WYNN RESORTS

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WYNN RESORTS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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05/08/2020 | 04:49 pm


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


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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%.



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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,
Increase/
2020 2019 (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.



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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,
Increase/ Percent
2020 2019 (Decrease) 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,
Increase/ Percent
2020 2019 (Decrease) 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):


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Three Months Ended March 31,
Increase/ Percent
2020 2019 (Decrease) 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)





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Three Months Ended March 31,
Increase/ Percent
2020 2019 (Decrease) 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.



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Non-casino revenues




The table below sets forth our room revenues and associated key operating
measures:

Three Months Ended March 31,
Increase/
2020 2019 (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
.


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Operating expenses



The table below presents operating expenses (in thousands):



Three Months Ended March 31,
Increase/
2020 2019 (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.


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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,
Increase/ Percent
2020 2019 (Decrease) 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.


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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,
Increase/
2020 2019 (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.




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