The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral part of the consolidated financial statements.
The accompanying notes are an integral
part of the consolidated financial statements.
The accompanying notes are an integral part of the
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)
Melco Crown Entertainment Limited (the Company) was incorporated in the Cayman Islands, with its American
depository shares (ADS) listed on the NASDAQ Global Select Market under the symbol MPEL in the United States of America and its ordinary shares listed on the Main Board of The Stock Exchange of Hong Kong Limited (the
Hong Kong Stock Exchange) under the stock code of 6883 in the Hong Kong Special Administrative Region of the Peoples Republic of China (Hong Kong) until 4:00 p.m. on July 3, 2015, the date of the
Company completed the voluntary withdrawal of the listing of its ordinary shares on the Main Board of the Hong Kong Stock Exchange.
The
Company together with its subsidiaries (collectively referred to as the Group) is a developer, owner and operator of casino gaming and entertainment casino resort facilities in Asia. The Group currently operates Altira Macau, a casino
hotel located at Taipa, the Macau Special Administrative Region of the Peoples Republic of China (Macau), City of Dreams, an integrated urban casino resort located at Cotai, Macau and Taipa Square Casino, a casino located at Taipa,
Macau. The Groups business also includes the Mocha Clubs, which comprise the non-casino based operations of electronic gaming machines in Macau. The Group also majority owns and operates Studio City, a cinematically-themed integrated
entertainment, retail and gaming resort in Cotai, Macau, which commenced operations on October 27, 2015. In the Philippines, Melco Crown (Philippines) Resorts Corporation (MCP), a majority-owned subsidiary of the Company whose
common shares are listed on The Philippine Stock Exchange, Inc. under the stock code of MCP, through MCPs subsidiary, MCE Leisure (Philippines) Corporation (MCE Leisure), currently operates and manages City of Dreams
Manila, a casino, hotel, retail and entertainment integrated resort in the Entertainment City complex in Manila. City of Dreams Manila commenced operations on December 14, 2014, with a grand opening of the integrated resort on February 2,
2015.
As of December 31, 2015 and 2014, the major shareholders of the Company are Melco International Development Limited
(Melco), a Hong Kong-listed company, and Crown Resorts Limited (Crown), an Australian-listed corporation.
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
(a)
|
Basis of Presentation and Principles of Consolidation
|
The consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have
been eliminated on consolidation.
The preparation of consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, revenues and expenses and related disclosures of contingent assets and liabilities. These estimates
and judgments are based on historical information, information that is currently available to the Group and on various other assumptions that the Group believes to be reasonable under the circumstances. Accordingly, actual results could differ from
those estimates.
|
(c)
|
Fair Value of Financial Instruments
|
Fair value is defined as the price that would be
received to sell the asset or paid to transfer a liability (i.e. the exit price) in an orderly transaction between market participants at the measurement date.
F-13
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(c)
|
Fair Value of Financial Instruments
-
continued
|
The Group estimated the fair values using appropriate valuation methodologies and market information available as of the balance sheet date.
|
(d)
|
Cash and Cash Equivalents
|
Cash and cash equivalents consist of cash on hand,
cashiers orders, demand deposits and highly liquid investments which are unrestricted as to withdrawal and use, and which have maturities of three months or less when purchased.
Cash and cash equivalents are placed with financial institutions with high-credit ratings and quality.
The current portion of restricted cash represents cash deposited into
bank accounts which are restricted as to withdrawal and use and the Group expects those funds will be released or utilized in accordance with the terms of the respective agreements within the next twelve months, while the non-current portion of
restricted cash represents those funds that will not be released or utilized within the next twelve months. Restricted cash as of December 31, 2015 and 2014 comprises i) bank accounts that are restricted for withdrawal and for payment of Studio
City project costs in accordance with the terms of the Studio City Notes and Studio City Project Facility as defined in Note 11 and other associated agreements; ii) a deposit account of the Taiwan branch office of one subsidiary in Taiwan which has
been frozen by the Taiwanese authority since January 2013 in connection with an investigation related to certain alleged violations of Taiwan banking and foreign exchange laws, with an indictment received in August 2014 against such Taiwan branch
office and certain of its employees, and such freeze order was lifted by the Taiwanese authority in October 2015, further information is included in Note 22(e); iii) cash in escrow account, which was set up in March 2013, that was restricted for
payment of City of Dreams Manila project costs in accordance with the terms of the Regular/Provisional License as defined in Note 21(a) issued by the Philippine Amusement and Gaming Corporation (PAGCOR) and which was released on
June 15, 2015, further information is included in Note 22(c); iv) cash in an escrow account that is restricted in respect of a foundation fee payable for City of Dreams Manila in accordance with the terms of the Regular/Provisional License; and
v) interest income earned on restricted cash balances which are restricted as to withdrawal and use.
|
(f)
|
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 and
the Philippines, 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 December 31, 2015 and 2014, a
substantial portion of the Groups markers were due from customers residing in foreign countries. Business or economic conditions, the legal enforceability of gaming debts, or other significant 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
F-14
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(f)
|
Accounts Receivable and Credit Risk
-
continued
|
receivable is uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful debts is maintained to reduce the Groups
receivables to their carrying amounts, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as managements experience with collection trends in the casino industry and current economic
and business conditions. Management believes that as of December 31, 2015 and 2014, no significant concentrations of credit risk existed for which an allowance had not already been recorded.
Inventories consist of retail merchandise, food and beverage items and
certain operating supplies, which are stated at the lower of cost or market value. Cost is calculated using the first-in, first-out, average and specific identification methods. Write downs of potentially obsolete or slow-moving inventory are
recorded based on managements specific analysis of inventory.
|
(h)
|
Property and Equipment, Net
|
Property and equipment are stated at cost less accumulated
depreciation and amortization. Impairment losses and gains or losses on dispositions of property and equipment are included in operating income. Major additions, renewals and betterments are capitalized, while maintenance and repairs are expensed as
incurred.
During the construction and development stage of the Groups casino gaming and entertainment casino resort facilities,
direct and incremental costs related to the design and construction, including costs under the construction contracts, duties and tariffs, equipment installation, shipping costs, payroll and payroll-benefit related costs, depreciation of plant and
equipment used, applicable portions of interest and amortization of deferred financing costs, are capitalized in property and equipment. The capitalization of such costs begins when the construction and development of a project starts and ceases
once the construction is substantially completed or development activity is suspended for more than a brief period.
Depreciation and
amortization expense related to capitalized construction costs and other property and equipment is recognized from the time each asset is placed in service. This may occur at different stages as casino gaming and entertainment casino resort
facilities are completed and opened.
Property and equipment and other long-lived assets with a finite useful life are depreciated and
amortized on a straight-line basis over the assets estimated useful life. Estimated useful lives are as follows:
|
|
|
Classification
|
|
Estimated Useful Life
|
Buildings
|
|
4 to 40 years
|
Transportation
|
|
5 to 10 years
|
Leasehold improvements
|
|
3 to 10 years or over the lease term, whichever is shorter
|
Furniture, fixtures and equipment
|
|
2 to 15 years
|
Plant and gaming machinery
|
|
3 to 5 years
|
The remaining estimated useful lives of the property and equipment are periodically reviewed. For the
review of estimated useful lives of buildings of Altira Macau and City of Dreams, the Group
F-15
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(h)
|
Property and Equipment, Net
-
continued
|
considered factors such as the business and operating environment of gaming industry in Macau, laws and regulations in Macau and the Groups anticipated usage of the buildings. As a result,
effective from October 1, 2015, the estimated useful lives of certain buildings assets of Altira Macau and City of Dreams have been extended in order to reflect the estimated periods during which the buildings are expected to remain in service.
The estimated useful lives of certain buildings assets of Altira Macau and City of Dreams were changed from 25 years to 40 years from the date the buildings are placed in service. The changes in estimated useful lives of these buildings assets have
resulted in a reduction in depreciation of $5,827, an increase in net income attributable to Melco Crown Entertainment Limited of $5,827 and an increase in basic and diluted earnings per share of $0.004 for the year ended December 31, 2015.
|
(i)
|
Capitalization of Interest and Amortization of Deferred Financing Costs
|
Interest and
amortization of deferred financing costs incurred on funds used to construct the Groups casino gaming and entertainment casino resort facilities during the active construction period are capitalized. Interest subject to capitalization
primarily includes interest paid or payable on the Groups long-term debt except for the Aircraft Term Loan as disclosed in Note 11, interest rate swap agreements, the land premium payables for the land use rights where City of Dreams and
Studio City are located and the capital lease obligations. The capitalization of interest and amortization of deferred financing costs ceases once a project is substantially completed or development activity is suspended for more than a brief
period. The amount to be capitalized is determined by applying the weighted average interest rate of the Groups outstanding borrowings to the average amount of accumulated qualifying capital expenditures for assets under construction during
the year and is added to the cost of the underlying assets and amortized over their respective useful lives. Total interest expenses incurred amounted to $253,168, $220,974 and $183,647, of which $134,838, $96,884 and $30,987 were capitalized for
the years ended December 31, 2015, 2014 and 2013, respectively. Total amortization of deferred financing costs amounted to $43,969, of which $5,458 was capitalized during the year ended December 31, 2015. No amortization of deferred
financing costs were capitalized during the years ended December 31, 2014 and 2013.
|
(j)
|
Gaming Subconcession, Net
|
The gaming subconcession is capitalized based on the fair
value of the gaming subconcession agreement as of the date of acquisition of Melco Crown (Macau) Limited (Melco Crown Macau), a subsidiary of the Company and the holder of the gaming subconcession in Macau, in 2006, and amortized using
the straight-line method over the term of agreement which is due to expire in June 2022.
|
(k)
|
Goodwill and Intangible Assets
|
Goodwill represents the excess of acquisition cost over
the fair value of tangible and identifiable intangible net assets of any business acquired. Goodwill is not amortized, but is tested for impairment at the reporting unit level on an annual basis, and between annual tests when circumstances indicate
that the carrying value of goodwill may not be recoverable. An impairment loss is recognized in an amount equal to the excess of the carrying amount over the implied fair value.
Intangible assets other than goodwill are amortized over their useful lives unless their lives are determined to be indefinite in which case
they are not amortized. Intangible assets are carried at cost,
F-16
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(k)
|
Goodwill and Intangible Assets
-
continued
|
less accumulated amortization. The Groups finite-lived intangible asset consists of the gaming subconcession. Finite-lived intangible assets are amortized over the shorter of their
contractual terms or estimated useful lives. The Groups intangible assets with indefinite lives represent Mocha Clubs trademarks, which are tested for impairment on an annual basis or when circumstances indicate that the carrying value of the
intangible assets may not be recoverable.
|
(l)
|
Impairment of Long-lived Assets (Other Than Goodwill)
|
The Group evaluates the
recoverability of long-lived assets with finite lives based on its classification as a) held for sale or b) to be held and used. Several criteria must be met before an asset is classified as held for sale, including that management with
the appropriate authority commits to a plan to sell the asset at a reasonable price in relation to its fair value and is actively seeking a buyer. For assets held for sale, the Group recognizes the assets at the lower of carrying value or fair
market value less costs to sell, as estimated based on comparable asset sales, offers received, or a discounted cash flow model. For assets to be held and used, the Group evaluates their recoverability whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be
generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds its fair value.
No impairment loss was recognized during the years ended December 31, 2015 and 2013. During the year ended December 31, 2014, an
impairment loss of $4,146 was recognized mainly due to reconfiguration of the entertainment area at City of Dreams and renovation of the casinos at City of Dreams and Altira Macau and the amount was included in the consolidated statements of
operations.
|
(m)
|
Deferred Financing Costs, Net
|
Direct and incremental costs incurred in obtaining loans
or in connection with the issuance of long-term debt are capitalized and amortized over the terms of the related debt agreements using the effective interest method. Amortization expense of approximately $38,511, $28,055 and $18,159, net of
amortization capitalized of $5,458, nil and nil, were recorded during the years ended December 31, 2015, 2014 and 2013, respectively.
Land use rights are recorded at cost less accumulated
amortization. Amortization is provided on a straight-line basis over the estimated lease term of the land.
Each land concession
contract in Macau has an initial term of 25 years and is renewable for further consecutive periods of 10 years, subject to applicable legislation in Macau. The land use rights were originally amortized over the initial term of 25 years, in which 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. The estimated term of the leases are periodically reviewed. For the review of
such estimated term of the leases under the applicable land concession contracts, the Group considered factors such as the business and operating environment of gaming industry in Macau, laws and regulations in Macau and the Groups development
plans. As a result, effective from October 1, 2015, the estimated term of the leases under the land concession contracts for Altira Macau, City of Dreams and Studio City, in accordance with the relevant accounting standards, have been extended
to April
F-17
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
|
|
(n)
|
Land Use Rights, Net
-
continued
|
2047, May 2049 and October 2055, respectively which aligned with the estimated useful lives of certain buildings assets of 40 years as disclosed in Note 2(h). The changes in estimated
term of the leases under the applicable land concession contracts have resulted in a reduction in amortization of land use rights of $10,413, an increase in net income attributable to Melco Crown Entertainment Limited of $6,763 and an increase in
basic and diluted earnings per share of $0.004 for the year ended December 31, 2015.
|
(o)
|
Revenue Recognition and Promotional Allowances
|
The Group recognizes revenue at the time
persuasive evidence of an arrangement exists, the service is provided or the retail goods are sold, prices are fixed or determinable and collection is reasonably assured.
Casino revenues are measured by the aggregate net difference between gaming wins and losses less accruals for the anticipated payouts of
progressive slot jackpots, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers possession.
The Group follows the accounting standards for reporting revenue gross as a principal versus net as an agent, when accounting for operations of
Grand Hyatt Macau hotel, Hyatt City of Dreams Manila hotel (collectively the Hyatt Hotels) and Taipa Square Casino. For the operations of the Hyatt Hotels, the Group is the owner of the hotels property, and the hotel managers operate the
hotels under management agreements providing management services to the Group, and the Group receives all rewards and takes substantial risks associated with the hotels business; it is the principal and the transactions of the Hyatt Hotels are
therefore recognized on a gross basis. For the operations of Taipa Square Casino, given the Group operates the casino under a right to use agreement with the owner of the casino premises and has full responsibility for the casino operations in
accordance with its gaming subconcession, it is the principal and casino revenue is therefore recognized on a gross basis.
Rooms, food and
beverage, entertainment, retail and other revenues are recognized when services are performed. Advance deposits on rooms and advance ticket sales are recorded as customer deposits until services are provided to the customer. Minimum operating and
right to use fee, adjusted for contractual base fee and operating fee escalations, are included in entertainment, retail and other revenues and are recognized on a straight-line basis over the terms of the related agreement.
Revenues are recognized net of certain sales incentives which are required to be recorded as a reduction of revenue; consequently, the
Groups casino revenues are reduced by discounts, commissions and points earned in customer loyalty programs, such as the players club loyalty program.
F-18
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(o)
|
Revenue Recognition and Promotional Allowances
-
continued
|
The retail value of rooms, food and beverage, entertainment, retail and other services
furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances for the years ended December 31, 2015, 2014 and 2013 is reclassified from
rooms costs, food and beverage costs, entertainment, retail and other services costs and is included in casino expenses as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Rooms
|
|
$
|
24,625
|
|
|
$
|
22,282
|
|
|
$
|
19,828
|
|
Food and beverage
|
|
|
64,676
|
|
|
|
53,941
|
|
|
|
43,838
|
|
Entertainment, retail and others
|
|
|
9,365
|
|
|
|
7,683
|
|
|
|
8,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
98,666
|
|
|
$
|
83,906
|
|
|
$
|
71,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(p)
|
Point-loyalty Programs
|
The Group operates different loyalty programs in certain of its
properties to encourage repeat business mainly from loyal slot machine customers and table games patrons. Members earn points primarily based on gaming activity and such points can be redeemed for free play and other free goods and services. The
Group accrues for loyalty program points expected to be redeemed for cash and free play as a reduction to gaming revenue and accrues for loyalty program points expected to be redeemed for free goods and services as casino expense. The accruals are
based on managements estimates and assumptions regarding the estimated costs of providing those benefits, age and history with expiration of unused points resulting in a reduction of the accruals.
|
(q)
|
Gaming Taxes and License Fees
|
The Group is subject to taxes and license fees based on
gross gaming revenue and other metrics in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes and license fees are determined mainly from an assessment of the Groups gaming revenue and
are recorded as an expense within the Casino line item in the consolidated statements of operations. These taxes and license fees totaled $1,717,805, $2,275,610 and $2,479,958 for the years ended December 31, 2015, 2014 and 2013,
respectively.
Pre-opening costs, consist primarily of marketing expenses and other
expenses related to new or start-up operations and are expensed as incurred. The Group has incurred pre-opening costs primarily in connection with City of Dreams Manila and Studio City since December 2012 and July 2011, respectively. The Group also
incurs pre-opening costs on other one-off activities related to the marketing of new facilities and operations.
Development costs include costs associated with the Groups
evaluation and pursuit of new business opportunities, which are expensed as incurred.
F-19
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-
continued
|
|
(t)
|
Advertising and Promotional Expenses
|
The Group expenses all advertising and promotional
expenses as incurred or the first time the advertising takes place. Advertising and promotional expenses included in the accompanying consolidated statements of operations were $107,383, $47,906 and $43,403 for the years ended December 31,
2015, 2014 and 2013, respectively.
|
(u)
|
Foreign Currency Transactions and Translations
|
All transactions in currencies other
than functional currencies of the Company during the year are remeasured at the exchange rates prevailing on the respective transaction dates. Monetary assets and liabilities existing at the balance sheet date denominated in currencies other than
functional currencies are remeasured at the exchange rates existing on that date. Exchange differences are recorded in the consolidated statements of operations.
The functional currencies of the Company and its major subsidiaries are the United States dollar ($ or US$), the Hong
Kong dollar (HK$), the Macau Pataca (MOP) or the Philippine Peso (PHP), respectively. All assets and liabilities are translated at the rates of exchange prevailing at the balance sheet date and all income and
expense items are translated at the average rates of exchange over the year. All exchange differences arising from the translation of subsidiaries financial statements are recorded as a component of comprehensive income (loss).
|
(v)
|
Share-based Compensation Expenses
|
The Group measures the cost of employee services
received in exchange for an award of equity instruments based on the grant date fair value of the award and recognizes that cost over the service period. Compensation is attributed to the periods of associated service and such expense is being
recognized on a straight-line basis over the vesting period of the awards. Forfeitures are estimated at the time of grant and actual forfeitures are recognized currently to the extent they differ from the estimate.
Further information on the Groups share-based compensation arrangements is included in Note 17.
The Group is subject to income taxes in Hong Kong, Macau, the United States
of America, the Philippines and other jurisdictions where it operates.
Deferred income taxes are recognized for all significant temporary
differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not
that some portion or all of the deferred tax assets will not be realized. The components of the deferred tax assets and liabilities are individually classified as current and non-current based on the characteristics of the underlying assets and
liabilities. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.
The Groups income
tax returns are subject to examination by tax authorities in the jurisdictions where it operates. The Group assesses potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes. These
accounting standards utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely
F-20
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
|
|
(w)
|
Income Tax
- continued
|
than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount
which is more than 50% likely, based solely on the technical merits, of being sustained on examinations.
|
(x)
|
Net Income Attributable to Melco Crown Entertainment Limited Per Share
|
Basic net income
attributable to Melco Crown Entertainment Limited per share is calculated by dividing the net income attributable to Melco Crown Entertainment Limited by the weighted average number of ordinary shares outstanding during the year.
Diluted net income attributable to Melco Crown Entertainment Limited per share is calculated by dividing the net income attributable to Melco
Crown Entertainment Limited by the weighted average number of ordinary shares outstanding during the year 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
Melco Crown Entertainment Limited per share consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Weighted average number of ordinary shares outstanding used in the calculation of basic net income attributable to Melco Crown
Entertainment Limited per share
|
|
|
1,617,263,041
|
|
|
|
1,647,571,547
|
|
|
|
1,649,678,643
|
|
Incremental weighted average number of ordinary shares from assumed vesting of restricted shares and exercise of share options using
the treasury stock method
|
|
|
9,845,729
|
|
|
|
12,931,583
|
|
|
|
14,519,448
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of ordinary shares outstanding used in the calculation of diluted net income attributable to Melco Crown
Entertainment Limited per share
|
|
|
1,627,108,770
|
|
|
|
1,660,503,130
|
|
|
|
1,664,198,091
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2015, 2014 and 2013, 4,778,880, 2,519,037 and nil outstanding
share options and 237,855, 701,681 and nil outstanding restricted shares as at December 31, 2015, 2014 and 2013, respectively, were excluded from the computation of diluted net income attributable to Melco Crown Entertainment Limited per share
as their effect would have been anti-dilutive.
|
(y)
|
Accounting for Derivative Instruments and Hedging Activities
|
The Group uses derivative
financial instruments such as floating-for-fixed interest rate swap agreements to manage its risks associated with interest rate fluctuations in accordance with lenders requirements under the Groups Studio City Project Facility (as
defined in Note 11). All derivative instruments are recognized in the consolidated financial statements at fair value at the balance sheet date. Any changes in fair value are recorded in the consolidated statements of operations or
F-21
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
|
|
(y)
|
Accounting for Derivative Instruments and Hedging Activities
- continued
|
accumulated other comprehensive income, depending on whether the derivative is designated and qualifies for hedge accounting, the type of hedge transaction and the effectiveness of the hedge. The
estimated fair values of interest rate swap agreements are based on a standard valuation model that projects future cash flows and discounts those future cash flows to a present value using market-based observable inputs such as interest rate
yields. Further information on the Groups interest rate swap agreements is included in Note 11.
|
(z)
|
Comprehensive (Loss) Income and Accumulated Other Comprehensive Losses
|
Comprehensive
(loss) income includes net (loss) income, foreign currency translation adjustment and change in fair value of interest rate swap agreements and is reported in the consolidated statements of comprehensive income.
As of December 31, 2015 and 2014, the Groups accumulated other comprehensive losses consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Foreign currency translation adjustment
|
|
$
|
(21,897
|
)
|
|
$
|
(17,130
|
)
|
Change in the fair value of interest rate swap agreements
|
|
|
(37
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(21,934
|
)
|
|
$
|
(17,149
|
)
|
|
|
|
|
|
|
|
|
|
|
(aa)
|
Recent Changes in Accounting Standards
|
Recent Accounting Pronouncements Not Yet
Adopted:
In May 2014, the Financial Accounting Standards Board (FASB) issued an accounting standard update which outlines
a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The core principal of this new revenue
recognition model is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or
services. This update also requires enhanced disclosures regarding the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entitys contracts with customers. In August 2015, the FASB issued an accounting standard
update which defers the effective date of the new revenue recognition accounting guidance by one year, to annual and interim periods beginning after December 15, 2017, and early adoption is permitted for annual and interim periods beginning
after December 15, 2016. The guidance can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Management is currently assessing the potential impact of adopting this
guidance on the Groups consolidated financial statements.
In June 2014, the FASB issued an accounting standard update which requires
that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of
the award. This update further clarifies that compensation cost should be recognized
F-22
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
|
|
(aa)
|
Recent Changes in Accounting Standards
- continued
|
Recent Accounting Pronouncements Not Yet Adopted -
continued
in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service
has already been rendered. The guidance is effective for interim and fiscal years beginning after December 15, 2015, with early adoption permitted. The guidance can be applied either (a) prospectively to all awards granted or modified
after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the consolidated financial statements and to all new or modified awards
thereafter. The adoption of this guidance is not expected to have a material impact on the Groups consolidated financial statements.
In January 2015, the FASB issued a new pronouncement which eliminates from U.S. GAAP the concept of an extraordinary item, which is an event or
transaction that is both unusual in nature and infrequently occurring. As a result of the amendment, an entity will no longer segregate an extraordinary item from the results of ordinary operations; separately present an extraordinary item on its
income statement, net of tax, after income from continuing operations; or disclose income taxes and earnings-per-share data applicable to an extraordinary item. The guidance is effective for interim and fiscals years beginning after
December 15, 2015 with early adoption permitted. The guidance should be applied retrospectively to all prior periods. The adoption of this guidance is not expected to have a material impact on the Groups consolidated financial statements.
In April 2015, the FASB issued an accounting standard update that requires debt issuance costs related to a recognized debt liability be
presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this update.
In August 2015, the FASB issued an accounting standard update which clarifies that the guidance issued in April 2015 is not required to be applied to line-of-credit arrangements. The debt issuance costs related to line-of-credit arrangements shall
be continue to present as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the arrangement. The guidance is effective for interim and fiscals years beginning after December 15, 2015, with early
adoption permitted. The guidance should be applied retrospectively to all prior periods. The adoption of this guidance is not expected to have a material impact on the Groups consolidated financial statements.
In July 2015, the FASB issued an accounting standard update, which changes the measurement principle for inventories that is measured using
other than last-in, first-out or the retail inventory method from the lower of cost or market to the lower of cost and net realizable value. Net realizable value is defined by FASB as estimated selling prices in the ordinary course of business, less
reasonably predictable costs of completion, disposal and transportation. The guidance is effective for interim and fiscals years beginning after December 15, 2016, with early adoption permitted. The guidance should be applied prospectively. The
adoption of this guidance is not expected to have a material impact on the Groups consolidated financial statements.
In November
2015, the FASB issued an accounting standard update which simplifies balance sheet classification of deferred taxes. The guidance requires that all deferred tax assets and liabilities, along with any related valuation allowance, be classified as
noncurrent. The guidance is effective for interim and fiscals years beginning after December 15, 2016, with early adoption permitted. The guidance can
F-23
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- continued
|
|
(aa)
|
Recent Changes in Accounting Standards
- continued
|
Recent Accounting Pronouncements Not Yet Adopted -
continued
be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The adoption of this guidance is not expected to have a material impact on
the Groups consolidated financial statements.
In January 2016, the FASB issued an accounting standard update which improves certain
aspects of recognition, measurement, presentation, and disclosure of financial instruments. The guidance changes the measurement of investments in equity securities and the presentation of certain fair value changes for financial liabilities
measured at fair value, and also amends certain disclosure requirements associated with the fair value of financial instruments. The guidance is effective for interim and fiscals years beginning after December 15, 2017, with early adoption
permitted for certain changes. The guidance should be applied as a cumulative-effect adjustment as of the date of adoption, except for the guidance related to equity securities without readily determinable fair values should be applied
prospectively. The adoption of this guidance is not expected to have a material impact on the Groups consolidated financial statements.
In February 2016, the FASB issued an accounting standard update on leases, which amends various aspects of existing accounting guidance for
leases. The guidance requires all lessees to recognize a lease liability and a right-of-use asset, measured at the present value of the future minimum lease payments, at the lease commencement date. Lessor accounting remains largely unchanged under
the new guidance. The guidance is effective for interim and fiscals years beginning after December 15, 2018, with early adoption permitted. The guidance should be applied at the beginning of the earliest period presented using a modified
retrospective approach. Management is currently assessing the potential impact of adopting this guidance on the Groups consolidated financial statements.
3.
|
ACCOUNTS RECEIVABLE, NET
|
Components of accounts receivable, net are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Casino
|
|
$
|
466,259
|
|
|
$
|
414,515
|
|
Hotel
|
|
|
8,427
|
|
|
|
1,728
|
|
Other
|
|
|
7,698
|
|
|
|
6,208
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
482,384
|
|
|
|
422,451
|
|
Less: allowance for doubtful debts
|
|
|
(210,757
|
)
|
|
|
(168,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
271,627
|
|
|
$
|
253,665
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2015, 2014 and 2013, the Group has provided allowance for
doubtful debts, net of recoveries of $37,978, $29,979 and $43,750 and has directly written off accounts receivable of $1,350, $7,690 and $549, respectively.
F-24
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
3.
|
ACCOUNTS RECEIVABLE, NET
- continued
|
Movement of allowance for doubtful debts are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
At beginning of year
|
|
$
|
168,786
|
|
|
$
|
143,334
|
|
|
$
|
113,264
|
|
Additional allowance, net of recoveries
|
|
|
37,978
|
|
|
|
29,979
|
|
|
|
43,750
|
|
Reclassified from (to) long-term receivables, net
|
|
|
3,993
|
|
|
|
(4,527
|
)
|
|
|
(13,680
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At end of year
|
|
$
|
210,757
|
|
|
$
|
168,786
|
|
|
$
|
143,334
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On February 18, 2014, the Group completed the sale of its properties in Macau pursuant to a promissory agreement dated
November 20, 2013 signed with a third party. Total consideration amounted to HK$240,000,000 (equivalent to $30,848) which include a cash deposit of HK$10,000,000 (equivalent to $1,285) received by the Group on the date of signing the promissory
agreement. During the year ended December 31, 2014, the Group recognized a gain on disposal of assets held for sale of $22,072.
5.
|
PROPERTY AND EQUIPMENT, NET
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Cost
|
|
|
|
|
|
|
|
|
Buildings
|
|
$
|
4,944,672
|
|
|
$
|
2,693,256
|
|
Furniture, fixtures and equipment
|
|
|
885,724
|
|
|
|
607,423
|
|
Leasehold improvements
|
|
|
775,422
|
|
|
|
588,454
|
|
Plant and gaming machinery
|
|
|
228,591
|
|
|
|
197,740
|
|
Transportation
|
|
|
88,590
|
|
|
|
84,441
|
|
Construction in progress
|
|
|
563,720
|
|
|
|
1,935,391
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
7,486,719
|
|
|
|
6,106,705
|
|
Less: accumulated depreciation and amortization
|
|
|
(1,726,490
|
)
|
|
|
(1,410,314
|
)
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
5,760,229
|
|
|
$
|
4,696,391
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015 and 2014, construction in progress in relation to City of Dreams, Studio
City and City of Dreams Manila included interest capitalized in accordance with applicable accounting standards and other direct incidental costs capitalized (representing insurance, salaries and wages and certain other professional charges
incurred) which, in the aggregate, amounted to $69,311 and $219,141, respectively.
The cost and accumulated depreciation and amortization
of property and equipment held under capital lease arrangements were $251,176 and $14,322 as of December 31, 2015 and $265,781 and $711 as of December 31, 2014, respectively. Further information
of the lease arrangements is included in Note 12.
F-25
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
6.
|
GAMING SUBCONCESSION, NET
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Deemed cost
|
|
$
|
900,000
|
|
|
$
|
900,000
|
|
Less: accumulated amortization
|
|
|
(529,443
|
)
|
|
|
(472,206
|
)
|
|
|
|
|
|
|
|
|
|
Gaming subconcession, net
|
|
$
|
370,557
|
|
|
$
|
427,794
|
|
|
|
|
|
|
|
|
|
|
The deemed cost was determined based on the estimated fair value of the gaming subconcession contributed
by a shareholder of the Company in 2006. The gaming subconcession is amortized on a straight-line basis over the term of the gaming subconcession agreement which expires in June 2022. The Group expects that amortization of the gaming subconcession
will be approximately $57,237 each year from 2016 through 2021, and approximately $27,135 in 2022.
7.
|
GOODWILL AND INTANGIBLE ASSETS
|
Goodwill relating to Mocha Clubs and other intangible assets with indefinite useful lives, representing trademarks of Mocha
Clubs, are not amortized. Goodwill and intangible assets arose from the acquisition of Mocha Slot Group Limited and its subsidiaries by the Group in 2006.
To assess potential impairment of goodwill, the Group performs an assessment of the carrying value of the reporting units at least on an annual
basis or when events occur or circumstances change that would more likely than not reduce the estimated fair value of those reporting units below their carrying value. If the carrying value of a reporting unit exceeds its fair value, the Group would
perform the second step in its assessment process and record an impairment loss to earnings to the extent the carrying amount of the reporting units goodwill exceeds its implied fair value. The Group estimates the fair value of those reporting
units through internal analysis and external valuations, which utilize income and market valuation approaches through the application of capitalized earnings and discounted cash flow methods. These valuation techniques are based on a number of
estimates and assumptions, including the projected future operating results of the reporting unit, discount rates, long-term growth rates and market comparables.
Trademarks of Mocha Clubs are tested for impairment at least annually or when events occur or circumstances change that would more likely than
not reduce the estimated fair value of trademarks below its carrying value using the relief-from-royalty method. Under this method, the Group estimates the fair value of the trademarks through internal and external valuations, mainly based on the
incremental after-tax cash flow representing the royalties that the Group is relieved from paying given it is the owner of the trademarks. These valuation techniques are based on a number of estimates and assumptions, including the projected future
revenues of the trademarks calculated using an appropriate royalty rate, discount rate and long-term growth rates.
The Group has performed
annual tests for impairment of goodwill and trademarks in accordance with the accounting standards regarding goodwill and other intangible assets. No impairment loss has been recognized during the years ended December 31, 2015, 2014 and 2013.
F-26
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
8.
|
LONG-TERM PREPAYMENTS, DEPOSITS AND OTHER ASSETS
|
Long-term prepayments, deposits and other assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Entertainment production costs
|
|
$
|
77,284
|
|
|
$
|
73,819
|
|
Less: accumulated amortization
|
|
|
(43,888
|
)
|
|
|
(34,646
|
)
|
|
|
|
|
|
|
|
|
|
Entertainment production costs, net
|
|
|
33,396
|
|
|
|
39,173
|
|
Other long-term prepayments and other assets
|
|
|
27,895
|
|
|
|
27,956
|
|
Advance payments for construction costs
|
|
|
26,544
|
|
|
|
107,563
|
|
Input value-added tax, net
|
|
|
23,281
|
|
|
|
43,841
|
|
Other deposits
|
|
|
14,579
|
|
|
|
11,653
|
|
Short film production cost
|
|
|
12,701
|
|
|
|
|
|
Deferred rent assets
|
|
|
10,393
|
|
|
|
99
|
|
Long-term receivables, net
|
|
|
9,202
|
|
|
|
10,115
|
|
Deposits for acquisition of property and equipment
|
|
|
1,686
|
|
|
|
47,158
|
|
|
|
|
|
|
|
|
|
|
Long-term prepayments, deposits and other assets
|
|
$
|
159,677
|
|
|
$
|
287,558
|
|
|
|
|
|
|
|
|
|
|
Entertainment production costs represent amounts incurred and capitalized for entertainment shows in City
of Dreams. The Group amortized the entertainment production costs over 10 years or the respective estimated useful life of the entertainment show, whichever is shorter.
Advance payments for construction costs are connected with the construction and fit-out cost for City of Dreams, Studio City and City of Dreams
Manila.
Input value-added tax, net represents the value-added tax recoverable from the tax authority in the Philippines mainly connected
with the purchase of assets or services for City of Dreams Manila. During the year ended December 31, 2015, a provision for input value-added tax primarily pertaining to certain construction of City of Dreams Manila expected to be
non-recoverable amounted to $30,254 was recognized and included in Property Charges and Others line item in the consolidated statements of operations. No provisions for input value-added tax were recognized during the years ended
December 31, 2014 and 2013.
Long-term receivables, net represent casino receivables from casino customers where settlement is not
expected within the next year. During the year ended December 31, 2015, net amount of long-term receivables of $5,111 and net amount of allowance for doubtful debts of $3,993 were reclassified to current. During the years ended
December 31, 2014 and 2013, net amount of current accounts receivable of $8,642 and $17,691 and net amount of allowance for doubtful debts of $4,527 and $13,680, respectively, were reclassified to non-current. Reclassifications to current
accounts receivable, net, are made when conditions support that it is probable for settlement of such balances to occur within one year.
F-27
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Altira Macau (Taipa Land)
|
|
$
|
146,475
|
|
|
$
|
146,475
|
|
City of Dreams (Cotai Land)
|
|
|
399,578
|
|
|
|
399,578
|
|
Studio City (Studio City Land)
|
|
|
653,564
|
|
|
|
653,564
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,199,617
|
|
|
|
1,199,617
|
|
Less: accumulated amortization
|
|
|
(366,485
|
)
|
|
|
(312,429
|
)
|
|
|
|
|
|
|
|
|
|
Land use rights, net
|
|
$
|
833,132
|
|
|
$
|
887,188
|
|
|
|
|
|
|
|
|
|
|
In January 2013, the Group recognized an additional land premium of approximately $2,449 for Taipa Land
upon Altira Developments Limiteds (Altira Developments), a subsidiary of the Company, acceptance of the initial terms for the revision of the land concession contract issued by the Macau Government further to an amendment request
applied by Altira Developments in 2012 for an increase of the total gross floor area, to reflect the construction plans approved by the Macau Government and to enable the final registration of the Taipa Land. In June 2013, the Macau Government
issued the final amendment proposal for the revision of the land concession contract for Taipa Land. On July 15, 2013, Altira Developments paid the additional land premium of approximately $2,449 set forth in the final amendment proposal, and
accepted the terms of such proposal on July 16, 2013. The land grant amendment process was completed with the publication in the Macau official gazette of such revision on December 18, 2013. Further details on the revised land amendment
for Taipa Land are disclosed in Note 22(c).
In March 2013, the Group recognized an additional land premium of approximately $23,344 for
Cotai Land upon Melco Crown (COD) Developments Limiteds (Melco Crown (COD) Developments), a subsidiary of the Company, and Melco Crown Macaus acceptance of the land grant amendment proposal for the land concession contract of
the Cotai Land, issued by the Macau Government in February 2013 further to an amendment request applied by Melco Crown (COD) Developments in 2011. Such amendment proposal contemplated the development of an additional five-star hotel area in
replacement of the four-star apartment hotel area included in such land grant, and the extension of the development period of the Cotai Land grant until the date falling four years after publication of the amendment in the Macau official gazette. In
October 2013, the Macau Government issued the final amendment proposal for the revision of the land concession contract for Cotai Land. On October 16, 2013, Melco Crown (COD) Developments paid a portion of the additional land premium of
approximately $8,736 set forth in the final amendment proposal, and on October 17, 2013, Melco Crown (COD) Developments and Melco Crown Macau accepted the terms of such proposal. The land grant amendment process for Cotai Land was completed
following the publication in the Macau official gazette of such revision on January 29, 2014. Further details on the final land amendment for Cotai Land are disclosed in Note 22(c).
F-28
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
10.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Construction costs payables
|
|
$
|
189,592
|
|
|
$
|
169,053
|
|
Gaming tax accruals
|
|
|
185,223
|
|
|
|
171,460
|
|
Outstanding gaming chips and tokens
|
|
|
184,223
|
|
|
|
237,013
|
|
Staff cost accruals
|
|
|
123,978
|
|
|
|
117,049
|
|
Operating expense and other accruals and liabilities
|
|
|
143,318
|
|
|
|
94,068
|
|
Property and equipment payables
|
|
|
87,291
|
|
|
|
70,957
|
|
Customer deposits and ticket sales
|
|
|
83,265
|
|
|
|
80,898
|
|
Interest expenses payable
|
|
|
32,755
|
|
|
|
33,544
|
|
Restricted cash refundable to the Philippine Parties (Note 22(c))
|
|
|
23,417
|
|
|
|
|
|
Land use rights payable
|
|
|
3,788
|
|
|
|
31,678
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,056,850
|
|
|
$
|
1,005,720
|
|
|
|
|
|
|
|
|
|
|
Long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Studio City Project Facility
|
|
$
|
1,295,689
|
|
|
$
|
1,295,689
|
|
2013 Senior Notes
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
Studio City Notes
|
|
|
825,000
|
|
|
|
825,000
|
|
2015 Credit Facilities
|
|
|
501,285
|
|
|
|
|
|
Philippine Notes
|
|
|
318,026
|
|
|
|
336,195
|
|
Aircraft Term Loan
|
|
|
22,705
|
|
|
|
28,731
|
|
2011 Credit Facilities
|
|
|
|
|
|
|
417,166
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,962,705
|
|
|
|
3,902,781
|
|
Current portion of long-term debt
|
|
|
(106,505
|
)
|
|
|
(262,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,856,200
|
|
|
$
|
3,640,031
|
|
|
|
|
|
|
|
|
|
|
2011 Credit Facilities
On June 22, 2011, Melco Crown Macau (the Borrower) entered into an amendment and restatement agreement (the 2011 Credit
Facilities), which was further amended on June 29, 2015 pursuant to a second amendment and restatement agreement dated June 19, 2015 (and defined as the 2015 Credit Facilities) as described below, with certain lenders in
respect of a senior secured credit facility (the City of Dreams Project Facility). The City of Dreams Project Facility was originally entered on September 5, 2007 (and was subsequently amended from time to time) in an aggregate
amount of $1,750,000 to fund the City of Dreams project, construction of an integrated entertainment resort complex in Macau. The City of Dreams Project Facility consisted of a $1,500,000 term loan facility (the Term Loan Facility) and a
$250,000 revolving credit facility (the Revolving Credit Facility).
F-29
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2011 Credit Facilities
- continued
On June 30, 2011, the 2011 Credit Facilities, which was subsequently amended from time
to time, became effective and among other things: (i) reduced the Term Loan Facility to HK$6,241,440,000 (equivalent to $802,241) (the 2011 Term Loan Facility) and increased the Revolving Credit Facility to HK$3,120,720,000
(equivalent to $401,121) (the 2011 Revolving Credit Facility), both of which were denominated in Hong Kong dollars; (ii) introduced new lenders and removed certain lenders originally under the City of Dreams Project Facility;
(iii) extended the repayment maturity date; (iv) reduced and removed certain restrictions imposed by the covenants in the City of Dreams Project Facility; and (v) removed one of the Borrowers subsidiaries which was subsequently
dissolved on May 31, 2012, from the borrowing group which included the Borrower and certain of its affiliates and subsidiaries as defined under the City of Dreams Project Facility (the 2011 Borrowing Group).
The 2011 Credit Facilities would have matured on June 30, 2016. The 2011 Term Loan Facility was subject to quarterly amortization payments
commencing on September 30, 2013. Each loan made under the 2011 Revolving Credit Facility would have been repaid in full on the last day of an agreed upon interest period in respect of the loan, generally ranging from one to six months, or
rolling over subject to compliance with certain covenants and satisfaction of conditions precedent. The Borrower had the option to make voluntary prepayments with a minimum amount required in respect of the 2011 Credit Facilities, plus any
applicable break costs. The Borrower was also subject to mandatory prepayment requirements in respect of various amounts within the 2011 Borrowing Group, including but not limited to: (i) the net proceeds received by any member of the 2011
Borrowing Group in respect of the compulsory transfer, seizure or acquisition by any governmental authority of the assets of any member of the 2011 Borrowing Group, subject to certain exceptions; (ii) the net proceeds in excess of a required
amount under the 2011 Credit Facilities of certain asset sales, subject to reinvestment rights and certain exceptions; (iii) net termination, claim or settlement proceeds paid under the Borrowers subconcession or the 2011 Borrowing
Groups land concessions, subject to certain exceptions; (iv) insurance proceeds net of expenses to obtain such proceeds under the property insurances relating to the total loss of all or substantially all of the Altira Macau gaming
business; and (v) other insurance proceeds net of expenses in excess of a required amount under the 2011 Credit Facilities to obtain such proceeds under any property insurances, subject to reinvestment rights and certain exceptions.
Drawdowns on the 2011 Term Loan Facility were subject to satisfaction of conditions precedent specified in the 2011 Credit Facilities and the
2011 Revolving Credit Facility was to be made available on a fully revolving basis to the date that was one month prior to the 2011 Revolving Credit Facilitys final maturity date.
The indebtedness under the 2011 Credit Facilities was guaranteed by the 2011 Borrowing Group, which applied until the 2011 Credit Facilities
was amended on June 29, 2015. Security for the 2011 Credit Facilities included: a first priority mortgage over all land where Altira Macau and City of Dreams are located, such mortgages also covered all present and any future buildings on, and
fixtures to, the relevant land; an assignment of any land use rights under land concession agreements, leases or equivalents; charges over the bank accounts in respect of the 2011 Borrowing Group, subject to certain exceptions; assignment of the
rights under certain insurance policies; first priority security over the chattels, receivables and other assets of the 2011 Borrowing Group which were not subject to any security under any other security documentation; first priority charges over
the issued share capital of the 2011 Borrowing Group and equipment and tools used in the gaming business by the 2011 Borrowing Group; as well as other customary security.
F-30
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2011 Credit Facilities
- continued
The 2011 Credit Facilities contained certain covenants customary for such financings
including, but not limited to: limitations on (i) incurring additional liens; (ii) incurring additional indebtedness (including guarantees); (iii) making certain investments; (iv) paying dividends and other restricted payments;
(v) creating any subsidiaries; (vi) selling assets; and (vii) entering into any contracts for the construction or financing of an additional hotel tower in connection with the development of City of Dreams except with plans approved
by the lenders in accordance with the terms of the 2011 Credit Facilities. The 2011 Credit Facilities removed the financial covenants under the City of Dreams Project Facility, and replaced them with, without limitation, a leverage ratio, total
leverage ratio and interest cover ratio. The first test date of the financial covenants was September 30, 2011. As of December 31, 2014, management believes that the 2011 Borrowing Group was in compliance with each of the financial
restrictions and requirements.
There were provisions that limited or prohibited certain payments of dividends and other distributions by
the 2011 Borrowing Group to companies or persons who were not members of the 2011 Borrowing Group (described in further detail in Note 19). As of December 31, 2014, the net assets of the 2011 Borrowing Group of approximately $3,559,000 were
restricted from being distributed under the terms of the 2011 Credit Facilities.
Borrowings under the 2011 Credit Facilities bore interest
at Hong Kong Interbank Offered Rate (HIBOR) plus a margin ranging from 1.75% to 2.75% per annum as adjusted in accordance with the leverage ratio in respect of the 2011 Borrowing Group. The Borrower had the option to select an
interest period for borrowings under the 2011 Credit Facilities of one, two, three or six months or any other agreed period. The Borrower was obligated to pay a commitment fee quarterly in arrears from June 30, 2011 on the undrawn amount of the
2011 Revolving Credit Facility throughout the availability period. Loan commitment fees on the 2011 Credit Facilities amounting to $1,385, $2,808 and $2,453 were recognized during the years ended December 31, 2015, 2014 and 2013, respectively.
During the years ended December 31, 2015 and 2014, the Borrower repaid HK$499,315,200 (equivalent to $64,179) and HK$1,997,260,800
(equivalent to $256,717), respectively, under the 2011 Term Loan Facility according to the quarterly amortization schedule which commenced on September 30, 2013, and the Borrower had no drawdown on the 2011 Revolving Credit Facility.
Immediately before the amendment of the 2011 Credit Facilities on June 29, 2015, the Borrower had total outstanding borrowings of HK$2,746,233,600 (equivalent to $352,987) under the 2011 Credit Facilities and the Borrower made voluntary
repayments to repay the entire outstanding balance under the 2011 Credit Facilities with part of the proceeds of the drawdown from the 2015 Credit Facilities as described below. As of December 31, 2014, the 2011 Term Loan Facility had been
fully drawn down while the entire 2011 Revolving Credit Facility of HK$3,120,720,000 (equivalent to $401,121) remained available for future drawdown, and accordingly, the Borrower had total outstanding borrowings of HK$3,245,548,800 (equivalent to
$417,166) under the 2011 Credit Facilities.
2015 Credit Facilities
On June 29, 2015, the 2011 Credit Facilities were further amended pursuant to a second amendment and restatement agreement (the 2015
Credit Facilities) entered into by, among others, the Borrower and certain lenders in respect of the 2011 Credit Facilities, on June 19, 2015. The 2015 Credit Facilities, among other things: (i) increased the size of the total
available facilities from HK$9,362,160,000 (equivalent to $1,203,362) to HK$13,650,000,000 (equivalent to $1,750,000 based on exchange rate on transaction date), comprising a HK$3,900,000,000 (equivalent to $500,000 based on exchange rate on
transaction date) term
F-31
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2015 Credit Facilities
- continued
loan facility (the 2015 Term Loan Facility) and a HK$9,750,000,000 (equivalent to $1,250,000 based on exchange rate on transaction date) multicurrency revolving credit facility (the
2015 Revolving Credit Facility). In addition, the 2015 Credit Facilities provide for additional incremental facilities to be made available, upon further agreement with any of the existing lenders under the 2015 Credit Facilities or
other entities, of up to $1,300,000 (the 2015 Incremental Facility); (ii) introduced new lenders and removed certain lenders originally under the 2011 Credit Facilities; (iii) extended the repayment maturity date; and
(iv) reduced and removed certain restrictions imposed by the covenants in the 2011 Credit Facilities, including but not limited to, increased flexibility to move cash within borrowing group as defined under the 2015 Credit Facilities (the
2015 Borrowing Group), lower covenant levels and reduced reporting requirements.
The final maturity date of the 2015 Credit
Facilities is: (i) June 29, 2021 in respect of the 2015 Term Loan Facility; and (ii) June 29, 2020 in respect of the 2015 Revolving Credit Facility, or if earlier, the date of repayment, prepayment or cancellation in full of the
2015 Credit Facilities. The maturity date, amount, margin, currency, form and other terms of the 2015 Incremental Facility will be further specified and agreed by the Borrower and the lenders under the 2015 Credit Facilities and additional lenders,
if any, upon drawdown on the 2015 Incremental Facility. The 2015 Term Loan Facility is repayable in quarterly instalments according to an amortization schedule commencing on September 29, 2016. Each loan made under the 2015 Revolving Credit
Facility is repayable in full on the last day of an agreed upon interest period in respect of the loan, generally ranging from one to six months, or rolling over subject to compliance with certain covenants and satisfaction of conditions precedent.
The Borrower may make voluntary prepayments in respect of the 2015 Credit Facilities in a minimum amount of HK$160,000,000 (equivalent to $20,566), plus the amount of any applicable break costs. The Borrower is also subject to mandatory prepayment
requirements in respect of various amounts within the 2015 Borrowing Group, including but not limited to: (i) net termination, claim or settlement proceeds paid under the Borrowers subconcession or the 2015 Borrowing Groups land
concessions, subject to certain exceptions; (ii) insurance proceeds net of expenses to obtain such proceeds under the property insurances relating to the total loss of all or substantially all of the Altira Macau gaming business; and
(iii) other insurance proceeds net of expenses to obtain such proceeds under any property insurances, subject to reinvestment rights and certain exceptions, which are in excess of $50,000. In addition, upon the occurrence of a Change of
Control as defined under the 2015 Credit Facilities, any lender under the 2015 Credit Facilities may, with 20 business days notice, cancel their commitment and request repayment in full of the 2015 Credit Facilities; and upon the
occurrence of the disposal of all or substantially all of the business and assets of the 2015 Borrowing Group, comprised in any of the Altira Macau or the City of Dreams gaming business, the whole of the 2015 Credit Facilities will be cancelled and
all amounts outstanding thereunder will become immediately due and payable.
Drawdowns on the 2015 Term Loan Facility are subject to
satisfaction of conditions precedent specified in the 2015 Credit Facilities and the 2015 Revolving Credit Facility is available on a fully revolving basis up to the date that is one month prior to the 2015 Revolving Credit Facilitys final
maturity date. On June 29, 2015, the 2015 Term Loan Facility of HK$3,900,000,000 (equivalent to $500,000 based on exchange rate on transaction date) was fully drawn down and the availability period for this facility has expired. The Borrower
has no drawdown on the 2015 Revolving Credit Facility and 2015 Incremental Facility during the year ended December 31, 2015.
F-32
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2015 Credit Facilities
- continued
The indebtedness under the 2015 Credit Facilities is guaranteed by the 2015 Borrowing Group,
which applied on and from June 29, 2015. Security for the 2015 Credit Facilities remains the same as the 2011 Credit Facilities (except that the terms of the associated security documents have been amended for consistency with the 2015 Credit
Facilities).
The 2015 Credit Facilities contains certain covenants customary for such financings including, but not limited to: the 2015
Borrowing Groups limitations on, except as permitted under the 2015 Credit Facilities (i) incurring additional liens; (ii) incurring additional indebtedness (including guarantees); (iii) making certain investments;
(iv) paying dividends and other restricted payments; (v) creating any subsidiaries; and (vi) selling assets. The financial covenants under the 2015 Credit Facilities remain the same as the 2011 Credit Facilities, including a leverage
ratio, total leverage ratio and interest cover ratio but with lower covenant levels. The first test date of the financial covenants was September 30, 2015. As of December 31, 2015, management believes that the 2015 Borrowing Group was in
compliance with each of the financial restrictions and requirements.
There are provisions that limit certain payments of dividends and
other distributions by the 2015 Borrowing Group to companies or persons who are not members of the 2015 Borrowing Group (described in further detail in Note 19). As of December 31, 2015, the net assets of the 2015 Borrowing Group of
approximately $3,825,000 were restricted from being distributed under the terms of the 2015 Credit Facilities.
Borrowings under the 2015
Credit Facilities bear an initial interest for the six months from June 29, 2015 at HIBOR plus a margin of 1.75% per annum. Subsequent to that, borrowings under the 2015 Credit Facilities bear interest at HIBOR plus a margin ranging from
1.25% to 2.50% per annum as adjusted in accordance with the leverage ratio in respect of the 2015 Borrowing Group. The Borrower may select an interest period for borrowings under the 2015 Credit Facilities of one, two, three or six months or
any other agreed period. The Borrower is obligated to pay a commitment fee quarterly in arrears from July 13, 2015 on the undrawn amount of the 2015 Revolving Credit Facility throughout the availability period. Loan commitment fees on the 2015
Credit Facilities amounting to $3,100 were recognized during the year ended December 31, 2015.
As of December 31, 2015, the
Borrower had total outstanding borrowings relating to the 2015 Credit Facilities of HK$3,900,000,000 (equivalent to $501,285). The entire 2015 Revolving Credit Facility of HK$9,750,000,000 (equivalent to $1,250,000 based on exchange rate on
transaction date) remains available for future drawdown.
In accordance with the applicable accounting standards, the Borrower recorded a
$481 loss on extinguishment of debt in the consolidated statements of operations for the year ended December 31, 2015 which represented the write off of a portion of unamortized deferred financing costs associated with the 2011 Credit
Facilities and recorded $592 costs associated with debt modification in the consolidated statements of operations for the year ended December 31, 2015 which represented the portion of the third party costs in relation to the 2015 Credit
Facilities. The upfront fee and the remaining portion of third party costs of $46,507 were capitalized as deferred financing costs.
2010 Senior Notes
On
May 17, 2010, MCE Finance Limited (MCE Finance), a subsidiary of the Company, issued and listed the $600,000 10.25% senior notes, due 2018 (the 2010 Senior Notes) on the Official List of Singapore Exchange Securities
Trading Limited (SGX-ST). The purchase price paid by the initial purchasers was
F-33
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
-
continued
|
2010 Senior Notes
- continued
98.671% of the principal amount. The 2010 Senior Notes were general obligations of MCE Finance, secured by a first-priority pledge of the intercompany note representing the on-lending of the
gross proceeds from the issuance of the 2010 Senior Notes by MCE Finance to a subsidiary of MCE Finance to reduce the indebtedness under the City of Dreams Project Facility, ranked equally in right of payment to all existing and future senior
indebtedness of MCE Finance and ranked senior in right of payment to any existing and future subordinated indebtedness of MCE Finance. The 2010 Senior Notes would have matured on May 15, 2018. Interest on the 2010 Senior Notes was accrued
at a rate of 10.25% per annum and was payable semi-annually in arrears on May 15 and November 15 of each year, commenced on November 15, 2010.
MCE Finance had the option to redeem all or part of the 2010 Senior Notes at any time prior to May 15, 2014, at a make-whole
redemption price. Thereafter, MCE Finance had the option to redeem all or a portion of the 2010 Senior Notes at any time at fixed redemption prices that declined ratably over time.
Prior to May 15, 2013, MCE Finance had the option to redeem up to 35% of the 2010 Senior Notes with the net cash proceeds from one or more
certain equity offerings at a fixed redemption price. In addition, under certain circumstances and subject to certain exceptions as more fully described in the indenture, MCE Finance also had the option to redeem in whole, but not in part the 2010
Senior Notes at fixed redemption prices.
The indenture governing the 2010 Senior Notes contained certain covenants that, subject to
certain exceptions and conditions, limited the ability of MCE Finance and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) make specified restricted payments; (iii) issue or sell
capital stock; (iv) sell assets; (v) create liens; (vi) enter into agreements that restrict the restricted subsidiaries ability to pay dividends, transfer assets or make intercompany loans; (vii) enter into transactions
with shareholders or affiliates; and (viii) effect a consolidation or merger.
There were provisions under the indenture of the 2010
Senior Notes that limited or prohibited certain payments of dividends and other distributions by MCE Finance and its respective restricted subsidiaries to companies or persons who were not MCE Finance or members of MCE Finance respective restricted
subsidiaries, subject to certain exceptions and conditions (described in further detail in Note 19).
On October 30, 2012, MCE Finance
received unrevoked consents from the holders (the Holders) of the requisite aggregate principal amount of the 2010 Senior Notes necessary to approve certain proposed amendments to, among other things, allowed MCE Finance to (i) make
an additional $400,000 of restricted payments to fund the Studio City project and (ii) have the flexibility to transact with, and use any revenues or other payments generated or derived from, certain projects and to provide for certain other
technical amendments (the Proposed Amendments) to the indenture governing the 2010 Senior Notes and executed a supplemental indenture to give effect to the Proposed Amendments. The Group capitalized the payments to the agent and Holders
who had validly delivered a consent to the Proposed Amendments totaling $14,795 as deferred financing costs and expensed the third party fee of $3,277 as a result of the aforementioned debt modification.
On January 28, 2013, MCE Finance made a cash tender offer to repurchase the 2010 Senior Notes at a cash consideration plus accrued
interest and also solicited consents to amend the terms of the 2010 Senior Notes to substantially remove the debt incurrence, restricted payment and other restrictive covenants (the Tender Offer). Closing of the Tender Offer and consent
solicitation were conditioned upon MCE Finance receiving
F-34
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2010 Senior Notes
- continued
net proceeds from offering of the 2013 Senior Notes (as described below) in an amount sufficient to repurchase the tendered 2010 Senior Notes and related fees and expenses and other general
conditions. The Tender Offer expired on February 26, 2013 and $599,135 aggregate principal amount of the 2010 Senior Notes were tendered. On February 27, 2013, MCE Finance elected to redeem the remaining outstanding 2010 Senior Notes in
aggregate principal amount of $865 on March 28, 2013, at a price equal to 100% of the principal amount outstanding plus applicable premium as of, and accrued and unpaid interest to March 28, 2013. The accounting for the total redemption
costs of $102,497, unamortized deferred financing costs of $23,793 and unamortized issue discount of $5,962 in relation to the 2010 Senior Notes as of the redemption date are disclosed as below under the 2013 Senior Notes.
RMB Bonds
On May 9,
2011, the Company issued and listed the Renminbi (RMB) 2,300,000,000 3.75% bonds due 2013 (the RMB Bonds) (equivalent to $353,278 based on exchange rate on transaction date) on SGX-ST. The RMB Bonds were priced at 100% at
par. The RMB Bonds were direct, general, unconditional, unsubordinated and unsecured obligations of the Company, which at all times ranked equally without any preference or priority among themselves and at least equally with all of the
Companys other present and future unsecured and unsubordinated obligations, save for such obligations as may be preferred by provisions of law that were both mandatory and of general application. The RMB Bonds would have matured on May 9,
2013 and the interest on the RMB Bonds was accrued at a rate of 3.75% per annum and was payable semi-annually in arrears on May 9 and November 9 of each year, commenced on November 9, 2011.
The Company had the option to redeem in whole, but not in part under certain circumstances as defined in the indenture, the RMB Bonds at any
time prior to May 9, 2012 at an additional redemption price. Thereafter, the Company had the option to redeem in whole, but not in part, the RMB Bonds at any time after May 9, 2012 at a fixed redemption price.
The indenture governing the RMB Bonds contained certain negative pledge and financial covenants, providing that the Company should not create
or permit to subsist any security interest upon the whole or any part of the Companys present or future undertaking, assets or revenues to secure any relevant indebtedness or guarantee of relevant indebtedness without: (i) at the same
time or prior thereto securing the RMB Bonds equally and rateably therewith to the satisfaction of the trustee under the RMB Bonds; or (ii) providing such other security for the RMB Bonds as the trustee may in its absolute discretion consider
to be not materially less beneficial to the interests of the holders of the RMB Bonds or as may be approved by an extraordinary resolution of bondholders. In addition, the Company was also required to comply with certain financial covenants,
including maintaining a specified consolidated tangible net worth and a leverage ratio.
On March 11, 2013, the Company early redeemed
the RMB Bonds in full in aggregate principal amount of RMB2,300,000,000 (equivalent to $368,177) together with accrued interest, which was partially funded from net proceeds from offering of the 2013 Senior Notes (described below). The Group wrote
off the unamortized deferred financing costs of $586 immediately before redemption of the RMB Bonds as loss on extinguishment of debt in the consolidated statements of operations for the year ended December 31, 2013.
Deposit-Linked Loan
On
May 20, 2011, the Company entered into a Hong Kong dollar deposit-linked loan facility (the Deposit-Linked Loan) with a lender in an amount of HK$2,748,500,000 (equivalent to $353,278 based on exchange
F-35
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Deposit-Linked Loan
- continued
rate on transaction date), which was secured by a deposit in an amount of RMB2,300,000,000 (equivalent to $353,278 based on exchange rate on transaction date) from the proceeds of the RMB Bonds
as described above. The Deposit-Linked Loan would have matured on May 20, 2013 or, if earlier, at any time with 30 days prior notice given to the lender, the Company may prepay the whole or any part of not less than HK$500,000,000
(equivalent to $64,267) of the Deposit-Linked Loan outstanding. The Deposit-Linked Loan bore interest at a rate of 2.88% per annum and was payable semi-annually in arrears on May 8 and November 8 of each year, commenced on
November 8, 2011.
On March 4, 2013, the Company prepaid in full the Deposit-Linked Loan in aggregate principal amount of
HK$2,748,500,000 (equivalent to $353,278) with accrued interest and a deposit in an amount of RMB2,300,000,000 (equivalent to $368,177) from the proceeds of the RMB Bonds, for security of the Deposit-Linked Loan, was released on the same date.
Aircraft Term Loan
On
June 25, 2012, MCE Transportation Limited (MCE Transportation), a subsidiary of the Company, entered into a $43,000 term loan facility agreement to partly finance the acquisition of an aircraft (the Aircraft Term Loan).
Principal and interest repayments are payable quarterly in arrears commenced on September 27, 2012 until maturity on June 27, 2019, interest is calculated based on 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 Aircraft Term Loan is guaranteed by the Company and security includes a first-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 Aircraft Term 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 lenders
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 December 31, 2015, the Aircraft Term Loan has been fully drawn down and utilized
with other funds of the Group, to fund the purchase of the aircraft. As of December 31, 2015 and 2014, the carrying value of aircraft was $37,559 and $40,974, respectively.
2013 Senior Notes
On
February 7, 2013, MCE Finance issued and listed $1,000,000 5% senior notes, due 2021 (the 2013 Senior Notes) and priced at 100% at par on the SGX-ST. The 2013 Senior Notes are general obligations of MCE Finance, rank equally in
right of payment to all existing and future senior indebtedness of MCE Finance and rank senior in right of payment to any existing and future subordinated indebtedness of MCE Finance and effectively subordinated to all of MCE Finances existing
and future secured indebtedness to the extent of the value of the assets securing such debt. Certain subsidiaries of MCE Finance (the 2013 Senior Notes Guarantors) jointly, severally and unconditionally guarantee the 2013 Senior Notes on
a senior basis. The guarantees are joint and several general obligations of the 2013 Senior Notes Guarantors, rank equally in right of payment with all existing and future senior indebtedness of the 2013 Senior Notes Guarantors, and rank senior in
right of payment to any existing and future subordinated indebtedness of the 2013 Senior Notes Guarantors. The 2013 Senior Notes mature on February 15, 2021. Interest on the 2013 Senior Notes is accrued at a rate of 5% per annum and is
payable semi-annually in arrears on February 15 and August 15 of each year, commenced on August 15, 2013.
F-36
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
2013 Senior Notes
- continued
The net proceeds from the offering of the 2013 Senior Notes, after deducting the underwriting
commissions and other expenses of approximately $14,500, was approximately $985,500. The Group used part of the net proceeds from the offering to (i) repurchase in full the 2010 Senior Notes of $600,000 and fund the related redemption costs of
the 2010 Senior Notes of $102,497 and (ii) for the partial repayment of the RMB Bonds on March 11, 2013. As a result, in accordance with the applicable accounting standards, the Group recorded a $50,256 loss on extinguishment of debt in
the consolidated statements of operations for the year ended December 31, 2013 which comprised the portion of the redemption costs of $38,949, write off of respective portion of unamortized deferred financing costs of $9,041 and unamortized
issue discount of $2,266 related to the 2010 Senior Notes and recorded $10,538 costs associated with debt modification in the consolidated statements of operations for the year ended December 31, 2013 which represented the portion of the
underwriting fee and other third party costs incurred in connection with the issuance of the 2013 Senior Notes. The remaining portion of the underwriting fee and other third party costs of $6,523 were capitalized as deferred financing costs.
MCE Finance has the option to redeem all or a portion of the 2013 Senior Notes at any time prior to February 15, 2016, at a
make-whole redemption price. Thereafter, MCE Finance has the option to redeem all or a portion of the 2013 Senior Notes at any time at fixed redemption prices that decline ratably over time.
MCE Finance has the option to redeem up to 35% of the 2013 Senior Notes with the net cash proceeds from one or more certain equity offerings at
a fixed redemption price at any time prior to February 15, 2016. In addition, under certain circumstances and subject to certain exceptions as more fully described in the indenture, MCE Finance also has the option to redeem in whole, but not in
part the 2013 Senior Notes at fixed redemption prices.
The indenture governing the 2013 Senior Notes contains certain covenants that,
subject to certain exceptions and conditions, limit the ability of MCE Finance and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) make specified restricted payments;
(iii) issue or sell capital stock; (iv) sell assets; (v) create liens; (vi) enter into agreements that restrict the restricted subsidiaries ability to pay dividends, transfer assets or make intercompany loans;
(vii) enter into transactions with shareholders or affiliates; and (viii) effect a consolidation or merger. As of December 31, 2015, management believes that MCE Finance was in compliance with each of the financial restrictions and
requirements.
There are provisions under the indenture of the 2013 Senior Notes that limit or prohibit certain payments of dividends and
other distributions by MCE Finance and its restricted subsidiaries to companies or persons who are not MCE Finance or members of MCE Finances restricted subsidiaries, subject to certain exceptions and conditions (described in further detail in
Note 19). As of December 31, 2015 and 2014, the net assets of MCE Finance and its restricted subsidiaries of approximately $3,913,000 and $3,639,000, respectively, were restricted from being distributed under the terms of the 2013 Senior Notes.
Studio City Notes
On
November 26, 2012, Studio City Finance Limited (Studio City Finance), a majority-owned subsidiary, issued and listed the $825,000 8.5% senior notes, due 2020 (the Studio City Notes) and priced at 100% at par on the
SGX-ST. The Studio City Notes are general obligations of Studio City Finance, secured by a first-priority security interest in certain specific bank accounts incidental to the Studio City Notes and a pledge of any intercompany loans from Studio City
Finance to or on behalf of Studio City Investments Limited (Studio City Investments), a subsidiary of Studio City Finance and the immediate holding
F-37
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Studio City Notes
- continued
company of Studio City Company Limited (Studio City Company), a subsidiary of Studio City Finance, or its subsidiaries entered into subsequent to the issue date of the Studio City
Notes, rank equally in right of payment to all existing and future senior indebtedness of Studio City Finance and rank senior in right of payment to any existing and future subordinated indebtedness of Studio City Finance. The Studio City Notes are
effectively subordinated to all of Studio City Finances existing and future secured indebtedness to the extent of the value of the property and assets securing such indebtedness. All of the existing subsidiaries of Studio City Finance and any
other future restricted subsidiaries that provide guarantees of certain specified indebtedness (including the Studio City Project Facility as described below) (the Studio City Notes Guarantors) jointly, severally and unconditionally
guarantee the Studio City Notes on a senior basis (the Guarantees). The Guarantees are general obligations of the Studio City Notes Guarantors, rank equally in right of payment with all existing and future senior indebtedness of the
Studio City Notes Guarantors and rank senior in right of payment to any existing and future subordinated indebtedness of the Studio City Notes Guarantors. The Guarantees are effectively subordinated to the Studio City Notes Guarantors
obligations under the Studio City Project Facility and any future secured indebtedness that is secured by property and assets of the Studio City Notes Guarantors to the extent of the value of such property and assets. The Studio City Notes mature on
December 1, 2020 and the interest on the Studio City Notes is accrued at a rate of 8.5% per annum and is payable semi-annually in arrears on June 1 and December 1 of each year, commenced on June 1, 2013.
The net proceeds from the offering, after deducting the underwriting commissions and other expenses of approximately $13,200, was approximately
$811,800. Studio City Finance used the net proceeds from the offering to fund the Studio City project and the related fees and expenses. The net proceeds from the offering was deposited in a bank account of Studio City Finance (the Escrow
Account) and was restricted for use, which was subsequently released upon signing of the Studio City Project Facility on January 28, 2013. Upon release from the Escrow Account, all the net proceeds were deposited in a bank account of
Studio City Finance (the Note Proceeds Account) and were available for payment of construction and development costs and other project costs of the Studio City project with conditions and sequence for disbursements in accordance with an
agreement (the Note Disbursement and Account Agreement) as described below, except for a portion of net proceeds amounting to $239,594, which represents the sum of interest expected to accrue on the Studio City Notes through to the
41-month anniversary of their issue date, which was deposited in a bank account of Studio City Finance (the Note Interest Reserve Account), and has been restricted for use to pay future interest payments until the opening date (the
Opening Date) of the Studio City project as defined in the Studio City Project Facility.
Concurrent with the submission of the
first utilization request under the Studio City Project Facility on January 10, 2014, an amount equal to the six-month sum of interest due on the Studio City Notes of $35,063 was released from the Note Interest Reserve Account and deposited in
a bank account (the Note Debt Service Reserve Account) of Studio City Company, the borrower under the Studio City Project Facility. The security agent of the Studio City Project Facility has security over the Note Debt Service Reserve
Account. During the years ended December 31, 2015 and 2014, Studio City Finance paid Studio City Notes interest expenses amounting to $70,125 and $70,125, respectively. As of December 31, 2015, the balance of the Note Interest Reserve
Account was fully utilized for interest payments.
As of December 31, 2015, the Group classified the balance of Note Debt Service
Reserve Account of $35,068 as current portion of restricted cash on the consolidated balance sheets. As of December 31, 2014,
F-38
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Studio City Notes
- continued
the Group classified the balance of the Note Interest Reserve Account of $63,340 as current portion of restricted cash, while the balance of Note Debt Service Reserve Account of $35,064 as
non-current portion of restricted cash on the consolidated balance sheets.
The Studio City Notes were subject to a special mandatory
redemption at a redemption price in the event that i) the Studio City Project Facility was not executed on or before March 31, 2013; and ii) the funds were not released from the Note Proceeds Account prior to January 28, 2014, the date
that was one year from the date of the execution of the Studio City Project Facility due to the failure of the conditions precedent (subject to certain exceptions) to first utilization of the Studio City Project Facility to be satisfied or waived by
such date. The first condition was satisfied with execution of the Studio City Project Facility on January 28, 2013 and the second condition was satisfied when the first disbursement funds on the Studio City Notes were released from the Note
Proceeds Account to a bank account of Studio City Finance for the Studio City project cost payments on January 17, 2014.
On
November 26, 2012, Studio City Finance and Studio City Company entered into a Note Disbursement and Account Agreement with certain banks and other parties to, among other things, establish the conditions and sequence of funding of the Studio
City project costs. The Studio City project costs are financed in the following order:
|
|
|
the funding from the Company and the ultimate noncontrolling shareholder of Studio City Finance in an aggregate amount of $825,000 is used until it has been exhausted;
|
|
|
|
thereafter, the proceeds in the Note Proceeds Account are used until they have been exhausted; and
|
|
|
|
thereafter, the proceeds of the Studio City Project Facility, including any proceeds in any construction disbursement accounts or other accounts established under the Studio City Project Facility, to the extent
established for such purpose under the Studio City Project Facility, are used until they have been exhausted.
|
Studio City
Finance had the option to redeem all or a portion of the Studio City Notes at any time prior to December 1, 2015, at an additional redemption price. Thereafter, Studio City Finance has the option to redeem all or a portion of the Studio City
Notes at any time at fixed redemption prices that decline ratably over time.
Studio City Finance had the option to redeem up to 35% of the
Studio City Notes with the net cash proceeds of certain equity offerings at a fixed redemption price at any time prior to December 1, 2015. In addition, under certain circumstances and subject to certain exceptions as more fully described in
the indenture governing the Studio City Notes, Studio City Finance also has the option to redeem in whole, but not in part the Studio City Notes at fixed redemption prices.
The indenture governing the Studio City Notes contains certain covenants that, subject to certain exceptions and conditions, limit the ability
of Studio City Finance and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) make specified restricted payments; (iii) issue or sell capital stock; (iv) sell assets;
(v) create liens; (vi) enter into agreements that restrict the restricted subsidiaries ability to pay dividends, transfer assets or make intercompany loans; (vii) enter into transactions with shareholders or affiliates; and
(viii) effect a consolidation or merger. As of December 31, 2015, management believes that Studio City Finance was in compliance with each of the financial restrictions and requirements.
F-39
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Studio City Notes
- continued
There are provisions under the indenture governing the Studio City Notes that limit or
prohibit certain payments of dividends and other distributions by Studio City Finance and its restricted subsidiaries to companies or persons who are not Studio City Finance or restricted subsidiaries of Studio City Finance, subject to certain
exceptions and conditions (described in further detail in Note 19). As of December 31, 2015 and 2014, the net assets of Studio City Finance and its restricted subsidiaries of approximately $89,000 and $102,000, respectively, were restricted
from being distributed under the terms of the Studio City Notes.
Studio City Project Facility
On January 28, 2013, Studio City Company (the Studio City Borrower) and certain lenders (the Studio City Lenders)
executed a senior secured credit facilities denominated in Hong Kong dollars with an aggregate amount of HK$10,855,880,000 (equivalent to $1,395,357) (the Studio City Project Facility), pursuant to substantially all the terms and
conditions set out in a commitment letter (the Commitment Letter) entered on October 19, 2012 by the Studio City Borrower, the Studio City Lenders, the Company and New Cotai Investments, LLC (New Cotai Investments), a
noncontrolling shareholder who owns 40% interest in Studio City Borrower, to fund the Studio City project. The Studio City Project Facility consists of a HK$10,080,460,000 (equivalent to $1,295,689) term loan facility (the Studio City Term
Loan Facility) and a HK$775,420,000 (equivalent to $99,668) revolving credit facility (the Studio City Revolving Credit Facility). The Studio City Term Loan Facility matures on January 28, 2018 and is subject to quarterly
amortization payments commencing on September 30, 2016. Amounts under the Studio City Term Loan Facility were able to be borrowed from and after the date that certain conditions precedent were satisfied until July 28, 2014. The Studio City
Revolving Credit Facility matures on January 28, 2018 and has no interim amortization. The Studio City Revolving Credit Facility may be utilized prior to the Opening Date for project costs by way of issue of letters of credit to a maximum of
HK$387,710,000 (equivalent to $49,834), and may be borrowed in full on a revolving basis after the Opening Date. On November 18, 2015, the Studio City Borrower received the requisite lender consent to amend the Studio City Project Facility
documentation as proposed by the Studio City Borrowing Group (as defined below). The amendments, which were in effect as of November 18, 2015, included changing the Studio City project Opening Date condition from 400 to 250 tables,
consequential adjustments to the financial covenants, and rescheduling the commencement of financial covenant testing (the Amendments to the Studio City Project Facility).
Borrowings under the Studio City Project Facility bear interest at HIBOR plus a margin of 4.50% per annum until September 30, 2016,
at which time the interest rate shall bear interest at HIBOR plus a margin ranging from 3.75% to 4.50% per annum as determined in accordance with the total leverage ratio in respect of Studio City Investments, Studio City Borrower and its
subsidiaries (together, the Studio City Borrowing Group).
The Studio City Borrower may make voluntary prepayments in respect
of the Studio City Project Facility in a minimum amount of HK$100,000,000 (equivalent to $12,853), plus the amount of any applicable break costs. The Studio City Borrower is also subject to mandatory prepayment requirements in respect of various
amounts within the Studio City Borrowing Group, including but not limited to: (i) net termination or claim proceeds under the Studio City Borrowing Groups land concessions, certain construction agreements or finance or project documents,
subject to certain exceptions; (ii) the net proceeds of certain asset sales, subject to reinvestment rights and certain exceptions, which are in excess of $5,000; (iii) the net proceeds received by any member of the Studio City Borrowing
Group in respect of the compulsory transfer, seizure or acquisition by any governmental authority of the assets of any member of the Studio City Borrowing
F-40
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Studio City Project Facility
- continued
Group, subject to certain exceptions; (iv) 50% of the net proceeds of any permitted equity issuance of any member of the Studio City Borrowing Group; (v) the net proceeds of any debt
issuance of any member of the Studio City Borrowing Group, subject to certain exceptions; (vi) insurance proceeds net of expenses to obtain such proceeds under the property insurances, subject to reinvestment rights and certain exceptions,
which are in excess of $10,000; and (vii) certain percentage of excess cash in accordance with leverage test.
The indebtedness under
the Studio City Project Facility is guaranteed by Studio City Investments and its subsidiaries (other than the Studio City Borrower). Security for the Studio City Project Facility included: a first priority mortgage over the land where Studio City
is located, such mortgage will also cover all present and any future buildings on, and fixtures to, the relevant land; an assignment of any land use rights under land concession agreements, leases or equivalent; as well as other customary security.
Certain accounts of Melco Crown Macau related solely to the operation of the Studio City gaming area which are funded from the proceeds of the Studio City Project Facility are pledged as security for the Studio City Project Facility and related
finance documents.
The Studio City Project Facility contains certain covenants that, subject to certain exceptions and conditions, limit
the ability of Studio City Investments and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) make specified restricted payments; (iii) issue or sell capital stock; (iv) sell
assets; (v) create liens; (vi) pay dividends and other restricted payments; and (vii) effect a consolidation or merger. The Studio City Project Facility, as amended, contains certain financial covenants and the first test date of
these financial covenants is March 31, 2017. As of December 31, 2015, management believes that Studio City Borrowing Group was in compliance with each of the financial restrictions and requirements.
There are provisions that limit or prohibit certain payments of dividends and other distributions by the Studio City Borrowing Group to
companies or persons who are not members of the Studio City Borrowing Group (described in further detail in Note 19). As of December 31, 2015 and 2014, the net assets of Studio City Investments and its restricted subsidiaries of approximately
$173,000 and $175,000, respectively, were restricted from being distributed under the terms of the Studio City Project Facility.
The
Studio City Borrower is obligated to pay a commitment fee quarterly in arrears on the undrawn amount of the Studio City Project Facility throughout the availability period which started from January 28, 2013. The Studio City Borrower recognized
loan commitment fees on the Studio City Project Facility of $1,794 and $15,153 during the years ended December 31, 2015 and 2014, respectively.
In connection with the Studio City Project Facility, Studio City International Holdings Limited (Studio City International), an
intermediate holding company of Studio City Finance and a majority-owned subsidiary, was required to procure a contingent equity undertaking or similar (with a liability cap of $225,000) granted in favor of the security agent for the Studio City
Project Facility to, amongst other things, pay agreed project costs (i) associated with construction of Studio City and (ii) for which the facility agent under the Studio City Project Facility has determined there is no other available
funding under the terms of the Studio City Project Facility. In support of such contingent equity undertaking, Studio City International had deposited and maintained a bank balance of $225,000 in an account secured in favor of the security agent for
the Studio City Project Facility (Cash Collateral) as of December 31, 2014. The Cash Collateral was required to be maintained until the construction completion date of the Studio City had occurred, certain debt service reserve and
accrual accounts had been funded to the required balance and the financial
F-41
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Studio City Project Facility
- continued
covenants had been complied with. As of December 31, 2014, the Cash Collateral was classified as non-current portion of restricted cash in the consolidated balance sheets. The Amendments to
the Studio City Project Facility on November 18, 2015 includes a creation of a new secured liquidity account (Liquidity Account) to be held in the name of the Studio City Borrower and to be credited with the Cash Collateral as a
liquidity amount for the general corporate and working capital purposes of the Studio City group. On November 30, 2015, the Cash Collateral was transferred to the Liquidity Account and was released from restricted cash.
During the year ended December 31, 2015, the Group recorded $7,011 costs associated with debt modification which represented the third
party fees incurred for the Amendments to the Studio City Project Facility in the consolidated statements of operations.
As of
December 31, 2015 and 2014, the Studio City Term Loan Facility of HK$10,080,460,000 (equivalent to $1,295,689) has been fully drawn down while the entire Studio City Revolving Credit Facility of HK$775,420,000 (equivalent to $99,668) remains
available for future drawdown, subject to satisfaction of certain conditions precedent.
The Studio City Borrower is required, within 120
days after the drawdown of the Studio City Term Loan Facility, to enter into agreements to ensure that at least 50% of the aggregate of drawn Studio City Term Loan Facility and the Studio City Notes are subject to interest rate protection, by way of
interest rate swap agreements, caps, collars or other agreements agreed with the facility agent under the Studio City Project Facility to limit the impact of increases in interest rates on its floating rate debt, for a period of not less than three
years from the date of the first drawdown of the Studio City Term Loan Facility. Since the Studio City Borrower drew down the Studio City Term Loan Facility on July 28, 2014, the Studio City Borrower entered into certain floating-for-fixed
interest rate swap agreements since September 2014 to limit its exposure to interest rate risk. Under the interest rate swap agreements, the Studio City Borrower pays a fixed interest rate of the notional amount, and receives variable interest which
is based on the applicable HIBOR for each of the payment dates. These interest rate swap agreements are expected to remain highly effective in fixing the interest rate and qualify for cash flow hedge accounting. Therefore, there is no impact on the
consolidated statements of operations from changes in the fair value of the hedging instruments. Instead the fair value of the instruments are recorded as assets or liabilities on the consolidated balance sheets, with an offsetting adjustment to the
accumulated other comprehensive losses until the hedged interest expenses were recognized in the consolidated statements of operations. No hedge agreement had been entered as at December 31, 2013, as the Studio City Borrower has not drawn down
on the Studio City Project Facility.
Philippine Notes
On January 24, 2014, MCE Leisure issued PHP15 billion 5% senior notes, due 2019 (the Philippine Notes) (equivalent
to $336,825 based on exchange rate on transaction date) at par of 100% of the principal amount and offered to certain primary institutional lenders as noteholders via private placement in the Philippines, which was priced on December 19,
2013.
The Philippine Notes are general obligations of MCE Leisure, secured on a first-ranking basis by pledge of shares of all present and
future direct and indirect subsidiaries of MCP, rank equally in right of payment to all existing and future senior indebtedness of MCE Leisure (save and except for any statutory preference or priority) and rank senior in right of payment to any
existing and future subordinated indebtedness of MCE Leisure.
F-42
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Philippine Notes
- continued
The Philippine Notes are guaranteed by MCP and all present and future direct and indirect
subsidiaries of MCP (subject to certain limited exceptions) (collectively the Philippine Guarantors), jointly and severally with MCE Leisure; and irrevocably and unconditionally by MCE on a senior basis. The guarantees are general
obligations of the Philippine Guarantors, rank equally in right of payment to all existing and future senior indebtedness of the Philippine Guarantors (except for any statutory preference or priority) and rank senior in right of payment to any
existing and future subordinated indebtedness of the Philippine Guarantors.
The Philippine Notes mature on January 24,
2019. Interest on the Philippine Notes is accrued at a rate of 5% per annum and is payable semi-annually in arrears on January 24 and July 24 of each year, commenced on July 24, 2014. In addition, the Philippine Notes
includes a tax gross up provision requiring MCE Leisure to pay without any deduction or withholding for or on account of tax.
The net
proceeds from the offering of the Philippine Notes, after deducting the underwriting commissions and other expenses of approximately PHP230,769,000 (equivalent to $5,182 based on exchange rate on transaction date), was approximately
PHP14,769,231,000 (equivalent to $331,643 based on exchange rate on transaction date). MCE Leisure used the net proceeds from the offering to fund the City of Dreams Manila project, refinancing of debt and general corporate purposes.
MCE Leisure had the option to redeem all or a portion of the Philippine Notes at any time prior to January 24, 2015 at 100% of the
principal amount plus applicable premium as defined in the notes facility and security agreement (the Notes Facility and Security Agreement) governing the Philippine Notes. Thereafter, MCE Leisure has the option to redeem all or a
portion of the Philippine Notes at any time at fixed prices that decline ratably over time.
The Notes Facility and Security Agreement
contains certain covenants that, subject to certain exceptions and conditions, limit the ability of MCP and its subsidiaries ability, including MCE Leisure to, among other things: (i) incur or guarantee additional indebtedness; (ii) sell
assets; (iii) create liens; and (iv) effect a consolidation and merger. As of December 31, 2015, management believes that MCE Leisure was in compliance with each of the financial restrictions and requirements.
The Philippine Notes are exempted from registration with the Philippine Securities and Exchange Commission (the Philippine SEC)
under the Philippine Securities Regulation Code Rule (SRC Rule) 9.2.2(B) promulgated by the Philippine SEC as the Philippine Notes were offered via private placement to not more than nineteen primary institutional lenders, accordingly,
the Philippine Notes are subject to the conditions of SRC Rule 9.2.2(B) which limit the assignment and transfer of the Philippine Notes to primary institutional lenders only and to be held by not more than nineteen primary institutional lenders at
any time before maturity of the Philippine Notes.
Philippine Credit Facility
On October 14, 2015, MCP entered into an on-demand, unsecured credit facility agreement of PHP2,350,000,000 (the Philippine Credit
Facility) (equivalent to $49,824) with a lender to finance advances to MCE Leisure. The Philippine Credit Facility availability period is up to August 31, 2016 and the maturity date of each individual drawdown cannot extend beyond
the later to occur of (i) the date which is one year from the date of drawdown, and (ii) 90 days after the end of the availability period. The individual drawdowns under the Philippine Credit Facility are subject to certain conditions
precedents,
F-43
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
11.
|
LONG-TERM DEBT
- continued
|
Philippine Credit Facility
- continued
including issuance of a promissory note in favor of the lender evidencing such drawdown. Borrowings under the Philippine Credit Facility bear interest at the higher of: (i) the
Philippine Dealing System Treasury Reference Rate PM (the PDST-R2) of the selected interest period plus the applicable PDST-R2 margin of 1.25% per annum and (ii) Philippines Special Deposit Account Rate (the SDA) of
the selected interest period plus the applicable SDA margin ranging from 0.50% to 0.75% per annum, such rate to be set one business day prior to the relevant interest period. The Philippine Credit Facility includes a tax gross up provision
requiring MCP to pay without any deduction or withholding for or on account of tax. As of December 31, 2015, the Philippine Credit Facility has not been drawn.
Total interest on long-term debt consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Interest for Studio City Notes
|
|
$
|
70,125
|
|
|
$
|
70,125
|
|
|
$
|
71,099
|
|
Interest for Studio City Project Facility
|
|
|
61,330
|
|
|
|
26,321
|
|
|
|
|
|
Interest for 2013 Senior Notes
|
|
|
50,000
|
|
|
|
50,000
|
|
|
|
44,998
|
|
Interest for Philippine Notes
|
|
|
20,563
|
|
|
|
19,751
|
|
|
|
|
|
Interest for 2015 Credit Facilities
|
|
|
5,053
|
|
|
|
|
|
|
|
|
|
Interest for 2011 Credit Facilities
|
|
|
3,768
|
|
|
|
11,337
|
|
|
|
16,841
|
|
Interest for Aircraft Term Loan
|
|
|
823
|
|
|
|
998
|
|
|
|
1,191
|
|
Interest for 2010 Senior Notes
|
|
|
|
|
|
|
|
|
|
|
6,028
|
|
Amortization of discount in connection with issuance of
2010 Senior Notes
|
|
|
|
|
|
|
|
|
|
|
71
|
|
Interest for RMB Bonds
|
|
|
|
|
|
|
|
|
|
|
2,610
|
|
Interest for Deposit-Linked Loan
|
|
|
|
|
|
|
|
|
|
|
1,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
211,662
|
|
|
|
178,532
|
|
|
|
144,566
|
|
Interest capitalized
|
|
|
(133,007
|
)
|
|
|
(82,761
|
)
|
|
|
(25,259
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
78,655
|
|
|
$
|
95,771
|
|
|
$
|
119,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the years ended December 31, 2015, 2014 and 2013, the Groups average borrowing rates
were approximately 5.40%, 5.41% and 5.36% per annum, respectively.
Scheduled maturities of the long-term debt as of December 31,
2015 are as follows:
|
|
|
|
|
Year ending December 31,
|
|
|
|
2016
|
|
$
|
106,505
|
|
2017
|
|
|
207,006
|
|
2018
|
|
|
1,114,194
|
|
2019
|
|
|
366,621
|
|
2020
|
|
|
870,116
|
|
Over 2020
|
|
|
1,298,263
|
|
|
|
|
|
|
|
|
$
|
3,962,705
|
|
|
|
|
|
|
F-44
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
12.
|
CAPITAL LEASE OBLIGATIONS
|
On March 13, 2013, a lease agreement (the MCP Lease Agreement) which was entered on October 25, 2012,
and was subsequently amended from time to time, between MCE Leisure and Belle Corporation (Belle, one of the Philippine Parties as defined in Note 21(a)) for lease of the land and certain of the building structures for City of Dreams
Manila which is expected to expire on July 11, 2033, became effective upon completion of closing arrangement conditions and with minor changes from the original terms.
Apart from the MCP Lease Agreement, the Group entered into lease agreements with third parties for the lease of certain property and equipment
during the year ended December 31, 2014.
The Group made assessments at inception of the leases and capitalized the portion related to
property and equipment under capital lease at the lower of the fair value or the present value of the future minimum lease payments.
Future minimum lease payments under capital lease obligations for the Group as of December 31, 2015 are as follows:
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
2016
|
|
$
|
32,030
|
|
2017
|
|
|
34,945
|
|
2018
|
|
|
38,234
|
|
2019
|
|
|
41,802
|
|
2020
|
|
|
46,016
|
|
Over 2020
|
|
|
678,950
|
|
|
|
|
|
|
Total minimum lease payments
|
|
|
871,977
|
|
Less: amounts representing interest
|
|
|
(571,708
|
)
|
|
|
|
|
|
Present value of minimum lease payments
|
|
|
300,269
|
|
Current portion
|
|
|
(29,792
|
)
|
|
|
|
|
|
Non-current portion
|
|
$
|
270,477
|
|
|
|
|
|
|
13.
|
OTHER LONG-TERM LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Staff cost accruals
|
|
$
|
47,979
|
|
|
$
|
20,545
|
|
Other liabilities
|
|
|
13,219
|
|
|
|
205
|
|
Deferred rent liabilities
|
|
|
11,749
|
|
|
|
12,296
|
|
Other deposits received
|
|
|
7,456
|
|
|
|
1,233
|
|
Construction costs and property and equipment retention payables
|
|
|
559
|
|
|
|
59,162
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
80,962
|
|
|
$
|
93,441
|
|
|
|
|
|
|
|
|
|
|
F-45
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
14.
|
FAIR VALUE MEASUREMENTS
|
Authoritative literature provides a fair value hierarchy, which prioritizes the inputs to valuation techniques used to
measure fair value into three broad levels. The level in the hierarchy within which the fair value measurement in its entirety falls is based upon the lowest level of input that is significant to the fair value measurement as follows:
|
|
|
Level 1 inputs are based upon unadjusted quoted prices for identical instruments traded in active markets.
|
|
|
|
Level 2 inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for
which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
|
|
|
|
Level 3 inputs are generally unobservable and typically reflect managements estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore
determined using model-based techniques that include option pricing models, discounted cash flow models and similar techniques.
|
The carrying values of cash and cash equivalents, bank deposits with original maturity over three months and restricted cash approximated fair
value and represented a level 1 measurement. The carrying values of long-term deposits, long-term receivables and other long-term liabilities approximated fair value and represented a level 2 measurement. The estimated fair value of long-term debt
as of December 31, 2015 and 2014, which included the Studio City Project Facility, the 2013 Senior Notes, the Studio City Notes, the 2015 Credit Facilities, the 2011 Credit Facilities, the Philippine Notes and the Aircraft Term Loan, were
approximately $3,855,538 and $3,878,381, respectively, as compared to its carrying value of $3,962,705 and $3,902,781, respectively. Fair value was estimated using quoted market prices and represented a level 1 measurement for the 2013 Senior Notes
and the Studio City Notes. Fair value for the Studio City Project Facility, the 2015 Credit Facilities, the 2011 Credit Facilities, the Philippine Notes and the Aircraft Term Loan approximated the carrying values as the instruments carried either
variable interest rates or the fixed interest rate approximated the market rate and represented a level 2 measurement. Additionally, the carrying value of land use rights payable approximated fair value as the instruments carried the fixed interest
rate approximated the market rate and represented a level 2 measurement.
As of December 31, 2015, the Group did not have any
non-financial assets or liabilities that are recognized or disclosed at fair value in the consolidated financial statements.
The
Groups financial assets and liabilities recorded at fair value have been categorized based upon the fair value in accordance with the accounting standards. As of December 31, 2015, the interest rate swap agreements carried at fair value
and the fair value of these interest rate swap agreements approximated the amounts the Group would pay if these contracts were settled at the respective valuation dates. Fair value is estimated based on a standard valuation model that projects
future cash flows and discounts those future cash flows to a present value using market-based observable inputs such as interest rate yields. Since significant observable inputs are used in the valuation model, the interest rate swap arrangements
represented a level 2 measurement in the fair value hierarchy.
F-46
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
Ordinary and Treasury Shares
The Companys treasury shares represent i) new shares issued by the Company and held by the depository bank to facilitate the
administration and operations of the Companys share incentive plans, and are to be delivered to the Directors, eligible employees and consultants on the vesting of restricted shares and upon the exercise of share options; ii) the shares
purchased under a trust arrangement for the benefit of certain beneficiaries who are awardees under the 2011 Share Incentive Plan and held by a trustee to facilitate the future vesting of restricted shares in selected Directors, employees and
consultants under the 2011 Share Incentive Plan as described in Note 17; and iii) the shares repurchased by the Company under the 2015 Stock Repurchase Program and 2014 Stock Repurchase Program (as described below) pending for retirement.
New Shares Issued by the Company
During the years ended December 31, 2015, 2014 and 2013, the Company issued 940,419, nil and 8,574,153 ordinary shares to its depository
bank for future vesting of restricted shares and exercise of share options, respectively. The Company issued 136,809, 1,068,534 and 1,297,902 of these ordinary shares upon vesting of restricted shares; and 1,368,747, 928,299 and 3,064,302 of these
ordinary shares upon exercise of share options during the years ended December 31, 2015, 2014 and 2013, respectively. As of December 31, 2015, 2014 and 2013, the Company had a balance of 12,917,017, 13,482,154 and 15,478,987 newly issued
ordinary shares which continue to be held by the Company for future issuance upon vesting of restricted shares and exercise of share options, respectively.
Shares Purchased under a Trust Arrangement
On May 15, 2013, the Board of Directors of the Company authorized a trustee to purchase the Companys ADS from the open market for
the purpose of satisfying its obligation to deliver ADS under its 2011 Share Incentive Plan (Share Purchase Program). Under the Share Purchase Program, the trustee can purchase ADS from the open market at the price range to be
determined by the Companys management from time to time. This Share Purchase Program may be terminated by the Company at any time. The purchased ADSs are to be delivered to the Directors, eligible employees and consultants upon vesting of the
restricted shares.
During the year ended December 31, 2015, no ordinary share was purchased under a trust arrangement, while 466,203
ordinary shares purchased under a trust arrangement were delivered to Directors and eligible employees to satisfy the vesting of restricted shares. During the year ended December 31, 2014, 69,426 ADSs, equivalent to 208,278 ordinary shares were
purchased under a trust arrangement from the open market at an average market price of $24.79 per ADS or $8.26 per share (including commissions), and 467,121 ordinary shares purchased under a trust arrangement were delivered to Directors and
eligible employees to satisfy the vesting of restricted shares. During the year ended December 31, 2013, 373,946 ADSs, equivalent to 1,121,838 ordinary shares were purchased under a trust arrangement from the open market at an average market
price of $23.45 per ADS or $7.82 per share (including commissions), and 378,579 ordinary shares purchased under a trust arrangement were delivered to Directors and eligible employees to satisfy the vesting of restricted shares. As of
December 31, 2015 and 2014, the shares purchased under trust arrangement had a balance of 18,213 and 484,416 ordinary shares for future issuance upon vesting of restricted shares, respectively.
F-47
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
15.
|
CAPITAL STRUCTURE
- continued
|
Ordinary and Treasury Shares
- continued
Shares Repurchased for Retirement
On August 7, 2014, the Board of Directors of the Company authorized the repurchase of the Companys ADS of up to an aggregate of
$500,000 under a stock repurchase program (the 2014 Stock Repurchase Program) for shares retirement. The 2014 Stock Repurchase Program expired following the 2015 share repurchase mandate granted by the shareholders at the annual general
meeting of the Company held on May 20, 2015 (as describe below). Under the 2014 Stock Repurchase Program, the Company could repurchase ADS from the open market at the price range determined by the Companys management from time to time.
The 2014 Stock Repurchase Program might be terminated by the Company at any time prior to the expiration of the 2014 Stock Repurchase Program.
On May 20, 2015, the Board of Directors of the Company authorized the repurchase of the Companys ADS of up to an aggregate of
$500,000 under a stock repurchase program (the 2015 Stock Repurchase Program), which remained valid until the expiry or revocation of the share repurchase mandate granted by the shareholders, upon conclusion of the annual general meeting
of the Company held in 2016, for shares retirement. Under the 2015 Stock Repurchase Program, the Company can repurchase ADS from the open market at the price range determined by the Companys management from time to time. The 2015 Stock
Repurchase Program may be terminated by the Company at any time prior to the expiration of the 2015 Stock Repurchase Program.
During the
year ended December 31, 2015, no ordinary share was repurchased under the 2015 Stock Repurchase Program and the 2014 Stock Repurchase Program, while 3,717,816 ordinary shares repurchased under the 2014 Stock Repurchase Program were retired.
During the year ended December 31, 2014, 12,216,448 ADSs, equivalent to 36,649,344 ordinary shares were repurchased under the 2014 Stock Repurchase Program from the open market in aggregate for $300,495 (including commissions), at an average
market price of $24.60 per ADS or $8.20 per share, of which 32,931,528 ordinary shares repurchased under the 2014 Stock Repurchase Program were retired. As of December 31, 2015 and 2014, the shares repurchased had a balance of nil and 3,717,816
ordinary shares for future shares retirement, respectively.
As of December 31, 2015, 2014 and 2013, the Company had 1,630,924,523,
1,633,701,920 and 1,666,633,448 issued ordinary shares, and 12,935,230, 17,684,386 and 16,222,246 treasury shares, with 1,617,989,293, 1,616,017,534 and 1,650,411,202 issued ordinary shares outstanding, respectively.
(Loss) income before income tax consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Macau operations
|
|
$
|
277,764
|
|
|
$
|
775,790
|
|
|
$
|
865,911
|
|
Hong Kong operations
|
|
|
(54,778
|
)
|
|
|
(10,062
|
)
|
|
|
(21,241
|
)
|
Other jurisdictions operations
|
|
|
(282,763
|
)
|
|
|
(235,306
|
)
|
|
|
(264,216
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (loss) income before income tax
|
|
$
|
(59,777
|
)
|
|
$
|
530,422
|
|
|
$
|
580,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-48
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
16.
|
INCOME TAXES
- continued
|
The income tax expense consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Income tax expense - current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Complementary Tax
|
|
$
|
408
|
|
|
$
|
2,761
|
|
|
$
|
41
|
|
Lump sum in lieu of Macau Complementary Tax on dividend
|
|
|
2,795
|
|
|
|
2,795
|
|
|
|
5,590
|
|
Hong Kong Profits Tax
|
|
|
800
|
|
|
|
1,171
|
|
|
|
654
|
|
Income tax in other jurisdictions
|
|
|
283
|
|
|
|
622
|
|
|
|
99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
4,286
|
|
|
|
7,349
|
|
|
|
6,384
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Over) under provision of income tax in prior years:
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Complementary Tax
|
|
|
(423
|
)
|
|
|
(57
|
)
|
|
|
(417
|
)
|
Hong Kong Profits Tax
|
|
|
(14
|
)
|
|
|
124
|
|
|
|
(2
|
)
|
Income tax in other jurisdictions
|
|
|
(5
|
)
|
|
|
91
|
|
|
|
8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(442
|
)
|
|
|
158
|
|
|
|
(411
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) - deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau Complementary Tax
|
|
|
(3,351
|
)
|
|
|
(3,917
|
)
|
|
|
(3,543
|
)
|
Hong Kong Profits Tax
|
|
|
32
|
|
|
|
(22
|
)
|
|
|
12
|
|
Income tax in other jurisdictions
|
|
|
506
|
|
|
|
(532
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(2,813
|
)
|
|
|
(4,471
|
)
|
|
|
(3,532
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense
|
|
$
|
1,031
|
|
|
$
|
3,036
|
|
|
$
|
2,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the income tax expense from (loss) income before income tax per the consolidated
statements of operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
(Loss) income before income tax
|
|
$
|
(59,777
|
)
|
|
$
|
530,422
|
|
|
$
|
580,454
|
|
Macau Complementary Tax rate
|
|
|
12
|
%
|
|
|
12
|
%
|
|
|
12
|
%
|
Income tax (credit) expense at Macau Complementary Tax rate
|
|
|
(7,173
|
)
|
|
|
63,651
|
|
|
|
69,654
|
|
Lump sum in lieu of Macau Complementary Tax on dividend
|
|
|
2,795
|
|
|
|
2,795
|
|
|
|
5,590
|
|
Effect of different tax rates of subsidiaries operating in other jurisdictions
|
|
|
(37,422
|
)
|
|
|
(25,416
|
)
|
|
|
(9,642
|
)
|
(Over) under provision in prior years
|
|
|
(442
|
)
|
|
|
158
|
|
|
|
(411
|
)
|
Effect of income for which no income tax expense is payable
|
|
|
(1,850
|
)
|
|
|
(2,272
|
)
|
|
|
(395
|
)
|
Effect of expenses for which no income tax benefit is receivable
|
|
|
18,824
|
|
|
|
12,441
|
|
|
|
26,557
|
|
Effect of profits generated by gaming operations exempted from Macau Complementary Tax
|
|
|
(64,437
|
)
|
|
|
(109,189
|
)
|
|
|
(125,702
|
)
|
Losses that cannot be carried forward
|
|
|
979
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance
|
|
|
89,757
|
|
|
|
60,868
|
|
|
|
36,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,031
|
|
|
$
|
3,036
|
|
|
$
|
2,441
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
16.
|
INCOME TAXES
- continued
|
The Company and certain of its 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 Profits Tax on profits from its activities conducted in Hong Kong. Certain subsidiaries incorporated or conducting businesses in Hong Kong, Macau, the
Philippines and other jurisdictions are subject to Hong Kong Profits Tax, Macau Complementary Tax, income tax in the Philippines and other jurisdictions, respectively, during the years ended December 31, 2015, 2014 and 2013. The Companys
subsidiary incorporated in the United States of America and dissolved in June 2013, is subject to income tax in the United States of America up to the date of dissolution in 2013.
Macau Complementary Tax, Hong Kong Profits Tax and the Philippines income tax have been provided at 12%, 16.5% and 30% on the estimated taxable
income earned in or derived from Macau, Hong Kong and the Philippines, respectively, during the years ended December 31, 2015, 2014 and 2013, if applicable. Income tax in other jurisdictions for the years ended December 31, 2015, 2014 and
2013 were provided mainly for the profits of the representative offices and branches set up by a subsidiary of the Company in the region where they operate. No provisions for income tax in the United States of America for the year ended
December 31, 2013 was provided as the subsidiary incurred tax losses.
Melco Crown Macau has been exempted from Macau Complementary
Tax on profits generated by gaming operations for five years commencing from 2007 to 2011 pursuant to the approval notice issued by the Macau Government dated June 7, 2007, and continues to benefit from this exemption for another five years
from 2012 to 2016 pursuant to the approval notice issued by the Macau Government in April 2011. Pursuant to a notice issued by the Macau Government dated January 12, 2015, one of the Companys subsidiaries in Macau has also been exempted
from Macau Complementary Tax on profits generated from income received from Melco Crown Macau until 2016, to the extent that such income is derived from Studio City gaming operations, coinciding with Melco Crown Macaus exemption from Macau
Complementary Tax. The dividend distributions of such subsidiary to its shareholders continue to be subject to Macau Complementary Tax. The non-gaming profits of Melco Crown Macau and the Companys subsidiary in Macau remain subject to the
Macau Complementary Tax and Melco Crown Macau casino revenues remain subject to the Macau special gaming tax and other levies in accordance with its gaming subconcession agreement.
During the years ended December 31, 2015, 2014 and 2013, Melco Crown Macau reported net income and had the Group been required to pay such
taxes, the Groups consolidated net income attributable to Melco Crown Entertainment Limited for the years ended December 31, 2015, 2014 and 2013 would have been decreased by $64,437, $109,189 and $125,702, respectively. The basic and
diluted net income attributable to Melco Crown Entertainment Limited per share would have reported reduced income of $0.040 and $0.040 per share for the year ended December 31, 2015, $0.066 and $0.066 per share for the year ended
December 31, 2014, and $0.076 and $0.076 per share for the year ended December 31, 2013, respectively. During the year ended December 31, 2015, the Companys subsidiary in Macau reported net loss and no effect of the tax holiday
on the consolidated net income attributable to Melco Crown Entertainment Limited and on the basic and diluted loss per share of the Group.
In 2013, Melco Crown Macau made an application to the Macau Government for a tax concession arrangement for its shareholders. Pursuant to the
proposed terms issued by the Macau Government in December 2013 which was accepted by Melco Crown Macau in January 2014, an annual lump sum amount of MOP22,400,000 (equivalent to $2,795) is payable by Melco Crown Macau to the Macau Government,
effective retroactively from 2012 through 2016, coinciding with the 5-year extension of the tax holiday as mentioned above, as payments in lieu of Macau Complementary Tax otherwise due by the shareholders of
F-50
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
16.
|
INCOME TAXES
- continued
|
Melco Crown Macau on dividend distributions from gaming profits. Such annual lump sum tax payments are required regardless of whether dividends are actually distributed or whether Melco Crown
Macau has distributable profits in the relevant year. The income tax provision for the year 2013 included the annual lump sum dividend withholding tax payments accrued for the years 2013 and 2012.
The effective tax rates for the years ended December 31, 2015, 2014 and 2013 were negative rate of 1.7%, positive rates of 0.6% and 0.4%,
respectively. Such rates differ from the statutory Macau Complementary Tax rate of 12% primarily due to the effect of profits generated by gaming operations exempted from Macau Complementary Tax, the effect of change in valuation allowance, the
effect of different tax rates of subsidiaries operating in other jurisdictions and the effect of expenses for which no income tax benefit is receivable for the years ended December 31, 2015, 2014 and 2013.
The net deferred tax liabilities as of December 31, 2015 and 2014 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Deferred tax assets
|
|
|
|
|
|
|
|
|
Net operating loss carried forwards
|
|
$
|
149,616
|
|
|
$
|
94,280
|
|
Depreciation and amortization
|
|
|
15,644
|
|
|
|
13,377
|
|
Deferred deductible expenses
|
|
|
3,994
|
|
|
|
4,402
|
|
Deferred rents
|
|
|
21,243
|
|
|
|
12,896
|
|
Others
|
|
|
7,219
|
|
|
|
9,527
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
197,716
|
|
|
|
134,482
|
|
|
|
|
|
|
|
|
|
|
Valuation allowances
|
|
|
|
|
|
|
|
|
Current
|
|
|
(26,617
|
)
|
|
|
(18,626
|
)
|
Long-term
|
|
|
(165,583
|
)
|
|
|
(109,301
|
)
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
(192,200
|
)
|
|
|
(127,927
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
|
5,516
|
|
|
|
6,555
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
|
|
|
Land use rights
|
|
|
(52,032
|
)
|
|
|
(55,683
|
)
|
Intangible assets
|
|
|
(505
|
)
|
|
|
(505
|
)
|
Unrealized capital allowance
|
|
|
(3,061
|
)
|
|
|
(2,821
|
)
|
Others
|
|
|
(5,414
|
)
|
|
|
(5,848
|
)
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(61,012
|
)
|
|
|
(64,857
|
)
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities, net
|
|
$
|
(55,496
|
)
|
|
$
|
(58,302
|
)
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015 and 2014, valuation allowances of $192,200 and $127,927 were provided,
respectively, as management believes that it is more likely than not that these deferred tax assets will not be realized. As of December 31, 2015, adjusted operating tax loss carry forwards, amounting to $175,986, $228,760 and $429,924 will
expire in 2016, 2017 and 2018, respectively. Adjusted operating tax loss carried forward of $152,118 has expired during the year ended December 31, 2015.
Deferred tax, where applicable, is provided under the liability method at the enacted statutory income tax rate of the respective tax
jurisdictions, applicable to the respective financial years, on the difference between the consolidated financial statements carrying amounts and income tax base of assets and liabilities.
F-51
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
16.
|
INCOME TAXES
- continued
|
Aggregate undistributed earnings of the Companys foreign subsidiaries available for
distribution to the Company of approximately $6,630 and $11,447 as at December 31, 2015 and 2014, respectively, are considered to be indefinitely reinvested and the amounts as of December 31, 2015 and 2014 exclude the undistributed
earnings of Melco Crown Macau. Accordingly, no provision has been made for the dividend withholding taxes that would be payable upon the distribution of those amounts to the Company. If those earnings were to be distributed or they were
determined to be no longer permanently reinvested, the Company would have to record a deferred income tax liability in respect of those undistributed earnings of approximately $994 and $1,717 as at December 31, 2015 and 2014, respectively.
An evaluation of the tax positions for recognition was conducted by the Group by determining if the weight of available evidence indicates it
is more likely than not that the positions will be sustained on audit, including resolution of related appeals or litigation processes, if any. Uncertain tax benefits associated with the tax positions were measured based solely on the technical
merits of being sustained on examinations. The Group concluded that there was no significant uncertain tax position requiring recognition in the consolidated financial statements for the years ended December 31, 2015, 2014 and 2013 and there is
no material unrecognized tax benefit which would favorably affect the effective income tax rate in future periods. As of December 31, 2015 and 2014, there were no interest and penalties related to uncertain tax positions recognized in the
consolidated financial statements. The Group does not anticipate any significant increases or decreases to its liability for unrecognized tax benefit within the next twelve months.
The income tax returns of the Company and its subsidiaries remain open and subject to examination by the tax authorities of Hong Kong, Macau,
the Philippines, the United States of America and other jurisdictions until the statute of limitations expire in each corresponding jurisdiction. The statute of limitations in Hong Kong, Macau, the Philippines and the United States of America are 6
years, 5 years, 3 years and 3 years, respectively.
17.
|
SHARE-BASED COMPENSATION
|
2006 Share Incentive Plan
The Group adopted a share incentive plan in 2006 (2006 Share Incentive Plan) to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentives to employees, Directors and consultants and to promote the success of its business. Under the 2006 Share Incentive Plan, the Group may grant either options to purchase the
Companys ordinary shares or restricted shares (Note: The restricted shares, as named in respective grant documents, are accounted for as nonvested shares). The term of an award shall not exceed 10 years from the date of the grant. The maximum
aggregate number of ordinary shares which may be issued pursuant to all awards under the 2006 Share Incentive Plan (including shares issuable upon exercise of options) is 100,000,000 over 10 years. The new share incentive plan (2011 Share
Incentive Plan) as described below was effective immediately after the listing of the Companys ordinary shares on the Main Board of the Hong Kong Stock Exchange 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. Accordingly, no share option and restricted share were granted under the 2006 Share Incentive Plan during the years ended
December 31, 2015, 2014 and 2013.
F-52
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
2006 Share Incentive Plan
- continued
Share Options
A summary of share options activity under the 2006 Share Incentive Plan as of December 31, 2015, and changes during the years ended
December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as at January 1, 2013
|
|
|
16,832,154
|
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(2,967,372
|
)
|
|
|
1.50
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(82,380
|
)
|
|
|
2.07
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(4,989
|
)
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2013
|
|
|
13,777,413
|
|
|
|
1.63
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(853,905
|
)
|
|
|
2.06
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(6,087
|
)
|
|
|
1.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2014
|
|
|
12,917,421
|
|
|
|
1.60
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(1,260,018
|
)
|
|
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2015
|
|
|
11,657,403
|
|
|
$
|
1.61
|
|
|
|
3.58
|
|
|
$
|
46,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as at December 31, 2015
|
|
|
11,657,403
|
|
|
$
|
1.61
|
|
|
|
3.58
|
|
|
$
|
46,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of share options vested under the 2006 Share Incentive Plan at December 31, 2015 are presented
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Range of exercise prices per share ($1.01- $5.06) (Note)
|
|
|
11,657,403
|
|
|
$
|
1.61
|
|
|
|
3.58
|
|
|
$
|
46,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: No share options vested and no share options expired during the year ended December 31, 2015.
As of December 31, 2015, there was no unvested share options under the 2006 Share Incentive Plan. Share options of 1,260,018, 853,905 and
2,967,372 were exercised and proceeds amounted to $1,904, $1,758 and $4,463 were recognized during the years ended December 31, 2015, 2014 and 2013, respectively. The total intrinsic values of share options exercised for the years ended
December 31, 2015, 2014 and 2013 were $5,152, $5,472 and $34,330, respectively. As of December 31, 2015, there was no unrecognized compensation costs related to share options under the 2006 Share Incentive Plan.
F-53
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
2006 Share Incentive Plan
- continued
Restricted Shares
A summary of restricted shares activity under the 2006 Share Incentive Plan as of December 31, 2015, and changes during the years ended
December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
Unvested as at January 1, 2013
|
|
|
2,238,885
|
|
|
$
|
2.19
|
|
Vested
|
|
|
(1,297,902
|
)
|
|
|
2.04
|
|
Forfeited
|
|
|
(38,313
|
)
|
|
|
2.12
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2013
|
|
|
902,670
|
|
|
|
2.42
|
|
Vested
|
|
|
(902,670
|
)
|
|
|
2.42
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2014 and 2015
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
The total fair values at the date of grant of the restricted shares under the 2006 Share Incentive Plan
vested during the years ended December 31, 2014 and 2013 were $2,182 and $2,643, respectively. As of December 31, 2015, there was no unrecognized compensation costs related to restricted shares under the 2006 Share Incentive Plan.
2011 Share Incentive Plan
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 which became effective 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 Companys ordinary shares, share appreciation rights, restricted shares and other types of awards.
The term of such awards shall not exceed 10 years from the date of the grant. The maximum aggregate number of ordinary 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 December 31, 2015 and 2014, 88,584,652 and 92,621,404 ordinary shares remain available for the grant of various share-based awards under the 2011 Share
Incentive Plan, respectively.
Share Options
The Group granted share options to certain personnel under the 2011 Share Incentive Plan during the years ended December 31, 2015, 2014
and 2013, with the exercise price for share options granted determined at the higher of the closing price at the date of grant and the average closing price for the five trading dates preceding the date of grant of the Companys ordinary shares
trading on the Hong Kong Stock Exchange. These share options became exercisable over vesting periods of three to four years. The share options granted expire 10 years from the date of grant.
The Group uses the Black-Scholes valuation model to determine the estimated fair value for each option granted, with highly subjective
assumptions, changes in which could materially affect the estimated fair value. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of grant.
F-54
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
2011 Share Incentive Plan
- continued
Share Options
- continued
Expected volatility is based on the historical volatility of the Companys ADS 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 under the 2011 Share Incentive Plan was estimated at the date of grant using the following weighted average
assumptions for options granted during the years ended December 31, 2015, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Expected dividend yield
|
|
|
1.40
|
%
|
|
|
1.11
|
%
|
|
|
|
|
Expected stock price volatility
|
|
|
57.86
|
%
|
|
|
69.56
|
%
|
|
|
65.50
|
%
|
Risk-free interest rate
|
|
|
1.59
|
%
|
|
|
2.04
|
%
|
|
|
0.82
|
%
|
Expected average life of options (years)
|
|
|
6.1
|
|
|
|
6.1
|
|
|
|
5.1
|
|
A summary of share options activity under the 2011 Share Incentive Plan as of December 31, 2015, and
changes during the years ended December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as at January 1, 2013
|
|
|
1,901,136
|
|
|
$
|
4.70
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,388,793
|
|
|
|
8.42
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(96,930
|
)
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(120,834
|
)
|
|
|
6.00
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(1,830
|
)
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2013
|
|
|
3,070,335
|
|
|
|
6.33
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
1,320,693
|
|
|
|
12.89
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(74,394
|
)
|
|
|
5.34
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(155,865
|
)
|
|
|
9.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2014
|
|
|
4,160,769
|
|
|
|
8.30
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
2,591,751
|
|
|
|
7.48
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(108,729
|
)
|
|
|
4.70
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(343,695
|
)
|
|
|
9.17
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(27,129
|
)
|
|
|
8.42
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2015
|
|
|
6,272,967
|
|
|
$
|
7.98
|
|
|
|
8.00
|
|
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as at December 31, 2015
|
|
|
2,294,499
|
|
|
$
|
6.00
|
|
|
|
6.64
|
|
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
2011 Share Incentive Plan
- continued
Share Options
- continued
A summary of share options vested and expected to vest under the 2011 Share Incentive Plan at
December 31, 2015 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Range of exercise prices per share
($4.70 - $8.42)
(Note)
|
|
|
2,294,499
|
|
|
$
|
6.00
|
|
|
|
6.64
|
|
|
$
|
1,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: 935,424 share options vested and 27,129 share options expired during the year ended
December 31, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to Vest
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Range of exercise prices per share
($7.48 - $12.98)
|
|
|
3,978,468
|
|
|
$
|
9.12
|
|
|
|
8.79
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair values of share options granted under the 2011 Share Incentive Plan during the
years ended December 31, 2015, 2014 and 2013 were $3.45, $7.11 and $4.50, respectively. Share options of 108,729, 74,394 and 96,930 were exercised and proceeds amounts to $511, $397 and $455 were recognized during the years ended
December 31, 2015, 2014 and 2013, respectively. The total intrinsic values of share options exercised for the years ended December 31, 2015, 2014 and 2013 were $98, $232 and $812, respectively. As of December 31, 2015, there was
$10,314 unrecognized compensation costs related to share options under the 2011 Share Incentive Plan and the costs were expected to be recognized over a weighted average period of 1.81 years.
Restricted Shares
The
Group has also granted restricted shares to certain personnel under the 2011 Share Incentive Plan during the years ended December 31, 2015, 2014 and 2013. These restricted shares have vesting periods of three to four years. The grant date fair
value is determined with reference to the market closing price of the Companys ADS trading on the NASDAQ Global Select Market at the date of grant.
F-56
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
2011 Share Incentive Plan
- continued
Restricted Shares
- continued
A summary of restricted shares activity under the 2011 Share Incentive Plan as of
December 31, 2015, and changes during the years ended December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Shares
|
|
|
Weighted
Average Grant
Date Fair Value
|
|
Unvested at January 1, 2013
|
|
|
1,153,890
|
|
|
$
|
4.43
|
|
Granted
|
|
|
817,068
|
|
|
|
8.27
|
|
Vested
|
|
|
(378,579
|
)
|
|
|
4.43
|
|
Forfeited
|
|
|
(60,420
|
)
|
|
|
5.77
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2013
|
|
|
1,531,959
|
|
|
|
6.43
|
|
Granted
|
|
|
746,856
|
|
|
|
12.42
|
|
Vested
|
|
|
(632,985
|
)
|
|
|
6.04
|
|
Forfeited
|
|
|
(77,938
|
)
|
|
|
9.57
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2014
|
|
|
1,567,892
|
|
|
|
9.28
|
|
Granted
|
|
|
1,445,001
|
|
|
|
7.24
|
|
Vested
|
|
|
(603,012
|
)
|
|
|
6.32
|
|
Forfeited
|
|
|
(175,191
|
)
|
|
|
8.85
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2015
|
|
|
2,234,690
|
|
|
$
|
8.80
|
|
|
|
|
|
|
|
|
|
|
The total fair values at the date of grant of the restricted shares under the 2011 Share Incentive Plan
vested during the years ended December 31, 2015, 2014 and 2013 were $3,809, $3,821 and $1,676, respectively. As of December 31, 2015, there was $11,509 of unrecognized compensation costs related to restricted shares under the 2011 Share
Incentive Plan and the costs were expected to be recognized over a weighted average period of 1.84 years.
MCP Share Incentive Plan
MCP adopted a share incentive plan (the MCP Share Incentive Plan) to promote the success and enhance the value of MCP, by
linking personal interests of members of the Board, employees and consultants of MCP, its subsidiaries, holding companies and affiliated companies by providing such individuals with an incentive for outstanding performance to generate superior
returns to the stockholders of MCP. The MCP Share Incentive Plan, which was subsequently amended from time to time, was approved by MCP shareholders at MCP annual stockholders meeting and the Companys shareholders at its extraordinary general
meeting on June 21, 2013 and became effective on June 24, 2013, the date of approval from the Philippine SEC. Under the MCP Share Incentive Plan, MCP may grant various share-based awards, including but not limited to, options to
purchase the MCP common shares, restricted shares, share appreciation rights and other types of awards. The term of such awards shall not exceed 10 years from the date of grant. The maximum aggregate number of common shares which may be issued
pursuant to all awards under the MCP Share Incentive Plan is 442,630,330 shares and with up to 5% of the issued capital stock of MCP from time to time over 10 years. As of December 31, 2015 and 2014, 90,550,748 and 57,075,917 MCP common shares
remain available for the grant of various share-based awards under the MCP Share Incentive Plan, respectively.
F-57
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
MCP Share Incentive Plan
- continued
Share Options
For the year ended December 31, 2015, MCP granted share options to personnel under the MCP Share Incentive Plan, with the exercise price
determined with reference to the market closing price of MCP common shares at the date of grant. These share options become exercisable over a vesting period of three years. For the year ended December 31, 2014, MCP granted 9,543,186
share options to certain personnel under the MCP Share Incentive Plan, with the exercise price for 4,861,003 share options determined at the higher of the closing price of MCP common shares at the date of grant and the average closing price for the
five trading days preceding the date of grant. The exercise price for 4,682,183 share options is fixed at $0.19 per share, with the same exercise price with the share options granted on June 28, 2013 on the bases approved by
MCPs management that these personnel would contribute significantly to the pre-opening of City of Dreams Manila and joined MCP and its subsidiaries (collectively referred to as the MCP Group) prior to March 31,
2014. These share options became exercisable over different vesting periods of around three years. For the year ended December 31, 2013, MCP granted share options to certain personnel under the MCP Share Incentive Plan with the
exercise price determined at the higher of the closing price of MCP common shares at the date of grant and the average closing price for the five trading days preceding the date of grant. These share options became exercisable over a vesting
period of three years, with the first vesting on 30 days after the opening of City of Dreams Manila which were vested on March 4, 2015. All share options granted expire 10 years from the date of grant.
MCP uses the Black-Scholes valuation model to determine the estimated fair value for each option granted, with highly subjective assumptions,
changes in which could materially affect the estimated fair value. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of grant. Expected volatility is based on the historical volatility of a peer group of
publicly traded companies. Expected term is based upon the vesting term or the historical of expected term of the Company. The risk-free interest rate used for each period presented is based on the Philippine Government bond yield at the time of
grant for the period equal to the expected term.
The fair value per option under the MCP Share Incentive Plan was estimated at the date of
grant using the following weighted average assumptions for options granted during the years ended December 31, 2015, 2014 and 2013:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Expected dividend yield
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected stock price volatility
|
|
|
45.00
|
%
|
|
|
40.00
|
%
|
|
|
45.00
|
%
|
Risk-free interest rate
|
|
|
4.08
|
%
|
|
|
3.77
|
%
|
|
|
3.73
|
%
|
Expected average life of options (years)
|
|
|
5.4
|
|
|
|
5.2
|
|
|
|
5.0
|
|
F-58
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
MCP Share Incentive Plan
- continued
Share Options
- continued
A summary of share options activity under the MCP Share Incentive Plan as of
December 31, 2015, and changes during the years ended December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding as at January 1, 2013
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
120,826,336
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(4,682,183
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2013
|
|
|
116,144,153
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
9,543,186
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(1,560,727
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2014
|
|
|
124,126,612
|
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
6,796,532
|
|
|
|
0.07
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(6,195,610
|
)
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(16,902
|
)
|
|
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as at December 31, 2015
|
|
|
124,710,632
|
|
|
$
|
0.17
|
|
|
|
7.69
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable as at December 31, 2015
|
|
|
75,194,658
|
|
|
$
|
0.18
|
|
|
|
7.53
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A summary of share options vested and expected to vest under the MCP Share Incentive Plan as of
December 31, 2015 are presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Range of exercise prices per share
($0.18 - $0.28) (Note)
|
|
|
75,194,658
|
|
|
$
|
0.18
|
|
|
|
7.53
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: 75,211,560 share options vested and 16,902 share options expired during the year ended
December 31, 2015.
F-59
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
MCP Share Incentive Plan
- continued
Share Options
- continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected to Vest
|
|
|
|
Number
of Share
Options
|
|
|
Weighted
Average
Exercise
Price per Share
|
|
|
Weighted
Average
Remaining
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
Range of exercise prices per share
($0.07 - $0.28)
|
|
|
49,515,974
|
|
|
$
|
0.17
|
|
|
|
7.93
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted average fair values of share options granted under the MCP Share Incentive Plan during the
years ended December 31, 2015, 2014 and 2013 were $0.03, $0.14 and $0.09, respectively. No share options were exercised during the years ended December 31, 2015, 2014 and 2013. As of December 31, 2015, there was $1,750 unrecognized
compensation costs related to share options under the MCP Share Incentive Plan and the costs were expected to be recognized over a weighted average period of 0.98 years.
Restricted Shares
For the
years ended December 31, 2015 and 2014, MCP granted restricted shares to certain personnel under the MCP Share Incentive Plan with vesting periods of around three years. For the year ended December 31, 2013, MCP granted restricted shares
to certain personnel under the MCP Share Incentive Plan with a vesting period of three years, with the first vesting on 30 days after the opening of City of Dreams Manila which were vested on March 4, 2015. The grant date fair value is
determined with reference to the market closing price of the MCP common shares at the date of grant.
A summary of restricted shares
activity under the MCP Share Incentive Plan as of December 31, 2015, and changes during the years ended December 31, 2015, 2014 and 2013 are presented below:
|
|
|
|
|
|
|
|
|
|
|
Number of
Restricted
Shares
|
|
|
Weighted
Average
Grant Date
Fair Value
|
|
Unvested as at January 1, 2013
|
|
|
|
|
|
$
|
|
|
Granted
|
|
|
60,413,167
|
|
|
|
0.19
|
|
Forfeited
|
|
|
(2,341,091
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2013
|
|
|
58,072,076
|
|
|
|
0.19
|
|
Granted
|
|
|
7,079,775
|
|
|
|
0.29
|
|
Forfeited
|
|
|
(780,365
|
)
|
|
|
0.19
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2014
|
|
|
64,371,486
|
|
|
|
0.20
|
|
Granted
|
|
|
5,745,033
|
|
|
|
0.08
|
|
Vested
|
|
|
(38,375,178
|
)
|
|
|
0.18
|
|
Forfeited
|
|
|
(3,210,126
|
)
|
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
Unvested as at December 31, 2015
|
|
|
28,531,215
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
F-60
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
17.
|
SHARE-BASED COMPENSATION
- continued
|
MCP Share Incentive Plan
- continued
Restricted Shares
- continued
The total fair value at the date of grant of the restricted shares under the MCP Share
Incentive Plan vested during the year ended December 31, 2015 was $6,989. No restricted shares under the MCP Share Incentive Plan were vested during the years ended December 31, 2014 and 2013. As of December 31, 2015, there was $2,382
unrecognized compensation costs related to restricted shares under the MCP Share Incentive Plan and the costs were expected to be recognized over a weighted average period of 1.15 years.
The impact of share options and restricted shares for the Group for the years ended December 31, 2015, 2014 and 2013 recognized in the
consolidated financial statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
2006 Share Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
|
$
|
|
|
|
$
|
579
|
|
|
$
|
3,234
|
|
Restricted shares
|
|
|
|
|
|
|
492
|
|
|
|
2,188
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
|
|
|
|
1,071
|
|
|
|
5,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011 Share Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
|
|
6,543
|
|
|
|
5,590
|
|
|
|
2,775
|
|
Restricted shares
|
|
|
7,191
|
|
|
|
5,915
|
|
|
|
3,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
13,734
|
|
|
|
11,505
|
|
|
|
5,827
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MCP Share Incentive Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
Share options
|
|
|
3,248
|
|
|
|
3,631
|
|
|
|
1,756
|
|
Restricted shares
|
|
|
3,845
|
|
|
|
4,194
|
|
|
|
1,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
7,093
|
|
|
|
7,825
|
|
|
|
3,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation expenses recognized in general and administrative expenses
|
|
$
|
20,827
|
|
|
$
|
20,401
|
|
|
$
|
14,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
|
EMPLOYEE BENEFIT PLANS
|
The Group provides defined contribution plans for its employees and executive officers in Macau, Hong Kong, the
Philippines and certain other jurisdictions.
Employees
Macau
Employees employed
by the Group in Macau are members of government-managed Social Security Fund Scheme (the SSF Scheme) operated by the Macau Government and the Group is required to pay a monthly fixed contribution to the SSF Scheme to fund the benefits.
The Group provides options for its qualifying employees in Macau to participate in voluntary defined contribution schemes (the Macau
Schemes) operated by the Group in Macau. The Group either contributes a fixed percentage of the eligible employees base salaries, a fixed amount or an amount which
F-61
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
18.
|
EMPLOYEE BENEFIT PLANS
- continued
|
Employees
- continued
Macau
- continued
matches the contributions of the employees up to a certain percentage of base salaries, determined by seniority, tenure and the type of plan, to the Macau Schemes. The Groups contributions
to the Macau Schemes are vested in accordance to a vesting schedule, achieving full vesting 10 years from the date of employment. The Macau Schemes were established under trust with the fund assets being held separately from those of the Group by
independent trustees in Macau.
Hong Kong
Executive officers, employees employed by the Group in Hong Kong and certain employees employed by the Group in other jurisdictions are members
of Mandatory Provident Fund Schemes (the MPF Schemes) operated by the Group in Hong Kong. The Group provides options for its qualifying employees to participate in voluntary contribution plan of the MPF Schemes. The Group is
required to contribute a certain percentage of the executive officers and employees base salaries, determined by seniority, tenure and the type of plan, to the MPF Schemes, which included the Groups mandatory portion. The
excess of contributions over the Groups mandatory portion are treated as the Groups voluntary contribution and are vested in accordance to a vesting schedule, achieving full vesting 10 years from the date of employment. The Groups
mandatory contributions to the MPF Schemes are fully and immediately vested to the executive officers and employees once they are paid. The MPF Schemes were established under trust with the fund assets being held separately from those of the
Group by independent trustees in Hong Kong.
The Philippines
Employees employed by MCP Group in the Philippines are members of government-managed Social Security System Scheme (the SSS Scheme)
operated by the Philippine Government and MCP Group is required to pay a certain percentage of the employees relevant income and met the minimum mandatory requirements of the SSS Scheme to fund the benefits.
Other Jurisdictions
The
Groups subsidiaries in certain other jurisdictions operate a number of defined contribution schemes. Contributions to the defined contribution schemes applicable to each year are made at a certain percentage of the employees relevant
income and met the minimum mandatory requirements.
The obligations of the Group with respect to the above retirement benefits schemes are
to make the required contributions under the schemes.
During the years ended December 31, 2015, 2014 and 2013, the Groups
contributions into the defined contribution plans were $18,295, $14,823 and $8,522, respectively.
19.
|
DISTRIBUTION OF PROFITS
|
All subsidiaries of the Company incorporated in Macau are required to set aside a minimum of 10% to 25% of the entitys
profit after taxation to the legal reserve until the balance of the legal reserve reaches a level equivalent to 25% to 50% of the entitys share capital in accordance with the provisions of the Macau Commercial Code. The legal reserve sets
aside an amount from the subsidiaries statements of operations and is not available for distribution to the shareholders of the subsidiaries. The appropriation of legal reserve
F-62
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
19.
|
DISTRIBUTION OF PROFITS
- continued
|
is recorded in the subsidiaries financial statements in the year in which it is approved by the Board of Directors of the relevant subsidiaries. As of December 31, 2015 and 2014, the
balance of the reserve amounted to $31,202 and $31,202, respectively.
The 2011 Credit Facilities contained restrictions, which applied
until the 2011 Credit Facilities was amended on June 29, 2015, on paying dividends to companies or persons who were not members of the 2011 Borrowing Group, unless certain financial tests and conditions were satisfied. Dividends might be paid
from (i) excess cash flow as defined in the 2011 Credit Facilities generated by the 2011 Borrowing Group subject to compliance with the financial covenants under the 2011 Credit Facilities; or (ii) cash held by the 2011 Borrowing Group in
an amount not exceeding the aggregate cash and cash equivalents investments of the 2011 Borrowing Group as at June 30, 2011 subject to a certain amount of cash and cash equivalents being retained for operating purposes and, in either case,
there being no event of default continuing or likely to occur under the 2011 Credit Facilities as a result of making such payment.
The
2015 Credit Facilities removed certain restrictions on paying of dividends applied under the 2011 Credit Facilities. Under the 2015 Credit Facilities, which apply on and from June 29, 2015, the payment of dividends to companies or persons
who are not members of the 2015 Borrowing Group remains restricted in certain circumstances, unless certain financial tests and conditions are satisfied and there is no continuing default under the 2015 Credit Facilities.
The indenture governing the 2013 Senior Notes and the 2010 Senior Notes contains certain covenants that, subject to certain exceptions and
conditions, restrict the payment of dividends by MCE Finance and its respective restricted subsidiaries.
The indenture governing the
Studio City Notes also contains certain covenants that, subject to certain exceptions and conditions, restrict the payment of dividends by Studio City Finance and its restricted subsidiaries.
The Studio City Project Facility contains certain covenants that, subject to certain exceptions and conditions, restrict the payment of
dividends by Studio City Investments and its restricted subsidiaries.
On February 25, 2014, the Companys Board of Directors adopted a new dividend policy (the New Dividend
Policy). Under the New Dividend Policy, subject to the Companys capacity to pay from accumulated and future earnings and the cash balance and future commitments at the time of declaration of dividend, the Company intends to provide its
shareholders with quarterly dividends of approximately 30% of the Companys consolidated net income attributable to Melco Crown Entertainment Limited for the relevant quarter, commencing from the first quarter of 2014. The New Dividend Policy
also allows the Company to declare special dividends from time to time in addition to the quarterly dividends.
On March 16,
2015, June 5, 2015, September 4, 2015 and December 4, 2015, the Company paid quarterly dividends of $0.0171, $0.0112, $0.0045 and $0.0061 per share, respectively, under the New Dividend Policy. During the year ended
December 31, 2015, the Company recorded $62,850 as a distribution against retained earnings.
On February 18, 2016, a special
dividend of $0.2146 per share has been declared by the Board of Directors of the Company and payable on March 16, 2016 to the shareholders of records as of March 1, 2016.
On April 16, 2014, the Company paid a special dividend of $0.1147 per share and recorded $189,459 as a distribution against share premium.
F-63
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
20.
|
DIVIDENDS
- continued
|
On June 6, 2014, September 4, 2014 and December 4, 2014, the Company paid
quarterly dividends of $0.0431, $0.0259 and $0.0239 per share, respectively, under the New Dividend Policy. During the year ended December 31, 2014, the Company recorded $153,259 as a distribution against retained earnings.
The total amount of special and quarterly dividends of $342,718 were paid during the year ended December 31, 2014.
During the year ended December 31, 2013, the Company did not declare or pay any cash dividends on the ordinary shares.
21.
|
REGULAR/PROVISIONAL LICENSE, COOPERATION AGREEMENT, OPERATING AGREEMENT AND MCP LEASE AGREEMENT FOR CITY OF DREAMS MANILA
|
|
(a)
|
Regular/Provisional License
|
As of March 13, 2013, PAGCOR allowed the inclusion of,
amongst others, MCE Leisure as a
co-licensee,
as well as the special purpose entity to operate the casino business and as representative for itself and on behalf of the other co-licensees including
SM Investments Corporation (SMIC), PremiumLeisure and Amusement, Inc. (PLAI) and Belle under the provisional license (the Provisional License) in their dealings with PAGCOR. SMIC, PLAI and Belle are collectively
referred to as the Philippine Parties. As a result, MCE Holdings (Philippines) Corporation, a subsidiary of MCP, and its subsidiaries including MCE Leisure (collectively the MCE Holdings Group) and the Philippine Parties
together became co-licensees (the Licensees) under the Provisional License granted by PAGCOR for the establishment and operation of City of Dreams Manila.
On January 30, 2015, MCE Leisure applied to PAGCOR for the issuance of the regular license (the Regular License) for City of
Dreams Manila as the Licensees satisfied the Investment Commitment (as defined in Note 22(c)) under the terms of the Provisional License.
PAGCOR issued the Regular License dated April 29, 2015 in replacement of the Provisional License to the Licensees for the operation of
City of Dreams Manila. The Regular License has the same terms and conditions as the Provisional License, is concurrent with section 13 of Presidential Decree No. 1869, and is valid until July 11, 2033.
Further details of the terms and commitments under the Regular/Provisional License are included in Note 22(c).
|
(b)
|
Cooperation Agreement
|
On March 13, 2013, a cooperation agreement (the
Cooperation Agreement) and other related arrangements which were entered on October 25, 2012 among MCE Holdings Group, SMIC and certain of its subsidiaries (collectively the SM Group), Belle and PLAI became effective
upon completion of the closing arrangement conditions, with minor changes to the original terms (except for certain provisions which were effective on signing).
The Cooperation Agreement governs the relationship and the rights and obligations of the Licensees. Under the Cooperation Agreement, MCE
Leisure has been designated as the operator to operate City of Dreams Manila and appointed as the sole and exclusive representative of the Licensees in connection with the Regular/Provisional License and the operation and management of City of
Dreams Manila until the expiry of the Regular/Provisional License (currently expected to be on July 11, 2033 or unless terminated earlier in accordance with its terms). Further details of the commitments under the Cooperation Agreement are
included in Note 22(c).
F-64
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
21.
|
REGULAR/PROVISIONAL LICENSE, COOPERATION AGREEMENT, OPERATING AGREEMENT AND MCP LEASE AGREEMENT FOR CITY OF DREAMS MANILA
- continued
|
On March 13, 2013, the Licensees entered into an operating
agreement (the Operating Agreement) which governs the operation and management of City of Dreams Manila by MCE Leisure. The Operating Agreement was effective on March 13, 2013 and ends on the date of expiry of the
Regular/Provisional License (as that Regular/Provisional License is extended, restored or renewed), unless terminated earlier in accordance with the terms of the Operating Agreement. The Regular/Provisional License is currently scheduled to expire
on July 11, 2033. Under the Operating Agreement, MCE Leisure is appointed as the sole and exclusive operator and manager of City of Dreams Manila, and is responsible for, and has sole discretion (subject to certain exceptions) and control over,
all matters relating to the management and operation of City of Dreams Manila (including the casino and gaming operations, hotel and retail components and all other activities necessary, desirable or incidental for the management and operation of
City of Dreams Manila). The Operating Agreement also included terms of certain payments to PLAI upon commencement of operations of City of Dreams Manila in December 2014, in particular, PLAI has the right to receive monthly payments from MCE
Leisure, based on the performance of gaming operations of City of Dreams Manila and was included in Payments to the Philippine Parties in the consolidated statements of operations, and MCE Leisure has the right to retain all revenues
from non-gaming operations of City of Dreams Manila.
On March 13, 2013, the MCP Lease Agreement which was entered
on October 25, 2012, and was subsequently amended from time to time, between MCE Leisure and Belle became effective upon completion of closing arrangement conditions and with minor changes from the original terms. Under the MCP Lease Agreement,
Belle agreed to lease to MCE Leisure the land and certain of the building structures for City of Dreams Manila. The lease continues until termination of the Operating Agreement (currently expected to be on July 11, 2033 or unless terminated
earlier in accordance with its terms). The leased property is used by MCE Leisure and any of its affiliates exclusively as a hotel, casino and resort complex with retail, entertainment, convention, exhibition, food and beverages services as well as
other activities ancillary, related or incidental to the operation of any of the preceding uses. Further information in relation to the MCP Lease Agreement was disclosed in Notes 12 and 22(c).
22.
|
COMMITMENTS AND CONTINGENCIES
|
As of December 31, 2015, the Group had capital commitments
contracted for but not incurred mainly for the construction and acquisition of property and equipment for Studio City, City of Dreams Manila and City of Dreams totaling $254,687 including advance payments for construction costs of $26,544.
|
(b)
|
Lease Commitments and Other Arrangements
|
Operating Leases As a Lessee
The Group leased a portion of land for City of Dreams Manila, Mocha Clubs sites, office space, warehouses, staff quarters and various
equipment under non-cancellable operating lease agreements that expire at various dates through July 2033. Certain lease agreements provide for periodic rental
F-65
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(b)
|
Lease Commitments and Other Arrangements
- continued
|
Operating Leases As a Lessee
- continued
increases based on both contractual agreed incremental rates and on the general inflation rate once agreed by the Group and its lessor and in some cases contingent rental expenses stated as a
percentage of turnover. During the years ended December 31, 2015, 2014 and 2013, the Group incurred rental expenses amounting to $39,667, $32,829 and $21,815, respectively, which consisted of minimum rental expenses of $32,864, $25,374 and
$17,586 and contingent rental expenses of $6,803, $7,455 and $4,229, respectively.
As of December 31, 2015, minimum lease payments
under all non-cancellable leases were as follows:
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
2016
|
|
$
|
25,271
|
|
2017
|
|
|
22,776
|
|
2018
|
|
|
22,408
|
|
2019
|
|
|
23,096
|
|
2020
|
|
|
16,352
|
|
Over 2020
|
|
|
80,365
|
|
|
|
|
|
|
|
|
$
|
190,268
|
|
|
|
|
|
|
As Grantor of Operating and Right To Use Arrangement
The Group entered into non-cancellable operating and right to use agreements mainly for mall spaces in the sites of City of Dreams, City of
Dreams Manila and Studio City with various retailers that expire at various dates through October 2025. Certain of the operating and right to use agreements include minimum base fee with escalated contingent fee clauses. During the years ended
December 31, 2015, 2014 and 2013, the Group earned contingent fees of $12,898, $17,497 and $19,563, respectively.
As of December 31,
2015, minimum future fees to be received under all non-cancellable operating and right to use agreements were as follows:
|
|
|
|
|
Year ending December 31,
|
|
|
|
|
2016
|
|
$
|
13,706
|
|
2017
|
|
|
15,324
|
|
2018
|
|
|
23,306
|
|
2019
|
|
|
20,482
|
|
2020
|
|
|
14,310
|
|
Over 2020
|
|
|
2,779
|
|
|
|
|
|
|
|
|
$
|
89,907
|
|
|
|
|
|
|
The total minimum future fees do not include the escalated contingent fee clauses.
F-66
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
Gaming Subconcession
On September 8, 2006, the Macau Government granted a gaming subconcession to Melco Crown Macau to operate the gaming business in Macau.
Pursuant to the gaming subconcession agreement, Melco Crown Macau has committed to the following:
|
i)
|
To pay the Macau Government a fixed annual premium of $3,744 (MOP30,000,000).
|
|
ii)
|
To pay the Macau Government a variable premium depending on the number and type of gaming tables and gaming machines that the Group operates. The variable premium is calculated as follows:
|
|
|
|
$37 (MOP300,000) per year for each gaming table (subject to a minimum of 100 tables) reserved exclusively for certain kind of games or to certain players;
|
|
|
|
$19 (MOP150,000) per year for each gaming table (subject to a minimum of 100 tables) not reserved exclusively for certain kind of games or to certain players; and
|
|
|
|
$0.1 (MOP1,000) per year for each electrical or mechanical gaming machine, including the slot machine.
|
|
iii)
|
To pay the Macau Government a sum of 1.6% of the gross revenues of the gaming business operations on a monthly basis, that will be made available to a public foundation for the promotion, development and study of
social, cultural, economic, educational, scientific, academic and charity activities, to be determined by the Macau Government.
|
|
iv)
|
To pay the Macau Government a sum of 2.4% of the gross revenues of the gaming business operations on a monthly basis, which will be used for urban development, tourist promotion and the social security of Macau.
|
|
v)
|
To pay special gaming tax to the Macau Government of an amount equal to 35% of the gross revenues of the gaming business operations on a monthly basis.
|
|
vi)
|
Melco Crown Macau must maintain a guarantee issued by a Macau bank in favor of the Macau Government in a maximum amount of $62,395 (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 a result of the bank guarantee given by the bank to the Macau Government as disclosed in Note 22(c)(vi) above, a sum of 1.75% of the
guarantee amount will be payable by Melco Crown Macau quarterly to such bank.
Land Concession Contracts
The Companys subsidiaries have entered into concession contracts for the land in Macau on which Altira Macau, City of Dreams and Studio
City properties and development projects are located. The title to the land lease right is obtained once the related land concession contract is published in the Macau official gazette. The contracts have a term of 25 years, which is renewable for
further consecutive periods of 10 years, subject to applicable legislation in Macau. The Companys land holding subsidiaries are required to i) pay an upfront land premium, which is recognized as land use
F-67
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(c)
|
Other Commitments
- continued
|
Land Concession Contracts
- continued
right in the consolidated balance sheets and a nominal annual government land use fee, which is recognized as general and administrative expense and may be adjusted every five years; and ii)
place a guarantee deposit upon acceptance of the land lease terms, which is subject to adjustments from time to time in line with the amounts paid as annual land use fee. During the land concession term, amendments have been sought which have or
will result in revisions to the development conditions, land premium and government land use fees.
Altira Macau
On December 18, 2013, the Macau Government published in the Macau official gazette the final amendment for revision of the land concession
contract for Taipa Land on which Altira Macau is located (see Note 9). The amendment required an additional land premium of approximately $2,449 which was fully paid by Altira Developments in July 2013. According to the revised land amendment, the
government land use fees were revised from approximately $171 per annum to $186 per annum. As of December 31, 2015, the Groups total commitment for government land use fees for Altira Macau site to be paid during the remaining term
of the land concession contract which expires in March 2031 was $2,817.
City of Dreams
On January 29, 2014, the Macau Government published in the Macau official gazette the final amendment for revision of the land concession
contract for Cotai Land on which City of Dreams is located (see Note 9). The amendment required an additional land premium of approximately $23,344, with $8,736 paid in October 2013 upon acceptance of the final amendment proposal and the remaining
amount of approximately $14,608 payable in four biannual instalments, with 5% interest accruing per annum, with the first three instalments paid in July 2014, January 2015 and July 2015, respectively, and the last instalment paid in January
2016. As of December 31, 2015 and 2014, the total outstanding balance of the land premium was included in accrued expenses and other current liabilities in an amount of $3,788 and $7,302, and in land use rights payable in an amount of nil and
$3,788, respectively. According to the revised land amendment, the government land use fees were revised to $1,185 per annum during the development period of additional hotel at City of Dreams; and to $1,235 per annum after the completion of the
development. As of December 31, 2015, the Groups total commitment for government land use fees for City of Dreams site to be paid during the remaining term of the land concession contract which expires in August 2033 was $21,616.
Studio City
On
September 23, 2015, the Macau Government published in the Macau official gazette the final amendment for revision of the land concession contract for Studio City Land on which Studio City is located. Such amendment reflected the change to build
a five-star hotel to a four-star hotel. According to the revised land amendment, the government land use fees were $490 per annum during the development period of Studio City; and $1,131 per annum after the development period. As of
December 31, 2015, the Groups total commitment for government land use fees for Studio City site to be paid during the remaining term of the land concession contract which expires in October 2026 was $10,565.
F-68
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(c)
|
Other Commitments
- continued
|
Regular/Provisional License
Under the terms of the Provisional License, PAGCOR requires, amongst other things, the Licensees to make a total investment of $1,000,000 for
City of Dreams Manila (the Investment Commitment) with a minimum investment of $650,000 to be made prior to the opening of City of Dreams Manila on December 14, 2014. Under the terms of the Cooperation Agreement, the Licensees
Investment Commitment of $1,000,000 will be satisfied as follows:
|
|
|
For the amount of $650,000: (a) in the case of the Philippine Parties, the land and building structures having an aggregate value as determined by PAGCOR of not less than $325,000; and (b) in the case of MCE
Leisure, the fit-out and furniture, gaming equipment, additional improvements, inventory and supplies as well as intangible property and entertainment facilities inside or outside of the building structures, having an aggregate value as determined
by PAGCOR of not less than $325,000.
|
|
|
|
For the remaining $350,000, the Philippine Parties and MCE Leisure shall make equal contributions of $175,000 to City of Dreams Manila. The Licensees agree to contribute such amounts and for such purposes as notified by
MCE Leisure (or in certain circumstances the Philippine Parties) to PAGCOR (subject to any recommendations PAGCOR may make).
|
On January 30, 2015, MCE Leisure applied to PAGCOR for the issuance of the Regular License for City of Dreams Manila as the Licensees
satisfied the Investment Commitment of $1,000,000 under the terms of the Provisional License. PAGCOR issued the Regular License dated April 29, 2015 in replacement of the Provisional License to the Licensees for the operation of City of Dreams
Manila. The Regular License has the same terms and conditions as the Provisional License and is valid until July 11, 2033.
Other
commitments required by PAGCOR under the Regular/Provisional License are as follows:
|
|
|
Within 30 days from getting approval by PAGCOR of the project implementation plan, to submit a bank guarantee, letter of credit or surety bond in the amount of PHP100,000,000 (equivalent to $2,120) to guarantee the
Licensees completion of City of Dreams Manila and is subject to forfeiture in case of delay in construction which delay exceeds 50% of the schedule, of which SM Group had submitted a surety bond of PHP100,000,000 (equivalent to $2,120) to
PAGCOR on February 17, 2012. The surety bond was subsequently released on March 31, 2015.
|
|
|
|
Seven days prior to commencement of operation of the casino, to secure a surety bond in favor of PAGCOR in the amount of PHP100,000,000 (equivalent to $2,120) to ensure prompt and punctual remittance/payment of all
license fees, of which MCE Leisure had secured a surety bond of PHP100,000,000 (equivalent to $2,120) in December 2014.
|
|
|
|
The Licensees are required to maintain an escrow account into which all funds for development of City of Dreams Manila must be deposited and all funds
withdrawn from this account must be used only for such development and to deposit $100,000 in the escrow account and maintain a balance of $50,000 until the completion of City of Dreams Manila, of which MCE Leisure had setup the escrow account in
March 2013. On May 7, 2015, PAGCOR granted the approval to close the escrow account as the Licensees had fulfilled the completion of City of Dreams Manila and funds of $50,000 held in the escrow account were released to MCE Leisure on
June 15, 2015. The
|
F-69
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(c)
|
Other Commitments
- continued
|
Regular/Provisional License
- continued
|
escrow account balance released to MCE Leisure was partly funded by the Philippine Parties in accordance with the terms of the Cooperation Agreement and the amount was included in the accrued
expenses and other current liabilities as disclosed in Note 10.
|
|
|
|
License fees must be remitted on a monthly basis, in lieu of all taxes with reference to the income component of the gross gaming revenues: (a) 15% high roller tables; (b) 25% non-high roller tables;
(c) 25% slot machines and electronic gaming machines; and (d) 15% junket operation.
|
For taxable periods prior to
April 1, 2014, under the terms of the Regular/Provisional License, PAGCOR and the Licensees agreed the license fees that are paid to PAGCOR by the Licensees are in lieu of all taxes with reference to the income component of the gross gaming
revenues. In May 2014, PAGCOR temporarily reduced the license fees by 10% to 5% and 15% of gross gaming revenues effective from April 1, 2014. The license fee reduction is required to be used for the payment of corporate income taxes and any
portion not used for such payment must be paid to PAGCOR as an annual true-up payment (as defined). This adjustment will address the additional exposure to corporate income tax on the Licensees brought by the Philippine Bureau of Internal Revenue
(BIR) Revenue Memorandum Circular (RMC) No. 33-2013 dated April 17, 2013. The 10% license fee adjustment is a temporary measure to address the unilateral BIR action and is not intended to modify, amend or revise the
Regular/Provisional License. PAGCOR and the Licensees agreed to revert to the original license fee structure under the Regular/Provisional License in the event BIR action is permanently restrained, corrected or withdrawn. PAGCOR and the Licensees
also agreed that the 10% license fee adjustment is not an admission of the validity of BIR RMC No. 33-2013 and it is not a waiver of any of the remedies against any assessments by BIR for corporate income tax on the gaming revenue of the
Licensees in the Philippines.
|
|
|
In addition to the above license fees, the Licensees are required to remit 2% of casino revenues generated from non-junket operation tables to a foundation devoted to the restoration of Philippine cultural heritage, as
selected by the Licensees and approved by PAGCOR, of which the foundation was setup by MCE Leisure on February 19, 2014.
|
|
|
|
PAGCOR may collect a 5% fee of non-gaming revenue received from food and beverage, retail and entertainment outlets. All revenues of hotel operations should not be subject to the 5% fee except for rental income received
from retail concessionaires.
|
|
|
|
Grounds for revocation of the Regular/Provisional License, among others, are as follows: (a) failure to comply with material provision of this license; (b) failure to remit license fees within 30 days from
receipt of notice of default; (c) has become bankrupt or insolvent; (d) delay in construction of more than 50% of the schedule; and (e) if debt-to-equity ratio is more than 70:30. As of December 31, 2015 and 2014, MCE Holdings
Group, as one of the parties as Licensees, has complied with the required debt-to-equity ratio under definition as agreed with PAGCOR.
|
Cooperation Agreement
Under the terms of the Cooperation Agreement, the Licensees are jointly and severally liable to PAGCOR under the Regular/Provisional License
and each Licensee (indemnifying Licensee) must indemnify the other Licensees for any loss suffered or incurred by that Licensees arising out of, or in
F-70
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(c)
|
Other Commitments
- continued
|
Cooperation Agreement
- continued
connection with, any breach by the indemnifying Licensee of the Regular/Provisional License. Also, each of the Philippine Parties and MCE Holdings Group agree to indemnify the non-breaching party
for any loss suffered or incurred as a result of a breach of any warranty.
MCP Lease Agreement
Under the terms of the MCP Lease Agreement, MCE Leisure shall indemnify and keep Belle fully indemnified against all claims, actions, demands,
actions and proceedings made against Belle by any person arising as a result of or in connection with any loss, damage or injury from MCE Leisures use and operation of business on the leased property.
Except as disclosed in Note 11, the Group has made the following significant
guarantees as of December 31, 2015:
|
|
|
Melco Crown Macau has issued a promissory note (Livrança) of $68,635 (MOP550,000,000) to a bank in respect of the bank guarantee issued to the Macau Government as disclosed in Note 22(c)(vi) under
gaming subconcession to the consolidated financial statements.
|
|
|
|
The Company 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.
|
|
|
|
Pursuant to the Commitment Letter for the Studio City Project Facility as disclosed in Note 11, the Studio City Borrower, among others, provided an indemnity on customary terms to the Studio City Lenders and their
affiliates, including in connection with any breach of such Commitment Letter and related documents, such as a breach of warranty in respect of factual information and financial projections provided by or on behalf of the Company and the Studio City
Borrower to the Studio City Lenders and their affiliates. On the same date, under the terms of an agreement between, among others, the Company and New Cotai Investments to regulate how indemnity claims under the Commitment Letter are dealt with and
funded, the Company has indemnified New Cotai Investments and the Studio City Borrower in respect of any act or omission of the Company or its affiliates (other than Studio City International and its subsidiaries) resulting from such persons
gross negligence, willful misconduct or bad faith.
|
|
|
|
Under the Cooperation Agreement, Belle has irrevocably and unconditionally guaranteed to MCE Holdings Group the due and punctual observance, performance and discharge of all obligations of PLAI and each SM Groups
company, and indemnified MCE Holdings Group against any and all loss incurred in connection with any default by the Philippine Parties under the Cooperation Agreement. MCE Leisure has likewise irrevocably and unconditionally guaranteed to each of
the Philippine Parties the due and punctual observance, performance and discharge of all obligations of MCE Holdings Group, and indemnified the Philippine Parties against any and all loss incurred in connection with any default by MCE Holdings Group
under the Cooperation Agreement.
|
|
|
|
In October 2013, Studio City Developments entered into a trade credit facility of HK$200,000,000 (equivalent to $25,707) (Trade Credit Facility) with a bank to meet certain payment obligations of the Studio
City project. The Trade Credit Facility is available until August 31, 2017 and guaranteed by Studio City Company. As of December 31, 2015, approximately $1,335 of the Trade Credit Facility had been utilized.
|
F-71
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
22.
|
COMMITMENTS AND CONTINGENCIES
- continued
|
|
(d)
|
Guarantees
- continued
|
|
|
|
MCE Leisure has issued a corporate guarantee of PHP100,000,000 (equivalent to $2,120) to a bank in respect of surety bond issued to PAGCOR as disclosed in Note 22(c) under Regular/Provisional License.
|
On August 12, 2014, a subsidiarys Taiwan branch office and
certain of its employees received indictment from the Taipei District Prosecutors Office for alleged violations of certain Taiwan banking and foreign exchange laws. In October 2015, the Taipei District Court rendered a not guilty verdict in favor of
all defendants, on all charges alleging violation of Taiwan banking and foreign exchange laws. The Taipei District Court also lifted the freeze order on a deposit account in October 2015 and such deposit was released from restricted cash upon
lifting of the freeze order. The case is now under appeal at the Taipei High Court. As of the date of this report, management believes that the Groups operations in Taiwan are in compliance with Taiwan laws and the legal proceedings would have
no material impact on the Groups financial statements as a whole.
As of December 31, 2015, the Group is a party to certain
other legal proceedings which relate to matters arising out of the ordinary course of its business. Management believes that the outcome of such proceedings would have no material impact on the Groups financial statements as a whole.
F-72
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
23.
|
RELATED PARTY TRANSACTIONS
|
During the years ended December 31, 2015, 2014 and 2013, the Group entered into the following significant related party
transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Related companies
|
|
Nature of transactions
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
Transactions with affiliated companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Crowns subsidiary
|
|
Consultancy fee expense
|
|
$
|
461
|
|
|
$
|
387
|
|
|
$
|
370
|
|
|
|
Purchase of property and equipment
|
|
|
771
|
|
|
|
830
|
|
|
|
371
|
|
|
|
Software license fee expense
|
|
|
312
|
|
|
|
312
|
|
|
|
312
|
|
|
|
|
|
|
Lisboa Holdings Limited
(Lisboa)
(1)
|
|
Office rental expense
|
|
|
1,597
|
|
|
|
1,810
|
|
|
|
895
|
|
|
|
|
|
|
Melcos subsidiaries and its associated companies
|
|
Consultancy fee expense
|
|
|
449
|
|
|
|
546
|
|
|
|
643
|
|
|
|
Office rental expense
|
|
|
|
|
|
|
|
|
|
|
308
|
|
|
|
Purchase of property and equipment
|
|
|
7,758
|
|
|
|
2,852
|
|
|
|
597
|
|
|
|
Service fee expense
(2)
|
|
|
728
|
|
|
|
775
|
|
|
|
802
|
|
|
|
Other service fee income
|
|
|
1,609
|
|
|
|
632
|
|
|
|
510
|
|
|
|
Rooms and food and beverage income
|
|
|
41
|
|
|
|
115
|
|
|
|
49
|
|
|
|
|
|
|
Shun Tak Holdings Limiteds subsidiaries and its associated company (collectively referred to
as the Shun Tak Group)
(1)
|
|
Office rental expense
|
|
|
238
|
|
|
|
199
|
|
|
|
171
|
|
|
|
Traveling expense
(3)
|
|
|
3,685
|
|
|
|
3,641
|
|
|
|
2,962
|
|
|
|
|
|
|
Sky Shuttle Helicopters Limited (Sky Shuttle)
(1)
|
|
Traveling expense
|
|
|
1,021
|
|
|
|
1,399
|
|
|
|
1,809
|
|
|
|
|
|
|
Sociedade de Jogos de Macau S.A.
(SJM)
(1)
|
|
Traveling expense
(3)
|
|
|
395
|
|
|
|
515
|
|
|
|
570
|
|
|
|
|
|
|
Sociedade de Turismo e Diversões de Macau, S.A. and its subsidiaries (collectively referred
to as the STDM Group)
(1)
|
|
Office rental expense
|
|
|
1,451
|
|
|
|
1,457
|
|
|
|
1,405
|
|
|
|
Service fee expense
|
|
|
194
|
|
|
|
203
|
|
|
|
222
|
|
|
|
Traveling expense
(3)
|
|
|
175
|
|
|
|
14
|
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes
|
(1)
|
Companies in which a relative/relatives of Mr. Lawrence Yau Lung Ho, the Companys Chief Executive Officer, has/have beneficial interests.
|
|
(2)
|
The amounts mainly represent the Companys reimbursement to Melcos subsidiary for service fees incurred on its behalf for rental, office administration, travel and security coverage for the operation of the
office of the Companys Chief Executive Officer.
|
|
(3)
|
Traveling expenses including ferry and hotel accommodation services within Hong Kong and Macau.
|
F-73
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
23.
|
RELATED PARTY TRANSACTIONS
- continued
|
Other Related Party Transaction
On December 18, 2014, MCE (IP) Holdings Limited (MCE IP), a subsidiary of the Company, and Crown Films LLC (CFL),
a subsidiary of Crown, entered into an assignment agreement, under which CFL agreed to assign exclusively to MCE IP a 50% share of a short film and all related elements at a consideration of $15,619, representing 50% of the total production cost
incurred by CFL as at the date of the assignment agreement. The short film was produced for the purpose of promoting the Companys properties in Asia and Crowns properties in Australia.
|
(a)
|
Amounts Due From Affiliated Companies
|
The outstanding balances arising from operating
income or prepayment of operating expenses as of December 31, 2015 and 2014 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Melcos subsidiaries
|
|
$
|
1,174
|
|
|
$
|
1,077
|
|
Shun Tak Group
|
|
|
1
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,175
|
|
|
$
|
1,079
|
|
|
|
|
|
|
|
|
|
|
The outstanding balances due from affiliated companies as of December 31, 2015 and 2014 as mentioned above
are unsecured, non-interest bearing and repayable on demand.
|
(b)
|
Amounts Due To Affiliated Companies
|
The outstanding balances arising from operating
expenses and expenses paid by affiliated companies on behalf of the Group as of December 31, 2015 and 2014 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
Crowns subsidiary
|
|
$
|
1,935
|
|
|
$
|
930
|
|
Melcos subsidiary
|
|
|
|
|
|
|
1,933
|
|
Shun Tak Group
|
|
|
231
|
|
|
|
343
|
|
SJM
|
|
|
98
|
|
|
|
215
|
|
Sky Shuttle
|
|
|
87
|
|
|
|
130
|
|
STDM Group
|
|
|
87
|
|
|
|
75
|
|
Lisboa
|
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,464
|
|
|
$
|
3,626
|
|
|
|
|
|
|
|
|
|
|
The outstanding balances due to affiliated companies as of December 31, 2015 and 2014 as mentioned above
are unsecured, non-interest bearing and repayable on demand.
The Group is principally engaged in the gaming and hospitality
business in Asia and its principal operating and developmental activities occur in two geographic areas: Macau and the Philippines. 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, Studio City, which commenced operations on October 27,
F-74
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
24.
|
SEGMENT INFORMATION
- continued
|
2015 and City of Dreams Manila, which commenced operations on December 14, 2014. Upon closing of the various agreements entered between MCP Group and the Philippine Parties for development
and operation of City of Dreams Manila and the completion of the placing and subscription transaction of MCP during the year ended December 31, 2013, City of Dreams Manila has become one of the operating segments of the Group as of
June 30, 2013. Taipa Square Casino is included within Corporate and Others.
The Groups segment information for total assets and
capital expenditures is as follows:
Total Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Macau:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mocha Clubs
|
|
$
|
145,631
|
|
|
$
|
173,150
|
|
|
$
|
159,927
|
|
Altira Macau
|
|
|
496,455
|
|
|
|
501,105
|
|
|
|
573,814
|
|
City of Dreams
|
|
|
3,183,460
|
|
|
|
3,133,680
|
|
|
|
3,148,657
|
|
Studio City
|
|
|
3,832,770
|
|
|
|
3,987,912
|
|
|
|
2,519,461
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
7,658,316
|
|
|
|
7,795,847
|
|
|
|
6,401,859
|
|
|
|
|
|
The Philippines:
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Dreams Manila
|
|
|
946,540
|
|
|
|
1,070,723
|
|
|
|
631,377
|
|
|
|
|
|
Corporate and Others
|
|
|
1,804,926
|
|
|
|
1,565,993
|
|
|
|
1,780,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total consolidated assets
|
|
$
|
10,409,782
|
|
|
$
|
10,432,563
|
|
|
$
|
8,813,639
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Macau:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mocha Clubs
|
|
$
|
6,446
|
|
|
$
|
13,116
|
|
|
$
|
6,515
|
|
Altira Macau
|
|
|
18,404
|
|
|
|
21,984
|
|
|
|
5,464
|
|
City of Dreams
|
|
|
331,503
|
|
|
|
264,922
|
|
|
|
97,654
|
|
Studio City
|
|
|
968,696
|
|
|
|
907,455
|
|
|
|
440,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
1,325,049
|
|
|
|
1,207,477
|
|
|
|
550,459
|
|
|
|
|
|
The Philippines:
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Dreams Manila
|
|
|
98,884
|
|
|
|
405,196
|
|
|
|
359,854
|
|
|
|
|
|
Corporate and Others
|
|
|
31,909
|
|
|
|
24,632
|
|
|
|
2,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total capital expenditures
|
|
$
|
1,455,842
|
|
|
$
|
1,637,305
|
|
|
$
|
912,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
24.
|
SEGMENT INFORMATION
- continued
|
The Groups segment information on its results of operations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
NET REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mocha Clubs
|
|
$
|
136,217
|
|
|
$
|
147,373
|
|
|
$
|
148,683
|
|
Altira Macau
|
|
|
574,848
|
|
|
|
744,850
|
|
|
|
1,033,801
|
|
City of Dreams
|
|
|
2,794,673
|
|
|
|
3,848,623
|
|
|
|
3,857,049
|
|
Studio City
|
|
|
125,303
|
|
|
|
1,767
|
|
|
|
1,093
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
3,631,041
|
|
|
|
4,742,613
|
|
|
|
5,040,626
|
|
|
|
|
|
The Philippines:
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Dreams Manila
|
|
|
300,409
|
|
|
|
7,564
|
|
|
|
|
|
|
|
|
|
Corporate and Others
|
|
|
43,350
|
|
|
|
52,132
|
|
|
|
46,552
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net revenues
|
|
$
|
3,974,800
|
|
|
$
|
4,802,309
|
|
|
$
|
5,087,178
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ADJUSTED PROPERTY EBITDA
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Macau:
|
|
|
|
|
|
|
|
|
|
|
|
|
Mocha Clubs
|
|
$
|
30,259
|
|
|
$
|
36,337
|
|
|
$
|
40,222
|
|
Altira Macau
|
|
|
36,261
|
|
|
|
84,795
|
|
|
|
147,340
|
|
City of Dreams
|
|
|
798,504
|
|
|
|
1,165,632
|
|
|
|
1,193,211
|
|
Studio City
|
|
|
11,594
|
|
|
|
(1,296
|
)
|
|
|
(1,059
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total
|
|
|
876,618
|
|
|
|
1,285,468
|
|
|
|
1,379,714
|
|
|
|
|
|
The Philippines:
|
|
|
|
|
|
|
|
|
|
|
|
|
City of Dreams Manila
|
|
|
55,366
|
|
|
|
6
|
|
|
|
(603
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjusted property EBITDA
|
|
|
931,984
|
|
|
|
1,285,474
|
|
|
|
1,379,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING COSTS AND EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments to the Philippine Parties
|
|
|
(16,547
|
)
|
|
|
(870
|
)
|
|
|
|
|
Pre-opening costs
|
|
|
(168,172
|
)
|
|
|
(90,556
|
)
|
|
|
(13,969
|
)
|
Development costs
|
|
|
(110
|
)
|
|
|
(10,734
|
)
|
|
|
(26,297
|
)
|
Amortization of gaming subconcession
|
|
|
(57,237
|
)
|
|
|
(57,237
|
)
|
|
|
(57,237
|
)
|
Amortization of land use rights
|
|
|
(54,056
|
)
|
|
|
(64,471
|
)
|
|
|
(64,271
|
)
|
Depreciation and amortization
|
|
|
(359,341
|
)
|
|
|
(246,686
|
)
|
|
|
(261,298
|
)
|
Land rent to Belle
|
|
|
(3,476
|
)
|
|
|
(3,562
|
)
|
|
|
(3,045
|
)
|
Share-based compensation
|
|
|
(20,827
|
)
|
|
|
(20,401
|
)
|
|
|
(14,987
|
)
|
Property charges and others
|
|
|
(38,068
|
)
|
|
|
(8,698
|
)
|
|
|
(6,884
|
)
|
Gain on disposal of assets held for sale
|
|
|
|
|
|
|
22,072
|
|
|
|
|
|
Corporate and Others expenses
|
|
|
(115,735
|
)
|
|
|
(118,971
|
)
|
|
|
(91,299
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating costs and expenses
|
|
|
(833,569
|
)
|
|
|
(600,114
|
)
|
|
|
(539,287
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING INCOME
|
|
$
|
98,415
|
|
|
$
|
685,360
|
|
|
$
|
839,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-76
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
24.
|
SEGMENT INFORMATION
- continued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
NON-OPERATING INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
$
|
13,900
|
|
|
$
|
20,025
|
|
|
$
|
7,660
|
|
Interest expenses, net of capitalized interest
|
|
|
(118,330
|
)
|
|
|
(124,090
|
)
|
|
|
(152,660
|
)
|
Amortization of deferred financing costs
|
|
|
(38,511
|
)
|
|
|
(28,055
|
)
|
|
|
(18,159
|
)
|
Loan commitment and other finance fees
|
|
|
(7,328
|
)
|
|
|
(18,976
|
)
|
|
|
(25,643
|
)
|
Foreign exchange loss, net
|
|
|
(2,156
|
)
|
|
|
(6,155
|
)
|
|
|
(10,756
|
)
|
Other income, net
|
|
|
2,317
|
|
|
|
2,313
|
|
|
|
1,661
|
|
Loss on extinguishment of debt
|
|
|
(481
|
)
|
|
|
|
|
|
|
(50,935
|
)
|
Costs associated with debt modification
|
|
|
(7,603
|
)
|
|
|
|
|
|
|
(10,538
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating expenses, net
|
|
|
(158,192
|
)
|
|
|
(154,938
|
)
|
|
|
(259,370
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS) INCOME BEFORE INCOME TAX
|
|
|
(59,777
|
)
|
|
|
530,422
|
|
|
|
580,454
|
|
INCOME TAX EXPENSE
|
|
|
(1,031
|
)
|
|
|
(3,036
|
)
|
|
|
(2,441
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET (LOSS) INCOME
|
|
|
(60,808
|
)
|
|
|
527,386
|
|
|
|
578,013
|
|
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
|
|
166,555
|
|
|
|
80,894
|
|
|
|
59,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME ATTRIBUTABLE TO MELCO CROWN ENTERTAINMENT LIMITED
|
|
$
|
105,747
|
|
|
$
|
608,280
|
|
|
$
|
637,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note
|
(1)
|
Adjusted property EBITDA is earnings before interest, taxes, depreciation, amortization, pre-opening costs, development costs, property charges and others, share-based compensation, payments to the
Philippine Parties, land rent to Belle, gain on disposal of assets held for sale, Corporate and Others 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, Studio City and City of Dreams Manila and to compare the operating performance of its properties with those of its competitors.
|
The Groups geographic information for long-lived assets is as follows:
Long-lived Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Macau
|
|
$
|
6,355,934
|
|
|
$
|
5,366,692
|
|
|
$
|
4,503,982
|
|
The Philippines
|
|
|
691,729
|
|
|
|
728,999
|
|
|
|
334,827
|
|
Hong Kong and other foreign countries
|
|
|
2,390
|
|
|
|
1,817
|
|
|
|
1,289
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
7,050,053
|
|
|
$
|
6,097,508
|
|
|
$
|
4,840,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-77
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-
continued
(In thousands of U.S. dollars, except share and per share data)
25.
|
CHANGE IN SHAREHOLDING OF THE PHILIPPINE SUBSIDIARIES
|
On April 8, 2013, the Company through its subsidiary, MCE (Philippines) Investments Limited (MCE
Investments), subscribed for 2,846,595,000 common shares of MCP at a total consideration of PHP2,846,595,000 (equivalent to $69,592 based on exchange rate on transaction date), which increased the Companys shareholding in MCP and the
Group recognized an increase of $401 in the Companys additional paid-in capital which reflects the adjustment to the carrying amount of the noncontrolling interest of MCP.
On April 24, 2013, MCP and MCE Investments completed a placing and subscription transaction (the Placing and Subscription
Transaction), under which MCE Investments offered and sold in a private placement to various institutional investors of 981,183,700 common shares of MCP at the offer price of PHP14 per share (equivalent to $0.34 per share) (the
Offer). MCE Investments then used the proceeds from the Offer to subscribe for an equivalent number of common shares of MCP at the subscription price of PHP14 per share (equivalent to $0.34 per share). In connection with the Offer, MCE
Investments granted an over-allotment option (the Over-allotment Option) of up to 117,075,000 common shares of MCP at the offer price of PHP14 per share (equivalent to $0.34 per share) to a stabilizing agent (the Stabilizing
Agent). On May 23, 2013, the Stabilizing Agent exercised the Over-allotment Option and subscribed for 36,024,600 common shares of MCP at the offer price of PHP14 per share (equivalent to $0.34 per share). MCE Investments then used the
proceeds from the Over-allotment Option to subscribe for an equivalent number of common shares of MCP at the subscription price of PHP14 per share (equivalent to $0.34 per share). The aforesaid transactions decreased the Companys
shareholding in MCP and the Group recognized an increase of $227,134 in the Companys additional paid-in capital which reflects the adjustment to the carrying amount of the noncontrolling interest of MCP.
In March and April 2014, there are minor changes in ownership of MCP by the Group. The Company through its subsidiary, MCE (Philippines)
Investments No.2 Corporation, acquired additional 400 common shares and 3,000 common shares of MCP under trust arrangements on March 13, 2014 and April 11, 2014, respectively. On March 31, 2014, MCE Investments sold 200 common
shares of MCP to two independent directors of MCP.
On June 24, 2014, MCP and MCE Investments completed a placing and subscription
transaction (the 2014 Placing and Subscription Transaction), under which MCE Investments offered and sold in a private placement to various institutional investors of 485,177,000 common shares of MCP at the offer price of PHP11.30 per
share (equivalent to $0.26 per share) (the 2014 Offer). MCE Investments then used the proceeds from the 2014 Offer to subscribe for an equivalent number of common shares of MCP at the subscription price of PHP11.30 per share
(equivalent to $0.26 per share). The aforesaid transactions decreased the Companys shareholding in MCP and the Group recognized an increase of $57,293 in the Companys additional paid-in capital which reflects the adjustment to the
carrying amount of the noncontrolling interest of MCP.
On November 23, 2015, the Company through MCE Investments, subscribed for
693,500,000 common shares of MCP at a total consideration of PHP2,704,650,000 (equivalent to $57,681 based on exchange rate on transaction date), which increased the Companys shareholding in MCP and the Group recognized a decrease of $7,368 in
the Companys additional paid-in capital which reflects the adjustment to the carrying amount of the noncontrolling interest of MCP.
For the year ended December 31, 2015, 38,375,178 of restricted shares under the MCP Share Incentive Plan were vested (further details
please refer to Note 17), which decreased the Companys shareholding in MCP and the Group recognized a decrease of $1,740 in the Companys additional paid-in capital which reflects the adjustment to the carrying amount of the
noncontrolling interest of MCP.
F-78
MELCO CROWN ENTERTAINMENT LIMITED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- continued
(In thousands of U.S. dollars, except share and per share data)
25.
|
CHANGE IN SHAREHOLDING OF THE PHILIPPINE SUBSIDIARIES
- continued
|
During the year ended December 31, 2015, the total transfers to noncontrolling interest
amounted to $9,108 and during the years ended December 31, 2014 and 2013, the total transfers from noncontrolling interests amounted to $57,293 and $227,535, respectively, in relation to transactions as described above. The Group retains its
controlling financial interest in MCP before and after the above transactions.
The schedule below discloses the effects of changes in the
Companys ownership interest in MCP on the Companys equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Net income attributable to Melco Crown Entertainment Limited
|
|
$
|
105,747
|
|
|
$
|
608,280
|
|
|
$
|
637,463
|
|
Transfers (to) from noncontrolling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in Melco Crown Entertainment Limited additional
paid-in
capital resulting from subscription of 693,500,000 common shares of MCP
|
|
|
(7,368
|
)
|
|
|
|
|
|
|
|
|
Decrease in Melco Crown Entertainment Limited additional
paid-in
capital resulting from the vesting of restricted shares under the MCP Share Incentive Plan
|
|
|
(1,740
|
)
|
|
|
|
|
|
|
|
|
Increase in Melco Crown Entertainment Limited additional
paid-in
capital resulting from the 2014 Placing and Subscription Transaction for subscription of common shares of MCP
|
|
|
|
|
|
|
57,293
|
|
|
|
|
|
Increase in Melco Crown Entertainment Limited additional
paid-in
capital resulting from the Placing and Subscription Transaction and the Over-allotment Option exercised by the Stabilizing Agent for subscription of common shares of MCP
|
|
|
|
|
|
|
|
|
|
|
227,134
|
|
Increase in Melco Crown Entertainment Limited additional
paid-in
capital resulting from subscription of 2,846,595,000 common shares of MCP
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes from net income attributable to Melco Crown Entertainment Limiteds shareholders and
transfers from noncontrolling interests
|
|
$
|
96,639
|
|
|
$
|
665,573
|
|
|
$
|
864,998
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On March 18, 2016, the Board of Directors of the Company approved a modification to lower the exercise prices and extend the
vesting schedules of certain outstanding share options held by active employees as of March 18, 2016. A total of 4,572,234 share options awarded in 2013, 2014 and 2015 under the 2011 Share Incentive Plan were modified to state an exercise price of
$17.27 per ADS or $5.7567 per share, which reflected the closing price of the Companys ADS on the NASDAQ Global Select Market on the modification date.
F-79
MELCO CROWN ENTERTAINMENT LIMITED
ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE 1
FINANCIAL INFORMATION OF PARENT COMPANY
BALANCE SHEETS
(In
thousands of U.S. dollars, except share and per share data)
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2015
|
|
|
2014
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,850
|
|
|
$
|
7,708
|
|
Bank deposits with original maturity over three months
|
|
|
47,943
|
|
|
|
|
|
Amount due from an affiliated company
|
|
|
184
|
|
|
|
1,091
|
|
Amounts due from subsidiaries
|
|
|
150,323
|
|
|
|
238,090
|
|
Income tax receivable
|
|
|
62
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
3,823
|
|
|
|
7,565
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
221,185
|
|
|
|
254,454
|
|
|
|
|
|
|
|
|
|
|
INVESTMENTS IN SUBSIDIARIES
|
|
|
5,940,761
|
|
|
|
5,915,023
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
6,161,946
|
|
|
$
|
6,169,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accrued expenses and other current liabilities
|
|
$
|
3,270
|
|
|
$
|
2,920
|
|
Income tax payable
|
|
|
|
|
|
|
239
|
|
Amount due to an affiliated company
|
|
|
320
|
|
|
|
24
|
|
Amounts due to subsidiaries
|
|
|
184,549
|
|
|
|
183,872
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
188,139
|
|
|
|
187,055
|
|
|
|
|
|
|
|
|
|
|
ADVANCE FROM A SUBSIDIARY
|
|
|
1,634,005
|
|
|
|
1,696,090
|
|
OTHER LONG-TERM LIABILITIES
|
|
|
169
|
|
|
|
191
|
|
|
|
|
SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
|
Ordinary shares at US$0.01 par value per share
(Authorized 7,300,000,000 shares as of
December 31, 2015 and 2014 and issued 1,630,924,523 and 1,633,701,920 shares as of December 31, 2015 and 2014, respectively)
|
|
|
16,309
|
|
|
|
16,337
|
|
Treasury shares, at cost
(12,935,230 and 17,684,386 shares as of December 31, 2015 and
2014, respectively)
|
|
|
(275
|
)
|
|
|
(33,167
|
)
|
Additional paid-in capital
|
|
|
3,075,459
|
|
|
|
3,092,943
|
|
Accumulated other comprehensive losses
|
|
|
(21,934
|
)
|
|
|
(17,149
|
)
|
Retained earnings
|
|
|
1,270,074
|
|
|
|
1,227,177
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
|
4,339,633
|
|
|
|
4,286,141
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY
|
|
$
|
6,161,946
|
|
|
$
|
6,169,477
|
|
|
|
|
|
|
|
|
|
|
F-80
MELCO CROWN ENTERTAINMENT LIMITED
ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE 1
FINANCIAL INFORMATION OF PARENT COMPANY
STATEMENTS OF OPERATIONS
(In thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
REVENUE
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
(30,843
|
)
|
|
|
(33,887
|
)
|
|
|
(33,345
|
)
|
Property charges and others
|
|
|
(907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(31,750
|
)
|
|
|
(33,887
|
)
|
|
|
(33,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING LOSS
|
|
|
(31,750
|
)
|
|
|
(33,887
|
)
|
|
|
(33,345
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-OPERATING INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
992
|
|
|
|
3
|
|
|
|
(403
|
)
|
Interest expenses, net of capitalized interest
|
|
|
|
|
|
|
|
|
|
|
(4,274
|
)
|
Amortization of deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
(748
|
)
|
Foreign exchange (loss) gain, net
|
|
|
(108
|
)
|
|
|
569
|
|
|
|
(1,231
|
)
|
Other income, net
|
|
|
19,118
|
|
|
|
22,325
|
|
|
|
20,366
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
(679
|
)
|
Share of results of subsidiaries
|
|
|
118,046
|
|
|
|
620,023
|
|
|
|
658,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-operating income, net
|
|
|
138,048
|
|
|
|
642,920
|
|
|
|
671,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME BEFORE INCOME TAX
|
|
|
106,298
|
|
|
|
609,033
|
|
|
|
637,702
|
|
|
|
|
|
INCOME TAX EXPENSE
|
|
|
(551
|
)
|
|
|
(753
|
)
|
|
|
(239
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME
|
|
$
|
105,747
|
|
|
$
|
608,280
|
|
|
$
|
637,463
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-81
MELCO CROWN ENTERTAINMENT LIMITED
ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE 1
FINANCIAL INFORMATION OF PARENT COMPANY
STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
Net income
|
|
$
|
105,747
|
|
|
$
|
608,280
|
|
|
$
|
637,463
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
(4,767
|
)
|
|
|
(1,538
|
)
|
|
|
(14,535
|
)
|
Change in fair value of interest rate swap agreements
|
|
|
(18
|
)
|
|
|
(19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
(4,785
|
)
|
|
|
(1,557
|
)
|
|
|
(14,535
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income attributable to Parent Company
|
|
$
|
100,962
|
|
|
$
|
606,723
|
|
|
$
|
622,928
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-82
MELCO CROWN ENTERTAINMENT LIMITED
ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE 1
FINANCIAL INFORMATION OF PARENT COMPANY
STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2015
|
|
|
2014
|
|
|
2013
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
105,747
|
|
|
$
|
608,280
|
|
|
$
|
637,463
|
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation
|
|
|
13,734
|
|
|
|
12,576
|
|
|
|
11,249
|
|
Amortization of deferred financing costs
|
|
|
|
|
|
|
|
|
|
|
748
|
|
Loss on extinguishment of debt
|
|
|
|
|
|
|
|
|
|
|
679
|
|
Dividend received from a subsidiary
|
|
|
150,000
|
|
|
|
420,000
|
|
|
|
|
|
Share of results of subsidiaries
|
|
|
(118,046
|
)
|
|
|
(620,023
|
)
|
|
|
(658,016
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount due from an affiliated company
|
|
|
907
|
|
|
|
(1,091
|
)
|
|
|
1,113
|
|
Income tax receivable
|
|
|
(301
|
)
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
983
|
|
|
|
(2,429
|
)
|
|
|
(367
|
)
|
Accrued expenses and other current liabilities
|
|
|
350
|
|
|
|
584
|
|
|
|
(4,129
|
)
|
Income tax payable
|
|
|
|
|
|
|
111
|
|
|
|
394
|
|
Amount due to a shareholder
|
|
|
|
|
|
|
(67
|
)
|
|
|
67
|
|
Amounts due to affiliated companies
|
|
|
296
|
|
|
|
(1,759
|
)
|
|
|
1,724
|
|
Amounts due to subsidiaries
|
|
|
964
|
|
|
|
2,053
|
|
|
|
1,189
|
|
Other long-term liabilities
|
|
|
(22
|
)
|
|
|
191
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
154,612
|
|
|
|
418,426
|
|
|
|
(7,886
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Placement of bank deposits with original maturity over three months
|
|
|
(144,730
|
)
|
|
|
|
|
|
|
|
|
Advances to subsidiaries
|
|
|
(63,246
|
)
|
|
|
(155,883
|
)
|
|
|
(497,325
|
)
|
Repayment of advance to a subsidiary
|
|
|
|
|
|
|
400
|
|
|
|
1,337
|
|
Change in restricted cash
|
|
|
|
|
|
|
|
|
|
|
368,177
|
|
Amounts due from subsidiaries
|
|
|
90,245
|
|
|
|
(167,606
|
)
|
|
|
1,800
|
|
Withdrawals of bank deposits with original maturity over three months
|
|
|
96,787
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(20,944
|
)
|
|
|
(323,089
|
)
|
|
|
(126,011
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of advance from a subsidiary
|
|
|
(105,398
|
)
|
|
|
|
|
|
|
|
|
Dividends paid
|
|
|
(62,850
|
)
|
|
|
(342,718
|
)
|
|
|
|
|
Repurchase of shares for retirement
|
|
|
|
|
|
|
(300,495
|
)
|
|
|
|
|
Purchase of shares under trust arrangement for future vesting of restricted shares
|
|
|
|
|
|
|
(1,721
|
)
|
|
|
(8,770
|
)
|
Principal payments on long-term debt
|
|
|
|
|
|
|
|
|
|
|
(721,455
|
)
|
Proceeds from exercise of share options
|
|
|
2,409
|
|
|
|
|
|
|
|
4,017
|
|
Advance from a subsidiary
|
|
|
43,313
|
|
|
|
553,891
|
|
|
|
860,632
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities
|
|
|
(122,526
|
)
|
|
|
(91,043
|
)
|
|
|
134,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS
|
|
|
11,142
|
|
|
|
4,294
|
|
|
|
527
|
|
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
|
|
7,708
|
|
|
|
3,414
|
|
|
|
2,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS AT END OF YEAR
|
|
$
|
18,850
|
|
|
$
|
7,708
|
|
|
$
|
3,414
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-83
MELCO CROWN ENTERTAINMENT LIMITED
ADDITIONAL INFORMATION - FINANCIAL STATEMENT SCHEDULE 1
FINANCIAL INFORMATION OF PARENT COMPANY
NOTES TO FINANCIAL STATEMENT SCHEDULE 1
(In thousands of U.S. dollars, except share and per share data)
1.
|
Schedule 1 has been provided pursuant to the requirements of Rule 12-04(a) and 4-08(e)(3) of Regulation
S-X,
which require condensed financial information as to financial
position, cash flows and results and operations of a parent company as of the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of the consolidated and
unconsolidated subsidiaries together exceed 25 percent of consolidated net assets as of end of the most recently completed fiscal year. As of December 31, 2015 and 2014, approximately $4,054,000 and $3,786,000, respectively, of the restricted
net assets were not available for distribution, and as such, the condensed financial information of the Company has been presented for the years ended December 31, 2015, 2014 and 2013. The Company received cash dividend of $150,000, 420,000 and
nil from its subsidiary during the years ended December 31, 2015, 2014 and 2013, respectively.
|
The condensed financial information has been prepared using the same
accounting policies as set out in the Companys consolidated financial statements except that the parent company has used equity method to account for its investments in subsidiaries.
F-84