filings.toolsItem 1. Financial Statements
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Item 1. Financial Statements
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| June 30, 2022 | December 31, 2021 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,014,898 | $ | 2,522,530 | |||||||
| Restricted cash | 5,605 | 4,896 | |||||||||
| Accounts receivable, net of allowance for credit losses of $92,579 and $111,319 | 186,380 | 199,463 | |||||||||
| Inventories | 69,075 | 69,967 | |||||||||
| Prepaid expenses and other | 95,256 | 79,061 | |||||||||
| Total current assets | 2,371,214 | 2,875,917 | |||||||||
| Property and equipment, net | 8,596,653 | 8,765,308 | |||||||||
| Restricted cash | 3,233 | 3,641 | |||||||||
| Goodwill and intangible assets, net | 256,519 | 307,578 | |||||||||
| Operating lease assets | 356,828 | 371,365 | |||||||||
| Other assets | 204,084 | 207,017 | |||||||||
| Total assets | $ | 11,788,531 | $ | 12,530,826 | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts and construction payables | $ | 153,816 | $ | 170,542 | |||||||
| Customer deposits | 412,594 | 436,388 | |||||||||
| Gaming taxes payable | 24,986 | 73,173 | |||||||||
| Accrued compensation and benefits | 161,801 | 206,225 | |||||||||
| Accrued interest | 132,888 | 132,877 | |||||||||
| Current portion of long-term debt | 544,632 | 50,000 | |||||||||
| Other accrued liabilities | 186,552 | 218,675 | |||||||||
| Total current liabilities | 1,617,269 | 1,287,880 | |||||||||
| Long-term debt | 11,367,861 | 11,884,546 | |||||||||
| Long-term operating lease liabilities | 109,641 | 115,187 | |||||||||
| Other long-term liabilities | 68,014 | 79,428 | |||||||||
| Total liabilities | 13,162,785 | 13,367,041 | |||||||||
| Commitments and contingencies (Note 16) | |||||||||||
| 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; 131,964,542 and 131,449,806 shares issued; 113,707,642 and 115,714,943 shares outstanding, respectively | 1,320 | 1,314 | |||||||||
| Treasury stock, at cost; 18,256,900 and 15,734,863 shares, respectively | (1,585,678) | (1,436,373) | |||||||||
| Additional paid-in capital | 3,566,498 | 3,502,715 | |||||||||
| Accumulated other comprehensive income | 9,829 | 6,004 | |||||||||
| Accumulated deficit | (2,601,331) | (2,288,078) | |||||||||
| Total Wynn Resorts, Limited stockholders' deficit | (609,362) | (214,418) | |||||||||
| Noncontrolling interests | (764,892) | (621,797) | |||||||||
| Total stockholders' deficit | (1,374,254) | (836,215) | |||||||||
| Total liabilities and stockholders' deficit | $ | 11,788,531 | $ | 12,530,826 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Casino | $ | 359,585 | $ | 602,746 | $ | 849,447 | $ | 1,118,964 | |||||||||||||||
| Rooms | 201,298 | 137,765 | 371,674 | 213,955 | |||||||||||||||||||
| Food and beverage | 229,816 | 149,142 | 403,836 | 217,651 | |||||||||||||||||||
| Entertainment, retail and other | 118,133 | 100,460 | 237,209 | 176,225 | |||||||||||||||||||
| Total operating revenues | 908,832 | 990,113 | 1,862,166 | 1,726,795 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | 244,064 | 381,615 | 568,143 | 733,581 | |||||||||||||||||||
| Rooms | 65,070 | 50,552 | 123,785 | 84,087 | |||||||||||||||||||
| Food and beverage | 185,471 | 117,106 | 332,127 | 191,054 | |||||||||||||||||||
| Entertainment, retail and other | 74,985 | 80,922 | 163,889 | 154,381 | |||||||||||||||||||
| General and administrative | 200,378 | 197,545 | 397,158 | 377,319 | |||||||||||||||||||
| Provision for credit losses | (3,487) | 441 | (3,145) | 7,808 | |||||||||||||||||||
| Pre-opening | 4,502 | 2,495 | 6,949 | 4,122 | |||||||||||||||||||
| Depreciation and amortization | 162,968 | 183,307 | 347,524 | 368,428 | |||||||||||||||||||
| Property charges and other | 26,909 | 5,651 | 72,629 | 11,268 | |||||||||||||||||||
| Total operating expenses | 960,860 | 1,019,634 | 2,009,059 | 1,932,048 | |||||||||||||||||||
| Operating loss | (52,028) | (29,521) | (146,893) | (205,253) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 2,691 | 720 | 3,971 | 1,624 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | (154,830) | (150,424) | (306,988) | (303,276) | |||||||||||||||||||
| Change in derivatives fair value | 1,562 | 972 | 8,962 | 5,381 | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | (1,322) | |||||||||||||||||||
| Other | (10,099) | 5,553 | (25,226) | (5,540) | |||||||||||||||||||
| Other income (expense), net | (160,676) | (143,179) | (319,281) | (303,133) | |||||||||||||||||||
| Loss before income taxes | (212,704) | (172,700) | (466,174) | (508,386) | |||||||||||||||||||
| Provision for income taxes | (718) | (697) | (1,858) | (1,190) | |||||||||||||||||||
| Net loss | (213,422) | (173,397) | (468,032) | (509,576) | |||||||||||||||||||
| Less: net loss attributable to noncontrolling interests | 83,371 | 42,028 | 154,657 | 97,229 | |||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited | $ | (130,051) | $ | (131,369) | $ | (313,375) | $ | (412,347) | |||||||||||||||
| Basic and diluted net loss per common share: | |||||||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited: | |||||||||||||||||||||||
| Basic | $ | (1.14) | $ | (1.15) | $ | (2.73) | $ | (3.66) | |||||||||||||||
| Diluted | $ | (1.14) | $ | (1.15) | $ | (2.73) | $ | (3.66) | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 114,471 | 114,545 | 114,749 | 112,792 | |||||||||||||||||||
| Diluted | 114,471 | 114,545 | 114,749 | 112,792 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net loss | $ | (213,422) | $ | (173,397) | $ | (468,032) | $ | (509,576) | |||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Foreign currency translation adjustments, before and after tax | 884 | (290) | 5,481 | 3,742 | |||||||||||||||||||
| Total comprehensive loss | (212,538) | (173,687) | (462,551) | (505,834) | |||||||||||||||||||
| Less: comprehensive loss attributable to noncontrolling interests | 83,015 | 42,110 | 153,001 | 96,176 | |||||||||||||||||||
| Comprehensive loss attributable to Wynn Resorts, Limited | $ | (129,523) | $ | (131,577) | $ | (309,550) | $ | (409,658) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands, except share data)
(unaudited)
| For the Three Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total Wynn Resorts, Ltd. stockholders' deficit | Noncontrolling interests | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, April 1, 2022 | 115,917,961 | $ | 1,318 | $ | (1,448,040) | $ | 3,571,666 | $ | 9,301 | $ | (2,471,285) | $ | (337,040) | $ | (696,219) | $ | (1,033,259) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (130,051) | (130,051) | (83,371) | (213,422) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 528 | — | 528 | 356 | 884 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 178,038 | 2 | — | (2) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (3,405) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (2,384,952) | — | (137,638) | — | — | — | (137,638) | — | (137,638) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (7,244) | (7,244) | ||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary equity issuance | — | — | — | (16,750) | — | — | (16,750) | 19,646 | 2,896 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 11,584 | — | 5 | 11,589 | 1,940 | 13,529 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2022 | 113,707,642 | $ | 1,320 | $ | (1,585,678) | $ | 3,566,498 | $ | 9,829 | $ | (2,601,331) | $ | (609,362) | $ | (764,892) | $ | (1,374,254) |
| For the Three Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total Wynn Resorts, Ltd. stockholders' equity (deficit) | Noncontrolling interests | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, April 1, 2021 | 115,647,328 | $ | 1,313 | $ | (1,426,887) | $ | 3,466,073 | $ | 6,501 | $ | (1,813,317) | $ | 233,683 | $ | (436,622) | $ | (202,939) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (131,369) | (131,369) | (42,028) | (173,397) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | (208) | — | (208) | (82) | (290) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 44,686 | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (6,435) | — | — | — | — | 18 | 18 | 6 | 24 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (1,596) | — | (207) | — | — | — | (207) | — | (207) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (6,479) | (6,479) | ||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary equity issuance | — | — | — | (20,211) | — | — | (20,211) | 25,371 | 5,160 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 21,046 | — | — | 21,046 | 3,243 | 24,289 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2021 | 115,683,983 | $ | 1,313 | $ | (1,427,094) | $ | 3,466,908 | $ | 6,293 | $ | (1,944,668) | $ | 102,752 | $ | (456,591) | $ | (353,839) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in thousands, except share data)
(unaudited)
| For the Six Months Ended June 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total Wynn Resorts, Ltd. stockholders' deficit | Noncontrolling interests | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2022 | 115,714,943 | $ | 1,314 | $ | (1,436,373) | $ | 3,502,715 | $ | 6,004 | $ | (2,288,078) | $ | (214,418) | $ | (621,797) | $ | (836,215) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (313,375) | (313,375) | (154,657) | (468,032) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 3,825 | — | 3,825 | 1,656 | 5,481 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 597,236 | 7 | — | 9,281 | — | — | 9,288 | — | 9,288 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (82,500) | (1) | — | 1 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (2,522,037) | — | (149,305) | — | — | — | (149,305) | — | (149,305) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (16,523) | (16,523) | ||||||||||||||||||||||||||||||||||||||||||||
| Contribution from noncontrolling interest | — | — | — | 48,559 | — | — | 48,559 | 1,474 | 50,033 | ||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary equity issuance | — | — | — | (16,750) | — | — | (16,750) | 19,646 | 2,896 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 22,692 | — | 122 | 22,814 | 5,309 | 28,123 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2022 | 113,707,642 | $ | 1,320 | $ | (1,585,678) | $ | 3,566,498 | $ | 9,829 | $ | (2,601,331) | $ | (609,362) | $ | (764,892) | $ | (1,374,254) |
| For the Six Months Ended June 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income | Accumulated deficit | Total Wynn Resorts, Ltd. stockholders' equity (deficit) | Noncontrolling interests | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2021 | 107,888,336 | $ | 1,235 | $ | (1,422,531) | $ | 2,598,115 | $ | 3,604 | $ | (1,532,420) | $ | (351,997) | $ | (385,320) | $ | (737,317) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (412,347) | (412,347) | (97,229) | (509,576) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 2,689 | — | 2,689 | 1,053 | 3,742 | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | 379,971 | 3 | — | 5,899 | — | — | 5,902 | 370 | 6,272 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (19,534) | — | — | — | — | 99 | 99 | 15 | 114 | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (39,790) | — | (4,563) | — | — | — | (4,563) | — | (4,563) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (6,479) | (6,479) | ||||||||||||||||||||||||||||||||||||||||||||
| Subsidiary equity issuance | — | — | — | (20,211) | — | — | (20,211) | 25,371 | 5,160 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 41,284 | — | — | 41,284 | 5,628 | 46,912 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, June 30, 2021 | 115,683,983 | $ | 1,313 | $ | (1,427,094) | $ | 3,466,908 | $ | 6,293 | $ | (1,944,668) | $ | 102,752 | $ | (456,591) | $ | (353,839) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (468,032) | $ | (509,576) | |||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation and amortization | 347,524 | 368,428 | |||||||||
| Deferred income taxes | 429 | (767) | |||||||||
| Stock-based compensation expense | 28,495 | 49,453 | |||||||||
| Amortization of debt issuance costs | 14,588 | 13,241 | |||||||||
| Loss on extinguishment of debt | — | 1,322 | |||||||||
| Provision for credit losses | (3,145) | 7,808 | |||||||||
| Change in derivatives fair value | (8,962) | (5,381) | |||||||||
| Property charges and other | 97,855 | 16,808 | |||||||||
| Increase (decrease) in cash from changes in: | |||||||||||
| Receivables, net | 15,833 | (53,799) | |||||||||
| Inventories, prepaid expenses and other | (10,450) | (35,819) | |||||||||
| Customer deposits | (21,949) | (144,407) | |||||||||
| Accounts payable and accrued expenses | (149,637) | 65,882 | |||||||||
| Net cash used in operating activities | (157,451) | (226,807) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures, net of construction payables and retention | (186,038) | (110,045) | |||||||||
| Purchase of intangible and other assets | (9,375) | (15,741) | |||||||||
| Proceeds from sale of assets and other | 29 | 3,502 | |||||||||
| Net cash used in investing activities | (195,384) | (122,284) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | — | 50,058 | |||||||||
| Repayments of long-term debt | (25,000) | (1,205,099) | |||||||||
| Proceeds from issuance of Wynn Resorts, Limited common stock | — | 841,896 | |||||||||
| Repurchase of common stock | (149,305) | (4,563) | |||||||||
| Proceeds from issuance of subsidiary common stock | 2,895 | 4,662 | |||||||||
| Proceeds from sale of additional interest in joint venture | 50,033 | — | |||||||||
| Distribution to noncontrolling interest | (16,523) | (6,479) | |||||||||
| Dividends paid | (1,291) | (388) | |||||||||
| Finance lease payments | (8,602) | (7,784) | |||||||||
| Payments for financing costs | (3,113) | (2,152) | |||||||||
| Net cash used in financing activities | (150,906) | (329,849) | |||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | (3,590) | 1,641 | |||||||||
| Cash, cash equivalents and restricted cash: | |||||||||||
| Decrease in cash, cash equivalents and restricted cash | (507,331) | (677,299) | |||||||||
| Balance, beginning of period | 2,531,067 | 3,486,384 | |||||||||
| Balance, end of period | $ | 2,023,736 | $ | 2,809,085 | |||||||
| Supplemental cash flow disclosures: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | 292,218 | $ | 294,011 | |||||||
| Liability settled with shares of common stock | $ | 9,287 | $ | 6,272 | |||||||
| Accounts and construction payables related to property and equipment | $ | 47,305 | $ | 66,701 | |||||||
| Other liabilities related to intangible assets | $ | 5,586 | $ | 13,796 | |||||||
| Finance lease liabilities arising from obtaining finance lease assets | $ | 4,135 | $ | 7,423 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Organization
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 ("Macau") of the People's Republic of China ("PRC"), 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. In Everett, Massachusetts, the Company owns 100% of and operates Encore Boston Harbor, an integrated resort. The Company also holds an approximately 85% interest in, and consolidates, Wynn Interactive Ltd. ("Wynn Interactive"), through which it operates online sports betting, gaming, and social casino businesses.
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, and mandatory quarantine, among other things, and the suspension or reduced accessibility of transportation to and from Macau. Although there have been periods during which certain restrictions and conditions were eased by the Macau government to allow for greater visitation and quarantine-free travel to Macau, adverse conditions and evolving conditions created by and in response to the COVID-19 pandemic may cause these restrictions and conditions to be reintroduced. For example, in response to an outbreak in Macau which initially commenced in mid-June 2022, the Macau government extended its COVID-19 containment measures, including the closures of casino operations in full as well as all non-essential business as of July 11, 2022, and the closure and the limiting of the opening hours and/or operational capacity of various areas and facilities in Macau. On July 23, 2022, casino operations at Wynn Palace and Wynn Macau resumed on a limited basis, and remain limited at the present time due to severely reduced visitation to Macau as a result of enhanced border controls. On August 2, 2022, the Macau government lifted most of the remaining enhanced COVID-19 restrictions which went into effect in June and July and limited non-gaming operations at Wynn Palace and Wynn Macau began to resume. Certain enhanced COVID-19 protective measures remain in effect at the present time with respect to gaming and non-gaming operations. 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 containment measures, management cannot predict whether future closures, in full or in part, will occur in our properties, and cannot reasonably estimate the impact to the Company's future results of operations, cash flows, or financial condition.
Liquidity
The COVID-19 pandemic has materially impacted and is likely to continue to materially impact our business, financial condition and results of operations. As of June 30, 2022, the Company had total cash and cash equivalents, excluding restricted cash, of $2.01 billion, and had access to $835.6 million of available borrowing capacity from the WRF Revolver and $211.5 million of available borrowing capacity from the WM Cayman II Revolver. As a result of the negative impact the COVID-19 pandemic has had, and will likely continue to have, on our operating income, the Company has suspended its dividend program for the foreseeable future. Given the Company's liquidity position as of June 30, 2022, the Company believes it will be able to support continuing operations and respond to the continuing impact of the COVID-19 pandemic and related economic disruptions.
Macau Gaming Concession
On June 23, 2022, Wynn Resorts (Macau) S.A. ("WRM") and the Macau government entered into a concession extension agreement (the "Concession Extension Agreement"), pursuant to which the expiration date of WRM's gaming concession was extended from June 26, 2022 to December 31, 2022. Under the Concession Extension Agreement, WRM paid the Macau
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
government MOP47.0 million (approximately $6.0 million) as a contract premium for the extension, and by no later than September 23, 2022 will provide a first demand bank guarantee of not less than MOP1,210.0 million (approximately $150.0 million) in favor of the Macau government for securing the fulfillment of its labor liabilities upon the expiration of the Concession Extension Agreement.
In order to enable WRM to fulfill the relevant requirements to become eligible to obtain a concession extension, each of WRM and Palo Real Estate Company Limited ("Palo") (the land concessionaires of Wynn Macau and Wynn Palace, respectively) entered into a letter of undertaking, pursuant to which each of WRM and Palo has undertaken, pursuant to Article 40 of the Macau gaming law and Clause 43 of the concession agreement, to revert to the Macau government relevant gaming equipment and gaming areas at Wynn Macau and Wynn Palace, without compensation and free of encumbrance upon the expiration of the concession agreement term, as amended by the Concession Extension Agreement.
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 and scope 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").
In June 2022, the Macau government published the amendments to the Macau gaming law approved by the Macau Legislative Assembly. These amendments include, for example, the awarding of up to six gaming concessions with a term up to ten years with a maximum three-year extension possible, and an increase in the minimum capital requirement applicable to concession holders to MOP5.0 billion (approximately $625.0 million), an increase in the percentage of the share capital of the concessionaire that must be held by the local managing director to 15% from 10% and a prohibition on revenue sharing arrangements between gaming promoters and concession holders. The Macau government also published the administrative regulations and related documents in relation to a public tender for the awarding of new gaming concessions in July 2022. Upon the publication and entry into force of the revised gaming law on June 23, 2022, the Company is monitoring developments with respect to the Macau government's public tender process, including the adoption of additional administrative regulations, instructions, dispatches, and further adaptations to the current legal and regulatory system, and at this time believes that its concession agreement will be further extended, renewed or replaced by a new gaming concession agreement beyond December 31, 2022. However, it is possible the Macau government could further change or interpret the associated gaming laws in a manner that could negatively impact the Company.
If the Company is unable to further extend or renew its concession agreement or obtain a new gaming concession agreement, an election by the WML Senior Notes holders to exercise the Special Put Option and the 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
The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures herein are adequate to make the information presented not misleading. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary to a fair presentation of the results for the interim periods presented. The results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for any other interim period or the full fiscal year ending December 31, 2022. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Principles of Consolidation
The accompanying condensed consolidated financial statements 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 17, "Retail Joint Venture." All significant intercompany accounts and transactions have been eliminated. Certain amounts in the condensed consolidated financial statements for the second quarter of 2021 have been reclassified to be consistent with the current quarter presentation. These reclassifications had no effect on the previously reported net loss or operating loss.
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. Significant estimates and assumptions reflected in the financial statements relate to and include, but are not limited to, inputs into the Company's estimated allowance for credit losses, estimates regarding the useful lives and recoverability of the cost of long-lived assets, fair value estimates of intangible assets and their estimated useful lives, and litigation and contingency estimates.
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 Condensed Consolidated Statements of Operations. These taxes totaled $106.3 million and $234.2 million for the three months ended June 30, 2022 and 2021, respectively, and $283.2 million and $449.2 million for the six months ended June 30, 2022 and 2021, respectively.
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 planned 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 must 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.
Note 3 - Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
| June 30, 2022 | December 31, 2021 | ||||||||||
| Cash and cash equivalents: | |||||||||||
| Cash (1) | $ | 1,298,200 | $ | 2,021,553 | |||||||
| Cash equivalents (2) | 716,698 | 500,977 | |||||||||
| Total cash and cash equivalents | 2,014,898 | 2,522,530 | |||||||||
| Restricted cash (3) | 8,838 | 8,537 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,023,736 | $ | 2,531,067 | |||||||
| (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. |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 4 - Receivables, net
Accounts Receivable and Credit Risk
Receivables, net consisted of the following (in thousands):
| June 30, 2022 | December 31, 2021 | ||||||||||
| Casino | $ | 182,687 | $ | 199,030 | |||||||
| Hotel | 31,719 | 36,749 | |||||||||
| Other | 64,553 | 75,003 | |||||||||
| 278,959 | 310,782 | ||||||||||
| Less: allowance for credit losses | (92,579) | (111,319) | |||||||||
| $ | 186,380 | $ | 199,463 |
As of June 30, 2022 and December 31, 2021, approximately 63.9% and 70.3%, 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 48.7% and 53.7% of gross casino receivables as of June 30, 2022 and December 31, 2021, 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 periods presented (in thousands):
| June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Balance at beginning of year | $ | 111,319 | $ | 100,329 | |||||||
| Provision for credit losses | (3,145) | 7,808 | |||||||||
| Write-offs | (16,894) | (10,490) | |||||||||
| Recoveries of receivables previously written off | 1,664 | 462 | |||||||||
| Effect of exchange rate | (365) | (66) | |||||||||
| Balance at end of period | $ | 92,579 | $ | 98,043 |
Note 5 - Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| June 30, 2022 | December 31, 2021 | ||||||||||
| Buildings and improvements | $ | 9,832,607 | $ | 9,785,514 | |||||||
| Land and improvements | 1,296,556 | 1,278,010 | |||||||||
| Furniture, fixtures and equipment | 3,099,965 | 3,067,793 | |||||||||
| Airplanes | 110,623 | 110,623 | |||||||||
| Construction in progress | 194,914 | 250,378 | |||||||||
| 14,534,665 | 14,492,318 | ||||||||||
| Less: accumulated depreciation | (5,938,012) | (5,727,010) | |||||||||
| $ | 8,596,653 | $ | 8,765,308 |
As of June 30, 2022, construction in progress consisted primarily of costs capitalized for various capital enhancements at the Company's properties, including reconfiguring the former Le Reve theater space at Wynn Las Vegas. As of December 31,
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
2021, construction in progress consisted primarily of costs capitalized for various capital enhancements at the Company's properties, including the Wynn Las Vegas room remodel, which was placed in service during the second quarter of 2022.
Depreciation expense for the three months ended June 30, 2022 and 2021 was $154.1 million and $176.1 million, respectively, and depreciation expense for the six months ended June 30, 2022 and 2021 was $330.4 million and $353.9 million, respectively.
Encore Boston Harbor Real Estate Sale and Leaseback
On February 14, 2022, Wynn MA, LLC, the owner and operator of Encore Boston Harbor and an indirect, wholly owned subsidiary of WRL (“Wynn MA”), entered into a sale-leaseback arrangement with respect to certain real estate assets related to Encore Boston Harbor. Upon closing of the related transactions, which is currently expected to take place in the fourth quarter of 2022 subject to the receipt of required 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 master lease agreement whereby Wynn MA and certain of its affiliates will lease such real estate assets for the purpose of continuing to operate the Encore Boston Harbor property. The master lease agreement provides for an initial annual rent of $100.0 million for a term of 30 years with one 30-year renewal option, subject to certain annual rent escalations. 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 6 - Goodwill and Intangible Assets, net
The following table shows the movement in the Company's goodwill and intangible assets, net balances that occurred during the periods presented (in thousands):
| June 30, 2022 | December 31, 2021 | ||||||||||
| Finite-lived intangible assets: | |||||||||||
| Macau gaming concession | $ | 5,964 | $ | 42,300 | |||||||
| Less: accumulated amortization | — | (41,114) | |||||||||
| 5,964 | 1,186 | ||||||||||
| Massachusetts gaming license | 117,700 | 117,700 | |||||||||
| Less: accumulated amortization | (23,714) | (19,791) | |||||||||
| 93,986 | 97,909 | ||||||||||
| Other finite-lived intangible assets | 62,244 | 76,317 | |||||||||
| Less: accumulated amortization | (4,591) | (5,969) | |||||||||
| 57,653 | 70,348 | ||||||||||
| Total finite-lived intangible assets | 157,603 | 169,443 | |||||||||
| 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 | 129,738 | 144,095 | |||||||||
| Foreign currency translation | (1,458) | (4,103) | |||||||||
| Impairment | (37,761) | (10,254) | |||||||||
| Balance at end of period | 90,519 | 129,738 | |||||||||
| Total goodwill and intangible assets, net | $ | 256,519 | $ | 307,578 |
The finite-lived intangible asset pertaining to the Company's original Macau gaming concession was acquired in 2004 and was amortized over the 20 year life of the original concession, which expired on June 26, 2022. On June 23, 2022, a Concession Extension Agreement was entered into between the Macau Government and WRM, pursuant to which the gaming concession of WRM has been extended from June 26, 2022 to December 31, 2022, in exchange for a payment to the Macau government equivalent to $6.0 million. The Company expects that amortization of the Macau gaming concession will be $6.0 million for the second half of 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 $3.9 million for the second half of 2022, $7.8 million each year from 2023 through 2033, and $3.8 million in 2034.
During the three months ended June 30, 2022, as a result of management's decision to cease the operations of Betbull Limited ("BetBull"), a subsidiary of Wynn Interactive, the Company impaired its trademark and customer list totaling $10.3 million and impaired the remaining balance of goodwill related to the BetBull reporting unit totaling $7.5 million.
During the three months ended March 31, 2022, as a result of changes in forecasts and other industry-specific factors, the Company identified interim indicators of impairment related to the goodwill assigned to the reporting units comprising Wynn
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Interactive. After revisiting the estimated fair value of those reporting units based on a combination of the income and market approaches, the Company recognized impairment of $30.3 million. Impairment of goodwill and intangible assets is recorded in Property charges and other in the accompanying Condensed Consolidated Statements of Operations.
Note 7 - Long-Term Debt
Long-term debt consisted of the following (in thousands):
| June 30, 2022 | December 31, 2021 | ||||||||||
| Macau Related: | |||||||||||
| WM Cayman II Revolver, due 2025 (1) | $ | 1,281,271 | $ | 1,287,766 | |||||||
| 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 (2): | |||||||||||
| WRF Term Loan, due 2024 | 862,500 | 887,500 | |||||||||
| 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 (3) | 615,000 | 615,000 | |||||||||
| 11,968,771 | 12,000,266 | ||||||||||
| Less: Unamortized debt issuance costs and original issue discounts and premium, net | (56,278) | (65,720) | |||||||||
| 11,912,493 | 11,934,546 | ||||||||||
| Less: Current portion of long-term debt | (544,632) | (50,000) | |||||||||
| Total long-term debt, net of current portion | $ | 11,367,861 | $ | 11,884,546 |
(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, subject to a floor on the interest rate margin of 2.625% per annum through June 30, 2023. Approximately $268.2 million and $1.01 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 June 30, 2022, the weighted average interest rate was approximately 3.66%. As of June 30, 2022, the available borrowing capacity under the WM Cayman II Revolver was $211.5 million. In July 2022, the Company drew $211.5 million on the WM Cayman II Revolver for general corporate purposes.
(2) The WRF Credit Facilities bear interest at a rate of LIBOR plus 1.75% per year. As of June 30, 2022, the weighted average interest rate was approximately 3.42%. Additionally, as of June 30, 2022, the available borrowing capacity under the WRF Revolver was $835.6 million, net of $14.4 million in outstanding letters of credit.
(3) The Retail Term Loan bears interest at a rate of LIBOR plus 1.70% per year. As of June 30, 2022, the effective interest rate was 2.76%.
WM Cayman II Revolver Amendment
On May 5, 2022, WM Cayman II and its lenders agreed to waive certain financial covenants in the facility agreement under the WM Cayman II Revolver in respect of the relevant periods ending on the following applicable test dates: (a) June 30, 2022; (b) September 30, 2022; (c) December 31, 2022; and (d) March 31, 2023; and to provide for a floor on the interest rate margin of 2.625% per annum through June 30, 2023. WML, as guarantor, may be subject to certain restrictions on payments of dividends or distributions to its shareholders, unless certain financial criteria have been satisfied through the facility agreement.
Debt Covenant Compliance
As of June 30, 2022, management believes the Company was in compliance with all debt covenants.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Fair Value of Long-Term Debt
The estimated fair value of the Company's long-term debt as of June 30, 2022 and December 31, 2021, was approximately $9.83 billion and $11.72 billion, respectively, compared to its carrying value, excluding debt issuance costs and original issue discount and premium, of $11.97 billion and $12.00 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' Deficit
Equity Repurchase Program
In April 2016, the Company's Board of Directors authorized an equity repurchase program of up to $1.0 billion, which may include repurchases by the Company of its common stock from time to time through open market purchases, privately negotiated transactions, and under plans complying with Rules 10b5-1 and 10b-18 under the Securities Exchange Act of 1934, as amended. During the three and six months ended June 30, 2022, the Company repurchased 2,381,928 shares of its common stock at an average price of $57.70 per share, for an aggregate cost of $137.4 million under the equity repurchase program. Any shares repurchased pursuant to the equity repurchase program are held as treasury shares. During the three and six months ended June 30, 2021, no repurchases were made under the equity repurchase program. As of June 30, 2022, the Company had $662.7 million in repurchase authority remaining under the program.
Equity Offering
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.
Noncontrolling Interests
Retail Joint Venture
During the six months ended June 30, 2022 and 2021, the Retail Joint Venture made aggregate distributions of approximately $16.5 million and $6.5 million, respectively, to its non-controlling interest holder. For more information on the Retail Joint Venture, see Note 17, "Retail Joint Venture".
During the three months ended March 31, 2022, in exchange for cash consideration of $50.0 million, the Company sold to Crown Acquisitions Inc. ("Crown") a 49.9% interest in certain additional retail space contributed by the Company to the Retail Joint Venture. In connection with this transaction, the Company recorded $48.6 million of additional paid-in capital and $1.5 million of noncontrolling interest, within Contribution from noncontrolling interest in the accompanying Condensed Consolidated Statement of Stockholders' Deficit for the six months ended June 30, 2022.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 9 - Fair Value Measurements
The following tables present assets and liabilities carried at fair value (in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||
| June 30, 2022 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 716,697 | $ | — | $ | 716,697 | $ | — | |||||||||||||||
| Restricted cash | $ | 8,838 | $ | 7,660 | $ | 1,178 | $ | — | |||||||||||||||
| Interest rate collar | $ | 3,415 | $ | — | $ | 3,415 | $ | — | |||||||||||||||
| 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 | $ | — |
Note 10 - 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):
| June 30, 2022 | December 31, 2021 | Increase / (decrease) | June 30, 2021 | December 31, 2020 | Increase / (decrease) | ||||||||||||||||||||||||||||||
| Casino outstanding chips and front money deposits (1) | $ | 325,187 | $ | 352,830 | $ | (27,643) | $ | 431,536 | $ | 596,463 | $ | (164,927) | |||||||||||||||||||||||
| Advance room deposits and ticket sales (2) | 60,777 | 55,438 | 5,339 | 56,208 | 29,224 | 26,984 | |||||||||||||||||||||||||||||
| Other gaming-related liabilities (3) | 25,272 | 26,515 | (1,243) | 10,333 | 7,882 | 2,451 | |||||||||||||||||||||||||||||
| Loyalty program and related liabilities (4) | 38,360 | 34,695 | 3,665 | 29,260 | 22,736 | 6,524 | |||||||||||||||||||||||||||||
| $ | 449,596 | $ | 469,478 | $ | (19,882) | $ | 527,337 | $ | 656,305 | $ | (128,968) |
(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 Condensed Consolidated Balance Sheets and may be recognized as revenue or redeemed for cash in the future. As of June 30, 2022 and 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 Condensed 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 Condensed 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 Condensed 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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 11 - Stock-Based Compensation
The total compensation cost for stock-based compensation plans was recorded as follows (in thousands):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Casino | $ | 2,723 | $ | 3,686 | $ | 4,978 | $ | 7,577 | |||||||||||||||
| Rooms | 215 | 403 | 401 | 909 | |||||||||||||||||||
| Food and beverage | 411 | 822 | 773 | 1,972 | |||||||||||||||||||
| Entertainment, retail and other (1) | 1,279 | 4,921 | 5,174 | 9,221 | |||||||||||||||||||
| General and administrative | 9,967 | 15,275 | 17,169 | 29,774 | |||||||||||||||||||
| Total stock-based compensation expense | 14,595 | 25,107 | 28,495 | 49,453 | |||||||||||||||||||
| Total stock-based compensation capitalized | 777 | 1,124 | 1,457 | 2,029 | |||||||||||||||||||
| Total stock-based compensation costs | $ | 15,372 | $ | 26,231 | $ | 29,952 | $ | 51,482 |
(1) For the three and six months ended June 30, 2021, reflects compensation cost of $1.4 million and $2.7 million, respectively, recognized in connection with the vesting of restricted stock performance awards.
Note 12 - Income Taxes
The Company recorded an income tax expense of $0.7 million and $0.7 million for the three months ended June 30, 2022 and 2021, respectively and an income tax expense of $1.9 million and $1.2 million for the six months ended June 30, 2022 and 2021, respectively. Income tax expense in both periods primarily related to the Macau dividend tax agreement that provides for an annual payment as complementary tax otherwise due by stockholders of WRM.
In March 2021, the Company received an extension of its Macau dividend tax agreement, providing for a payment of MOP12.8 million (approximately $1.6 million) for 2021 and MOP6.3 million (approximately $0.8 million) for the period ended June 26, 2022.
The Company records valuation allowances on certain of its U.S. and foreign deferred tax assets. The Company continues to rely solely on the reversal of net taxable temporary differences in assessing a need for a valuation allowance.
In April 2020, WRM 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. In June 2022, WRM requested an extension of the exemption from Complementary Tax on casino gaming profits.
For the three and six months ended June 30, 2022 and 2021, 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 gaming concession agreement.
In March 2021, the Financial Services Bureau concluded its review of the 2017 and 2018 Macau income tax returns of Palo Real Estate Company Limited, a subsidiary of WRM, with no changes.
In January 2022, the Financial Services Bureau issued final tax assessments for WRM for the year 2017 and 2018. While no additional tax was due, adjustments were made to WRM's tax loss carryforwards.
In March 2022, the Financial Services Bureau commenced examination of Palo’s 2019 and 2020 Macau Complementary Tax returns.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 13 - Earnings Per Share
Basic earnings per share ("EPS") is computed by dividing net loss attributable to Wynn Resorts by the weighted average number of common shares outstanding during the period. Diluted EPS is computed by dividing net 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):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited | $ | (130,051) | $ | (131,369) | $ | (313,375) | $ | (412,347) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding | 114,471 | 114,545 | 114,749 | 112,792 | |||||||||||||||||||
| Potential dilutive effect of stock options, nonvested, and performance nonvested shares | — | — | — | — | |||||||||||||||||||
| Weighted average common and common equivalent shares outstanding | 114,471 | 114,545 | 114,749 | 112,792 | |||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited per common share, basic | $ | (1.14) | $ | (1.15) | $ | (2.73) | $ | (3.66) | |||||||||||||||
| Net loss attributable to Wynn Resorts, Limited per common share, diluted | $ | (1.14) | $ | (1.15) | $ | (2.73) | $ | (3.66) | |||||||||||||||
| Anti-dilutive stock options, nonvested, and performance nonvested shares excluded from the calculation of diluted net income per share | 975 | 1,129 | 975 | 1,129 |
Note 14 - Leases
Lessor Arrangements
The following table presents the minimum and contingent operating lease income for the periods presented (in thousands):
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Minimum rental income | $ | 37,233 | $ | 25,218 | $ | 61,834 | $ | 47,957 | |||||||||||||||
| Contingent rental income | 14,092 | 30,110 | 34,715 | 56,115 | |||||||||||||||||||
| Total rental income | $ | 51,325 | $ | 55,328 | $ | 96,549 | $ | 104,072 |
Note 15 - Related Party Transactions
Home Purchase
In 2022, Linda Chen, President and Executive Director of WRM exercised an option to purchase a home provided by the Company for her use for no consideration, as provided by the terms of her employment agreement. Based on a third-party appraisal as of the date of option exercise, the estimated fair value of the home is $6.4 million. The home purchase is expected to close during the second half of 2022.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 16 - Commitments and Contingencies
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
WRM 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 WRM, as a gaming concessionaire, should be held responsible for Dore’s conduct on the basis that WRM is responsible for the supervision of Dore’s activities at Wynn Macau that resulted in the purported losses.
The Company believes most remaining cases are without merit and unfounded and intends to vigorously defend against the remaining claims pleaded against WRM 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 condensed consolidated financial statements. No assurances can be provided as to the outcome of the pending Dore cases, and actual results may differ from these estimates.
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 this action intend to vigorously defend against the claims pleaded against them. This action is in the 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 reasonably estimate the range of 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 17 - Retail Joint Venture
As of June 30, 2022 and December 31, 2021, the Retail Joint Venture had total assets of $96.2 million and $98.0 million, respectively, and total liabilities of $618.8 million and $624.4 million, respectively. As of June 30, 2022 and December 31, 2021, the Retail Joint Venture's liabilities included long-term debt of $613.2 million and $612.9 million, respectively, net of debt issuance costs, related to the outstanding borrowings under the Retail Term Loan.
Note 18 - 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.
The following tables present the Company's segment information (in thousands):
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | |||||||||||||||||||||||
| Casino | $ | 27,194 | $ | 212,067 | $ | 141,607 | $ | 397,976 | |||||||||||||||
| Rooms | 7,008 | 20,883 | 20,839 | 37,895 | |||||||||||||||||||
| Food and beverage | 6,857 | 13,805 | 18,300 | 25,477 | |||||||||||||||||||
| Entertainment, retail and other (1) | 17,592 | 23,616 | 41,230 | 46,349 | |||||||||||||||||||
| 58,651 | 270,371 | 221,976 | 507,697 | ||||||||||||||||||||
| Wynn Macau | |||||||||||||||||||||||
| Casino | 39,959 | 142,419 | 142,389 | 281,346 | |||||||||||||||||||
| Rooms | 4,762 | 13,427 | 14,152 | 28,129 | |||||||||||||||||||
| Food and beverage | 5,231 | 8,559 | 13,617 | 15,992 | |||||||||||||||||||
| Entertainment, retail and other (1) | 8,631 | 19,623 | 23,525 | 38,212 | |||||||||||||||||||
| 58,583 | 184,028 | 193,683 | 363,679 | ||||||||||||||||||||
| Total Macau Operations | 117,234 | 454,399 | 415,659 | 871,376 | |||||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Casino | 135,345 | 112,775 | 259,616 | 192,678 | |||||||||||||||||||
| Rooms | 167,116 | 93,785 | 298,582 | 133,546 | |||||||||||||||||||
| Food and beverage | 196,627 | 112,858 | 332,656 | 152,935 | |||||||||||||||||||
| Entertainment, retail and other (1) | 61,981 | 35,648 | 111,401 | 54,623 | |||||||||||||||||||
| Total Las Vegas Operations | 561,069 | 355,066 | 1,002,255 | 533,782 | |||||||||||||||||||
| Encore Boston Harbor: | |||||||||||||||||||||||
| Casino | 157,087 | 135,485 | 305,835 | 246,964 | |||||||||||||||||||
| Rooms | 22,412 | 9,670 | 38,101 | 14,385 | |||||||||||||||||||
| Food and beverage | 21,101 | 13,920 | 39,263 | 23,247 | |||||||||||||||||||
| Entertainment, retail and other (1) | 9,554 | 6,166 | 17,751 | 10,735 | |||||||||||||||||||
| Total Encore Boston Harbor | 210,154 | 165,241 | 400,950 | 295,331 | |||||||||||||||||||
| Wynn Interactive: | |||||||||||||||||||||||
| Entertainment, retail and other | 20,375 | 15,407 | 43,302 | 26,306 | |||||||||||||||||||
| Total Wynn Interactive | 20,375 | 15,407 | 43,302 | 26,306 | |||||||||||||||||||
| Total operating revenues | $ | 908,832 | $ | 990,113 | $ | 1,862,166 | $ | 1,726,795 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| Three months ended June 30, | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Adjusted Property EBITDA (2) | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | $ | (49,950) | $ | 53,555 | $ | (50,814) | $ | 80,924 | |||||||||||||||
| Wynn Macau | (40,390) | 14,086 | (45,072) | 30,642 | |||||||||||||||||||
| Total Macau Operations | (90,340) | 67,641 | (95,886) | 111,566 | |||||||||||||||||||
| Las Vegas Operations | 226,706 | 133,222 | 386,084 | 161,303 | |||||||||||||||||||
| Encore Boston Harbor | 63,746 | 46,916 | 118,996 | 77,279 | |||||||||||||||||||
| Wynn Interactive | (20,953) | (40,899) | (52,454) | (84,368) | |||||||||||||||||||
| Total | 179,159 | 206,880 | 356,740 | 265,780 | |||||||||||||||||||
| Other operating expenses | |||||||||||||||||||||||
| Pre-opening | 4,502 | 2,495 | 6,949 | 4,122 | |||||||||||||||||||
| Depreciation and amortization | 162,968 | 183,307 | 347,524 | 368,428 | |||||||||||||||||||
| Property charges and other | 26,909 | 5,651 | 72,629 | 11,268 | |||||||||||||||||||
| Corporate expenses and other | 22,213 | 19,841 | 48,036 | 37,762 | |||||||||||||||||||
| Stock-based compensation | 14,595 | 25,107 | 28,495 | 49,453 | |||||||||||||||||||
| Total other operating expenses | 231,187 | 236,401 | 503,633 | 471,033 | |||||||||||||||||||
| Operating loss | (52,028) | (29,521) | (146,893) | (205,253) | |||||||||||||||||||
| Other non-operating income and expenses | |||||||||||||||||||||||
| Interest income | 2,691 | 720 | 3,971 | 1,624 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | (154,830) | (150,424) | (306,988) | (303,276) | |||||||||||||||||||
| Change in derivatives fair value | 1,562 | 972 | 8,962 | 5,381 | |||||||||||||||||||
| Loss on extinguishment of debt | — | — | — | (1,322) | |||||||||||||||||||
| Other | (10,099) | 5,553 | (25,226) | (5,540) | |||||||||||||||||||
| Total other non-operating income and expenses | (160,676) | (143,179) | (319,281) | (303,133) | |||||||||||||||||||
| Loss before income taxes | (212,704) | (172,700) | (466,174) | (508,386) | |||||||||||||||||||
| Provision for income taxes | (718) | (697) | (1,858) | (1,190) | |||||||||||||||||||
| Net loss | (213,422) | (173,397) | (468,032) | (509,576) | |||||||||||||||||||
| Net loss attributable to noncontrolling interests | 83,371 | 42,028 | 154,657 | 97,229 | |||||||||||||||||||
| Net loss attributable to Wynn Resorts, Limited | $ | (130,051) | $ | (131,369) | $ | (313,375) | $ | (412,347) |
(1) Includes lease revenue accounted for under lease accounting guidance. For more information on leases, see Note 14, "Leases".
(2) "Adjusted Property EBITDA" is net 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. The Company uses Adjusted Property EBITDA to manage the operating results of its 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 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| June 30, 2022 | December 31, 2021 | ||||||||||
| Assets | |||||||||||
| Macau Operations: | |||||||||||
| Wynn Palace | $ | 2,981,546 | $ | 3,122,424 | |||||||
| Wynn Macau | 765,591 | 1,032,521 | |||||||||
| Other Macau | 1,016,683 | 1,173,913 | |||||||||
| Total Macau Operations | 4,763,820 | 5,328,858 | |||||||||
| Las Vegas Operations | 3,134,626 | 3,063,897 | |||||||||
| Encore Boston Harbor | 2,123,807 | 2,193,117 | |||||||||
| Wynn Interactive | 268,341 | 287,805 | |||||||||
| Corporate and other | 1,497,937 | 1,657,149 | |||||||||
| Total | $ | 11,788,531 | $ | 12,530,826 |
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