBUTABLE TO
NONCONTROLLING
INTERESTS 7,442 —
NET INCOME ATTRIBUTABLE TO
MELCO CROWN
ENTERTAINMENT LIMITED $ 204,353 $ 73,808
Note:
| (1) |
|
“Adjusted property EBITDA” is earnings before interest, taxes, depreciation, |
amortization, pre-opening costs, development costs, share-based compensation,
property charges and others, corporate and other expenses, and other non-
operating income and expenses. The chief operating decision maker uses Adjusted
property EBITDA to measure the operating performance of Mocha Clubs, Altira
Macau, City of Dreams and Studio City and to compare the operating performance
of its properties with those of its competitors.
| 16. |
|
DISTRIBUTION OF PROFITS |
During the six months ended June 30, 2012 and 2011, the Company did not
declare or pay any dividends. No dividends have been proposed since the end
of the reporting period.
Melco Crown Entertainment Limited INTERIM REPORT 2012 89
(In thousands of U.S. dollars, except share and per share data)
| 17. |
|
SUBSEQUENT EVENTS |
The Philippines Project
On July 5, 2012, MCE through its wholly-owned subsidiary, MPEL Projects
Limited (“MPEL Projects”), entered into a memorandum of agreement (the
“MOA”) with certain Philippine parties (collectively, the “Philippine Parties”) (the
Philippine Parties and upon signing of the Consortium Agreement (as de? ned
below), MPEL Projects or its designated nominee are collectively referred to as
the “Consortium”), to negotiate in good faith and sign upon the satisfaction of
various conditions precedent within sixty (60) days or such other date as may
be mutually agreed, a consortium agreement, which would include the agreed
form of certain de? nitive agreements for the leasing, development, operation
and management of certain parcels of land located in Manila, Philippines, as
a casino, hotel, retail and entertainment resort (the “Consortium Agreement”).
The execution of the Consortium Agreement is conditional upon registration
of the project site as a tourism economic zone by Philippine Economic Zone
Authority. Philippine Amusement and Gaming Corporation (“PAGCOR”) has
issued a provisional license to the Consortium and intends to issue a regular
casino gaming license upon satisfaction of certain conditions referred to in
the provisional license. MPEL Projects or its designated nominee shall also be
included as a member-licensee of the provisional license. The MOA is legally
binding. On signing of the Consortium Agreement, the MOA shall terminate and
be superseded by the Consortium Agreement. MPEL Projects or an af? liated
party will operate the gaming and non-gaming operations as lessee.
Under the terms of the provisional license, PAGCOR requires the Consortium to
make a minimum investment of $650,000 at the start of commercial operations
and a total of $1,000,000 for the entire project. MPEL Projects or its designated
nominee will also be required to contribute to this investment by a combination
of cash, Group cash ? ow and debt ? nancing.
90 INTERIM REPORT 2012 Melco Crown Entertainment Limited
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
| 18. |
|
DIFFERENCES BETWEEN U.S. GAAP AND IFRS |
The unaudited condensed consolidated ? nancial statements are prepared in
accordance with U.S. GAAP, which differ in certain respects from IFRS. For the
six months ended June 30, 2012, there were no material changes to the nature
of those signi? cant differences described in the Company’s annual consolidated
? nancial statements for the year ended December 31, 2011, and their ? nancial
impact on net income attributable to the Company for the six months ended
June 30, 2012 and the Company’s shareholders’ equity as of June 30, 2012 are
summarized as follows:
Six Months Ended June 30,
2012 2011
Net income attributable
to the Company as reported
under U.S. GAAP $ 204,353 $ 73,808
IFRS adjustments:
Capitalization of amortization of
land use rights as property
and equipment 16,615 —
Additional capitalization of
borrowing costs as property
and equipment 612 —
Reversal of deferred tax in
relation to land use rights (1,851) (390)
Decrease in amortization of
land use rights as a result of
change in assigned value of
land use rights 2,347 470
Additional depreciation of
property and equipment in
relation to difference in
capitalization of amortization of
land use rights and
borrowing costs (1,013) (1,013)
Additional share-based
compensation recognized (104) (476)
Reduction in amortization of
deferred fi nancing costs 3,549 —
Financing costs recognized
as part of loss on
extinguishment of debt — (27,642)
Reduction in net loss attributable
to noncontrolling interests (6,812) —
Net income attributable to the
Company as reported under
IFRS $ 217,696 $ 44,757
Melco Crown Entertainment Limited INTERIM REPORT 2012 91
(In thousands of U.S. dollars, except share and per share data)
| 18. |
|
DIFFERENCES BETWEEN U.S. GAAP AND IFRS — |
continued
June 30, December 31,
2012 2011
The Company’s shareholders’
equity as reported under U.S.
GAAP $ 3,167,124 $ 2,956,155
IFRS adjustments:
Capitalization of amortization of
land use rights as property and
equipment 77,758 61,143
Additional capitalization of
borrowing costs as property
and equipment 2,318 1,706
Reduction in amortization of
deferred ? nancing costs 6,935 3,386
Reversal of deferred tax in
relation to land use rights (13,006) (11,155)
Decrease in amortization of
land use rights as a result of
change in assigned value of
land use rights 9,694 7,347
Additional depreciation of
property and equipment in
relation to difference in
capitalization of amortization of
land use rights and
borrowing costs (6,610) (5,597)
Financing costs recognized
as part of loss on
extinguishment of debt (29,328) (29,328)
Reduction in net loss attributable
to noncontrolling interests (12,032) (5,220)
The Company’s shareholders’
equity as reported under IFRS $ 3,202,853 $ 2,978,437
92 INTERIM REPORT 2012 Melco Crown Entertainment Limited
CORPORATE INFORMATION
BOARD OF DIRECTORS
Executive Director
Mr. Lawrence Yau Lung Ho (Co-Chairman and Chief Executive Of? cer)
Non-executive Directors
Mr. James Douglas Packer (Co-Chairman)
Mr. John Peter Ben Wang
Mr. Yuk Man Chung
Mr. William Todd Nisbet
Mr. Rowen Bruce Craigie
Independent Non-executive Directors
Mr. James Andrew Charles MacKenzie
Mr. Thomas Jefferson Wu
Mr. Yiu Wa Alec Tsui
Mr. Robert Wason Mactier
AUDIT COMMITTEE
Mr. James Andrew Charles MacKenzie (Chairman)
Mr. Thomas Jefferson Wu
Mr. Yiu Wa Alec Tsui
NOMINATING AND CORPORATE GOVERNANCE COMMITTEE
Mr. Yiu Wa Alec Tsui (Chairman)
Mr. Thomas Jefferson Wu
Mr. Robert Wason Mactier
COMPENSATION COMMITTEE
Mr. Thomas Jefferson Wu (Chairman)
Mr. Yiu Wa Alec Tsui
Mr. Robert Wason Mactier
Melco Crown Entertainment Limited INTERIM REPORT 2012 93
CORPORATE INFORMATION
REGISTERED OFFICE IN CAYMAN ISLANDS
87 Mary Street
George Town
Grand Cayman KY1-9005
Cayman Islands
PRINCIPAL PLACE OF BUSINESS AND HEAD OFFICE IN
MACAU
22/F, Golden Dragon Centre
Avenida Xian Xing Hai
Macau
PLACE OF BUSINESS IN HONG KONG REGISTERED UNDER
PART XI OF THE COMPANIES ORDINANCE
36/F, The Centrium
60 Wyndham Street
Central
Hong Kong
LEGAL ADVISORS
As to Hong Kong law and U.S. law
Shearman & Sterling
As to Macau law
Manuela António — Lawyers and Notaries
As to Cayman Islands law
Walkers
AUDITOR
Messrs. Deloitte Touche Tohmatsu
COMPANY SECRETARY
Ms. Stephanie Cheung
94 INTERIM REPORT 2012 Melco Crown Entertainment Limited
CORPORATE INFORMATION
COMPANY’S WEBSITE
www.melco-crown.com
LISTING INFORMATION
Hong Kong stock code: 6883
NASDAQ symbol: MPEL
COMPLIANCE ADVISOR
Anglo Chinese Corporate Finance, Limited
40/F, Two Exchange Square
| 8 |
|
Connaught Place |
Central
Hong Kong
PRINCIPAL BANKERS
Bank of China, Macau Branch
Citibank N.A., Hong Kong Branch
HONG KONG SHARE REGISTRAR
Computershare Hong Kong Investor Services Limited
Shops 1712–1716, 17/F
Hopewell Centre
183 Queen’s Road East
Wanchai
Hong Kong
CAYMAN ISLANDS PRINCIPAL SHARE REGISTRAR AND
TRANSFER OFFICE
Intertrust Corporate Services (Cayman) Limited
87 Mary Street
George Town
Grand Cayman KY1-9005
Cayman Islands
Melco Crown Entertainment Limited INTERIM REPORT 2012 95
DEFINITIONS AND GLOSSARY
De? nitions
• “2006 Share Incentive Plan” refers to a share incentive plan as adopted
and revised by the Board on November 28, 2006 and March 17, 2009 and
as approved by the Shareholders on December 1, 2006 and May 19, 2009,
respectively, which aims to provide incentives in the form of awards to
consultants, employees and members of the Board with the view of promoting
further success of our Company;
• “2011 Credit Facilities” refers to the credit facilities entered into pursuant to
an amendment agreement dated June 22, 2011 between, amongst others,
Melco Crown Gaming, Deutsche Bank AG, Hong Kong Branch as agent and
DB Trustees (Hong Kong) Limited as security agent, comprising a term loan
facility and a revolving credit facility, for a total amount of HK$9.36 billion
(approximately US$1.2 billion), and which reduce and remove certain restrictions
in the City of Dreams Project Facility;
• “2011 Share Incentive Plan” refers to a share incentive plan as adopted
by our Company pursuant to a resolution passed by our Shareholder at an
extraordinary general meeting on October 6, 2011 and became effective on
the Listing Date, which aims to provide incentives in the form of awards to
consultants, employees and members of the Board, with the view of promoting
further success of our Company;
• “Adjusted EBITDA” refers to earnings before interest, taxes, depreciation,
amortization, pre-opening costs, development costs, property charges and
others, share-based compensation, and other non-operating income and
expenses;
• “Adjusted property EBITDA” refers to earnings before interest, taxes,
depreciation, amortization, pre-opening costs, development costs, property
charges and others, share-based compensation, corporate and other expenses
and other non-operating income and expenses;
• “ADSs” refers to our American Depositary Shares, each of which represents
three Shares;
• “Aircraft Term Loan” refers to the US$43 million term loan credit facility entered
into by MCE Transportation in June 2012 for the purpose of ? nancing part of the
acquisition of an aircraft;
96 INTERIM REPORT 2012 Melco Crown Entertainment Limited
DEFINITIONS AND GLOSSARY
• “Altira Macau” refers to an integrated casino and hotel property that caters to
Asian rolling chip customers, which opened in May 2007 and owned by Altira
Developments Limited, our subsidiary;
• “Articles of Association” refers to our articles of association conditionally
adopted on October 6, 2011 and became effective on the Listing Date, and as
amended from time to time;
• “Board” and “Board of Directors” refers to the board of Directors or a duly
constituted committee thereof;
• “China”, “mainland China” and “PRC” refer to the People’s Republic of China,
excluding Hong Kong, Macau and Taiwan;
• “City of Dreams” refers to an integrated resort located on two adjacent pieces
of land in Cotai, Macau, which opened in June 2009, and currently features a
casino areas and three luxury hotels, including a collection of retail brands, a
wet stage performance theater and other entertainment venues, and owned by
Melco Crown (COD) Developments;
• “City of Dreams Project Facility” refers to the project facility dated September 5,
2007 entered into between, amongst others, Melco Crown Gaming as borrower
and certain other subsidiaries as guarantors, for a total sum of US$1.75 billion
for the purposes of ? nancing, among other things, certain project costs of City
of Dreams, as amended and supplemented from time to time;
• “Companies Ordinance” refers to the Companies Ordinance (Chapter 32 of the
Laws of Hong Kong), as amended, supplemented or otherwise modi? ed from
time to time;
• “Consortium Agreement” refers to the consortium agreement to be entered
into, subject to the satisfaction of various conditions precedent, by MCE or its
designated nominee with its counterparties in Philippines, which would include
the agreed form of certain de? nitive agreements for the leasing, development,
operation and management of casino, hotel, retail and entertainment complex in
the Philippines;
• “Cotai” refers to an area of reclaimed land located between the islands of Taipa
and Coloane in Macau;
• “Crown” refers to Crown Limited, an Australian-listed corporation, which
completed its acquisition of the gaming businesses and investments of PBL,
now known as Consolidated Media Holdings Limited, on December 12, 2007;
Melco Crown Entertainment Limited INTERIM REPORT 2012 97
DEFINITIONS AND GLOSSARY
• “Crown Asia Investments” refers to Crown Asia Investments Pty. Ltd., formerly
known as PBL Asia Investments Limited, which is 100% indirectly owned by
Crown and was incorporated in the Cayman Islands but is now a registered
Australian company;
• “Crown Entertainment Group Holdings” refer to Crown Entertainment Group
Holdings Pty Ltd., a company incorporated on June 19, 2007 under the laws of
Australia and a subsidiary of Crown;
• “Deposit-Linked Loan” refers to a deposit linked facility for HK$2.7 billion
(equivalent to US$353.3 million based on exchange rate on transaction date)
entered into on May 20, 2011, which is secured by a deposit of RMB2.3 billion
(equivalent to US$353.3 million based on exchange rate on transaction date)
from the proceeds of the RMB Bonds;
• “DICJ” refers to the Direcçăo de Inspecçăo e Coordenaçăo de Jogos (the
Gaming Inspection and Coordination Bureau), a department of the Public
Administration of Macau;
• “Directors” refers to the director(s) of our Company;
• “Exchangeable Bonds” refer to the US$250 million in aggregate principal
amount of 2.4% guaranteed exchangeable bonds due 2012 offered by SPV;
• “Greater China” refers to mainland China, Hong Kong and Macau, collectively;
• “Group” refers to our Company and our subsidiaries and, in respect of the
period before our Company became the holding company of such subsidiaries,
the entities which carried on the business of the present Group at the relevant
time;
• “HK$” and “H.K. dollars” refer to the legal currency of Hong Kong;
• “Hong Kong” refers to the Hong Kong Special Administrative Region of the PRC;
• “Hong Kong Stock Exchange” refers to The Stock Exchange of Hong Kong
Limited;
• “IFRS” refers to International Financial Reporting Standards;
• “Listing” refer to the listing of our Shares on the Main Board of the Hong Kong
Stock Exchange on December 7, 2011;
98 INTERIM REPORT 2012 Melco Crown Entertainment Limited
DEFINITIONS AND GLOSSARY
• “Listing Date” refers to December 7, 2011, on which our Shares are listed and
from which dealings in our Shares are permitted to take place on the Main Board
of the Hong Kong Stock Exchange;
• “Listing Rules” refers to the Rules Governing the Listing of Securities on the
Hong Kong Stock Exchange, as amended, supplemented or otherwise modi? ed
from time to time;
• “Macau” and “Macau SAR” refer to the Macau Special Administrative Region of
the PRC;
• “Macau Tower” refers to the Macau Tower Convention & Entertainment Centre,
owned by Sociedade de Turismo e Diversoes de Macau, S.A. and operated by
Shun Tak Holdings Limited;
• “MCE Finance” refers to our wholly-owned subsidiary MCE Finance Limited, a
Cayman Islands exempted company with limited liability;
• “MCE Transportation” refers to our subsidiary, MCE Transportation Limited
(formerly known as MCE Designs and Brands Limited), a company incorporated
under the laws of the British Virgin Islands;
• “Melco” refers to Melco International Development Limited, a Hong Kong listed
company;
• “Melco Crown (COD) Developments” refers to our subsidiary, Melco Crown
(COD) Developments Limited, a Macau company through which we hold the land
and buildings for City of Dreams;
• “Melco Crown Gaming” refers to our subsidiary, Melco Crown Gaming (Macau)
Limited, a Macau company and the holder of our Subconcession;
• “Melco Leisure” refers to Melco Leisure and Entertainment Group Limited, a
company incorporated under the laws of the British Virgin Islands and a wholly-
owned subsidiary of Melco;
• “Mocha Clubs” collectively refers to clubs with gaming machines, the fi rst of
which opened in September 2003, and are now the largest non-casino based
operations of electronic gaming machines in Macau, and operated by Melco
Crown Gaming;
• “Model Code” refers to the Model Code for Securities Transactions by Directors
of Listed issuers as set out in Appendix 10 to the Listing Rules;
Melco Crown Entertainment Limited INTERIM REPORT 2012 99
DEFINITIONS AND GLOSSARY
• “NASDAQ” refers to the National Association of Securities Dealers Automated
Quotation System;
• “New Cotai Holdings” refers to New Cotai Holdings, LLC, a company
incorporated in Delaware, the United States on March 24, 2006 under the laws
of Delaware, primarily owned by U.S. investment funds managed by Silver Point
Capital, L.P. and Oaktree Capital Management, L.P.;
• “our Subconcession” refers to the Macau gaming subconcession held by Melco
Crown Gaming;
• “Patacas” and “MOP” refer to the legal currency of Macau;
• “PBL” refers to Publishing and Broadcasting Limited, an Australian-listed
corporation that is now known as Consolidated Media Holdings Limited;
• “Renminbi” and “RMB” refer to the legal currency of China;
• “RMB Bonds” refers to the RMB2.3 billion aggregate principal amount of 3.75%
bonds due 2013 issued by our Company on May 9, 2011;
• “SCI” refers to Studio City International Holdings Limited, formerly known as
Cyber One Agents Limited, a company incorporated in the British Virgin Islands
with limited liability that is 60% owned by one of our subsidiaries and 40%
owned by New Cotai, LLC, a subsidiary of New Cotai Holdings;
• “SFO” refers to the Securities and Futures Ordinance (Chapter 571 of the Laws
of Hong Kong), as amended, supplemented or otherwise modi? ed from time to
time;
• “Senior Notes” refers to the initial notes (i.e. the US$600 million aggregate
principal amount of 10.25% senior notes due 2018 issued by MCE Finance on
May 17, 2010) and the exchange notes (i.e. approximately 99.96% of the initial
notes which were, on December 27, 2010, exchanged for 10.25% senior notes
due 2018, registered under the U.S. Securities Act of 1933, collectively);
• “Share(s)” refer to our ordinary share(s), par value of US$0.01 each;
• “Shareholder(s)” refers to holder(s) of our Share(s) from time to time;
• “SPV” refers to Melco Crown SPV Limited, formerly known as Melco PBL SPV
Limited, a Cayman Islands exempted company which is 50/50 owned by Melco
Leisure and Crown Asia Investments;
100 INTERIM REPORT 2012 Melco Crown Entertainment Limited
DEFINITIONS AND GLOSSARY
• “Studio City” refers to an integrated resort comprising entertainment, retail and
gaming facilities proposed to be developed under the shareholder agreement
between our Company and New Cotai, LLC;
• “US$” and “U.S. dollars” refer to the legal currency of the United States;
• “U.S.” and “United States” refer to the United States of America, its territories,
its possessions and all areas subject to its jurisdiction;
• “U.S. GAAP” refers to the accounting principles generally accepted in the United
States; and
• “we”, “us”, “our”, “our Company”, “the Company”, “MCE” and “Melco Crown
Entertainment” refer to Melco Crown Entertainment Limited and, as the context
requires, its predecessor entities and its consolidated subsidiaries.
Melco Crown Entertainment Limited INTERIM REPORT 2012 101
DEFINITIONS AND GLOSSARY
Glossary
“average daily rate” or calculated by dividing total room revenues (less service
“ADR” charges, if any) by total rooms occupied, i.e., average
price of occupied rooms per day
“cage” a secure room within a casino with a facility that
allows patrons to exchange cash for chips required to
participate in gaming activities, or to exchange chips for
cash
“chip” round token that is used on casino gaming tables in lieu
of cash
“concession” a government grant for the operation of games of fortune
and chance in casinos in Macau under an administrative
contract pursuant to which a concessionaire, or the entity
holding the concession, is authorized to operate games
of fortune and chance in casinos in Macau
“drop box” a box or container that serves as a repository for cash,
chips, chip purchase vouchers, credit markers and forms
used to record movements in the chip inventory on each
table game
“gaming machine handle the total amount wagered in gaming machines
(volume)”
“gaming promoter” or an individual or corporate entity who, for the purpose
“junket representative” of promoting rolling chip and other gaming activities,
arranges customer transportation and accommodation,
provides credit in its sole discretion if authorized by
a gaming operator, and arranges food and beverage
services and entertainment in exchange for commissions
or other compensation from a gaming operator
“hold percentage” the amount of win (calculated before discounts and
commissions) as a percentage of drop
“integrated resort” a resort which provides customers with a combination of
hotel accommodations, casinos or gaming areas, retail
and dining facilities, MICE space, entertainment venues
and spas
102 INTERIM REPORT 2012 Melco Crown Entertainment Limited
DEFINITIONS AND GLOSSARY
“marker” evidence of indebtedness by a player to the casino or
gaming operator
“mass market patron” a customer who plays in the mass market segment
“mass market segment” consists of both table games and slot machines played
on public mass gaming ? oors by mass market patrons
for cash stakes that are typically lower than those in the
rolling chip segment
“mass market table games the amount of table games drop in the mass market table
drop” games segment
“mass market table games mass market table games win as a percentage of mass
hold percentage” market table games drop
“MICE” Meetings, Incentives, Conventions and Exhibitions, an
acronym commonly used to refer to tourism involving
large groups brought together for an event or speci? c
purpose
“non-negotiable chip” promotional casino chip that is not to be exchanged for
cash
“non-rolling chip” or chip that can be exchanged for cash, used by mass
“traditional cash chip” market patrons to make wagers
“occupancy rate” the average percentage of available hotel rooms
occupied during a period
“revenue per calculated by dividing total room revenues (less service
available room” or charges, if any) by total rooms available, thereby
“REVPAR” representing a combination of hotel average daily room
rates and occupancy
“rolling chip” non-negotiable chip primarily used by rolling chip patrons
to make wagers
“rolling chip patron” a player who is primarily a VIP player and typically
receives various forms of complimentary services
from the gaming promoters or concessionaires or
subconcessionaires
“rolling chip volume” the amount of non-negotiable chips wagered and lost by
the rolling chip market segment
Melco Crown Entertainment Limited INTERIM REPORT 2012 103
DEFINITIONS AND GLOSSARY
“rolling chip win rate” rolling chip table games win as a percentage of rolling
chip volume
“slot machine” traditional gaming machine operated by a single player
and electronic multiple-player gaming machines
“subconcession” an agreement for the operation of games of fortune
and chance in casinos between the entity holding the
concession, or the concessionaire, a subconcessionaire
and Macau government, pursuant to which the
subconcessionaire is authorized to operate games of
fortune and chance in casinos in Macau
“table games win” the amount of wagers won net of wagers lost on gaming
tables that is retained and recorded as casino revenues
“wet stage performance the approximately 2,000-seat theater specifi cally
theater” designed to stage “The House of Dancing Water” show
“win percentage-gaming gaming machine win expressed as a percentage of
machines” gaming machine handle
104 INTERIM REPORT 2012 Melco Crown Entertainment Limited
Member Companies
www.melco-crown.com