WYNN RESORTS LTD - Quarter Report: 2020 March (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the quarterly period ended March 31, 2020
OR
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
For the transition period from to
Commission File No. 000-50028
WYNN RESORTS, LIMITED
(Exact name of registrant as specified in its charter)
| Nevada | 46-0484987 | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
3131 Las Vegas Boulevard South - Las Vegas, Nevada 89109
(Address of principal executive offices) (Zip Code)
(702) 770-7555
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
| Common stock, par value $0.01 | WYNN | Nasdaq Global Select Market | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||||||
| Emerging growth company | ☐ | |||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
| Class | Outstanding at April 27, 2020 | |||||||
| Common stock, par value $0.01 | 107,868,264 | |||||||
WYNN RESORTS, LIMITED AND SUBSIDIARIES
FORM 10-Q
INDEX
| Part I. | Financial Information | |||||||
| Part II. | Other Information | |||||||
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
| March 31, 2020 | December 31, 2019 | ||||||||||
| (unaudited) | |||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 2,880,971 | $ | 2,351,904 | |||||||
Accounts receivable, net of allowance for credit losses of $59,971 and $39,317 | 380,771 | 346,429 | |||||||||
| Inventories | 86,182 | 88,519 | |||||||||
| Prepaid expenses and other | 67,440 | 69,485 | |||||||||
| Total current assets | 3,415,364 | 2,856,337 | |||||||||
| Property and equipment, net | 9,539,407 | 9,623,832 | |||||||||
| Restricted cash | 4,930 | 6,388 | |||||||||
| Intangible assets, net | 143,857 | 146,414 | |||||||||
| Operating lease assets | 446,564 | 452,919 | |||||||||
| Deferred income taxes, net | 487,402 | 562,262 | |||||||||
| Other assets | 235,823 | 223,129 | |||||||||
| Total assets | $ | 14,273,347 | $ | 13,871,281 | |||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts and construction payables | $ | 194,226 | $ | 262,437 | |||||||
| Customer deposits | 913,395 | 824,269 | |||||||||
| Gaming taxes payable | 48,348 | 168,043 | |||||||||
| Accrued compensation and benefits | 249,092 | 180,140 | |||||||||
| Accrued interest | 106,344 | 73,136 | |||||||||
| Current portion of long-term debt | 235,997 | 323,876 | |||||||||
| Other accrued liabilities | 137,435 | 150,983 | |||||||||
| Total current liabilities | 1,884,837 | 1,982,884 | |||||||||
| Long-term debt | 11,133,048 | 10,079,983 | |||||||||
| Long-term operating lease liabilities | 156,120 | 159,182 | |||||||||
| Other long-term liabilities | 106,862 | 107,760 | |||||||||
| Total liabilities | 13,280,867 | 12,329,809 | |||||||||
| Commitments and contingencies (Note 14) | |||||||||||
| Stockholders' equity: | |||||||||||
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; 123,403,105 and 122,837,930 shares issued; 107,884,163 and 107,363,943 shares outstanding, respectively | 1,234 | 1,228 | |||||||||
Treasury stock, at cost; 15,518,942 and 15,473,987 shares, respectively | (1,416,525) | (1,410,998) | |||||||||
| Additional paid-in capital | 2,526,062 | 2,512,676 | |||||||||
| Accumulated other comprehensive loss | (947) | (1,679) | |||||||||
| Retained earnings | 132,266 | 641,818 | |||||||||
| Total Wynn Resorts, Limited stockholders' equity | 1,242,090 | 1,743,045 | |||||||||
| Noncontrolling interests | (249,610) | (201,573) | |||||||||
| Total stockholders' equity | 992,480 | 1,541,472 | |||||||||
| Total liabilities and stockholders' equity | $ | 14,273,347 | $ | 13,871,281 | |||||||
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 March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Operating revenues: | |||||||||||
| Casino | $ | 570,789 | $ | 1,185,101 | |||||||
| Rooms | 152,681 | 191,270 | |||||||||
| Food and beverage | 149,414 | 173,219 | |||||||||
| Entertainment, retail and other | 80,832 | 101,956 | |||||||||
| Total operating revenues | 953,716 | 1,651,546 | |||||||||
| Operating expenses: | |||||||||||
| Casino | 442,690 | 750,071 | |||||||||
| Rooms | 73,480 | 63,706 | |||||||||
| Food and beverage | 175,910 | 148,761 | |||||||||
| Entertainment, retail and other | 45,580 | 44,044 | |||||||||
| General and administrative | 234,328 | 217,322 | |||||||||
| Provision for credit losses | 20,613 | 5,422 | |||||||||
| Pre-opening | 2,551 | 27,713 | |||||||||
| Depreciation and amortization | 178,746 | 136,557 | |||||||||
| Property charges and other | 27,229 | 2,774 | |||||||||
| Total operating expenses | 1,201,127 | 1,396,370 | |||||||||
| Operating income (loss) | (247,411) | 255,176 | |||||||||
| Other income (expense): | |||||||||||
| Interest income | 7,953 | 7,287 | |||||||||
| Interest expense, net of amounts capitalized | (128,827) | (93,180) | |||||||||
| Change in derivatives fair value | (15,660) | (1,509) | |||||||||
| Loss on extinguishment of debt | (843) | — | |||||||||
| Other | 10,335 | (6,358) | |||||||||
| Other income (expense), net | (127,042) | (93,760) | |||||||||
| Income (loss) before income taxes | (374,453) | 161,416 | |||||||||
| Provision for income taxes | (75,800) | (1,685) | |||||||||
| Net income (loss) | (450,253) | 159,731 | |||||||||
| Less: net (income) loss attributable to noncontrolling interests | 48,216 | (54,859) | |||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (402,037) | $ | 104,872 | |||||||
| Basic and diluted net income (loss) per common share: | |||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited: | |||||||||||
| Basic | $ | (3.77) | $ | 0.98 | |||||||
| Diluted | $ | (3.77) | $ | 0.98 | |||||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | 106,663 | 106,792 | |||||||||
| Diluted | 106,663 | 107,073 | |||||||||
| Dividends declared per common share | $ | 1.00 | $ | 0.75 | |||||||
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 March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Net income (loss) | $ | (450,253) | $ | 159,731 | |||||||
| Other comprehensive income (loss): | |||||||||||
| Foreign currency translation adjustments, before and after tax | 1,015 | (888) | |||||||||
| Total comprehensive income (loss) | (449,238) | 158,843 | |||||||||
| Less: comprehensive (income) loss attributable to noncontrolling interests | 47,933 | (54,612) | |||||||||
| Comprehensive income (loss) attributable to Wynn Resorts, Limited | $ | (401,305) | $ | 104,231 | |||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(in thousands, except share data)
(unaudited)
| For the Three Months Ended March 31, 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total Wynn Resorts, Ltd. stockholders' equity | Noncontrolling interests | Total stockholders' equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2020 | 107,363,943 | $ | 1,228 | $ | (1,410,998) | $ | 2,512,676 | $ | (1,679) | $ | 641,818 | $ | 1,743,045 | $ | (201,573) | $ | 1,541,472 | ||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | (402,037) | (402,037) | (48,216) | (450,253) | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | 732 | — | 732 | 283 | 1,015 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 620,745 | 6 | — | 6,086 | — | — | 6,092 | 629 | 6,721 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (55,570) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (44,955) | — | (5,527) | — | — | — | (5,527) | — | (5,527) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (107,515) | (107,515) | 14 | (107,501) | ||||||||||||||||||||||||||||||||||||||||||||
| Distribution to non-controlling interest | — | — | — | — | — | — | — | (998) | (998) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 7,300 | — | — | 7,300 | 251 | 7,551 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2020 | 107,884,163 | $ | 1,234 | $ | (1,416,525) | $ | 2,526,062 | $ | (947) | $ | 132,266 | $ | 1,242,090 | $ | (249,610) | $ | 992,480 | ||||||||||||||||||||||||||||||||||||
| For the Three Months Ended March 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares outstanding | Par value | Treasury stock | Additional paid-in capital | Accumulated other comprehensive loss | Retained earnings | Total Wynn Resorts, Ltd. stockholders' equity | Noncontrolling interests | Total stockholders' equity | |||||||||||||||||||||||||||||||||||||||||||||
| Balances, January 1, 2019 | 107,232,026 | $ | 1,221 | $ | (1,344,012) | $ | 2,457,079 | $ | (1,950) | $ | 921,785 | $ | 2,034,123 | $ | (219,334) | $ | 1,814,789 | ||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | 104,872 | 104,872 | 54,859 | 159,731 | ||||||||||||||||||||||||||||||||||||||||||||
| Currency translation adjustment | — | — | — | — | (641) | — | (641) | (247) | (888) | ||||||||||||||||||||||||||||||||||||||||||||
| Exercise of stock options | 77,690 | 1 | — | 4,063 | — | — | 4,064 | — | 4,064 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of restricted stock | 396,596 | 4 | — | 14,344 | — | — | 14,348 | 785 | 15,133 | ||||||||||||||||||||||||||||||||||||||||||||
| Cancellation of restricted stock | (1,045) | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||
| Shares repurchased by the Company and held as treasury shares | (44,818) | — | (5,401) | — | — | — | (5,401) | — | (5,401) | ||||||||||||||||||||||||||||||||||||||||||||
| Cash dividends declared | — | — | — | — | — | (80,685) | (80,685) | 17 | (80,668) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | 7,540 | — | — | 7,540 | 943 | 8,483 | ||||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2019 | 107,660,449 | $ | 1,226 | $ | (1,349,413) | $ | 2,483,026 | $ | (2,591) | $ | 945,972 | $ | 2,078,220 | $ | (162,977) | $ | 1,915,243 | ||||||||||||||||||||||||||||||||||||
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)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income (loss) | $ | (450,253) | $ | 159,731 | |||||||
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||
| Depreciation and amortization | 178,746 | 136,557 | |||||||||
| Deferred income taxes | 74,860 | (76) | |||||||||
| Stock-based compensation expense | 9,364 | 10,338 | |||||||||
| Amortization of debt issuance costs | 6,944 | 7,594 | |||||||||
| Loss on extinguishment of debt | 843 | — | |||||||||
| Provision for credit losses | 20,613 | 5,422 | |||||||||
| Change in derivatives fair value | 15,660 | 1,509 | |||||||||
| Property charges and other | 16,894 | 9,133 | |||||||||
| Increase (decrease) in cash from changes in: | |||||||||||
| Receivables, net | (56,284) | 11,088 | |||||||||
| Inventories, prepaid expenses and other | 5,135 | (13,939) | |||||||||
| Customer deposits | 71,736 | (37,398) | |||||||||
| Accounts payable and accrued expenses | (70,758) | (26,101) | |||||||||
| Net cash (used in) provided by operating activities | (176,500) | 263,858 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures, net of construction payables and retention | (139,316) | (310,279) | |||||||||
| Purchase of intangible and other assets | — | (1,000) | |||||||||
| Proceeds from sale of assets and other | 2,162 | 404 | |||||||||
| Net cash used in investing activities | (137,154) | (310,875) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 1,469,028 | 250,000 | |||||||||
| Repayments of long-term debt | (515,194) | (500,503) | |||||||||
| Repurchase of common stock | (5,527) | (5,401) | |||||||||
| Finance lease payment | (37) | — | |||||||||
| Proceeds from exercise of stock options | 70 | 4,064 | |||||||||
| Dividends paid | (107,426) | (80,773) | |||||||||
| Distribution to noncontrolling interest | (998) | — | |||||||||
| Payments for financing costs | (1,919) | (10,496) | |||||||||
| Net cash provided by (used in) financing activities | 837,997 | (343,109) | |||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | 3,266 | (2,404) | |||||||||
| Cash, cash equivalents and restricted cash: | |||||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | 527,609 | (392,530) | |||||||||
| Balance, beginning of period | 2,358,292 | 2,219,323 | |||||||||
| Balance, end of period | $ | 2,885,901 | $ | 1,826,793 | |||||||
| Supplemental cash flow disclosures: | |||||||||||
| Cash paid for interest, net of amounts capitalized | $ | 88,438 | $ | 71,343 | |||||||
| Liability settled with shares of common stock | $ | 6,720 | $ | 15,134 | |||||||
| Accounts and construction payables related to property and equipment | $ | 127,895 | $ | 226,829 | |||||||
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 of the People's Republic of China ("Macau"), the Company owns approximately 72% of Wynn Macau, Limited ("WML"), which includes the operations of the Wynn Palace and Wynn Macau resorts. The Company refers to Wynn Palace and Wynn Macau as its Macau Operations. In Las Vegas, Nevada, the Company operates and, with the exception of certain retail space, owns 100% of Wynn Las Vegas. Additionally, the Company is a 50.1% owner and managing member of a joint venture that owns and leases certain retail space at Wynn Las Vegas (the "Retail Joint Venture"). The Company refers to Wynn Las Vegas and the Retail Joint Venture as its Las Vegas Operations. On June 23, 2019, the Company opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts, that is owned 100% by the Company.
Recent Developments Related to COVID-19
As previously disclosed, in January 2020, an outbreak of a new strain of coronavirus, COVID-19 ("COVID-19"), was identified. Since then, COVID-19 has spread around the world, and steps have been taken by various countries, including those in which the Company operates, to advise citizens to avoid non-essential travel, to restrict inbound international travel, to implement closures of non-essential operations, and to implement quarantines and lockdowns to contain the spread of the virus. Currently, no fully effective treatments or vaccines have been developed, and there can be no assurance as to if or when an effective treatment or vaccine will be discovered.
In response to the COVID-19 pandemic, the Macau government announced on February 4, 2020 the closure of all casino operations in Macau, including those at Wynn Palace and Wynn Macau, for a period of 15 days. On February 20, 2020, the Company's casino operations at Wynn Palace and Wynn Macau reopened on a reduced basis and have since been fully restored; however, certain health safeguards, such as traveler quarantines, limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and health declarations remain in effect at the present time. The Company is currently unable to determine when these measures will be lifted.
Visitation to Macau has fallen meaningfully since the outbreak of COVID-19, driven by the outbreak's strong deterrent effect on travel and social activities, the Chinese government's suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau, quarantine measures, travel and entry restrictions in Macau, Hong Kong and certain cities and regions in mainland China, the suspension of ferry services and other modes of transportation with Macau and regionally, and the ban on entry or enhanced quarantine requirements for any residents of Greater China attempting to enter Macau. Persons who are not residents of Greater China are barred from entry to Macau at this time.
On March 14, 2020, the Massachusetts Gaming Commission temporarily suspended operations at all casinos in Massachusetts, including Encore Boston Harbor. On March 17, 2020, the Nevada government suspended all casino and non-essential operations, including all operations at Wynn Las Vegas. Accordingly, Encore Boston Harbor and Wynn Las Vegas ceased all operations and closed to the public on March 15, 2020 and March 17, 2020, respectively. Both resorts will remain closed until authorized to re-open under U.S. and state government directives. During the first quarter of 2020, the Company committed to pay salary, tips and benefits continuation for all U.S. employees, inclusive of part-time employees, through May 15, 2020. The Company has accrued $75.7 million of expense related to this commitment for the period from April 1 through May 15, 2020 within the accompanying Condensed Consolidated Financial Statements. In May 2020, the Company announced that it had extended its commitment through May 31, 2020.
The COVID-19 outbreak has had and will continue to have an adverse effect on the Company's results of 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 protective measures, management cannot reasonably estimate the impact to the Company's future results of operations, cash flows, or financial condition.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
As of March 31, 2020, the Company had total cash and cash equivalents, excluding restricted cash, of $2.88 billion, and had access to $40.9 million and $74.2 million of available borrowing capacity from the WRF Revolving Facility and Wynn Macau Revolving Facility, respectively. In addition, the Company has suspended its quarterly dividend program and has postponed major project capital expenditures. Given the Company's liquidity position at March 31, 2020 and the steps the Company has taken subsequent to March 31, 2020 as further described in Note 6, "Long-Term Debt," the Company believes it is able to support continuing operations and respond to the current COVID-19 pandemic challenges.
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 months ended March 31, 2020 are not necessarily indicative of results to be expected for the full fiscal year. 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, 2019.
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 15, "Retail Joint Venture." All significant intercompany accounts and transactions have been eliminated.
Accounts Receivable
Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are recorded at amortized cost. Casino receivables primarily consist of credit issued to patrons in the form of markers and advances paid to gaming promoters. The Company issues credit based on factors such as level of play and financial resources, following background and credit checks. The casino credit extended by the Company is generally unsecured and due on demand. Gaming promoter advances are settled shortly after each month end.
An estimated allowance for credit losses is maintained to reduce the Company's receivables to their carrying amount, which reflects the net amount the Company expects to collect. The allowance estimate reflects specific review of customer accounts and outstanding gaming promoter accounts with a balance over a specified dollar amount, based upon the age of the account, the customer's financial condition as well as management's experience with historical and current collection trends, current economic and business conditions, and management's expectations of future economic and business conditions and forecasts. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received.
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 $254.0 million and $589.0 million for the three months ended March 31, 2020 and 2019, respectively.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Recently Adopted Accounting Standards
Financial Instruments - Credit Losses
The FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) in 2016. The new guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. For trade and other receivables, loans and other financial instruments, the Company is required to use a forward-looking expected loss model rather than the incurred loss model for recognizing credit losses which reflects losses that are probable. The Company adopted the guidance effective January 1, 2020, and this adoption did not have a material effect on its Condensed Consolidated Financial Statements.
Cloud Computing Arrangement Implementation Costs
In August 2018, the FASB issued ASU No. 2018-15, Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The ASU is intended to eliminate potential diversity in practice in accounting for costs incurred to implement cloud computing arrangements that are service contracts by requiring customers in such arrangements to follow internal-use software guidance with respect to such costs, with any resulting deferred implementation costs recognized over the term of the contract in the same income statement line item as the fees associated with the hosting element of the arrangement. The Company adopted the guidance effective January 1, 2020, and this adoption did not have a material effect on its Condensed Consolidated Financial Statements.
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The new guidance amends the disclosure requirements for recurring and nonrecurring fair value measurements by removing, modifying, and adding certain disclosures on fair value measurements in ASC 820. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted the guidance effective January 1, 2020, and this adoption did not have a material effect on its Condensed Consolidated Financial Statements.
Note 3 - Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following (in thousands):
| March 31, 2020 | December 31, 2019 | ||||||||||
| Cash and cash equivalents: | |||||||||||
Cash (1) | $ | 1,722,706 | $ | 1,265,502 | |||||||
Cash equivalents (2) | 1,158,265 | 1,086,402 | |||||||||
| Total cash and cash equivalents | 2,880,971 | 2,351,904 | |||||||||
Restricted cash (3) | 4,930 | 6,388 | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 2,885,901 | $ | 2,358,292 | |||||||
(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 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):
| March 31, 2020 | December 31, 2019 | ||||||||||
| Casino | $ | 333,487 | $ | 304,137 | |||||||
| Hotel | 20,454 | 22,114 | |||||||||
| Other | 86,801 | 59,495 | |||||||||
| 440,742 | 385,746 | ||||||||||
| Less: allowance for credit losses | (59,971) | (39,317) | |||||||||
| $ | 380,771 | $ | 346,429 | ||||||||
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino receivables. As of March 31, 2020 and December 31, 2019, approximately 82.9% and 79.0%, 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 our customers reside could affect the collectability of such receivables. The Company believes the concentration of its credit risk in casino receivables is mitigated substantially by its credit investigation process, credit policies and collection procedures.
The Company’s allowance for casino credit losses was 17.2% and 12.4% of gross casino receivables as of March 31, 2020 and December 31, 2019, respectively. Although the Company believes that its allowance is adequate, it is possible the estimated amounts of cash collections with respect to receivables could change. The Company’s allowance for credit losses from its hotel and other receivables is not material.
The following table shows the movement in the Company's allowance for credit losses recognized for receivables that occurred during the period (in thousands):
| March 31, 2020 | March 31, 2019 | ||||||||||
| Balance at beginning of year | $ | 39,317 | $ | 32,694 | |||||||
| Provision for credit losses | 20,613 | 5,422 | |||||||||
| Write-offs | (70) | (2,975) | |||||||||
| Effect of exchange rate | 111 | (47) | |||||||||
| Balance at end of period | $ | 59,971 | $ | 35,094 | |||||||
Note 5 - Property and Equipment, net
Property and equipment, net consisted of the following (in thousands):
| March 31, 2020 | December 31, 2019 | ||||||||||
| Buildings and improvements | $ | 9,708,047 | $ | 9,367,241 | |||||||
| Land and improvements | 1,260,386 | 1,246,679 | |||||||||
| Furniture, fixtures and equipment | 2,983,616 | 2,932,483 | |||||||||
| Airplanes | 110,623 | 110,623 | |||||||||
| Construction in progress | 158,198 | 477,333 | |||||||||
| 14,220,870 | 14,134,359 | ||||||||||
| Less: accumulated depreciation | (4,681,463) | (4,510,527) | |||||||||
| $ | 9,539,407 | $ | 9,623,832 | ||||||||
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Depreciation expense for the three months ended March 31, 2020 and 2019 was $172.3 million and $132.3 million, respectively.
Note 6 - Long-Term Debt
Long-term debt consisted of the following (in thousands):
| March 31, 2020 | December 31, 2019 | ||||||||||
| Macau Related: | |||||||||||
Wynn Macau Credit Facilities (1): | |||||||||||
Wynn Macau Term Loan, due 2022 (2) | $ | 2,156,491 | $ | 2,302,540 | |||||||
Wynn Macau Revolver, due 2022 (3) | 676,711 | 350,232 | |||||||||
| WML 4 7/8% Senior Notes, due 2024 | 600,000 | 600,000 | |||||||||
| WML 5 1/2% Senior Notes, due 2027 | 750,000 | 750,000 | |||||||||
| WML 5 1/8% Senior Notes, due 2029 | 1,000,000 | 1,000,000 | |||||||||
| U.S. and Corporate Related: | |||||||||||
WRF Credit Facilities (4): | |||||||||||
| WRF Term Loan, due 2024 | 975,000 | 987,500 | |||||||||
| WRF Revolver, due 2024 | 791,000 | — | |||||||||
| WLV 4 1/4% Senior Notes, due 2023 | 500,000 | 500,000 | |||||||||
| WLV 5 1/2% Senior Notes, due 2025 | 1,780,000 | 1,780,000 | |||||||||
| WLV 5 1/4% Senior Notes, due 2027 | 880,000 | 880,000 | |||||||||
| WRF 5 1/8% Senior Notes, due 2029 | 750,000 | 750,000 | |||||||||
Retail Term Loan, due 2025 (5) | 615,000 | 615,000 | |||||||||
| 11,474,202 | 10,515,272 | ||||||||||
| Less: Unamortized debt issuance costs and original issue discounts and premium, net | (105,157) | (111,413) | |||||||||
| 11,369,045 | 10,403,859 | ||||||||||
| Less: Current portion of long-term debt | (235,997) | (323,876) | |||||||||
| Total long-term debt, net of current portion | $ | 11,133,048 | $ | 10,079,983 | |||||||
(1) The borrowings under the Wynn Macau Credit Facilities bear interest at LIBOR or HIBOR plus a margin of 1.50% to 2.25% per annum based on Wynn Resorts Macau S.A.’s leverage ratio.
(2) Approximately $1.22 billion and $936.6 million of the Wynn Macau Term Loan currently bears interest at a rate of LIBOR plus 1.75% per year and HIBOR plus 1.75% per year, respectively. As of March 31, 2020, the weighted average interest rate was approximately 3.20%.
(3) Approximately $384.8 million and $291.9 million of the Wynn Macau Revolver currently bears interest at a rate of LIBOR plus 1.75% per year and HIBOR plus 1.75% per year, respectively. As of March 31, 2020, the weighted average interest rate was approximately 2.71%. As of March 31, 2020, the available borrowing capacity under the Wynn Macau Revolver was $74.2 million. In April 2020, the Company drew an additional $50.0 million under the Wynn Macau Revolver.
(4) The WRF Credit Facilities bear interest at a rate of LIBOR plus 1.75% per year. As of March 31, 2020, the weighted average interest rate was approximately 2.68%. Additionally, as of March 31, 2020, the available borrowing capacity under the WRF Revolver was $40.9 million, net of $18.1 million in outstanding letters of credit. In April 2020, the Company drew an additional $25.0 million under the WRF Revolver.
(5) The Retail Term Loan bears interest at a rate of LIBOR plus 1.70% per year. As of March 31, 2020, the interest rate was 3.28%.
WRF 7 3/4% Senior Notes, due 2025
On April 14, 2020, WRF and its subsidiary Wynn Resorts Capital Corp. (collectively with WRF, the “WRF Issuers”), each an indirect wholly owned subsidiary of the Company, issued $600.0 million aggregate principal amount of 7 3/4% Senior Notes due 2025 (the “2025 WRF Notes”) pursuant to an indenture (the “2025 Indenture”) among the WRF Issuers, the guarantors party thereto, and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering. The 2025 WRF Notes were issued at par.
The 2025 WRF Notes will mature on April 15, 2025 and bear interest at the rate of 7 3/4% per annum payable in arrears semi-annually on April 15 and October 15 of each year, beginning on October 15, 2020. The WRF Issuers may redeem some or
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
all of the 2025 WRF Notes at any time prior to April 15, 2022 at a redemption price equal to 100% of the aggregate principal amount of the 2025 WRF Notes to be redeemed plus a “make-whole” premium and accrued and unpaid interest. In addition, at any time prior to April 15, 2022, the WRF Issuers may, on any one or more occasions, redeem up to 35% of the original aggregate principal amount of the 2025 WRF Notes with the proceeds of one or more equity offerings at a redemption price equal to 107.75% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the applicable redemption date. On or after April 15, 2022, the WRF Issuers may redeem some or all of the 2025 WRF Notes at the redemption prices set forth in the 2025 Indenture plus accrued and unpaid interest. In the event of a change of control triggering event, the WRF Issuers must offer to repurchase the 2025 WRF Notes at a repurchase price equal to 101% of the aggregate principal amount thereof plus any accrued and unpaid interest, to, but not including, the repurchase date. The 2025 WRF Notes are subject to disposition and redemption requirements imposed by gaming laws and regulations of applicable gaming regulatory authorities.
The 2025 WRF Notes are jointly and severally guaranteed by each of WRF’s existing domestic restricted subsidiaries that guarantee indebtedness under the WRF's senior secured credit facilities and the WRF Issuers' existing 5 1/8% senior notes due 2029, including Wynn Las Vegas, LLC and each of its subsidiaries that guarantees its existing senior notes due 2023, 2025 and 2027.
The 2025 Indenture contains covenants that limit the ability of the WRF Issuers and the guarantors to, among other things, enter into sale-leaseback transactions, create or incur liens to secure debt, and merge, consolidate or sell all or substantially all of the WRF Issuers’ assets. These covenants are subject to exceptions and qualifications set forth in the 2025 Indenture.
The 2025 Indenture also contains customary events of default, including, but not limited to, failure to make required payments, failure to comply with certain covenants, failure to pay certain other indebtedness, certain events of bankruptcy and insolvency, and failure to pay certain judgments. An event of default under the 2025 Indenture allows either the Trustee or the holders of at least 25% in aggregate principal amount of the 2025 WRF Notes, as applicable, issued under such 2025 Indenture to accelerate the amounts due under the 2025 WRF Notes, or in the case of a bankruptcy or insolvency, will automatically cause the acceleration of the amounts due under the 2025 WRF Notes.
The 2025 WRF Notes were offered pursuant to an exemption under the Securities Act of 1933, as amended (the "Securities Act"). The 2025 WRF Notes were offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act or outside the United States to certain persons in reliance on Regulation S under the Securities Act. The 2025 WRF Notes have not been and will not be registered under the Securities Act or under any state securities laws. Therefore, the WRF 2025 Notes may not be offered or sold within the United States to, or for the account or benefit of, any United States person unless the offer or sale would qualify for a registration exemption from the Securities Act and applicable state securities laws.
WRF Credit Agreement Amendment
On April 10, 2020, WRF and certain of its subsidiaries entered into an amendment (the “WRF Credit Agreement Amendment”) to its existing credit agreement (the “WRF Credit Agreement”) among Deutsche Bank AG New York Branch, as administrative agent and collateral agent, and the other lenders party thereto.
The WRF Credit Agreement Amendment amends the WRF Credit Agreement to, among other things, implement a financial covenant relief period (the “Financial Covenant Relief Period”) through April 1, 2021 (unless earlier terminated by WRF), implement a financial covenant increase period (the “Financial Covenant Increase Period”) commencing on the first day after the expiration of the Financial Covenant Relief Period and ending on the first day of the fourth fiscal quarter after the expiration of the Financial Covenant Relief Period (unless earlier terminated by WRF), amend the definition of “Consolidated EBITDA” in the WRF Credit Agreement during the Financial Covenant Increase Period, amend WRF’s financial reporting obligations (including extensions to certain deadlines), add certain restrictions on restricted payments (including restrictions on a portion of dividends received from WRF’s subsidiaries) during the Financial Covenant Relief Period and the Financial Covenant Increase Period, and amend the definition of “Material Adverse Effect” in the WRF Credit Agreement to take into consideration COVID-19.
During the Financial Covenant Relief Period, the existing consolidated first lien net leverage ratio financial covenant will be replaced with a minimum liquidity financial covenant that requires WRF and its restricted subsidiaries to maintain liquidity of at least $300.0 million at all times (with liquidity being the sum of unrestricted operating cash, as defined in the WRF Credit Agreement, and the available borrowing capacity under the WRF Revolver). Following the Financial Covenant Relief Period
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
and for as long as the Financial Covenant Increase Period is in effect, WRF may not permit the consolidated first lien net leverage ratio as of the last day of any fiscal quarter to exceed for the first fiscal quarter of the Financial Covenant Increase Period, 4.50 to 1.00, for the second fiscal quarter of the Financial Covenant Increase Period, 4.25 to 1.00, for the third fiscal quarter of the Financial Covenant Increase Period, 4.00 to 1.00, and for each subsequent fiscal quarter thereafter (including from and including the first fiscal quarter during which the Financial Covenant Increase Period has been terminated by WRF), 3.75 to 1.00.
Debt Covenant Compliance
As of March 31, 2020, 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 March 31, 2020 and December 31, 2019, was approximately $9.96 billion and $10.80 billion, respectively, compared to its carrying value, excluding debt issuance costs and original issue discount and premium, of $11.47 billion and $10.52 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 7 - Stockholders' Equity
Dividends
During the first quarter of 2020 and 2019, the Company paid a cash dividend of $1.00 and $0.75 per share, respectively, and recorded $107.5 million and $80.7 million as a reduction of retained earnings from cash dividends declared, respectively.
On May 6, 2020, the Company announced that it had suspended its quarterly dividend program due to the financial impact of the COVID-19 pandemic.
Noncontrolling Interests
During the three months ended March 31, 2020, the Retail Joint Venture made aggregate distributions of approximately $1.0 million to its non-controlling interest holder in the normal course of business. During the three months ended March 31, 2019, the Retail Joint Venture did not make any distribution to its non-controlling interest holder. For more information on the Retail Joint Venture, see Note 15, "Retail Joint Venture".
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 8 - Fair Value Measurements
The following tables present assets and liabilities carried at fair value (in thousands):
| Fair Value Measurements Using: | |||||||||||||||||||||||
| March 31, 2020 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 1,158,265 | $ | 400,839 | $ | 757,426 | — | ||||||||||||||||
| Restricted cash | $ | 4,930 | $ | 2,053 | $ | 2,877 | — | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate collar | $ | 19,508 | — | $ | 19,508 | — | |||||||||||||||||
| Fair Value Measurements Using: | |||||||||||||||||||||||
| December 31, 2019 | Quoted Market Prices in Active Markets (Level 1) | Other Observable Inputs (Level 2) | Unobservable Inputs (Level 3) | ||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
| Cash equivalents | $ | 1,086,402 | — | $ | 1,086,402 | — | |||||||||||||||||
| Restricted cash | $ | 6,388 | $ | 2,048 | $ | 4,340 | — | ||||||||||||||||
| Liabilities: | |||||||||||||||||||||||
| Interest rate collar | $ | 3,847 | — | $ | 3,847 | — | |||||||||||||||||
Note 9 - 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):
| March 31, 2020 | December 31, 2019 | Increase (decrease) | March 31, 2019 | December 31, 2018 | Increase (decrease) | ||||||||||||||||||||||||||||||
Casino outstanding chips and front money deposits (1) | $ | 857,233 | $ | 769,053 | $ | 88,180 | $ | 863,160 | $ | 905,561 | $ | (42,401) | |||||||||||||||||||||||
Advance room deposits and ticket sales (2) | 29,293 | 49,834 | (20,541) | 47,128 | 42,197 | 4,931 | |||||||||||||||||||||||||||||
Other gaming-related liabilities (3) | 5,485 | 13,970 | (8,485) | 7,904 | 12,694 | (4,790) | |||||||||||||||||||||||||||||
Loyalty program and related liabilities (4) | 20,397 | 21,148 | (751) | 16,504 | 18,148 | (1,644) | |||||||||||||||||||||||||||||
| $ | 912,408 | $ | 854,005 | $ | 58,403 | $ | 934,696 | $ | 978,600 | $ | (43,904) | ||||||||||||||||||||||||
(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.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Note 10 - Stock-Based Compensation
The total compensation cost for stock-based compensation plans was recorded as follows (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
Casino (1) | $ | (896) | $ | 2,584 | |||||||
| Rooms | 349 | 218 | |||||||||
| Food and beverage | 637 | 332 | |||||||||
| Entertainment, retail and other | 73 | 44 | |||||||||
| General and administrative | 9,201 | 6,830 | |||||||||
| Pre-opening | — | 330 | |||||||||
| Total stock-based compensation expense | 9,364 | 10,338 | |||||||||
| Total stock-based compensation capitalized | 217 | 64 | |||||||||
| Total stock-based compensation costs | $ | 9,581 | $ | 10,402 | |||||||
(1) For the three months ended March 31, 2020, reflects the reversal of $3.3 million of compensation cost previously recognized for awards forfeited in connection with the departure of an employee.
Note 11 - Income Taxes
The Company recorded an income tax expense of $75.8 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively. The 2020 and 2019 income tax expense primarily related to the increase in the valuation allowance for U.S foreign tax credits.
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 and the duration of statutory carryforward periods.
Wynn Macau SA received a five year exemption from Macau's 12% Complementary Tax on casino gaming profits through December 31, 2020. Accordingly, for the three months ended March 31, 2019, the Company was exempt from the payment of such taxes totaling $22.8 million. For the three months ended March 31, 2020, the Company did not have any casino gaming profits exempt from the Macau Complementary Tax. The Company's non-gaming profits remain subject to the Macau Complementary Tax and its casino winnings remain subject to the Macau special gaming tax and other levies in accordance with its concession agreement.
In April 2020, Wynn Macau SA received an extension of the exemption from Macau’s 12% Complementary Tax on casino gaming profits earned from January 1, 2021 to June 26, 2022, the expiration date of the gaming concession agreement.
Note 12 - 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 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. Potentially dilutive securities include outstanding stock options and unvested restricted stock.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
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 March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Numerator: | |||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (402,037) | $ | 104,872 | |||||||
| Denominator: | |||||||||||
| Weighted average common shares outstanding | 106,663 | 106,792 | |||||||||
| Potential dilutive effect of stock options, nonvested, and performance nonvested shares | — | 281 | |||||||||
| Weighted average common and common equivalent shares outstanding | 106,663 | 107,073 | |||||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, basic | $ | (3.77) | $ | 0.98 | |||||||
| Net income (loss) attributable to Wynn Resorts, Limited per common share, diluted | $ | (3.77) | $ | 0.98 | |||||||
| Anti-dilutive stock options, nonvested, and performance nonvested shares excluded from the calculation of diluted net income per share | 1,209 | 355 | |||||||||
Note 13 - Leases
Lessor Arrangements
The following table presents the minimum and contingent operating lease income for the periods presented (in thousands):
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Minimum rental income | $ | 31,650 | $ | 32,708 | |||||||
| Contingent rental income | 6,679 | 14,971 | |||||||||
| Total rental income | $ | 38,329 | $ | 47,679 | |||||||
Note 14 - 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.
Massachusetts Gaming License Related Actions
On September 17, 2014, the Massachusetts Gaming Commission ("MGC") designated Wynn MA the award winner of the Greater Boston (Region A) gaming license (the "Boston area license"). On November 7, 2014, the gaming license became effective.
Revere Action
On October 16, 2014, the City of Revere, the host community to the unsuccessful bidder for the Boston area license, the International Brotherhood of Electrical Workers, Local 103, and several individuals, filed a complaint against the MGC and its gaming commissioners in Suffolk Superior Court in Boston, Massachusetts (the "Revere Action"). Mohegan Sun ("Mohegan") the other applicant for the Boston area license, joined the lawsuit and challenged the MGC's award of the Boston area license. On December 3, 2015, the court granted the MGC's motion to dismiss the claims asserted in the Revere Action and the court
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
dismissed all claims except Mohegan's claim alleging procedural error by the MGC in granting the license to Wynn MA. The plaintiffs appealed. After multiple appeals and cross appeals, only two claims remained: (1) individual plaintiffs' claim for violation of the open meeting laws; and (2) Mohegan's claim for procedural error. On July 12, 2019, the Suffolk Superior Court granted the MGC's motion for summary judgment and dismissed the open meeting law claim, leaving only Mohegan's procedural claim.
On August 2, 2019, Mohegan filed a motion to file a second amended complaint, to add new claims related to the MGC's allegedly inadequate 2013 investigation. On October 15, 2019, the court granted Mohegan's motion to amend and allowed it to file a second amended intervenor's complaint.
Wynn MA was not named in the Revere Action.
Derivative Litigation
A number of stockholder derivative actions have been filed in state and federal court located in Clark County, Nevada against certain current and former members of the Company's Board of Directors and, in some cases, the Company's current and former officers. Each of the complaints alleges, among other things, breach of fiduciary duties in failing to detect, prevent and remedy alleged inappropriate personal conduct by Stephen A. Wynn in the workplace. On September 19, 2018, the Board established a Special Litigation Committee (the "SLC") to investigate the allegations in the State Derivative Case (as defined below).
The actions filed in the Eighth Judicial District Court of Clark County, Nevada were consolidated as In re Wynn Resorts, Ltd. Derivative Litigation ("State Derivative Case"). On October 26, 2018, the SLC filed a motion to intervene and stay the State Derivative Case pending completion of its investigation, which the court granted.
On June 3, 2019, a separate stockholder derivative action was filed in the Eighth Judicial District Court of Clark County, Nevada alleging substantially similar causes of action as the State Derivative Case with the additional allegation that various of the Company's attorneys committed professional malpractice, and certain current and former executives also breached fiduciary duties and aided and abetted the breach of fiduciary duties, in connection with the alleged inappropriate personal conduct by Stephen A. Wynn in the workplace. On July 26, 2019, the plaintiff voluntarily dismissed Matt Maddox, Stephen A. Wynn, Kimmarie Sinatra, John J. Hagenbuch, Ray R. Irani, Jay L. Johnson, Robert J. Miller, Patricia Mulroy, Clark T. Randt, Jr., Alvin V. Shoemaker, J. Edward Virtue, D. Boone Wayson, and one of the Company's law firms from the action. On September 19, 2019, the court entered an order consolidating this action into the State Derivative Case, and on December 2, 2019, further clarified that this action may not proceed as a separate action apart from the State Derivative Case.
On November 27, 2019, the State Derivative Case parties agreed to terms of a settlement agreement. The court approved the settlement agreement on February 12, 2020, and entered a written order approving the settlement on March 10, 2020. The settlement agreement becomes effective following the exhaustion of any appeals.
In 2018, several actions filed in the United States District Court, District of Nevada were consolidated as In re Wynn Resorts, Ltd. Derivative Litigation ("Federal Derivative Case"), which also claim corporate waste and violation of Section 14(a) of the Exchange Act. In June 2018, the Company filed a motion to dismiss and a motion to stay pending resolution of the Securities Action (described below). On March 29, 2019, the Court granted the Company's request for a stay. On March 25, 2020, the parties stipulated to dismiss the Federal Derivative Case given the approved settlement in the State Derivative Case.
On March 25, 2019, a separate stockholder derivative action was filed in the United States District Court, District of Nevada alleging identical causes of action as the Federal Derivative Case with the additional allegation that the Board of Directors improperly refused the stockholder's demand to commence litigation against the officers and directors of the Company. On June 10, 2019, the Company filed a motion to dismiss, or alternatively to consolidate this action into the Federal Derivative Case, which is stayed. On March 23, 2020, the court denied the Company’s motion to dismiss as moot given the approved settlement in the State Derivative Case.
Each of the actions seeks to recover for the Company unspecified damages, including restitution and disgorgement of profits, and also seeks to recover attorneys' fees, costs and related expenses for the plaintiff.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
Individual Stockholder Actions
A number of stockholders have filed individual actions in the Eighth Judicial District Court of Clark County, Nevada against certain current and former members of the Company's Board of Directors and certain of the Company's current and former officers ("Individual Stockholder Actions"). Each of the complaints alleges that defendants, among other things, breached their fiduciary duties in failing to detect, prevent and remedy alleged inappropriate personal conduct by Stephen A. Wynn in the workplace causing injury to each of the individual stockholders.
On January 29, 2019, the defendants filed motions to dismiss each of the Individual Stockholder Actions. On December 12, 2019, the court entered an order denying the motions to dismiss, which the defendants appealed to the Nevada Supreme Court on December 24, 2019. On January 7, 2020, the Nevada Supreme Court stayed the underlying Individual Stockholder Actions pending a decision on the defendants' appeal.
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. The defendants have filed motions to dismiss, which are currently pending before the court.
The defendants in these actions will vigorously defend against the claims pleaded against them. These actions are in preliminary stages and management has determined that based on proceedings to date, it is currently unable to determine the probability of the outcome of these actions or the range of reasonably possible loss, if any.
Note 15 - Retail Joint Venture
As of March 31, 2020 and December 31, 2019, the Retail Joint Venture had total assets of $92.8 million and $90.0 million, respectively, and total liabilities of $637.4 million and $622.4 million, respectively. As of March 31, 2020 and December 31, 2019, the Retail Joint Venture's liabilities included long-term debt of $611.9 million and $611.7 million, respectively, net of debt issuance costs, related to the outstanding borrowings under the Retail Term Loan.
Note 16 - Segment Information
The Company reviews the results of operations for each of its operating segments, and identifies reportable segments based upon factors such as geography, regulatory environment, and the Company's organizational and management reporting structure. Wynn Macau and Encore, an expansion at Wynn Macau, are managed as a single integrated resort and have been aggregated as one reportable segment ("Wynn Macau"). Wynn Palace is presented as a separate reportable segment and is combined with Wynn Macau for geographical presentation. Wynn Las Vegas, Encore, an expansion at Wynn Las Vegas, and the Retail Joint Venture are managed as a single integrated resort and have been aggregated as one reportable segment ("Las Vegas Operations"). On June 23, 2019, the Company opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts. Encore Boston Harbor is presented as one reportable segment. Other Macau primarily represents the assets for the Company's Macau holding company.
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 March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
| Operating revenues | |||||||||||
| Macau Operations: | |||||||||||
| Wynn Palace | |||||||||||
| Casino | $ | 207,576 | $ | 623,175 | |||||||
| Rooms | 19,710 | 43,314 | |||||||||
| Food and beverage | 13,298 | 28,625 | |||||||||
Entertainment, retail and other (1) | 18,929 | 31,508 | |||||||||
| 259,513 | 726,622 | ||||||||||
| Wynn Macau | |||||||||||
| Casino | 190,128 | 450,242 | |||||||||
| Rooms | 15,911 | 28,867 | |||||||||
| Food and beverage | 9,531 | 20,975 | |||||||||
Entertainment, retail and other (1) | 13,919 | 23,807 | |||||||||
| 229,489 | 523,891 | ||||||||||
| Total Macau Operations | 489,002 | 1,250,513 | |||||||||
| Las Vegas Operations: | |||||||||||
| Casino | 71,295 | 111,684 | |||||||||
| Rooms | 106,105 | 119,089 | |||||||||
| Food and beverage | 105,979 | 123,619 | |||||||||
Entertainment, retail and other (1) | 40,445 | 46,641 | |||||||||
| Total Las Vegas Operations | 323,824 | 401,033 | |||||||||
| Encore Boston Harbor: | |||||||||||
| Casino | 101,790 | — | |||||||||
| Rooms | 10,955 | — | |||||||||
| Food and beverage | 20,606 | — | |||||||||
Entertainment, retail and other (1) | 7,539 | — | |||||||||
| Total Encore Boston Harbor | 140,890 | — | |||||||||
| Total operating revenues | $ | 953,716 | $ | 1,651,546 | |||||||
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| Three Months Ended March 31, | |||||||||||
| 2020 | 2019 | ||||||||||
Adjusted Property EBITDA (2) | |||||||||||
| Macau Operations: | |||||||||||
| Wynn Palace | $ | 10,176 | $ | 222,586 | |||||||
| Wynn Macau | 19,208 | 163,889 | |||||||||
| Total Macau Operations | 29,384 | 386,475 | |||||||||
Las Vegas Operations (3) | (22,077) | 108,302 | |||||||||
Encore Boston Harbor (4) | (12,636) | — | |||||||||
| Total | (5,329) | 494,777 | |||||||||
| Other operating expenses | |||||||||||
| Pre-opening | 2,551 | 27,713 | |||||||||
| Depreciation and amortization | 178,746 | 136,557 | |||||||||
| Property charges and other | 27,229 | 2,774 | |||||||||
| Corporate expenses and other | 24,192 | 62,549 | |||||||||
Stock-based compensation (5) | 9,364 | 10,008 | |||||||||
| Total other operating expenses | 242,082 | 239,601 | |||||||||
| Operating income (loss) | (247,411) | 255,176 | |||||||||
| Other non-operating income and expenses | |||||||||||
| Interest income | 7,953 | 7,287 | |||||||||
| Interest expense, net of amounts capitalized | (128,827) | (93,180) | |||||||||
| Change in derivatives fair value | (15,660) | (1,509) | |||||||||
| Loss on extinguishment of debt | (843) | — | |||||||||
| Other | 10,335 | (6,358) | |||||||||
| Total other non-operating income and expenses | (127,042) | (93,760) | |||||||||
| Income (loss) before income taxes | (374,453) | 161,416 | |||||||||
| Provision for income taxes | (75,800) | (1,685) | |||||||||
| Net income (loss) | (450,253) | 159,731 | |||||||||
| Net (income) loss attributable to noncontrolling interests | 48,216 | (54,859) | |||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | $ | (402,037) | $ | 104,872 | |||||||
(1) Includes lease revenue accounted for under lease accounting guidance. For more information on leases, see Note 13, "Leases".
(2) "Adjusted Property EBITDA" is net income (loss) before interest, income taxes, depreciation and amortization, pre-opening expenses, property charges and other, management and license fees, corporate expenses and other (including intercompany golf course and water rights leases), stock-based compensation, change in derivatives fair value, loss on extinguishment of debt, and other non-operating income and expenses. Adjusted Property EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted Property EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors, as well as a basis for determining certain incentive compensation. We also present Adjusted Property EBITDA because it is used by some investors to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to GAAP. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their EBITDA calculations preopening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, Adjusted Property EBITDA should not be considered as an alternative to operating income as an indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, Adjusted Property EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, income taxes and other non-recurring charges, which are not reflected in Adjusted Property EBITDA. Also, our calculation of Adjusted Property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
(3) For the three months ended March 31, 2020, includes $56.4 million of expense accrued during the quarter related to the Company's commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
(4) For the three months ended March 31, 2020, includes $19.3 million of expense accrued during the quarter related to the Company's commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
(5) Excludes $0.3 million included in pre-opening expenses for the three months ended March 31, 2019.
WYNN RESORTS, LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(unaudited)
| March 31, 2020 | December 31, 2019 | ||||||||||
| Assets | |||||||||||
| Macau Operations: | |||||||||||
| Wynn Palace | $ | 3,666,518 | $ | 3,734,210 | |||||||
| Wynn Macau | 1,713,929 | 1,656,625 | |||||||||
| Other Macau | 1,030,508 | 1,023,411 | |||||||||
| Total Macau Operations | 6,410,955 | 6,414,246 | |||||||||
| Las Vegas Operations | 3,122,987 | 2,806,972 | |||||||||
| Encore Boston Harbor | 2,371,999 | 2,456,667 | |||||||||
| Corporate and other | 2,367,406 | 2,193,396 | |||||||||
| Total | $ | 14,273,347 | $ | 13,871,281 | |||||||
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with, and is qualified in its entirety by, the condensed consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q and the consolidated financial statements appearing in our annual report on Form 10-K for the year ended December 31, 2019. Unless the context otherwise requires, all references herein to the "Company," "we," "us," or "our," or similar terms, refer to Wynn Resorts, Limited, a Nevada corporation, and its consolidated subsidiaries. This discussion and analysis contains forward-looking statements. Please refer to the section below entitled "Special Note Regarding Forward-Looking Statements."
Overview
We are a designer, developer, and operator of integrated resorts featuring luxury hotel rooms, high-end retail space, an array of dining and entertainment options, meeting and convention facilities, and gaming, all supported by an unparalleled focus on our guests, our people, and our community. Through our approximately 72% ownership of WML, we operate two integrated resorts in the Macau Special Administrative Region of the People's Republic of China ("Macau"), Wynn Palace and Wynn Macau (collectively, our "Macau Operations"). In Las Vegas, Nevada, we operate and, with the exception of certain retail space, own 100% of Wynn Las Vegas, which we also refer to as our Las Vegas Operations. On June 23, 2019, we opened Encore Boston Harbor, an integrated resort in Everett, Massachusetts.
Recent Developments Related to COVID-19
As previously disclosed, in January 2020, an outbreak of a new strain of coronavirus, COVID-19 ("COVID-19"), was identified. Since then, COVID-19 has spread around the world, and steps have been taken by various countries, including those in which we operate, to advise citizens to avoid non-essential travel, to restrict inbound international travel, to implement closures of non-essential operations, and to implement quarantines and lockdowns to contain the spread of the virus. Currently, no fully effective treatments or vaccines have been developed, and there can be no assurance as to if or when an effective treatment or vaccine will be discovered.
Macau Operations
In response to the COVID-19 pandemic, the Macau government announced on February 4, 2020 the closure of all casino operations in Macau, including those at Wynn Palace and Wynn Macau, for a period of 15 days. On February 20, 2020, our casino operations at Wynn Palace and Wynn Macau reopened on a reduced basis and have since been fully restored; however, certain health safeguards, such as traveler quarantines, limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and health declarations remain in effect at the present time. We are currently unable to determine when these measures will be lifted.
Visitation to Macau has fallen meaningfully since the outbreak of COVID-19. Total visitation from mainland China to Macau decreased by 97.2% and 96.3% in February and March 2020, respectively, compared to the same periods in 2019. The decrease in visitation is driven by the numerous measures put in place by the governments of China and Macau, including the Chinese government's suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau, traveler quarantine measures, travel and entry restrictions in Macau, Hong Kong, and certain cities and regions in mainland China, the suspension of ferry services and other modes of transportation with Macau and regionally, and the ban on entry or enhanced quarantine requirements for any residents of Greater China attempting to enter Macau. Persons who are not residents of Greater China are barred from entry to Macau at this time. The Company is currently unable to determine when these restrictions will be modified or lifted.
Las Vegas Operations and Encore Boston Harbor
On March 14, 2020, the Massachusetts Gaming Commission temporarily suspended operations at all casinos in Massachusetts, including Encore Boston Harbor. On March 17, 2020, the Nevada government suspended all casino and non-essential operations, including all operations at Wynn Las Vegas. Accordingly, Encore Boston Harbor and Wynn Las Vegas ceased all operations and closed to the public on March 15, 2020 and March 17, 2020, respectively. Both resorts will remain closed until authorized to re-open under U.S. and state government directives. During the first quarter of 2020, the Company committed to pay salary, tips and benefits continuation for all U.S. employees, inclusive of part-time employees, through May 15, 2020. The Company has accrued $75.7 million of expense related to this commitment for the period from April 1 through
May 15, 2020 within the accompanying Condensed Consolidated Financial Statements. In May 2020, the Company announced that it had extended its commitment through May 31, 2020.
The disruptions arising from the COVID-19 outbreak have had, during the three months ended March 31, 2020, and will continue to have an adverse effect on the Company's results of operations. Wynn Las Vegas and Encore Boston Harbor are effectively generating no revenue during the periods of their respective closures, and our Macau Operations are generating extremely limited revenue. Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, the impact on the Company’s consolidated results of operations, cash flows and financial condition in 2020 and potentially thereafter will be material, but cannot be reasonably estimated at this time as it is unknown when the COVID-19 pandemic will end, when or if our properties will return to pre-pandemic demand and pricing, when or how quickly the current travel restrictions will be modified or cease to be necessary and the resulting impact on the Company’s business.
Key Operating Measures
Certain key operating measures specific to the gaming industry are included in our discussion of our operational performance for the periods for which the Condensed Consolidated Statements of Operations are presented. These key operating measures are presented as supplemental disclosures because management and/or certain investors use these measures to better understand period-over-period fluctuations in our casino and hotel operating revenues. These key operating measures are defined below:
•Table drop in mass market for our Macau Operations is the amount of cash that is deposited in a gaming table's drop box plus cash chips purchased at the casino cage.
•Table drop for our Las Vegas Operations is the amount of cash and net markers issued that are deposited in a gaming table's drop box.
•Table drop for Encore Boston Harbor is the amount of cash and gross markers issued that are deposited in a gaming table's drop box.
•Rolling chips are non-negotiable identifiable chips that are used to track turnover for purposes of calculating incentives within our Macau Operations' VIP program.
•Turnover is the sum of all losing rolling chip wagers within our Macau Operations' VIP program.
•Table games win is the amount of table drop or turnover that is retained and recorded as casino revenues. Table games win is before discounts, commissions and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Table games win does not include poker rake.
•Slot machine win is the amount of handle (representing the total amount wagered) that is retained by us and is recorded as casino revenues. Slot machine win is after adjustment for progressive accruals and free play, but before discounts and the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis.
•Poker rake is the portion of cash wagered by patrons in our poker rooms that is retained by the casino as a service fee, after adjustment for progressive accruals, but before the allocation of casino revenues to rooms, food and beverage and other revenues for services provided to casino customers on a complimentary basis. Poker tables are not included in our measure of average number of table games.
•Average daily rate ("ADR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms occupied.
•Revenue per available room ("REVPAR") is calculated by dividing total room revenues, including complimentaries (less service charges, if any), by total rooms available.
•Occupancy is calculated by dividing total occupied rooms, including complimentary rooms, by the total rooms available.
Below is a discussion of the methodologies used to calculate win percentages at our resorts.
In our VIP operations in Macau, customers primarily purchase rolling chips from the casino cage and can only use them to make wagers. Winning wagers are paid in cash chips. The loss of the rolling chips in the VIP operations is recorded as turnover and provides a base for calculating VIP win percentage. It is customary in Macau to measure VIP play using this rolling chip method. We expect our win as a percentage of turnover from these operations to be within the range of 2.7% to 3.0%.
In our mass market operations in Macau, customers may purchase cash chips at either the gaming tables or at the casino cage. The measurements from our VIP and mass market operations are not comparable as the measurement method used in our mass market operations tracks the initial purchase of chips at the table and at the casino cage, while the measurement method from our VIP operations tracks the sum of all losing wagers. Accordingly, the base measurement from the VIP operations is much larger than the base measurement from the mass market operations. As a result, the expected win percentage with the same amount of gaming win is lower in the VIP operations when compared to the mass market operations.
In Las Vegas, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers at the gaming tables or at the casino cage. The cash and markers, net of redemptions, used to purchase chips are deposited in the gaming table's drop box. This is the base of measurement that we use for calculating win percentage. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 22% to 26%.
At Encore Boston Harbor, customers purchase chips at the gaming tables in exchange for cash and markers. Customers may then redeem markers only at the casino cage. The cash and gross markers used to purchase chips are deposited in the gaming table's drop box. This is the base of measurement that we use for calculating win percentage. Each type of table game has its own theoretical win percentage. Our expected table games win percentage is 16% to 20%.
Results of Operations
Summary of first quarter 2020 results
The following table summarizes our financial results for the periods presented (in thousands, except per share data):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | $ | 953,716 | $ | 1,651,546 | $ | (697,830) | (42.3) | ||||||||||||||||
| Net income (loss) attributable to Wynn Resorts, Limited | (402,037) | 104,872 | (506,909) | (483.4) | |||||||||||||||||||
| Diluted net income (loss) per share | (3.77) | 0.98 | (4.75) | (484.7) | |||||||||||||||||||
Adjusted Property EBITDA (1) | (5,329) | 494,777 | (500,106) | (101.1) | |||||||||||||||||||
(1) See Item 1—"Financial Statements," Note 16, "Segment Information," for a reconciliation of Adjusted Property EBITDA to net income (loss) attributable to Wynn Resorts, Limited.
The decrease in operating revenues for the three months ended March 31, 2020 was primarily driven by decreases of $467.1 million, $294.4 million, and $77.2 million from Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. These declines were precipitated by the adverse effects of the COVID-19 outbreak during the three months ended March 31, 2020, which include the closure of our casino operations in Macau for a 15-day period and their subsequent reopening on a reduced basis, and the closure of our Las Vegas Operations on March 17, 2020 for the remainder of the first quarter of 2020. Operating revenues from Encore Boston Harbor were $140.9 million. Encore Boston Harbor closed to the public on March 15, 2020 for the remainder of the first quarter of 2020.
The decrease in net income (loss) attributable to Wynn Resorts, Limited for the three months ended March 31, 2020 was primarily related to the adverse effects of the COVID-19 outbreak on the results of our operations for the three months ended March 31, 2020, and includes the impact of $75.7 million of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
The decrease in Adjusted Property EBITDA for the three months ended March 31, 2020 was driven by decreases of $212.4 million, $144.7 million, and $130.4 million from Wynn Palace, Wynn Macau, and our Las Vegas Operations, respectively. Adjusted Property EBITDA from Encore Boston Harbor was $(12.6) million. Adjusted Property EBITDA for the first quarter of 2020 includes the impact of $75.7 million of expense related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
Financial results for the three months ended March 31, 2020 compared to the three months ended March 31, 2019.
Operating revenues
The following table presents our operating revenues (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace | $ | 259,513 | $ | 726,622 | $ | (467,109) | (64.3) | ||||||||||||||||
| Wynn Macau | 229,489 | 523,891 | (294,402) | (56.2) | |||||||||||||||||||
| Total Macau Operations | 489,002 | 1,250,513 | (761,511) | (60.9) | |||||||||||||||||||
| Las Vegas Operations | 323,824 | 401,033 | (77,209) | (19.3) | |||||||||||||||||||
Encore Boston Harbor (1) | 140,890 | — | 140,890 | — | |||||||||||||||||||
| $ | 953,716 | $ | 1,651,546 | $ | (697,830) | (42.3) | |||||||||||||||||
(1) Encore Boston Harbor opened on June 23, 2019.
The following table presents our casino and non-casino operating revenues (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating revenues | |||||||||||||||||||||||
| Casino revenues | $ | 570,789 | $ | 1,185,101 | $ | (614,312) | (51.8) | ||||||||||||||||
| Non-casino revenues: | |||||||||||||||||||||||
| Rooms | 152,681 | 191,270 | (38,589) | (20.2) | |||||||||||||||||||
| Food and beverage | 149,414 | 173,219 | (23,805) | (13.7) | |||||||||||||||||||
| Entertainment, retail and other | 80,832 | 101,956 | (21,124) | (20.7) | |||||||||||||||||||
| Total non-casino revenues | 382,927 | 466,445 | (83,518) | (17.9) | |||||||||||||||||||
| $ | 953,716 | $ | 1,651,546 | $ | (697,830) | (42.3) | |||||||||||||||||
Casino revenues for the three months ended March 31, 2020 were 59.8% of operating revenues, compared to 71.8% for the same period of 2019. Non-casino revenues for the three months ended March 31, 2020 were 40.2% of operating revenues, compared to 28.2% for the same period of 2019.
Casino revenues
Casino revenues decreased primarily due to the adverse effects of the COVID-19 outbreak, including the closure of our casino operations in Macau for a 15-day period and their subsequent reopening on a reduced basis, and the closure of Encore Boston Harbor on March 15, 2020 and our Las Vegas Operations on March 17, 2020 for the remainder of the first quarter of 2020. Casino revenues from Encore Boston Harbor totaled $101.8 million. The table below sets forth our casino revenues and associated key operating measures (dollars in thousands, except for win per unit per day):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
| Wynn Palace: | |||||||||||||||||||||||
| Total casino revenues | $ | 207,576 | $ | 623,175 | $ | (415,599) | (66.7) | ||||||||||||||||
| VIP: | |||||||||||||||||||||||
| Average number of table games | 89 | 111 | (22) | (19.8) | |||||||||||||||||||
| VIP turnover | $ | 4,792,454 | $ | 12,627,262 | $ | (7,834,808) | (62.0) | ||||||||||||||||
| VIP table games win | $ | 139,569 | $ | 493,184 | $ | (353,615) | (71.7) | ||||||||||||||||
| VIP win as a % of turnover | 2.91 | % | 3.91 | % | (1.0) | ||||||||||||||||||
| Table games win per unit per day | $ | 20,257 | $ | 49,156 | $ | (28,899) | (58.8) | ||||||||||||||||
| Mass market: | |||||||||||||||||||||||
| Average number of table games | 179 | 211 | (32) | (15.2) | |||||||||||||||||||
| Table drop | $ | 475,223 | $ | 1,303,924 | $ | (828,701) | (63.6) | ||||||||||||||||
| Table games win | $ | 130,714 | $ | 315,469 | $ | (184,755) | (58.6) | ||||||||||||||||
| Table games win % | 27.5 | % | 24.2 | % | 3.3 | ||||||||||||||||||
| Table games win per unit per day | $ | 9,507 | $ | 16,646 | $ | (7,139) | (42.9) | ||||||||||||||||
| Average number of slot machines | 733 | 1,091 | (358) | (32.8) | |||||||||||||||||||
| Slot machine handle | $ | 424,714 | $ | 975,048 | $ | (550,334) | (56.4) | ||||||||||||||||
| Slot machine win | $ | 18,405 | $ | 51,401 | $ | (32,996) | (64.2) | ||||||||||||||||
| Slot machine win per unit per day | $ | 326 | $ | 524 | $ | (198) | (37.8) | ||||||||||||||||
| Wynn Macau: | |||||||||||||||||||||||
| Total casino revenues | $ | 190,128 | $ | 450,242 | $ | (260,114) | (57.8) | ||||||||||||||||
| VIP: | |||||||||||||||||||||||
| Average number of table games | 81 | 113 | (32) | (28.3) | |||||||||||||||||||
| VIP turnover | $ | 2,964,146 | $ | 10,194,031 | $ | (7,229,885) | (70.9) | ||||||||||||||||
| VIP table games win | $ | 122,625 | $ | 295,298 | $ | (172,673) | (58.5) | ||||||||||||||||
| VIP win as a % of turnover | 4.14 | % | 2.90 | % | 1.24 | ||||||||||||||||||
| Table games win per unit per day | $ | 19,702 | $ | 29,099 | $ | (9,397) | (32.3) | ||||||||||||||||
| Mass market: | |||||||||||||||||||||||
| Average number of table games | 183 | 206 | (23) | (11.2) | |||||||||||||||||||
| Table drop | $ | 578,235 | $ | 1,351,693 | $ | (773,458) | (57.2) | ||||||||||||||||
| Table games win | $ | 117,941 | $ | 264,542 | $ | (146,601) | (55.4) | ||||||||||||||||
| Table games win % | 20.4 | % | 19.6 | % | 0.8 | ||||||||||||||||||
| Table games win per unit per day | $ | 8,372 | $ | 14,283 | $ | (5,911) | (41.4) | ||||||||||||||||
| Average number of slot machines | 634 | 826 | (192) | (23.2) | |||||||||||||||||||
| Slot machine handle | $ | 366,537 | $ | 794,367 | $ | (427,830) | (53.9) | ||||||||||||||||
| Slot machine win | $ | 13,295 | $ | 37,894 | $ | (24,599) | (64.9) | ||||||||||||||||
| Slot machine win per unit per day | $ | 272 | $ | 510 | $ | (238) | (46.6) | ||||||||||||||||
| Poker rake | $ | 2,083 | $ | 5,752 | $ | (3,669) | (63.8) | ||||||||||||||||
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Total casino revenues | $ | 71,295 | $ | 111,684 | $ | (40,389) | (36.2) | ||||||||||||||||
| Average number of table games | 237 | 238 | (1) | (0.4) | |||||||||||||||||||
| Table drop | $ | 414,933 | $ | 404,073 | $ | 10,860 | 2.7 | ||||||||||||||||
| Table games win | $ | 82,666 | $ | 111,370 | $ | (28,704) | (25.8) | ||||||||||||||||
| Table games win % | 19.9 | % | 27.6 | % | (7.7) | ||||||||||||||||||
| Table games win per unit per day | $ | 4,530 | $ | 5,198 | $ | (668) | (12.9) | ||||||||||||||||
| Average number of slot machines | 1,766 | 1,807 | (41) | (2.3) | |||||||||||||||||||
| Slot machine handle | $ | 664,834 | $ | 789,310 | $ | (124,476) | (15.8) | ||||||||||||||||
| Slot machine win | $ | 46,674 | $ | 54,544 | $ | (7,870) | (14.4) | ||||||||||||||||
| Slot machine win per unit per day | $ | 343 | $ | 335 | $ | 8 | 2.3 | ||||||||||||||||
| Poker rake | $ | 2,175 | $ | 2,460 | $ | (285) | (11.6) | ||||||||||||||||
Encore Boston Harbor (1): | |||||||||||||||||||||||
| Total casino revenues | $ | 101,790 | $ | — | $ | 101,790 | — | ||||||||||||||||
| Average number of table games | 160 | — | 160 | — | |||||||||||||||||||
| Table drop | $ | 275,631 | $ | — | $ | 275,631 | — | ||||||||||||||||
| Table games win | $ | 57,286 | $ | — | $ | 57,286 | — | ||||||||||||||||
| Table games win % | 20.8 | % | — | % | 20.8 | ||||||||||||||||||
| Table games win per unit per day | $ | 4,826 | $ | — | $ | 4,826 | — | ||||||||||||||||
| Average number of slot machines | 2,837 | — | 2,837 | — | |||||||||||||||||||
| Slot machine handle | $ | 767,739 | $ | — | $ | 767,739 | — | ||||||||||||||||
| Slot machine win | $ | 59,448 | $ | — | $ | 59,448 | — | ||||||||||||||||
| Slot machine win per unit per day | $ | 283 | $ | — | $ | 283 | — | ||||||||||||||||
| Poker rake | $ | 5,105 | $ | — | $ | 5,105 | — | ||||||||||||||||
(1) Encore Boston Harbor opened on June 23, 2019.
Non-casino revenues
The table below sets forth our room revenues and associated key operating measures:
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Macau Operations: | |||||||||||||||||||||||
Wynn Palace: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 19,710 | $ | 43,314 | $ | (23,604) | (54.5) | ||||||||||||||||
| Occupancy | 41.6 | % | 97.2 | % | (55.6) | ||||||||||||||||||
| ADR | $ | 294 | $ | 271 | $ | 23 | 8.4 | ||||||||||||||||
| REVPAR | $ | 122 | $ | 264 | $ | (142) | (53.8) | ||||||||||||||||
| Wynn Macau: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 15,911 | $ | 28,867 | $ | (12,956) | (44.9) | ||||||||||||||||
| Occupancy | 49.2 | % | 99.3 | % | (50.1) | ||||||||||||||||||
| ADR | $ | 321 | $ | 290 | $ | 31 | 10.9 | ||||||||||||||||
| REVPAR | $ | 158 | $ | 288 | $ | (130) | (45.1) | ||||||||||||||||
| Las Vegas Operations: | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 106,105 | $ | 119,089 | $ | (12,984) | (10.9) | ||||||||||||||||
| Occupancy | 80.1 | % | 82.6 | % | (2.5) | ||||||||||||||||||
| ADR | $ | 374 | $ | 338 | $ | 36 | 10.7 | ||||||||||||||||
| REVPAR | $ | 299 | $ | 279 | $ | 20 | 7.2 | ||||||||||||||||
Encore Boston Harbor (1): | |||||||||||||||||||||||
| Total room revenues (dollars in thousands) | $ | 10,955 | $ | — | $ | 10,955 | — | ||||||||||||||||
| Occupancy | 75.8 | % | — | % | 75.8 | ||||||||||||||||||
| ADR | $ | 292 | $ | — | $ | 292 | — | ||||||||||||||||
| REVPAR | $ | 222 | $ | — | $ | 222 | — | ||||||||||||||||
(1) Encore Boston Harbor opened on June 23, 2019.
Room revenues decreased $38.6 million, primarily due to lower occupancy at Wynn Palace and Wynn Macau and the closure of our Las Vegas Operations resulting from the adverse effects of the COVID-19 outbreak. Room revenues from Encore Boston Harbor were $11.0 million.
Food and beverage revenues decreased $23.8 million, primarily due to decreased covers at our restaurants at our Macau Operations and closure of our Las Vegas Operations resulting from the adverse effects of the COVID-19 outbreak. Food and beverage revenues from Encore Boston Harbor were $20.6 million.
Entertainment, retail and other revenues decreased $21.1 million, primarily due to a decrease in visitation to our Macau Operations and closure of our Las Vegas Operations resulting from the adverse effects of the COVID-19 outbreak. Entertainment, retail and other revenues from Encore Boston Harbor were $7.5 million.
Operating expenses
The table below presents operating expenses (in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Casino | $ | 442,690 | $ | 750,071 | $ | (307,381) | (41.0) | ||||||||||||||||
| Rooms | 73,480 | 63,706 | 9,774 | 15.3 | |||||||||||||||||||
| Food and beverage | 175,910 | 148,761 | 27,149 | 18.3 | |||||||||||||||||||
| Entertainment, retail and other | 45,580 | 44,044 | 1,536 | 3.5 | |||||||||||||||||||
| General and administrative | 234,328 | 217,322 | 17,006 | 7.8 | |||||||||||||||||||
| Provision for credit losses | 20,613 | 5,422 | 15,191 | 280.2 | |||||||||||||||||||
| Pre-opening | 2,551 | 27,713 | (25,162) | (90.8) | |||||||||||||||||||
| Depreciation and amortization | 178,746 | 136,557 | 42,189 | 30.9 | |||||||||||||||||||
| Property charges and other | 27,229 | 2,774 | 24,455 | 881.6 | |||||||||||||||||||
| Total operating expenses | $ | 1,201,127 | $ | 1,396,370 | $ | (195,243) | (14.0) | ||||||||||||||||
Total operating expenses decreased $195.2 million compared to the first quarter of 2019, primarily due to decreased casino and pre-opening expenses, partially offset by $75.7 million of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020, and increased depreciation and amortization expense of $36.9 million following the opening of Encore Boston Harbor in June 2019.
Casino expenses decreased primarily due to decreases of $235.6 million and $147.4 million at Wynn Palace and Wynn Macau, respectively, commensurate with the decreases in casino revenues at each property. These decreases were partially offset by $67.1 million from Encore Boston Harbor and an increase of $8.6 million from our Las Vegas Operations, inclusive of $7.9 million and $12.8 million, respectively, of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
Room expenses increased primarily due to $9.6 million from Encore Boston Harbor and an increase of $3.4 million at our Las Vegas Operations, inclusive of $1.5 million and $8.3 million, respectively, of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020. The increase was partially offset by a decrease of $2.8 million at Wynn Palace, commensurate with the decrease in room revenues.
Food and beverage expenses increased primarily due to $26.2 million from Encore Boston Harbor and an increase of $12.9 million at our Las Vegas Operations, inclusive of $4.8 million and $20.8 million, respectively, of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020. The increase was partially offset by decreases of $9.1 million and $2.9 million at Wynn Palace and Wynn Macau, respectively, primarily due to decreased costs of sales associated with a decrease in covers.
Entertainment, retail and other expenses increased primarily due to $5.0 million from Encore Boston Harbor and an increase of $3.2 million at our Las Vegas Operations, inclusive of $0.7 million and $4.1 million, respectively, of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020. The increase was partially offset by decreases of $4.5 million and $2.3 million at Wynn Palace and Wynn Macau, respectively, primarily due to the closure of certain owned retail outlets at our Macau Operations and their conversion to leased outlets during 2019.
General and administrative expenses increased primarily due to $45.6 million from Encore Boston Harbor and an increase of $13.1 million at our Las Vegas Operations, inclusive of $4.4 million and $10.2 million, respectively, of expense accrued during the quarter related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020. The increase was partially offset by decreases of $4.3 million and $0.6 million at Wynn Palace and Wynn Macau, respectively. In addition, corporate and other general and administrative expenses decreased $38.5 million, primarily due to a fine of $35 million assessed by the Massachusetts Gaming Commission incurred during the three months ended March 31, 2019.
Provision for credit losses increased primarily due to increases of $11.7 million, $1.8 million and $0.9 million at our Las Vegas Operations, Wynn Palace, and Wynn Macau, respectively. The increases were primarily due to the impact of historical collection patterns and current collection trends in light of the COVID-19 outbreak, as well as the specific review of customer accounts, on our estimated credit loss for the respective periods.
For the three months ended March 31, 2020, pre-opening expenses totaled $2.6 million, which primarily related to restaurant remodels at our Las Vegas Operations. For the three months ended March 31, 2019, pre-opening expenses totaled $27.7 million, which primarily related to the development of Encore Boston Harbor.
Depreciation and amortization increased primarily due to additional depreciation expense of $36.9 million associated with the opening of Encore Boston Harbor in June 2019 and an increase of $2.7 million at our Las Vegas Operations associated with the opening of the meeting and convention expansion in February 2020.
Our property charges and other expenses for the quarter ended March 31, 2020 consisted primarily of asset abandonments and retirements of $22.2 million and $1.4 million at Wynn Palace and Wynn Macau, respectively.
Interest expense, net of capitalized interest
The following table summarizes information related to interest expense (dollars in thousands):
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Interest expense | |||||||||||||||||||||||
| Interest cost, including amortization of debt issuance costs and original issue discount and premium | $ | 130,079 | $ | 115,898 | $ | 14,181 | 12.2 | ||||||||||||||||
| Capitalized interest | (1,252) | (22,718) | (21,466) | (94.5) | |||||||||||||||||||
| $ | 128,827 | $ | 93,180 | $ | 35,647 | 38.3 | |||||||||||||||||
| Weighted average total debt balance | $ | 10,850,355 | $ | 9,214,600 | |||||||||||||||||||
| Weighted average interest rate | 4.80 | % | 5.02 | % | |||||||||||||||||||
Interest costs increased due to an increase in the weighted average debt balance, partially offset by the decrease in the weighted average interest rate. Capitalized interest decreased due to the completion of Encore Boston Harbor construction activities on June 23, 2019.
Other non-operating income and expenses
We incurred a foreign currency remeasurement gain of $10.3 million and loss of $6.4 million for the three months ended March 31, 2020 and 2019, respectively. The impact of the exchange rate fluctuation of the Macau pataca, in relation to the U.S. dollar, on the remeasurements of U.S. dollar denominated debt and other obligations from our Macau-related entities drove the variability between periods.
We recorded a loss of $15.7 million and $1.5 million for the three months ended March 31, 2020 and 2019, respectively, from change in derivatives fair value.
Income taxes
We recorded an income tax expense of $75.8 million and $1.7 million for the three months ended March 31, 2020 and 2019, respectively. The 2020 and 2019 income tax expense primarily related to the increase in the valuation allowance for U.S foreign tax credits.
Net income (loss) attributable to noncontrolling interests
Net loss attributable to noncontrolling interests was $48.2 million for the three months ended March 31, 2020, compared to income of $54.9 million for the same period of 2019. These amounts are primarily related to the noncontrolling interests' share of net income (loss) from WML.
Adjusted Property EBITDA
We use Adjusted Property EBITDA to manage the operating results of our segments. Adjusted Property EBITDA is net income (loss) before interest, income taxes, depreciation and amortization, pre-opening expenses, property charges and other, management and license fees, corporate expenses and other (including intercompany golf course and water rights leases), stock-based compensation, change in derivatives fair value, loss on extinguishment of debt, and other non-operating income and expenses. Adjusted Property EBITDA is presented exclusively as a supplemental disclosure because management believes that it is widely used to measure the performance, and as a basis for valuation, of gaming companies. Management uses Adjusted Property EBITDA as a measure of the operating performance of its segments and to compare the operating performance of its properties with those of its competitors, as well as a basis for determining certain incentive compensation. We also present Adjusted Property EBITDA because it is used by some investors to measure a company's ability to incur and service debt, make capital expenditures and meet working capital requirements. Gaming companies have historically reported EBITDA as a supplement to GAAP. In order to view the operations of their casinos on a more stand-alone basis, gaming companies, including us, have historically excluded from their EBITDA calculations preopening expenses, property charges, corporate expenses and stock-based compensation, that do not relate to the management of specific casino properties. However, Adjusted Property EBITDA should not be considered as an alternative to operating income as an indicator of our performance, as an alternative to cash flows from operating activities as a measure of liquidity, or as an alternative to any other measure determined in accordance with GAAP. Unlike net income, Adjusted Property EBITDA does not include depreciation or interest expense and therefore does not reflect current or future capital expenditures or the cost of capital. We have significant uses of cash flows, including capital expenditures, interest payments, debt principal repayments, income taxes and other non-recurring charges, which are not reflected in Adjusted Property EBITDA. Also, our calculation of Adjusted Property EBITDA may be different from the calculation methods used by other companies and, therefore, comparability may be limited.
The following table summarizes Adjusted Property EBITDA (in thousands) for Wynn Palace, Wynn Macau, Las Vegas Operations, and Encore Boston Harbor as reviewed by management and summarized in Item 1—"Notes to Condensed Consolidated Financial Statements," Note 16, "Segment Information." That footnote also presents a reconciliation of Adjusted Property EBITDA to net income (loss) attributable to Wynn Resorts, Limited.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2020 | 2019 | Increase/ (Decrease) | Percent Change | ||||||||||||||||||||
| Wynn Palace | $ | 10,176 | $ | 222,586 | $ | (212,410) | (95.4) | ||||||||||||||||
| Wynn Macau | 19,208 | 163,889 | (144,681) | (88.3) | |||||||||||||||||||
| Las Vegas Operations | (22,077) | 108,302 | (130,379) | (120.4) | |||||||||||||||||||
Encore Boston Harbor (1) | (12,636) | — | (12,636) | — | |||||||||||||||||||
(1) Encore Boston Harbor opened on June 23, 2019.
Adjusted Property EBITDA decreased $212.4 million and $144.7 million at Wynn Palace and Wynn Macau, respectively. The decreases were primarily attributable to a decline in operating revenues precipitated by the adverse effects of the COVID-19 outbreak during the three months ended March 31, 2020, which include the closure of our casino operations in Macau for a 15-day period and their subsequent reopening on a reduced basis.
Adjusted Property EBITDA decreased $130.4 million at our Las Vegas Operations, primarily due to the adverse effects of the COVID-19 outbreak during the three months ended March 31, 2020, including the closure of our Las Vegas Operations on March 17, 2020 for the remainder of the quarter. In addition, Adjusted Property EBITDA for our Las Vegas Operations includes the impact of $56.4 million of expense related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020.
Adjusted Property EBITDA from Encore Boston Harbor for the three months ended March 31, 2020 was $(12.6) million, which includes the impact of $19.3 million of expense related to our commitment to pay salary, tips, and benefits continuation for all of our U.S. employees for the period from April 1 through May 15, 2020. Encore Boston Harbor closed to the public on March 15, 2020 for the remainder of the first quarter of 2020.
Refer to the discussions above regarding the specific details of our results of operations.
Liquidity and Capital Resources
Our cash flows were as follows (in thousands):
| Three Months Ended March 31, | |||||||||||
| Cash Flows - Summary | 2020 | 2019 | |||||||||
| Net cash (used in) provided by operating activities | $ | (176,500) | $ | 263,858 | |||||||
| Net cash used in investing activities: | |||||||||||
| Capital expenditures, net of construction payables and retention | (139,316) | (310,279) | |||||||||
| Purchase of intangible and other assets | — | (1,000) | |||||||||
| Proceeds from sale of assets and other | 2,162 | 404 | |||||||||
| Net cash used in investing activities | (137,154) | (310,875) | |||||||||
| Net cash provided by (used in) financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 1,469,028 | 250,000 | |||||||||
| Repayments of long-term debt | (515,194) | (500,503) | |||||||||
| Repurchase of common stock | (5,527) | (5,401) | |||||||||
| Finance lease payment | (37) | — | |||||||||
| Proceeds from exercise of stock options | 70 | 4,064 | |||||||||
| Dividends paid | (107,426) | (80,773) | |||||||||
| Distribution to noncontrolling interest | (998) | — | |||||||||
| Payments for financing costs | (1,919) | (10,496) | |||||||||
| Net cash provided by (used) in financing activities | 837,997 | (343,109) | |||||||||
| Effect of exchange rate on cash, cash equivalents and restricted cash | 3,266 | (2,404) | |||||||||
| Increase (decrease) in cash, cash equivalents and restricted cash | $ | 527,609 | $ | (392,530) | |||||||
Operating Activities
Our operating cash flows primarily consist of operating income (excluding depreciation and amortization and other non-cash charges), interest paid and earned, and changes in working capital accounts such as receivables, inventories, prepaid expenses, and payables. Our table games play is a mix of cash play and credit play, while our slot machine play is conducted primarily on a cash basis. A significant portion of our table games revenue is attributable to the play of a limited number of premium international customers who gamble on credit. The ability to collect these gaming receivables may impact our operating cash flow for the period. Our rooms, food and beverage, and entertainment, retail and other revenue is conducted on a cash and credit basis. Accordingly, operating cash flows will be impacted by changes in operating income and accounts receivable, net.
During the three months ended March 31, 2020, the decrease in net cash provided by operations was primarily due to the adverse effects of the COVID-19 outbreak on the results of our operations for the three months ended March 31, 2020. During the three months ended March 31, 2019, the increase in net cash provided by operations was primarily driven by an increase in net income.
Investing Activities
Our investing activities primarily consist of project capital expenditures, such as the construction of Encore Boston Harbor, which opened in June 2019, and the construction of the meeting and convention expansion, which opened in February 2020, as well as maintenance capital expenditures associated with maintaining and continually refining our world-class integrated resort properties. In light of the unprecedented COVID-19 outbreak and our focus on safeguarding the Company's operations and the well-being of our employees, we expect to temporarily postpone major project capital expenditures for the remainder of fiscal year 2020, including the Wynn Tower room remodel at Wynn Las Vegas. We will be continuously monitoring the situation and conditions in the markets in which we operate, and will resume such project capital expenditures when conditions have stabilized.
During the three months ended March 31, 2020, we incurred capital expenditures of $43.6 million at Encore Boston Harbor primarily for the payment of construction retention and other payables related to its construction, $37.0 million at our Las Vegas Operations for restaurant remodels and maintenance capital expenditures, $12.2 million for the construction of the additional meeting and convention space at Wynn Las Vegas, and $17.5 million and $26.6 million at Wynn Palace and Wynn Macau, respectively, primarily related to maintenance capital expenditures.
During the three months ended March 31, 2019, we incurred capital expenditures of $170.6 million related to the construction of Encore Boston Harbor and $48.8 million related to the construction of the additional meeting and convention space at Wynn Las Vegas and the reconfiguration of the Wynn Las Vegas golf course.
Financing Activities
During the three months ended March 31, 2020, we borrowed $325.8 million, net of amounts repaid, under the Wynn Macau Revolver, borrowed $791.0 million under the WRF Revolver, prepaid $150.2 million of outstanding principal owed under the Wynn Macau Term Loan, and made a $12.5 million quarterly amortization payment under the WRF Term Loan. In addition, we used cash of $107.4 million for the payment of dividends.
During the three months ended March 31, 2019, we repaid $498.8 million on the Wynn Macau Revolver and borrowed an additional $250.0 million term loan under the Wynn Resorts Term Loan. In addition, we used cash of $80.8 million for the payment of dividends.
In April 2020, Wynn Resorts Finance, LLC ("WRF") and its subsidiary, Wynn Resorts Capital Corp., each an indirect wholly-owned subsidiary of the Company, issued $600 million aggregate principal amount of 7 3/4% Senior Notes due 2025. Also in April 2020, WRF and certain of its subsidiaries entered into an amendment to its existing credit agreement to provide for certain financial covenant relief through fiscal year 2021. Refer to Capital Resources below for further discussion.
Capital Resources
The COVID-19 pandemic has caused, and is continuing to cause, significant disruption in the financial markets both globally and in the United States, and has impacted and will continue to impact, materially, our business, financial condition and results of operations. While we believe our strong liquidity position will enable us to fund our current obligations for the foreseeable future, COVID-19 has resulted in significant disruption, which has had and will continue to have a negative impact on our operating income and could have a negative impact on our ability to access capital in the future. We continue to monitor the rapidly evolving situation and guidance from international and domestic authorities.
The following table summarizes our unrestricted cash and cash equivalents and available revolver borrowing capacity under the Company as of March 31, 2020 (in thousands):
| Total Cash and Cash Equivalents | Revolver Borrowing Capacity | ||||||||||
| Wynn Resorts (Macau) S.A. and subsidiaries | $ | 819,279 | $ | 74,186 | |||||||
| Wynn Macau, Limited and subsidiaries (1) | 1,013,443 | — | |||||||||
| Wynn Resorts Finance, LLC (2) | 73,229 | 40,950 | |||||||||
| Wynn Resorts, Limited and other | 975,020 | — | |||||||||
| Total cash and cash equivalents | $ | 2,880,971 | $ | 115,136 | |||||||
(1) Excluding Wynn Resorts (Macau) S.A. and subsidiaries.
(2) Excluding Wynn Macau, Limited and subsidiaries.
Wynn Resorts (Macau) S.A. and subsidiaries. Wynn Resorts (Macau) S.A. ("Wynn Macau SA") generates cash from our Macau Operations and utilizes its revolver to fund short term working capital requirements as needed. We expect to use this cash to service our existing Wynn Macau Credit Facilities, make distributions to WML, and fund working capital and capital expenditure requirements at our Macau Operations. In April 2020, Wynn Macau SA drew an additional $50.0 million under the Wynn Macau Revolver.
The Wynn Macau Credit Facilities contain customary negative and financial covenants, including, but not limited to, leverage ratio and interest coverage ratio tests (as defined in the Wynn Macau Credit Facilities) that could restrict its ability to make distributions to WML and incur additional indebtedness. Wynn Macau SA is required to maintain a leverage ratio of not greater than 4.00 to 1 and an interest coverage ratio of not less than 2.00 to 1. Wynn Macau SA complied with these ratios for the three months ended March 31, 2020.
Wynn Macau, Limited and subsidiaries. Wynn Macau, Limited ("WML") primarily generates cash through distributions from Wynn Macau SA. We expect to use WML's cash to service our existing WML Notes, pay dividends to shareholders of WML (of which we own approximately 72%), and fund working capital requirements at WML.
The board of directors of WML concluded not to recommend the payment of a final dividend with respect to the year ended December 31, 2019, in light of the unprecedented COVID-19 outbreak and our focus on safeguarding the Company's Macau Operations and the well-being of our employees. The WML board of directors will be continuously monitoring the situation and market conditions in Macau and Greater China and may consider a special dividend in the future when such conditions have stabilized.
If our portion of our cash and cash equivalents were repatriated to the U.S. on March 31, 2020, it would be subject to minimal U.S. taxes in the year of repatriation.
Wynn Resorts Finance, LLC and subsidiaries. Wynn Resorts Finance, LLC ("WRF" or "Wynn Resorts Finance") generates cash from distributions from its subsidiaries, which include our Macau Operations, Wynn Las Vegas, and Encore Boston Harbor, and contributions from Wynn Resorts, as required. In addition, WRF may utilize its available revolving borrowing capacity as needed. We expect to use this cash to service our WRF Credit Facilities, 2025 WRF Notes (as defined below), 2029 WRF Notes, and WLV Notes, and to fund working capital and capital expenditure requirements as needed. As discussed within our Results of Operations, Encore Boston Harbor ceased all operations and closed to the public on March 15, 2020 and Wynn Las Vegas ceased all operations and closed to the public on March 17, 2020, and will remain closed until authorized to re-open under U.S. and state government directives. During the first quarter of 2020, we committed to pay salary, tips and benefits continuation for all of our U.S. employees, inclusive of part-time employees, through May 15, 2020, and in May 2020 we announced the extension of this commitment through May 31, 2020. We expect to fund this commitment using WRF's cash and available revolver borrowing capacity. In April 2020, WRF drew an additional $25.0 million under the WRF Revolver.
In April 2020, WRF and its subsidiary, Wynn Resorts Capital Corp. (collectively with WRF, the “WRF Issuers”), each an indirect wholly-owned subsidiary of the Company, issued $600 million aggregate principal amount of 7 3/4% Senior Notes due 2025 (the “2025 WRF Notes”) pursuant to an indenture (the “2025 Indenture”) among the WRF Issuers, the guarantors party thereto and U.S. Bank National Association, as trustee (the “Trustee”), in a private offering. The 2025 WRF Notes were issued at par. WRF plans to use the net proceeds from the offering for general corporate purposes and to pay related fees and expenses.
In April 2020, WRF and certain of its subsidiaries entered into an amendment (the “WRF Credit Agreement Amendment”) to its existing credit agreement (the “WRF Credit Agreement”). The WRF Credit Agreement Amendment provides for a financial covenant relief period through April 1, 2021, during which the existing consolidated first lien net leverage ratio financial covenant is replaced by a requirement for WRF to maintain minimum liquidity of at least $300.0 million at all times. Following the financial covenant relief period, WRF is subject to a financial covenant increase period beginning on the first day after the expiration of the financial covenant relief period and ending on the first day of the fourth fiscal quarter after the expiration of the financial covenant relief period, during which WRF must maintain a consolidated first lien net leverage ratio no greater than 4.50 to 1 during the first quarter of the financial covenant increase period, no greater than 4.25 to 1 for the second fiscal quarter, no greater than 4.00 to 1 for the third fiscal quarter, and no greater than 3.75 to 1 for the fourth fiscal quarter of the financial covenant increase period and for each subsequent fiscal quarter thereafter. The WRF Credit Agreement Amendment also adds certain restrictions on restricted payments during the financial covenant relief period and the financial covenant increase period.
WRF is a holding company and, as a result, its ability to pay dividends to Wynn Resorts is dependent on WRF receiving distributions from its subsidiaries, which include WML, Wynn Las Vegas, LLC, and Wynn MA, LLC (the owner and operator of Encore Boston Harbor). The WRF Credit Agreement contains customary negative and financial covenants, including, but not limited to, covenants that restrict WRF's ability to pay dividends or distributions and incur additional indebtedness.
As previously disclosed, we are in the planning phase of a room remodel of the Wynn Tower at Wynn Las Vegas. We have concluded to temporarily postpone the remodel until conditions have stabilized (as discussed above within Investing Activities). Accordingly, at this time we do not expect to incur significant capital expenditures associated with the Wynn Tower room remodel during the remainder of fiscal year 2020.
Wynn Resorts, Limited and other subsidiaries. Wynn Resorts, Limited is a holding company and, as a result, our ability to pay dividends is dependent on our ability to obtain funds and our subsidiaries' ability to provide funds to us. Wynn Resorts, Limited and other primarily generates cash from royalty and management agreements with our resorts, dividends and distributions from our subsidiaries, and the operations of the Retail Joint Venture of which we own 50.1%. We expect to use this cash to service our Retail Term Loan and for general corporate purposes.
On March 6, 2020, the Company paid a cash dividend of $1.00 per share, for a total of $106.7 million. On May 6, 2020, the Company announced that it has suspended its quarterly dividend program due to the financial impact of the COVID-19 pandemic.
Other Factors Affecting Liquidity
We may refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of the indebtedness on acceptable terms or at all.
Legal proceedings in which we are involved also may impact our liquidity. No assurance can be provided as to the outcome of such proceedings. In addition, litigation inherently involves significant costs. For information regarding legal proceedings, see Item 1 — "Notes to Condensed Consolidated Financial Statements," Note 14, "Commitments and Contingencies."
Our Board of Directors has authorized an equity repurchase program of up to $1.0 billion. Under the equity repurchase program, we may repurchase the Company's outstanding shares from time to time through open market purchases, in privately negotiated transactions, and under plans complying with Rules 10b5-1 and 10b-18 under the Exchange Act. As of March 31, 2020, we had $800.1 million in repurchase authority remaining under the program.
We have in the past repurchased, and in the future, we may periodically consider repurchasing our outstanding notes for cash. The amount of any notes to be repurchased, as well as the timing of any repurchases, will be based on business, market and other conditions and factors, including price, contractual requirements or consents, and capital availability.
New business developments or other unforeseen events may occur, resulting in the need to raise additional funds. We continue to explore opportunities to develop additional gaming or related businesses in domestic and international markets. There can be no assurances regarding the business prospects with respect to any other opportunity. Any new development may require us to obtain additional financing. We may decide to conduct any such development through Wynn Resorts, Limited or through subsidiaries separate from the Las Vegas, Boston or Macau-related entities.
Off-Balance Sheet Arrangements
We have not entered into any transactions with special purpose entities nor do we engage in any derivatives except for an interest rate collar associated with our Retail Term Loan. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. As of March 31, 2020, we had outstanding letters of credit totaling $18.1 million.
Critical Accounting Policies and Estimates
A description of our critical accounting policies is included in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019. There have been no significant changes to these policies for the three months ended March 31, 2020.
Recently Adopted Accounting Standards and Accounting Standards Issued But Not Yet Adopted
See related disclosure in Item 1—"Notes to Condensed Consolidated Financial Statements," Note 2, "Basis of Presentation and Significant Accounting Policies."
Forward-Looking Statements
We make forward-looking statements in this Annual Report on Form 10-K based upon the beliefs and assumptions of our management and on information currently available to us. Forward-looking statements include, but are not limited to, information about our business strategy, development activities, competition and possible or assumed future results of operations, throughout this report and are often preceded by, followed by or include the words "may," "will," "should," "would," "could," "believe," "expect," "anticipate," "estimate," "intend," "plan," "continue" or the negative of these terms or similar expressions.
Forward-looking statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those we express in these forward-looking statements, including the risks and uncertainties in Item 1A—"Risk Factors" and other factors we describe from time to time in our periodic filings with the SEC, such as:
•the recent global pandemic of COVID-19, caused by a novel strain of the coronavirus, and the continued impact of its consequences;
•the uncertainty of the extent, duration and effects of the COVID-19 pandemic and the response of governments, including government mandated property closures of travel restrictions, and other third parties on our business, results of operations, cash flows, liquidity, and development projects;
•extensive regulation of our business and the cost of compliance or failure to comply with applicable laws and regulations;
•pending or future claims and legal proceedings, regulatory or enforcement actions or probity investigations;
•our ability to maintain our gaming licenses and concessions;
•our dependence on key employees;
•general global political and economic conditions, in the U.S. and China (including COVID-19 and the Chinese government's ongoing anti-corruption campaign), which may impact levels of travel, leisure, and consumer spending;
•restrictions or conditions on visitation (caused by COVID-19 or otherwise) by citizens of mainland China to Macau;
•the continued impact on the travel and leisure industry from factors such as an outbreak of an infectious disease, such as COVID-19, public incidents of violence, riots, demonstrations, extreme weather patterns or natural disasters, military conflicts, civil unrest, and any future security alerts and/or terrorist attacks;
•doing business in foreign locations such as Macau;
•our ability to maintain our customer relationships and collect and enforce gaming receivables;
•our relationships with Macau gaming promoters;
•our dependence on a limited number of resorts and locations for all of our cash flow and our subsidiaries' ability to pay us dividends and distributions;
•competition in the casino/hotel and resort industries and actions taken by our competitors, including new development and construction activities of competitors;
•factors affecting the development and success of new gaming and resort properties (including limited labor resources, government labor and gaming policies and transportation infrastructure in Macau; and cost increases, environmental regulation, and our ability to secure necessary permits and approvals);
•construction risks (including disputes with and defaults by contractors and subcontractors; construction, equipment or staffing problems; shortages of materials or skilled labor; environment, health and safety issues; and unanticipated cost increases);
•legalization and growth of gaming in other jurisdictions;
•any violations by us of the anti-money laundering laws or Foreign Corrupt Practices Act;
•adverse incidents or adverse publicity concerning our resorts or our corporate responsibilities;
•changes in gaming laws or regulations;
•changes in federal, foreign, or state tax laws or the administration of such laws;
•continued compliance with all provisions in our debt agreements;
•conditions precedent to funding under our credit facilities;
•leverage and debt service (including sensitivity to fluctuations in interest rates);
•cybersecurity risk, including cyber and physical security breaches, system failure, computer viruses, and negligent or intentional misuse by customers, company employees, or employees of third-party vendors;
•our ability to protect our intellectual property rights; and
•our current and future insurance coverage levels.
Further information on potential factors that could affect our financial condition, results of operations and business are included in this report and our other filings with the SEC. You should not place undue reliance on any forward-looking statements, which are based only on information available to us at the time this statement is made. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices.
Interest Rate Risks
One of our primary exposures to market risk is interest rate risk associated with our debt facilities that bear interest based on floating rates. We attempt to manage interest rate risk by managing the mix of long-term fixed rate borrowings and variable rate borrowings, supplemented by hedging activities as believed by us to be appropriate. We cannot assure you that these risk management strategies will have the desired effect, and interest rate fluctuations could have a negative impact on our results of operations.
Interest Rate Sensitivity
As of March 31, 2020, approximately 55% of our long-term debt was based on fixed rates. Based on our borrowings as of March 31, 2020, an assumed 100 basis point change in the variable rates would cause our annual interest expense to change by $52.1 million.
In order to mitigate exposure to interest rate fluctuations on the Retail Term Loan, the Company entered into a five year interest rate collar with a notional value of $615.0 million. The interest rate collar establishes a range whereby the Company will pay the counterparty if one-month LIBOR falls below the established floor rate of 1.00%, and the counterparty will pay the Company if one-month LIBOR exceeds the ceiling rate of 3.75%.
Foreign Currency Risks
We expect most of the revenues and expenses for any casino that we operate in Macau will be denominated in Hong Kong dollars or Macau patacas; however, a significant portion of our Wynn Macau, Limited debt is denominated in U.S. dollars. Fluctuations in the exchange rates resulting in weakening of the Macau pataca or the Hong Kong dollar in relation to the U.S. dollar could have materially adverse effects on our results, financial condition and ability to service debt. Based on our balances as of March 31, 2020, an assumed 1% change in the U.S. dollar/Hong Kong dollar exchange rate would cause a foreign currency transaction gain/loss of $26.6 million.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
The Company's management, with the participation of the Company's Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), has evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this report. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving the desired control objectives and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, the Company's CEO and CFO have concluded that, as of the period covered by this report, the Company's disclosure controls and procedures were effective, at the reasonable assurance level, in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act and were effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company's management, including the Company's CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management's Report on Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter to which this report relates that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
We are occasionally party to lawsuits. As with all litigation, no assurance can be provided as to the outcome of such matters and we note that litigation inherently involves significant costs. For information regarding the Company's legal proceedings see Item 1—"Notes to Condensed Consolidated Financial Statements," Note 14, "Commitments and Contingencies" of Part I in this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
A description of our risk factors can be found in Item 1A, Part I of our Annual Report on Form 10-K for the year ended December 31, 2019. There were no material changes to those risk factors during the three months ended March 31, 2020 other than the risk factor described below:
The outbreak of the novel coronavirus COVID-19 ("COVID 19") has had and will likely continue to have an adverse effect on our business, operations, financial condition and operating results, and the ability of our subsidiaries to pay dividends and distributions.
In January 2020, an outbreak of a new strain of coronavirus, COVID-19, was identified and has spread around the world including the United States. Currently, there are no fully effective vaccines and there can be no assurance that an effective vaccine will be developed. The United States has not approved any specific treatments for COVID-19. The spread of COVID-19 and the recent developments surrounding the global pandemic are currently having negative impacts on all aspects of our business.
The current, and uncertain future, impact of the COVID-19 outbreak, including its effect on the ability or desire of people to travel (including to and from our properties), is expected to continue to impact our results, operations, outlooks, plans, goals, growth, reputation, cash flows and liquidity.
The U.S. government has put in place restrictions on travel to the United States from Europe and Asia, and could expand the restrictions. A significant portion of our business in the United States relies on the willingness and ability of premium international customers to travel to the United States. As such, our Las Vegas Operations and operations at Encore Boston Harbor have been and may continue to be adversely impacted.
Furthermore, in response to and as part of a continuing effort to reduce the spread of COVID-19, we have temporarily closed all operations at Wynn Las Vegas and at Encore Boston Harbor, and they will remain closed until authorized to re-open under U.S. and state government directives. In addition, we have been, and will continue to be further, negatively impacted by related developments, including heightened governmental regulations and travel advisories, including recommendations by the U.S. Department of State and the Centers for Disease Control and Prevention, and travel bans and restrictions, each of which has impacted, and is expected to continue to significantly impact, the casino resort industry.
Our casino operations in Macau were closed for a 15-day period in February 2020 and resumed operations on a reduced basis on February 20, 2020. On March 20, 2020, our casinos’ operations were fully restored; however certain health safeguards, such as limiting the number of seats per table game, slot machine spacing, temperature checks, mask protection, and health declarations remain in effect at the present time. Visitation to Macau has meaningfully decreased since the outbreak of COVID-19, driven by outbreak’s strong deterrent effect on travel and social activities, the Chinese government’s suspension of its visa and group tour schemes that allow mainland Chinese residents to travel to Macau, quarantine measures, travel and entry restrictions in Macau, Hong Kong and certain cities and regions in mainland China, the suspension of ferry services and other modes of transportation with Macau and regionally, and most recently, the ban on entry or enhanced quarantine requirements for any residents of Greater China attempting to enter Macau. Persons who are not residents of Greater China are barred from entry to Macau at this time.
We cannot predict when any of our closed properties will be able to reopen, the conditions upon which such reopening may occur, and the effects of any such conditions. Moreover, even once travel advisories and restrictions are lifted, demand for casino resorts may remain weak for a significant length of time and we cannot predict if and when our properties will return to pre-outbreak demand or pricing. In particular, demand for casino resorts may be negatively impacted by the adverse changes in the perceived or actual economic climate, including higher unemployment rates, declines in income levels and loss of personal wealth resulting from the impact of COVID-19. In addition, we cannot predict the impact COVID-19 will have on our partners,
such as tenants, travel agencies, suppliers and other vendors. We may be adversely impacted as a result of the adverse impact our partners suffer.
As a result of all of the foregoing, we may be required to raise additional capital in the future and our access to and cost of financing will depend on, among other things, global economic conditions, conditions in the global financing markets, the availability of sufficient amounts of financing, our prospects and our credit ratings. If our credit ratings were to be downgraded, or general market conditions were to ascribe higher risk to our rating levels, our industry, or us, our access to capital and the cost of any debt financing will be further negatively impacted. In addition, the terms of future debt agreements could include more restrictive covenants, or require incremental collateral, which may further restrict our business operations or be unavailable due to our covenant restrictions then in effect. There is no guarantee that debt financings will be available in the future to fund our obligations, or that they will be available on terms consistent with our expectations.
In addition, the COVID-19 outbreak has significantly increased economic and demand uncertainty. The current outbreak and continued spread of COVID-19 could cause a global recession, which would have a further adverse impact on our financial condition and operations. Current economic forecasts for significant increases in unemployment in the U.S. and other regions due to the adoption of social distancing and other policies to slow the spread of the virus is likely to have a negative impact on demand for casino resorts once our operations resume, and these impacts could exist for an extensive period of time.
The extent of the effects of the outbreak on our business and the casino resort industry at large is highly uncertain and will ultimately depend on future developments, including, but not limited to, the duration and severity of the outbreak, the length of time it takes for demand and pricing to return and normal economic and operating conditions to resume.
The COVID-19 outbreak has had and will continue to have an adverse effect on our results of operations and the ability of our subsidiaries to pay dividends and distributions. Given the uncertainty around the extent and timing of the potential future spread or mitigation of COVID-19 and around the imposition or relaxation of protective measures, we cannot reasonably estimate the impact to our future results of operations, cash flows, or financial condition.
To the extent COVID-19 adversely affects our business, operations, financial condition and operating results, it may also have the effect of heightening many of the other risks related to our business, including, but not limited to, those relating to our high level of indebtedness, our need to generate sufficient cash flows to service our indebtedness, and our ability to comply with the covenants contained in the agreements that govern our indebtedness.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer Purchases of Equity Securities
The following table summarizes the share repurchases in satisfaction of tax withholding obligations on vested restricted stock during the quarter ended March 31, 2020:
| For the Month Ended | Number of Shares Repurchased | Weighted Average Price Paid Per Share | Approximate Dollar Value of Repurchased Shares (in thousands) | |||||||||||||||||
| January 31, 2020 | 16,252 | $ | 149.41 | $ | 2,428 | |||||||||||||||
| February 29, 2020 | 1,771 | $ | 121.85 | $ | 216 | |||||||||||||||
| March 31, 2020 | 26,932 | $ | 107.68 | $ | 2,900 | |||||||||||||||
None of the foregoing repurchases that occurred during the three months ended March 31, 2020 were part of the Company's publicly announced repurchase program. As of March 31, 2020, we had $800.1 million in repurchase authority under the program.
Item 5. Other Information
None.
Item 6. Exhibits
(a)Exhibits
| Exhibit No. | Description | |||||||
| 3.1 | ||||||||
| 3.2 | ||||||||
| *4.1 | ||||||||
| *10.1 | ||||||||
| *31.1 | ||||||||
| *31.2 | ||||||||
| *32 | ||||||||
| 101 | The following material from Wynn Resorts, Limited's Quarterly Report on Form 10-Q, formatted in Inline XBRL (Inline Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019; (ii) the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 and 2019; (iii) the Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2020 and 2019; (iv) the Condensed Consolidated Statements of Stockholders' Equity for the three months ended March 31, 2020 and 2019; (v) the Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019; and (vi) Notes to Condensed Consolidated Financial Statements. The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |||||||
| 104 | Cover Page Interactive Data File - The cover page XBRL tags are embedded within the Inline XBRL document. | |||||||
Wynn Resorts, Limited agrees to furnish to the U.S. Securities and Exchange Commission, upon request, a copy of each agreement with respect to long-term debt not filed herewith in reliance upon the exemption from filing applicable to any series of debt which does not exceed 10% of the total consolidated assets of the company.
* Filed herein
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| WYNN RESORTS, LIMITED | ||||||||||||||
| Dated: May 8, 2020 | By: | /s/ Craig S. Billings | ||||||||||||
| Craig S. Billings | ||||||||||||||
| President, Chief Financial Officer and Treasurer | ||||||||||||||
| (Principal Financial and Accounting Officer) | ||||||||||||||