filings.toolsItem 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.
Discussion of 2018 items and year-to-year comparisons between 2019 and 2018 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, 2019.
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. In October 2020, Wynn Interactive Ltd. ("Wynn Interactive") was formed through the merger of our U.S. online sports betting and gaming business, social casino business, and our strategic partner, BetBull Limited ("BetBull"). Following the merger, Wynn Resorts owns approximately 72% of, and consolidates, Wynn Interactive. The results of Wynn Interactive are presented within Corporate and other.
Recent Developments Related to COVID-19
In January 2020, a new strain of coronavirus, COVID-19 ("COVID-19"), was identified. Since then, COVID-19 has spread around the world, and steps have been taken by various countries, including those in which the Company operates, to advise citizens to avoid non-essential travel, to restrict inbound international travel, to implement closures of non-essential operations, and to implement quarantines and lockdowns to contain the spread of the virus. Several vaccines have been granted authorizations in numerous countries and vaccines are being rolled out to citizens based on their priority of need. There can be no assurance as to when a sufficient number of individuals will be vaccinated, permitting travel restrictions to be lifted.
Macau Operations
In response to the COVID-19 pandemic, the Macau government announced on February 4, 2020 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, casino operations at Wynn Palace and Wynn Macau reopened on a reduced basis and have since been fully restored; however, certain COVID-19 specific protective measures, such as limiting the number of seats per table game, increasing the spacing between active slot machines and visitor entry checks and requirements involving temperature checkpoints, mask wearing, health declarations and proof of negative COVID-19 test results remain in effect at the present time.
Visitation to Macau has fallen significantly since the outbreak of COVID-19, driven by the strong deterrent effect of the COVID-19 Pandemic on travel and social activities, the suspension or reduced availability of the IVS, group tour scheme and other travel visas for visitors, quarantine measures in Macau and elsewhere, travel and entry restrictions and conditions in Macau, the PRC, Hong Kong and Taiwan involving COVID-19 testing, among other things, and the suspension or reduced accessibility of transportation to and from Macau. Total visitation from PRC to Macau decreased by 83.0% in the year ended December 31, 2020, compared with the year ended December 31, 2019. Regionally, bans on entry or enhanced quarantine requirements, depending on the person’s residency and their recent travel history, for any Macau residents, PRC citizens, Hong Kong residents and Taiwan residents attempting to enter Macau are drastically impacting visitation. At present, bans on entry or enhanced quarantine requirements remain in place for people attempting to enter Macau, depending on various conditions such as the usual visa requirements, their COVID-19 test results, purpose of visit, recent travel history and/or other conditions as applicable.
While many aspects of these travel restrictions and conditions continue to adversely impact visitations to Macau, beginning in June 2020 certain restrictions and conditions have eased to allow for visitation to Macau as certain regions recover from the COVID-19 pandemic. Quarantine-free travel, subject to COVID-19 safeguards such as testing and the usual visa requirements, was reintroduced between Macau and an increasing number of areas and cities within the PRC in progressive phases from June to August 2020, commencing with an area in Guangdong Province, which is adjacent to Macau, and
expanding to additional areas and major cities within Guangdong Province, followed by most other areas of the PRC. On September 23, 2020, PRC authorities fully resumed the IVS exit visa program, which permits individual PRC citizens from nearly 50 PRC cities to travel to Macau for tourism purposes.
Notwithstanding these developments, certain border control, travel-related restrictions and conditions, including certain quarantine and medical observation measures, stringent health declarations, COVID-19 testing and other procedures remain in place, and all visitors need to test negative for COVID-19 before entering Macau.
Given the evolving conditions created by and in response to the COVID-19 pandemic, we are currently unable to determine when travel-related restrictions and conditions will be further lifted. Measures that have been lifted or are expected to be lifted may be reintroduced if there are adverse developments in the COVID-19 situation in Macau and other regions with access to Macau.
Las Vegas Operations and Encore Boston Harbor
Wynn Las Vegas closed on March 17, 2020, and reopened on June 4, 2020 with certain COVID-19 specific protective measures in place, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and suspension of certain entertainment and nightlife offerings. Beginning October 19, 2020, Encore at Wynn Las Vegas adjusted its operating schedule to five days/four nights each week due to currently reduced customer demand levels.
Encore Boston Harbor commenced operations on June 23, 2019. In response to the COVID-19 pandemic, Encore Boston Harbor ceased all operations and closed to the public on March 15, 2020, for the remainder of the first and second quarters of 2020. On July 10, 2020, Encore Boston Harbor reopened with certain COVID-19 specific protective measures in place, such as limiting the number of seats per table game, slot machine spacing, temperature checks, and mask protection. In addition, certain food and beverage outlets have remained closed, and following the July 10, 2020 reopening, our hotel operations were limited to Thursday through Sunday until their temporary closure on November 6, 2020, pursuant to a state directive limiting the operating hours of certain businesses, including restaurants and casinos. On January 25, 2021, the limitations on operating hours were lifted, and Encore Boston Harbor restored certain operations, including its hotel. We are currently unable to determine when the remaining measures will be lifted.
The disruptions arising from the COVID-19 outbreak have had, during the year ended December 31, 2020, and will continue to have an adverse effect on the Company's results of operations. Our operations are generating extremely limited revenue. Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 and potentially thereafter will be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 pandemic will end, when or if our properties will return to pre-pandemic demand and pricing, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business.
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 Operations 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:
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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.
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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.
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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.
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Rolling chips are non-negotiable identifiable chips that are used to track turnover for purposes of calculating incentives within our Macau Operations' VIP program.
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Turnover is the sum of all losing rolling chip wagers within our Macau Operations' VIP program.
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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.
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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.
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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.
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Average daily rate ("ADR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms occupied.
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Revenue per available room ("REVPAR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms available.
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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 18% to 22%.
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, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | $ | 2,095,861 | $ | 6,611,099 | $ | (4,515,238) | (68.3) | ||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | (2,067,245) | 122,985 | (2,190,230) | NM | |||||||||||||||||||
| Diluted net income (loss) per share | (19.37) | 1.15 | (20.52) | NM | |||||||||||||||||||
| Adjusted Property EBITDA (1) | (324,305) | 1,815,408 | (2,139,713) | (117.9) |
(1) See Item 8—"Financial Statements and Supplemental Data," Note 20, "Segment Information," for a reconciliation of Adjusted Property EBITDA to net income (loss) attributable to Wynn Resorts, Limited.
NM - Not meaningful.
The decrease in operating revenues for the year ended December 31, 2020 was primarily driven by decreases of $2.04 billion, $1.60 billion, $885.5 million, and $2.3 million from Wynn Palace, Wynn Macau, our Las Vegas Operations, and Encore Boston Harbor, respectively. These declines were precipitated by the adverse effects of the COVID-19 pandemic, including travel restrictions, property closures and capacity limitations at our Macau Operations, our Las Vegas Operations and Encore Boston Harbor.
The decrease in net income (loss) attributable to Wynn Resorts, Limited for the year ended December 31, 2020 was primarily related to the adverse effects of the COVID-19 pandemic on the results of our operations.
The decrease in Adjusted Property EBITDA for the year ended December 31, 2020 was driven by decreases of $879.2 million, $736.0 million, $470.2 million, and $46.9 million from Wynn Palace, Wynn Macau, our Las Vegas Operations, and Encore Boston Harbor, respectively, and was primarily related to the adverse effects of the COVID-19 pandemic on the results of our operations.
Financial results for the year ended December 31, 2020 compared to the year ended December 31, 2019.
Operating revenues
The following table presents our operating revenues (in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | $ | 505,420 | $ | 2,543,694 | $ | (2,038,274) | (80.1) | ||||||||||||||||
| Wynn Macau | 474,657 | 2,070,029 | (1,595,372) | (77.1) | |||||||||||||||||||
| Total Macau Operations | 980,077 | 4,613,723 | (3,633,646) | (78.8) | |||||||||||||||||||
| Las Vegas Operations | 747,947 | 1,633,457 | (885,510) | (54.2) | |||||||||||||||||||
| Encore Boston Harbor (1) | 361,666 | 363,919 | (2,253) | (0.6) | |||||||||||||||||||
| Corporate and other | 6,171 | — | 6,171 | NM | |||||||||||||||||||
| $ | 2,095,861 | $ | 6,611,099 | $ | (4,515,238) | (68.3) |
(1) Encore Boston Harbor opened on June 23, 2019.
NM - Not meaningful.
The following table presents our casino and non-casino operating revenues (in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Casino revenues | $ | 1,237,230 | $ | 4,573,924 | $ | (3,336,694) | (73.0) | ||||||||||||||||
| Non-casino revenues: | |||||||||||||||||||||||
| Rooms | 307,973 | 804,162 | (496,189) | (61.7) | |||||||||||||||||||
| Food and beverage | 329,584 | 818,822 | (489,238) | (59.7) | |||||||||||||||||||
| Entertainment, retail and other | 221,074 | 414,191 | (193,117) | (46.6) | |||||||||||||||||||
| Total non-casino revenues | 858,631 | 2,037,175 | (1,178,544) | (57.9) | |||||||||||||||||||
| $ | 2,095,861 | $ | 6,611,099 | $ | (4,515,238) | (68.3) |
Casino revenues for the year ended December 31, 2020 were 59.0% of operating revenues, compared to 69.2% for the same period of 2019. Non-casino revenues for the year ended December 31, 2020 were 41.0% of operating revenues, compared to 30.8% for the same period of 2019.
Casino revenues
Casino revenues decreased primarily due to the adverse effects of the COVID-19 pandemic, including the closure of our casino operations in Macau for a 15-day period in February and their subsequent reopening on a reduced basis, and the closures of our Las Vegas Operations from March 17, 2020 until June 4, 2020, and Encore Boston Harbor from March 15, 2020 until July 10, 2020. Each of our properties reopened with certain COVID-19 specific protective measures in place, including limitations on the number of seats per table game and increased spacing between active slot machines. 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, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace: | |||||||||||||||||||||||
| Total casino revenues | $ | 368,284 | $ | 2,139,756 | $ | (1,771,472) | (82.8) | ||||||||||||||||
| VIP: | |||||||||||||||||||||||
| Average number of table games | 99 | 109 | (10) | (9.2) | |||||||||||||||||||
| VIP turnover | $ | 9,631,018 | $ | 45,847,647 | $ | (36,216,629) | (79.0) | ||||||||||||||||
| VIP table games win | $ | 168,435 | $ | 1,519,225 | $ | (1,350,790) | (88.9) | ||||||||||||||||
| VIP win as a % of turnover | 1.75 | % | 3.31 | % | (1.56) | ||||||||||||||||||
| Table games win per unit per day | $ | 4,850 | $ | 38,224 | $ | (33,374) | (87.3) | ||||||||||||||||
| Mass market: | |||||||||||||||||||||||
| Average number of table games | 212 | 216 | (4) | (1.9) | |||||||||||||||||||
| Table drop | $ | 1,242,100 | $ | 5,122,897 | $ | (3,880,797) | (75.8) | ||||||||||||||||
| Table games win | $ | 299,181 | $ | 1,251,920 | $ | (952,739) | (76.1) | ||||||||||||||||
| Table games win % | 24.1 | % | 24.4 | % | (0.3) | ||||||||||||||||||
| Table games win per unit per day | $ | 4,009 | $ | 15,902 | $ | (11,893) | (74.8) | ||||||||||||||||
| Average number of slot machines | 591 | 1,054 | (463) | (43.9) | |||||||||||||||||||
| Slot machine handle | $ | 999,942 | $ | 3,918,554 | $ | (2,918,612) | (74.5) | ||||||||||||||||
| Slot machine win | $ | 39,175 | $ | 195,367 | $ | (156,192) | (79.9) | ||||||||||||||||
| Slot machine win per unit per day | $ | 188 | $ | 508 | $ | (320) | (63.0) | ||||||||||||||||
| Wynn Macau: | |||||||||||||||||||||||
| Total casino revenues | $ | 344,595 | $ | 1,796,209 | $ | (1,451,614) | (80.8) | ||||||||||||||||
| VIP: | |||||||||||||||||||||||
| Average number of table games | 89 | 106 | (17) | (16.0) | |||||||||||||||||||
| VIP turnover | $ | 5,841,627 | $ | 35,426,483 | $ | (29,584,856) | (83.5) | ||||||||||||||||
| VIP table games win | $ | 185,059 | $ | 1,081,934 | $ | (896,875) | (82.9) | ||||||||||||||||
| VIP win as a % of turnover | 3.17 | % | 3.05 | % | 0.12 | ||||||||||||||||||
| Table games win per unit per day | $ | 5,925 | $ | 27,864 | $ | (21,939) | (78.7) | ||||||||||||||||
| Mass market: | |||||||||||||||||||||||
| Average number of table games | 225 | 207 | 18 | 8.7 | |||||||||||||||||||
| Table drop | $ | 1,384,537 | $ | 5,410,439 | $ | (4,025,902) | (74.4) | ||||||||||||||||
| Table games win | $ | 259,361 | $ | 1,099,353 | $ | (839,992) | (76.4) | ||||||||||||||||
| Table games win % | 18.7 | % | 20.3 | % | (1.6) | ||||||||||||||||||
| Table games win per unit per day | $ | 3,279 | $ | 14,519 | $ | (11,240) | (77.4) | ||||||||||||||||
| Average number of slot machines | 504 | 807 | (303) | (37.5) | |||||||||||||||||||
| Slot machine handle | $ | 830,785 | $ | 3,545,899 | $ | (2,715,114) | (76.6) | ||||||||||||||||
| Slot machine win | $ | 31,153 | $ | 170,358 | $ | (139,205) | (81.7) | ||||||||||||||||
| Slot machine win per unit per day | $ | 176 | $ | 578 | $ | (402) | (69.6) | ||||||||||||||||
| Poker rake | $ | 2,083 | $ | 20,835 | $ | (18,752) | (90.0) |
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Total casino revenues | $ | 236,826 | $ | 394,104 | $ | (157,278) | (39.9) | ||||||||||||||||
| Average number of table games | 214 | 236 | (22) | (9.3) | |||||||||||||||||||
| Table drop | $ | 1,127,309 | $ | 1,690,132 | $ | (562,823) | (33.3) | ||||||||||||||||
| Table games win | $ | 238,490 | $ | 395,439 | $ | (156,949) | (39.7) | ||||||||||||||||
| Table games win % | 21.2 | % | 23.4 | % | (2.2) | ||||||||||||||||||
| Table games win per unit per day | $ | 3,873 | $ | 4,581 | $ | (708) | (15.5) | ||||||||||||||||
| Average number of slot machines | 1,703 | 1,788 | (85) | (4.8) | |||||||||||||||||||
| Slot machine handle | $ | 2,452,811 | $ | 3,427,820 | $ | (975,009) | (28.4) | ||||||||||||||||
| Slot machine win | $ | 159,387 | $ | 230,954 | $ | (71,567) | (31.0) | ||||||||||||||||
| Slot machine win per unit per day | $ | 325 | $ | 354 | $ | (29) | (8.2) | ||||||||||||||||
| Poker rake | $ | 3,264 | $ | 12,569 | $ | (9,305) | (74.0) | ||||||||||||||||
| Encore Boston Harbor (1)****: | |||||||||||||||||||||||
| Total casino revenues | $ | 287,525 | $ | 243,855 | $ | 43,670 | 17.9 | ||||||||||||||||
| Average number of table games | 182 | 152 | 30 | 19.7 | |||||||||||||||||||
| Table drop | $ | 697,873 | $ | 778,898 | $ | (81,025) | (10.4) | ||||||||||||||||
| Table games win | $ | 147,512 | $ | 151,247 | $ | (3,735) | (2.5) | ||||||||||||||||
| Table games win % | 21.1 | % | 19.4 | % | 1.7 | ||||||||||||||||||
| Table games win per unit per day | $ | 3,256 | $ | 5,178 | $ | (1,922) | (37.1) | ||||||||||||||||
| Average number of slot machines | 2,159 | 3,023 | (864) | (28.6) | |||||||||||||||||||
| Slot machine handle | $ | 2,303,582 | $ | 1,847,080 | $ | 456,502 | 24.7 | ||||||||||||||||
| Slot machine win | $ | 180,207 | $ | 138,264 | $ | 41,943 | 30.3 | ||||||||||||||||
| Slot machine win per unit per day | $ | 335 | $ | 238 | $ | 97 | 40.8 | ||||||||||||||||
| Poker rake | $ | 5,105 | $ | 12,324 | $ | (7,219) | (58.6) |
(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, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 46,110 | $ | 174,576 | $ | (128,466) | (73.6) | ||||||||||||||||
| Occupancy | 29.8 | % | 97.2 | % | (67.4) | ||||||||||||||||||
| ADR | $ | 235 | $ | 269 | $ | (34) | (12.6) | ||||||||||||||||
| REVPAR | $ | 70 | $ | 262 | $ | (192) | (73.3) | ||||||||||||||||
| Wynn Macau: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 39,111 | $ | 110,387 | $ | (71,276) | (64.6) | ||||||||||||||||
| Occupancy | 34.8 | % | 99.2 | % | (64.4) | ||||||||||||||||||
| ADR | $ | 276 | $ | 286 | $ | (10) | (3.5) | ||||||||||||||||
| REVPAR | $ | 96 | $ | 284 | $ | (188) | (66.2) | ||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 202,073 | $ | 483,055 | $ | (280,982) | (58.2) | ||||||||||||||||
| Occupancy | 49.6 | % | 87.5 | % | (37.9) | ||||||||||||||||||
| ADR | $ | 319 | $ | 325 | $ | (6) | (1.8) | ||||||||||||||||
| REVPAR | $ | 158 | $ | 284 | $ | (126) | (44.4) | ||||||||||||||||
| Encore Boston Harbor (1) (2)****: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 20,679 | $ | 36,144 | $ | (15,465) | (42.8) | ||||||||||||||||
| Occupancy | 74.5 | % | 72.6 | % | 1.9 | ||||||||||||||||||
| ADR | $ | 294 | $ | 391 | $ | (97) | (24.8) | ||||||||||||||||
| REVPAR | $ | 219 | $ | 284 | $ | (65) | (22.9) |
(1) Encore Boston Harbor commenced operations on June 23, 2019.
(2) Encore Boston Harbor closed on March 15, 2020 and reopened July 10, 2020. Upon reopening, hotel reservations at Encore Boston Harbor were limited to Thursday through Sunday until their temporary closure on November 6, 2020, pursuant to a state directive limiting the operating hours of certain businesses. Accordingly, Encore Boston Harbor's room key operating measures have been computed based on 141 days of operation for the year ended December 31, 2020.
Room revenues decreased $496.2 million, primarily due to lower occupancy and temporary closures of our Las Vegas Operations and Encore Boston Harbor resulting from the adverse effects of the COVID-19 pandemic.
Food and beverage revenues decreased $489.2 million, primarily due to decreased covers at our restaurants and the reduction of nightlife offerings at our Las Vegas Operations as a result of the adverse effects of the COVID-19 pandemic.
Entertainment, retail and other revenues decreased $193.1 million, primarily due to a decrease in visitation to Macau and our Macau Operations and temporary closures of our Las Vegas Operations and Encore Boston Harbor resulting from the adverse effects of the COVID-19 pandemic. The closure of the Le Reve show at our Las Vegas Operations and rent concessions provided to tenants at our Macau Operations also contributed to the decrease.
Operating expenses
The table below presents operating expenses (in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | $ | 1,064,976 | $ | 2,924,254 | $ | (1,859,278) | (63.6) | ||||||||||||||||
| Rooms | 172,223 | 276,095 | (103,872) | (37.6) | |||||||||||||||||||
| Food and beverage | 398,792 | 696,498 | (297,706) | (42.7) | |||||||||||||||||||
| Entertainment, retail and other | 107,228 | 170,206 | (62,978) | (37.0) | |||||||||||||||||||
| General and administrative | 720,849 | 896,670 | (175,821) | (19.6) | |||||||||||||||||||
| Provision for credit losses | 64,375 | 21,898 | 42,477 | 194.0 | |||||||||||||||||||
| Pre-opening | 6,506 | 102,009 | (95,503) | (93.6) | |||||||||||||||||||
| Depreciation and amortization | 725,502 | 624,878 | 100,624 | 16.1 | |||||||||||||||||||
| Property charges and other | 67,455 | 20,286 | 47,169 | 232.5 | |||||||||||||||||||
| Total operating expenses | $ | 3,327,906 | $ | 5,732,794 | $ | (2,404,888) | (41.9) |
Total operating expenses decreased $2.4 billion compared to the year ended December 31, 2019, primarily due to decreased expenses related to the impact of the COVID-19 pandemic on our resorts, partially offset by increased operating expenses following the opening of Encore Boston Harbor in June 2019.
Casino expenses decreased $1.03 billion, $797.8 million, and $49.8 million at Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. These decreases were primarily due to reductions in gaming tax expense commensurate with the declines in casino revenues at each property resulting from the effects of the COVID-19 pandemic as well as lower payroll and other operating costs. These decreases were partially offset by increased casino expenses of $22.3 million from Encore Boston Harbor due to the opening of the property in June 2019.
Room expenses decreased $75.2 million, $20.8 million, and $7.3 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively. The decreases were primarily a result of lower operating costs related to the declines in occupancy at our Las Vegas Operations and our Macau Operations resulting from the effects of the COVID-19 pandemic as well as the temporary closure of our Las Vegas Operations, as previously noted.
Food and beverage expenses decreased $214.8 million, $48.8 million, $22.8 million, and $11.2 million at our Las Vegas Operations, Wynn Palace, Wynn Macau, and Encore Boston Harbor, respectively. The decreases were primarily a result of lower operating costs related to the declines in food and beverage revenues at each property as well as lower nightlife entertainment costs at our Las Vegas Operations resulting from the effects of the COVID-19 pandemic.
Entertainment, retail and other expenses decreased $59.8 million, $13.9 million, and $7.2 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively. The decreases were primarily a result of lower operating costs related to the declines in entertainment, retail and other revenues at each property resulting from the effects of the COVID-19 pandemic, including the closure of the Le Reve show at our Las Vegas Operations, and were partially offset by increased entertainment, retail and other expenses of $3.3 million at Encore Boston Harbor due to the opening of the property in June 2019.
General and administrative expenses decreased $54.5 million, $31.3 million, and $27.6 million at Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. These decreases were primarily attributable to the effects of the COVID-19 pandemic. In addition, corporate and other general and administrative expenses decreased $91.2 million, primarily due to a credit of $30.2 million for the net proceeds of a derivative action settlement recognized during the year ended December 31, 2020, and a fine of $35.0 million assessed by the Massachusetts Gaming Commission which was incurred in 2019. These decreases were partially offset by an increase of $28.7 million of general and administrative expenses from Encore Boston Harbor due to the opening of the property in June 2019.
The provision for credit losses increased $15.1 million, $14.8 million, $10.2 million, and $2.4 million at our Las Vegas Operations, Wynn Palace, Wynn Macau, and Encore Boston Harbor, respectively. The increases were primarily due to the impact of historical collection patterns and expectations of current and future collection trends in light of the COVID-19 pandemic, as well as the specific review of customer accounts, on our estimated credit loss for the respective periods.
For the year ended December 31, 2020, pre-opening expenses totaled $6.5 million, which primarily related to restaurant remodels at our Las Vegas Operations and the meeting and convention expansion at Wynn Las Vegas, which opened in February 2020. For the year ended December 31, 2019, pre-opening expenses totaled $102.0 million, which primarily related to the development of Encore Boston Harbor prior to its opening in June 2019..
Depreciation and amortization increased primarily due to an increase in depreciation expense of $72.5 million associated with the opening of Encore Boston Harbor in June 2019 and an increase of $18.8 million at our Las Vegas Operations associated with the opening of the meeting and convention expansion in February 2020.
Our property charges and other expenses for the year ended December 31, 2020 consisted primarily of asset disposals and abandonments of $24.4 million, $12.8 million, and $21.5 million at Wynn Palace, Encore Boston Harbor and Corporate and other, respectively. Our property charges and other expenses for the year ended December 31, 2019 consisted primarily of asset abandonments and retirements.
Interest expense, net of capitalized interest
The following table summarizes information related to interest expense (dollars in thousands):
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest cost, including amortization of debt issuance costs and original issue discount and premium | $ | 557,726 | $ | 467,946 | $ | 89,780 | 19.2 | ||||||||||||||||
| Capitalized interest | (1,252) | (53,916) | (52,664) | (97.7) | |||||||||||||||||||
| $ | 556,474 | $ | 414,030 | $ | 142,444 | 34.4 | |||||||||||||||||
| Weighted average total debt balance | $ | 12,284,646 | $ | 9,287,441 | |||||||||||||||||||
| Weighted average interest rate | 4.54 | % | 5.04 | % |
Interest costs increased due to an increase in the weighted average debt balance, partially offset by a decrease in the weighted average interest rate. Capitalized interest decreased primarily due to the completion of Encore Boston Harbor construction activities on June 23, 2019.
Other non-operating income and expenses
We incurred a foreign currency remeasurement gain of $12.8 million and $15.2 million for the years ended December 31, 2020 and 2019, 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.
We recorded a gain of $15.7 million for the year ended December 31, 2020 to reflect the fair value of our cost method investment at the date we acquired a controlling interest in BetBull Limited.
We recorded a loss of $13.1 million and $3.2 million for the years ended December 31, 2020 and 2019, respectively, from change in the fair value of an interest rate collar.
We recorded a $4.6 million loss on extinguishment of debt for the year ended December 31, 2020 primarily related to the partial prepayment of the Wynn Macau Term Loan. We recorded a $12.4 million loss on extinguishment of debt for the year ended December 31, 2019 in connection with refinancing our Wynn Resorts Finance (formerly Wynn America) credit facility and Wynn Resorts term loan.
Income Taxes
For the years ended December 31, 2020 and 2019, we recorded an income tax expense of $564.7 million and $176.8 million, respectively. The 2020 income tax expense primarily related to the increase in the valuation allowances for U.S foreign tax credits, intangible assets, U.S. loss carryforwards and other U.S. deferred tax assets. The 2019 income tax expense primarily related to the increase in the valuation allowance for U.S foreign tax credits.
Wynn Macau SA received a five-year exemption from the Macau Complementary Tax on casino gaming profits through December 31, 2020. For the year ended December 31, 2019, we were exempt from the payment of $77.7 million in such taxes. For the year ended December 31, 2020, we did not have any casino gaming profits in Macau. 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. In March 2020, Wynn Macau SA applied for an extension of this agreement for an additional five years through 2025. The extension is subject to approval and may only extend through June 26, 2022, the expiration date of the gaming concession agreement.
In April 2020, Wynn Macau SA received an extension of the exemption from Macau's 12% Complementary Tax on casino gaming profits earned from January 1, 2021 to June 26, 2022, the expiration date of the gaming concession agreement.
We have participated in the Internal Revenue Service ("IRS") Compliance Assurance Program ("CAP") for the 2012 through 2020 tax years and will continue to participate in the IRS CAP for the 2021 tax year.
Net income (loss) attributable to noncontrolling interests
Net loss attributable to noncontrolling interests was $259.7 million for the year ended December 31, 2020, compared to net income of $188.4 million for the year ended December 31, 2019. These amounts are primarily related to the noncontrolling interests' share of net income (loss) from WML.
Adjusted Property EBITDA
We use Adjusted Property EBITDA to manage the operating results of our segments. Adjusted Property EBITDA is net income (loss) 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, change in derivatives fair value, loss on extinguishment of debt, and other non-operating income and expenses. 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 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 us, have historically excluded from their EBITDA calculations preopening 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 (loss), 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 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 20, "Segment Information." That footnote also presents a reconciliation of Adjusted Property EBITDA to net income (loss) attributable to Wynn Resorts, Limited.
| Years Ended December 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Wynn Palace | $ | (149,647) | $ | 729,535 | $ | (879,182) | (120.5) | ||||||||||||||||
| Wynn Macau | (87,189) | 648,837 | (736,026) | (113.4) | |||||||||||||||||||
| Las Vegas Operations | (56,356) | 413,886 | (470,242) | (113.6) | |||||||||||||||||||
| Encore Boston Harbor (1) | (23,762) | 23,150 | (46,912) | (202.6) |
(1) Encore Boston Harbor commenced operations on June 23, 2019.
Adjusted Property EBITDA at Wynn Palace and Wynn Macau decreased $879.2 million and $736.0 million, respectively, for the year ended December 31, 2020, primarily due to a decline in operating revenues precipitated by the adverse effects of the COVID-19 pandemic during the year ended December 31, 2020, which include the closure of our casino operations in Macau for a 15-day period and their subsequent reopening on a reduced basis.
Adjusted Property EBITDA at our Las Vegas Operations decreased $470.2 million for the year ended December 31, 2020, primarily due to the adverse effects of the COVID-19 pandemic during the year ended December 31, 2020, including the closure of our Las Vegas Operations on March 17, 2020 for a 79-day period and their subsequent reopening on a reduced basis.
Adjusted Property EBITDA at Encore Boston Harbor was $(23.8) million for the year ended December 31, 2020. Encore Boston Harbor closed to the public on March 15, 2020, and reopened on July 10, 2020 on a reduced basis. In addition, subsequent to reopening, hotel reservations were limited to Thursday through Sunday until the hotel tower's temporary closure on November 6, 2020 for the remainder of 2020, pursuant to a state directive limiting the operating hours of certain businesses, including restaurants and casinos. On January 25, 2021, the limitations on operating hours were lifted, and Encore Boston Harbor restored certain operations, including its hotel, although it remains limited to Thursday through Sunday.
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 | 2020 | 2019 | |||||||||
| Net cash (used in) provided by operating activities | $ | (1,072,425) | $ | 901,070 | |||||||
| Net cash used in investing activities: | |||||||||||
| Capital expenditures, net of construction payables and retention | (290,115) | (1,063,293) | |||||||||
| Purchase of intangible and other assets | — | (6,000) | |||||||||
| Cash acquired from business combination | 4,604 | — | |||||||||
| Proceeds from sale of assets | 19,752 | 695 | |||||||||
| Net cash used in investing activities | (265,759) | (1,068,598) | |||||||||
| Net cash provided by financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 4,691,953 | 3,893,778 | |||||||||
| Repayments of long-term debt | (2,035,354) | (2,930,015) | |||||||||
| Repurchase of common stock | (11,533) | (66,986) | |||||||||
| Finance lease payment | (5,916) | (73) | |||||||||
| Proceeds from exercise of stock options | 70 | 14,696 | |||||||||
| Shares of subsidiary repurchased for share award plan | — | (5,384) | |||||||||
| Dividends paid | (108,777) | (566,521) | |||||||||
| Distribution to noncontrolling interest | (6,238) | (7,745) | |||||||||
| Payments for additional ownership interest in Wynn Interactive | (33,621) | — | |||||||||
| Payments for financing costs | (27,339) | (32,738) | |||||||||
| Net cash provided by financing activities | 2,463,245 | 299,012 | |||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | 3,031 | 7,485 | |||||||||
| Increase in cash, cash equivalents and restricted cash | $ | 1,128,092 | $ | 138,969 |
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, 2020, the decrease in net cash provided by operations was primarily due to the adverse effects of the COVID-19 pandemic on the results of our operations.
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.
Investing Activities
Our investing activities primarily consist of project capital expenditures, such as the construction of Encore Boston Harbor, which opened in June 2019, and the construction of the meeting and convention expansion at Wynn Las Vegas, which opened in February 2020, as well as maintenance capital expenditures associated with maintaining and continually refining our world-class integrated resort properties. In light of the unprecedented COVID-19 pandemic and our focus on safeguarding the Company's operations and the well-being of our employees, we temporarily postponed major project capital expenditures for 2020, including the Wynn Tower room remodel at Wynn Las Vegas. We will be continuously monitoring the situation and conditions in the markets in which we operate, and will resume such project capital expenditures when conditions have stabilized.
During the year ended December 31, 2020, we incurred capital expenditures of $61.3 million at Encore Boston Harbor primarily for the payment of construction retention and other payables related to its construction, $85.9 million at our Las Vegas Operations for restaurant remodels and maintenance capital expenditures, $45.3 million for the construction of the additional meeting and convention space at Wynn Las Vegas, and $46.7 million and $49.8 million at Wynn Palace and Wynn Macau, respectively, primarily related to maintenance capital expenditures.
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.
Financing Activities
During the year ended December 31, 2020, we issued $1.0 billion aggregate principal amount of WML 5 1/2% Senior Notes due 2026, issued $1.35 billion aggregate principal amount of WML 5 5/8% Senior Notes due 2028, issued $600.0 million aggregate principal amount of WRF 7 3/4% Senior Notes due 2025, borrowed $56.5 million, net of amounts repaid, under the Wynn Macau Revolver, borrowed $716.0 million, net of amounts repaid, under the WRF Revolver, paid $1.04 billion of outstanding principal owed under the Wynn Macau Term Loan, and made quarterly amortization payments under the WRF Term Loan totaling $50.0 million.
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, 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.
Capital Resources
The COVID-19 pandemic has impacted and will continue to impact, materially, our business, financial condition and results of operations. While we believe our liquidity position will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption, which has had and will continue to have a negative impact on our operating income and could have a negative impact on our ability to access capital in the future. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities.
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, 2020 (in thousands):
| Cash and Cash Equivalents | Revolver Borrowing Capacity | ||||||||||
| Wynn Resorts (Macau) S.A. and subsidiaries | $ | 417,591 | $ | 343,526 | |||||||
| Wynn Macau, Limited and subsidiaries (1) | 2,011,382 | — | |||||||||
| Wynn Resorts Finance, LLC and subsidiaries (2) | 297,856 | 117,895 | |||||||||
| Wynn Resorts, Limited and other | 755,203 | — | |||||||||
| Total | $ | 3,482,032 | $ | 461,421 |
(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.
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 4.00 to 1 and an interest coverage ratio of not less than 2.00 to 1. Wynn Macau SA complied with these ratios as of December 31, 2020.
In January 2021, Wynn Macau SA prepaid approximately $412.5 million of the term loan outstanding under the Wynn Macau Credit Facilities using proceeds from WML senior notes issuances.
The Company is currently designing the second phase of Wynn Palace. We do not expect to incur significant capital expenditures related to the construction of this project in 2021.
Wynn Macau, Limited and subsidiaries. Wynn Macau, Limited ("WML") primarily generates cash through distributions from Wynn Macau SA. We expect to use WML's 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.
The WML board of directors concluded not to recommend the payment of a dividend with respect to the year ended December 31, 2019, in light of the unprecedented COVID-19 pandemic and our focus on safeguarding the Company's Macau Operations and the well-being of our employees. As such, WML paid no dividends during 2020. The WML board of directors will be continuously monitoring the situation and market conditions in Macau and Greater China and may consider a special dividend in the future when such conditions have stabilized.
During 2020, WML issued $1.0 billion of 5 1/2% Senior Notes due 2026 and $1.35 billion of 5 5/8% Senior Notes due 2028 (collectively, the "2026 and 2028 WML Notes"). The Company used the proceeds from the 2026 and 2028 WML Notes to facilitate repayments on the Wynn Macau Credit Facilities and for general corporate purposes.
If our portion of our cash and cash equivalents were repatriated to the U.S. on December 31, 2020, it would be subject to minimal U.S. taxes in the year of repatriation.
Wynn Resorts Finance, LLC and subsidiaries. Wynn Resorts Finance, 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, 2025 WRF Notes (as defined below), 2029 WRF Notes, and WLV Notes, and to fund working capital and capital expenditure requirements as needed.
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 Agreement contains 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.
As previously disclosed, we are in the planning phase of a room remodel of the Wynn Tower at Wynn Las Vegas. We have temporarily postponed the remodel until conditions have stabilized (as discussed above within Investing Activities). Accordingly, at this time we do not expect to incur significant capital expenditures associated with the Wynn Tower room remodel during 2021.
During 2020, the WRF Credit Agreement was amended to, among other things, implement a financial covenant relief period through April 1, 2022. Through that date, WRF and its restricted subsidiaries are required to maintain liquidity of at least $325.0 million at all times (with liquidity being the sum of unrestricted operating cash, as defined in the WRF Credit Agreement, and the available borrowing capacity under the WRF Revolver).
In addition, during 2020, WRF issued $600.0 million aggregate principal amount of 7 3/4% Senior Notes due 2025, the net proceeds of which WRF used for general corporate purposes.
The Company repaid $716.0 million of the outstanding borrowings under the WRF Revolver in February 2021, using proceeds from the February 2021 equity offering described below.
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 and for general corporate purposes.
On May 5, 2020, certain subsidiaries of the Retail Joint Venture entered into an amendment to the existing retail term loan agreement to temporarily suspend the requirement to maintain certain financial ratios to avoid triggering excess cash sweep provisions from the first quarter of 2020 through the fourth quarter of 2021.
On May 6, 2020, the Company announced that it has suspended its quarterly dividend program due to the financial impact of the COVID-19 pandemic.
On February 11, 2021, the Company completed a registered public offering of 7,475,000 newly issued shares of its common stock, par value $0.01 per share, at a price of $115.00 per share for proceeds of $842.4 million, net of $17.2 million in underwriting discounts and commissions. The Company used $716.0 million of the net proceeds from this equity offering to repay the outstanding borrowings under the WRF revolver in February 2021, and intends to use the remaining net proceeds for general corporate purposes.
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, 2020, 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, 2020, we had outstanding letters of credit totaling $16.1 million.
Contractual Commitments
The following table summarizes our scheduled contractual commitments as of December 31, 2020 (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) | $ | 596,408 | $ | 1,729,141 | $ | 5,098,500 | $ | 5,730,000 | $ | 13,154,049 | |||||||||||||||||||
| Fixed interest payments | 502,975 | 993,554 | 812,367 | 687,007 | 2,995,903 | ||||||||||||||||||||||||
| Estimated variable interest payments (2) | 82,599 | 108,151 | 47,255 | — | 238,005 | ||||||||||||||||||||||||
| Construction contracts and commitments | 30,592 | 49,250 | — | — | 79,842 | ||||||||||||||||||||||||
| Operating leases | 20,772 | 31,847 | 20,168 | 450,009 | 522,796 | ||||||||||||||||||||||||
| Finance leases | 15,898 | 31,796 | 10,821 | 65,084 | 123,599 | ||||||||||||||||||||||||
| Employment agreements | 54,090 | 35,063 | 1,450 | 1,996 | 92,599 | ||||||||||||||||||||||||
| Massachusetts surrounding community payments (3) | 13,499 | 27,626 | 28,475 | 112,469 | 182,069 | ||||||||||||||||||||||||
| Other (4) | 161,665 | 109,378 | 23,805 | 13,984 | 308,832 | ||||||||||||||||||||||||
| Total contractual commitments | $ | 1,478,498 | $ | 3,115,806 | $ | 6,042,841 | $ | 7,060,549 | $ | 17,697,694 |
(1) In the Less Than 1 Year column, includes $412.5 million related to the prepayment of the Wynn Macau Term Loan paid in January 2021.
(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, 2020. 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 $107.7 million of unrecognized tax benefits as of December 31, 2020. 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, 2020.
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.
Allowance for Credit Losses
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 credit losses based on a specific review of customer accounts and outstanding gaming promoter accounts taking into consideration the amount owed, the age of the account, the customer's financial condition, management's experience with historical and current collection trends, current economic and business conditions, and management's expectations of future economic and business conditions and forecasts. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received.
The following table presents key statistics related to our casino accounts receivable (dollars in thousands):
| December 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Casino accounts receivable | $ | 207,823 | $ | 304,137 | |||||||
| Allowance for casino credit losses | $ | 98,035 | $ | 37,652 | |||||||
| Allowance as a percentage of casino accounts receivable | 47.2 | % | 12.4 | % |
The increase in allowance for casino credit losses as shown in the table above is primarily due to the impact of historical collection patterns and expectations of current and future collection trends in light of the COVID-19 pandemic, as well as the specific review of customer accounts. Although the Company believes that its allowance is adequate, it is possible the estimated amounts of cash collections with respect to receivables could change. Our allowance for credit losses is based on our estimates of amounts collectible and depends on the risk assessments and judgments by management regarding realizability, the current and expected future 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, 2020 and 2019, 50.0% and 61.0%, respectively, of our outstanding casino accounts receivable balance originated at our Macau Operations, which include advances to gaming promoters, which are settled within five days of period end.
As of December 31, 2020, a 100 basis point change in the allowance for credit losses as a percentage of casino accounts receivable would change the provision for credit losses by approximately $2.1 million.
As our customer payment experience evolves, we will continue to refine our estimated allowance for credit losses. Accordingly, the associated provision for credit losses 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.
Development, Construction and Property, and Equipment Estimates
During the construction and development of a resort or other projects, 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.
Impairment of Long-lived Assets, Intangible assets, and Goodwill
We 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.
During the year ended December 31, 2020, Wynn Palace, Wynn Macau, the Company's Las Vegas Operations, and Encore Boston Harbor each experienced a significant decline in revenues, operating income, and cash provided by operations as a result of the COVID-19 pandemic as noted in Note 1, "Organization and Business." As a result, we concluded that a triggering event occurred at each of these asset groups. We tested our asset groups for recoverability as of December 31, 2020 and concluded no impairment existed at that date as the estimated undiscounted future cash flows exceeded the net carrying amount for each of the asset groups. The tests for recoverability include estimates of future cash flows and the useful lives of our primary assets. These estimates are subjective and may change should the COVID-19 pandemic, including travel restrictions and operating capacity limitations, persist longer than expected. Unfavorable changes in the Company's estimates could require an impairment charge in the future.
The Company tests goodwill for impairment as of October 1 of each year, or more frequently if events or changes in circumstances indicate that this asset may be impaired. The Company’s test of goodwill impairment starts with a qualitative assessment to determine whether it is necessary to perform a quantitative goodwill impairment test. If qualitative factors indicate that the fair value of the reporting unit is more likely than not less than its carrying amount, then a quantitative goodwill impairment test is performed. For the quantitative analysis, the Company compares the fair value of its reporting unit to its carrying value. If the estimated fair value exceeds its carrying value, goodwill is considered not to be impaired and no additional steps are necessary. However, if the fair value of the reporting unit is less than book value, then under the second step the carrying amount of the goodwill is compared to its implied fair value. Prior to 2020, the Company had an immaterial amount of goodwill. Most of the Company’s goodwill recorded as of December 31, 2020 was the result of an acquisition during the fourth quarter of 2020.
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, 2020, we had deferred tax assets of $3 billion including a foreign tax credit ("FTC") carryforward of $2.5 billion and a deferred tax asset related to interest expense carryforwards of $138.3 million. As of December 31, 2020, we have recorded a valuation allowance of $3.0 billion against the FTC carryforward, disallowed interest expense carryforward and the other deferred tax assets based on our estimate of future realization. In assessing the need for a valuation allowance, the Company considers whether it is more likely than not that the deferred tax assets will be realized. In this assessment, appropriate consideration was given to all positive and negative evidence including recent operating profitability, forecasts of future earnings, ability to carryback, the reversal of net taxable temporary differences, the duration of statutory carryforward periods, and tax planning strategies. As of December 31, 2020, the Company no longer relies on forecast of future taxable income due to recent tax legislation that reduces future sources of taxable income as well as the uncertainty caused by the COVID-19 pandemic and relies solely on the reversal of net taxable temporary differences.
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 that 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."
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