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)
| September 30, 2023 | December 31, 2022 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,788,108 | $ | 3,650,440 | |||||||
| Restricted cash | 983 | 4,819 | |||||||||
| Investments | 791,676 | — | |||||||||
| Accounts receivable, net of allowance for credit losses of $59,618 and $78,842, respectively | 249,367 | 216,033 | |||||||||
| Inventories | 75,071 | 70,094 | |||||||||
| Prepaid expenses and other | 125,971 | 88,201 | |||||||||
| Total current assets | 4,031,176 | 4,029,587 | |||||||||
| Property and equipment, net | 6,730,797 | 6,896,060 | |||||||||
| Restricted cash | 90,495 | 127,731 | |||||||||
| Goodwill and intangible assets, net | 340,397 | 245,253 | |||||||||
| Operating lease assets | 1,826,355 | 1,853,164 | |||||||||
| Other assets | 317,041 | 263,305 | |||||||||
| Total assets | $ | 13,336,261 | $ | 13,415,100 | |||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||||||
| Current liabilities: | |||||||||||
| Accounts and construction payables | $ | 187,898 | $ | 197,474 | |||||||
| Customer deposits | 517,145 | 506,148 | |||||||||
| Gaming taxes payable | 138,214 | 44,967 | |||||||||
| Accrued compensation and benefits | 187,098 | 187,160 | |||||||||
| Accrued interest | 123,897 | 135,630 | |||||||||
| Current portion of long-term debt | 112,099 | 547,543 | |||||||||
| Other accrued liabilities | 247,683 | 192,501 | |||||||||
| Total current liabilities | 1,514,034 | 1,811,423 | |||||||||
| Long-term debt | 11,678,732 | 11,569,316 | |||||||||
| Long-term operating lease liabilities | 1,614,953 | 1,615,157 | |||||||||
| Other long-term liabilities | 237,591 | 59,569 | |||||||||
| Total liabilities | 15,045,310 | 15,055,465 | |||||||||
| 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; 132,986,087 and 132,256,185 shares issued; 113,357,215 and 113,369,439 shares outstanding, respectively | 1,330 | 1,323 | |||||||||
| Treasury stock, at cost; 19,628,872 and 18,886,746 shares, respectively | (1,694,891) | (1,623,872) | |||||||||
| Additional paid-in capital | 3,633,517 | 3,583,923 | |||||||||
| Accumulated other comprehensive income (loss) | 6,218 | (404) | |||||||||
| Accumulated deficit | (2,767,938) | (2,711,808) | |||||||||
| Total Wynn Resorts, Limited stockholders' deficit | (821,764) | (750,838) | |||||||||
| Noncontrolling interests | (887,285) | (889,527) | |||||||||
| Total stockholders' deficit | (1,709,049) | (1,640,365) | |||||||||
| Total liabilities and stockholders' deficit | $ | 13,336,261 | $ | 13,415,100 |
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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating revenues: | |||||||||||||||||||||||
| Casino | $ | 972,453 | $ | 359,876 | $ | 2,652,444 | $ | 1,209,323 | |||||||||||||||
| Rooms | 289,338 | 197,212 | 838,372 | 568,886 | |||||||||||||||||||
| Food and beverage | 267,432 | 224,730 | 757,079 | 628,566 | |||||||||||||||||||
| Entertainment, retail and other | 142,713 | 107,904 | 443,542 | 345,113 | |||||||||||||||||||
| Total operating revenues | 1,671,936 | 889,722 | 4,691,437 | 2,751,888 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | 577,733 | 239,901 | 1,594,761 | 808,044 | |||||||||||||||||||
| Rooms | 77,790 | 67,689 | 224,275 | 191,474 | |||||||||||||||||||
| Food and beverage | 220,835 | 185,388 | 605,376 | 517,515 | |||||||||||||||||||
| Entertainment, retail and other | 82,554 | 72,964 | 261,035 | 236,853 | |||||||||||||||||||
| General and administrative | 268,445 | 201,275 | 785,538 | 598,433 | |||||||||||||||||||
| Provision for credit losses | 870 | (8,186) | (6,314) | (11,331) | |||||||||||||||||||
| Pre-opening | 867 | 6,447 | 6,822 | 13,396 | |||||||||||||||||||
| Depreciation and amortization | 171,969 | 172,502 | 510,743 | 520,026 | |||||||||||||||||||
| Impairment of goodwill and intangible assets | 93,990 | — | 94,490 | 48,036 | |||||||||||||||||||
| Property charges and other | 114,288 | 4,733 | 132,265 | 29,326 | |||||||||||||||||||
| Total operating expenses | 1,609,341 | 942,713 | 4,208,991 | 2,951,772 | |||||||||||||||||||
| Operating income (loss) | 62,595 | (52,991) | 482,446 | (199,884) | |||||||||||||||||||
| Other income (expense): | |||||||||||||||||||||||
| Interest income | 46,534 | 6,892 | 130,854 | 10,863 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | (188,571) | (165,277) | (566,554) | (472,265) | |||||||||||||||||||
| Change in derivatives fair value | (50,637) | 5,839 | (3,255) | 14,801 | |||||||||||||||||||
| Gain (loss) on debt financing transactions | 2,928 | — | (12,683) | — | |||||||||||||||||||
| Other | 3,861 | (864) | (19,794) | (26,090) | |||||||||||||||||||
| Other income (expense), net | (185,885) | (153,410) | (471,432) | (472,691) | |||||||||||||||||||
| Income (loss) before income taxes | (123,290) | (206,401) | 11,014 | (672,575) | |||||||||||||||||||
| Benefit (provision) for income taxes | 2,749 | (1,390) | (2,574) | (3,248) | |||||||||||||||||||
| Net income (loss) | (120,541) | (207,791) | 8,440 | (675,823) | |||||||||||||||||||
| Less: net (income) loss attributable to noncontrolling interests | 3,863 | 64,899 | (7,602) | 219,556 | |||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (116,678) | $ | (142,892) | $ | 838 | $ | (456,267) | |||||||||||||||
| Basic and diluted net income (loss) per common share: | |||||||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited: | |||||||||||||||||||||||
| Basic | $ | (1.03) | $ | (1.27) | $ | 0.01 | $ | (4.00) | |||||||||||||||
| Diluted | $ | (1.03) | $ | (1.27) | $ | 0.01 | $ | (4.00) | |||||||||||||||
| Weighted average common shares outstanding: | |||||||||||||||||||||||
| Basic | 112,797 | 112,709 | 112,813 | 114,061 | |||||||||||||||||||
| Diluted | 112,797 | 112,709 | 113,132 | 114,061 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Net income (loss) | $ | (120,541) | $ | (207,791) | $ | 8,440 | $ | (675,823) | |||||||||||||||
| Other comprehensive income (loss): | |||||||||||||||||||||||
| Foreign currency translation adjustments, before and after tax | (2,319) | 732 | 9,249 | 6,213 | |||||||||||||||||||
| Total comprehensive income (loss) | (122,860) | (207,059) | 17,689 | (669,610) | |||||||||||||||||||
| Less: comprehensive (income) loss attributable to noncontrolling interests | 4,484 | 64,726 | (10,229) | 217,727 | |||||||||||||||||||
| Comprehensive income (loss) attributable to Wynn Resorts, Limited | $ | (118,376) | $ | (142,333) | $ | 7,460 | $ | (451,883) |
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 September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| 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, July 1, 2023 | 113,942,935 | $ | 1,329 | $ | (1,635,966) | $ | 3,619,241 | $ | 7,916 | $ | (2,622,773) | $ | (630,253) | $ | (876,911) | $ | (1,507,164) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (116,678) | (116,678) | (3,863) | (120,541) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | (1,698) | — | (1,698) | (621) | (2,319) | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 40,099 | 1 | — | (1) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (2,402) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (623,417) | — | (58,925) | — | — | — | (58,925) | — | (58,925) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (28,487) | (28,487) | — | (28,487) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (6,984) | (6,984) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 14,277 | — | — | 14,277 | 1,094 | 15,371 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2023 | 113,357,215 | $ | 1,330 | $ | (1,694,891) | $ | 3,633,517 | $ | 6,218 | $ | (2,767,938) | $ | (821,764) | $ | (887,285) | $ | (1,709,049) |
| For the Three Months Ended September 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, July 1, 2022 | 113,707,642 | $ | 1,320 | $ | (1,585,678) | $ | 3,566,498 | $ | 9,829 | $ | (2,601,331) | $ | (609,362) | $ | (764,892) | $ | (1,374,254) | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (142,892) | (142,892) | (64,899) | (207,791) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 559 | — | 559 | 173 | 732 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 166,424 | 1 | — | (1) | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (3,674) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (497,062) | — | (29,319) | — | — | — | (29,319) | — | (29,319) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (4,982) | (4,982) | ||||||||||||||||||||||||||||||||||||||||||||
| Transactions with subsidiary minority shareholders | — | — | — | 1,627 | — | — | 1,627 | (1,627) | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 16,233 | — | 1 | 16,234 | 2,417 | 18,651 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2022 | 113,373,330 | $ | 1,321 | $ | (1,614,997) | $ | 3,584,357 | $ | 10,388 | $ | (2,744,222) | $ | (763,153) | $ | (833,810) | $ | (1,596,963) |
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 Nine Months Ended September 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive income (loss) | Accumulated deficit | Total Wynn Resorts, Ltd. stockholders' deficit | Noncontrolling interests | Total stockholders' deficit | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2023 | 113,369,439 | $ | 1,323 | $ | (1,623,872) | $ | 3,583,923 | $ | (404) | $ | (2,711,808) | $ | (750,838) | $ | (889,527) | $ | (1,640,365) | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 838 | 838 | 7,602 | 8,440 | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 6,622 | — | 6,622 | 2,627 | 9,249 | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 32,284 | — | — | 1,965 | — | — | 1,965 | — | 1,965 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 708,428 | 7 | — | 6,631 | — | — | 6,638 | — | 6,638 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (16,991) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (742,126) | — | (71,019) | — | — | — | (71,019) | — | (71,019) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (56,968) | (56,968) | — | (56,968) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | (2,994) | — | — | (2,994) | (12,935) | (15,929) | ||||||||||||||||||||||||||||||||||||||||||||
| Transactions with subsidiary minority shareholders | 6,181 | — | — | (754) | — | — | (754) | 754 | — | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 44,746 | — | — | 44,746 | 4,194 | 48,940 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2023 | 113,357,215 | $ | 1,330 | $ | (1,694,891) | $ | 3,633,517 | $ | 6,218 | $ | (2,767,938) | $ | (821,764) | $ | (887,285) | $ | (1,709,049) |
| For the Nine Months Ended September 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 | — | — | — | — | — | (456,267) | (456,267) | (219,556) | (675,823) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 4,384 | — | 4,384 | 1,829 | 6,213 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 763,660 | 8 | — | 9,280 | — | — | 9,288 | — | 9,288 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (86,174) | (1) | — | 1 | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (3,019,099) | — | (178,624) | — | — | — | (178,624) | — | (178,624) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to noncontrolling interest | — | — | — | — | — | — | — | (21,505) | (21,505) | ||||||||||||||||||||||||||||||||||||||||||||
| Contribution from noncontrolling interest | — | — | — | 48,559 | — | — | 48,559 | 1,474 | 50,033 | ||||||||||||||||||||||||||||||||||||||||||||
| Transactions with subsidiary minority shareholders | — | — | — | (15,123) | — | — | (15,123) | 18,019 | 2,896 | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 38,925 | — | 123 | 39,048 | 7,726 | 46,774 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, September 30, 2022 | 113,373,330 | $ | 1,321 | $ | (1,614,997) | $ | 3,584,357 | $ | 10,388 | $ | (2,744,222) | $ | (763,153) | $ | (833,810) | $ | (1,596,963) |
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)
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | 8,440 | $ | (675,823) | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 510,743 | 520,026 | |||||||||
| Deferred income taxes | (198) | 1,188 | |||||||||
| Stock-based compensation expense | 49,139 | 48,569 | |||||||||
| Amortization of debt issuance costs | 29,251 | 21,859 | |||||||||
| Loss on debt financing transactions | 12,683 | — | |||||||||
| Provision for credit losses | (6,314) | (11,331) | |||||||||
| Change in derivatives fair value | 3,255 | (14,801) | |||||||||
| Impairment of goodwill and intangible assets | 94,490 | 48,036 | |||||||||
| Property charges and other | 146,298 | 55,416 | |||||||||
| Increase (decrease) in cash from changes in: | |||||||||||
| Receivables, net | (29,513) | 341 | |||||||||
| Inventories, prepaid expenses and other | (34,118) | (7,199) | |||||||||
| Customer deposits | 12,265 | 1,731 | |||||||||
| Accounts payable and accrued expenses | 10,129 | (141,050) | |||||||||
| Net cash provided by (used in) operating activities | 806,550 | (153,038) | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures, net of construction payables and retention | (329,428) | (273,251) | |||||||||
| Purchase of investments | (786,519) | — | |||||||||
| Purchase of intangible and other assets | (62,921) | (10,919) | |||||||||
| Proceeds from sale of assets and other | 490 | 485 | |||||||||
| Net cash used in investing activities | (1,178,378) | (283,685) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 1,200,000 | 211,435 | |||||||||
| Repayments of long-term debt | (1,522,812) | (37,500) | |||||||||
| Repurchase of common stock | (71,019) | (178,624) | |||||||||
| Proceeds from exercise of stock options | 1,965 | — | |||||||||
| Proceeds from issuance of subsidiary common stock | — | 2,895 | |||||||||
| Proceeds from sale of noncontrolling interest in subsidiary | — | 50,033 | |||||||||
| Distribution to noncontrolling interest | (15,929) | (21,505) | |||||||||
| Dividends paid | (56,720) | (1,316) | |||||||||
| Finance lease payments | (14,407) | (12,812) | |||||||||
| Payments for financing costs | (41,160) | (3,165) | |||||||||
| Other | (7,773) | — | |||||||||
| Net cash (used in) provided by financing activities | (527,855) | 9,441 | |||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | (3,721) | (1,119) | |||||||||
| Cash, cash equivalents and restricted cash: | |||||||||||
| Decrease in cash, cash equivalents and restricted cash | (903,404) | (428,401) | |||||||||
| Balance, beginning of period | 3,782,990 | 2,531,067 | |||||||||
| Balance, end of period | $ | 2,879,586 | $ | 2,102,666 |
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
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 operates Encore Boston Harbor, an integrated resort. The Company also holds an approximately 97% interest in, and consolidates, Wynn Interactive Ltd. ("Wynn Interactive"), through which it operates online sports betting, gaming, and social casino businesses.
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 nine months ended September 30, 2023 are not necessarily indicative of results to be expected for any other interim period or the full fiscal year ending December 31, 2023. 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, 2022.
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 nine months ended September 30, 2022 have been reclassified to be consistent with the current period presentation. These reclassifications had no effect on the previously reported net loss or operating loss.
Use of Estimates
The preparation of condensed 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 long-lived and intangible assets, valuations of derivatives, and litigation and contingency estimates.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 $415.0 million and $105.2 million for the three months ended September 30, 2023 and 2022, respectively, and $1.12 billion and $388.4 million for the nine months ended September 30, 2023 and 2022, respectively.
Investments
The Company's investments include financial assets in the form of interest-bearing fixed deposits, which are recorded at fair value (see Note 10, "Fair Value Measurements"), and debt securities in the form of United States treasury bills. Investments in debt securities which the Company has the positive intent and ability to hold to maturity are classified as held-to-maturity and are carried at amortized cost. Debt securities held primarily for the purpose of selling in the near term are classified as trading securities and are reported at fair value, with unrealized gains and losses included in income. Debt securities not classified as held-to-maturity or trading are classified as available-for-sale and are reported at fair value with unrealized gains and losses as a separate component of other comprehensive income. Premiums and discounts on debt securities are amortized or accreted into interest income using the effective interest method. All of the Company’s debt securities are classified as held-to-maturity.
As of September 30, 2023, the Company held $500.0 million in fixed deposits, recorded at fair value, and $291.7 million in debt securities, recorded at amortized cost within Investments on the Condensed Consolidated Balance Sheets. The estimated fair value of the Company's debt securities as of September 30, 2023 was approximately $290.7 million and the gross unrecognized holding loss was $1.0 million. As of September 30, 2023, the Company had $5.2 million in accrued interest on its debt securities, recorded in Investments on the Condensed Consolidated Balance Sheets.
As of December 31, 2022, the Company had no investments in fixed deposits or debt securities recorded within Investments on the Condensed Consolidated Balance Sheets.
As of the balance sheet date, the Company evaluates whether the unrealized losses are attributable to credit losses or other factors. The Company considers the severity of the decline in value, creditworthiness of the issuer and other relevant factors and records an allowance for credit losses, limited to the excess of amortized cost over fair value, with a corresponding charge to earnings. The allowance may be subsequently increased or decreased based on the prevailing facts and circumstances. During the three and nine months ended September 30, 2023, no impairment was recognized.
Recently Issued Accounting Standards
The Company’s management has evaluated the recently issued, but not yet effective, accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standard-setting bodies through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position, results of operations and cash flows.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 3 - Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Cash and cash equivalents: | |||||||||||
| Cash (1) | $ | 1,668,003 | $ | 1,699,583 | |||||||
| Cash equivalents (2) | 1,120,105 | 1,950,857 | |||||||||
| Total cash and cash equivalents | 2,788,108 | 3,650,440 | |||||||||
| Restricted cash (3) | 91,478 | 132,550 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,879,586 | $ | 3,782,990 | |||||||
| (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, and as of September 30, 2023 and December 31, 2022 included $87.3 million and $124.5 million, respectively, in the form of a first demand bank guarantee in favor of the Macau government to support Wynn Resorts (Macau) S.A.'s legal and contractual obligations through the term of the Gaming Concession Contract (as defined in Note 6, "Goodwill and Intangible Assets, net"). |
The following table presents the supplemental cash flow disclosures of the Company (in thousands):
| Nine Months Ended September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash paid for interest, net of amounts capitalized | $ | 536,021 | $ | 437,760 | |||||||
| Liability settled with shares of common stock | $ | 6,639 | $ | 9,287 | |||||||
| Accounts and construction payables related to property and equipment | $ | 58,518 | $ | 27,603 | |||||||
| Other liabilities related to intangible assets (1) | $ | 207,106 | $ | 4,163 | |||||||
| Finance lease liabilities arising from obtaining finance lease assets | $ | 8,191 | $ | 4,778 |
(1) For the nine months ended September 30, 2023, included $204.2 million related to the Macau gaming premium in connection with the Gaming Concession Contract. See Note 6, "Goodwill and Intangible Assets, net" for further information.
Note 4 - Receivables, net
Accounts Receivable and Credit Risk
Receivables, net consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Casino | $ | 179,522 | $ | 171,893 | |||||||
| Hotel | 40,670 | 35,654 | |||||||||
| Other | 88,793 | 87,328 | |||||||||
| 308,985 | 294,875 | ||||||||||
| Less: allowance for credit losses | (59,618) | (78,842) | |||||||||
| $ | 249,367 | $ | 216,033 |
As of September 30, 2023 and December 31, 2022, approximately 66.8% and 57.6%, 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 31.3% and 43.2% of gross casino receivables as of September 30, 2023 and December 31, 2022, 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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):
| September 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| Balance at beginning of year | $ | 78,842 | $ | 111,319 | |||||||
| Provision for credit losses | (6,314) | (11,331) | |||||||||
| Write-offs | (23,262) | (22,507) | |||||||||
| Recoveries of receivables previously written off | 10,521 | 4,103 | |||||||||
| Effect of exchange rate | (169) | (376) | |||||||||
| Balance at end of period | $ | 59,618 | $ | 81,208 |
Note 5 - Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Buildings and improvements | $ | 8,360,768 | $ | 8,363,427 | |||||||
| Land and improvements | 1,226,090 | 1,195,717 | |||||||||
| Furniture, fixtures and equipment | 3,252,135 | 3,165,659 | |||||||||
| Airplanes | 110,623 | 110,623 | |||||||||
| Construction in progress | 231,129 | 112,034 | |||||||||
| 13,180,745 | 12,947,460 | ||||||||||
| Less: accumulated depreciation | (6,449,948) | (6,051,400) | |||||||||
| $ | 6,730,797 | $ | 6,896,060 |
As of September 30, 2023 and December 31, 2022, construction in progress consisted primarily of costs capitalized for various capital enhancements at the Company's properties.
Depreciation expense for the three months ended September 30, 2023 and 2022 was $156.0 million and $161.7 million, respectively, and depreciation expense for the nine months ended September 30, 2023 and 2022 was $465.0 million and $492.1 million, respectively.
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 balances that occurred during the periods presented (in thousands):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Finite-lived intangible assets: | |||||||||||
| Macau gaming concession | $ | 208,810 | $ | 48,304 | |||||||
| Less: accumulated amortization | (15,661) | (48,304) | |||||||||
| 193,149 | — | ||||||||||
| Massachusetts gaming license | 117,700 | 117,700 | |||||||||
| Less: accumulated amortization | (33,523) | (27,638) | |||||||||
| 84,177 | 90,062 | ||||||||||
| Other finite-lived intangible assets | 50,054 | 65,194 | |||||||||
| Less: accumulated amortization | (13,845) | (8,920) | |||||||||
| 36,209 | 56,274 | ||||||||||
| Total finite-lived intangible assets | 313,535 | 146,336 | |||||||||
| 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 | 90,520 | 129,738 | |||||||||
| Foreign currency translation | — | (1,457) | |||||||||
| Impairment | (72,055) | (37,761) | |||||||||
| Balance at end of period | 18,465 | 90,520 | |||||||||
| Total goodwill and intangible assets, net | $ | 340,397 | $ | 245,253 |
Wynn Interactive Goodwill and Finite-Lived Intangible Assets
During the three months ended September 30, 2023, as a result of the Company's decision to cease operating Wynn Interactive's online sports betting and iGaming platform in certain jurisdictions, the Company identified interim indicators of impairment related to the goodwill assigned to the WynnBET reporting unit within the Wynn Interactive reportable segment. As a result, the Company performed an interim impairment test as of September 30, 2023, and determined that the carrying value of its goodwill exceeded the estimated fair value of that reporting unit based on a combination of the income and cost approaches, causing the Company to recognize a goodwill impairment loss of $72.1 million. As of September 30, 2023, the Company had no remaining goodwill recorded related to the acquisition of BetBull Limited ("BetBull"), a subsidiary of Wynn Interactive. The Company also recognized impairment of other finite-lived intangible assets related to Wynn Interactive's closed operations totaling $21.9 million during the three months ended September 30, 2023.
During the nine months ended September 30, 2022, the Company identified interim indicators of impairment of Wynn Interactive's BetBull reporting unit following management's decision to cease the operations of BetBull as well as changes in forecasts and other industry-specific factors. After revisiting the estimated fair value of the BetBull reporting units based on a combination of the income and market approaches, the Company recognized impairment of goodwill totaling $37.8 million and impairment of other finite-lived intangible totaling $10.3 million.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Macau Gaming Concession
In December 2022, Wynn Resorts (Macau) S.A. ("Wynn Macau SA"), an indirect subsidiary of Wynn Resorts, Limited, entered into a definitive gaming concession contract (the "Gaming Concession Contract") with the Macau government, pursuant to which Wynn Macau SA was granted a 10-year gaming concession commencing on January 1, 2023 and expiring on December 31, 2032, to operate games of chance at Wynn Palace and Wynn Macau. Under the terms of the Gaming Concession Contract, Wynn Macau SA is required to pay the Macau government an annual gaming premium consisting of a fixed and a variable portion. The fixed portion of the premium is composed of an annual amount equal to MOP30.0 million (approximately $3.7 million). The variable portion is composed of an annual amount equal to MOP300,000 (approximately $37 thousand) per gaming table located in special gaming halls reserved exclusively to particular games or players, MOP150,000 (approximately $19 thousand) per gaming table that is not reserved exclusively to particular games or players, and MOP1,000 (approximately $124) per gaming machine, including slot machines, operated by Wynn Macau SA.
In December 2022, in accordance with the requirements of the Macau Gaming Law, Wynn Macau SA and Palo Real Estate Company Limited ("Palo"), a subsidiary of Wynn Macau SA, entered into agreements (collectively, the "Property Transfer Agreements") with the Macau government, pursuant to which Wynn Macau SA and Palo transferred the casino areas and gaming equipment of the Company's Macau Operations to the Macau government without compensation on December 31, 2022, and the Macau government agreed to transfer such casino areas and gaming equipment back to Wynn Macau SA as of January 1, 2023, for its use in the operation of games of chance at Wynn Macau and Wynn Palace as permitted under the Gaming Concession Contract through December 31, 2032. As the Company expects to continue to operate the casino areas and gaming equipment at its Macau Operations in the same manner as under the previous concession, obtain substantially all of the economic benefits, and bear all of the risks arising from the use of these assets, the Company will continue to recognize the casino areas and gaming equipment as property and equipment over their remaining estimated useful lives. In exchange for the use of such assets, Wynn Macau SA has agreed to make annual payments to the Macau government of MOP53.1 million (approximately $6.6 million) during each of the years ending December 31, 2023, 2024, and 2025, and an annual payment of MOP177.0 million (approximately $21.9 million) during each of the remaining years of the term of the Gaming Concession Contract through December 31, 2032, subject to adjustment in each year based on the average price index in Macau. Pursuant to the Gaming Concession Contract, Wynn Macau SA will revert to the Macau government the casino areas and gaming equipment, without compensation and free of encumbrance upon the rescission or termination of the gaming concession on December 31, 2032.
On January 1, 2023, the Company recognized an intangible asset and financial liability of MOP1.68 billion (approximately $208.3 million), representing the right to operate games of chance at Wynn Palace and Wynn Macau and the unconditional obligation to make payments under the Gaming Concession Contract. This intangible asset comprises the contractually obligated annual payments of fixed and variable premiums, as well as fees associated with the above-described Property Transfer Agreements. The contractually obligated annual variable premium payments associated with the intangible asset was determined using the total number of gaming tables and gaming machines that Wynn Macau SA is currently approved to operate by the Macau government. In the accompanying condensed consolidated balance sheets, the noncurrent portion of the financial liability is included in "Other long-term liabilities" and the current portion is included in "Other accrued liabilities." The intangible asset is being amortized on a straight-line basis over the 10-year term of the Gaming Concession Contract. The Company expects that amortization of the Macau Gaming Concession will be $5.2 million in the three months ending December 31, 2023, and $20.9 million each year from 2024 to 2032.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 7 - Long-Term Debt
Long-term debt consisted of the following (in thousands):
| September 30, 2023 | December 31, 2022 | ||||||||||
| Macau Related: | |||||||||||
| WM Cayman II Revolver, due 2025 (1) | $ | 1,495,406 | $ | 1,500,473 | |||||||
| 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 | |||||||||
| WML 4 1/2% Convertible Bonds, due 2029 (2) | 600,000 | — | |||||||||
| U.S. and Corporate Related: | |||||||||||
| WRF Credit Facilities (3): | |||||||||||
| WRF Term Loan, due 2024 | 74,628 | 837,500 | |||||||||
| WRF Term Loan, due 2027 | 740,060 | — | |||||||||
| WLV 4 1/4% Senior Notes, due 2023 | — | 500,000 | |||||||||
| WLV 5 1/2% Senior Notes, due 2025 | 1,380,001 | 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 | |||||||||
| WRF 5 1/8% Senior Notes, due 2029 | 750,000 | 750,000 | |||||||||
| WRF 7 1/8% Senior Notes, due 2031 | 600,000 | — | |||||||||
| Retail Term Loan, due 2025 (4) | 615,000 | 615,000 | |||||||||
| 11,835,095 | 12,162,973 | ||||||||||
| WML Convertible Bond Conversion Option Derivative | 125,752 | — | |||||||||
| Less: Unamortized debt issuance costs and original issue discounts and premium, net | (170,016) | (46,114) | |||||||||
| 11,790,831 | 12,116,859 | ||||||||||
| Less: Current portion of long-term debt | (112,099) | (547,543) | |||||||||
| Total long-term debt, net of current portion | $ | 11,678,732 | $ | 11,569,316 |
(1) As of September 30, 2023, the borrowings under the WM Cayman II Revolver bear interest at the term secured overnight financing rate ("Term SOFR") plus a credit adjustment spread of 0.10% or HIBOR, in each case plus a margin of 1.875% to 2.875% per annum based on WM Cayman II’s leverage ratio on a consolidated basis. Approximately $312.5 million and $1.18 billion of the WM Cayman II Revolver bears interest at a rate of Term SOFR plus 2.1% per year and HIBOR plus 2.0% per year, respectively. As of September 30, 2023, the weighted average interest rate was approximately 7.35%. As of September 30, 2023, the WM Cayman II Revolver was fully drawn.
(2) As of September 30, 2023, the net carrying amount of the WML Convertible Bonds was $475.1 million, with unamortized debt discount and debt issuance costs of $124.9 million. The Company recorded contractual interest expense of $6.8 million and $15.3 million and amortization of discounts and issuance costs of $4.4 million and $9.7 million during the three and nine months ended September 30, 2023, respectively.
(3) The WRF Credit Facilities bear interest at a rate of Term SOFR plus 1.85% per year. As of September 30, 2023, the weighted average interest rate was approximately 7.17%. Additionally, as of September 30, 2023, the available borrowing capacity under the WRF Revolver was $737.0 million, net of $13.0 million in outstanding letters of credit.
(4) The Retail Term Loan bears interest at a rate of adjusted daily simple secured overnight financing rate ("SOFR") plus 1.80% per year. As of September 30, 2023, the interest rate was 5.47%. On June 2, 2023, the Company entered into a second amendment to the existing term loan agreement which transitions the benchmark interest rate of the Retail Term Loan from LIBOR to SOFR, effective July 3, 2023.
WM Cayman II Revolver Facility Agreement Amendment
Due to the global phase out of London Interbank Offered Rate ("LIBOR"), on June 27, 2023, WM Cayman Holdings Limited II, as borrower ("WM Cayman II"), and WML, as guarantor, entered into an Amended and Restated Facility Agreement with Bank of China Limited, Macau Branch, as agent for the syndicate of lenders (as amended and restated, the "Facility Agreement"), to transition the base rate applicable to loans denominated in U.S. dollars made pursuant to the revolving credit facility provided thereunder (the "WM Cayman II Revolver") from LIBOR to Term SOFR. The new Term SOFR base rate became effective July 4, 2023.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The WM Cayman II Revolver consists of a U.S. dollar tranche in an amount of $312.5 million ("Facility A") and a Hong Kong dollar tranche in an amount of HK$9.26 billion (equivalent to $1.18 billion) ("Facility B"). Pursuant to the Facility Agreement, loans provided under Facility A bear interest at a variable rate per annum equal to: (a) Term SOFR, plus a credit adjustment spread of 0.10% (subject to a minimum floor of 0.00%), plus (b) a margin of 1.875% to 2.875% based on the consolidated leverage ratio of WM Cayman II and its subsidiaries (as calculated pursuant to the Facility Agreement), and loans provided under Facility B bear interest at a variable rate per annum equal to: (i) the Hong Kong Interbank Offered Rate, plus (ii) a margin of 1.875% to 2.875% based on the consolidated leverage ratio of WM Cayman II and its subsidiaries (as calculated pursuant to the Facility Agreement).
WML 4 1/2% Convertible Bonds, due 2029
On March 7, 2023, WML completed an offering (the "Offering") of $600 million 4.50% convertible bonds due 2029 (the "WML Convertible Bonds"). The WML Convertible Bonds are governed by a trust deed dated March 7, 2023 (the "Trust Deed"), between WML and DB Trustees (Hong Kong) Limited, as trustee. WML, DB Trustees (Hong Kong) Limited, as trustee, and Deutsche Bank Trust Company Americas entered into an agency agreement, appointing Deutsche Bank Trust Company Americas as the principal paying agent, principal conversion agent, transfer agent and registrar in relation to the WML Convertible Bonds. The net proceeds from the Offering, after deduction of commissions and other related expenses, were $585.9 million. WML intends to use the net proceeds for general corporate purposes.
The WML Convertible Bonds bear interest on their outstanding principal amount from and including March 7, 2023 at the rate of 4.50% per annum, payable semi-annually in arrears on March 7 and September 7 of each year. At any time on or after April 17, 2023, the WML Convertible Bonds are convertible at the option of the holder thereof into fully paid ordinary shares of WML, each with a nominal value of HK$0.001 per share ("Ordinary Shares"), at the initial conversion price of approximately HK$10.24 (equivalent to approximately $1.31) per share, subject to and upon compliance with the terms and conditions of the WML Convertible Bonds (the "Terms and Conditions," and such right, the "Conversion Right"). The conversion price is at the fixed exchange rate of HK$7.8497 per $1.00, subject to standard adjustments for certain dilutive events as described in the Terms and Conditions. WML has the option upon conversion by a bondholder to pay an amount of cash equivalent described in the Terms and Conditions in order to satisfy such Conversion Right in whole or in part.
Holders of the WML Convertible Bonds have the option to require WML to redeem all or some only of such holder’s WML Convertible Bonds (i) on March 7, 2027 at their principal amount together with interest accrued but unpaid to, but excluding, the date fixed for redemption; or (ii) on the Relevant Event Redemption Date (as defined in the Terms and Conditions) at their principal amount together with interest accrued but unpaid to, but excluding, such date, following the occurrence of (a) when the Ordinary Shares cease to be listed or admitted to trading or are suspended from trading for a period equal to or exceeding 10 consecutive trading days on the Stock Exchange of Hong Kong Limited, or if applicable, the alternative stock exchange, (b) when there is a Change of Control (as defined in the Terms and Conditions), or (c) when less than 25% of WML’s total number of issued Ordinary Shares are held by the public (as interpreted under Rule 8.24 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited).
The WML Convertible Bonds may also be redeemed at the option of WML under certain circumstances specified in the Terms and Conditions, in whole, but not in part, at any time after March 7, 2027, but prior to March 7, 2029, upon giving notice to the bondholders in accordance with the Terms and Conditions. The WML Convertible Bonds constitute direct, unsubordinated, unconditional and, subject to the Terms and Conditions, unsecured obligations of WML and rank pari passu and without any preference or priority among themselves. The Ordinary Shares to be issued upon exercise of Conversion Right will be fully-paid and will in all respects rank pari passu with the fully-paid Ordinary Shares in issue on the relevant registration date set forth in the Terms and Conditions.
The Trust Deed contains covenants limiting WML's and all of its subsidiaries' ability to, among other things, create, permit to subsist or arise or have outstanding any mortgage, charge, pledge, lien or other encumbrance or certain security interest; consolidate or merge with or into another company; and sell, assign, transfer, convey or otherwise dispose of all or substantially all of its and its subsidiaries’ properties or assets, with certain exceptions. The Trust Deed also contains customary events of default.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The Company determined that the conversion feature contained within the WML Convertible Bonds is required to be bifurcated from the debt host contract and accounted for as a free-standing derivative (the "WML Convertible Bond Conversion Option Derivative"). In accordance with applicable accounting standards, the WML Convertible Bond Conversion Option Derivative will be reported at fair value as of the end of each reporting period, with changes recognized in the statements of operations. For more information, see "Note 8 - WML Convertible Bond Conversion Option Derivative." As a result, the Company recognized a debt discount of $123.5 million within Long-term debt, representing the estimated fair value of the holders' conversion option upon completion of the Offering. The debt discount will be amortized to interest expense over the term of the WML Convertible Bonds using the effective interest method. As of September 30, 2023, the estimated fair value of the WML Convertible Bond Conversion Option Derivative was a liability of $125.8 million, recorded within Long-term debt within the accompanying Condensed Consolidated Balance Sheet.
WRF Credit Facility Agreement Amendment
On May 17, 2023, Wynn Resorts Finance, LLC ("WRF") and certain of its subsidiaries entered into an amendment (the "WRF Credit Facility Agreement Amendment") to its existing credit agreement (the "WRF Credit Facility Agreement") among Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto.
The WRF Credit Facility Agreement Amendment amends the WRF Credit Facility Agreement to: (i) transition the benchmark rate from LIBOR to Term SOFR and to make conforming changes, (ii) reduce the aggregate principal amount of revolving commitments under the revolving credit facility by $100.0 million, from $850.0 million to $750.0 million, (iii) extend the stated maturity date for lenders electing to extend their revolving commitments in an amount equal to approximately $681.3 million from September 20, 2024 to September 20, 2027, and (iv) extend the stated maturity date for lenders electing to extend their term loan commitments in an amount equal to approximately $749.4 million from September 20, 2024 to September 20, 2027. Lenders who elected not to extend their revolving commitments in an amount equal to approximately $68.7 million will remain subject to a stated maturity date of September 20, 2024, and lenders who elected not to extend their term loan commitments in an amount equal to approximately $75.6 million will remain subject to a stated maturity date of September 20, 2024. In connection with the WRF Credit Facility Agreement Amendment, the Company recognized a loss on debt financing transactions of $1.2 million within the accompanying Condensed Consolidated Statements of Operations, and the Company recorded debt issuance costs of $5.1 million, within the Condensed Consolidated Balance Sheet.
WRF 7 1/8% Senior Notes, due 2031 and WRF 7 3/4% Senior Notes, due 2025
On February 16, 2023, WRF and its subsidiary Wynn Resorts Capital Corp. (together with WRF, the "WRF Issuers"), each an indirect wholly owned subsidiary of the Company, issued $600.0 million aggregate principal amount of 7 1/8% Senior Notes due 2031 (the "2031 WRF Senior Notes") pursuant to an indenture among the WRF Issuers, the guarantors party thereto, and U.S. Bank Trust Company, National Association, as trustee, in a private offering. The 2031 WRF Senior Notes were issued at par, for proceeds of $596.2 million, net of $3.8 million of related fees and expenses. Also on February 16, 2023, the WRF Issuers completed a cash tender offer for any and all of the outstanding principal amount of the 7 3/4% Senior Notes due 2025 (the "2025 WRF Senior Notes") and accepted for purchase valid tenders with respect to $506.4 million principal amount and paid a tender premium of $12.4 million to the holders of such tendered 2025 WRF Senior Notes. The Company used a portion of the net proceeds from the issuance of the 2031 WRF Senior Notes to purchase such tendered 2025 WRF Senior Notes and to pay the tender premium and related fees and expenses.
In April 2023, WRF repurchased all of the outstanding 2025 WRF Senior Notes using the remaining net proceeds from the issuance of the 2031 WRF Senior Notes and cash held by WRF, at a price equal to 101.938% of the principal amount plus accrued interest under the terms of its indenture.
In connection with the issuance of the 2031 WRF Senior Notes and purchase of the 2025 WRF Senior Notes, the Company recognized a loss on debt financing transactions of $10.6 million within the accompanying Condensed Consolidated Statements of Operations, and the Company recorded debt issuance costs of $11.4 million within the accompanying Condensed Consolidated Balance Sheet.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
WLV 5 1/2% Senior Notes, due 2025
In August 2023, Wynn Las Vegas repurchased $400.0 million aggregate principal amount of its 5 1/2% Senior Notes due 2025 (the "2025 WLV Senior Notes"), at a price equal to 94% of the principal amount, plus accrued interest and an early tender premium of $20.0 million to the holders of validly tendered 2025 WLV Senior Notes. WRF used cash held by Wynn Resorts to purchase such tendered 2025 WLV Senior Notes and to pay the tender premium and related fees and expenses. In connection with the completion of the tender, the Company recognized a gain on debt financing transaction of $2.9 million within the accompanying Condensed Consolidated Statements of Operations.
WLV 4 1/4% Senior Notes, due 2023
In March 2023, the Company repurchased all of its outstanding Wynn Las Vegas 4 1/4% Senior Notes due 2023, representing an aggregate principal amount of $500.0 million, using cash held by WRF, at a price equal to 100% of the principal amount plus accrued interest under the terms of its indenture. In connection with the repurchase, the Company recognized a loss on debt financing transaction of $1.0 million within the accompanying Condensed Consolidated Statements of Operations.
Retail Term Loan Second Amendment
On June 2, 2023, Wynn/CA Plaza Property Owner, LLC and Wynn/CA Property Owner, LLC (collectively, the "Borrowers") entered into a second amendment (the "Retail Term Loan Second Amendment") to their existing term loan agreement (the "Retail Term Loan Agreement"). The Retail Term Loan Second Amendment, which is effective as of July 3, 2023, amends the Retail Term Loan Agreement to transition the benchmark interest rate applicable to the secured loan in an aggregate principal amount of $615.0 million issued to the Borrowers thereunder from LIBOR to SOFR and to make related conforming changes to the Retail Term Loan Agreement.
Debt Covenant Compliance
As of September 30, 2023, management believes the Company was in compliance with all debt covenants.
Fair Value of Long-Term Debt
The estimated fair value of the Company's long-term debt as of September 30, 2023 and December 31, 2022, was approximately $11.13 billion and $11.23 billion, respectively, compared to its carrying value, excluding debt issuance costs and original issue discount and premium, of $11.84 billion and $12.16 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 - WML Convertible Bond Conversion Option Derivative
An embedded derivative is a feature contained within a contract that affects some or all of the cash flows or the value of other exchanges required by the contract in a manner similar to a derivative instrument. Embedded derivatives are required to be bifurcated and accounted for separately from the host contract and carried at fair value when: (a) the embedded derivative possesses economic characteristics that are not clearly and closely related to the economic characteristics of the host contract; and (b) a separate, freestanding instrument with the same terms would qualify as a derivative instrument. The Company determined that the conversion feature contained within the WML Convertible Bonds is not indexed to WML's equity and, as such, is required to be bifurcated from the debt host contract and accounted for as a free-standing derivative. In accordance with applicable accounting standards, the WML Convertible Bond Conversion Option Derivative will be reported at fair value as of the end of each reporting period, with changes recognized in the statements of operations.
The Company used a binomial lattice model in order to estimate the fair value of the embedded derivative in the WML Convertible Bonds. Inherent in a binomial options pricing model are unobservable (Level 3) inputs and assumptions related to expected share-price volatility, risk-free interest rate, expected term, and dividend yield. The Company estimates the volatility of shares of WML common stock based on historical volatility that matches the expected remaining term to maturity of the WML Convertible Bonds. The risk-free interest rate is based on the Hong Kong and United States benchmark yield curves on the valuation date for a maturity similar to the expected remaining term of the WML Convertible Bonds. The expected life of
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
the WML Convertible Bonds is assumed to be equivalent to their remaining term to maturity. The dividend yield is based on the historical WML dividend rate over the last several years.
The following table sets forth the inputs to the lattice models that were used to value the embedded derivatives:
| September 30, 2023 | March 2, 2023 (Pricing date) | ||||||||||
| WML stock price | HK$ | 7.50 | HK$ | 8.08 | |||||||
| Estimated volatility | 33.6 | % | 26.0 | % | |||||||
| Risk-free interest rate | 4.4 | % | 4.2 | % | |||||||
| Expected term (years) | 5.4 | 6.0 | |||||||||
| Dividend yield | 0.0 | % | 0.0 | % |
In connection with the completion of the Offering on March 7, 2023, the Company recognized a debt discount and a corresponding liability for the embedded derivative, based on an estimated fair value of $123.5 million. The debt discount will be amortized to interest expense over the term of the WML Convertible Bonds using the effective interest method. As of September 30, 2023, the estimated fair value of the embedded derivative was a liability of $125.8 million, recorded within Long-term debt within the accompanying Condensed Consolidated Balance Sheet. In connection with the change in fair value, the Company recorded a loss of $48.8 million and $2.3 million within Change in derivatives fair value in the accompanying Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2023, respectively.
Note 9 - Stockholders' Deficit
Equity Repurchase Program
In April 2016, the Company's board of directors authorized an equity repurchase program of up to $1.00 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. Any shares repurchased pursuant to the equity repurchase program are held as treasury shares. During the three and nine months ended September 30, 2023, the Company repurchased 596,948 shares of its common stock at an average price of $94.11 per share, for an aggregate cost of $56.2 million under the equity repurchase program. During the three and nine months ended September 30, 2022, the Company repurchased 491,503 and 2,873,431 shares of its common stock, respectively, at average prices of $58.95 and $57.91 per share, respectively, for an aggregate cost of $29.0 million and $166.4 million, respectively, under the equity repurchase program. As of September 30, 2023, the Company had $572.7 million in repurchase authority remaining under the program.
Dividends
The Company paid a cash dividend of $0.25 per share in each of the quarters ended June 30, 2023 and September 30, 2023 and recorded $28.5 million and $28.2 million, respectively, against accumulated deficit.
On November 9, 2023, the Company declared a cash dividend of $0.25 per share, payable on November 30, 2023 to stockholders of record as of November 20, 2023.
Noncontrolling Interests
Retail Joint Venture
During the nine months ended September 30, 2023 and 2022, the Retail Joint Venture made aggregate distributions of approximately $15.9 million and $21.5 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
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
$1.5 million of noncontrolling interest, within Contribution from noncontrolling interest in the accompanying Condensed Consolidated Statement of Stockholders' Deficit for the three months ended March 31, 2022.
WML Securities Lending Agreement
In connection with the WML Convertible Bonds Offering, WM Cayman Holdings I Limited ("WM Cayman I"), a wholly owned subsidiary of the Company and holder of our approximate 72% ownership interest in WML, entered into a stock borrowing and lending agreement with Goldman Sachs International (the "WML Stock Borrower") on March 2, 2023 (as amended on March 30, 2023, the "Securities Lending Agreement"), pursuant to which WM Cayman I has agreed to lend to the WML Stock Borrower up to 459,774,985 of its ordinary share holdings in WML, upon and subject to the terms and conditions in the Securities Lending Agreement. WM Cayman I may, at its sole discretion, terminate any stock loan by giving the WML Stock Borrower no less than five business days' notice. The Securities Lending Agreement terminates on the date on which the WML Convertible Bonds have been redeemed, or converted in full, whichever is the earlier. On March 6, 2023, the WML Stock Borrower borrowed 459,774,985 ordinary shares of WML under the Securities Lending Agreement and on April 3, 2023 returned 280,000,000 of such shares to WM Cayman I. As of the date of this report, the WML Stock Borrower held 179,774,985 WML shares under the Securities Lending Agreement.
Note 10 - Fair Value Measurements
The following tables present assets and liabilities carried at fair value (in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||
| September 30, 2023 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 1,120,105 | $ | — | $ | 1,120,105 | $ | — | |||||||||||||||
| Restricted cash | $ | 91,478 | $ | 3,110 | $ | 88,368 | $ | — | |||||||||||||||
| Fixed deposits | $ | 500,000 | $ | — | $ | 500,000 | $ | — | |||||||||||||||
| Interest rate collar | $ | 9,425 | $ | — | $ | 9,425 | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| WML Convertible Bond Conversion Option Derivative (see Note 8) | $ | 125,752 | $ | — | $ | — | $ | 125,752 | |||||||||||||||
| Fair Value Measurements Using: | |||||||||||||||||||||||
| December 31, 2022 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 1,950,857 | $ | 490,683 | $ | 1,460,174 | $ | — | |||||||||||||||
| Restricted cash | $ | 132,550 | $ | 6,891 | $ | 125,659 | $ | — | |||||||||||||||
| Interest rate collar | $ | 10,408 | $ | — | $ | 10,408 | $ | — |
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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The Company's primary liabilities associated with customer contracts are as follows (in thousands):
| September 30, 2023 | December 31, 2022 | Increase / (decrease) | September 30, 2022 | December 31, 2021 | Increase / (decrease) | ||||||||||||||||||||||||||||||
| Casino outstanding chips and front money deposits (1) | $ | 397,828 | $ | 390,531 | $ | 7,297 | $ | 327,004 | $ | 352,830 | $ | (25,826) | |||||||||||||||||||||||
| Advance room deposits and ticket sales (2) | 97,705 | 85,019 | 12,686 | 76,256 | 55,438 | 20,818 | |||||||||||||||||||||||||||||
| Other gaming-related liabilities (3) | 25,208 | 31,265 | (6,057) | 30,610 | 26,515 | 4,095 | |||||||||||||||||||||||||||||
| Loyalty program and related liabilities (4) | 34,215 | 35,083 | (868) | 38,323 | 34,695 | 3,628 | |||||||||||||||||||||||||||||
| $ | 554,956 | $ | 541,898 | $ | 13,058 | $ | 472,193 | $ | 469,478 | $ | 2,715 |
(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.
(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.
Note 12 - Stock-Based Compensation
The total compensation cost for stock-based compensation plans was recorded as follows (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Casino | $ | 550 | $ | 3,857 | $ | 1,539 | $ | 8,835 | |||||||||||||||
| Rooms | 197 | 415 | 598 | 816 | |||||||||||||||||||
| Food and beverage | 376 | 774 | 1,178 | 1,547 | |||||||||||||||||||
| Entertainment, retail and other | 946 | 3,064 | 6,831 | 8,238 | |||||||||||||||||||
| General and administrative | 14,075 | 11,964 | 38,993 | 29,133 | |||||||||||||||||||
| Total stock-based compensation expense | 16,144 | 20,074 | 49,139 | 48,569 | |||||||||||||||||||
| Total stock-based compensation capitalized | 1,563 | 894 | 3,697 | 2,351 | |||||||||||||||||||
| Total stock-based compensation costs | $ | 17,707 | $ | 20,968 | $ | 52,836 | $ | 50,920 |
Note 13 - Income Taxes
The Company recorded an income tax benefit of $2.7 million and an expense of $1.4 million for the three months ended September 30, 2023 and 2022, respectively and an income tax expense of $2.6 million and $3.2 million for the nine months ended September 30, 2023 and 2022, respectively. Income tax expense in 2023 primarily relates to U.S. operating profits. Income tax expense in 2022 primarily related to changes in U.S. deferred taxes.
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. 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.
Given the Company’s current earnings and anticipated future earnings, the Company believes there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance on certain of its U.S. deferred tax assets will no longer be needed.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
WRM received an exemption from Macau's 12% Complementary Tax on casino gaming profits (the "Tax Holiday") through December 31, 2022. In December 2022, the Company applied for an exemption from Complementary Tax on casino gaming profits commencing January 1, 2023. The application is subject to approval.
WRM had an agreement with the Macau government that provided for a payment of MOP 12.8 million (approximately $1.6 million) as complementary tax otherwise due by stockholders of WRM through December 31, 2022. The Company is evaluating an extension of this agreement.
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 period. Diluted EPS is computed by dividing net income (loss) attributable to Wynn Resorts, adjusted for the potential dilutive impact assuming that the conversion of the WML Convertible Bonds occurred as of the date of their issuance under the if-converted method, 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 September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited - basic | $ | (116,678) | $ | (142,892) | $ | 838 | $ | (456,267) | |||||||||||||||
| Effect of dilutive securities of Wynn Resorts, Limited subsidiaries: | |||||||||||||||||||||||
| Assumed conversion of WML Convertible Bonds | — | — | — | — | |||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited - diluted | $ | (116,678) | $ | (142,892) | $ | 838 | $ | (456,267) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted average common shares outstanding | 112,797 | 112,709 | 112,813 | 114,061 | |||||||||||||||||||
| Potential dilutive effect of stock options, nonvested, and performance nonvested shares | — | — | 319 | — | |||||||||||||||||||
| Weighted average common and common equivalent shares outstanding | 112,797 | 112,709 | 113,132 | 114,061 | |||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, basic | $ | (1.03) | $ | (1.27) | $ | 0.01 | $ | (4.00) | |||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, diluted | $ | (1.03) | $ | (1.27) | $ | 0.01 | $ | (4.00) | |||||||||||||||
| Anti-dilutive stock options, nonvested, and performance nonvested shares excluded from the calculation of diluted net income per share | 1,255 | 1,087 | 308 | 1,087 |
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 15 - Leases
Lessor Arrangements
The following table presents the minimum and contingent operating lease income for the periods presented (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Minimum rental income | $ | 33,196 | $ | 31,962 | $ | 98,845 | $ | 93,796 | |||||||||||||||
| Contingent rental income | 20,700 | 10,689 | 74,670 | 45,404 | |||||||||||||||||||
| Total rental income | $ | 53,896 | $ | 42,651 | $ | 173,515 | $ | 139,200 |
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
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.
The Company believes these 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 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 Class 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 current CEO Craig Billings and the individual directors, and allowing other claims to proceed against the Company and several of the Company's former executive officers, including Matthew Maddox, Stephen A. Wynn, Kimmarie Sinatra, and Steven Cootey. On March 2, 2023, the court granted the plaintiffs' motion for class certification and appointed lead counsel. The parties are now proceeding with discovery.
The defendants in this action intend to vigorously defend against the claims pleaded against them and believe that the claims are without merit. This action is in the preliminary stages and the Company has determined that based on proceedings to
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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.
Note 17 - Retail Joint Venture
As of September 30, 2023 and December 31, 2022, the Retail Joint Venture had total assets of $107.7 million and $102.9 million, respectively, and total liabilities of $622.3 million and $620.9 million, respectively. As of September 30, 2023 and December 31, 2022, the Retail Joint Venture's liabilities included long-term debt of $613.9 million and $613.5 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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
The following tables present the Company's segment information (in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | |||||||||||||||||||||||
| Casino | $ | 418,043 | $ | 45,361 | $ | 1,054,007 | $ | 186,968 | |||||||||||||||
| Rooms | 54,309 | 6,974 | 151,311 | 27,813 | |||||||||||||||||||
| Food and beverage | 26,215 | 5,727 | 75,028 | 24,027 | |||||||||||||||||||
| Entertainment, retail and other (1) | 26,206 | 17,186 | 82,140 | 58,416 | |||||||||||||||||||
| 524,773 | 75,248 | 1,362,486 | 297,224 | ||||||||||||||||||||
| Wynn Macau | |||||||||||||||||||||||
| Casino | 230,294 | 22,832 | 649,627 | 165,221 | |||||||||||||||||||
| Rooms | 31,673 | 4,395 | 79,774 | 18,547 | |||||||||||||||||||
| Food and beverage | 18,287 | 4,261 | 47,255 | 17,878 | |||||||||||||||||||
| Entertainment, retail and other (1) | 14,762 | 8,880 | 50,679 | 32,405 | |||||||||||||||||||
| 295,016 | 40,368 | 827,335 | 234,051 | ||||||||||||||||||||
| Total Macau Operations | 819,789 | 115,616 | 2,189,821 | 531,275 | |||||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Casino | 168,130 | 134,314 | 460,606 | 393,930 | |||||||||||||||||||
| Rooms | 178,518 | 162,125 | 541,392 | 460,707 | |||||||||||||||||||
| Food and beverage | 203,066 | 193,733 | 570,695 | 526,389 | |||||||||||||||||||
| Entertainment, retail and other (1) | 69,252 | 54,217 | 211,109 | 165,618 | |||||||||||||||||||
| Total Las Vegas Operations | 618,966 | 544,389 | 1,783,802 | 1,546,644 | |||||||||||||||||||
| Encore Boston Harbor: | |||||||||||||||||||||||
| Casino | 155,986 | 157,369 | 488,204 | 463,204 | |||||||||||||||||||
| Rooms | 24,838 | 23,718 | 65,895 | 61,819 | |||||||||||||||||||
| Food and beverage | 19,864 | 21,009 | 64,101 | 60,272 | |||||||||||||||||||
| Entertainment, retail and other (1) | 9,715 | 9,687 | 30,441 | 27,438 | |||||||||||||||||||
| Total Encore Boston Harbor | 210,403 | 211,783 | 648,641 | 612,733 | |||||||||||||||||||
| Wynn Interactive: | |||||||||||||||||||||||
| Entertainment, retail and other | 22,778 | 17,934 | 69,173 | 61,236 | |||||||||||||||||||
| Total Wynn Interactive | 22,778 | 17,934 | 69,173 | 61,236 | |||||||||||||||||||
| Total operating revenues | $ | 1,671,936 | $ | 889,722 | $ | 4,691,437 | $ | 2,751,888 |
(1) Includes lease revenue accounted for under lease accounting guidance. For more information on leases, see Note 15, "Leases."
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| Adjusted Property EBITDAR (1) | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | $ | 177,048 | $ | (21,808) | $ | 444,713 | $ | (72,622) | |||||||||||||||
| Wynn Macau | 77,939 | (43,806) | 212,274 | (88,878) | |||||||||||||||||||
| Total Macau Operations | 254,987 | (65,614) | 656,987 | (161,500) | |||||||||||||||||||
| Las Vegas Operations | 219,740 | 195,760 | 675,458 | 581,844 | |||||||||||||||||||
| Encore Boston Harbor | 60,498 | 61,136 | 193,016 | 180,132 | |||||||||||||||||||
| Wynn Interactive | (4,864) | (17,748) | (40,896) | (70,202) | |||||||||||||||||||
| Total | 530,361 | 173,534 | 1,484,565 | 530,274 | |||||||||||||||||||
| Other operating expenses | |||||||||||||||||||||||
| Pre-opening | 867 | 6,447 | 6,822 | 13,396 | |||||||||||||||||||
| Depreciation and amortization | 171,969 | 172,502 | 510,743 | 520,026 | |||||||||||||||||||
| Impairment of goodwill and intangible assets | 93,990 | — | 94,490 | 48,036 | |||||||||||||||||||
| Property charges and other (2) | 114,288 | 4,733 | 132,265 | 29,326 | |||||||||||||||||||
| Corporate expenses and other | 35,104 | 22,769 | 102,342 | 70,805 | |||||||||||||||||||
| Stock-based compensation | 16,144 | 20,074 | 49,139 | 48,569 | |||||||||||||||||||
| Triple-net operating lease expense | 35,404 | — | 106,318 | — | |||||||||||||||||||
| Total other operating expenses | 467,766 | 226,525 | 1,002,119 | 730,158 | |||||||||||||||||||
| Operating income (loss) | 62,595 | (52,991) | 482,446 | (199,884) | |||||||||||||||||||
| Other non-operating income and expenses | |||||||||||||||||||||||
| Interest income | 46,534 | 6,892 | 130,854 | 10,863 | |||||||||||||||||||
| Interest expense, net of amounts capitalized | (188,571) | (165,277) | (566,554) | (472,265) | |||||||||||||||||||
| Change in derivatives fair value | (50,637) | 5,839 | (3,255) | 14,801 | |||||||||||||||||||
| Gain (loss) on debt financing transactions | 2,928 | — | (12,683) | — | |||||||||||||||||||
| Other | 3,861 | (864) | (19,794) | (26,090) | |||||||||||||||||||
| Total other non-operating income and expenses | (185,885) | (153,410) | (471,432) | (472,691) | |||||||||||||||||||
| Income (loss) before income taxes | (123,290) | (206,401) | 11,014 | (672,575) | |||||||||||||||||||
| Benefit (provision) for income taxes | 2,749 | (1,390) | (2,574) | (3,248) | |||||||||||||||||||
| Net income (loss) | (120,541) | (207,791) | 8,440 | (675,823) | |||||||||||||||||||
| Net (income) loss attributable to noncontrolling interests | 3,863 | 64,899 | (7,602) | 219,556 | |||||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (116,678) | $ | (142,892) | $ | 838 | $ | (456,267) |
(1) "Adjusted Property EBITDAR" is net income (loss) before interest, income taxes, depreciation and amortization, pre-opening expenses, impairment of goodwill and intangible assets, property charges and other, triple-net operating lease rent expense related to Encore Boston Harbor, 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, gain (loss) on debt financing transactions, and other non-operating income and expenses. Adjusted Property EBITDAR 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 EBITDAR 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 EBITDAR 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 EBITDAR 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 EBITDAR 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 EBITDAR should not be considered as an alternative to operating income (loss) 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 EBITDAR 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, triple-net operating lease rent expense related to Encore Boston Harbor, interest payments, debt principal repayments, income taxes and other non-recurring charges, which are not reflected in Adjusted Property EBITDAR. Also, the Company's calculation of Adjusted Property EBITDAR may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
(2) For the three and nine months ended September 30, 2023, includes $97.7 million related to the Company's decision to cease operating Wynn Interactive's online sports betting and iGaming platform in certain jurisdictions.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| September 30, 2023 | December 31, 2022 | ||||||||||
| Assets | |||||||||||
| Macau Operations: | |||||||||||
| Wynn Palace | $ | 2,929,750 | $ | 2,884,073 | |||||||
| Wynn Macau | 1,712,077 | 1,430,051 | |||||||||
| Other Macau | 858,098 | 268,017 | |||||||||
| Total Macau Operations | 5,499,925 | 4,582,141 | |||||||||
| Las Vegas Operations | 3,133,145 | 3,168,597 | |||||||||
| Encore Boston Harbor | 2,024,697 | 2,080,424 | |||||||||
| Wynn Interactive | 86,067 | 213,837 | |||||||||
| Corporate and other | 2,592,427 | 3,370,101 | |||||||||
| Total | $ | 13,336,261 | $ | 13,415,100 |
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