Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with, and is qualified in its entirety by, the consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.

Overview

We are a developer, owner and operator of destination casino resorts (integrated resorts). In Macau, we own approximately 72% of WML, which includes the operations of the Wynn Macau and Wynn Palace resorts. In Las Vegas, Nevada, we operate and, with the exception of certain retail space, own 100% of Wynn Las Vegas. We are currently constructing Wynn Boston Harbor, an integrated casino resort in Everett, Massachusetts.

Macau Operations

Wynn Macau features two luxury hotel towers with a total of 1,008 guest rooms and suites, approximately 273,000 square feet of casino space, eight food and beverage outlets, approximately 31,000 square feet of meeting and convention space, approximately 59,000 square feet of retail space, a rotunda show and recreation and leisure facilities.

On August 22, 2016, we opened Wynn Palace, an integrated resort in the Cotai area of Macau. Wynn Palace features a luxury hotel tower with 1,706 guest rooms, suites and villas, approximately 420,000 square feet of casino space, 11 food and beverage outlets, approximately 37,000 square feet of meeting and convention space, approximately 106,000 square feet of retail space, public attractions, including a performance lake and floral art displays, and recreation and leisure facilities.

Las Vegas Operations

Wynn Las Vegas features two luxury hotel towers with a total of 4,748 guest rooms, suites and villas, approximately 192,000 square feet of casino space, 33 food and beverage outlets, approximately 290,000 square feet of meeting and convention space, approximately 110,000 square feet of retail space (of which 103,000 square feet is owned and operated under a joint venture arrangement of which we own 50.1%), as well as two theaters, three nightclubs, a beach club, and recreation and leisure facilities.

In December 2016, we entered into the Retail Joint Venture with Crown to own and operate approximately 88,000 square feet of existing retail space. In November 2017, we contributed approximately 74,000 square feet of additional retail space to the Retail Joint Venture, the majority of which is currently under construction at Wynn Las Vegas. We expect to open the additional retail space in the second half of 2018. For more information on the Retail Joint Venture, see Item 8—"Financial Statements and Supplementary Data," Note 3, "Retail Joint Venture."

Development Projects

We are currently constructing Wynn Boston Harbor, an integrated resort in Everett, Massachusetts, adjacent to Boston along the Mystic River. The resort will contain a hotel, a waterfront boardwalk, meeting and convention space, casino space, a spa, retail offerings and food and beverage outlets. The total project budget, including gaming license fees, construction costs, capitalized interest, pre-opening expenses and land costs, is estimated to be approximately $2.5 billion. As of December 31, 2017, we have incurred approximately $1.13 billion in total project costs. We expect to open Wynn Boston Harbor in mid-2019.

We have begun site preparation and pre-construction activities for the redevelopment of the land previously occupied by the Wynn Las Vegas golf course, which we closed in the fourth quarter of 2017. Phase 1 of the project is expected to include a lagoon and additional meeting and convention space. Based on current designs, we estimate the total project budget for Phase 1 to be approximately $500 million and we expect to open Phase 1 in the first half of 2020.

We continually seek out new opportunities for additional gaming or related businesses, in the United States, and worldwide.

Key Operating Measures

Certain key operating measures specific to the gaming industry are included in our discussion of our operational performance for the periods for which the Consolidated Statements of Income are presented. Below are definitions of these key operating measures discussed:

•Table drop for our Macau Operations is the amount of cash that is deposited in a gaming table's drop box plus cash chips purchased at the casino cage.
•Table drop for our Las Vegas Operations is the amount of cash and net markers issued that are deposited in a gaming table's drop box.
•Rolling chips are identifiable chips that are used to track turnover for purposes of calculating incentives.
•Turnover is the sum of all losing rolling chip wagers within our Macau Operations' VIP program.
•Table games win is the amount of table drop or turnover that is retained and recorded as casino revenues.
•Slot machine win is the amount of handle (representing the total amount wagered) that is retained by us and is recorded as casino revenues.
•Average daily rate ("ADR") is calculated by dividing total room revenues, including the retail value of promotional allowances (less service charges, if any), by total rooms occupied, including complimentary rooms.
•Revenue per available room ("REVPAR") is calculated by dividing total room revenues, including the retail value of promotional allowances (less service charges, if any), by total rooms available.
•Occupancy is calculated by dividing total occupied rooms, including complimentary rooms, by the total rooms available.

Below is a discussion of the methodologies used to calculate win percentages at our resorts.

In our VIP operations in Macau, customers primarily purchase rolling chips from the casino cage and can only use them to make wagers. Winning wagers are paid in cash chips. The loss of the rolling chips in the VIP operations is recorded as turnover and provides a base for calculating VIP win percentage. It is customary in Macau to measure VIP play using this rolling chip method. We expect our win as a percentage of turnover from these operations to be within the range of 2.7% to 3.0%. In our mass market operations in Macau, customers may purchase cash chips at either the gaming tables or at the casino cage.

The measurements from our VIP and mass market operations are not comparable as the measurement method used in our mass market operations tracks the initial purchase of chips at the table and at the casino cage, while the measurement method from our VIP operations tracks the sum of all losing wagers. Accordingly, the base measurement from the VIP operations is much larger than the base measurement from the mass market operations. As a result, the expected win percentage with the same amount of gaming win is smaller in the VIP operations when compared to the mass market operations.

In Las Vegas, customers purchase chips at the gaming tables. The cash and net markers used to purchase chips are deposited in the gaming table's drop box. This is the base of measurement that we use for calculating win percentage in Las Vegas. Each type of table game has its own theoretical win percentage. Our expected table games win percentage in Las Vegas is 21% to 25%.

Results of Operations

Summary annual results

The following table summarizes our financial results for the periods presented (in thousands, except per share data).

Years Ended December 31,
201720162015
Net revenues$6,306,368$4,466,297$4,075,883
Net income attributable to Wynn Resorts, Limited747,181241,975195,290
Diluted net income per share7.282.381.92
Adjusted Property EBITDA1,810,7321,259,3271,185,789

During the year ended December 31, 2017, our net income attributable to Wynn Resorts, Limited was $747.2 million, or $7.28 per diluted share, an increase of 208.8%, or $505.2 million, compared to $242.0 million, or $2.38 per diluted share, for the same period of 2016. The increase in net income attributable to Wynn Resorts, Limited was primarily the result of the provisional income tax benefit from U.S. tax reform and increases in operating income from Wynn Palace, Wynn Macau and our Las Vegas Operations, partially offset by increases in the Redemption Note fair value and interest expense as we are no longer capitalizing interest on Wynn Palace. Wynn Palace opened on August 22, 2016, with our results for the year ended December 31, 2016 including 132 days of operations.

Adjusted Property EBITDA was $1.81 billion for the year ended December 31, 2017, an increase of 43.8%, or $551.4 million, from $1.26 billion for the same period of 2016. The increase in Adjusted Property EBITDA was the result of increases of $424.5 million, $79.2 million, and $47.7 million from Wynn Palace, Wynn Macau and our Las Vegas Operations, respectively.

During the year ended December 31, 2016, our net income attributable to Wynn Resorts, Limited was $242.0 million, or $2.38 per diluted share, an increase of 23.9%, or $46.7 million, compared to $195.3 million, or $1.92 per diluted share, for the same period of 2015. The increase in net income attributable to Wynn Resorts, Limited was primarily due to a loss on extinguishment of debt in 2015 that was not experienced in 2016.

Adjusted Property EBITDA was $1.26 billion for the year ended December 31, 2016, an increase of 6.2%, or $73.5 million, from $1.19 billion for the same period of 2015. The increase in Adjusted Property EBITDA was primarily due to the new operations associated with the opening of Wynn Palace, partially offset by a decrease of 3.8% from Wynn Macau driven by a decrease in business volumes.

Financial results for the year ended December 31, 2017 compared to the year ended December 31, 2016.

Net revenues

The following table presents net revenues from our Macau and Las Vegas Operations (dollars in thousands):

Years Ended December 31,
20172016Percent Change
Net Revenues
Macau Operations:
Wynn Macau$2,485,804$2,264,0879.8
Wynn Palace (1)2,139,154583,336266.7
Total Macau Operations4,624,9582,847,42362.4
Las Vegas Operations1,681,4101,618,8743.9
$6,306,368$4,466,29741.2

(1) Wynn Palace opened on August 22, 2016.

Net revenues increased 41.2%, or $1.84 billion, to $6.31 billion for the year ended December 31, 2017, from $4.47 billion for the same period of 2016. The increase was the result of increases of $1.56 billion, $221.7 million and $62.5 million from Wynn Palace, Wynn Macau and our Las Vegas Operations, respectively.

Non-casino revenues consist of operating revenues from rooms, food and beverage, entertainment, retail and other, less promotional allowances. The following table presents net revenues from our casino revenues and non-casino revenues (dollars in thousands):

Years Ended December 31,
20172016Percent Change
Net revenues
Casino revenues$4,948,319$3,268,14151.4
Non-casino revenues1,358,0491,198,15613.3
$6,306,368$4,466,29741.2

Casino revenues were 78.5% of total net revenues for the year ended December 31, 2017, compared to 73.2% for the same period of 2016, while non-casino revenues were 21.5% of total net revenues, compared to 26.8% for the same period of 2016.

Casino revenues

Casino revenues increased 51.4%, or $1.68 billion, to $4.95 billion for the year ended December 31, 2017, from $3.27 billion for the same period of 2016. The increase was primarily due to increases of $1.45 billion, $225.0 million and $9.7 million from Wynn Palace, Wynn Macau and our Las Vegas Operations, respectively. The increase in casino revenues from Wynn Macau was primarily driven by a 23.9% increase in VIP turnover.

Prior to the opening of Wynn Palace, the Gaming Inspection and Coordination Bureau of Macau authorized 100 new table games for operation at Wynn Palace with 25 additional table games authorized for operation on January 1, 2017, and a further 25 new table games for operation on January 1, 2018, for a total of 150 new table games in the aggregate. In addition, we have and will continue to transfer table games between Wynn Macau and Wynn Palace, subject to the aggregate cap, to optimize our casino operations. As of February 15, 2018, we had a total of 316 table games at Wynn Macau and 323 at Wynn Palace.

The table below sets forth our casino revenues and associated key operating measures for our Macau and Las Vegas Operations (dollars in thousands, except for win per unit per day).

Years Ended December 31,
20172016Increase/ (Decrease)Percent Change
Macau Operations:
Wynn Macau:
Total casino revenues$2,360,221$2,135,193$225,02810.5
VIP:
Average number of table games96149(53)(35.6)
VIP turnover$58,303,836$47,048,754$11,255,08223.9
Table games win$1,907,625$1,547,261$360,36423.3
VIP win as a % of turnover3.27%3.29%(0.02)
Table games win per unit per day$54,726$28,332$26,39493.2
Mass market:
Average number of table games204216(12)(5.6)
Table drop$4,525,727$4,585,476$(59,749)(1.3)
Table games win$880,964$881,797$(833)(0.1)
Table games win %19.5%19.2%0.3
Table games win per unit per day$11,820$11,131$6896.2
Average number of slot machines91480211214.0
Slot machine handle$3,526,747$3,386,973$139,7744.1
Slot machine win$154,425$145,680$8,7456.0
Slot machine win per unit per day$463$497$(34)(6.8)
Wynn Palace (1):
Total casino revenues$1,965,362$519,877$1,445,485278.0
VIP:
Average number of table games104812328.4
VIP turnover$52,573,258$14,480,023$38,093,235263.1
Table games win$1,486,674$396,954$1,089,720274.5
VIP win as a % of turnover2.83%2.74%0.09
Table games win per unit per day$39,325$37,009$2,3166.3
Mass market:
Average number of table games202245(43)(17.6)
Table drop$3,490,363$1,000,881$2,489,482248.7
Table games win$795,159$211,146$584,013276.6
Table games win %22.8%21.1%1.7
Table games win per unit per day$10,759$6,527$4,23264.8
Average number of slot machines1,026962646.7
Slot machine handle$3,053,614$738,907$2,314,707313.3
Slot machine win$165,754$40,664$125,090307.6
Slot machine win per unit per day$443$320$12338.4

(1) Wynn Palace opened on August 22, 2016.

Years Ended December 31,
20172016Increase/ (Decrease)Percent Change
Las Vegas Operations:
Total casino revenues$622,736$613,071$9,6651.6
Average number of table games23623510.4
Table drop$1,804,988$1,838,479$(33,491)(1.8)
Table games win$465,664$465,041$6230.1
Table games win %25.8%25.3%0.5
Table games win per unit per day$5,415$5,406$90.2
Average number of slot machines1,8561,893(37)(2.0)
Slot machine handle$3,183,369$3,148,610$34,7591.1
Slot machine win$218,897$208,024$10,8735.2
Slot machine win per unit per day$323$300$237.7

Non-casino revenues

Non-casino revenues increased 13.3%, or $159.9 million, to $1.36 billion for the year ended December 31, 2017, from $1.20 billion for the same period of 2016, primarily due to the increases of $110.3 million and $52.9 million from Wynn Palace and our Las Vegas Operations, respectively, partially offset by a decrease of $3.3 million from Wynn Macau.

Room revenues increased 16.7%, or $100.9 million, to $704.2 million for the year ended December 31, 2017, from $603.3 million for the same period of 2016, primarily due to increases of $92.1 million and $19.4 million from Wynn Palace and our Las Vegas Operations, respectively, partially offset by a decrease of $10.6 million from Wynn Macau. The increase experienced by our Las Vegas Operations was driven by an ADR increase of 3.0% and a 1.6 percentage point increase in occupancy, while the decrease from Wynn Macau was a result of an ADR decline of 12.3%, partially offset by a 3.1 percentage point increase in occupancy.

The table below sets forth our room revenues and associated key operating measures for our Macau and Las Vegas Operations.

Years Ended December 31,
20172016Percent Change (1)
Macau Operations:
Wynn Macau:
Total room revenues (dollars in thousands)$101,242$111,817(9.5)
Occupancy97.5%94.4%3.1
ADR$257$293(12.3)
REVPAR$251$277(9.4)
Wynn Palace (2):
Total room revenues (dollars in thousands)$146,980$54,843168.0
Occupancy96.2%83.2%13.0
ADR$237$276(14.1)
REVPAR$227$230(1.3)
Las Vegas Operations:
Total room revenues (dollars in thousands)$455,980$436,6134.4
Occupancy86.9%85.3%1.6
ADR$305$2963.0
REVPAR$265$2525.2

(1) Except occupancy, which is presented as a percentage point change.

(2) Wynn Palace opened on August 22, 2016.

Food and beverage revenues increased 14.9%, or $89.4 million, to $690.9 million for the year ended December 31, 2017, from $601.5 million for the same period of 2016, primarily due to increases of $60.4 million and $32.0 million from Wynn Palace and our Las Vegas Operations, respectively, partially offset by a decrease of $3.1 million from Wynn Macau, respectively. The increase from our Las Vegas Operations was primarily driven by an increase in revenues at our nightclubs.

Entertainment, retail and other increased 16.9%, or $61.4 million, to $424.8 million for the year ended December 31, 2017, from $363.4 million for the same period of 2016, primarily due to $62.8 million from Wynn Palace.

Promotional allowances increased 24.8%, or $91.8 million, to $461.9 million for the year ended December 31, 2017, from $370.1 million for the same period of 2016. The increase was primarily due to an increase of $105.0 million from Wynn Palace, partially offset by decreases of $8.0 million and $5.2 million from Wynn Macau and our Las Vegas Operations, respectively. The decreases from Wynn Macau and our Las Vegas Operations were primarily a result of a greater percentage of cash-paying guests in our rooms and food and beverage outlets.

Operating expenses

Operating expenses increased 33.1%, or $1.31 billion, to $5.25 billion for the year ended December 31, 2017, from $3.94 billion for the same period of 2016, primarily due to increases in casino expenses of $1.12 billion, depreciation and amortization of $147.6 million and general and administrative expenses of $137.3 million, partially offset by a decrease of $128.0 million in pre-opening expenses, all primarily related to the opening of Wynn Palace.

Casino expenses increased 53.8%, or $1.12 billion, to $3.20 billion for the year ended December 31, 2017, from $2.08 billion for the same period of 2016, primarily due to increases of $975.1 million and $150.1 million from Wynn Palace and Wynn Macau, respectively. The increase at Wynn Macau was driven by gaming taxes, which increased commensurate with the 10.5% increase in casino revenues.

Room expenses increased 12.4%, or $19.6 million, to $177.5 million for the year ended December 31, 2017, from $157.9 million for the same period of 2016. The increase was primarily due to increases of $10.5 million and $9.7 million from our Las Vegas Operations and Wynn Palace, respectively, mainly attributable to expenses associated with the increase in occupancy and an increase in labor costs.

Food and beverage expenses increased 9.5%, or $35.6 million, to $410.8 million for the year ended December 31, 2017, from $375.2 million for the same period of 2016, primarily due to increases of $23.7 million and $16.8 million from Wynn Palace and our Las Vegas Operations, respectively. The increase from our Las Vegas Operations was primarily driven by increased labor costs.

Entertainment, retail and other expenses increased 10.0%, or $16.2 million, to $177.3 million for the year ended December 31, 2017, from $161.1 million for the same period of 2016, primarily related to Wynn Palace.

General and administrative expenses increased 25.1%, or $137.3 million, to $685.5 million for the year ended December 31, 2017, from $548.1 million for the same period of 2016, primarily related to Wynn Palace.

Provision for doubtful accounts was a benefit of $6.7 million for the year ended December 31, 2017, compared to an expense of $8.2 million for the same period of 2016. The change was due to the collection of certain casino accounts receivable that resulted in the reversal of previously recorded allowance for doubtful accounts.

Pre-opening expenses were $26.7 million for the year ended December 31, 2017, compared to $154.7 million for the same period of 2016. During the year ended December 31, 2017, we incurred pre-opening expenses of $25.9 million related to Wynn Boston Harbor and $0.2 million related to our Las Vegas Operations. During the year ended December 31, 2016, we incurred $129.8 million related to Wynn Palace, $22.7 million related to Wynn Boston Harbor, and $2.3 million related to our Las Vegas Operations.

Depreciation and amortization increased 36.5%, or $147.6 million, to $552.4 million for the year ended December 31, 2017, from $404.7 million for the same period of 2016. The increase was primarily due to the opening of Wynn Palace with the associated building and furniture, fixtures and equipment being placed in service.

Property charges and other was $29.6 million for the year ended December 31, 2017, compared to $54.8 million for the same period of 2016. During the year ended December 31, 2017, we incurred $12.6 million and $6.7 million at Wynn Palace

and Wynn Macau, respectively, primarily due to abandonment charges and asset retirements associated with various renovation projects and estimated costs related to property damage caused by a typhoon that impacted Macau. In addition, we incurred $10.6 million in charges from our Las Vegas Operations primarily related to miscellaneous renovations. During the year ended December 31, 2016, we incurred a $15.5 million exit fee for the right to procure energy for our Las Vegas Operations from the wholesale energy markets instead of from the local public electric utility, $14.1 million for the write-down of the carrying value to the purchase price of an aircraft we sold in January 2017, $10.1 million in abandonment charges related to current construction of additional retail space at our Las Vegas Operations and $5.5 million for the write-off of show production costs due to the closing of Steve Wynn's ShowStoppers in December 2016.

Interest expense, net of capitalized interest

The following table summarizes information related to interest expense (dollars in thousands):

Years Ended December 31,
20172016Percent Change
Interest expense
Interest cost, including amortization of debt issuance costs and original issue discount and premium$407,098$383,4976.2
Capitalized interest(18,434)(94,132)(80.4)
$388,664$289,36534.3
Weighted average total debt balance$10,031,005$9,564,845
Weighted average interest rate4.06%4.00%

Interest cost increased $23.6 million for the year ended December 31, 2017, compared to the same period of 2016, primarily due to an increase in our weighted average total debt balance from borrowings under the Wynn America Credit Facilities. Capitalized interest decreased $75.7 million for the year ended December 31, 2017, compared to the same period of 2016, primarily due to the completion of Wynn Palace construction activities in August 2016 and a $25.6 million out-of-period adjustment recorded in the first quarter of 2016. During the first quarter of 2016, we corrected immaterial amounts of additional interest that should have been capitalized instead of being expensed during the years ended December 31, 2015 and 2014.

Other non-operating income and expenses

We incurred a loss of $59.7 million and a gain of $65.0 million for the years ended December 31, 2017 and 2016, respectively, from the change in fair value of the Redemption Note. The change in fair value was a result of changes in certain variables used to calculate the estimated fair value. For further information on the fair value of the Redemption Note, see Item 8—"Financial Statements and Supplementary Data," Note 2, "Summary of Significant Accounting Policies."

We incurred a loss of $55.4 million on the extinguishment of debt for the year ended December 31, 2017. During the year ended December 31, 2017, we completed a cash tender offer and subsequent redemption of our 5 3/8% First Mortgage Notes due 2022 (the "2022 Notes") and issued our 5 1/4% Senior Notes due 2027 (the "2027 WLV Notes"). We also completed a cash tender offer and subsequent redemption of our 5 1/4% Senior Notes ("2021 Notes") and issued our 4 7/8% Senior Notes due 2024 (the "2024 WML Notes") and 5 1/2% Senior Notes due 2027 (the "2027 WML Notes"), together (the "WML Notes"). We recorded losses on extinguishment of debt of $20.8 million in connection with the 2022 Notes and 2027 WLV Notes transactions and $33.1 million in connection with the WML Notes transactions. Additionally, in connection with an amendment of our Wynn America credit facilities, we recorded a loss on extinguishment of debt of $1.5 million. We incurred no losses from the extinguishment of debt for the year ended December 31, 2016.

Interest income was $31.2 million for the year ended December 31, 2017, compared to $13.5 million for the same period of 2016. During the years ended December 31, 2017 and 2016, our short-term investment strategy was to preserve capital while retaining sufficient liquidity. The majority of our short-term investment amounts were in time deposits, fixed deposits and money market accounts with maturities of three months or less.

We incurred losses of $21.7 million and $0.7 million for the years ended December 31, 2017 and 2016, respectively, from foreign currency remeasurements. The losses were primarily due to the impact of the exchange rate fluctuation of the Macau

pataca, in relation to the U.S. dollar, on the remeasurements of U.S. dollar denominated debt and other obligations from our Macau-related entities.

Income Taxes

For the years ended December 31, 2017 and 2016, we recorded a tax benefit of $329.0 million and a tax expense of $8.1 million, respectively. Our income tax benefit for the year ended December 31, 2017 primarily relates to a provisional tax benefit of $339.9 million resulting from the impact of U.S. tax reform on the Company's deferred taxes. Our income tax expense for the year ended December 31, 2016 primarily related to an increase in our deferred tax liabilities.

Wynn Macau SA received a five-year exemption from the Macau Complementary Tax on casino gaming profits through December 31, 2020. For the years ended December 31, 2017 and 2016, we were exempt from the payment of $63.0 million and $27.3 million, respectively, in such taxes. Our non-gaming profits remain subject to the Macau Complementary Tax and casino winnings remain subject to the Macau special gaming tax and other levies together totaling 39% in accordance with our concession agreement.

In August 2016, Wynn Macau SA received an extension of its agreement with the Macau government that provides for an annual payment of 12.8 million Macau patacas (approximately $1.6 million) as complementary tax due by stockholders on dividend distributions. This agreement on dividends is effective through December 31, 2020.

We have participated in the Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP") for the 2012 through 2017 tax years and will continue to participate in the IRS CAP for the 2018 tax year. In February 2017 and 2018, the IRS completed an examination of our 2015 and 2016 U.S. tax return, respectively, and had no changes.

In March 2017, the Financial Services Bureau commenced an examination of the 2013 and 2014 Macau income tax returns of Wynn Macau SA. As of December 31, 2017, based upon the current status of the examination, we believe no changes to the unrecognized tax benefits are required.

In July 2017, the Financial Services Bureau commenced an examination of the 2013 and 2014 Macau income tax returns of Palo Real Estate Company Limited ("Palo"), a subsidiary of Wynn Macau SA. In February 2018, the Financial Services Bureau concluded its examination with no changes.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $142.1 million for the year ended December 31, 2017, compared to $60.5 million for the year ended December 31, 2016. These amounts are primarily related to the noncontrolling interests' share of net income from WML.

Financial results for the year ended December 31, 2016 compared to the year ended December 31, 2015.

Net Revenues

The following table presents net revenues from our Macau and Las Vegas Operations (dollars in thousands):

Years Ended December 31,
20162015Percent Change
Net revenues
Macau Operations:
Wynn Macau$2,264,087$2,463,092(8.1)
Wynn Palace (1)583,336——
Total Macau Operations2,847,4232,463,09215.6
Las Vegas Operations1,618,8741,612,7910.4
$4,466,297$4,075,8839.6

(1) Wynn Palace opened on August 22, 2016.

Net revenues increased 9.6%, or $390.4 million, to $4.47 billion for the year ended December 31, 2016, from $4.08 billion for the same period of 2015. The increase was primarily due to $583.3 million from Wynn Palace and an increase of $6.1 million from our Las Vegas Operations, partially offset by a decrease of $199.0 million from Wynn Macau.

The following table presents net revenues from our casino revenues and non-casino revenues (dollars in thousands):

Years Ended December 31,
20162015Percent Change
Net revenues
Casino revenues$3,268,141$2,932,41911.4
Non-casino revenues1,198,1561,143,4644.8
$4,466,297$4,075,8839.6

Casino revenues were 73.2% of total net revenues for the year ended December 31, 2016, compared to 71.9% of total net revenues for the same period of 2015, while non-casino revenues were 26.8% of total net revenues, compared to 28.1% for the same period of 2015.

Casino Revenues

Casino revenues increased 11.4%, or $335.7 million, to $3.27 billion for the year ended December 31, 2016, from $2.93 billion in the same period of 2015. The increase was primarily due to casino revenues of $519.9 million from Wynn Palace, partially offset by a $177.7 million decrease from Wynn Macau. The decline in casino revenues from Wynn Macau was driven by a decrease in business volumes from both our VIP and mass market operations, with decreases in VIP turnover of 18.8%, table drop of 5.6% and slot handle of 14.5%. The business volume decrease for Wynn Macau was primarily driven by the impact from the economic and political conditions in Macau and China, as well as from resort openings in the Cotai area of Macau, including Wynn Palace. We experienced a VIP win as a percentage of turnover of 3.29% for the year ended December 31, 2016, compared to 2.87% for the same period of 2015, which partially offset the business volume decrease in our VIP operations.

Prior to the opening of Wynn Palace, the Gaming Inspection and Coordination Bureau of Macau authorized 100 new table games for operation at Wynn Palace with 25 additional table games authorized for operation on January 1, 2017, and a further 25 new table games for operation on January 1, 2018, for a total of 150 new table games in the aggregate. In addition, we have and will continue to transfer table games between Wynn Macau and Wynn Palace, subject to the aggregate cap, to optimize our casino operations.

The table below sets forth our casino revenues and associated key operating measures for our Macau and Las Vegas Operations (dollars in thousands, except for win per unit per day).

Years Ended December 31,
20162015Increase/ (Decrease)Percent Change
Macau Operations:
Wynn Macau:
Total casino revenues$2,135,193$2,312,925$(177,732)(7.7)
VIP:
Average number of table games149230(81)(35.2)
VIP turnover$47,048,754$57,917,060$(10,868,306)(18.8)
Table games win$1,547,261$1,659,683$(112,422)(6.8)
VIP win as a % of turnover3.29%2.87%0.42
Table games win per unit per day$28,332$19,785$8,54743.2
Mass market:
Average number of table games216228(12)(5.3)
Table drop$4,585,476$4,857,804$(272,328)(5.6)
Table games win$881,797$951,458$(69,661)(7.3)
Table games win %19.2%19.6%(0.4)
Table games win per unit per day$11,131$11,431$(300)(2.6)
Average number of slot machines8027089413.3
Slot machine handle$3,386,973$3,961,115$(574,142)(14.5)
Slot machine win$145,680$191,164$(45,484)(23.8)
Slot machine win per unit per day$497$740$(243)(32.8)
Wynn Palace (1):
Total casino revenues$519,877$—$519,877—
VIP:
Average number of table games81—81—
VIP turnover$14,480,023$—$14,480,023—
Table games win$396,954$—$396,954—
VIP win as a % of turnover2.74%—%2.74
Table games win per unit per day$37,009$—$37,009—
Mass market:
Average number of table games245—245—
Table drop$1,000,881$—$1,000,881—
Table games win$211,146$—$211,146—
Table games win %21.1%—%21.1
Table games win per unit per day$6,527$—$6,527—
Average number of slot machines962—962—
Slot machine handle$738,907$—$738,907—
Slot machine win$40,664$—$40,664—
Slot machine win per unit per day$320$—$320—

(1) Wynn Palace opened on August 22, 2016.

Years Ended December 31,
20162015Increase/ (Decrease)Percent Change
Las Vegas Operations:
Total casino revenues$613,071$619,494$(6,423)(1.0)
Average number of table games23523231.3
Table drop$1,838,479$2,060,189$(221,710)(10.8)
Table games win$465,041$490,920$(25,879)(5.3)
Table games win %25.3%23.8%1.5
Table games win per unit per day$5,406$5,786$(380)(6.6)
Average number of slot machines1,8931,866271.4
Slot machine handle$3,148,610$2,969,327$179,2836.0
Slot machine win$208,024$206,626$1,3980.7
Slot machine win per unit per day$300$303$(3)(1.0)

Non-casino revenues

Non-casino revenues increased 4.8%, or $54.7 million, to $1.20 billion for the year ended December 31, 2016, from $1.14 billion for the same period of 2015, primarily due to the opening of Wynn Palace during the third quarter of 2016 and an increase of 5.7% in room revenue from our Las Vegas Operations, partially offset by a 14.4% decrease in non-casino revenues at Wynn Macau.

Room revenues increased 12.0%, or $64.8 million, to $603.3 million for the year ended December 31, 2016, from $538.5 million for the same period of 2015, primarily due to $54.8 million from Wynn Palace and an increase of $23.5 million from our Las Vegas Operations, partially offset by a decrease of $13.5 million from Wynn Macau. The increase experienced by our Las Vegas Operations was driven by an ADR increase of 3.9% while the decrease from Wynn Macau was the result of an ADR decline of 9.3% and a 2.1 percentage point decrease in occupancy.

The table below sets forth our room revenues and associated key operating measures for our Macau and Las Vegas Operations.

Years Ended December 31,
20162015Percent Change (1)
Macau Operations:
Wynn Macau:
Total room revenues (dollars in thousands)$111,817$125,348(10.8)
Occupancy94.4%96.5%(2.1)
ADR$293$323(9.3)
REVPAR$277$312(11.2)
Wynn Palace (2):
Total room revenues (dollars in thousands)$54,843$——
Occupancy83.2%—%—
ADR$276$——
REVPAR$230$——
Las Vegas Operations:
Total room revenues (dollars in thousands)$436,613$413,1525.7
Occupancy85.3%85.2%0.1
ADR$296$2853.9
REVPAR$252$2433.7

(1) Except occupancy, which is presented as a percentage point change.

(2) Wynn Palace opened on August 22, 2016.

Food and beverage revenues increased 0.7%, or $4.4 million, to $601.5 million for the year ended December 31, 2016, from $597.1 million for the same period of 2015, primarily due to $27.1 million from Wynn Palace, partially offset by decreases of $12.0 million and $10.7 million from our Las Vegas Operations and Wynn Macau, respectively. The decrease at our Las Vegas Operations was primarily due to a decline in revenues at our nightclubs and the decrease from Wynn Macau was mainly from a decline in revenues at our restaurants.

Entertainment, retail and other increased 3.7%, or $12.8 million, to $363.4 million for the year ended December 31, 2016, from $350.6 million for the same period of 2015, primarily due to $38.0 million from Wynn Palace, partially offset by a $19.3 million decrease in revenue from retail shops at Wynn Macau.

Promotional allowances increased 8.0%, or $27.3 million, to $370.1 million for the year ended December 31, 2016, from $342.7 million for the same period of 2015. As a percentage of total casino revenues, promotional allowances were 11.3% for the year ended December 31, 2016, compared to 11.7% for the same period of 2015.

Operating expenses

Operating expenses increased 15.4%, or $527.6 million, to $3.94 billion for the year ended December 31, 2016, from $3.42 billion for the same period of 2015, driven primarily by increases in casino expenses of $217.1 million, general and administrative expenses of $83.3 million, depreciation and amortization of $82.1 million and pre-opening expenses of $77.1 million, all primarily due to the opening of Wynn Palace.

Casino expenses increased 11.7%, or $217.1 million, to $2.08 billion for the year ended December 31, 2016, from $1.86 billion for the same period of 2015. The increase was commensurate with the 11.4% increase in casino revenues.

Room expenses increased 6.0%, or $8.9 million, to $157.9 million for the year ended December 31, 2016, from $149.0 million for the same period of 2015. The increase was primarily due to $16.4 million from Wynn Palace and a $4.3 million increase from our Las Vegas Operations, partially offset by an $11.6 million decrease from Wynn Macau.

Food and beverage expenses increased 3.9%, or $14.0 million, to $375.2 million for the year ended December 31, 2016, from $361.2 million for the same period of 2015, primarily related to Wynn Palace.

Entertainment, retail and other expenses increased 2.4%, or $3.7 million, to $161.1 million for the year ended December 31, 2016, from $157.4 million in the same period of 2015. The increase was primarily due to $8.9 million from Wynn Palace, partially offset by a decrease of $4.8 million from Wynn Macau.

General and administrative expenses increased 17.9%, or $83.3 million, to $548.1 million for the year ended December 31, 2016, from $464.8 million in the same period of 2015. The increase was primarily due to $73.9 million from Wynn Palace, as well as increases in general and administrative expenses from our Las Vegas Operations and corporate related expenses.

Provision for doubtful accounts decreased 26.2%, or $2.9 million, to $8.2 million for the year ended December 31, 2016, from $11.1 million for the same period of 2015. The change in the provision was primarily due to increased collections of certain casino accounts receivable at Wynn Macau.

Pre-opening expenses were $154.7 million for the year ended December 31, 2016, compared to $77.6 million for the same period of 2015. During the year ended December 31, 2016, we incurred pre-opening expenses of $129.8 million related to Wynn Palace, $22.7 million related to Wynn Boston Harbor and $2.3 million related to our Las Vegas Operations. During the year ended December 31, 2015 we incurred pre-opening expenses of $55.1 million and $22.6 million related to Wynn Palace and Wynn Boston Harbor, respectively.

Depreciation and amortization increased 25.4%, or $82.1 million, to $404.7 million for the year ended December 31, 2016, from $322.6 million for the same period of 2015. The increase was attributable to $105.9 million from Wynn Palace, primarily from the opening and associated building and furniture, fixtures and equipment placed in service, partially offset by a decrease of $14.1 million at Wynn Macau. The majority of the Wynn Macau decrease was due to a change in estimated useful lives of buildings and improvements, which was effective September 1, 2015, to more accurately reflect the estimated periods during which these assets are expected to remain in service.

Property charges and other was $54.8 million for the year ended December 31, 2016, compared to $10.5 million for the same period of 2015. During the year ended December 31, 2016, we incurred a $15.5 million exit fee for the right to procure energy for our Las Vegas Operations from the wholesale energy markets instead of from the local public electric utility and $14.1 million for the write-down of the carrying value of the purchase price of an aircraft we sold in January 2017. In addition, we incurred expenses of $10.1 million in abandonment charges related to current construction of additional retail space at our Las Vegas Operations and $5.5 million for the write-off of show production costs due to the closing of Steve Wynn's ShowStoppers in December 2016.

Interest expense, net of capitalized interest

The following table summarizes information related to interest expense (dollars in thousands):

Years Ended December 31,
20162015Percent Change
Interest expense
Interest cost, including amortization of debt issuance costs and original issue discount and premium$383,497$354,2338.3
Capitalized interest(94,132)(53,327)76.5
$289,365$300,906(3.8)
Weighted average total debt balance$9,564,845$8,214,598
Weighted average interest rate4.00%4.30%

Interest cost increased $29.3 million for the year ended December 31, 2016, compared to the same period of 2015, primarily due to an increase in our weighted average total debt balance, partially offset by a decrease in our weighted average interest rate. Capitalized interest increased $40.8 million for the year ended December 31, 2016, primarily due to the $25.6 million correction of an immaterial amount during 2016 as well as the construction of Wynn Palace. During the first quarter of 2016, we corrected immaterial amounts of additional interest that should have been capitalized instead of being expensed

during the years ended December 31, 2015 and 2014. Had these amounts been corrected in the appropriate periods, the capitalized interest for the year ended December 31, 2015, would have been $21.9 million higher. For further information, see Item 8—"Financial Statements and Supplementary Data," Note 2, "Summary of Significant Accounting Policies."

Other non-operating income and expenses

We incurred gains of $65.0 million and $52.0 million for the years ended December 31, 2016 and 2015, respectively, from the change in fair value of the Redemption Note. The change in fair value was a result of changes in certain variables used to calculate its estimated fair value.

We incurred a loss of $126.0 million from the extinguishment of debt for the year ended December 31, 2015, in connection with the cash tender offer for the 7 7/8% First Mortgage Notes due May 1, 2020 and the 7 3/4% 2020 First Mortgage Notes due August 15, 2020 (together the "2020 Notes"), subsequent redemption of the untendered 2020 Notes and the amendment of our Wynn Macau Credit Facilities. In connection with the tender offer and subsequent redemption of the 2020 Notes, we recorded a loss on the extinguishment of debt of $123.9 million. In connection with the amendment of the Wynn Macau Credit Facilities, we expensed $2.1 million of unamortized debt issuance costs. We incurred no loss on extinguishment of debt for the year ended December 31, 2016.

We incurred a gain of $0.4 million and a loss of $5.3 million from the change in the fair value of our interest rate swaps for the years ended December 31, 2016 and 2015, respectively.

Interest income was $13.5 million for the year ended December 31, 2016, compared to $7.2 million for the same period of 2015. During the years ended December 31, 2016 and 2015, our short-term investment strategy was to preserve capital while retaining sufficient liquidity. The majority of our short-term investment amounts were in fixed deposits and money market accounts with a maturity of three months or less.

Income Taxes

For the years ended December 31, 2016 and 2015, we recorded a tax expense of $8.1 million and $7.7 million, respectively, primarily related to an increase in our deferred tax liabilities.

For the years ended December 31, 2016 and 2015, we were exempt from the payment of $27.3 million and $41.6 million, respectively, under our exemption from the Macau Complementary Tax on gaming profits. Our non-gaming profits remain subject to the Macau Complementary Tax and casino winnings remain subject to the Macau special gaming tax and other levies together totaling 39% in accordance with our concession agreement.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $60.5 million for the year ended December 31, 2016, compared to $86.2 million for the year ended December 31, 2015. These amounts are primarily related to the noncontrolling interests' share of net income from WML.

Adjusted Property EBITDA

We use Adjusted Property EBITDA to manage the operating results of our segments. Adjusted Property EBITDA is net income before interest, income taxes, depreciation and amortization, pre-opening expenses, property charges and other, management and license fees, corporate expenses and other (including intercompany golf course and water rights leases), stock-based compensation, loss on extinguishment of debt, change in interest rate swap fair value, change in Redemption Note fair value and other non-operating income and expenses, and includes equity in income from unconsolidated affiliates. Adjusted Property EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted Property EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors, as well as a basis for determining certain incentive compensation. We also present Adjusted Property EBITDA because it is used by some investors as a way to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to U.S. generally accepted accounting principles ("GAAP"). In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their EBITDA calculations pre-opening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, Adjusted Property EBITDA should not be considered as an alternative to operating income as an

indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, Adjusted Property EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, income taxes and other non-recurring charges, which are not reflected in Adjusted Property EBITDA. Also, our calculation of Adjusted Property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.

The following table summarizes Adjusted Property EBITDA (in thousands) for our Macau and Las Vegas Operations as reviewed by management and summarized in Item 8—"Financial Statements and Supplementary Data," Note 15, "Segment Information." That footnote also presents a reconciliation of Adjusted Property EBITDA to net income attributable to Wynn Resorts, Limited.

Years Ended December 31,
201720162015
Wynn Macau$760,752$681,509$708,623
Wynn Palace (1)$527,583$103,036$—
Las Vegas Operations$522,397$474,782$477,166

(1) Wynn Palace opened on August 22, 2016.

Adjusted Property EBITDA at Wynn Macau increased 11.6% for the year ended December 31, 2017, compared to the same period of 2016, primarily due to improved VIP operations driven by a year-over-year increase in VIP turnover. Adjusted Property EBITDA at Wynn Macau decreased 3.8% for the year ended December 31, 2016, compared to the same period of 2015, primarily due to casino revenue performance driven by year-over-year declines in VIP turnover, table drop and slot machine handle.

Adjusted Property EBITDA at Wynn Palace was $527.6 million for the year ended December 31, 2017, compared to $103.0 million for the same period of 2016. Although the ramp up of Wynn Palace continues to be impacted by construction surrounding the property, we experienced significant business volume increases in both VIP and mass market operations during 2017, its first full year of operations. VIP turnover increased 18.5%, 39.9% and 47.0%, for the three months ended December 31, 2017, compared to the three months ended September 30, 2017, June 30, 2017 and March 31, 2017, respectively. Table drop increased 29.8%, 54.3% and 46.1%, for the three months ended December 31, 2017, compared to the three months ended September 30, 2017, June 30, 2017 and March 31, 2017, respectively.

Adjusted Property EBITDA at our Las Vegas Operations increased 10.0% for the year ended December 31, 2017, compared to the same period of 2016, primarily due to improved casino operations and food and beverage operations. Adjusted Property EBITDA at our Las Vegas Operations was relatively flat for the year ended December 2016, compared to the same period of 2015.

Refer to the discussions above regarding the specific details of our results of operations.

Liquidity and Capital Resources

Cash Flows - Summary

Our cash flows were as follows (in thousands):

Years Ended December 31,
201720162015
Net cash provided by operating activities$1,876,577$970,546$572,813
Net cash used in investing activities(957,633)(1,288,250)(1,891,558)
Net cash (used in) provided by financing activities(563,712)691,8661,216,258
Effect of exchange rate on cash(3,880)(1,129)412
Increase (decrease) in cash and cash equivalents$351,352$373,033$(102,075)

Operating Activities

Our operating cash flows primarily consist of the operating income generated by our Macau and Las Vegas Operations (excluding depreciation and amortization and other non-cash charges), interest paid and earned, and changes in working capital accounts such as receivables, inventories, prepaid expenses and payables. Our table games play both in Macau and Las Vegas is a mix of cash play and credit play, while our slot machine play is conducted primarily on a cash basis. A significant portion of our table games revenue is attributable to the play of a limited number of premium international customers who gamble on credit. The ability to collect these gaming receivables may impact our operating cash flow for the period. Our rooms, food and

beverage, and entertainment, retail, and other revenue is conducted on a cash and credit basis. Accordingly, operating cash flows will be impacted by changes in operating income and accounts receivable.

Net cash provided by operations for the year ended December 31, 2017 was $1.88 billion, compared to $970.5 million for the same period of 2016. The increase was primarily due to the operations of Wynn Palace, which generated $424.5 million of additional Adjusted Property EBITDA, and a $292.8 million increase in customer deposits.

Net cash provided by operations for the year ended December 31, 2016 was $970.5 million, compared to $572.8 million for the same period of 2015. The increase was primarily due to an increase in customer deposits of $276.0 million and a change in working capital accounts from our Macau Operations.

Investing Activities

Net cash used in investing activities for the year ended December 31, 2017 was $957.6 million, which was primarily attributable to $935.5 million in capital expenditures, net of construction payables and retention, with $572.8 million related to Wynn Boston Harbor and $150.9 million related to our Macau Operations.

Net cash used in investing activities for the year ended December 31, 2016 was $1.29 billion, which was primarily attributable to $1.23 billion in capital expenditures, net of construction payables and retention, with $838.3 million related to Wynn Palace and $212.2 million related to Wynn Boston Harbor.

Net cash used in investing activities for the year ended December 31, 2015 was $1.89 billion, which was primarily attributable to $1.92 billion in capital expenditures, net of construction payables and retention, with $1.57 billion related to Wynn Palace.

Financing Activities

Net cash used in financing activities for the year ended December 31, 2017 was $563.7 million, which was primarily attributable to net repayments of $340.2 million under our Wynn Macau Credit Facilities, $320.8 million for dividend payments and $91.2 million for the payment of financing costs, partially offset by $180.0 million in proceeds received from Crown for assets contributed to the Retail Joint Venture.

Net cash provided by financing activities for the year ended December 31, 2016 was $691.9 million, which was primarily attributable to borrowings of $930.0 million under our Wynn America Credit Facilities and proceeds of $217.0 million from the sale of a 49.9% ownership interest in a subsidiary, partially offset by dividend payments of $325.2 million.

Net cash provided by financing activities was $1.22 billion for the year ended December 31, 2015, which was primarily attributable to net borrowings of $1.62 billion under our amended Wynn Macau Credit Facilities, partially offset by dividend payments of $499.1 million. We also issued the $1.8 billion 5 1/2% Senior Notes due 2025 (the "2025 Notes") and used the proceeds to extinguish $1.6 billion of our 2020 Notes.

Capital Resources

As of December 31, 2017, we had approximately $2.80 billion of cash and cash equivalents and $327.5 million of available-for-sale investments in domestic and foreign debt securities. Cash and cash equivalents include cash on hand, cash in bank and fixed deposits, investments in money market funds, domestic and foreign bank time deposits and commercial paper, all with original maturities of less than 90 days. Of these amounts, WML and its subsidiaries (of which we own approximately 72%) held $670.3 million in cash and cash equivalents. If our portion of this cash and cash equivalents were repatriated to the U.S. on December 31, 2017, it would be subject to minimal U.S. taxes in the year of repatriation. Wynn America and Wynn Las Vegas, LLC held cash balances of $142.5 million and $244.6 million, respectively. Wynn Resorts, Limited (including its subsidiaries other than WML, Wynn America and Wynn Las Vegas, LLC), which is not a guarantor of the debt of its subsidiaries, held $1.75 billion and $327.5 million of cash and available-for-sale investments, respectively.

The following table summarizes our outstanding borrowings and available borrowing capacity under our credit facilities as of December 31, 2017 (in thousands):

Facility Borrowing CapacityBorrowings OutstandingLetters of Credit OutstandingFacility Availability
Macau Related:
Wynn Macau Credit Facilities (1):
Senior Term Loan Facility$2,298,798$2,298,798$—$—
Senior Revolving Credit Facility748,287——748,287
WML Finance Credit Facility (2)495,152——495,152
U.S. Related:
Wynn America Credit Facilities (3):
Senior Term Loan Facility1,000,0001,000,000——
Senior Revolving Credit Facility375,000—17,689357,311
Total credit facilities$4,917,237$3,298,798$17,689$1,600,750
(1)Our Macau related credit facilities include a $2.30 billion equivalent fully funded senior secured term loan facility (the "Wynn Macau Senior Term Loan Facility") and a $750 million equivalent senior secured revolving credit facility (the "Wynn Macau Senior Revolving Credit Facility," and together with the Wynn Macau Senior Term Loan Facility, the "Wynn Macau Credit Facilities"). The borrower is Wynn Macau SA, an indirect wholly owned subsidiary of WML, and borrowings consist of both United States dollar and Hong Kong dollar tranches. Wynn Macau SA has the ability to upsize the Wynn Macau Credit Facilities by an additional $1 billion in equivalent senior secured loans upon its satisfaction of various conditions.
(2)Our Macau related credit facilities include a HK$3.87 billion (approximately $495.2 million) cash-collateralized revolving credit facility ("WML Finance Credit Facility") under which WML Finance I, Limited, an indirect wholly owned subsidiary of WML, is the borrower.
(3)Our U.S. related credit facilities consist of an $875 million fully funded senior secured term loan facility (the "WA Senior Term Loan Facility I"), a $125 million fully funded senior term loan facility (the "WA Senior Term Loan Facility II") and a $375 million senior secured revolving credit facility (the "WA Senior Revolving Credit Facility," and collectively, the "Wynn America Credit Facilities"), under which Wynn America, an indirect wholly owned subsidiary of the Company, is the borrower.

We expect that our future cash needs will relate primarily to operations, funding of development projects and enhancements to our operating resorts, debt service and retirement and general corporate purposes. We expect to meet our cash needs including our contractual obligations with future anticipated cash flow from operations, availability under our bank credit facilities and our existing cash balances. We intend to primarily fund our current development project, Wynn Boston Harbor, with the available borrowing capacity under our Wynn America Credit Facilities.

Macau Related Debt

Our Macau related debt consists of senior notes, the Wynn Macau Credit Facilities and the WML Finance Credit Facility.

2024 WML Notes. On September 20, 2017, WML issued the $600 million 2024 WML Notes pursuant to an indenture, dated as of September 20, 2017, between WML and Deutsche Bank Trust Company Americas, as trustee (the "2024 WML Indenture"). The 2024 WML Notes will mature on October 1, 2024 and bear interest at the rate of 4 7/8% per annum. At any time prior to October 1, 2020, WML may redeem the 2024 WML Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the WML 2024 Notes or (b) a "make-whole" amount as determined by an independent investment banker in accordance with the terms of the 2024 WML Indenture. In either case, the redemption price would include accrued and unpaid interest. In addition, at any time prior to October 1, 2020, WML may use the net cash proceeds from certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2024 WML Notes at a redemption price equal to 104.875% of the aggregate principal amount of the 2024 WML Notes. On or after October 1, 2020, WML may redeem the 2024 WML Notes, in whole or in part, at a premium decreasing annually from 102.438% of the principal amount to 100% of the principal amount, plus accrued and unpaid interest.

2027 WML Notes. On September 20, 2017, WML issued the $750 million 2027 WML Notes pursuant to an indenture, dated as of September 20, 2017, between WML and Deutsche Bank Trust Company Americas, as trustee (the "2027 WML Indenture" and together with the 2024 WML Indenture, the "WML Indentures"). The 2027 WML Notes bear interest at the rate of 5 1/2% per annum and mature on October 1, 2027. At any time prior to October 1, 2022, WML may redeem the 2027 WML Notes, in whole or in part, at a redemption price equal to the greater of (a) 100% of the principal amount of the 2027 WML

Notes or (b) a "make-whole" amount as determined by an independent investment banker in accordance with the terms of the 2027 WML Indenture. In either case, the redemption price would include accrued and unpaid interest. In addition, at any time prior to October 1, 2020, WML may use the net cash proceeds from certain equity offerings to redeem up to 35% of the aggregate principal amount of the 2027 WML Notes, at a redemption price equal to 105.5% of the aggregate principal amount of the 2027 WML Notes. On or after October 1, 2022, WML may redeem the 2027 WML Notes, in whole or in part, at a premium decreasing annually from 102.75% of the principal amount to 100% of the principal amount, plus accrued and unpaid interest.

If WML undergoes a change of control (as defined in the WML Indentures), it must offer to repurchase the WML Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest. In addition, WML may redeem the WML Notes, in whole but not in part, at a redemption price equal to 100% of the principal amount, plus accrued and unpaid interest, in response to any change in or amendment to certain tax laws or tax positions. Further if a holder or beneficial owner of the WML Notes fails to meet certain requirements imposed by any Gaming Authority (as defined in the WML Indentures), WML may require the holder or beneficial owner to dispose of or redeem its WML Notes.

Upon the occurrence of (1) any event after which none of WML or any of its subsidiaries have such licenses, concessions, subconcessions or other permits or authorizations as necessary to conduct gaming activities in substantially the same scope as it does on the date of the WML Notes issuance, for a period of ten consecutive days or more, and such event has a material adverse effect on the financial condition, business, properties, or results of operations of WML and its subsidiaries, taken as a whole, or (2) the termination, rescission, revocation or modification of any such licenses, concessions, subconcessions or other permits or authorizations which has had a material adverse effect on the financial condition, business, properties, or results of operations of WML and its subsidiaries, taken as a whole, each holder of the WML Notes will have the right to require WML to repurchase all or any part of such holders' WML Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest.

The WML Notes are WML's general unsecured obligations and rank pari passu in right of payment with all of WML's existing and future senior unsecured indebtedness; will rank senior to all of WML's future subordinated indebtedness, if any; will be effectively subordinated to all of WML's future secured indebtedness to the extent of the value of the assets securing such debt; and will be structurally subordinated to all existing and future obligations of WML's subsidiaries, including the Wynn Macau Credit Facilities and the WML Finance Credit Facility. The WML Notes are not registered under the Securities Act of 1933, as amended (the "Securities Act"), and the WML Notes are subject to restrictions on transferability and resale.

The WML Indentures contain covenants limiting WML's (and certain of its subsidiaries') ability to, among other things: merge or consolidate with another company; transfer or sell all or substantially all of its properties or assets; and lease all or substantially all of its properties or assets. The terms of the WML Indentures contain customary events of default, including, but not limited to: default for 30 days in the payment of interest when due on the WML Notes; default in the payment of the principal, or premium, if any, when due on the WML Notes; failure to comply with any payment obligations relating to the repurchase by WML of the WML Notes upon a change of control; failure to comply with certain covenants in the WML Indentures; certain defaults on certain other indebtedness; failure to pay judgments against WML or certain subsidiaries that, in the aggregate, exceed $50.0 million; and certain events of bankruptcy or insolvency. In the case of an event of default arising from certain events of bankruptcy or insolvency, all WML Notes then outstanding will become due and payable immediately without further action or notice.

Wynn Macau Credit Facilities. The Wynn Macau Senior Term Loan Facility is repayable in graduating installments of 2.50% to 7.33% of the principal amount on a quarterly basis commencing in December 2018, with a final installment of 50% of the principal amount repayable in September 2021. The Wynn Macau Senior Revolving Credit Facility will mature in September 2020, at which time any outstanding borrowings must be repaid. The Wynn Macau Credit Facilities bear interest at LIBOR or HIBOR plus a margin of 1.50% to 2.25% per annum based on Wynn Macau SA's Leverage Ratio (as defined in the Wynn Macau Credit Facilities). The commitment fee required to be paid for unborrowed amounts under the Wynn Macau Senior Revolving Credit Facility, if any, is between 0.52% and 0.79%, per annum, based on Wynn Macau SA's Leverage Ratio. The annual commitment fee is payable quarterly in arrears and is calculated based on the daily average of the unborrowed amounts.

The Wynn Macau Credit Facilities contain a requirement that Wynn Macau SA must make mandatory repayments of indebtedness from specified percentages of excess cash flow. If Wynn Macau SA's Leverage Ratio is greater than 4.5 to 1, then 25% of Excess Cash Flow (as defined in the Wynn Macau Credit Facilities) must be used for prepayment of indebtedness and cancellation of available borrowings under the Wynn Macau Credit Facilities. There is no mandatory prepayment in respect of Excess Cash Flow if Wynn Macau SA's Leverage Ratio is equal to or less than 4.5 to 1.

The Wynn Macau Credit Facilities contain customary covenants restricting certain activities including, but not limited to: the incurrence of additional indebtedness, the incurrence or creation of liens on any of its property, sale and leaseback transactions, the ability to dispose of assets, and making loans or other investments. In addition, Wynn Macau SA is required by the financial covenants to maintain a Leverage Ratio of not greater than 5.25 to 1 for the fiscal year ending December 31, 2017, and an Interest Coverage Ratio (as defined in the Wynn Macau Credit Facilities) of not less than 2.00 to 1 at any time.

Borrowings under the Wynn Macau Credit Facilities will continue to be guaranteed by Palo, and by certain subsidiaries of the Company that own equity interests in Wynn Macau SA, and are secured by substantially all of the assets of Wynn Macau SA and Palo, and the equity interests in Wynn Macau SA. Borrowings under the Wynn Macau Credit Facilities are not guaranteed by the Company or WML.

In connection with the gaming concession contract of Wynn Macau SA, Wynn Macau SA entered into a Bank Guarantee Reimbursement Agreement with BNU for the benefit of the Macau government. This guarantee assures Wynn Macau SA's performance under the casino concession agreement, including the payment of premiums, fines and indemnity for any material failure to perform under the terms of the concession agreement and the payment of any gaming taxes. As of December 31, 2017, the guarantee was in the amount of MOP 300 million (approximately $37.3 million) and will remain at such amount until 180 days after the end of the term of the concession agreement (2022). BNU, as issuer of the guarantee, is currently secured by a second priority security interest in the senior lender collateral package. From and after repayment of all indebtedness under the Wynn Macau Credit Facilities, Wynn Macau SA is obligated to promptly, upon demand by BNU, repay any claim made on the guarantee by the Macau government. BNU is paid an annual fee for the guarantee of MOP 2.3 million (approximately $0.3 million).

WML Finance Credit Facility. Borrowings under the WML Finance Credit Facility are in Hong Kong dollars and are used for working capital requirements and general corporate purposes. The WML Finance Credit Facility matures in July 2018, at which time any outstanding borrowings must be repaid. The WML Finance Credit Facility bears interest initially at 1.50% per annum, such rate calculated as the interest rate paid by the lender as the deposit bank for the cash collateral deposited and pledged with the lender plus a margin of 0.40%. Under terms of the agreement, mandatory repayment is required upon a Change in Control or Material Adverse Effect, as defined in the agreement.

U.S. and Corporate Related Debt

Our U.S. related debt consists of senior notes and the Wynn America Credit Facilities. The Corporate related debt consists of the Redemption Note.

Notes. Our senior notes rank pari passu in right of payment.

2023 Notes. In May 2013, Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp., an indirect wholly owned subsidiary of Wynn Resorts ("Capital Corp." and, together with Wynn Las Vegas, LLC, the "Issuers"), issued the $500 million 4 1/4% Senior Notes due 2023 (the "2023 Notes") pursuant to an indenture, dated as of May 22, 2013 (the "2023 Indenture"), among the Issuers, the Guarantors (as defined below), and the U.S. Bank National Association, as trustee (the "Trustee"). The 2023 Notes will mature on May 30, 2023 and bear interest at the rate of 4 1/4% per annum. The Issuers may, at their option, redeem the 2023 Notes, in whole or in part, at any time or from time to time prior to their stated maturity. The redemption price for the 2023 Notes that are redeemed before February 28, 2023 will include a "make-whole" premium, plus accrued and unpaid interest. In the event of a change of control triggering event (as defined in the 2023 Indenture), the Issuers will be required to offer to repurchase the 2023 Notes at 101% of the principal amount, plus accrued and unpaid interest.

On February 16, 2018, the Issuers commenced a solicitation of consents (the "Consent Solicitation") for a proposed amendment (the "Proposed Amendment") to the 2023 Indenture. The Proposed Amendment would conform the definition of change of control relating to ownership of equity interests in the Company to the terms of the indentures governing the 2025 Notes and 2027 WLV Notes. Adoption of the Proposed Amendment requires the consent of holders of a majority in aggregate principal amount of the 2023 Notes. The Consent Solicitation will expire on March 6, 2018.

2025 Notes. In February 2015, the Issuers issued the $1.8 billion 2025 Notes pursuant to an indenture, dated as of February 18, 2015 (the "2025 Indenture"), among the Issuers, Guarantors (as defined below) and the Trustee. The 2025 Notes will mature on March 1, 2025 and bear interest at the rate of 5 1/2% per annum. The Issuers may, at their option, redeem the 2025 Notes, in whole or in part, at any time or from time to time prior to their stated maturity. The redemption price for the 2025 Notes that are redeemed before December 1, 2024 will include a "make-whole" premium, plus accrued and unpaid interest. In the event of a change of control triggering event (as defined in the 2025 Indenture), the Issuers will be required to offer to repurchase the 2025 Notes at 101% of the principal amount, plus accrued and unpaid interest.

2027 WLV Notes. In May 2017, the Issuers issued the $900 million 2027 WLV Notes pursuant to an indenture, dated as of May 11, 2017 (the "2027 Indenture"), among the Issuers, the Guarantors (as defined below) and the Trustee. The 2027 WLV Notes will mature on May 15, 2027 and bear interest at the rate of 5 1/4% per annum. The Issuers may, at their option, redeem the 2027 WLV Notes, in whole or in part, at any time or from time to time prior to their stated maturity. The redemption price for the 2027 WLV Notes that are redeemed before February 15, 2027 will include a "make-whole" premium, plus accrued and unpaid interest. In the event of a change of control triggering event (as defined in the 2027 Indenture), the Issuers will be required to offer to repurchase the 2027 WLV Notes at 101% of the principal amount, plus accrued and unpaid interest.

Each of the 2023 Notes, 2025 Notes and 2027 WLV Notes are senior obligations of the Issuers and are unsecured, except for the first priority pledge by Wynn Las Vegas Holdings, LLC of its equity interests in Wynn Las Vegas, LLC. If Wynn Resorts receives an investment grade rating from one or more ratings agencies, the first priority pledge securing the 2023 Notes, 2025 Notes and 2027 WLV Notes will be released.

Each of the 2023 Notes, 2025 Notes and 2027 WLV Notes are jointly and severally guaranteed by all of the Issuers' subsidiaries, other than Capital Corp., which was a co-issuer (the "Guarantors"). The guarantees are senior unsecured obligations and rank senior in right of payment to all of their existing and future subordinated debt. The guarantees rank equally in right of payment with all existing and future liabilities of the Issuers' subsidiaries that are not so subordinated and will be effectively subordinated in right of payment to all of such existing and future secured debt (to the extent of the collateral securing such debt).

Each of the 2023 Indenture, 2025 Indenture and 2027 Indenture contains negative covenants and financial covenants, including, but not limited to, covenants limiting the Issuers' and the Guarantors' ability to create liens on assets to secure debt; enter into sale-leaseback transactions; and merge or consolidate with another company. These covenants are subject to a number of important and significant limitations, qualifications and exceptions. The 2027 Indenture also provides that Wynn America may assume all of Wynn Las Vegas, LLC's obligations under the 2027 Indenture and the 2027 WLV Notes if certain conditions set forth in the 2027 Indenture are met.

Events of default under each of the 2023 Indenture, 2025 Indenture and 2027 Indenture include, among others, the following: default for 30 days in the payment of interest when due on the applicable notes; default in payment of the principal, or premium, if any, when due on the applicable notes; failure to comply with certain covenants in the applicable indenture; and certain events of bankruptcy or insolvency. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to the Issuers or Guarantors, all notes then outstanding will become due and payable immediately without further action or notice.

Each of the 2023 Notes, 2025 Notes and 2027 WLV Notes are also subject to mandatory redemption requirements imposed by gaming laws and regulations of gaming authorities in Nevada.

Wynn America Credit Facilities. On April 24, 2017, we amended the Wynn America Credit Facilities to, among other things, extend the maturity of portions of the credit facilities. Of the $875 million WA Senior Term Loan Facility I, $69.6 million matures in November 2020 with repayments in quarterly installments of $1.7 million commencing in June 2018 and a final installment of $52.2 million in November 2020, and $805.4 million matures in December 2021 with repayment in quarterly installments of $20.1 million commencing in March 2020 and a final installment of $664.5 million in December 2021. The WA Senior Term Loan Facility II matures in December 2021 with no required repayments until maturity in December 2021. Of the $375 million WA Senior Revolving Credit Facility, $42 million matures in November 2019 and $333 million matures in December 2021.

Subject to certain exceptions, the Wynn America Credit Facilities bear interest at either base rate plus 0.75% per annum or the reserve adjusted Eurodollar rate plus 1.75% per annum. The annual fee required to pay for unborrowed amounts, if any, is 0.30% per annum, payable quarterly in arrears, calculated based on the daily average of the unborrowed amounts under such credit facilities.

The Wynn America Credit Facilities contain customary representations and warranties, events of default and negative and affirmative covenants, including, among other things, limitations on: indebtedness; investments; restricted payments; mergers and acquisitions; payment of indebtedness; negative pledges; liens; transactions with affiliates and sales of assets. In addition, Wynn America is subject to financial covenants, including maintaining a Maximum Consolidated Senior Secured Net Leverage Ratio and a Minimum Consolidated EBITDA, each as defined in the Wynn America Credit Facilities. Commencing with the second full fiscal quarter ending after the fiscal quarter in which Wynn Boston Harbor opens, the Maximum Consolidated

Senior Secured Net Leverage Ratio is not to exceed 2.75 to 1. Commencing with the fiscal quarter ending December 31, 2015, the Minimum Consolidated EBITDA is not to be less than $200.0 million.

We provided a completion guaranty in favor of the lenders under the Wynn America Credit Facilities to support the development and opening of Wynn Boston Harbor. Wynn America and the guarantors have entered into a security agreement (as amended from time to time) in favor of the lenders under the Wynn America Credit Facilities pursuant to which, subject to certain exceptions, Wynn America and the guarantors have pledged all equity interests in the guarantors to the extent permitted by applicable law and granted a first priority security interest in substantially all of the other existing and future assets of the guarantors.

Redemption Note. Based on the Board of Directors' finding of "unsuitability," on February 18, 2012, we redeemed and canceled Aruze's 24,549,222 shares of Wynn Resorts' common stock. Following a finding of "unsuitability," our articles of incorporation authorize redemption at "fair value" of the shares held by unsuitable persons. Pursuant to the articles of incorporation, we issued the Redemption Note to Aruze, a former stockholder and related party, in redemption of the shares. The Redemption Note has a principal amount of approximately $1.94 billion, matures on February 18, 2022 and bears interest at the rate of 2% per annum, payable annually in arrears on each anniversary of the date of the Redemption Note. We may, in our sole and absolute discretion, at any time and from time to time, and without penalty or premium, prepay the whole or any portion of the principal or interest due under the Redemption Note. In no instance shall any payment obligation under the Redemption Note be accelerated except in the sole and absolute discretion of Wynn Resorts or as specifically mandated by law. The indebtedness evidenced by the Redemption Note, is subordinated to the prior payment in full of all existing and future obligations of Wynn Resorts and any of its affiliates in respect of indebtedness for borrowed money of any kind or nature. Aruze, Universal Entertainment Corporation and Kazuo Okada have challenged the redemption of Aruze's shares and we are currently involved in litigation with those parties as well as related stockholder derivative litigation. The outcome of these various proceedings cannot be predicted. Any adverse judgments or settlements involving payment of a material sum of money could cause a material adverse effect on our financial condition and results of operations and could expose us to additional claims by third parties, including current or former investors or regulators. Any adverse judgments or settlements would reduce our profits and could limit our ability to operate our business. See Item 1A—Risk Factors and Item 8—"Financial Statements and Supplementary Data," Note 14, "Commitments and Contingencies."

Other Factors Affecting Liquidity

Wynn Resorts is a holding company and, as a result, our ability to pay dividends is highly dependent on our ability to obtain funds and our subsidiaries' ability to provide funds to us. Wynn America and Wynn Macau SA debt instruments contain customary negative covenants and financial covenants, including, but not limited to, covenants that restrict their ability to pay dividends or distributions to any direct or indirect subsidiaries.

Wynn Las Vegas, LLC intends to fund its operations and capital requirements from cash on hand and operating cash flow. We cannot assure you, however, that our Las Vegas Operations will generate sufficient cash flow from operations or the availability of additional indebtedness will be sufficient to enable us to service and repay Wynn Las Vegas, LLC's indebtedness and to fund its other liquidity needs. Similarly, we expect that our Macau Operations will fund Wynn Macau SA and WML's debt service obligations with existing cash, operating cash flow and availability under the Wynn Macau Credit Facilities. However, we cannot assure you that operating cash flows will be sufficient to do so. We may refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of the indebtedness on acceptable terms or at all.

Legal proceedings in which we are involved also may impact our liquidity. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Item 8—"Financial Statements and Supplementary Data," Note 14, "Commitments and Contingencies."

Our Board of Directors has authorized an equity repurchase program. Under the equity repurchase program, we may repurchase the Company's outstanding shares from time to time through open market purchases, in privately negotiated transactions, and under plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. As of December 31, 2017, we had $1.0 billion in repurchase authority under the program.

We have in the past repurchased, and in the future, we may periodically consider repurchasing our outstanding notes for cash. The amount of any notes to be repurchased, as well as the timing of any repurchases, will be based on business, market and other conditions and factors, including price, contractual requirements or consents, and capital availability.

New business developments or other unforeseen events may occur, resulting in the need to raise additional funds. We continue to explore opportunities to develop additional gaming or related businesses in domestic and international markets. There can be no assurances regarding the business prospects with respect to any other opportunity. Any new development would require us to obtain additional financing. We may decide to conduct any such development through Wynn Resorts or through subsidiaries separate from the Las Vegas or Macau-related entities.

Off Balance Sheet Arrangements

We have not entered into any transactions with special purpose entities nor do we engage in any derivatives, except for interest rate swaps entered into in the past to manage interest rate risk associated with variable rate borrowings and foreign currency forward contracts. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. As of December 31, 2017, we had outstanding letters of credit totaling $17.7 million.

Contractual Commitments

The following table summarizes our scheduled contractual commitments as of December 31, 2017 (in thousands):

Payments Due By Period
Less Than 1 Year1 to 3 Years4 to 5 YearsAfter 5 YearsTotal
Long-term debt obligations$62,690$899,695$4,272,856$4,550,000$9,785,241
Fixed interest payments276,729553,458553,458682,2912,065,936
Estimated variable interest payments (1)102,185188,90152,383—343,469
Construction contracts and commitments596,699267,358——864,057
Operating leases18,05229,53222,61769,045139,246
Capital leases9891,9781,97867,73272,677
Employment agreements65,79164,1327,690—137,613
Other (2) (3)175,493162,07565,1054,000406,673
Total contractual commitments$1,298,628$2,167,129$4,976,087$5,373,068$13,814,912
(1)Amounts for all periods represent our estimated future interest payments on our debt facilities based upon amounts outstanding and LIBOR or HIBOR rates as of December 31, 2017. Actual rates will vary.
(2)Other includes open purchase orders, future charitable contributions, fixed gaming tax payments in Macau, performance contracts and other contracts. As further discussed in Item 8—"Financial Statements and Supplementary Data," Note 13, "Income Taxes," we had $95.2 million of unrecognized tax benefits as of December 31, 2017. Due to the inherent uncertainty of the underlying tax positions, it is not practicable to assign this liability to any particular year and therefore it is not included in the table above as of December 31, 2017.
(3)Other excludes community payments associated with the continuing operations of Wynn Boston Harbor, which commence upon the opening of the resort. These amounts are approximately $10.6 million per year with minimal annual increases.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with GAAP involves the use of estimates and assumptions that affect the amounts reported in the consolidated financial statements. Certain of our accounting policies require management to apply significant judgment in defining the appropriate assumptions integral to financial estimates and on an ongoing basis, management evaluates those estimates. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from our estimates.

Development, Construction and Property and Equipment Estimates

During the construction and development of a resort, pre-opening or start-up costs are expensed when incurred. In connection with the construction and development of our resorts, significant start-up costs are incurred and charged to pre-opening costs through their respective openings. Once our resorts open, expenses associated with the opening of the resorts are no longer charged as pre-opening costs.

During the construction and development stage, direct costs such as those incurred for the design and construction of our resorts, including applicable portions of interest, are capitalized. Accordingly, the recorded amounts of property and equipment

increase significantly during construction periods. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. We determine the estimated useful lives based on our experience with similar assets, estimates of the usage of the asset and other factors specific to the asset. Depreciation expense related to capitalized construction costs and fixed assets commence when the related assets are placed in service. The remaining estimated useful lives of assets are periodically reviewed and adjusted as necessary.

Costs of repairs and maintenance are charged to expense when incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in property charges and other.

We also evaluate our property and equipment and other long-lived assets for impairment in accordance with applicable accounting standards. For assets to be disposed of we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. In reviewing for impairment, we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.

Redemption Price Promissory Note

We record the Redemption Note at its fair value in accordance with applicable accounting guidance. As of December 31, 2017 and 2016, the fair value of the Redemption Note was $1.88 billion and $1.82 billion, respectively. We utilized an independent third party valuation to assist in the determination of this fair value. In determining this fair value, we estimated the Redemption Note's present value using discounted cash flows with a probability-weighted expected return for redemption assumptions and a discount rate, which included time value and non-performance risk adjustments commensurate with the risk of the Redemption Note.

Considerations for the redemption assumptions included the stated maturity of the Redemption Note, uncertainty of the related cash flows as well as potential effects of the following: uncertainties surrounding the potential outcome and timing of pending litigation with the Okada Parties (Item 8—"Financial Statements and Supplementary Data," Note 14, "Commitments and Contingencies."); the outcome of ongoing investigations of Aruze by the United States Attorney's Office, the U.S. Department of Justice and the Nevada Gaming Control Board; and other potential legal and regulatory actions. In addition, in the furtherance of various future business objectives, we considered our ability, at our sole option, to prepay the Redemption Note at any time in accordance with its terms without penalty. Accordingly, we reasonably determined that the estimated life of the Redemption Note could be less than the contractual life of the Redemption Note.

In determining the appropriate discount rate to be used in the estimated present value, the Redemption Note's subordinated position and credit risk relative to all other debt in our capital structure and credit ratings associated with our traded debt were considered. Observable inputs for the risk-free rate based on Federal Reserve rates for U.S. Treasury securities and credit risk spread based on a yield curve index of similarly rated debt were used.

Allowance for Estimated Doubtful Accounts Receivable

A substantial portion of our outstanding receivables relates to casino credit play. Credit play, through the issuance of markers, represents a significant portion of the table games volume at our Las Vegas Operations. While offered, the issuance of credit at our Macau Operations is less significant when compared to Las Vegas. Our goal is to maintain strict controls over the issuance of credit and aggressively pursue collection from those customers who fail to pay their balances in a timely fashion. These collection efforts may include the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies and litigation. Markers issued at our Las Vegas Operations are generally legally enforceable instruments in the United States, and United States assets of foreign customers may be used to satisfy judgments entered in the United States.

The enforceability of markers and other forms of credit related to gaming debt outside of the United States varies from country to country. Some foreign countries do not recognize the enforceability of gaming related debt, or make enforcement burdensome. We closely consider the likelihood and difficulty of enforceability, among other factors, when issuing credit to customers who are not residents of the United States. In addition to our internal credit and collection departments, located in both Las Vegas and Macau, we have a network of legal, accounting and collection professionals to assist us in our determinations regarding enforceability and our overall collection efforts.

As of December 31, 2017 and 2016, 81.7% and 88.1%, respectively, of our casino accounts receivable were owed by customers from foreign countries, primarily in Asia. In addition to enforceability issues, the collectability of markers given to foreign customers is affected by a number of factors, including changes in currency exchange rates and economic conditions in the customers' home countries.

We regularly evaluate our reserve for bad debts based on a specific review of customer accounts and outstanding gaming promoter accounts as well as management's prior experience with collection trends in the casino industry and current economic and business conditions. In determining our allowance for estimated doubtful accounts receivable, we apply loss factors based on historical marker collection history to aged account balances and we specifically analyze the collectability of each account with a balance over a specified dollar amount, based upon the age, the customer's financial condition, collection history and any other known information.

The following table presents key statistics related to our casino accounts receivable (dollars in thousands):

December 31,
20172016
Casino accounts receivable$173,664$211,557
Allowance for doubtful casino accounts receivable$28,841$53,860
Allowance as a percentage of casino accounts receivable16.6%25.5%

Our reserve for doubtful casino accounts receivable is based on our estimates of amounts collectible and depends on the risk assessments and judgments by management regarding realizability, the state of the economy and our credit policy. Our reserve methodology is applied similarly to credit extended at each of our resorts. As of December 31, 2017 and 2016, 42.4% and 49.2%, respectively, of our outstanding casino accounts receivable balance originated at our Macau Operations.

As of December 31, 2017, a 100 basis point change in the allowance for doubtful accounts as a percentage of casino accounts receivable would change the provision for doubtful accounts by approximately $1.7 million.

As our customer payment experience evolves, we will continue to refine our estimated reserve for bad debts. Accordingly, the associated provision for doubtful accounts may fluctuate. Because individual customer account balances can be significant, the reserve and the provision can change significantly between periods as we become aware of additional information about a customer or changes occur in a region's economy or legal system.

Consolidation

The consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and variable interest entities ("VIEs") in which the Company is the primary beneficiary. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.

We assessed our ownership in the Retail Joint Venture with Crown based on consolidation accounting guidance and concluded that the Retail Joint Venture is a VIE and we are the primary beneficiary based on our involvement in the leasing activities of the Retail Joint Venture. As a result, we consolidate all of the Retail Joint Venture's assets, liabilities and results of operations. We will evaluate our primary beneficiary designation on an ongoing basis and will assess the appropriateness of the Retail Joint Venture's VIE status when changes occur. For more information on the Retail Joint Venture, see Item 8—"Financial Statements and Supplementary Data," Note 3, "Retail Joint Venture."

Investments and Fair Value

We have made investments in domestic and foreign corporate debt securities and commercial paper. Our investment policy requires investments to be investment grade and limits the amount of exposure to any one issuer with the objective of minimizing the potential risk of principal loss. We determine the appropriate classification of our investments at the time of purchase and reevaluate such designation as of each balance sheet date. Our investments are reported at fair value, with unrealized gains and losses, net of tax, reported in other comprehensive income (loss). Adjustments are made for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization is included in interest income together with realized gains and losses and the stated interest on such securities.

We measure certain of our financial assets and liabilities, at fair value on a recurring basis pursuant to accounting standards for fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These accounting standards establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

We obtain pricing information in determining the fair value of our available-for-sale securities from independent pricing vendors. Based on our inquiries, the pricing vendors use various pricing models consistent with what other market participants would use. The assumptions and inputs used by the pricing vendors are derived from observable market sources including: reported trades, broker/dealer quotes, issuer spreads, benchmark curves, bids, offers and other market-related data. We have not made adjustments to such prices. Each quarter, we validate the fair value pricing methodology to determine the fair value consistent with applicable accounting guidance and to confirm that the securities are classified properly in the fair value hierarchy. We also compare the pricing received from our vendors to independent sources for the same or similar securities.

Income Taxes

We are subject to income taxes in the United States and other foreign jurisdictions where we operate. Accounting standards require the recognition of deferred tax assets, net of applicable reserves, and liabilities for the estimated future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on the income tax provision and deferred tax assets and liabilities generally is recognized in the results of operations in the period that includes the enactment date. Accounting standards require recognition of a future tax benefit to the extent that realization of such benefit is more likely than not. Otherwise, a valuation allowance is applied.

As of December 31, 2017, we have a foreign tax credit ("FTC") carryover of $3.62 billion and we have recorded a valuation allowance of $3.27 billion against this asset based on our estimate of future realization. The FTCs are attributable to the Macau special gaming tax, which is 35% of gross gaming revenue in Macau. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including recent operating profitability, forecast of future earnings and the duration of statutory carryforward periods.

Our income tax returns are subject to examination by the IRS and other tax authorities in the locations where we operate. We assess potentially unfavorable outcomes of such examinations based on accounting standards for uncertain income taxes. The accounting standards prescribe a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.

Uncertain tax position accounting standards apply to all tax positions related to income taxes. These accounting standards utilize a two-step approach for evaluating tax positions. The tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.

As applicable, we recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes.

Stock-Based Compensation

Accounting standards for stock-based payments establish standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services or incurs a liability in exchange for goods and services that are based

on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. It requires an entity to measure the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize that cost over the service period. We use the Black-Scholes option pricing model to determine the grant-date fair value of our stock options. The Black-Scholes model uses assumptions of expected volatility, risk-free interest rates, the expected term of options granted, and expected rates of dividends. Management determines these assumptions by reviewing current market rates, making industry comparisons and reviewing conditions relevant to our Company.

The expected volatility and expected term assumptions can significantly impact the fair value of stock options. We believe that the valuation techniques and the approach utilized to develop our assumptions are reasonable in calculating the fair value of the options we grant. We estimate the expected stock price volatility using a combination of implied and historical factors related to our stock price in accordance with applicable accounting standards. As our stock price fluctuates, this estimate will change. A hypothetical 10% change in the volatility assumption for our options granted in 2017 would not have a material effect on the change in fair value. Expected term represents the estimated average time between the option's grant date and its exercise date. A hypothetical 10% change in the expected term assumption for our options granted in 2017 would not have a material effect on the change in fair value. These assumed changes in fair value would have been recognized over the vesting schedule of such awards.

Accounting standards also require the classification of stock-based compensation expense in the same financial statement line items as cash compensation, and therefore impacts our departmental expenses (and related operating margins), pre-opening expenses and construction in progress for our development projects and our general and administrative expenses, including corporate expenses.

Recently Adopted Accounting Standards and Accounting Standards Issued But Not Yet Adopted

See Item 8—"Financial Statements and Supplementary Data," Note 2, "Summary of Significant Accounting Policies."

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