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.

Discussion of 2017 items and year-to-year comparisons between 2018 and 2017 that are not included in this Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018.

Overview

We are a designer, developer, and operator of integrated resorts featuring luxury hotel rooms, high-end retail space, an array of dining and entertainment options, meeting and convention facilities, and gaming, all supported by an unparalleled focus on our guests, our people, and our community. Through our approximately 72% ownership of WML, we operate two integrated resorts in the Macau Special Administrative Region of the People's Republic of China ("Macau"), Wynn Palace and Wynn Macau (collectively, our "Macau Operations"). In Las Vegas, Nevada, we operate and, with the exception of certain retail space, own 100% of Wynn Las Vegas, which we also refer to as our Las Vegas Operations. On June 23, 2019, we opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts.

Recent Developments

In January 2020, an outbreak of a new strain of coronavirus, COVID-19, was identified in Wuhan, China. Currently, no fully effective vaccines have been developed and there can be no assurance that an effective vaccine can be discovered in time to protect against a potential pandemic.

In response, on February 4, 2020, the Macau government announced the closure of all casino operations in Macau, including those at Wynn Palace and Wynn Macau, for a period of 15 days. On February 20, 2020, our casino operations at Wynn Palace and Wynn Macau reopened on a reduced basis, and are expected to fully reopen by March 20, 2020 (the deadline set by the Macau government for Macau casinos to fully reopen). Since reopening, all casinos in Macau are subject to a number of government procedures which address the health and safety of staff and patrons, including limitations on the spacing of open tables and slot machines to ensure adequate distance between people, stopping patrons from congregating together, limiting the number of players and spectators at a table to three to four, temperature checks, mask protection, and health declarations.

Visitation to Macau has fallen precipitously since the outbreak of Coronavirus, driven by the Chinese government’s suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau, quarantines in certain cities in mainland China, and the suspension by the Hong Kong government of ferry service from Hong Kong to Macau until further notice.

The US government has put in place restrictions on travel to the US from mainland China, and could expand the restrictions. A significant portion of our US business relies on the willingness and ability of premium international customers to travel to the US, including from mainland China. As such, our Las Vegas Operations and operations at Encore Boston Harbor may also be adversely impacted.

The Coronavirus outbreak has had and will have an adverse effect on our results of operations. Given the uncertainty around the extent and timing of the potential future spread or mitigation of the Coronavirus and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.

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. These key operating measures are presented as supplemental disclosures because management and/or certain investors use these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key operating measures are defined below:

• Table drop in mass market 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.

• Table drop for Encore Boston Harbor is the amount of cash and gross markers issued that are deposited in a gaming table's drop box.

• Rolling chips are non-negotiable identifiable chips that are used to track turnover for purposes of calculating incentives within our Macau Operations' VIP program.

• 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. Table games win is before discounts, commissions and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Table games win does not include poker rake.

• Slot machine win is the amount of handle (representing the total amount wagered) that is retained by us and is recorded as casino revenues. Slot machine win is after adjustment for progressive accruals and free play, but before discounts and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis.

• Poker rake is the portion of cash wagered by patrons in our poker rooms that is retained by the casino as a service fee, after adjustment for progressive accruals, but before the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Poker tables are not included in our measure of average number of table games.

• Average daily rate ("ADR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms occupied.

• Revenue per available room ("REVPAR") is calculated by dividing total room revenues, including complimentaries (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 lower in the VIP operations when compared to the mass market operations.

In Las Vegas, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers at the gaming tables or at the casino cage. The cash and markers, net of redemptions, 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. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 22% to 26%.

At Encore Boston Harbor, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers only at the casino cage. The cash and gross 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. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 16% to 20%.

Results of Operations

Summary annual results

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

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Operating revenues			$	6,611,099					$	6,717,660					$	(106,561)					(1.6)
Net income attributable to Wynn Resorts, Limited			122,985						572,430						(449,445)						(78.5)
Diluted net income per share			1.15						5.35						—						—
Adjusted Property EBITDA (1)			1,815,408						2,044,413						(229,005)						(11.2)

(1) See Item 8—"Financial Statements and Supplemental Data," Note 19, "Segment Information," for a reconciliation of Adjusted Property EBITDA to net income attributable to Wynn Resorts, Limited.

The decrease in operating revenues for the year ended December 31, 2019 was primarily driven by decreases of $213.9 million, $224.5 million, and $32.1 million from Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. Operating revenues from Encore Boston Harbor were $363.9 million.

The decrease in net income attributable to Wynn Resorts, Limited for the year ended December 31, 2019 was principally due to a tax provision of $176.8 million recorded in 2019, largely related to an increase in the valuation allowance on our deferred tax assets, compared to a net tax benefit of $497.3 million recorded during the year ended December 31, 2018 primarily in connection with U.S. tax reform.

The decrease in Adjusted Property EBITDA for the year ended December 31, 2019 was driven by decreases of $114.4 million, $84.4 million, and $53.4 million from Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. Adjusted Property EBITDA from Encore Boston Harbor was $23.2 million.

Financial results for the year ended December 31, 2019 compared to the year ended December 31, 2018.

Operating revenues

The following table presents our operating revenues (in thousands):

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Operating revenues
Macau Operations:
Wynn Palace			$	2,543,694					$	2,757,566					$	(213,872)					(7.8)
Wynn Macau			2,070,029						2,294,525						(224,496)						(9.8)
Total Macau Operations			4,613,723						5,052,091						(438,368)						(8.7)
Las Vegas Operations			1,633,457						1,665,569						(32,112)						(1.9)
Encore Boston Harbor (1)			363,919						—						363,919						—
			$	6,611,099					$	6,717,660					$	(106,561)					(1.6)

(1) Encore Boston Harbor opened on June 23, 2019.

The following table presents our casino and non-casino operating revenues (in thousands):

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Operating revenues
Casino revenues			$	4,573,924					$	4,784,990					$	(211,066)					(4.4)
Non-casino revenues:
Rooms			804,162						751,800						52,362						7.0
Food and beverage			818,822						754,128						64,694						8.6
Entertainment, retail and other			414,191						426,742						(12,551)						(2.9)
Total non-casino revenues			2,037,175						1,932,670						104,505						5.4
			$	6,611,099					$	6,717,660					$	(106,561)					(1.6)

Casino revenues for the year ended December 31, 2019 were 69.2% of operating revenues, compared to 71.2% for the same period of 2018. Non-casino revenues for the year ended December 31, 2019 were 30.8% of operating revenues, compared to 28.8% for the same period of 2018.

Casino revenues

Casino revenues decreased primarily due to decreased VIP turnover and VIP table games win at our Macau Operations and decreased table drop and table games win at our Las Vegas Operations, partially offset by increased mass market table drop and mass market table games win at our Macau Operations and casino revenues from Encore Boston Harbor totaling $243.9 million. The table below sets forth our casino revenues and associated key operating measures (dollars in thousands, except for win per unit per day):

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Macau Operations:
Wynn Palace:
Total casino revenues			$	2,139,756					$	2,356,022					$	(216,266)					(9.2)
VIP:
Average number of table games			109						114						(5)						(4.4)
VIP turnover			$	45,847,647					$	61,097,527					$	(15,249,880)					(25.0)
VIP table games win			$	1,519,225					$	1,874,189					$	(354,964)					(18.9)
VIP win as a % of turnover			3.31		%				3.07		%				0.24
Table games win per unit per day			$	38,224					$	45,006					$	(6,782)					(15.1)
Mass market:
Average number of table games			216						209						7						3.3
Table drop			$	5,122,897					$	4,926,347					$	196,550					4.0
Table games win			$	1,251,920					$	1,206,244					$	45,676					3.8
Table games win %			24.4		%				24.5		%				(0.1)
Table games win per unit per day			$	15,902					$	15,834					$	68					0.4
Average number of slot machines			1,054						1,065						(11)						(1.0)
Slot machine handle			$	3,918,554					$	3,933,064					$	(14,510)					(0.4)
Slot machine win			$	195,367					$	203,568					$	(8,201)					(4.0)
Slot machine win per unit per day			$	508					$	524					$	(16)					(3.1)
Wynn Macau:
Total casino revenues			$	1,796,209					$	1,994,885					$	(198,676)					(10.0)
VIP:
Average number of table games			106						111						(5)						(4.5)
VIP turnover			$	35,426,483					$	57,759,607					$	(22,333,124)					(38.7)
VIP table games win			$	1,081,934					$	1,588,002					$	(506,068)					(31.9)
VIP win as a % of turnover			3.05		%				2.75		%				0.30
Table games win per unit per day			$	27,864					$	39,113					$	(11,249)					(28.8)
Mass market:
Average number of table games			207						203						4						2.0
Table drop			$	5,410,439					$	5,058,332					$	352,107					7.0
Table games win			$	1,099,353					$	1,014,484					$	84,869					8.4
Table games win %			20.3		%				20.1		%				0.2
Table games win per unit per day			$	14,519					$	13,698					$	821					6.0
Average number of slot machines			807						877						(70)						(8.0)
Slot machine handle			$	3,545,899					$	3,740,096					$	(194,197)					(5.2)
Slot machine win			$	170,358					$	161,384					$	8,974					5.6
Slot machine win per unit per day			$	578					$	504					$	74					14.7
Poker rake			$	20,835					$	20,980					$	(145)					(0.7)

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Las Vegas Operations:
Total casino revenues			$	394,104					$	434,083					$	(39,979)					(9.2)
Average number of table games			236						237						(1)						(0.4)
Table drop			$	1,690,132					$	1,852,816					$	(162,684)					(8.8)
Table games win			$	395,439					$	456,021					$	(60,582)					(13.3)
Table games win %			23.4		%				24.6		%				(1.2)
Table games win per unit per day			$	4,581					$	5,282					$	(701)					(13.3)
Average number of slot machines			1,788						1,822						(34)						(1.9)
Slot machine handle			$	3,427,820					$	3,237,085					$	190,735					5.9
Slot machine win			$	230,954					$	213,025					$	17,929					8.4
Slot machine win per unit per day			$	354					$	320					$	34					10.6
Poker rake			$	12,569					$	10,048					$	2,521					25.1
Encore Boston Harbor (1)****:
Total casino revenues			$	243,855					$	—					$	243,855					—
Average number of table games			152						—						152						—
Table drop			$	778,898					$	—					$	778,898					—
Table games win			$	151,247					$	—					$	151,247					—
Table games win %			19.4		%				—		%				19.4
Table games win per unit per day			$	5,178					$	—					$	5,178					—
Average number of slot machines			3,023						—						3,023						—
Slot machine handle			$	1,847,080					$	—					$	1,847,080					—
Slot machine win			$	138,264					$	—					$	138,264					—
Slot machine win per unit per day			$	238					$	—					$	238					—
Poker rake			$	12,324					$	—					$	12,324					—

(1) Encore Boston Harbor opened on June 23, 2019.

Non-casino revenues

The table below sets forth our room revenues and associated key operating measures:

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Macau Operations:
Wynn Palace:
Total room revenues (dollars in thousands)			$	174,576					$	170,067					$	4,509					2.7
Occupancy			97.2		%				96.5		%				0.7
ADR			$	269					$	265					$	4					1.5
REVPAR			$	262					$	255					$	7					2.7
Wynn Macau:
Total room revenues (dollars in thousands)			$	110,387					$	113,495					$	(3,108)					(2.7)
Occupancy			99.2		%				99.2		%				—
ADR			$	286					$	283					$	3					1.1
REVPAR			$	284					$	281					$	3					1.1
Las Vegas Operations:
Total room revenues (dollars in thousands)			$	483,055					$	468,238					$	14,817					3.2
Occupancy			87.5		%				87.5		%				—
ADR			$	325					$	314					$	11					3.5
REVPAR			$	284					$	274					$	10					3.6
Encore Boston Harbor (1)****:
Total room revenues (dollars in thousands)			$	36,144					$	—					$	36,144					—
Occupancy			72.6		%				—		%				—
ADR			$	391					$	—					$	391					—
REVPAR			$	284					$	—					$	284					—

(1) Encore Boston Harbor opened on June 23, 2019.

Room revenues increased $52.4 million, primarily due to $36.1 million from Encore Boston Harbor and higher ADR at Wynn Palace and our Las Vegas Operations, partially offset by rooms out of service for renovations at Wynn Macau during 2019. We completed our Encore tower room renovation at Wynn Macau in the fourth quarter of 2019.

Food and beverage revenues increased $64.7 million, primarily due to $61.1 million from Encore Boston Harbor and increased covers at our high-volume restaurants at our Macau Operations, partially offset by a decrease in Food and beverage revenues of $8.3 million at our Las Vegas Operations primarily due to lower revenues from our nightclubs and banquets.

Entertainment, retail and other revenues decreased $12.6 million primarily due to the closure of certain owned retail outlets at our Macau Operations and their conversion to leased outlets during 2019, the effect of which was partially offset by Entertainment, retail and other revenues of $22.8 million from Encore Boston Harbor. During the third quarter of 2018, Wynn Palace and Wynn Macau recorded business interruption insurance proceeds of $5.4 million and $5.3 million, respectively, related to the full settlement of claims from Typhoon Hato in 2017.

Operating expenses

The table below presents operating expenses (in thousands):

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Operating expenses:
Casino			$	2,924,254					$	3,036,907					$	(112,653)					(3.7)
Rooms			276,095						254,549						21,546						8.5
Food and beverage			696,498						611,706						84,792						13.9
Entertainment, retail and other			170,206						183,113						(12,907)						(7.0)
General and administrative			896,670						761,415						135,255						17.8
Litigation settlement			—						463,557						(463,557)						(100.0)
Provision for doubtful accounts			21,898						6,527						15,371						235.5
Pre-opening			102,009						53,490						48,519						90.7
Depreciation and amortization			624,878						550,596						74,282						13.5
Property charges and other			20,286						60,256						(39,970)						(66.3)
Total operating expenses			$	5,732,794					$	5,982,116					$	(249,322)					(4.2)

Total operating expenses decreased $249.3 million compared to the year ended December 31, 2018, primarily due to a prior year litigation settlement expense of $463.6 million. The decrease was partially offset by operating expenses associated with the opening of Encore Boston Harbor on June 23, 2019.

Casino expenses decreased commensurate with the decrease in casino revenues at our Macau Operations and Las Vegas Operations, partially offset by $141.4 million of casino expenses from Encore Boston Harbor.

Room expenses increased primarily due to $17.5 million from Encore Boston Harbor and an increase of $3.0 million from our Las Vegas Operations. The increase at our Las Vegas Operations was primarily driven by increased payroll costs.

Food and beverage expenses increased primarily due to $56.7 million from Encore Boston Harbor and increases of $9.4 million, $9.9 million, and $8.8 million at Wynn Palace, Wynn Macau and our Las Vegas Operations, respectively. The increases at Wynn Palace and Wynn Macau were driven by incremental costs associated with opening new food and beverage outlets at Wynn Palace and increased cost of goods sold. The increase at our Las Vegas Operations was primarily driven by increased payroll costs.

Entertainment, retail and other expenses decreased $12.9 million, primarily due to the closure of certain owned retail outlets at our Macau Operations and their conversion to leased outlets during 2019.

General and administrative expenses increased primarily due to $117.2 million from Encore Boston Harbor and increases of $1.5 million, $11.6 million, and $3.0 million, at Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. These increases were primarily attributable to increased payroll costs and property taxes at our Macau Operations and increased advertising costs at our Las Vegas Operations.

Litigation settlement expense of $463.6 million was incurred in the first quarter of 2018 in connection with the repayment of the Redemption Note for claims related to the allegedly below-market interest rate of the Redemption Note.

The provision for doubtful accounts increased $11.2 million, $1.3 million and $1.4 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively. The increases were primarily due to the impact of historical collection patterns and current collection trends, as well as the specific review of customer accounts, on our estimated allowance for the respective periods.

For the years ended December 31, 2019 and 2018, pre-opening expenses totaled $102.0 million and $53.5 million, respectively, which primarily related to the development of Encore Boston Harbor.

Depreciation and amortization increased primarily due to additional depreciation expense of $78.4 million associated with the opening of Encore Boston Harbor.

Our property charges and other expenses for the year ended December 31, 2019 consisted primarily of asset abandonments and retirements. Our property charges and other expenses for the year ended December 31, 2018 included $14.7 million for the write-down of the carrying value to the purchase price of an aircraft we sold and $8.3 million related to employee severance arrangements. We also incurred asset abandonments and retirements of $9.8 million, $11.6 million, $4.4 million, and $9.3 million at Wynn Palace, Wynn Macau, our Las Vegas Operations, and Corporate and Other, respectively, during the year ended December 31, 2018.

Interest expense, net of capitalized interest

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

						Years Ended December 31,
						2019						2018						Increase/ (Decrease)						Percent Change
Interest expense
Interest cost, including amortization of debt issuance costs and original issue discount and premium						$	467,946					$	439,157					$	28,789					6.6
Capitalized interest						(53,916)						(57,308)						(3,392)						(5.9)
						$	414,030					$	381,849					$	32,181					8.4
Weighted average total debt balance						$	9,287,441					$	9,155,978
Weighted average interest rate						5.04		%				4.80		%

Interest costs increased due to an increase in the weighted average interest rate. Capitalized interest decreased due to the completion of Encore Boston Harbor construction activities on June 23, 2019.

Other non-operating income and expenses

We recorded a $12.4 million loss on extinguishment of debt for the year ended December 31, 2019 related to the Refinancing Transactions. For more information on the Refinancing Transactions, see Note 7, "Long-Term Debt." We recorded a $0.1 million net gain on extinguishment of debt for the year ended December 31, 2018, related to the repayment of the Redemption Note, Wynn Resorts' purchase of $40.0 million of Wynn Las Vegas' 5 1/2% Senior Notes due 2025 and 5 1/4% Senior Notes due 2027 and the execution of the supplemental indenture related to Wynn Las Vegas' 4 1/4% Senior Notes due 2023, offset by a loss on debt extinguishment associated with the amendment of the Wynn Macau Credit Facilities.

During the first quarter of 2018, we repaid the $1.94 billion principal amount of the Redemption Note and recorded a loss of $69.3 million from the change in the fair value of the Redemption Note.

We incurred a foreign currency remeasurement gain of $15.2 million and loss of $4.1 million for the years ended December 31, 2019 and 2018, respectively. 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 drove the variability between periods.

Income Taxes

For the years ended December 31, 2019 and 2018, we recorded a tax provision of $176.8 million and a tax benefit of $497.3 million, respectively. The 2019 income tax expense is primarily related to the increase in the valuation allowance for U.S foreign tax credits and disallowed interest expense carryforwards. The 2018 income tax benefit primarily related to a decrease in the valuation allowance for U.S. foreign tax credits as a result of tax reform.

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, 2019 and 2018, we were exempt from the payment of $77.7 million and $96.8 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 through December 31, 2020.

We have participated in the Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP") for the 2012 through 2019 tax years and will continue to participate in the IRS CAP for the 2020 tax year.

Net income attributable to noncontrolling interests

Net income attributable to noncontrolling interests was $188.4 million for the year ended December 31, 2019, compared to $230.7 million for the year ended December 31, 2018. 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, litigation settlement expense, 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) gain on extinguishment of debt, change in derivatives fair value, change in Redemption Note fair value and other non-operating income and expenses. Adjusted Property EBITDA is presented exclusively as a supplemental disclosure because we believe that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. We use Adjusted Property EBITDA as a measure of the operating performance of our segments and to compare the operating performance of our properties with those of our competitors, as well as a basis for determining certain incentive compensation. We also present Adjusted Property EBITDA because it is used by some investors 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 GAAP. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including Wynn Resorts, Limited, 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 the Company's 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. The Company has 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, the Company's 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 Wynn Palace, Wynn Macau, Las Vegas Operations, and Encore Boston Harbor as reviewed by management and summarized in Item 8—"Financial Statements and Supplementary Data," Note 19, "Segment Information." That footnote also presents a reconciliation of Adjusted Property EBITDA to net income attributable to Wynn Resorts, Limited.

			Years Ended December 31,
			2019						2018						Increase/ (Decrease)						Percent Change
Wynn Palace			$	729,535					$	843,902					$	(114,367)					(13.6)
Wynn Macau			648,837						733,238						(84,401)						(11.5)
Las Vegas Operations			413,886						467,273						(53,387)						(11.4)
Encore Boston Harbor			23,150						—						23,150						—

Adjusted Property EBITDA at Wynn Palace decreased 13.6% for the year ended December 31, 2019, primarily due to a decrease in VIP turnover and VIP table games win.

Adjusted Property EBITDA at Wynn Macau decreased 11.5% for the year ended December 31, 2019, primarily due to a decrease in VIP turnover and VIP table games win and increased general and administrative expenses.

Adjusted Property EBITDA at our Las Vegas Operations decreased 11.4% for the year ended December 31, 2019, primarily due to decreased table drop and increased operating expenses.

Adjusted Property EBITDA at Encore Boston Harbor was $23.2 million for the year ended December 31, 2019. Encore Boston Harbor opened on June 23, 2019.

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

Liquidity and Capital Resources

Our cash flows were as follows (in thousands):

			Years Ended December 31,
Cash Flows - Summary			2019						2018
Net cash provided by operating activities			$	901,070					$	961,489
Net cash used in investing activities:
Capital expenditures, net of construction payables and retention			(1,063,293)						(1,475,972)
Purchase of intangible and other assets			(6,000)						(126,414)
Proceeds from the sale or maturity of investment securities			—						359,461
Purchase of investment securities			—						(34,098)
Proceeds from sale of assets			695						54,213
Net cash used in investing activities			(1,068,598)						(1,222,810)
Net cash used in financing activities:
Proceeds from issuance of long-term debt			3,893,778						2,788,925
Repayments of long-term debt			(2,930,015)						(3,032,267)
Proceeds from note receivable from sale of ownership interest in subsidiary			—						75,000
Proceeds from issuance of common stock, net of issuance costs			—						915,240
Repurchase of common stock			(66,986)						(159,544)
Finance lease payment			(73)						—
Proceeds from exercise of stock options			14,696						21,971
Shares of subsidiary repurchased for share award plan			(5,384)						(6,232)
Dividends paid			(566,521)						(569,781)
Distribution to noncontrolling interest			(7,745)						(305,372)
Payment to acquire derivatives			—						(3,900)
Payments for financing costs			(32,738)						(48,297)
Net cash provided by (used in) financing activities			299,012						(324,257)
Effect of exchange rate on cash, cash equivalents and restricted cash			7,485						(1,733)
Increase (decrease) in cash, cash equivalents and restricted cash			$	138,969					$	(587,311)

Operating Activities

Our operating cash flows primarily consist of operating income (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 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.

During the year ended December 31, 2019, the decrease in net cash provided by operations was primarily driven by lower operating revenues at our Macau Operations and Las Vegas Operations, offset by operating revenues from Encore Boston Harbor.

During the year ended December 31, 2018, net cash provided by operations was impacted by a litigation settlement expense and a reduction in customer deposits at our Macau Operations.

Investing Activities

During the year ended December 31, 2019, we incurred capital expenditures of $471.4 million at Encore Boston Harbor, primarily related to the construction of the resort which opened in June 2019; $211.1 million related to the construction of the Meeting and Convention Expansion and the reconfiguration of the golf course; $142.1 million at Wynn Macau primarily related to our Encore Tower room remodel and Lakeside Casino expansion; and $66.5 million and $96.9 million at Wynn Palace and our Las Vegas Operations, respectively, primarily related to maintenance capital expenditures.

During the year ended December 31, 2018, we incurred $1.48 billion in capital expenditures, net of construction payables and retention, driven by capital expenditures of $791.3 million related to Encore Boston Harbor and $247.0 million for the acquisition of land on the Las Vegas Strip directly across from Wynn Las Vegas. Capital expenditures were offset by net proceeds from the sale or maturity of investment securities of $325.4 million.

Financing Activities

During the first quarter of 2019 we borrowed an additional $250.0 million term loan under the Wynn Resorts Term Loan. During the third quarter of 2019, in connection with the Refinancing Transactions described below, we repaid $991.3 million of outstanding principal under the Wynn America Credit Facilities and $746.3 million of outstanding principal under the Wynn Resorts Term Loan along with related financing costs, using proceeds from the borrowing of $1.03 billion under the WRF Credit Facilities and the issuance of $750.0 million of 2029 WRF Notes. During the fourth quarter of 2019, we received net proceeds of $990.2 million from the issuance of the WML 2029 Notes. Throughout the year ended December 31, 2019, we repaid $273.9 million, net of amounts borrowed, on the Wynn Macau Revolver. In addition, we used cash of $566.5 million for the payment of dividends, of which $400.6 million was paid to Wynn Resorts shareholders and $165.9 million was paid to WML shareholders, excluding Wynn Resorts.

During the year ended December 31, 2018, we repaid the Redemption Note principal amount of $1.94 billion using cash on hand and amounts borrowed under a Wynn Resorts bridge facility and the WA Senior Revolving Credit Facility. In April 2018, we repaid all amounts borrowed under the Wynn Resorts bridge facility and the WA Senior Revolving Credit Facility using net proceeds of $915.2 million from a registered public equity offering. In addition, we borrowed $623.9 million under the Wynn Macau Revolver, $615.0 million under the Retail Term Loan, $500.0 million under the Wynn Resorts Term Loan, and we used cash of $569.8 million for the payment of dividends and $305.4 million for distributions to noncontrolling interest holders of the Retail Joint Venture. In the fourth quarter, the Company repurchased 1,478,552 shares of its common stock for approximately $156.7 million.

Capital Resources

The following table summarizes our unrestricted cash and cash equivalents and available revolver borrowing capacity. Refer to Item 8—"Financial Statements and Supplementary Data," Note 7, "Long-Term Debt" in the accompanying consolidated financial statements for more information regarding each of the Company's debt agreements. The following table is presented by significant financing entity as of December 31, 2019 (in thousands):

						Cash and Cash Equivalents						Revolver Borrowing Capacity
Wynn Resorts (Macau) S.A. and subsidiaries						$	799,178					$	399,263
Wynn Macau, Limited and subsidiaries (1)						1,009,702						—
Wynn Resorts Finance, LLC and subsidiaries (2)						123,733						831,950
Wynn Resorts, Limited and other						419,291						—
Total						$	2,351,904					$	1,231,213

(1) Excluding Wynn Resorts (Macau) S.A. and subsidiaries.

(2) Excluding Wynn Macau, Limited and subsidiaries.

Wynn Resorts (Macau) S.A. and subsidiaries. Wynn Resorts (Macau) S.A. ("Wynn Macau SA") generates cash from our Macau Operations and utilizes its revolver to fund short term working capital requirements as needed. We expect to use this cash to service our existing Wynn Macau Credit Facilities, make distributions to WML, and fund working capital and capital expenditure requirements at our Macau Operations.

Wynn Macau completed its Encore Tower room remodel and opened a significant portion of its Lakeside Casino expansion in the fourth quarter of 2019; as such, we do not expect to incur significant ongoing capital expenditures for these projects. The Company is currently in the design phase for the Crystal Pavilion, an expansion of Wynn Palace. We do not expect to incur significant capital expenditures related to the construction of this project until late 2021.

In connection with WML's issuance of the WML 2029 Notes described below, we expect to repay approximately $1.0 billion of the Wynn Macau Term Loan over the next two years, subject to generating sufficient operating cash flow from our Macau Operations. In February 2020, Wynn Macau SA prepaid $150.0 million of the Wynn Macau Term Loan, and the future contractual amortization payments were reduced on a pro-rata basis.

WML is dependent on Wynn Macau SA's ability to make periodic distributions in order to facilitate its debt service requirements and to pay dividends to its shareholders, which includes Wynn Resorts. The Wynn Macau Credit Facilities contain customary negative and financial covenants, including, but not limited to, leverage ratio and interest coverage ratio tests (as defined in the Wynn Macau Credit Facilities) that could restrict its ability to make distributions to WML and incur additional indebtedness. Wynn Macau SA is required to maintain a leverage ratio of not greater than 4.75 to 1, 4.25 to 1, and 4.00 to 1 for the fiscal years ended December 31, 2018, December 31, 2019, and December 31, 2020 and thereafter, respectively, and an interest coverage ratio of not less than 2.00 to 1 at any time. For the years ended December 31, 2018 and 2019, Wynn Macau SA complied with these ratios.

Wynn Macau, Limited and subsidiaries. Wynn Macau, Limited ("WML") primarily generates cash through distributions from Wynn Macau SA. We expect to use this cash to service our existing WML Notes, pay dividends to shareholders of WML (of which we own approximately 72%), and fund working capital requirements at WML.

In December 2019, WML issued at par $1.0 billion of 5 1/8% senior unsecured notes due 2029 (the "WML 2029 Notes"). The Company expects to use an equivalent amount of the net proceeds from the WML 2029 Notes to facilitate the repayment of $1.0 billion of the Wynn Macau Term Loan as described above.

On June 19, 2019 and September 16, 2019, WML paid cash dividends of HK$0.45 per share each for a total of $596.0 million. The Company's share of these dividends was $430.1 million with the remaining $165.9 million paid to WML’s public shareholders.

If our portion of our cash and cash equivalents were repatriated to the U.S. on December 31, 2019, it would be subject to minimal U.S. taxes in the year of repatriation.

Wynn Resorts Finance, LLC and subsidiaries. Wynn Resorts Finance, LLC (formerly known as Wynn America, LLC) ("WRF" or "Wynn Resorts Finance") generates cash from distributions from its subsidiaries, which include our Macau

Operations, Wynn Las Vegas, and Encore Boston Harbor, and contributions from Wynn Resorts, as required. In addition, WRF may utilize its available revolving borrowing capacity as needed. We expect to use this cash to service our WRF Credit Facilities, 2029 WRF Notes, and WLV Notes, make distributions to Wynn Resorts, and to fund working capital and capital expenditure requirements.

In 2020, Wynn Las Vegas will undergo a room remodel of the Wynn Tower, which we expect to complete before the end of the first quarter of 2021. In addition, Wynn Las Vegas is developing three new food and beverage concepts, which are expected to be open by the end of 2020. We expect to incur between $225 million and $250 million of capital expenditures associated with these projects.

On September 20, 2019, WRF and its subsidiary Wynn Resorts Capital Corp. (collectively with WRF, the "WRF Issuers"), each an indirect wholly owned subsidiary of the Company, issued at par $750.0 million aggregate principal amount of 5 1/8% Senior Notes due 2029 (the "2029 WRF Notes"). Concurrently with the issuance of the 2029 WRF Notes, WRF entered into a credit agreement (the "WRF Credit Agreement") providing for a new first lien term loan facility in an aggregate principal amount of $1.0 billion (the "WRF Term Loan") and a new first lien revolving credit facility in an aggregate principal amount of $850.0 million (the "WRF Revolver" and together with the WRF Term Loan, the "WRF Credit Facilities") (the WRF Credit Facilities and 2029 WRF Notes are collectively referred to as the "Refinancing Transactions"). Wynn Resorts Finance used the net proceeds from the Refinancing Transactions to refinance the existing Wynn America Credit Facilities and the Wynn Resorts Term Loan and to pay related fees and expenses. See Item 8 — Note 7, "Long-Term Debt" for further discussion of the Refinancing Transactions.

On February 1, 2020, WRF purchased the Meeting and Convention Expansion from a subsidiary of Wynn Resorts at fair value, which was determined to be $366.0 million, subject to customary purchase price adjustments. WRF drew $366.0 million under the WRF Revolver to fund this purchase.

WRF is a holding company and, as a result, its ability to pay dividends to Wynn Resorts is dependent on WRF receiving distributions from its subsidiaries, which include WML, Wynn Las Vegas, LLC and Wynn MA, LLC (the owner and operator of Encore Boston Harbor). The WRF Credit Facilities contain customary negative and financial covenants, including, but not limited to, covenants that restrict WRF's ability to pay dividends or distributions and incur additional indebtedness. WRF may make ordinary course dividends or distributions to Wynn Resorts in an amount not to exceed $1.0 billion in any fiscal year, with certain carryover provisions for unused amounts from the two preceding fiscal years. In addition, WRF may distribute an amount greater than $1.0 billion in any fiscal year subject to certain other conditions.

The 2029 WRF Notes' indenture contains covenants that limit the ability of the WRF Issuers and the guarantors to, among other things, create or incur liens to secure debt in excess of the greater of $1.85 billion or an amount that would cause the Consolidated Senior Secured Net Leverage Ratio (as defined in the indenture) to be greater than 3.00 to 1.00.

Each of the WLV Notes' indentures contain negative covenants and financial covenants, including, but not limited to, covenants limiting their issuers' and guarantors' ability to create liens on assets to secure debt; enter into sale-leaseback transactions; and merge or consolidate with another company. The 2027 WLV Notes' indenture also provides that Wynn Resorts Finance may assume all of Wynn Las Vegas, LLC's obligations under the 2027 WLV Notes' indenture and the 2027 WLV Notes if certain conditions are met.

Wynn Resorts, Limited and other subsidiaries. Wynn Resorts, Limited is a holding company and, as a result, our ability to pay dividends is dependent on our ability to obtain funds and our subsidiaries' ability to provide funds to us. Wynn Resorts, Limited and other primarily generates cash from royalty and management agreements with our resorts, dividends and distributions from our subsidiaries, and the operations of the Retail Joint Venture of which we own 50.1%. We expect to use this cash to service our Retail Term Loan, fund the remaining construction of the Meeting and Convention Expansion, and continue to pay dividends, subject to reassessment and approval by our Board of Directors.

On February 26, 2019, the Company paid a cash dividend of $0.75 and on May 30, 2019, August 27, 2019 and November 22, 2019, the Company paid cash dividends of $1.00 per share, respectively, for a total of $403.0 million of dividends paid during the year ended December 31, 2019.

Other Factors Affecting Liquidity

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 17, "Commitments and Contingencies."

Our Board of Directors has authorized an equity repurchase program of up to $1.0 billion. 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, 2019, we had $800.1 million in repurchase authority remaining 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 may require us to obtain additional financing. We may decide to conduct any such development through Wynn Resorts, Limited or through subsidiaries separate from the Las Vegas, Boston 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 an interest rate collar associated with our Retail Term Loan. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. As of December 31, 2019, we had outstanding letters of credit totaling $18.1 million.

Contractual Commitments

The following table summarizes our scheduled contractual commitments as of December 31, 2019 (in thousands):

			Payments Due By Period
			Less Than 1 Year						1 to 3 Years						4 to 5 Years						After 5 Years						Total
Long-term debt obligations (1)			$	323,876					$	2,478,896					$	1,937,500					$	5,775,000					$	10,515,272
Fixed interest payments			325,538						651,075						610,117						676,172						2,262,902
Estimated variable interest payments (2)			153,937						233,262						91,711						11,951						490,861
Construction contracts and commitments			173,251						—						—						—						173,251
Operating leases			27,908						47,731						36,606						464,903						577,148
Finance leases			1,203						2,406						2,406						66,287						72,302
Employment agreements			69,981						51,650						2,807						—						124,438
Massachusetts surrounding community payments (3)			10,806						22,097						22,914						112,496						168,313
Other (4)			212,666						109,414						10,091						—						332,171
Total contractual commitments			$	1,299,166					$	3,596,531					$	2,714,152					$	7,106,809					$	14,716,658

(1) Includes $150.0 million related to the prepayment of the Wynn Macau Term Loan paid in February 2020.

(2) 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, 2019. Actual rates will vary.

(3) Represents payments to certain communities surrounding Encore Boston Harbor, required as a condition of the gaming license awarded to Wynn MA, LLC.

(4) 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 $104.3 million of unrecognized tax benefits as of December 31, 2019. 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, 2019.

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 commences 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.

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 and Encore Boston Harbor 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 and Encore Boston Harbor 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, we have a network of legal, accounting and collection professionals to assist us in our determinations regarding enforceability and our overall collection efforts.

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,
			2019						2018
Casino accounts receivable			$	304,137					$	229,594
Allowance for doubtful casino accounts receivable			$	37,652					$	31,263
Allowance as a percentage of casino accounts receivable			12.4		%				13.6		%

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, 2019 and 2018, 61.0% and 57.9%, respectively, of our outstanding casino accounts receivable balance originated at our Macau Operations, the majority of which relates to advances to gaming promoters, which are settled within five days of period end.

As of December 31, 2019, 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 $3.0 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.

Litigation and Contingency Estimates

We are subject to various claims, legal actions and other contingencies, and we accrue for these matters when they are both probable and estimable. For matters that arose on or prior to the balance sheet date, we estimate any accruals based on the relevant facts and circumstances available through the date of issuance of the financial statements. We include the accruals associated with any contingent matters in other accrued liabilities on the consolidated balance sheets.

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, 2019, we have a foreign tax credit ("FTC") carryforward of $3.1 billion and a deferred tax asset related to interest expense carryforwards of $88.3 million. As of December 31, 2019, we have recorded valuation allowances of $2.51 billion and $88.3 million, respectively, against the FTC carryforward and disallowed interest expense carryforward assets 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, forecasts of future earnings, the duration of statutory carryforward periods, and tax planning strategies.

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.

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

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