filings.toolsItem 8. Financial Statements and Supplementary Data
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Wynn Resorts, Limited and subsidiaries
Opinion on Internal Control Over Financial Reporting
We have audited Wynn Resorts, Limited and subsidiaries’ internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Wynn Resorts, Limited and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 28, 2022
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders of Wynn Resorts, Limited and subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Wynn Resorts, Limited and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)2 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosure to which it relates.
| Allowance for Credit Losses on Casino Receivables | |||||
| Description of the Matter | At December 31, 2021, the Company’s allowance for credit losses on accounts receivable was $111.3 million, primarily consisting of casino receivables. As discussed in Note 2 to the consolidated financial statements, casino receivables primarily consist of credit issued to patrons in the form of markers and advances paid to gaming promoters. The Company records an estimated allowance for credit losses to reduce the Company’s receivables to their carrying amount, which reflects the net amount the Company expects to collect. The Company estimates the allowance based on specific review of customer and outstanding gaming promoter accounts taking into consideration the amount due from the patron and gaming promoters, the age of the account, the customer’s financial condition, as well as 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. Auditing management’s estimate of the allowance for credit losses on casino receivables is complex due to the highly judgmental nature of the qualitative factors used to estimate the collectability of casino receivables and high degree of subjectivity in evaluating management’s judgments related to the collectability of patron accounts receivable. | ||||
| How We Addressed the Matter in Our Audit | We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s allowance for credit losses process. For example, we tested controls over the issuance of markers to patrons, the collection processes and management’s review controls over the assessment of the expected collection of casino receivables and evaluation of the allowance for credit losses, including the information used by management in those controls. To test the allowance for credit losses, our audit procedures included, among others: testing management’s historical collections analysis by obtaining evidence related to the original issuance of the credit to patrons on a sample of casino accounts receivable and examining support for subsequent settlement, if any; corroborating management’s representations for specific provisions made for certain individual casino patrons with internal data and examination of publicly available information of the customers’ financial condition; evaluating management’s assumptions regarding future collectability in comparison to current business trends, third-party macroeconomic data and peer data; and evaluating management’s use of this information in establishing the allowance for credit losses as of December 31, 2021. In addition, we performed sensitivity analyses over the Company's significant assumptions and evaluated the overall allowance for credit losses by performing a retrospective analysis of the Company’s historical estimates, which consisted of comparing the Company’s estimates to subsequent settlements and write-offs. |
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2006.
Las Vegas, Nevada
February 28, 2022
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,522,530 | $ | 3,482,032 | |||||||
| Restricted cash | 4,896 | — | |||||||||
| Accounts receivable, net of allowance for credit losses of $111,319 and $100,329 | 199,463 | 200,158 | |||||||||
| Inventories | 69,967 | 66,285 | |||||||||
| Prepaid expenses and other | 79,061 | 64,672 | |||||||||
| Total current assets | 2,875,917 | 3,813,147 | |||||||||
| Property and equipment, net | 8,765,308 | 9,196,644 | |||||||||
| Restricted cash | 3,641 | 4,352 | |||||||||
| Goodwill and intangible assets, net | 307,578 | 278,195 | |||||||||
| Operating lease assets | 371,365 | 398,594 | |||||||||
| Other assets | 207,017 | 178,615 | |||||||||
| Total assets | $ | 12,530,826 | $ | 13,869,547 | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts and construction payables | $ | 170,542 | $ | 148,478 | |||||||
| Customer deposits | 436,388 | 646,856 | |||||||||
| Gaming taxes payable | 73,173 | 66,346 | |||||||||
| Accrued compensation and benefits | 206,225 | 126,846 | |||||||||
| Accrued interest | 132,877 | 136,421 | |||||||||
| Current portion of long-term debt | 50,000 | 596,408 | |||||||||
| Other accrued liabilities | 218,675 | 159,533 | |||||||||
| Total current liabilities | 1,287,880 | 1,880,888 | |||||||||
| Long-term debt | 11,884,546 | 12,469,362 | |||||||||
| Long-term operating lease liabilities | 115,187 | 123,124 | |||||||||
| Other long-term liabilities | 79,428 | 133,490 | |||||||||
| Total liabilities | 13,367,041 | 14,606,864 | |||||||||
| Commitments and contingencies (Note 17) | |||||||||||
| Stockholders' deficit: | |||||||||||
| Preferred stock, par value $0.01; 40,000,000 shares authorized; zero shares issued and outstanding | — | — | |||||||||
| Common stock, par value $0.01; 400,000,000 shares authorized; 131,449,806 and 123,482,836 shares issued; 115,714,943 and 107,888,336 shares outstanding, respectively | 1,314 | 1,235 | |||||||||
| Treasury stock, at cost; 15,734,863 and 15,594,500 shares, respectively | (1,436,373) | (1,422,531) | |||||||||
| Additional paid-in capital | 3,502,715 | 2,598,115 | |||||||||
| Accumulated other comprehensive income | 6,004 | 3,604 | |||||||||
| Accumulated deficit | (2,288,078) | (1,532,420) | |||||||||
| Total Wynn Resorts, Limited stockholders' deficit | (214,418) | (351,997) | |||||||||
| Noncontrolling interests | (621,797) | (385,320) | |||||||||
| Total stockholders' deficit | (836,215) | (737,317) | |||||||||
| Total liabilities and stockholders' deficit | $ | 12,530,826 | $ | 13,869,547 |
The accompanying notes are an integral part of these consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Operating revenues: | |||||||||||||||||
| Casino | $ | 2,133,420 | $ | 1,237,230 | $ | 4,573,924 | |||||||||||
| Rooms | 592,571 | 307,973 | 804,162 | ||||||||||||||
| Food and beverage | 633,911 | 329,584 | 818,822 | ||||||||||||||
| Entertainment, retail and other | 403,762 | 221,074 | 414,191 | ||||||||||||||
| Total operating revenues | 3,763,664 | 2,095,861 | 6,611,099 | ||||||||||||||
| Operating expenses: | |||||||||||||||||
| Casino | 1,394,098 | 1,064,976 | 2,924,254 | ||||||||||||||
| Rooms | 197,734 | 172,223 | 276,095 | ||||||||||||||
| Food and beverage | 516,391 | 398,792 | 696,498 | ||||||||||||||
| Entertainment, retail and other | 450,358 | 107,228 | 170,206 | ||||||||||||||
| General and administrative | 796,592 | 720,849 | 896,670 | ||||||||||||||
| Provision for credit losses | 29,487 | 64,375 | 21,898 | ||||||||||||||
| Pre-opening | 6,821 | 6,506 | 102,009 | ||||||||||||||
| Depreciation and amortization | 715,962 | 725,502 | 624,878 | ||||||||||||||
| Property charges and other | 50,762 | 67,455 | 20,286 | ||||||||||||||
| Total operating expenses | 4,158,205 | 3,327,906 | 5,732,794 | ||||||||||||||
| Operating income (loss) | (394,541) | (1,232,045) | 878,305 | ||||||||||||||
| Other income (expense): | |||||||||||||||||
| Interest income | 3,213 | 15,384 | 24,449 | ||||||||||||||
| Interest expense, net of amounts capitalized | (605,562) | (556,474) | (414,030) | ||||||||||||||
| Change in derivatives fair value | 11,360 | (13,060) | (3,228) | ||||||||||||||
| Loss on extinguishment of debt | (2,060) | (4,601) | (12,437) | ||||||||||||||
| Other | (23,926) | 28,521 | 15,159 | ||||||||||||||
| Other income (expense), net | (616,975) | (530,230) | (390,087) | ||||||||||||||
| Income (loss) before income taxes | (1,011,516) | (1,762,275) | 488,218 | ||||||||||||||
| Provision for income taxes | (474) | (564,671) | (176,840) | ||||||||||||||
| Net income (loss) | (1,011,990) | (2,326,946) | 311,378 | ||||||||||||||
| Less: net (income) loss attributable to noncontrolling interests | 256,204 | 259,701 | (188,393) | ||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (755,786) | $ | (2,067,245) | $ | 122,985 | |||||||||||
| Basic and diluted net income (loss) per common share: | |||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited: | |||||||||||||||||
| Basic | $ | (6.64) | $ | (19.37) | $ | 1.15 | |||||||||||
| Diluted | $ | (6.64) | $ | (19.37) | $ | 1.15 | |||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||
| Basic | 113,760 | 106,745 | 106,745 | ||||||||||||||
| Diluted | 113,760 | 106,745 | 106,985 |
The accompanying notes are an integral part of these consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Net income (loss) | $ | (1,011,990) | $ | (2,326,946) | $ | 311,378 | |||||||||||
| Other comprehensive income: | |||||||||||||||||
| Foreign currency translation adjustments, before and after tax | 3,477 | 7,367 | 376 | ||||||||||||||
| Total comprehensive income (loss) | (1,008,513) | (2,319,579) | 311,754 | ||||||||||||||
| Less: comprehensive (income) loss attributable to noncontrolling interests | 255,127 | 257,617 | (188,498) | ||||||||||||||
| Comprehensive income (loss) attributable to Wynn Resorts, Limited | $ | (753,386) | $ | (2,061,962) | $ | 123,256 |
The accompanying notes are an integral part of these consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Retained earnings (accumulated deficit) | Total Wynn Resorts, Limited stockholders' equity (deficit) | Noncontrolling interests | Total stockholders' equity (deficit) | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2019 | 107,232,026 | $ | 1,221 | $ | (1,344,012) | $ | 2,457,079 | $ | (1,950) | $ | 921,785 | $ | 2,034,123 | $ | (219,334) | $ | 1,814,789 | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 122,985 | 122,985 | 188,393 | 311,378 | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 271 | — | 271 | 105 | 376 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 293,690 | 3 | — | 14,693 | — | — | 14,696 | — | 14,696 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 472,480 | 5 | — | 14,343 | — | — | 14,348 | 785 | 15,133 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (43,825) | (1) | — | 1 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (590,428) | — | (66,986) | — | — | — | (66,986) | — | (66,986) | ||||||||||||||||||||||||||||||||||||||||||||
| Shares of subsidiary repurchased for share award plan | — | — | — | (3,885) | — | — | (3,885) | (1,499) | (5,384) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (402,952) | (402,952) | (165,835) | (568,787) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (7,745) | (7,745) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 30,445 | — | — | 30,445 | 3,557 | 34,002 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2019 | 107,363,943 | 1,228 | (1,410,998) | 2,512,676 | (1,679) | 641,818 | 1,743,045 | (201,573) | 1,541,472 | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (2,067,245) | (2,067,245) | (259,701) | (2,326,946) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 5,283 | — | 5,283 | 2,084 | 7,367 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 886,014 | 9 | — | 6,711 | — | — | 6,720 | 823 | 7,543 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (241,108) | (2) | — | 2 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (120,513) | — | (11,533) | — | — | — | (11,533) | — | (11,533) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (106,993) | (106,993) | 44 | (106,949) | ||||||||||||||||||||||||||||||||||||||||||||
| Wynn Interactive transactions | — | — | — | 26,262 | — | — | 26,262 | 73,768 | 100,030 | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (6,238) | (6,238) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 52,464 | — | — | 52,464 | 5,473 | 57,937 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2020 | 107,888,336 | 1,235 | (1,422,531) | 2,598,115 | 3,604 | (1,532,420) | (351,997) | (385,320) | (737,317) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (755,786) | (755,786) | (256,204) | (1,011,990) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 2,400 | — | 2,400 | 1,077 | 3,477 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock, net of $17.7 million underwriter discounts, commissions and other expenses | 7,475,000 | 75 | — | 841,821 | — | — | 841,896 | — | 841,896 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 518,191 | 4 | — | 5,897 | — | — | 5,901 | 370 | 6,271 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (26,221) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (140,363) | — | (13,842) | — | — | — | (13,842) | — | (13,842) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | 128 | 128 | 21 | 149 | ||||||||||||||||||||||||||||||||||||||||||||
| Wynn Interactive transactions | — | — | — | (20,211) | — | — | (20,211) | 25,372 | 5,161 | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (18,761) | (18,761) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 77,093 | — | — | 77,093 | 11,648 | 88,741 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2021 | 115,714,943 | $ | 1,314 | $ | (1,436,373) | $ | 3,502,715 | $ | 6,004 | $ | (2,288,078) | $ | (214,418) | $ | (621,797) | $ | (836,215) |
The accompanying notes are an integral part of these consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||
| Net income (loss) | $ | (1,011,990) | $ | (2,326,946) | $ | 311,378 | |||||||||||
| Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities: | |||||||||||||||||
| Depreciation and amortization | 715,962 | 725,502 | 624,878 | ||||||||||||||
| Deferred income taxes | (2,706) | 562,484 | 174,190 | ||||||||||||||
| Stock-based compensation expense | 95,238 | 62,254 | 40,372 | ||||||||||||||
| Amortization of debt issuance costs | 27,047 | 28,932 | 28,954 | ||||||||||||||
| Loss on extinguishment of debt | 2,060 | 4,601 | 12,437 | ||||||||||||||
| Provision for credit losses | 29,487 | 64,375 | 21,898 | ||||||||||||||
| Change in derivatives fair value | (11,360) | 13,060 | 3,228 | ||||||||||||||
| Property charges and other | 74,688 | 38,933 | 5,122 | ||||||||||||||
| Increase (decrease) in cash from changes in: | |||||||||||||||||
| Receivables, net | (29,441) | 81,646 | (86,712) | ||||||||||||||
| Inventories, prepaid expenses and other | (21,499) | 27,660 | (37,907) | ||||||||||||||
| Customer deposits | (207,878) | (192,451) | (134,858) | ||||||||||||||
| Accounts payable and accrued expenses | 117,801 | (162,475) | (61,910) | ||||||||||||||
| Net cash (used in) provided by operating activities | (222,591) | (1,072,425) | 901,070 | ||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||
| Capital expenditures, net of construction payables and retention | (290,657) | (290,115) | (1,063,293) | ||||||||||||||
| Purchase of intangible and other assets | (56,034) | — | (6,000) | ||||||||||||||
| Cash acquired from business combination | — | 4,604 | — | ||||||||||||||
| Proceeds from sale of assets and other | 4,268 | 19,752 | 695 | ||||||||||||||
| Net cash used in investing activities | (342,423) | (265,759) | (1,068,598) | ||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||
| Proceeds from issuance of long-term debt | 1,340,281 | 4,691,953 | 3,893,778 | ||||||||||||||
| Repayments of long-term debt | (2,488,401) | (2,035,354) | (2,930,015) | ||||||||||||||
| Proceeds from issuance of Wynn Resorts, Limited common stock | 841,896 | — | — | ||||||||||||||
| Proceeds from issuance of subsidiary common stock | 4,662 | — | — | ||||||||||||||
| Repurchase of common stock | (13,842) | (11,533) | (66,986) | ||||||||||||||
| Finance lease payments | (15,658) | (5,916) | (73) | ||||||||||||||
| Proceeds from exercise of stock options | — | 70 | 14,696 | ||||||||||||||
| Shares of subsidiary repurchased for share award plan | — | — | (5,384) | ||||||||||||||
| Dividends paid | (1,553) | (108,777) | (566,521) | ||||||||||||||
| Payments to acquire ownership interest in subsidiary | (5,433) | (33,621) | — | ||||||||||||||
| Distribution to noncontrolling interest | (18,761) | (6,238) | (7,745) | ||||||||||||||
| Payments for financing costs | (31,193) | (27,339) | (32,738) | ||||||||||||||
| Net cash (used in) provided by financing activities | (388,002) | 2,463,245 | 299,012 | ||||||||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | (2,301) | 3,031 | 7,485 | ||||||||||||||
| Cash, cash equivalents and restricted cash: | |||||||||||||||||
| (Decrease) increase in cash, cash equivalents and restricted cash | (955,317) | 1,128,092 | 138,969 | ||||||||||||||
| Balance, beginning of period | 3,486,384 | 2,358,292 | 2,219,323 | ||||||||||||||
| Balance, end of period | $ | 2,531,067 | $ | 3,486,384 | $ | 2,358,292 | |||||||||||
| Supplemental cash flow disclosures | |||||||||||||||||
| Cash paid for interest, net of amounts capitalized | $ | 581,650 | $ | 463,458 | $ | 373,052 | |||||||||||
| Capitalized stock-based compensation | $ | 5,058 | $ | 2,212 | $ | 350 | |||||||||||
| Cash paid for income taxes (income tax refunds received) | $ | 1,749 | $ | 1,433 | $ | (16,811) | |||||||||||
| Finance lease liabilities arising from obtaining finance lease assets | $ | 7,423 | $ | 56,215 | $ | 1,413 | |||||||||||
| Liability settled with shares of common stock | $ | 6,272 | $ | 6,720 | $ | 15,134 | |||||||||||
| Accounts and construction payables related to property and equipment | $ | 52,647 | $ | 62,956 | $ | 163,471 | |||||||||||
| Other liabilities related to intangible assets | $ | 5,417 | $ | 13,822 | $ | 13,945 | |||||||||||
| Financing costs included in accounts payable and other liabilities | $ | 290 | $ | 3,116 | $ | 1,857 | |||||||||||
| Dividends payable on unvested restricted stock included in other accrued liabilities | $ | 1,846 | $ | 3,564 | $ | 6,690 |
The accompanying notes are an integral part of these consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Organization and Business
Organization
Wynn Resorts, Limited, a Nevada corporation (together with its subsidiaries, "Wynn Resorts" or the "Company") is 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.
In the Macau Special Administrative Region of the People's Republic of China ("Macau"), the Company owns approximately 72% of Wynn Macau, Limited ("WML"), which includes the operations of the Wynn Palace and Wynn Macau resorts. The Company refers to Wynn Palace and Wynn Macau as its Macau Operations. In Las Vegas, Nevada, the Company operates and, with the exception of certain retail space, owns 100% of Wynn Las Vegas. Additionally, the Company is a 50.1% owner and managing member of a joint venture that owns and leases certain retail space at Wynn Las Vegas (the "Retail Joint Venture"). The Company refers to Wynn Las Vegas, Encore, an expansion at Wynn Las Vegas, and the Retail Joint Venture as its Las Vegas Operations. On June 23, 2019, the Company opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts, that is owned 100% by the Company. 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"). Wynn Resorts holds an approximately 74% interest in, and consolidates, Wynn Interactive. For more information on the BetBull Acquisition, see Note 19, "Business Combination."
Macau Operations
Wynn Palace, which opened in August 2016, features a luxury hotel tower with 1,706 guest rooms, suites and villas, approximately 424,000 square feet of casino space, 14 food and beverage outlets, approximately 37,000 square feet of meeting and convention space, approximately 107,000 square feet of retail space, public attractions including a performance lake and floral art displays, and recreation and leisure facilities.
Wynn Macau features two luxury hotel towers with a total of 1,010 guest rooms and suites, approximately 252,000 square feet of casino space, 14 food and beverage outlets, approximately 31,000 square feet of meeting and convention space, approximately 59,000 square feet of retail space, a performance lake, a rotunda show and recreation and leisure facilities.
Las Vegas Operations
Wynn Las Vegas features two luxury hotel towers with a total of 4,748 guest rooms, suites and villas, approximately 194,000 square feet of casino space, 32 food and beverage outlets, approximately 513,000 square feet of meeting and convention space, approximately 155,000 square feet of retail space (the majority of which is owned and operated under a joint venture of which the Company owns 50.1%), as well as two theaters, three nightclubs and a beach club and recreation and leisure facilities.
Encore Boston Harbor
On June 23, 2019, the Company opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts, adjacent to Boston along the Mystic River. The property features a luxury hotel tower with a total of 671 guest rooms and suites, approximately 211,000 square feet of casino space, 15 food and beverage outlets, one nightclub, approximately 71,000 square feet of meeting and convention space, and approximately 10,000 square feet of retail space. Public attractions include a waterfront park, floral displays, and water shuttle service to downtown Boston.
Wynn Interactive
Wynn Interactive's subsidiary operates the digital and interactive sports betting app, WynnBET, which is operational in New Jersey, Colorado, Michigan, Virginia, Indiana, Arizona, Tennessee, Louisiana, and New York. In addition, subject to all necessary legislative authorizations and regulatory approvals, Wynn Interactive’s subsidiary has secured market access in Iowa and Ohio. BetBull, a wholly owned subsidiary of Wynn Interactive, operates a digital and interactive sports betting app in the United Kingdom.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Recent Developments Related to COVID-19
Macau Operations
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, quarantine measures put in place 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. Beginning in June 2020, certain restrictions and conditions have eased to allow for visitation to Macau as some regions continue to recover from the COVID-19 pandemic. Quarantine-free travel, subject to COVID-19 safeguards such as testing and the usual visa requirements, has been reintroduced between Macau and most areas and cities within the PRC, and in September 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. Given the evolving conditions created by and in response to the COVID-19 pandemic, measures that have been lifted may be reintroduced if there are adverse developments in the COVID-19 situation in Macau and other regions with access to Macau, and the Company is currently unable to determine when protective measures and the suspension of certain offerings in effect at our Macau Operations will be lifted. 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, management cannot reasonably estimate the impact to the Company's future results of operations, cash flows, or financial condition.
Las Vegas Operations and Encore Boston Harbor
In response to the COVID-19 outbreak, the Company’s Las Vegas Operations and Encore Boston Harbor each implemented certain COVID-19 specific protective measures, 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. Over the course of the twelve months ended December 31, 2021, the Company's Las Vegas Operations and Encore Boston Harbor have each incrementally resumed full operations, including reopening gaming areas to 100% of capacity and restoring seven-day-per-week hotel operations, as permitted by governmental authorities and in response to increased customer demand. Given the evolving conditions created by and in response to the COVID-19 pandemic, measures that have been lifted may be reintroduced if there are adverse developments in the COVID-19 situation, and management cannot reasonably estimate the impact of such developments to the Company's future results of operations, cash flows, or financial condition.
Liquidity
As of December 31, 2021, the Company had total cash and cash equivalents, excluding restricted cash, of $2.52 billion, and had access to $835.6 million of available borrowing capacity from the WRF Revolver and $212.5 million of available borrowing capacity from the WM Cayman II Revolver (as defined and discussed further in Note 7, "Long Term Debt"). The Company has suspended its dividend program. Given the Company's liquidity position at December 31, 2021 and the steps the Company has taken as further described in Note 7, "Long-Term Debt," the Company believes it is able to support continuing operations and respond to the COVID-19 pandemic challenges.
Macau Gaming Concession
The term of the Company's concession agreement with the Macau government ends on June 26, 2022. If the term of this concession agreement is not extended or renewed or is not replaced by a new gaming concession, all of the Company's gaming operations and related equipment in Macau will be automatically transferred to the Macau government without compensation on that date and the Company will cease to generate gaming revenues from its Macau Operations. In addition, under the indentures governing the Company's $4.7 billion aggregate principal amount of WML Senior Notes and the facility agreement governing the WM Cayman II Revolver, upon the occurrence of any event after which the Company does not own or manage casino or gaming areas or operate casino games of fortune and chance in Macau in substantially the same manner as of the issue date of the respective senior notes or the date of the facility agreement, for a period of 10 consecutive days or more in the case of the WML Senior Notes or a period of 30 consecutive days or more in the case of the WM Cayman II Revolver, and such event has a material adverse effect on the financial condition, business, properties or results of operations of WML and its subsidiaries, taken as a whole, holders of the WML Senior Notes can require the Company to repurchase all or any part of the WML Senior Notes at par, plus any accrued and unpaid interest (the "Special Put Option"), and any amounts owed under the WM Cayman II Revolver may become immediately due and payable (the "Property Mandatory Prepayment Event").
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In January 2022, the Macau government published a draft of its proposed revisions to the gaming law. The Company is monitoring developments with respect to the Macau government's concession renewal or extension process, and at this time believes that its concession will be renewed or extended beyond June 26, 2022. The failure to extend or renew the Company's concession or obtain a new concession and the resulting ability of the WML Senior Note holders to exercise the Special Put Option and triggering of the Property Mandatory Prepayment Event would have a material adverse effect on the Company's business, financial condition, results of operations, and cash flows.
Note 2 - Basis of Presentation and Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and include the accounts of the Company, its majority-owned subsidiaries, and entities the Company identifies as variable interest entities ("VIEs") of which the Company is determined to be the primary beneficiary. For information on the Company's VIEs, see Note 18, "Retail Joint Venture." All significant intercompany accounts and transactions have been eliminated. Certain amounts in the consolidated financial statements for the previous years have been reclassified to be consistent with the current year presentation of the Company's reportable segments. These reclassifications had no effect on the previously reported net income.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash and highly liquid investments with original maturities of three months or less and include both U.S. dollar-denominated and foreign currency-denominated securities. Cash equivalents are carried at cost, which approximates fair value. Restricted cash consists of cash collateral associated with obligations and cash held in a trust in accordance with WML's share award plan.
Accounts Receivable and Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues credit in the form of "markers" to approved casino customers following investigations of creditworthiness.
Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are recorded at amortized cost. Casino receivables primarily consist of credit issued to patrons in the form of markers and advances paid to gaming promoters. The Company issues credit based on factors such as level of play and financial resources, following background and credit checks. The casino credit extended by the Company is generally unsecured and due on demand. Gaming promoter advances are settled shortly after each month end. As of December 31, 2021, the Company had no agreements in place with gaming promoters.
An estimated allowance for credit losses is maintained to reduce the Company's receivables to their carrying amount, which reflects the net amount the Company expects to collect. The allowance estimate reflects 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Inventories
Inventories consist of retail merchandise and food and beverage items, which are stated at the lower of cost or net realizable value, and certain operating supplies. Cost is determined by the first-in, first-out, weighted average and specific identification methods.
Property and Equipment
Purchases of property and equipment are stated at cost, and when placed into service, are depreciated over the estimated
useful lives of the assets using the straight-line method as follows:
| Estimated Useful Life in Years | |||||
| Buildings and improvements | 10 - 45 | ||||
| Land improvements | 10 - 45 | ||||
| Furniture, fixtures and equipment | 3 - 20 | ||||
| Leasehold interest in land | 25 | ||||
| Airplanes | 20 |
Costs related to improvements are capitalized, while costs of repairs and maintenance are charged to expense as 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.
Capitalized Interest
The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project using the weighted average cost of the Company's outstanding borrowings. For the year ended December 31, 2021, the Company did not capitalize any interest. Interest of $1.3 million and $53.9 million was capitalized for the years ended December 31, 2020 and 2019, respectively.
Business Combinations
The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values in accordance with the applicable accounting standards. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes estimates and assumptions to determine the fair value of intangible assets.
Estimates in valuing certain intangible assets include, but are not limited to future expected cash flows from acquired technology and acquired trademarks from a market participant perspective, useful lives, and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.
During the measurement period, which is not to exceed one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to the Consolidated Statements of Operations.
Goodwill
Goodwill represents the excess of the purchase price in a business combination over the fair value of the tangible and intangible assets acquired and the liabilities assumed. Goodwill is not amortized, but rather is subject to an annual impairment test.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company tests goodwill for impairment annually, 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 amount, 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 its carrying amount, goodwill impairment is recorded equal to the difference between the carrying amount of the reporting unit and its fair value, not to exceed the carrying amount of goodwill.
Intangible Assets other than goodwill
The Company's intangible assets other than goodwill consist primarily of finite-lived intangible assets, including its Macau gaming concession and Massachusetts gaming license. Finite-lived intangible assets are amortized over the shorter of their contractual terms or estimated useful lives. The Company's indefinite-lived intangible assets are not amortized, but are reviewed for impairment annually.
Long-Lived Assets
Long-lived assets, which are to be held and used, including finite-lived intangible assets and property and equipment, are periodically reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. If an indicator of impairment exists, the Company compares 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, then impairment is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.
Leases
Lessee Arrangements
The Company is the lessee under non-cancelable real estate and equipment leases. Finance and operating lease assets and liabilities are measured and recorded upon lease commencement at the present value of the future minimum lease payments. The Company combines lease and nonlease components in its determination of minimum lease payments, except for certain asset classes that have significant nonlease components. As the interest rate implicit in its leases is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of lease payments. The Company does not record an asset or liability for leases with a term of less than one year. Variable lease costs generally arise from changes in an index, such as the consumer price index. Variable lease costs are expensed as incurred and are not included in the determination of lease assets or liabilities.
Lessor Arrangements
The Company is the lessor under non-cancelable operating leases for retail and food and beverage outlet space at its integrated resorts, which represents approximately 105,000, 59,000, 155,000, and 39,500 square feet of space at Wynn Palace, Wynn Macau, Wynn Las Vegas, and Encore Boston Harbor, respectively. The lease arrangements generally include minimum base rent and contingent rental clauses based on a percentage of net sales. Generally, the terms of the leases range between five and 10 years. The Company records revenue on a straight-line basis over the term of the lease, and recognizes revenue for contingent rentals when the contingency has been resolved. The Company has elected to combine lease and nonlease components for the purpose of measuring lease revenue.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Debt Issuance Costs
Direct and incremental costs and original issue discounts and premiums incurred in connection with the issuance of long-term debt are deferred and amortized to interest expense using the effective interest method or, if the amounts approximate the effective interest method, on a straight-line basis. Debt issuance costs incurred in connection with the issuance of the Company's revolving credit facilities are presented in noncurrent assets on the Consolidated Balance Sheets. All other debt issuance costs are presented as a direct reduction of long-term debt on the Consolidated Balance Sheets. Approximately $27.0 million, $28.9 million, and $29.0 million was amortized to interest expense during the years ended December 31, 2021, 2020, and 2019, respectively.
Derivative Financial Instruments
The Company has an interest rate collar to manage interest rate exposure on its Retail Term Loan (as defined in Note 7, "Long-Term Debt"). The Company measures the fair value of the interest rate collar at each balance sheet date based on a Black-Scholes option pricing model, which incorporates observable market inputs such as market volatility and interest rates. The fair value of the interest rate collar is recognized as an asset or liability at each balance sheet date, with changes in fair value recorded in earnings as the Company's interest rate collar does not qualify for hedge accounting. The fair value approximates the amount the Company would pay if the interest rate collar was settled at the respective valuation date.
Revenue Recognition
The Company's revenue from contracts with customers primarily consists of casino wagers and sales of rooms, food and beverage, entertainment, retail and other goods and services.
Gross casino revenues are measured by the aggregate net difference between gaming wins and losses. The Company applies a practical expedient by accounting for its casino wagering transactions on a portfolio basis versus an individual basis as all wagers have similar characteristics. Commissions rebated to customers either directly or indirectly through games promoters and cash discounts and other cash incentives earned by customers are recorded as a reduction of casino revenues. In addition to the wager, casino transactions typically include performance obligations related to complimentary goods or services provided to incentivize future gaming or in exchange for points earned under the Company's loyalty programs.
For casino transactions that include complimentary goods or services provided by the Company to incentivize future gaming, the Company allocates the standalone selling price of each good or service to the appropriate revenue type based on the good or service provided. Complimentary goods or services that are provided under the Company's control and discretion and supplied by third parties are recorded as an operating expense.
The Company offers loyalty programs at each of its resorts. Customers earn points based on their level of table games and slots play, which can be redeemed for slots free play, gifts and complimentary goods or services provided by the Company. For casino transactions that include points earned under the Company's loyalty programs, the Company defers a portion of the revenue by recording the estimated standalone selling price of the earned points that are expected to be redeemed as a liability.
Upon redemption of the points for Company-owned goods or services, the standalone selling price of each good or service is allocated to the appropriate revenue type based on the good or service provided. Upon the redemption of points with third parties, the redemption amount is deducted from the liability and paid directly to the third party with any difference between the amount paid and the stand-alone selling price recorded as Entertainment, retail and other revenue in the accompanying Consolidated Statements of Operations.
After allocating amounts to the complimentary goods or services provided and to the points earned under the Company's loyalty programs, the residual amount is recorded as casino revenue when the wager is settled.
The transaction price for rooms, food and beverage, entertainment, retail and other transactions is the net amount collected from the customer for such goods and services and is recorded as revenue when the goods are provided, services are performed or events are held. Sales tax and other applicable taxes collected by the Company are excluded from revenues. Advance deposits on rooms and advance ticket sales are performance obligations that are recorded as customer deposits until services are provided to the customer. Revenues from contracts with multiple goods or services are allocated to each good or service based on its relative standalone selling price. As previously noted, Entertainment, retail and other revenue also includes lease revenue, which is recognized in accordance with the relevant accounting principles.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Gaming Taxes
The Company is subject to taxes based on gross gaming revenues in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes are recorded as casino expenses in the accompanying Consolidated Statements of Operations. These taxes totaled $830.4 million, $527.5 million, and $2.24 billion for the years ended December 31, 2021, 2020, and 2019, respectively.
Advertising Costs
The cost of advertising is expensed as incurred, and totaled $250.6 million, $28.3 million, and $61.3 million for the years ended December 31, 2021, 2020, and 2019, respectively.
Pre-opening Expenses
Pre-opening expenses represent personnel, advertising, and other costs incurred prior to the opening of new ventures and are expensed as incurred. During the year ended December 31, 2021, the Company incurred pre-opening expenses primarily in connection with restaurant remodels at our Las Vegas Operations. During the year ended December 31, 2020, the Company incurred pre-opening expenses primarily in connection with restaurant remodels at our Las Vegas Operations and the meeting and convention expansion at Wynn Las Vegas, which opened in February 2020. During the year ended December 31, 2019, the Company incurred pre-opening expenses primarily in connection with the development of Encore Boston Harbor.
Income Taxes
The Company is subject to income taxes in the U.S. and foreign jurisdictions where it operates. 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 also 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.
The Company's income tax returns are subject to examination by the Internal Revenue Service ("IRS") and other tax authorities in the locations where it operates. The Company assesses 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. If a tax position, based on its technical merits, is deemed more likely than not to be sustained, then the tax benefit is measured as the largest amount of benefit that is more likely than not to be realized upon settlement.
As applicable, the Company will recognize accrued penalties and interest related to unrecognized tax benefits in the provision for income taxes.
Foreign Currency
Gains or losses from foreign currency remeasurements are included in Other income (expense) in the accompanying Consolidated Statements of Operations. Balance sheet accounts are translated at the exchange rate in effect at each balance sheet date and income statement accounts are translated at the average rate of exchange prevailing during the year. Translation adjustments resulting from this process are charged or credited to other comprehensive income (loss).
Comprehensive Income (Loss) and Accumulated Other Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and all other non-stockholder changes in equity or other comprehensive income (loss). Components of the Company's comprehensive income (loss) are reported in the accompanying Consolidated Statements of Stockholders' Equity (Deficit) and Consolidated Statements of Comprehensive Income (Loss).
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Fair Value Measurements
The Company measures certain of its financial assets and liabilities, at fair value on a recurring basis pursuant to accounting standards for fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These accounting standards establish a three-tier fair value hierarchy, which prioritizes the inputs used to measure fair value. These tiers include:
-
Level 1** - Observable inputs such as quoted prices in active markets.
-
Level 2** - Inputs other than quoted prices in active markets that are either directly or indirectly observable.
-
Level 3** - Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.
Stock-Based Compensation
The Company accounts for stock-based compensation in accordance with accounting standards, which require the compensation cost relating to share-based payment transactions be recognized in the Company's Consolidated Statements of Operations. The cost is measured at the grant date, based on the estimated fair value of the award using the Black-Scholes option pricing model for stock options, and based on the closing share price of the Company's stock on the grant date for nonvested share awards. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant. Expected volatility is based on implied and historical factors related to the Company's common stock. The risk-free interest rate used for each period presented is based on the U.S. Treasury yield curve for stock options issued under the Wynn Resorts Omnibus Plan and Wynn Interactive Omnibus Plan (as defined and discussed in Note 12, "Stock-Based Compensation") and the Hong Kong Exchange Fund rates for stock options issued under the Share Option Plan (as defined in Note 12, "Stock-Based Compensation"), both at the time of grant for the period equal to the expected term. Expected term represents the weighted average time between the option's grant date and its exercise date. The Company uses historical award exercise activity and termination activity in estimating the expected term for the Omnibus Plan and Share Option Plan. The cost is recognized as an expense on a straight-line basis over the employee's requisite service period (the vesting period of the award), and forfeitures are recognized as they occur. The Company's stock-based employee compensation arrangements are more fully discussed in Note 12, "Stock-Based Compensation."
Recently Issued Accounting Standards
In March 2020, the FASB issued ASU No. 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" ("ASU 2020-04"). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate (referred to as "LIBOR"), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction-based and less susceptible to manipulation. ASU 2020-04 also provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. ASU 2020-04 can be adopted no later than December 1, 2022 with early adoption permitted. The Company is currently assessing the impact the adoption of the new guidance will have on its consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 3 - Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Cash and cash equivalents: | |||||||||||
| Cash (1) | $ | 2,021,553 | $ | 2,501,452 | |||||||
| Cash equivalents (2) | 500,977 | 980,580 | |||||||||
| Total cash and cash equivalents | 2,522,530 | 3,482,032 | |||||||||
| Restricted cash (3) | 8,537 | 4,352 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,531,067 | $ | 3,486,384 |
(1) Cash consists of cash on hand and bank deposits.
(2) Cash equivalents consist of bank time deposits and money market funds.
(3) Restricted cash consists of cash subject to certain contractual restrictions, cash collateral associated with obligations and cash held in a trust in accordance with WML's share award plan.
Note 4 - Receivables, net
Receivables, net consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Casino | $ | 199,030 | $ | 207,823 | |||||||
| Hotel | 36,749 | 7,075 | |||||||||
| Other | 75,003 | 85,589 | |||||||||
| 310,782 | 300,487 | ||||||||||
| Less: allowance for credit losses | (111,319) | (100,329) | |||||||||
| $ | 199,463 | $ | 200,158 |
As of December 31, 2021 and 2020, approximately 70.3% and 77.3%, respectively, of the Company's markers were due from customers residing outside the United States, primarily in Asia. Business or economic conditions or other significant events in the countries in which the Company's customers reside could affect the collectability of such receivables.
The Company’s allowance for casino credit losses was 53.7% and 47.2% of gross casino receivables as of December 31, 2021 and 2020, respectively. Although the Company believes that its allowance is adequate, it is possible the estimated amounts of cash collections with respect to receivables could change. The Company’s allowance for credit losses from its hotel and other receivables is not material.
The following table shows the movement in the Company's allowance for credit losses recognized for receivables that occurred during the period (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Balance at beginning of year | $ | 100,329 | $ | 39,317 | |||||||
| Provision for credit losses | 29,487 | 64,375 | |||||||||
| Write-offs | (19,898) | (4,692) | |||||||||
| Recoveries of receivables previously written-off | 1,661 | 1,264 | |||||||||
| Effect of exchange rate | (260) | 65 | |||||||||
| Balance at end of period | $ | 111,319 | $ | 100,329 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 5 - Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Buildings and improvements | $ | 9,785,514 | $ | 9,758,846 | |||||||
| Land and improvements | 1,278,010 | 1,265,510 | |||||||||
| Furniture, fixtures and equipment | 3,067,793 | 3,093,481 | |||||||||
| Airplanes | 110,623 | 110,623 | |||||||||
| Construction in progress | 250,378 | 136,390 | |||||||||
| 14,492,318 | 14,364,850 | ||||||||||
| Less: accumulated depreciation | (5,727,010) | (5,168,206) | |||||||||
| $ | 8,765,308 | $ | 9,196,644 |
As of December 31, 2021 and 2020, construction in progress consisted primarily of costs capitalized for various capital enhancements at the Company's properties, including the Wynn Las Vegas room remodel.
Depreciation expense for the years ended December 31, 2021, 2020 and 2019 was $685.7 million, $699.6 million, and $602.9 million, respectively.
Encore Boston Harbor Real Estate Sale and Leaseback
On February 15, 2022, the Company announced its entry into a sale-leaseback arrangement with respect to certain real estate assets related to Encore Boston Harbor. Upon closing of the related transactions, currently expected to take place in the fourth quarter of 2022 subject to regulatory approvals and customary closing conditions, the Company expects to receive cash consideration of approximately $1.7 billion in exchange for the sale of such real estate assets to an unrelated third party, and to concurrently enter into a lease agreement whereby the Company will lease such real estate assets for the purpose of continuing to operate the Encore Boston Harbor property. The lease agreement provides for an initial annual minimum rent of $100.0 million for an initial term of 30 years, subject to certain annual rent escalations and renewal provisions. The Company expects to use the cash proceeds from the sale of the real estate assets for general corporate purposes, which may include the repayment of certain debt obligations.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 6 - Goodwill and Intangible Assets, net
Goodwill and intangible assets, net consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Finite-lived intangible assets: | |||||||||||
| Macau gaming concession | $ | 42,300 | $ | 42,300 | |||||||
| Less: accumulated amortization | (41,114) | (38,731) | |||||||||
| 1,186 | 3,569 | ||||||||||
| Massachusetts gaming license | 117,700 | 117,700 | |||||||||
| Less: accumulated amortization | (19,791) | (11,944) | |||||||||
| 97,909 | 105,756 | ||||||||||
| Other finite-lived intangible assets | 76,317 | 16,998 | |||||||||
| Less: accumulated amortization | (5,969) | (620) | |||||||||
| 70,348 | 16,378 | ||||||||||
| Total finite-lived intangible assets | 169,443 | 125,703 | |||||||||
| Indefinite-lived intangible assets: | |||||||||||
| Water rights and other | 8,397 | 8,397 | |||||||||
| Total indefinite-lived intangible assets | 8,397 | 8,397 | |||||||||
| Goodwill: | |||||||||||
| Balance at beginning of year | 144,095 | 18,463 | |||||||||
| Acquisitions | — | 121,039 | |||||||||
| Foreign currency translation | (4,103) | 4,593 | |||||||||
| Impairment | (10,254) | — | |||||||||
| Balance end of period | 129,738 | 144,095 | |||||||||
| Total goodwill and intangible assets, net | $ | 307,578 | $ | 278,195 |
The Macau gaming concession is a finite-lived intangible asset that is being amortized over the 20 year life of the concession. The Company expects that amortization of the Macau gaming concession will be $1.2 million in 2022.
The Massachusetts gaming license is a finite-lived intangible asset that is being amortized over the 15 year life of the license. The Company expects that amortization of the Massachusetts gaming license will be $7.8 million each year from 2022 through 2033, and $3.7 million in 2034.
The Other finite-lived intangible assets consist of trademarks and customer lists acquired in connection with the BetBull Acquisition and are being amortized over ten and three years, respectively. For more information on the BetBull Acquisition, see Note 19, "Business Combination." The Company expects that amortization of Other intangible assets will be $3.4 million in 2022, $2.9 million for 2023, $1.0 million each year from 2024 through 2029, and $0.8 million in 2030.
The Company recognized goodwill of $121.0 million in 2020 in connection with the BetBull Acquisition. Goodwill is recorded within Wynn Interactive as of December 31, 2021 and 2020.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
On November 12, 2021, Wynn Resorts announced the termination of a previously announced agreement and plan of merger which contemplated the combination of Wynn Interactive and a special purpose acquisition company. The Company concluded that the termination of the agreement constituted a potential indicator of impairment, and as a result of revisiting its estimated fair value of the reporting units comprising Wynn Interactive based on a combination of the income and market approaches, the Company recognized impairment of $10.3 million. Impairment of goodwill is recorded in Property charges and other in the accompanying Consolidated Statements of Operations during the year ended December 31, 2021.
Note 7 - Long-Term Debt
Long-term debt consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Macau Related: | |||||||||||
| WM Cayman II Revolver, due 2025 (1) | $ | 1,287,766 | $ | — | |||||||
| Wynn Macau Credit Facilities (2): | |||||||||||
| Wynn Macau Term Loan, due 2022 | — | 1,268,106 | |||||||||
| Wynn Macau Revolver, due 2022 | — | 407,443 | |||||||||
| WML 4 7/8% Senior Notes, due 2024 | 600,000 | 600,000 | |||||||||
| WML 5 1/2% Senior Notes, due 2026 | 1,000,000 | 1,000,000 | |||||||||
| WML 5 1/2% Senior Notes, due 2027 | 750,000 | 750,000 | |||||||||
| WML 5 5/8% Senior Notes, due 2028 | 1,350,000 | 1,350,000 | |||||||||
| WML 5 1/8% Senior Notes, due 2029 | 1,000,000 | 1,000,000 | |||||||||
| U.S. and Corporate Related: | |||||||||||
| WRF Credit Facilities (3): | |||||||||||
| WRF Term Loan, due 2024 | 887,500 | 937,500 | |||||||||
| WRF Revolver, due 2024 | — | 716,000 | |||||||||
| WLV 4 1/4% Senior Notes, due 2023 | 500,000 | 500,000 | |||||||||
| WLV 5 1/2% Senior Notes, due 2025 | 1,780,000 | 1,780,000 | |||||||||
| WLV 5 1/4% Senior Notes, due 2027 | 880,000 | 880,000 | |||||||||
| WRF 7 3/4% Senior Notes, due 2025 | 600,000 | 600,000 | |||||||||
| WRF 5 1/8% Senior Notes, due 2029 | 750,000 | 750,000 | |||||||||
| Retail Term Loan, due 2025 (4) | 615,000 | 615,000 | |||||||||
| 12,000,266 | 13,154,049 | ||||||||||
| Less: Unamortized debt issuance costs and original issue discounts and premium, net | (65,720) | (88,279) | |||||||||
| 11,934,546 | 13,065,770 | ||||||||||
| Less: Current portion of long-term debt | (50,000) | (596,408) | |||||||||
| Total long-term debt, net of current portion | $ | 11,884,546 | $ | 12,469,362 |
(1) The borrowings under the WM Cayman II Revolver bear interest at LIBOR or HIBOR plus a margin of 1.875% to 2.875% per annum based on WM Cayman II’s leverage ratio on a consolidated basis. Approximately $268.2 million and $1.02 billion of the WM Cayman II Revolver bears interest at a rate of LIBOR plus 2.625% per year and HIBOR plus 2.625% per year, respectively. As of December 31, 2021, the weighted average interest rate was approximately 2.80%. As of December 31, 2021, the available borrowing capacity under the WM Cayman II Revolver was $212.5 million.
(2) In September 2021, the Company repaid in full the then-outstanding principal amount of $1.26 billion owed under Wynn Macau Credit Facilities.
(3) The WRF Credit Facilities bear interest at a rate of LIBOR plus 1.75% per year. As of December 31, 2021 and 2020, the weighted average interest rate was 1.86% and 1.90%, respectively. Additionally, as of December 31, 2021, the available borrowing capacity under the WRF Revolver was $835.6 million, net of $14.4 million in outstanding letters of credit. The Company repaid $716.0 million of the outstanding borrowings under the WRF Revolver in February 2021.
(4) The Retail Term Loan bears interest at a rate of LIBOR plus 1.70% per year. As of December 31, 2021 and 2020, the effective interest rate was 2.70% for both years.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Macau Related Debt
WM Cayman II Revolver
On September 16, 2021, WM Cayman Holdings Limited II, an indirect wholly owned subsidiary of WML, as borrower ("WM Cayman II") and WML as guarantor, each an indirect subsidiary of Wynn Resorts, entered into a facility agreement with, among others, Bank of China Limited, Macau Branch as agent and a syndicate of lenders (the "Facility Agreement"), pursuant to which the lenders will make available in an aggregate amount of $1.50 billion equivalent revolving unsecured credit facility consisting of one tranche in an amount of $312.5 million and one tranche in an amount of HK$9.26 billion (approximately $1.19 billion) to WM Cayman II (the "WM Cayman II Revolver"). WM Cayman II has the ability to upsize the total WM Cayman II Revolver by an additional $1.00 billion equivalent under the Facility Agreement and related agreements upon the satisfaction of various conditions.
The final maturity of all outstanding loans under the WM Cayman II Revolver is September 16, 2025 (or if September 16, 2025 is not a business day, the next business day in the relevant calendar month), by which time any outstanding borrowings from the WM Cayman II Revolver must be repaid.
Borrowings of $1.09 billion under the WM Cayman II Revolver, along with $200.0 million of cash, were used to facilitate the prepayment of the outstanding $1.26 billion of borrowings under the Wynn Macau Credit Facilities, and to pay related fees and expenses totaling $30.3 million, of which $29.2 million was recorded as debt issuance costs within the Consolidated Balance Sheet. The Company recognized this transaction primarily as a modification of existing debt with the related unamortized debt issuance costs reallocated to the WM Cayman II Revolver. For those components of debt that were deemed extinguished, the Company recognized a loss on extinguishment of debt of $0.7 million.
Wynn Macau Credit Facilities
The Company's Wynn Macau credit facilities consisted of an approximately $1.27 billion equivalent senior secured term loan facility (the "Wynn Macau Term Loan") and an approximately $751 million equivalent senior secured revolving credit facility (the "Wynn Macau Revolver" and together with the Wynn Macau Term Loan, the "Wynn Macau Credit Facilities"). The borrower was Wynn Resorts (Macau) S.A. ("Wynn Macau SA"), an indirect subsidiary of WML.
During 2020, the Company prepaid $938.2 million, excluding contractual amortization payments of $100.7 million, on the Wynn Macau Term Loan using the proceeds from issuances of WML Senior Notes and operating cash. In January 2021, the Company prepaid $412.5 million of the Wynn Macau Term Loan, and accordingly, has presented that amount as a current liability on the accompany Consolidated Balance Sheet as of December 31, 2020.
As discussed above, in September 2021, the Wynn Macau Credit Facilities were repaid in full along with related financing costs.
WML Senior Notes
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 (the “2026 and 2028 WML Senior Notes” and collectively with the WML 4 7/8% Senior Notes, due 2024, the WML 5 1/2% Senior Notes, due 2027, and the WML 5 1/8% Senior Notes, due 2029, the “WML Senior Notes”). The Company used the proceeds from the 2026 and 2028 WML Senior Notes to facilitate repayments on the Wynn Macau Credit Facilities and for general corporate purposes. The WML Senior Notes bear interest at each of their respective interest rates and interest is payable semi-annually. In connection with the issuance of the 2026 and 2028 WML Senior Notes, the Company paid fees and expenses totaling $20.7 million, which were recorded as debt issuance costs within the Consolidated Balance Sheets.
The WML Senior Notes are WML's general unsecured obligations and rank pari passu in right of payment with all of WML's existing and future senior unsecured indebtedness, will rank senior to all of WML's future subordinated indebtedness, if any; will be effectively subordinated to all of WML's future secured indebtedness to the extent of the value of the assets securing such debt; and will be structurally subordinated to all existing and future obligations of WML's subsidiaries, including the WM Cayman II Revolver. The WML Senior Notes are not registered under the Securities Act of 1933, as amended (the "Securities Act") and the WML Notes are subject to restrictions on transferability and resale.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The WML Senior Notes were issued pursuant to indentures between WML and Deutsche Bank Trust Company Americas, as trustee (the “WML Senior Notes Indentures”). The WML Senior Notes Indentures contain covenants limiting WML’s (and certain of its subsidiaries’) ability to, among other things: merge or consolidate with another company; transfer or sell all or substantially all of its properties or assets; and lease all or substantially all of its properties or assets. The WML Senior Notes Indentures also contain customary events of default. In the case of an event of default arising from certain events of bankruptcy or insolvency, all WML Senior Notes then outstanding will become due and payable immediately without further action or notice.
Upon the occurrence of (a) any event after which none of WML or any subsidiary of WML has the applicable gaming concessions or authorizations in Macau in substantially the same manner and scope as WML and its subsidiaries are entitled to at the date on which each of the WML Senior Notes are issued, for a period of 10 consecutive days or more, and such event has a material adverse effect on WML and its subsidiaries, taken as a whole; or (b) the termination or modification of any such concessions or authorizations which has a material adverse effect on WML and its subsidiaries, taken as a whole, each holder of the WML Senior Notes will have the right to require WML to repurchase all or any part of such holder’s WML Senior Notes at a purchase price in cash equal to 100% of the principal amount thereof, plus accrued and unpaid interest. If WML undergoes a Change of Control (as defined in the WML Senior Notes Indentures), it must offer to repurchase the WML Senior Notes at a price equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest.
U.S. and Corporate Related Debt
Refinancing Transactions
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 $750.0 million aggregate principal amount of 5 1/8% Senior Notes due 2029 (the "2029 WRF Senior Notes") pursuant to an indenture (the "2029 Indenture") among the WRF Issuers, the guarantors party thereto, and U.S. Bank National Association, as trustee (the "Trustee").
Concurrently with the issuance of the 2029 WRF Senior 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").
WRF 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 totaling $19.3 million, of which $15.1 million was recorded as debt issuance costs within the Consolidated Balance Sheet. The Company recognized the Refinancing Transactions primarily as a modification of existing debt with the related unamortized debt issuance costs reallocated to the new debt instruments. For those components of debt that were deemed extinguished, the Company recognized a loss on extinguishment of debt of $12.4 million.
WRF Credit Facilities
Subject to certain exceptions, the WRF Credit Facilities bear interest at LIBOR plus 1.75% per annum. The annual fee required to pay for unborrowed amounts under the WRF Revolver, if any, is 0.25% per annum. The Company is required to make quarterly repayments on the WRF Term Loan of $12.5 million beginning in the fourth quarter of 2019, with any remaining principal amount outstanding repayable in full on September 20, 2024.
The WRF Credit Agreement contains customary representations and warranties, events of default and negative and affirmative covenants, including, but not limited to, covenants that restrict our ability to pay dividends or distributions to any direct or indirect subsidiaries, to incur and/or repay indebtedness, to make certain restricted payments, and to enter into mergers and acquisitions, negative pledges, liens, transactions with affiliates, and sales of assets. In addition, WRF is subject to financial covenants, including maintaining a Consolidated First Lien Net Leverage Ratio, as defined in the WRF Credit Agreement. Commencing with the fourth quarter of 2019, the Consolidated Senior Secured Net Leverage Ratio is not to exceed 3.75 to 1.00.
The WRF Credit Facilities are guaranteed by each of WRF's existing and future wholly owned domestic restricted subsidiaries (the "Guarantors"), subject to certain exceptions, and are secured by a first priority lien on substantially all of
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
WRF's and each of the guarantors' existing and future property and assets, subject to certain exceptions, including a limitation on the amount of collateral granted by Wynn Las Vegas, LLC ("WLV") and its subsidiaries so as to not violate the indenture governing WLV's outstanding senior notes.
On April 10, 2020 and November 27, 2020, the WRF Credit Agreement was collectively amended to, among other things, implement a financial covenant relief period (the "Financial Covenant Relief Period") through April 1, 2022 (unless earlier terminated by WRF), implement a financial covenant increase period (the "Financial Covenant Increase Period") commencing on the first day after the expiration of the Financial Covenant Relief Period and ending on the first day of the fourth fiscal quarter after the expiration of the Financial Covenant Relief Period (unless earlier terminated by WRF), amend the definition of "Consolidated EBITDA" in the WRF Credit Agreement during the Financial Covenant Increase Period, amend WRF's financial reporting obligations (including extensions to certain deadlines), add certain restrictions on restricted payments (including restrictions on a portion of dividends received from WRF's subsidiaries) during the Financial Covenant Relief Period and the Financial Covenant Increase Period, and amend the definition of "Material Adverse Effect" in the WRF Credit Agreement to take into consideration COVID-19.
During the Financial Covenant Relief Period, the existing consolidated first lien net leverage ratio financial covenant was replaced with a minimum liquidity financial covenant that requires WRF and its restricted subsidiaries 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). Following the Financial Covenant Relief Period and for as long as the Financial Covenant Increase Period is in effect, WRF may not permit the consolidated first lien net leverage ratio as of the last day of any fiscal quarter to exceed for the first fiscal quarter of the Financial Covenant Increase Period, 4.50 to 1.00, for the second fiscal quarter of the Financial Covenant Increase Period, 4.25 to 1.00, for the third fiscal quarter of the Financial Covenant Increase Period, 4.00 to 1.00, and for each subsequent fiscal quarter thereafter (including from and including the first fiscal quarter during which the Financial Covenant Increase Period has been terminated by WRF), 3.75 to 1.00.
WRF Senior Notes
On April 14, 2020, the WRF Issuers issued $600.0 million aggregate principal amount of 7 3/4% Senior Notes due 2025 (the "2025 WRF Senior Notes" and collectively with the 2029 WRF Senior Notes, the “WRF Senior Notes”) pursuant to an indenture (the "2025 Indenture" and collectively with the 2029 Indenture, the “WRF Indentures”) among the WRF Issuers, the guarantors party thereto, and the Trustee. The Company intends to use the proceeds from the 2025 Senior Notes for general corporate purposes. The WRF Senior Notes bear interest at each of their respective interest rates and interest is payable semi-annually. In connection with the issuance of the 2025 WRF Senior Notes and the 2029 WRF Senior Notes, the Company paid fees and expenses totaling $13.5 million, which were recorded as debt issuance costs within the Consolidated Balance Sheets.
The WRF Senior Notes are the WRF Issuers' senior unsecured obligations and rank pari passu in right of payment with the WLV Senior Notes (as defined below), and rank equally in right of payment with Wynn Las Vegas' guarantee of the WRF Credit Facilities, and rank senior in right of payment to all of the WRF Issuers' existing and future subordinated debt. The WRF Senior Notes are effectively subordinated in right of payment to all of the WRF Issuers' existing and future secured debt (to the extent of the value of the collateral securing such debt), and structurally subordinated to all of the liabilities of any of the WRF Issuers' subsidiaries that do not guarantee the WRF Senior Notes, including WML and its subsidiaries.
The WRF Senior Notes are jointly and severally guaranteed by each of WRF's existing domestic restricted subsidiaries that guarantee indebtedness under the WRF Credit Agreement, including Wynn Las Vegas, LLC and each of its subsidiaries that guarantees the WLV Senior Notes. The guarantees are senior unsecured obligations of the Guarantors and rank senior in right of payment to all of their future subordinated debt. The guarantees rank equally in right of payment with all existing and future liabilities of the Guarantors that are not so subordinated and will be effectively subordinated in right of payment to all of such Guarantors' existing and future secured debt (to the extent of the collateral securing such debt).
The WRF Indentures contains covenants that limit the ability of the WRF Issuers and the guarantors to, among other things, enter into sale-leaseback transactions, create or incur liens to secure debt, and merge, consolidate or sell all or substantially all of the WRF Issuers' assets. These covenants are subject to exceptions and qualifications set forth in the WRF Indentures. The WRF Indentures also contain customary events of default, including, but not limited to, failure to make required payments, failure to comply with certain covenants, certain events of bankruptcy and insolvency, and failure to pay certain judgments.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The WRF Senior Notes were offered pursuant to an exemption under the Securities Act of 1933, as amended (the "Securities Act"). The WRF Senior Notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act. The WRF Senior Notes have not been and will not be registered under the Securities Act or under any state securities laws. Therefore, the WRF Senior Notes may not be offered or sold within the United States to, or for the account or benefit of, any United States person unless the offer or sale would qualify for a registration exemption from the Securities Act and applicable state securities laws.
WLV Senior Notes
Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. ("Capital Corp." and together with Wynn Las Vegas, LLC, the "Issuers") issued $500.0 million 4 1/4% Senior Notes due 2023 (the "2023 WLV Senior Notes"), $1.8 billion 5 1/2% Senior Notes due 2025 (the “2025 WLV Senior Notes”), and $900.0 million 5 1/4% Senior Notes due 2027 (the 2027 WLV Senior Notes) pursuant to indentures, dated as of May 22, 2013 (the "2023 Indenture"), February 18, 2015 (the “2025 Indenture”), and May 11, 2017 (the "2027 Indenture"), respectively, among the Issuers, the Guarantors (as defined below) and the Trustee. The 2023 WLV Senior Notes, 2025 WLV Senior Notes, and 2027 WLV Senior Notes are collectively referred to as the “WLV Senior Notes.” The 2023 Indenture, 2025 Indenture, and 2027 Indenture are collectively referred to as the “WLV Indentures.”
The WLV Senior Notes are the WLV Issuers' senior unsecured obligations and each rank pari passu in right of payment. The WLV Senior Notes are unsecured, except by the first priority pledge by Wynn Las Vegas Holdings, LLC ("WLVH"), a direct wholly owned subsidiary of Wynn Resorts Finance, LLC, of its equity interests in Wynn Las Vegas, LLC. If Wynn Resorts receives an investment grade rating from one or more ratings agencies, the first priority pledge securing the WLV Senior Notes will be released.
The WLV Senior Notes are jointly and severally guaranteed by all of the Issuers' subsidiaries, other than Capital Corp., which was a co-issuer. The guarantees are senior unsecured obligations of the guarantors and rank senior in right of payment to all of their existing and future subordinated debt. The guarantees rank equally in right of payment with all existing and future liabilities of the guarantors that are not so subordinated and will be effectively subordinated in right of payment to all of such guarantors' existing and future secured debt (to the extent of the collateral securing such debt).
The WLV Indentures contain covenants limiting the WLV Issuers' and the guarantors' ability to create liens on assets to secure debt; enter into sale-leaseback transactions; and merge or consolidate with another company. These covenants are subject to a number of important and significant limitations, qualifications and exceptions.
Events of default under the WLV Indentures include, among others, the following: default for 30 days in the payment of interest when due on the WLV Senior Notes; default in payment of the principal or premium, if any, when due on the WLV Senior Notes; failure to comply with certain covenants in the WLV Indentures; and certain events of bankruptcy or insolvency. In the case of an event of default arising from certain events of bankruptcy or insolvency with respect to the WLV Issuers or any guarantor, all WLV Senior Notes then outstanding will become due and payable immediately without further action or notice.
In 2018, Wynn Resorts purchased $20.0 million principal amount of the 2025 WLV Senior Notes and 2027 WLV Senior Notes, respectively through open market purchases. As of December 31, 2021, Wynn Resorts holds this debt and has not contributed it to its wholly owned subsidiary, Wynn Las Vegas, LLC.
The WLV Issuers and certain of their subsidiaries will guarantee and secure their obligation under the WRF Credit Facilities with liens on substantially all of their assets, with such liens limiting the amount of such obligations secured to 15% of their total assets.
The WLV Senior Notes were offered pursuant to an exemption under the Securities Act only to qualified institutional buyers in reliance on Rule 144A under the Securities Act. The WLV Senior Notes have not been and will not be registered under the Securities Act or under any state securities laws. Therefore, the WLV Senior Notes may not be offered or sold within the United States to, or for the account or benefit of, any United States person unless the offer or sale would qualify for a registration exemption from the Securities Act and applicable state securities laws.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Retail Term Loan
On July 25, 2018, Wynn/CA Plaza Property Owner, LLC and Wynn/CA Property Owner, LLC (collectively, the "Retail Borrowers"), subsidiaries of the Retail Joint Venture, entered into a term loan agreement (the "Retail Term Loan Agreement").
The Retail Term Loan Agreement provides for a term loan facility to the Retail Borrowers of $615.0 million (the "Retail Term Loan"). The Retail Term Loan is secured by substantially all of the assets of the Retail Borrowers. The Retail Term Loan matures on July 24, 2025 and bears interest at a rate of LIBOR plus 1.70% per annum. In accordance with the Retail Term Loan Agreement, the Retail Borrowers entered into an interest rate collar agreement with a LIBOR floor of 1.00% and a ceiling of 3.75%. The Retail Borrowers distributed approximately $589 million of the net proceeds of the Retail Term Loan to their members on a proportionate basis to each member's ownership percentage. At any time subsequent to July 25, 2019, the Retail Borrowers may prepay the Retail Term Loan, in whole or in part, with no premium above the principal amount.
The Retail Term Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants for debt facilities of this type, including, among other things, limitations on leasing matters, incurrence of indebtedness, distributions and transactions with affiliates. The Retail Term Loan Agreement also provides for customary sweeps of the Retail Borrowers' excess cash in the event of a default or in the event the Retail Borrowers fail to maintain certain financial ratios as defined in the Retail Term Loan Agreement. In addition, the Company will indemnify the lenders under the Retail Term Loan and be liable, in each case, for certain customary environmental and non-recourse carve out matters pursuant to a hazardous materials indemnity agreement and a recourse indemnity agreement, each entered into concurrently with the execution of the Retail Term Loan Agreement.
In accordance with the terms of the Retail Term Loan Agreement, the Retail Borrowers entered into a five year interest rate collar with a notional value of $615.0 million for a cash payment of $3.9 million in July 2018. The interest rate collar establishes a range whereby the Retail Borrowers will pay the counterparty if one-month LIBOR falls below the established floor rate of 1.00%, and the counterparty will pay the Retail Borrowers if one-month LIBOR exceeds the ceiling rate of 3.75%. The interest rate collar settles monthly commencing in August 2019 through the termination date in August 2024. No payments or receipts are exchanged on interest rate collar contracts unless interest rates rise above or fall below the pre-determined ceiling or floor rate, respectively. The Company measures the fair value of the interest rate collar at each balance sheet date based on a Black-Scholes option pricing model, which incorporates observable market inputs such as market volatility and interest rates, with changes in fair value recorded in earnings. As of December 31, 2021, the fair value of the interest rate collar was a liability of $5.5 million, of which $3.9 million was recorded in Other accrued liabilities and $1.6 million was recorded in Other long-term liabilities in the accompanying Consolidated Balance Sheets.
On May 5, 2020, the Retail Borrowers entered into an amendment (the "Retail Term Loan Agreement Amendment") to its existing retail term loan agreement (the "Retail Term Loan Agreement"). The Retail Term Loan Agreement Amendment amended the Retail Term Loan Agreement to, among other things, 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.
Debt Covenant Compliance
As of December 31, 2021, management believes the Company was in compliance with all debt covenants.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Scheduled Maturities of Long-Term Debt
Scheduled maturities of long-term debt as of December 31, 2021 were as follows (in thousands):
| Years Ending December 31, | |||||
| 2022 | $ | 50,000 | |||
| 2023 | 550,000 | ||||
| 2024 | 1,387,500 | ||||
| 2025 | 4,282,766 | ||||
| 2026 | 1,000,000 | ||||
| Thereafter | 4,730,000 | ||||
| 12,000,266 | |||||
| Unamortized debt issuance costs and original issue discounts and premium, net | (65,720) | ||||
| $ | 11,934,546 |
Fair Value of Long-Term Debt
The estimated fair value of the Company's long-term debt as of December 31, 2021 and 2020, was approximately $11.72 billion and $13.35 billion, respectively, compared to its carrying value, excluding debt issuance costs and original issue discount and premium, of $12.00 billion, and $13.15 billion, respectively. The estimated fair value of the Company's long-term debt is based on recent trades, if available, and indicative pricing from market information (Level 2 inputs).
Note 8 - Stockholders' Equity (Deficit)
Common Stock
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 $841.9 million, net of $17.7 million in underwriting discounts and commissions. The Company used the net proceeds from this equity offering for general corporate purposes, including the repayment of debt.
The Company's board of directors has authorized an equity repurchase program of up to $1.0 billion, which may include repurchases from time to time through open market purchases or negotiated transactions, depending on market conditions. During the years ended December 31, 2021 and 2020, the Company did not repurchase any of its shares under the program. During the year ended December 31, 2019, the Company repurchased 413,439 shares at a net cost of $43.2 million under the equity repurchase program. As of December 31, 2021, the Company had $800.1 million in repurchase authority under the program.
During the years ended December 31, 2021, 2020, and 2019, the Company withheld a total of 140,363 shares, 120,513 shares, and 176,989 shares, respectively, in satisfaction of tax withholding obligations on vested restricted stock and stock option exercises.
Dividends
During the first quarter of 2020, the Company paid a cash dividend of $1.00 per share. On May 6, 2020, the Company announced that it had suspended its quarterly dividend program due to the financial impact of the COVID-19 pandemic.
During the first quarter of 2019, the Company paid a cash dividend of $0.75 per share and $1.00 per share for each of the the three subsequent quarters, for annual cash dividends of $3.75 per share.
During the years ended December 31, 2020 and 2019, the Company recorded $107.5 million and $403.0 million, respectively, as a reduction of retained earnings from cash dividends declared.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Noncontrolling Interests
Wynn Interactive Ltd
On April 16, 2021, Wynn Interactive issued a pre-emptive rights notice to its shareholders in connection with the proposed creation and issuance of new Class A shares. Upon the consummation of the share issuance in May 2021, Wynn Interactive issued 3,229 new Class A shares to noncontrolling interest holders in exchange for aggregate proceeds of $4.7 million.
Wynn Macau, Limited
In October 2009, WML, the developer, owner and operator of Wynn Macau and Wynn Palace, listed its ordinary shares of common stock on The Stock Exchange of Hong Kong Limited through an initial public offering. The Company currently owns approximately 72% of this subsidiary's common stock. The shares of WML were not and will not be registered under the Securities Act and may not be offered or sold in the United States absent a registration under the Securities Act, or an applicable exception from such registration requirements.
The WML board of directors concluded not to recommend the payment of a dividend with respect to the years ended December 31, 2021, 2020 and 2019 due to the financial impact of the COVID-19 pandemic. As such, WML paid no dividends during 2021 and 2020.
On September 16, 2019, WML paid a cash dividend of HK$0.45 per share for a total of $298.0 million. The Company's share of this dividend was $215.1 million with a reduction of $82.9 million to noncontrolling interest in the accompanying Consolidated Balance Sheet.
On June 19, 2019, WML paid a cash dividend of HK$0.45 per share for a total of $298.0 million. The Company's share of this dividend was $215.0 million with a reduction of $83.0 million to noncontrolling interest in the accompanying Consolidated Balance Sheet.
Retail Joint Venture
During the years ended December 31, 2021, 2020 and 2019, the Retail Joint Venture made aggregate distributions of $18.8 million, $6.2 million and $7.7 million, respectively, to its non-controlling interest holder. For more information on the Retail Joint Venture, see Note 18, "Retail Joint Venture".
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 9 - Fair Value Measurements
The following tables present assets and liabilities carried at fair value (in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||
| December 31, 2021 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 500,977 | $ | — | $ | 500,977 | $ | — | |||||||||||||||
| Restricted cash | $ | 8,537 | $ | 6,950 | $ | 1,587 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate collar | $ | 5,548 | $ | — | $ | 5,548 | $ | — | |||||||||||||||
| Fair Value Measurements Using: | |||||||||||||||||||||||
| December 31, 2020 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 980,580 | $ | 504,980 | $ | 475,600 | $ | — | |||||||||||||||
| Restricted cash | $ | 4,352 | $ | 2,054 | $ | 2,298 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate collar | $ | 16,908 | $ | — | $ | 16,908 | $ | — |
Note 10 - Benefit Plans
Defined Contribution Plans
The Company established a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its U.S. non-union employees in July 2000. The plan allows employees to defer, within prescribed limits, a percentage of their income on a pre-tax basis through contributions to this plan. The Company matches 50% of employee contributions, up to 6% of employees' eligible compensation. During the year ended December 31, 2021, the Company recorded matching contribution expenses of $8.0 million. During the year ended December 31, 2020, the Company did not match employee contributions. During the year ended December 31, 2019, the Company recorded matching contribution expenses of $6.9 million.
Wynn Macau SA also operates a defined contribution retirement benefit plan (the "Wynn Macau Plan"). Eligible employees are allowed to contribute 5% of their base salary to the Wynn Macau Plan and the Company matches any contributions. On July 1 2019, the Company offered the option for the eligible Macau resident employees to join the non-mandatory central provident fund (the "CPF") system. Eligible Macau resident employees joining the Company from July 1, 2019 onwards have the option of enrolling in the CPF system while the Company's existing Macau resident employees who are currently members of the Wynn Macau Plan will be provided with the option of joining the CPF system or staying in the existing Wynn Macau Plan, which will continue to be in effect in parallel. The CPF system allows eligible employees to contribute 5% or more of their base salary to the CPF while the Company matches with a 5% of such salary as employer's contribution to the CPF. The Company's matching contributions vest to the employee at 10% per year with full vesting in ten years. The assets of the Wynn Macau Plan and the CPF are held separately from those of the Company in independently administered funds and overseen by the Macau government. Forfeitures of unvested contributions are used to reduce the Company's liability for its contributions payable. During the years ended December 31, 2021, 2020 and 2019, the Company recorded matching contribution expenses of $17.2 million, $19.5 million, and $17.8 million, respectively.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Multi-Employer Pension Plan
Wynn Las Vegas, LLC contributes to a multi-employer defined benefit pension plan for certain of its union employees under the terms of the Southern Nevada Culinary and Bartenders Union collective-bargaining agreement, which expires in July 2023. The term of the collective bargaining agreement was extended through Memoranda of Agreement ("MOA") that the Company and the Culinary and Bartenders’ Unions entered into in April 2020 and January 2021, respectively. The MOA further provided for a partial deferral of the 2020 and 2021 contractual wage increases until 2023, and allowed the Company additional flexibility in scheduling during the pandemic. The legal name of the multi-employer pension plan is the Southern Nevada Culinary and Bartenders Pension Plan (the "Plan") (EIN: 88-6016617 Plan Number: 1). The Company recorded expenses of $9.8 million, $7.0 million, and $11.9 million for contributions to the Plan for the years ended December 31, 2021, 2020 and 2019, respectively. For the 2020 plan year, the most recent for which plan data is available, the Company's contributions were identified by the Plan to exceed 5% of total contributions for that year. Based on information the Company received from the Plan, it was certified to be in neither endangered nor critical status for the 2020 plan year. Risks of participating in a multi-employer plan differ from single-employer plans for the following reasons: (1) assets contributed to a multi-employer plan by one employer may be used to provide benefits to employees of other participating employers; (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers; (3) if a participating employer stops participating, it may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability; and (4) if the plan is terminated by withdrawal of all employers and if the value of the nonforfeitable benefits exceeds plan assets and withdrawal liability payments, employers are required by law to make up the insufficient difference.
Note 11 - Customer Contract Liabilities
In providing goods and services to its customers, there is often a timing difference between the Company receiving cash and the Company recording revenue for providing services or holding events.
The Company's primary liabilities associated with customer contracts are as follows (in thousands):
| December 31, 2021 | December 31, 2020 | Increase/ (Decrease) | December 31, 2020 | December 31, 2019 | Increase/ (Decrease) | ||||||||||||||||||||||||||||||
| Casino outstanding chips and front money deposits (1) | $ | 352,830 | $ | 596,463 | $ | (243,633) | $ | 596,463 | $ | 769,053 | $ | (172,590) | |||||||||||||||||||||||
| Advance room deposits and ticket sales (2) | 55,438 | 29,224 | 26,214 | 29,224 | 49,834 | (20,610) | |||||||||||||||||||||||||||||
| Other gaming-related liabilities (3) | 26,515 | 7,882 | 18,633 | 7,882 | 13,970 | (6,088) | |||||||||||||||||||||||||||||
| Loyalty program and related liabilities (4) | 34,695 | 22,736 | 11,959 | 22,736 | 21,148 | 1,588 | |||||||||||||||||||||||||||||
| $ | 469,478 | $ | 656,305 | $ | (186,827) | $ | 656,305 | $ | 854,005 | $ | (197,700) |
(1) Casino outstanding chips generally represent amounts owed to gaming promoters and customers for chips in their possession, and casino front money deposits represent funds deposited by customers before gaming play occurs. These amounts are included in customer deposits on the Consolidated Balance Sheets and may be recognized as revenue or redeemed for cash in the future. As of December 31, 2021, the Company had no agreements in place with gaming promoters.
(2) Advance room deposits and ticket sales represent cash received in advance for goods or services to be provided in the future. These amounts are included in customer deposits on the Consolidated Balance Sheets and will be recognized as revenue when the goods or services are provided or the events are held. Decreases in this balance generally represent the recognition of revenue and increases in the balance represent additional deposits made by customers. The deposits are expected to primarily be recognized as revenue within one year.
(3) Other gaming-related liabilities generally represent unpaid wagers primarily in the form of unredeemed slot, race and sportsbook tickets or wagers for future sporting events. The amounts are included in other accrued liabilities on the Consolidated Balance Sheets.
(4) Loyalty program and related liabilities represent the deferral of revenue until the loyalty points or other complimentaries are redeemed. The amounts are included in other accrued liabilities on the Consolidated Balance Sheets and are expected to be recognized as revenue within one year of being earned by customers.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 12 - Stock-Based Compensation
The Company has adopted equity plans that allow for grants of stock-based compensation awards. The following sections describe each of these plans.
Wynn Resorts, Limited 2014 Omnibus Incentive Plan (the "WRL Omnibus Plan")
On May 16, 2014, the Company adopted the WRL Omnibus Plan after approval from its stockholders, which was adopted for a period of 10 years. The WRL Omnibus Plan allows for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, and other share-based awards to eligible participants. The Company reserved 4,409,390 shares of its common stock for issuance under the WRL Omnibus Plan. On June 25, 2020, the Company's shareholders approved an amendment to the WRL Omnibus Plan that increases the shares authorized for issuance by 1,500,000 shares, for an aggregate number of shares authorized for issuance to 5,909,390 shares.
As of December 31, 2021, the Company had an aggregate of 3,003,920 shares of its common stock available for grant as share-based awards under the WRL Omnibus Plan.
Wynn Macau, Limited Share Option and Share Award Plans
The Company's majority-owned subsidiary, WML, has two stock-based compensation plans that provide awards based on shares of WML's common stock. The shares available for issuance under these plans are separate and distinct from the common stock of Wynn Resorts' share plan and are not available for issuance for any awards under the Wynn Resorts share plan.
WML Share Option Plan ("WML Share Option Plan")
WML adopted the WML Share Option Plan for the grant of stock options to purchase shares of WML to eligible directors and employees of WML and its subsidiaries. The WML Share Option Plan is administered by WML's Board of Directors, which has the discretion on the vesting and service requirements, exercise price, performance targets to exercise if applicable and other conditions, subject to certain limits.
The WML Share Option Plan was adopted for a period of 10 years commencing from May 30, 2019. The maximum number of shares which may be issued pursuant to the WML Share Option Plan is 519,695,860 shares. As of December 31, 2021, there were 501,735,860 shares available for issuance under the WML Share Option Plan.
WML Employee Share Ownership Scheme (the "WML Share Award Plan")
On June 30, 2014, WML adopted the WML Share Award Plan. The Share Award Plan allows for the grant of nonvested shares of WML's common stock to eligible employees. The WML Share Award Plan has been mandated under the plan to allot, issue and process the transfer of a maximum of 75,000,000 shares. As of December 31, 2021, there were 45,094,570 shares available for issuance under the WML Share Award Plan.
Wynn Interactive Ltd. 2020 Omnibus Incentive Plan (the "WIL Omnibus Plan")
On October 23, 2020, the Wynn Interactive board of directors adopted the WIL Omnibus Plan. The WIL Omnibus Plan, which is administered by the Wynn Interactive board of directors, allows for an aggregate number of shares totaling 101,419 for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards, and other share-based awards to eligible participants. As of December 31, 2021, there were 14,660 shares available to grant under the WIL Omnibus Plan.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Stock Options
The summary of stock option activity for the year ended December 31, 2021 is presented below:
| Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value | ||||||||||||||||||||
| WRL Omnibus Plan | |||||||||||||||||||||||
| Outstanding as of January 1, 2021 | 23,700 | $ | 80.42 | ||||||||||||||||||||
| Granted | — | $ | — | ||||||||||||||||||||
| Exercised | — | $ | — | ||||||||||||||||||||
| Forfeited or expired | — | $ | — | ||||||||||||||||||||
| Outstanding as of December 31, 2021 | 23,700 | $ | 80.42 | 4.16 | $ | 230,023 | |||||||||||||||||
| Fully vested and expected to vest as of December 31, 2021 | 23,700 | $ | 80.42 | 4.16 | $ | 230,023 | |||||||||||||||||
| Exercisable as of December 31, 2021 | 23,700 | $ | 80.42 | 4.16 | $ | 230,023 | |||||||||||||||||
| WML Share Option Plan | |||||||||||||||||||||||
| Outstanding as of January 1, 2021 | 19,858,400 | $ | 2.36 | ||||||||||||||||||||
| Granted | 9,065,000 | $ | 0.89 | ||||||||||||||||||||
| Exercised | — | $ | — | ||||||||||||||||||||
| Forfeited or expired | (400,000) | $ | 3.33 | ||||||||||||||||||||
| Outstanding as of December 31, 2021 | 28,523,400 | $ | 1.87 | 7.70 | $ | — | |||||||||||||||||
| Fully vested and expected to vest as of December 31, 2021 | 28,523,400 | $ | 1.87 | 7.70 | $ | — | |||||||||||||||||
| Exercisable as of December 31, 2021 | 10,030,200 | $ | 2.39 | 5.34 | $ | — | |||||||||||||||||
| WIL Omnibus Plan | |||||||||||||||||||||||
| Outstanding as of January 1, 2021 | 90,298 | $ | 1,134.00 | ||||||||||||||||||||
| Granted | 5,297 | $ | 760.79 | ||||||||||||||||||||
| Exercised | — | $ | — | ||||||||||||||||||||
| Forfeited or expired | (4,961) | $ | 593.15 | ||||||||||||||||||||
| Outstanding as of December 31, 2021 | 90,634 | $ | 1,143.48 | 8.94 | $ | 1,185 | |||||||||||||||||
| Fully vested and expected to vest as of December 31, 2021 | 90,634 | $ | 1,143.48 | 8.94 | $ | 1,185 | |||||||||||||||||
| Exercisable as of December 31, 2021 | — | $ | — | — | $ | — |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following is provided for stock options under the Company's stock-based compensation plans (in thousands, except weighted average grant date fair value):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| WRL Omnibus Plan (1) | |||||||||||||||||
| Intrinsic value of stock options exercised | $ | — | $ | — | $ | 24,731 | |||||||||||
| Cash received from the exercise of stock options | $ | — | $ | — | $ | 14,696 | |||||||||||
| WML Share Option Plan (2) | |||||||||||||||||
| Weighted average grant date fair value | $ | 0.26 | $ | 0.54 | $ | 0.55 | |||||||||||
| Intrinsic value of stock options exercised | $ | — | $ | 57 | $ | — | |||||||||||
| Cash received from the exercise of stock options | $ | — | $ | 70 | $ | — | |||||||||||
| WIL Omnibus Plan (3) | |||||||||||||||||
| Weighted average grant date fair value | $ | 159.51 | $ | 146.97 | $ | — |
(1) As of December 31, 2021, there was no unamortized compensation expense related to stock options.
(2) As of December 31, 2021, there was $6.8 million of unamortized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 3.8 years.
(3) As of December 31, 2021, there was $6.4 million of unamortized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 2.7 years.
Option Valuation Inputs
There were no stock options granted under the WRL Omnibus Plan during the years ended December 31, 2021, 2020, and 2019.
The fair value of stock options granted under WML's Share Option Plan was estimated on the date of grant using the following weighted average assumptions:
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Expected dividend yield | 2.9 | % | 4.7 | % | 5.7 | % | |||||||||||
| Expected volatility | 46.4 | % | 42.6 | % | 40.7 | % | |||||||||||
| Risk-free interest rate | 1.1 | % | 1.0 | % | 1.4 | % | |||||||||||
| Expected term (years) | 6.5 | 6.5 | 6.5 |
The fair value of stock options granted under the WIL Omnibus Plan was estimated on the date of grant using the following weighted average assumptions:
| Years Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Expected dividend yield | — | % | — | % | |||||||
| Expected volatility | 50.0 | % | 50.0 | % | |||||||
| Risk-free interest rate | 0.60 | % | 0.61 | % | |||||||
| Expected term (years) | 6.3 | 6.5 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Nonvested and performance nonvested shares
The summary of nonvested and performance nonvested share activity under the Company's stock-based compensation plans for the year ended December 31, 2021 is presented below:
| Shares | Weighted Average Grant Date Fair Value | ||||||||||
| WRL Omnibus Plan | |||||||||||
| Nonvested as of January 1, 2021 | 929,635 | $ | 112.11 | ||||||||
| Granted | 415,360 | $ | 108.68 | ||||||||
| Vested | (417,146) | $ | 95.50 | ||||||||
| Forfeited | (26,221) | $ | 113.85 | ||||||||
| Nonvested as of December 31, 2021 | 901,628 | $ | 118.09 | ||||||||
| WML Share Award Plan | |||||||||||
| Nonvested as of January 1, 2021 | 10,878,778 | $ | 2.33 | ||||||||
| Granted | 5,319,814 | $ | 1.56 | ||||||||
| Vested | (4,934,549) | $ | 2.06 | ||||||||
| Forfeited | (1,239,306) | $ | 2.12 | ||||||||
| Nonvested as of December 31, 2021 | 10,024,737 | $ | 2.06 | ||||||||
| WIL Omnibus Plan | |||||||||||
| Nonvested as of January 1, 2021 | — | $ | — | ||||||||
| Granted | 4,094 | $ | 3,150.00 | ||||||||
| Vested | — | $ | — | ||||||||
| Forfeited | (54) | $ | 3,150.00 | ||||||||
| Nonvested as of December 31, 2021 | 4,040 | $ | 3,150.00 |
Certain members of the executive management team receive grants of nonvested share awards that are subject to service and performance conditions. Generally, these awards vest if certain revenue and Adjusted Property EBITDA fair share metrics (as approved by the Company's Compensation Committee of the Board of Directors) are attained over a one-, two-, or three-year performance period. The Company records expense for these awards if it determines that vesting is probable. At December 31, 2021, all performance nonvested awards were deemed to be probable of vesting; however, none of the performance criteria contingencies have been resolved. The activity for these performance nonvested shares is included in the table above.
The following is provided for the share awards under the Company's stock-based compensation plans (in thousands, except weighted average grant date fair value):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| WRL Omnibus Plan | |||||||||||||||||
| Weighted average grant date fair value | $ | 108.68 | $ | 99.21 | $ | 119.61 | |||||||||||
| Fair value of shares vested | $ | 41,133 | $ | 34,068 | $ | 19,428 | |||||||||||
| WML Share Award Plan | |||||||||||||||||
| Weighted average grant date fair value | $ | 1.56 | $ | 1.86 | $ | 2.43 | |||||||||||
| Fair value of shares vested | $ | 4,771 | $ | 8,371 | $ | 5,139 |
As of December 31, 2021, there was $49.4 million of unamortized compensation expense related to nonvested shares, which is expected to be recognized over a weighted average period of 1.88 years under the WRL Omnibus Plan. As of December 31, 2021, there was $8.5 million of unamortized compensation expense, which is expected to be recognized over a weighted average period of 2.14 years under the WML Share Award Plan.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Annual Incentive Bonus
Certain members of the Company's management team receive a portion of their annual incentive bonus in shares of the Company's stock. The number of shares is determined based on the closing stock price on the date the annual incentive bonus is settled. As the number of shares is variable, the Company records a liability for the fixed monetary amount over the service period. The Company recorded stock-based compensation expense associated with these awards of $9.3 million, $5.7 million and $6.7 million for each of the years ended December 31, 2021, 2020 and 2019, respectively. The Company settled its obligations for the 2021, 2020, and 2019 annual incentive bonuses by issuing 108,224, 58,058, 44,788 of vested shares with a weighted-average grant date fair value of $85.80, $108.03, and $150.03, in January of the respective following year.
Compensation Cost
The total compensation cost for stock-based compensation plans was recorded as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Casino (1) | $ | 13,899 | $ | 8,538 | $ | 7,903 | |||||||||||
| Rooms | 1,525 | 1,618 | 1,046 | ||||||||||||||
| Food and beverage | 3,264 | 3,189 | 1,807 | ||||||||||||||
| Entertainment, retail and other (2) | 19,978 | 432 | 174 | ||||||||||||||
| General and administrative | 56,572 | 48,477 | 28,772 | ||||||||||||||
| Pre-opening | — | — | 670 | ||||||||||||||
| Total stock-based compensation expense | 95,238 | 62,254 | 40,372 | ||||||||||||||
| Total stock-based compensation capitalized | 5,058 | 2,212 | 350 | ||||||||||||||
| Total stock-based compensation costs | $ | 100,296 | $ | 64,466 | $ | 40,722 |
(1) In 2020, reflects the reversal of $3.3 million of compensation cost previously recognized for awards forfeited in connection with the departure of an employee.
(2) In 2021, reflects compensation cost of $2.7 million recognized in connection with the vesting of restricted stock performance awards.
During the years ended December 31, 2021, 2020 and 2019, the Company recognized income tax benefits in the Consolidated Statements of Operations of $14.9 million, $9.3 million, and $5.8 million, respectively, related to stock-based compensation expense. Additionally, during the years ended December 31, 2021, 2020, and 2019, the Company realized tax benefits of $8.0 million, $3.7 million, and $8.4 million, respectively, related to stock option exercises and restricted stock vesting that occurred in those years.
Note 13 - Income Taxes
Consolidated income (loss) before taxes for United States ("U.S.") and foreign operations consisted of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| United States | $ | (264,323) | $ | (821,012) | $ | (158,937) | |||||||||||
| Foreign | (747,193) | (941,263) | 647,155 | ||||||||||||||
| Total | $ | (1,011,516) | $ | (1,762,275) | $ | 488,218 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The income tax provision (benefit) attributable to income before income taxes is as follows (in thousands):
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Current | |||||||||||||||||
| U.S. Federal | $ | — | $ | (2) | $ | (14) | |||||||||||
| U.S. State | — | 309 | 868 | ||||||||||||||
| Foreign | 2,746 | 1,879 | 1,796 | ||||||||||||||
| Total | 2,746 | 2,186 | 2,650 | ||||||||||||||
| Deferred | |||||||||||||||||
| U.S. Federal | (176) | 563,658 | 170,508 | ||||||||||||||
| U.S. State | (20) | (1,095) | 3,682 | ||||||||||||||
| Foreign | (2,076) | (78) | — | ||||||||||||||
| Total | (2,272) | 562,485 | 174,190 | ||||||||||||||
| Total income tax provision (benefit) | $ | 474 | $ | 564,671 | $ | 176,840 |
The reconciliation of the U.S. federal statutory tax rate to the actual tax rate is as follows:
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| U.S. Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State Tax | 1.6 | % | — | % | — | % | |||||||||||
| Foreign tax credits, net of valuation allowance | 0.7 | % | (31.8) | % | 13.1 | % | |||||||||||
| Non-taxable foreign income | (3.0) | % | (2.2) | % | (27.4) | % | |||||||||||
| Foreign tax rate differential | (9.4) | % | (5.3) | % | (10.4) | % | |||||||||||
| Global intangible low-taxed income | — | % | — | % | 10.1 | % | |||||||||||
| Valuation allowance, other | (6.8) | % | (11.1) | % | 20.6 | % | |||||||||||
| Other, net | (4.1) | % | (2.6) | % | 9.2 | % | |||||||||||
| Effective income tax rate | — | % | (32.0) | % | 36.2 | % |
Wynn Macau SA received a five year exemption from Macau's 12% Complementary Tax on casino gaming profits through December 31, 2020. 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.
For the years ended December 31, 2021 and 2020, the Company did not have any casino gaming profits exempt from the Macau Complementary Tax. The Company's non-gaming profits remain subject to the Macau Complementary Tax and its casino winnings remain subject to the Macau special gaming tax and other levies in accordance with its concession agreement.
Wynn Macau SA also entered into an agreement with the Macau government that provides for an annual payment of MOP 12.8 million (approximately $1.6 million) as complementary tax otherwise due by stockholders of Wynn Macau SA on dividend distributions through 2020. In March 2021, the Company received an extension of its Macau dividend tax agreement, providing for a payment of MOP 12.8 million (approximately $1.6 million) for 2021 and MOP 6.3 million (approximately $0.8 million) for the period ending June 26, 2022, the expiration date of the gaming concession agreement. As a result of the stockholder dividend tax agreements, income tax expense includes $1.6 million for each of the years ended December 31, 2021, 2020, and 2019.
The Macau special gaming tax is 35% of gross gaming revenue. U.S. tax laws only allow a foreign tax credit ("FTC") up to 21% of foreign source income. In February 2010, the Company and the IRS entered into a Pre-Filing Agreement ("PFA") providing that the Macau special gaming tax qualifies as a tax paid in lieu of an income tax and could be claimed as a U.S. FTC.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
During the years ended December 31, 2021 and 2020, the Company did not recognize any tax benefits for FTCs generated by the earnings of Wynn Macau SA. During the year ended December 31, 2019, the Company recognized tax benefits of $32.9 million (net of valuation allowance and uncertain tax positions) for FTCs generated from the earnings of Wynn Macau SA.
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. During the years ended December 31, 2021 and 2020, the aggregate valuation allowance for deferred tax assets decreased $485.4 million and increased $227.3 million, respectively. The 2021 decrease is primarily related to the expiration of FTCs. The 2020 increase is primarily related to the realizability of FTCs, intangible assets, U.S. loss carryforwards and other deferred tax assets.
The Company recorded tax benefits resulting from the exercise of nonqualified stock options and the value of vested restricted stock and accrued dividends of $1.9 million, $1.2 million, and $5.7 million for the years ended December 31, 2021, 2020, and 2019, respectively, in excess of the amounts reported for such items as compensation costs under accounting standards related to stock-based compensation.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Deferred tax assets—U.S.: | |||||||||||
| Foreign tax credit carryforwards | $ | 2,000,145 | $ | 2,540,400 | |||||||
| Disallowed interest expense carryforward | 154,530 | 138,339 | |||||||||
| Net operating loss carryforward | 89,665 | 45,015 | |||||||||
| Lease liability | 22,021 | 22,826 | |||||||||
| Property and Equipment | 28,710 | 3,048 | |||||||||
| Receivables, inventories, accrued liabilities and other | 21,714 | 25,882 | |||||||||
| Stock-based compensation | 12,488 | 7,528 | |||||||||
| Other tax credit carryforwards | 10,784 | 10,049 | |||||||||
| Intangibles and related other | 28,038 | 50,750 | |||||||||
| Other | 553 | 5,502 | |||||||||
| 2,368,648 | 2,849,339 | ||||||||||
| Less: valuation allowance | (2,329,495) | (2,812,808) | |||||||||
| 39,153 | 36,531 | ||||||||||
| Deferred tax liabilities—U.S.: | |||||||||||
| Property and equipment | (1,217) | — | |||||||||
| Lease asset | (22,021) | (22,826) | |||||||||
| Prepaid insurance, maintenance and taxes | (14,271) | (13,606) | |||||||||
| Other | (1,749) | (400) | |||||||||
| (39,258) | (36,832) | ||||||||||
| Deferred tax assets—Foreign: | |||||||||||
| Net operating loss carryforwards | 99,873 | 107,653 | |||||||||
| Property and equipment | 69,166 | 61,428 | |||||||||
| Pre-opening expenses | 1,536 | 3,832 | |||||||||
| Other | 6,060 | 6,529 | |||||||||
| 176,635 | 179,442 | ||||||||||
| Less: valuation allowance | (171,768) | (173,876) | |||||||||
| 4,867 | 5,566 | ||||||||||
| Deferred tax liabilities—Foreign: | |||||||||||
| Property and equipment | (3,352) | (4,234) | |||||||||
| Intangibles | (77) | (2,402) | |||||||||
| (3,429) | (6,636) | ||||||||||
| Net deferred tax asset (liability) | $ | 1,333 | $ | (1,371) |
FTC carryforwards of $533.6 million expired on December 31, 2021. As of December 31, 2021, the Company had FTC carryforwards (net of uncertain tax positions) of $2.0 billion. Of this amount,$756.0 million will expire in 2023, $710.7 million in 2024, $47.2 million in 2025 and $486.2 million in 2027. The Company has a disallowed interest carryforward of $674.9 million which does not expire. The Company has U.S. federal tax loss carryforwards of $343.1 million and state tax loss carryforwards of $74.4 million. U.S. federal tax loss carryforwards do not expire. The majority of state tax loss carryforwards expire in 2040. The Company incurred foreign tax losses of $394.1 million, $378.6 million and $376.8 million during the tax years ended December 31, 2021, 2020 and 2019, respectively. The majority of foreign tax loss carryforwards expire in 2024, 2023 and 2022, respectively.
The Company records valuation allowances on certain of its U.S. and foreign deferred tax assets. 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In the assessment of the valuation allowance, appropriate consideration is given to all positive and negative evidence including recent operating profitability, forecast of future earnings, ability to carryback, the reversal of net taxable temporary differences, the duration of statutory carryforward periods and tax planning strategies. For the year ended December 31, 2019, the Company relied on the forecast of future taxable income and tax planning strategies in assessing the need for a valuations allowance. Due to tax legislation that reduces future sources of taxable income as well as the uncertainty caused by the COVID-19 pandemic, the Company relied solely on the reversal of net taxable temporary differences in assessing the need for a valuation allowance in the years ended December 31, 2021 and 2020.
As of December 31, 2021 and 2020, the Company had valuation allowances provided on its deferred tax assets as follows (in thousands):
| December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Foreign tax credits | $ | 2,000,145 | $ | 2,540,400 | |||||||
| Disallowed interest expense carryforwards | 154,530 | 138,339 | |||||||||
| Intangible assets | 29,081 | 48,395 | |||||||||
| U.S. loss carryforwards | 89,665 | 45,015 | |||||||||
| Other U.S. deferred tax assets | 56,073 | 40,659 | |||||||||
| Foreign loss carryforwards | 99,971 | 106,737 | |||||||||
| Other foreign deferred tax assets | 71,798 | 67,139 | |||||||||
| Total | $ | 2,501,263 | $ | 2,986,684 |
The Company had the following activity for unrecognized tax benefits as follows (in thousands):
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Balance at beginning of period | $ | 107,661 | $ | 104,295 | $ | 99,470 | |||||||||||
| Increases based on tax positions of the current year | 14,079 | 7,061 | 8,986 | ||||||||||||||
| Increases based on tax positions of prior years | 66,043 | — | — | ||||||||||||||
| Reductions based on tax positions of prior years | (35,633) | — | — | ||||||||||||||
| Reductions due to lapse in statutes of limitations | (10,635) | (3,695) | (4,161) | ||||||||||||||
| Balance at end of period | $ | 141,515 | $ | 107,661 | $ | 104,295 |
As of December 31, 2021, 2020 and 2019, unrecognized tax benefits of $141.5 million, $107.7 million and $104.3 million, respectively, were recorded as reductions in deferred income taxes, net. The Company had no unrecognized tax benefits recorded in other long-term liabilities as of December 31, 2021, 2020 and 2019.
As of December 31, 2021, 2020 and 2019, $74.3 million, $40.2 million and $36.6 million, respectively, of unrecognized tax benefits would, if recognized, impact the effective tax rate.
The Company recognizes penalties and interest related to unrecognized tax benefits in the provision for income taxes. During each of the years ended December 31, 2021, 2020 and 2019, the Company recognized no interest and penalties.
The Company anticipates that the 2017 statute of limitations will expire in the next 12 months for certain foreign tax jurisdictions. Also, the Company's unrecognized tax benefits include certain income tax accounting methods, which govern the timing and deductibility of income tax deductions. As a result, the Company's unrecognized tax benefits could decrease up to $0.9 million over the next 12 months.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company's income tax returns are subject to examination by the IRS and other tax authorities in the locations where it operates. The Company's 2002 to 2017 domestic income tax returns remain subject to examination by the IRS to the extent tax attributes carryforward to future years. The Company's 2018 to 2020 domestic income tax returns also remain subject to examination by the IRS. The Company's 2017 to 2020 Macau income tax returns remain subject to examination by the Financial Services Bureau.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company has participated in the IRS Compliance Assurance Program ("CAP") for the 2012 through 2021 tax years and will continue to participate in the IRS CAP for the 2022 tax year.
In May 2019, July 2020, and February 2021, the Company received notification that the IRS completed its examination of the Company's 2017, 2018, and 2019 U.S. income tax returns, respectively.
On December 31, 2019, 2020 and 2021, the statute of limitations for the 2014, 2015, and 2016 Macau Complementary tax return expired, respectively. As a result of the expiration of the statute of limitations for the Macau Complementary Tax return, the total amount of unrecognized tax benefits decreased by $4.2 million, $3.7 million, and $10.6 million, respectively.
In January of 2020, the Financial Services Bureau commenced an examination of the 2015 and 2016 Macau income tax returns of Palo. In July 2020, the Financial Services Bureau issued final tax assessments for Palo for the years 2015 and 2016 and the examination resulted in no change to the tax returns.
In July 2020, the Financial Services Bureau issued final tax assessments for the Company's Macau income tax returns of Wynn Macau SA for the years 2015 and 2016, while no additional tax was due, adjustments were made to the Company's tax loss carryforwards.
In March 2021, the Financial Services Bureau concluded its review of the 2017 and 2018 Macau income tax returns of Palo with no changes.
In January 2022, the Financial Services Bureau issued final tax assessments for the Company’s Macau income tax returns of Wynn Macau SA for the years 2017 and 2018, while no additional tax was due, adjustments were made to the Company’s tax loss carryforwards.
Note 14 - Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing net income (loss) attributable to Wynn Resorts by the weighted average number of common shares outstanding during the year. Diluted EPS is computed by dividing net income (loss) attributable to Wynn Resorts by the weighted average number of common shares outstanding during the period increased to include the number of additional shares of common stock that would have been outstanding if the potential dilutive securities had been issued, to the extent such impact is not anti-dilutive. Potentially dilutive securities include outstanding stock options and unvested restricted stock.
The weighted average number of common and common equivalent shares used in the calculation of basic and diluted EPS consisted of the following (in thousands, except per share amounts):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Numerator: | |||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (755,786) | $ | (2,067,245) | $ | 122,985 | |||||||||||
| Denominator: | |||||||||||||||||
| Weighted average common shares outstanding | 113,760 | 106,745 | 106,745 | ||||||||||||||
| Potential dilutive effect of stock options, nonvested, and performance nonvested shares | — | — | 240 | ||||||||||||||
| Weighted average common and common equivalent shares outstanding | 113,760 | 106,745 | 106,985 | ||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, basic | $ | (6.64) | $ | (19.37) | $ | 1.15 | |||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, diluted | $ | (6.64) | $ | (19.37) | $ | 1.15 | |||||||||||
| Anti-dilutive stock options, nonvested, and performance nonvested shares excluded from the calculation of diluted net income per share | 925 | 1,044 | 277 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 15 - Leases
Lessee Arrangements
The following table summarizes the balance sheet classification of the Company's lease assets and liabilities (in thousands):
| December 31, | |||||||||||||||||
| Balance Sheet Classification | 2021 | 2020 | |||||||||||||||
| Assets | |||||||||||||||||
| Operating leases | Operating lease assets | $ | 371,365 | $ | 398,594 | ||||||||||||
| Finance leases | Property and equipment, net | $ | 64,646 | $ | 73,201 | ||||||||||||
| Current liabilities | |||||||||||||||||
| Operating leases | Other accrued liabilities | $ | 10,881 | $ | 13,627 | ||||||||||||
| Finance leases | Other accrued liabilities | $ | 16,041 | $ | 13,879 | ||||||||||||
| Non-current liabilities | |||||||||||||||||
| Operating leases | Long-term operating lease liabilities | $ | 115,187 | $ | 123,124 | ||||||||||||
| Finance leases | Other long-term liabilities | $ | 44,018 | $ | 54,379 |
The following tables disclose the components of the Company's lease cost, supplemental cash flow disclosures, and other information regarding the Company's lease arrangements (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Lease cost: | |||||||||||||||||
| Operating lease cost | $ | 22,878 | $ | 29,574 | $ | 33,126 | |||||||||||
| Short-term lease cost | 16,224 | 11,363 | 24,634 | ||||||||||||||
| Amortization of leasehold interests in land | 13,862 | 13,885 | 13,373 | ||||||||||||||
| Variable lease cost | 911 | 194 | 1,487 | ||||||||||||||
| Finance lease interest cost | 2,216 | 1,604 | 1,058 | ||||||||||||||
| Total lease cost | $ | 56,091 | $ | 56,620 | $ | 73,678 |
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Supplemental cash flow disclosures: | |||||||||||||||||
| Operating lease liabilities arising from obtaining operating lease assets | $ | 3,761 | $ | 11,625 | $ | 45,435 | |||||||||||
| Finance lease liabilities arising from obtaining finance lease assets | $ | 7,423 | $ | 56,215 | $ | 1,413 | |||||||||||
| Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||||||||
| Cash used in operating activities - Operating leases | $ | 21,404 | $ | 28,873 | $ | 30,409 | |||||||||||
| Cash used in financing activities - Finance leases | $ | 15,658 | $ | 5,916 | $ | 73 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Other information: | |||||||||||||||||
| Weighted-average remaining lease term - Operating leases | 46.5 years | 43.9 years | 35.4 years | ||||||||||||||
| Weighted-average remaining lease term - Finance leases | 14.0 years | 13.6 years | 42.8 years | ||||||||||||||
| Weighted-average discount rate - Operating leases | 6.6 | % | 6.5 | % | 6.4 | % | |||||||||||
| Weighted-average discount rate - Finance leases | 4.7 | % | 4.5 | % | 6.2 | % |
The following table presents an analysis of lease liability maturities as of December 31, 2021 (in thousands):
| Years Ending December 31, | Operating Leases | Finance Leases | ||||||||||||
| 2022 | $ | 18,106 | $ | 17,839 | ||||||||||
| 2023 | 16,285 | 17,839 | ||||||||||||
| 2024 | 11,375 | 11,559 | ||||||||||||
| 2025 | 9,300 | 1,203 | ||||||||||||
| 2026 | 8,292 | 1,203 | ||||||||||||
| Thereafter | 441,640 | 63,881 | ||||||||||||
| Total undiscounted cash flows | $ | 504,998 | $ | 113,524 | ||||||||||
| Present value | ||||||||||||||
| Short-term lease liabilities | $ | 10,881 | $ | 16,041 | ||||||||||
| Long-term lease liabilities | 115,187 | 44,018 | ||||||||||||
| Total lease liabilities | $ | 126,068 | $ | 60,059 | ||||||||||
| Interest on lease liabilities | $ | 378,930 | $ | 53,465 |
Ground Leases
Undeveloped Land - Las Vegas
The Company leases approximately 16 acres of undeveloped land on Las Vegas Boulevard directly across from Wynn Las Vegas in Las Vegas, Nevada, pursuant to a lease agreement which expires in 2097. The ground lease payments, which increase at a fixed rate over the term of the lease, are $3.8 million in 2022, $3.9 million in 2023, $4.0 million per year from 2024 to 2026 and total payments of $355.8 million thereafter. As of December 31, 2021 and 2020, the liability associated with this lease was $63.7 million and $63.2 million, respectively.
At December 31, 2021 and 2020, operating lease assets included approximately $84.7 million and $85.8 million, respectively, related to an amount allocated to the leasehold interest in land upon the acquisition of a group of assets in 2018. The Company expects that the amortization of this amount will be $1.1 million each year from 2022 through 2096 and $0.7 million in 2097.
Macau Land Concessions
Wynn Palace and Wynn Macau were built on land that is leased under Macau land concession contracts each with terms of 25 years from May 2012 and August 2004, respectively, which may be renewed with government approval for successive 10-year periods in accordance with Macau legislation. The land concession payments are expected to be $1.6 million per year through 2026 and total payments of $12.3 million thereafter through 2037. At December 31, 2021 and 2020, the total liability associated with these leases was $14.5 million and $15.4 million, respectively.
At December 31, 2021 and 2020, operating lease assets included $166.7 million and $180.3 million of leasehold interests in land related to the Wynn Palace and Wynn Macau land concessions. The Company expects that the amortization associated
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
with these leasehold interests will be approximately $12.6 million per year from 2022 through 2028 and approximately $9.3 million per year thereafter through 2037.
Lessor Arrangements
The following table presents the minimum and contingent operating lease income for the periods presented (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Minimum rental income (1) | $ | 104,860 | $ | 77,946 | $ | 136,612 | |||||||||||
| Contingent rental income | 97,521 | 56,889 | 57,807 | ||||||||||||||
| Total rental income | $ | 202,381 | $ | 134,835 | $ | 194,419 |
(1) For the year ended December 31, 2020, reflects the impact of rent concessions provided to tenants.
The following table presents the future minimum rentals to be received under operating leases (in thousands):
| Years Ending December 31, | Operating Leases | ||||
| 2022 | $ | 123,716 | |||
| 2023 | 109,838 | ||||
| 2024 | 100,002 | ||||
| 2025 | 83,095 | ||||
| 2026 | 48,870 | ||||
| Thereafter | 75,599 | ||||
| Total future minimum rentals | $ | 541,120 |
Note 16 - Related Party Transactions
Home Purchase
In May 2010, the Company entered into an employment agreement with Linda Chen ("Ms. Chen"), who is the President and Executive Director of Wynn Macau SA. Under the terms of the employment agreement, the Company purchased a home in Macau for use by Ms. Chen and has made renovations to the home with a total cost of $11.0 million. In addition, Ms. Chen has an option to purchase the home for no further consideration at any time before the expiration of this option arrangement.
Cooperation Agreement
On August 3, 2018, the Company entered into a Cooperation Agreement (the "Cooperation Agreement") with Elaine P. Wynn regarding the composition of the Company's Board of Directors and certain other matters, including, among other things, the appointment of Mr. Philip G. Satre to the Company's Board of Directors, standstill restrictions, releases, non-disparagement, reimbursement of expenses and the grant of certain complimentary privileges. The term of the Cooperation Agreement expires on the date that Mr. Satre no longer serves as Chair of the Board, unless earlier terminated pursuant to the circumstances described in the Cooperation Agreement.
Amounts Due to Officers, Directors and Former Directors
The Company periodically provides services to certain executive officers, directors or former directors of the Company, including the personal use of employees, construction work and other personal services, for which the officers, directors or former directors reimburse the Company. The Company requires prepayment for any such services, which amounts are replenished on an ongoing basis as needed. As of December 31, 2021 and 2020, these net deposit balances with the Company were immaterial, as were the services provided.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Note 17 - Commitments and Contingencies
Employment Agreements
The Company has entered into employment agreements with several executive officers, other members of management and certain key employees. These agreements generally have three to five year terms and typically indicate a base salary and often contain provisions for discretionary bonuses. Certain of the executives are also entitled to a separation payment if terminated without "cause" or upon voluntary termination of employment for "good reason" following a "change of control" (as these terms are defined in the employment contracts). As of December 31, 2021, the Company was obligated to make future payments of $62.2 million, $41.5 million, $15.0 million, $0.9 million, and $0.2 million during the years ending December 31, 2022, 2023, 2024, 2025 and 2026, respectively. There are no employment agreement obligations after December 31, 2026.
Other Commitments
The Company has additional commitments for gaming tax payments in Macau, open purchase orders, construction contracts, payment obligations to communities surrounding Encore Boston Harbor, and performance and other miscellaneous contracts. As of December 31, 2021, the Company was obligated under these arrangements to make future minimum payments as follows (in thousands):
| Years Ending December 31, | |||||
| 2022 | $ | 376,328 | |||
| 2023 | 134,420 | ||||
| 2024 | 65,821 | ||||
| 2025 | 41,059 | ||||
| 2026 | 28,655 | ||||
| Thereafter | 173,060 | ||||
| Total minimum payments | $ | 819,343 |
Letters of Credit
As of December 31, 2021, the Company had outstanding letters of credit of $14.4 million.
Litigation
In addition to the actions noted below, the Company and its affiliates are involved in litigation arising in the normal course of business. In the opinion of management, such litigation is not expected to have a material effect on the Company's financial condition, results of operations, and cash flows.
Macau Litigation Related to Dore
Wynn Macau SA has been named as a defendant in lawsuits filed in the Macau Court of First Instance by individuals who claim to be investors in or persons with credit in accounts maintained by Dore Entertainment Company Limited (“Dore”), an independent, Macau registered and licensed company that operated a gaming promoter business at Wynn Macau. In connection with the alleged theft, embezzlement, fraud and/or other crime(s) perpetrated by a former employee of Dore (the “Dore Incident”), the plaintiffs of the lawsuits allege that Dore failed to honor withdrawal of funds deposited with Dore as investments or gaming deposits that allegedly resulted in certain losses for these individuals. The principal allegations common to the lawsuits are that Wynn Macau SA, as a gaming concessionaire, should be held responsible for Dore’s conduct on the basis that Wynn Macau SA is responsible for the supervision of Dore’s activities at Wynn Macau that resulted in the purported losses.
On November 19, 2021, the Macau Court of Final Appeal issued a final ruling (the “Ruling”) with respect to one such lawsuit that Wynn Macau SA was held jointly liable to a plaintiff. Pursuant to the Ruling, Wynn Macau SA was required to pay approximately $1.2 million, inclusive of accumulated interest, to such plaintiff.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company believes most remaining cases are without merit and unfounded and intends to vigorously defend against the remaining claims pleaded against Wynn Macau SA in these lawsuits. The Company has made estimates for potential litigation costs based upon its assessment of the likely outcome and has recorded provisions for such amounts in the accompanying consolidated financial statements for the year ended December 31, 2021. No assurances can be provided as to the outcome of the pending Dore cases, and actual results may differ from these estimates.
Massachusetts Gaming License Related Actions
On September 17, 2014, the Massachusetts Gaming Commission ("MGC") designated Wynn MA the award winner of the Greater Boston (Region A) gaming license (the "Boston area license"). On November 7, 2014, the gaming license became effective.
Revere Action
On October 16, 2014, the City of Revere, the host community to the unsuccessful bidder for the Boston area license, the International Brotherhood of Electrical Workers, Local 103, and several individuals, filed a complaint against the MGC and its gaming commissioners in Suffolk Superior Court in Boston, Massachusetts (the "Revere Action"). Mohegan Sun ("Mohegan"), the other applicant for the Boston area license, joined the lawsuit and challenged the MGC's award of the Boston area license. On December 3, 2015, the court granted the MGC's motion to dismiss the claims asserted in the Revere Action and the court dismissed all claims except Mohegan's claim alleging procedural error by the MGC in granting the license to Wynn MA. The plaintiffs appealed. After multiple appeals and cross appeals, only two claims remained: (1) individual plaintiffs' claim for violation of the open meeting laws; and (2) Mohegan's claim for procedural error. On July 12, 2019, the Suffolk Superior Court granted the MGC's motion for summary judgment and dismissed the open meeting law claim, leaving only Mohegan's procedural claim for procedural error.
On August 2, 2019, Mohegan filed a motion to file a second amended complaint, to add new claims related to the MGC's allegedly inadequate 2013 investigation. On October 15, 2019, the court granted Mohegan's motion to amend and allowed it to file a second amended intervenor's complaint. Mohegan and the MGC engaged in supplemental briefing on Mohegan’s still-pending Motion for Judgment Against the MGC and Individual Commissioners, which concluded in April 2021. On February 16, 2022, the court denied Mohegan’s motion, and ordered that judgment shall enter for the MGC and Individual Commissioners on all remaining claims asserted in the action.
Wynn MA was not a party to and was not named in the Revere Action.
Derivative Litigation
A number of stockholder derivative actions were filed in state and federal court located in Clark County, Nevada against certain current and former members of the Company's Board of Directors and, in some cases, the Company's current and former officers. Each of the complaints alleged, among other things, breach of fiduciary duties in failing to detect, prevent and remedy alleged inappropriate personal conduct by Stephen A. Wynn in the workplace.
The actions filed in the Eighth Judicial District Court of Clark County, Nevada were consolidated as In re Wynn Resorts, Ltd. Derivative Litigation ("State Derivative Case").
On June 3, 2019, a separate stockholder derivative action was filed in the Eighth Judicial District Court of Clark County, Nevada alleging substantially similar causes of action as the State Derivative Case with the additional allegation that various of the Company's attorneys committed professional malpractice, and certain current and former executives also breached fiduciary duties and aided and abetted the breach of fiduciary duties, in connection with the alleged inappropriate personal conduct by Stephen A. Wynn in the workplace. This case was consolidated in September 2019 into the State Derivative Case.
On November 27, 2019, the State Derivative Case parties agreed to terms of a settlement agreement. The court approved the settlement agreement on February 12, 2020, and entered a written order approving the settlement on March 10, 2020. Following the Nevada Supreme Court’s dismissal of the only appeal, the settlement agreement became effective and final. Following the dismissal, the Company received net proceeds of $30.2 million, which has been recognized as a reduction of general and administrative expense within the Consolidated Statements of Operations for the year ended December 31, 2020.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
In 2018, several actions filed in the United States District Court, District of Nevada were consolidated as In re Wynn Resorts, Ltd. Derivative Litigation ("Federal Derivative Case"), which also claim corporate waste and violation of Section 14(a) of the Exchange Act. In June 2018, the Company filed a motion to dismiss and a motion to stay pending resolution of the Securities Action (described below). On March 29, 2019, the Court granted the Company's request for a stay. On March 25, 2020, the parties stipulated to dismiss the Federal Derivative Case given the approved settlement in the State Derivative Case.
On March 25, 2019, a separate stockholder derivative action was filed in the United States District Court, District of Nevada alleging similar causes of action as the Federal Derivative Case with the additional allegation that the Board of Directors improperly refused the stockholder's demand to commence litigation against the officers and directors of the Company. On April 30, 2020, the Company filed a motion for summary judgment, seeking dismissal of the claims given the approved settlement in the State Derivative Case. On January 12, 2021, the court granted the Company’s motion for summary judgment of this action and denied the stockholder’s request to vacate the parties' stipulation to dismiss the Federal Derivative Case. On February 11, 2021, the stockholder filed a notice of appeal to the United States Court of Appeals for the Ninth Circuit. On May 12, 2021, the parties stipulated to dismiss the appeal.
Each of the actions sought to recover for the Company unspecified damages, including restitution and disgorgement of profits, and also sought to recover attorneys' fees, costs and related expenses for the plaintiff.
Securities Action
On February 20, 2018, a putative securities class action was filed against the Company and certain current and former officers of the Company in the United States District Court, Southern District of New York (which was subsequently transferred to the United States District Court, District of Nevada) by John V. Ferris and Joann M. Ferris on behalf of all persons who purchased the Company's common stock between February 28, 2014 and January 25, 2018. The complaint alleges, among other things, certain violations of federal securities laws and seeks to recover unspecified damages as well as attorneys' fees, costs and related expenses for the plaintiffs. On April 15, 2019, the Company filed a motion to dismiss, which the court granted on May 27, 2020, with leave to amend. On July 1, 2020, the plaintiffs filed an amended complaint. On August 14, 2020, the Company filed a motion to dismiss the amended complaint. On July 28, 2021, the court granted in part, and denied in part, the Company's motion to dismiss the amended complaint, dismissing certain of plaintiffs' claims, including all claims against Mr. Billings and the individual directors, and allowing other claims to proceed against the Company and several of the Company's former executive officers, including Mr. Maddox, Stephen A. Wynn, Kimmarie Sinatra, and Steven Cootey.
The defendants in these actions will vigorously defend against the claims pleaded against them. These actions are in preliminary stages and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of these actions or the range of reasonably possible loss, if any.
Federal Investigation
From time to time, the Company receives regulatory inquiries about compliance with anti-money laundering laws. The Company received requests for information from the U.S. Attorney’s Office for the Southern District of California relating to its anti-money laundering policies and procedures, and beginning in 2020 received several grand jury subpoenas regarding various transactions at Wynn Las Vegas relating to certain patrons and agents who reside or operate in foreign jurisdictions. The Company continues to cooperate with the U.S. Attorney's Office in its investigation, which remains ongoing. Because no charges or claims have been brought, the Company is unable to predict the outcome of the investigation, the extent of the materiality of the outcome, or reasonably estimate the possible range of loss, if any, which could be associated with the resolution of any possible charges or claims that may be brought against the Company.
Note 18 - Retail Joint Venture
In December 2016, the Company entered into the Retail Joint Venture with Crown Acquisitions Inc. ("Crown") to own and operate approximately 88,000 square feet of existing retail space at Wynn Las Vegas. In November 2017, the Company contributed approximately 74,000 square feet of additional retail space to the Retail Joint Venture. The Company opened the additional retail space during the fourth quarter of 2018. The Company maintains a 50.1% ownership in the Retail Joint Venture and is the managing member. The Company's responsibilities with respect to the Retail Joint Venture include day-to-day business operations, property management services and a role in the leasing decisions of the retail space.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Company assessed its ownership in the Retail Joint Venture based on consolidation accounting guidance with an evaluation being performed to determine if the Retail Joint Venture is a VIE, if the Company has a variable interest in the Retail Joint Venture and if the Company is the primary beneficiary of the Retail Joint Venture. The primary beneficiary is the party who has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and who has an obligation to absorb losses of the entity or a right to receive benefits from the entity that could potentially be significant to the entity.
The Company concluded that the Retail Joint Venture is a VIE and the Company is the primary beneficiary based on its involvement in the leasing activities of the Retail Joint Venture. As a result, the Company consolidates all of the Retail Joint Venture's assets, liabilities and results of operations. The Company will evaluate its primary beneficiary designation on an ongoing basis and will assess the appropriateness of the Retail Joint Venture's VIE status when changes occur.
As of December 31, 2021 and 2020, the Retail Joint Venture had total assets of $98.0 million and $96.3 million, respectively, and total liabilities of $624.4 million and $633.5 million, respectively. The Retail Joint Venture's total liabilities as of December 31, 2021 included long-term debt of $612.9 million, net of debt issuance costs, related to the outstanding borrowings under the Retail Term Loan.
Note 19 - Business Combination
On October 23, 2020, the Company acquired a controlling interest in Wynn Interactive, which was formed in stages through the merger of Wynn Resorts' digital gaming businesses and BetBull (the “BetBull Acquisition”). As part of the BetBull Acquisition, BetBull shareholders, which included Wynn Resorts, exchanged their shares in BetBull for shares of Wynn Interactive, and Wynn Resorts exchanged its membership interests in its subsidiaries that operated its existing digital and social casino businesses ("WSI" and "WSG", respectively) for a controlling interest in Wynn Interactive. Prior to the BetBull Acquisition, the Company held a 22.5% interest in BetBull, which was accounted for as a cost method investment.
Total consideration (including the fair value of noncontrolling interest) in order to compute goodwill related to the business combination was $164.7 million, which included the following:
-
The acquisition date fair value of Wynn Resorts' previously held minority equity interest in BetBull of $37.3 million. Immediately prior to the BetBull Acquisition, the book value of this cost method investment was $21.5 million. The Company recorded a gain of $15.7 million to reflect the fair value of its interest at the date of acquisition, which was recorded in Other non-operating income (expense) on the Consolidated Statement of Operations for the year ended December 31, 2020.
-
The acquisition date fair value of the non-controlling interests in WSI and WSG that Wynn Resorts transferred to legacy BetBull shareholders in exchange for a controlling interest in BetBull, totaling $49.5 million.
-
The settlement of transactions from Wynn Resorts' pre-existing relationship with BetBull and the fair value of vested replacement stock options, all of which totaled $5.9 million.
-
The fair value of BetBull’s noncontrolling interest totaling $72.0 million.
The fair values of WSI, WSG, and BetBull were all determined using the market approach given the early stages of each of the businesses. The settlement of pre-existing transactions was valued based on the contractual amounts owed to either party. Wynn Resorts' contribution of its remaining, controlling membership interests in WSI and WSG were accounted for as a transfer of businesses between entities under the common control of Wynn Resorts and therefore transferred at Wynn Resorts' carrying value.
BetBull is licensed to operate online sports and casino wagering in the United Kingdom and develops mobile applications for that purpose. This acquisition provides the Company with access to the online market in the United Kingdom, synergies in mobile application development, and digital gaming operations expertise.
The BetBull Acquisition was accounted for as a business combination. The assets acquired and liabilities assumed were recognized at their fair values at the acquisition date, which was estimated using both level 2 (observable) and level 3 (unobservable) inputs.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following table sets forth the final purchase price allocation (in thousands):
| Consideration | |||||
| Total consideration | $ | 164,672 | |||
| Less: Cash acquired | 4,604 | ||||
| Total consideration, net of cash acquired | 160,068 | ||||
| Identifiable assets acquired and liabilities assumed | |||||
| Other current assets | 1,484 | ||||
| Property and equipment | 33,179 | ||||
| Intangible assets other than goodwill | 16,462 | ||||
| Goodwill | 120,092 | ||||
| Deferred tax liabilities | (905) | ||||
| Liabilities assumed | (10,244) | ||||
| Total identifiable assets acquired and liabilities assumed | $ | 160,068 |
Acquired intangible assets included in the above table are being amortized on a straight-line basis over their estimated useful life of ten years for trademarks and three years for customer lists. In addition, the Company acquired software totaling $31.5 million, which is included in Property and equipment in the table above and is being amortized over an estimated useful life of three years. The estimated useful lives approximate the pattern in which the economic benefits of the intangible assets and software are expected to be realized.
Immediately after the BetBull Acquisition, the Company contributed $78.0 million to Wynn Interactive and purchased approximately $33.6 million of Wynn Interactive shares from non-controlling shareholders (the "Secondary Transaction"). Immediately after the BetBull Acquisition and the Secondary Transaction, the Company held an approximately 72% interest in Wynn Interactive, which owns 100% of BetBull, WSI, and WSG.
The Secondary Transaction was recorded as an adjustment to Stockholders’ equity (deficit) on the Consolidated Balance Sheet as the Company had a controlling interest in BetBull at the time of the transaction.
Pro forma results of operations for this acquisition have not been presented because they are not material to the consolidated statements of operations.
Note 20 - Segment Information
The Company has identified its reportable segments based on factors such as geography, regulatory environment, the information reviewed by its chief operating decision maker, and the Company's organizational and management reporting structure.
The Company has identified the following reportable segments: (i) Wynn Macau, representing the aggregate of Wynn Macau and Encore, an expansion at Wynn Macau, which are managed as a single integrated resort; (ii) Wynn Palace; (iii) Las Vegas Operations, representing the aggregate of Wynn Las Vegas, Encore, an expansion at Wynn Las Vegas, and the Retail Joint Venture, which are managed as a single integrated resort; (iv) Encore Boston Harbor; and (v) Wynn Interactive. For geographical reporting purposes, Wynn Macau, Wynn Palace, and Other Macau (which represents the assets of the Company's Macau holding company and other ancillary entities) have been aggregated into Macau Operations.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The following tables present the Company's segment information (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Operating revenues | |||||||||||||||||
| Macau Operations: | |||||||||||||||||
| Wynn Palace | |||||||||||||||||
| Casino | $ | 677,917 | $ | 368,284 | $ | 2,139,756 | |||||||||||
| Rooms | 69,022 | 46,110 | 174,576 | ||||||||||||||
| Food and beverage | 47,985 | 43,198 | 117,376 | ||||||||||||||
| Entertainment, retail and other (1) | 88,083 | 47,828 | 111,986 | ||||||||||||||
| 883,007 | 505,420 | 2,543,694 | |||||||||||||||
| Wynn Macau | |||||||||||||||||
| Casino | 476,999 | 344,595 | 1,796,209 | ||||||||||||||
| Rooms | 50,492 | 39,111 | 110,387 | ||||||||||||||
| Food and beverage | 32,420 | 33,094 | 81,576 | ||||||||||||||
| Entertainment, retail and other (1) | 66,104 | 57,857 | 81,857 | ||||||||||||||
| 626,015 | 474,657 | 2,070,029 | |||||||||||||||
| Total Macau Operations | 1,509,022 | 980,077 | 4,613,723 | ||||||||||||||
| Las Vegas Operations: | |||||||||||||||||
| Casino | 426,440 | 236,826 | 394,104 | ||||||||||||||
| Rooms | 425,777 | 202,073 | 483,055 | ||||||||||||||
| Food and beverage | 489,587 | 216,426 | 558,782 | ||||||||||||||
| Entertainment, retail and other (1) | 161,877 | 92,622 | 197,516 | ||||||||||||||
| Total Las Vegas Operations | 1,503,681 | 747,947 | 1,633,457 | ||||||||||||||
| Encore Boston Harbor: | |||||||||||||||||
| Casino | 552,064 | 287,525 | 243,855 | ||||||||||||||
| Rooms | 47,280 | 20,679 | 36,144 | ||||||||||||||
| Food and beverage | 63,919 | 36,866 | 61,088 | ||||||||||||||
| Entertainment, retail and other (1) | 28,260 | 16,596 | 22,832 | ||||||||||||||
| Total Encore Boston Harbor | 691,523 | 361,666 | 363,919 | ||||||||||||||
| Wynn Interactive: | |||||||||||||||||
| Entertainment, retail and other | 59,438 | 6,171 | — | ||||||||||||||
| Total Wynn Interactive | 59,438 | 6,171 | — | ||||||||||||||
| Total operating revenues | $ | 3,763,664 | $ | 2,095,861 | $ | 6,611,099 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Adjusted Property EBITDA (2) | |||||||||||||||||
| Macau Operations: | |||||||||||||||||
| Wynn Palace | $ | 91,646 | $ | (149,647) | $ | 729,535 | |||||||||||
| Wynn Macau | 4,209 | (87,189) | 648,837 | ||||||||||||||
| Total Macau Operations | 95,855 | (236,836) | 1,378,372 | ||||||||||||||
| Las Vegas Operations | 530,878 | (56,356) | 413,886 | ||||||||||||||
| Encore Boston Harbor | 210,068 | (23,762) | 23,150 | ||||||||||||||
| Wynn Interactive | (267,360) | (7,351) | — | ||||||||||||||
| Total | 569,441 | (324,305) | 1,815,408 | ||||||||||||||
| Other operating expenses | |||||||||||||||||
| Pre-opening | 6,821 | 6,506 | 102,009 | ||||||||||||||
| Depreciation and amortization | 715,962 | 725,502 | 624,878 | ||||||||||||||
| Property charges and other | 50,762 | 67,455 | 20,286 | ||||||||||||||
| Corporate expenses and other (3) | 95,199 | 46,023 | 150,228 | ||||||||||||||
| Stock-based compensation (4) | 95,238 | 62,254 | 39,702 | ||||||||||||||
| Total other operating expenses | 963,982 | 907,740 | 937,103 | ||||||||||||||
| Operating income (loss) | (394,541) | (1,232,045) | 878,305 | ||||||||||||||
| Other non-operating income and expenses | |||||||||||||||||
| Interest income | 3,213 | 15,384 | 24,449 | ||||||||||||||
| Interest expense, net of amounts capitalized | (605,562) | (556,474) | (414,030) | ||||||||||||||
| Change in derivatives fair value | 11,360 | (13,060) | (3,228) | ||||||||||||||
| (Loss) gain on extinguishment of debt | (2,060) | (4,601) | (12,437) | ||||||||||||||
| Other | (23,926) | 28,521 | 15,159 | ||||||||||||||
| Total other non-operating income and expenses | (616,975) | (530,230) | (390,087) | ||||||||||||||
| Income (loss) before income taxes | (1,011,516) | (1,762,275) | 488,218 | ||||||||||||||
| Provision for income taxes | (474) | (564,671) | (176,840) | ||||||||||||||
| Net income (loss) | (1,011,990) | (2,326,946) | 311,378 | ||||||||||||||
| Net income (loss) attributable to noncontrolling interests | 256,204 | 259,701 | (188,393) | ||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (755,786) | $ | (2,067,245) | $ | 122,985 |
(1)Includes lease revenue accounted for under lease accounting guidance. For more information on leases, see Note 15, "Leases".
(2)"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, meeting and convention, and water rights leases), stock-based compensation, change in derivatives fair value, loss on extinguishment of debt, and other non-operating income and expenses. We use Adjusted Property EBITDA to manage the operating results of our segments. 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. The Company also presents 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 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 (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. 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.
(3)For the year ended December 31, 2020, includes a $30.2 million net gain recorded in relation to a derivative litigation settlement. For the year ended December 31, 2019, includes a $35.0 million nonrecurring regulatory expense.
(4)Excludes $0.7 million included in pre-opening expenses for the year ended December 31, 2019.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
| Years Ended December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Capital expenditures | |||||||||||||||||
| Macau Operations: | |||||||||||||||||
| Wynn Palace | $ | 37,169 | $ | 46,717 | $ | 66,545 | |||||||||||
| Wynn Macau | 25,249 | 49,845 | 142,112 | ||||||||||||||
| Total Macau Operations | 62,418 | 96,562 | 208,657 | ||||||||||||||
| Las Vegas Operations | 168,788 | 85,882 | 96,928 | ||||||||||||||
| Encore Boston Harbor | 38,730 | 61,342 | 471,381 | ||||||||||||||
| Wynn Interactive | 13,624 | 5,603 | — | ||||||||||||||
| Corporate and other | 7,097 | 40,726 | 286,327 | ||||||||||||||
| Total | $ | 290,657 | $ | 290,115 | $ | 1,063,293 | |||||||||||
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Assets | |||||||||||||||||
| Macau Operations: | |||||||||||||||||
| Wynn Palace | $ | 3,122,424 | $ | 3,393,790 | $ | 3,734,210 | |||||||||||
| Wynn Macau | 1,032,521 | 1,202,709 | 1,656,625 | ||||||||||||||
| Other Macau | 1,173,913 | 2,026,098 | 1,023,411 | ||||||||||||||
| Total Macau Operations | 5,328,858 | 6,622,597 | 6,414,246 | ||||||||||||||
| Las Vegas Operations | 3,063,897 | 2,992,870 | 2,806,972 | ||||||||||||||
| Encore Boston Harbor | 2,193,117 | 2,300,016 | 2,456,667 | ||||||||||||||
| Wynn Interactive | 287,805 | 265,945 | — | ||||||||||||||
| Corporate and other | 1,657,149 | 1,688,119 | 2,193,396 | ||||||||||||||
| Total | $ | 12,530,826 | $ | 13,869,547 | $ | 13,871,281 |
| December 31, | |||||||||||||||||
| 2021 | 2020 | 2019 | |||||||||||||||
| Long-lived assets | |||||||||||||||||
| Macau | $ | 3,678,236 | $ | 3,989,797 | $ | 4,321,970 | |||||||||||
| United States | 5,604,531 | 5,738,343 | 5,909,847 | ||||||||||||||
| Total | $ | 9,282,767 | $ | 9,728,140 | $ | 10,231,817 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
Quarterly Consolidated Financial Information (Unaudited)
The following tables (in thousands, except per share data) present selected quarterly financial information for 2021 and 2020, as previously reported. Because income (loss) per share amounts are calculated using the weighted average number of common and dilutive common equivalent shares outstanding during each quarter, the sum of the per share amounts for the four
quarters may not equal the total income per share amounts for the year.
| Year Ended December 31, 2021 | |||||||||||||||||||||||||||||
| First | Second | Third | Fourth | Year | |||||||||||||||||||||||||
| Operating revenues | $ | 725,783 | $ | 990,113 | $ | 994,644 | $ | 1,053,124 | $ | 3,763,664 | |||||||||||||||||||
| Operating loss | $ | (175,732) | $ | (29,521) | $ | (83,664) | $ | (105,624) | $ | (394,541) | |||||||||||||||||||
| Net loss | $ | (336,179) | $ | (173,397) | $ | (245,983) | $ | (256,431) | $ | (1,011,990) | |||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited | $ | (280,978) | $ | (131,369) | $ | (166,249) | $ | (177,190) | $ | (755,786) | |||||||||||||||||||
| Basic loss per share | $ | (2.53) | $ | (1.15) | $ | (1.45) | $ | (1.54) | $ | (6.64) | |||||||||||||||||||
| Diluted loss per share | $ | (2.53) | $ | (1.15) | $ | (1.45) | $ | (1.54) | $ | (6.64) |
| Year Ended December 31, 2020 | |||||||||||||||||||||||||||||
| First | Second | Third | Fourth | Year | |||||||||||||||||||||||||
| Operating revenues | $ | 953,716 | $ | 85,698 | $ | 370,452 | $ | 685,995 | $ | 2,095,861 | |||||||||||||||||||
| Operating loss | $ | (247,411) | $ | (523,016) | $ | (283,007) | $ | (178,611) | $ | (1,232,045) | |||||||||||||||||||
| Net loss | $ | (450,253) | $ | (734,869) | $ | (831,533) | $ | (310,291) | $ | (2,326,946) | |||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited | $ | (402,037) | $ | (637,564) | $ | (758,142) | $ | (269,502) | $ | (2,067,245) | |||||||||||||||||||
| Basic loss per share | $ | (3.77) | $ | (5.97) | $ | (7.10) | $ | (2.53) | $ | (19.37) | |||||||||||||||||||
| Diluted loss per share | $ | (3.77) | $ | (5.97) | $ | (7.10) | $ | (2.53) | $ | (19.37) |
Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure