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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
| x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period to
Commission File No. 333-100768
WYNN LAS VEGAS, LLC
(Exact name of registrant as specified in its charter)
| Nevada | 88-0494875 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ¨ No ¨
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer x Smaller reporting company ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x
The aggregate market value of the registrant’s voting interests held by non-affiliates on June 30, 2010 was $0. Wynn Resorts Holdings, LLC owns all of the membership interests of the registrant.
The registrant meets the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and is therefore filing this Form with the reduced disclosure format.
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Overview
Wynn Las Vegas, LLC owns and operates “Wynn Las Vegas,” a destination casino resort on the “Strip” in Las Vegas, Nevada, and “Encore at Wynn Las Vegas,” or “Encore” which is located adjacent to and is connected with Wynn Las Vegas. Wynn Las Vegas, LLC was formed on April 17, 2001 as a Nevada limited liability company. Unless the context otherwise requires, all references herein to the “Company,” “we,” “us” or “our,” or similar terms, refer to Wynn Las Vegas, LLC and its consolidated subsidiaries. The sole member of the Company is Wynn Resorts Holdings, LLC (“Holdings”). The sole member of Holdings is Wynn Resorts, Limited (“Wynn Resorts”).
Wynn Las Vegas Capital Corp. (“Wynn Capital”) is a wholly owned subsidiary of Wynn Las Vegas, LLC, incorporated on June 3, 2002, solely for the purpose of obtaining financing for Wynn Las Vegas. Wynn Capital is authorized to issue 2,000 shares of common stock, par value $0.01. At December 31, 2010, the Company owned the one share that was issued and outstanding. Wynn Capital has neither any significant net assets nor any operating activity. Its sole function is to serve as the co-issuer of the mortgage notes described below.
We commenced operations with the opening of Wynn Las Vegas on April 28, 2005. We opened Encore on December 22, 2008. Prior to April 28, 2005, we were solely a development stage company.
Due to a number of factors over the last few years, including disruptions in global economies, stagnant credit markets, reduced consumer spending, and high unemployment, 2010 was a difficult year for the U.S. casino resort business similar to 2008 and 2009. Auto traffic into Las Vegas, airline capacity and air travel to McCarran International Airport did not improve significantly over 2008 and 2009. Casino volumes and demand for hotel rooms continue to be lower than the trends experienced pre-2008. While we have experienced some stabilization in our operations over the past year, the current economic conditions in the United States, as well as the addition of new supply in late 2010, may continue to put pressure on hotel occupancy rates, room rates, casino volumes and profitability.
We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments of such reports with the Securities and Exchange Commission (“SEC”). Any document we file may be inspected, without charge, at the SEC’s public reference room at 100 F Street, N.E. Washington, D.C. 20549 or at the SEC’s internet site address at http://www.sec.gov. Information related to the operation of the SEC’s public reference room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, through its own internet address at www.wynnresorts.com, Wynn Resorts provides a hyperlink to a third-party SEC filing website which posts our filings as soon as reasonably practicable, where they can be reviewed without charge. The information found on our website is not a part of this Annual Report on Form 10-K or any other report we file or furnish to the SEC.
Wynn Las Vegas
We believe that Wynn Las Vegas offers exceptional accommodations, amenities and service with 2,716 rooms and suites, including 36 fairway villas and 6 private-entry villas for our premium guests. The Tower Suites at Wynn Las Vegas has received both the Forbes five-star and AAA five-diamond distinctions for 2011. The Spa at Wynn Las Vegas earned five-star recognition from Forbes for the third year in a row. The Spa at Wynn Las Vegas and the Spa at Encore are two of the only three spas in Las Vegas to be recognized with the Forbes five-star award.
The approximately 110,000 square foot casino features 147 table games, a baccarat salon, private VIP gaming rooms, a poker room, 1,842 slot machines, and a race and sports book. The resort’s 22 food and beverage outlets feature five fine dining restaurants, including restaurants helmed by award winning chefs. Wynn Las Vegas also offers two nightclubs, a spa and salon, a Ferrari and Maserati automobile dealership, wedding
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chapels, an 18-hole golf course, approximately 223,000 square feet of meeting space and an approximately 74,000 square foot retail promenade featuring boutiques from Alexander McQueen, Brioni, Cartier, Chanel, Dior, Graff, Louis Vuitton, Manolo Blahnik, Oscar de la Renta and Vertu. Wynn Las Vegas also has a showroom which features “Le Rêve”, a water-based theatrical production. We believe that the unique experience of Wynn Las Vegas drives the significant visitation experienced since opening.
Encore
Encore is located immediately adjacent to and is connected to Wynn Las Vegas and features a 2,034 all-suite hotel as well as an approximately 76,000 square foot casino with 95 table games, a baccarat salon, a sky casino, private VIP gaming rooms, 778 slot machines and a sports book. For the second year in a row, the Encore Tower Suites has received both the Forbes five-star and AAA five-diamond awards for 2011. The Spa at Encore also earned five-star recognition from Forbes for the second year in a row. The resort’s 13 food and beverage outlets include five restaurants, many of which feature award winning chefs. Encore also offers a beach club, two nightclubs, a spa and salon, approximately 60,000 square feet of meeting space and approximately 27,000 square feet of upscale retail outlets featuring boutiques from Hermes, Chanel and others. Encore also has a showroom which features Garth Brooks and other headliner entertainment acts.
Construction and Other Development
In July 2010, we commenced a project to refurbish and upgrade the rooms and suites at Wynn Las Vegas. The total project budget is approximately $83 million. The room remodel was completed in January 2011 and the suite remodel is expected to be completed early in the second quarter of 2011. As a part of this project, we are temporarily removing floors from service which reduces our total number of rooms available during the construction period.
In the ordinary course of our business, in response to market developments and customer preferences, we have made and continue to make certain enhancements and refinements to our resorts.
Approximately 142 acres of land adjacent to Wynn Las Vegas and Encore is currently improved with a golf course. While we may develop this property in the future, due to the current economic environment and certain restrictions in our credit facilities, we have no immediate plans to do so.
Our Strategy
We believe that Steve Wynn is the preeminent designer, developer and operator of destination casino resorts and has developed brand name status. Mr. Wynn’s involvement with our casino resorts provides a distinct advantage over other gaming enterprises. We integrate luxurious surroundings, distinctive entertainment and superior amenities, including fine dining and premium retail offerings, to create resorts that appeal to a variety of customers.
Our resort complex was designed and built to provide a premium experience. Wynn Las Vegas and Encore are positioned as full-service luxury resorts and casinos in the leisure, convention and tour and travel industries. We market these resorts directly to gaming customers using database marketing techniques, as well as traditional incentives, including reduced room rates and complimentary meals and suites. Our rewards system offers discounted and complimentary meals, lodging and entertainment for our guests. We also create general market awareness for our properties through various media channels, including television, radio, newspapers, magazines, the internet, direct mail and billboards.
Mr. Wynn and his team bring significant experience in designing, developing and operating casino resorts. The senior executive team has an average of approximately 25 years of experience in the hotel and gaming industries. We also have an approximately 90-person design, development and construction affiliate, the senior management of which has significant experience in all major construction disciplines.
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Market and Competition
Las Vegas
Las Vegas is the largest gaming market in the United States. The casino/hotel industry in Las Vegas is highly competitive and, prior to the recent economic conditions and interruption in projects under development, had undergone a period of exceptional growth, particularly with the addition of projects targeting the premium customer. Wynn Las Vegas and Encore are located on the Las Vegas Strip and compete with other high-quality resorts and hotel casinos on the Strip, those in downtown Las Vegas, as well as a large number of hotels in and near Las Vegas. Many competing properties draw a significant number of visitors and directly compete with our operations. We seek to differentiate Wynn Las Vegas and Encore from other major Las Vegas resorts by concentrating on our fundamental elements of design, atmosphere, personal service and luxury.
Wynn Las Vegas and Encore also compete, to some extent, with other hotel/casino facilities in Nevada and Atlantic City, riverboat gaming facilities in other states, casino facilities on Native American lands, casino resorts throughout Asia and elsewhere in the world, as well as state lotteries and other forms of gaming. In addition, the legalization of casino gaming in or near metropolitan areas from which we attract customers could have a negative effect on our business. New or renovated casinos in Asia, including our properties in Macau, could draw Asian gaming customers away from Las Vegas.
During 2010, while the market did experience some stabilization, the economic environment in the gaming and hotel markets in Las Vegas continues at depressed levels of gaming revenue, visitation, and hotel room demand. While certain gaming and hotel statistics may have increased from the 2009 levels, improvement has not been significant. The average daily room rate increased 2%, visitation increased 2.7% to 37.3 million visitors, and Las Vegas strip gaming revenues increased 4.1%, all as compared to the year ended December 31, 2009. We, along with our competitors, have responded to the depressed levels in consumer spending by aggressively marketing and pricing our Las Vegas offerings.
Regulation and Licensing
Introduction. The gaming industry is highly regulated. Gaming registrations, licenses and approvals, once obtained, can be suspended or revoked for a variety of reasons. We cannot assure you that we will obtain all required registrations, licenses and approvals on a timely basis or at all, or that, once obtained, the registrations, findings of suitability, licenses and approvals will not be suspended, conditioned, limited or revoked. If we ever are prohibited from operating Wynn Las Vegas, Encore or any other property we may own and operate in the future, we would, to the extent permitted by law, seek to recover our investment by selling the property affected, but we cannot assure you that we would recover its full value.
The ownership and operation of casino gaming facilities in the State of Nevada are subject to the Nevada Gaming Control Act and the regulations made under the Act, as well as to various local ordinances. Our properties are subject to the licensing and regulatory control of the Nevada Gaming Commission, the Nevada State Gaming Control Board and the Clark County Liquor and Gaming Licensing Board, which we refer to herein collectively as the “Nevada Gaming Authorities.”
Policy Concerns of Gaming Laws. The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy. Such public policy concerns include, among other things:
| • | preventing unsavory or unsuitable persons from being directly or indirectly involved with gaming at any time or in any capacity; |
| • | establishing and maintaining responsible accounting practices and procedures; |
| • | maintaining effective controls over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding assets and revenue, providing reliable recordkeeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; |
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| • | preventing cheating and fraudulent practices; and |
| • | providing a source of state and local revenue through taxation and licensing fees. |
Changes in applicable laws, regulations and procedures could have significant negative effects on Wynn Las Vegas’ gaming operations and our financial condition and results of operations.
Owner and Operator Licensing Requirements. Wynn Las Vegas, LLC, as the owner and operator of Wynn Las Vegas and Encore, has been approved by the Nevada Gaming Authorities as a limited liability company licensee, referred to as a company licensee, which includes approval to conduct casino gaming operations, including a race book and sports pool and pari-mutuel wagering. These gaming licenses are not transferable.
Company Registration Requirements. Wynn Resorts was found suitable by the Nevada Gaming Commission to own the equity interests of Holdings and to be registered by the Nevada Gaming Commission as a publicly traded corporation, referred to as a registered company, for the purposes of the Nevada Gaming Control Act. Holdings was found suitable by the Nevada Gaming Commission to own the equity interests of Wynn Las Vegas, LLC and to be registered by the Nevada Gaming Commission as an intermediary company. In addition to being licensed, Wynn Las Vegas, LLC, as an issuer of debt securities that were registered with the SEC, also qualified as a registered company. Wynn Las Vegas Capital Corp., a co-issuer of the debt securities, was not required to be registered or licensed, but may be required to be found suitable as a lender or financing source.
Periodically, we are required to submit detailed financial and operating reports to the Nevada Gaming Commission and provide any other information that the Nevada Gaming Commission may require. Substantially all of our material loans, leases, sales of securities and similar financing transactions must be reported to, and/or approved by, the Nevada Gaming Commission.
Individual Licensing Requirements. No person may become a stockholder or member of, or receive any percentage of the profits of, an intermediary company or company licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Nevada Gaming Authorities may investigate any individual who has a material relationship to or material involvement with us to determine whether the individual is suitable or should be licensed as a business associate of a gaming licensee. Certain of our officers, directors and key employees have been or may be required to file applications with the Nevada Gaming Authorities and are or may be required to be licensed or found suitable by the Nevada Gaming Authorities. All applications required as of the date of this report have been filed. However, the Nevada Gaming Authorities may require additional applications and may also deny an application for licensing for any reason, which they deem appropriate. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. An applicant for licensing or an applicant for a finding of suitability must pay or must cause to be paid all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and, in addition to their authority to deny an application for a finding of suitability or licensing, the Nevada Gaming Authorities have the jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with us, we would have to sever all relationships with that person. In addition, the Nevada Gaming Commission may require us to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or questions pertaining to licensing are not subject to judicial review in Nevada.
Consequences of Violating Gaming Laws. If the Nevada Gaming Commission determines that we have violated the Nevada Gaming Control Act or any of its regulations, it could limit, condition, suspend or revoke our registrations and gaming license. In addition, we and the persons involved could be subject to substantial fines
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for each separate violation of the Nevada Gaming Control Act, or of the regulations of the Nevada Gaming Commission, at the discretion of the Nevada Gaming Commission. Further, the Nevada Gaming Commission could appoint a supervisor to operate Wynn Las Vegas and Encore and, under specified circumstances, earnings generated during the supervisor’s appointment (except for the reasonable rental value of the premises) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of any of our gaming licenses and the appointment of a supervisor could, and revocation of any gaming license would, have a significant negative effect on our gaming operations.
Requirements for Voting or Nonvoting Securities Holders. Regardless of the number of shares held, any beneficial owner of a registered company’s voting or nonvoting securities may be required to file an application, be investigated and have that person’s suitability as a beneficial owner of voting securities determined if the Nevada Gaming Commission has reason to believe that the ownership would be inconsistent with the declared policies of the State of Nevada. If the beneficial owner of the voting or nonvoting securities of Wynn Resorts who must be found suitable is a corporation, partnership, limited partnership, limited liability company or trust, it must submit detailed business and financial information including a list of its beneficial owners. The applicant must pay all costs of the investigation incurred by the Nevada Gaming Authorities in conducting any investigation.
The Nevada Gaming Control Act requires any person who acquires more than 5% of the voting securities of a registered company to report the acquisition to the Nevada Gaming Commission. The Nevada Gaming Control Act requires beneficial owners of more than 10% of a registered company’s voting securities to apply to the Nevada Gaming Commission for a finding of suitability within 30 days after the Chairman of the Nevada State Gaming Control Board mails the written notice requiring such filing. However, an “institutional investor,” as defined in the Nevada Gaming Control Act, which beneficially owns more than 10% but not more than 11% of a registered company’s voting securities as a result of a stock repurchase by the registered company may not be required to file such an application. Further, an institutional investor which acquires more than 10%, but not more than 25%, of a registered company’s voting securities may apply to the Nevada Gaming Commission for a waiver of a finding of suitability if the institutional investor holds the voting securities for investment purposes only. An institutional investor that has obtained a waiver may hold more than 25% but not more than 29% of a registered company’s voting securities and maintain its waiver where the additional ownership results from a stock repurchase by the registered company. An institutional investor will not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the registered company, a change in the corporate charter, bylaws, management, policies or operations of the registered company, or any of its gaming affiliates, or any other action which the Nevada Gaming Commission finds to be inconsistent with holding the registered company’s voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include:
| • | voting on all matters voted on by stockholders or interest holders; |
| • | making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and |
| • | other activities that the Nevada Gaming Commission may determine to be consistent with such investment intent. |
The articles of incorporation of Wynn Resorts include provisions intended to assist its implementation of the above restrictions.
Consequences of Being Found Unsuitable. Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Nevada Gaming Commission or by the Chairman of the Nevada State Gaming Control Board, or who refuses or fails to pay the investigative costs
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incurred by the Nevada Gaming Authorities in connection with the investigation of its application, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of any voting security or debt security of a registered company beyond the period of time as may be prescribed by the Nevada Gaming Commission may be guilty of a criminal offense. We will be subject to disciplinary action if, after we receive notice that a person is unsuitable to hold an equity interest or to have any other relationship with us, we:
| • | pay that person any dividend or interest upon any voting securities; |
| • | allow that person to exercise, directly or indirectly, any voting right held by that person relating to Wynn Resorts; |
| • | pay remuneration in any form to that person for services rendered or otherwise; or, |
| • | fail to pursue all lawful efforts to require the unsuitable person to relinquish such person’s voting securities including, if necessary, the immediate purchase of the voting securities for cash at fair market value. |
Gaming Laws Relating to Debt Securities Ownership. The Nevada Gaming Commission may, in its discretion, require the owner of any debt or similar securities of a registered company, to file applications, be investigated and be found suitable to own the debt or other security of the registered company if the Nevada Gaming Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the State of Nevada. If the Nevada Gaming Commission decides that a person is unsuitable to own the security, then under the Nevada Gaming Control Act, the registered company can be sanctioned, including the loss of its approvals if, without the prior approval of the Nevada Gaming Commission, it:
| • | pays to the unsuitable person any dividend, interest or any distribution whatsoever; |
| • | recognizes any voting right by the unsuitable person in connection with the securities; |
| • | pays the unsuitable person remuneration in any form; or, |
| • | makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation or similar transaction. |
Approval of Public Offerings. We may not make a public offering without the prior approval of the Nevada Gaming Commission if the proceeds from the offering are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for those purposes or for similar transactions. On March 19, 2009, the Nevada Gaming Commission granted us prior approval, subject to certain conditions, to make public offerings for a period of two years (the “Shelf Approval”). The Shelf Approval also applies to any affiliated company wholly owned by us which is a publicly traded corporation or would thereby become a publicly traded corporation pursuant to a public offering. The Shelf Approval may be rescinded for good cause without prior notice upon the issuance of an interlocutory stop order by the Chairman of the Nevada State Gaming Control Board. The Shelf Approval does not constitute a finding, recommendation or approval by any of the Nevada Gaming Authorities as to the accuracy or adequacy of the offering memorandum or the investment merits of the securities. Any representation to the contrary is unlawful.
Approval of Changes in Control. A registered company must obtain the prior approval of the Nevada Gaming Commission with respect to a change in control through merger; consolidation; stock or asset acquisitions; management or consulting agreements; or any act or conduct by a person by which the person obtains control of the registered company.
Entities seeking to acquire control of a registered company must satisfy the Nevada State Gaming Control Board and Nevada Gaming Commission with respect to a variety of stringent standards before assuming control of the registered company. The Nevada Gaming Commission may also require controlling stockholders, officers,
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directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction.
Approval of Defensive Tactics. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate gaming licensees or affecting registered companies that are affiliated with the operations of Nevada gaming licensees may be harmful to stable and productive corporate gaming. The Nevada Gaming Commission has established a regulatory scheme to reduce the potential adverse effects of these business practices upon Nevada’s gaming industry and to further Nevada’s policy in order to:
| • | assure the financial stability of corporate gaming licensees and their affiliated companies; |
| • | preserve the beneficial aspects of conducting business in the corporate form; and |
| • | promote a neutral environment for the orderly governance of corporate affairs. |
Approvals may be required from the Nevada Gaming Commission before a registered company can make exceptional repurchases of voting securities above its current market price and before a corporate acquisition opposed by management can be consummated. The Nevada Gaming Control Act also requires prior approval of a plan of recapitalization proposed by a registered company’s board of directors in response to a tender offer made directly to its stockholders for the purpose of acquiring control.
Fees and Taxes. License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the State of Nevada and to the counties and cities in which the licensed subsidiaries’ respective operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable monthly, quarterly or annually and are based upon :
| • | a percentage of the gross revenue received; |
| • | the number of gaming devices operated; or, |
| • | the number of table games operated. |
A live entertainment tax also is imposed on admission charges and sales of food, beverages and merchandise where live entertainment is furnished.
Foreign Gaming Investigations. Any person who is licensed, required to be licensed, registered, required to be registered in Nevada, or is under common control with such persons (collectively, “licensees”), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada State Gaming Control Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation of the Nevada State Gaming Control Board of the licensee’s or registrant’s participation in such foreign gaming. The revolving fund is subject to increase or decrease at the discretion of the Nevada Gaming Commission. Licensees and registrants are required to comply with the foreign gaming reporting requirements imposed by the Nevada Gaming Control Act. A licensee or registrant is also subject to disciplinary action by the Nevada Gaming Commission if it:
| • | knowingly violates any laws of the foreign jurisdiction pertaining to the foreign gaming operation; |
| • | fails to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations; |
| • | engages in any activity or enters into any association that is unsuitable because it poses an unreasonable threat to the control of gaming in Nevada, reflects or tends to reflect, discredit or disrepute upon the State of Nevada or gaming in Nevada, or is contrary to the gaming policies of Nevada; |
| • | engages in activities or enters into associations that are harmful to the State of Nevada or its ability to collect gaming taxes and fees; or, |
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| • | employs, contracts with or associates with a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of unsuitability. |
Licenses for Conduct of Gaming and Sale of Alcoholic Beverages. The conduct of gaming activities and the service and sale of alcoholic beverages at Wynn Las Vegas and Encore are subject to licensing, control and regulation by the Clark County Liquor and Gaming Licensing Board, which has granted Wynn Las Vegas, LLC, licenses for such purposes. In addition to approving Wynn Las Vegas, LLC, the Clark County Liquor and Gaming Licensing Board has the authority to approve all persons owning or controlling the stock of any corporation controlling a gaming license. Clark County gaming and liquor licenses are not transferable. The County has full power to limit, condition, suspend or revoke any license. Any disciplinary action could, and revocation would, have a substantial negative impact upon our operations.
Seasonality
We may experience fluctuations in revenues and cash flows from month to month, however, we do not believe that our business is materially impacted by seasonality.
Employees
As of December 31, 2010, we had a total of approximately 9,405 full-time equivalent employees.
During 2006, we entered into a ten year collective bargaining agreement with the Culinary and Bartenders Union local covering approximately 5,600 of our employees. We also entered into a ten year collective bargaining agreement with the Transportation Workers Union in November 2010, which covers the table games dealers at Wynn Las Vegas. Certain other unions may seek to organize the workers at Wynn Las Vegas and Encore. Unionization, pressure to unionize, or other forms of collective bargaining could increase our labor costs.
Intellectual Property
Among our most important marks are our trademarks and service marks that use the name “WYNN.” Holdings has filed applications with the U.S. Patent and Trademark Office (“PTO”) and various foreign patent and trademark registries, to register a variety of the WYNN-related trademarks and service marks in connection with a variety of goods and services. These marks include “WYNN LAS VEGAS” and “ENCORE.” Some of the applications are based upon ongoing use and others are based upon a bona fide intent to use the marks.
A common element of most of these marks is the use of the surname “WYNN.” As a general rule, a surname (or the portion of a mark primarily constituting a surname) is not eligible for registration unless the surname has acquired “secondary meaning.” To date, Holdings has been successful in demonstrating to the PTO such secondary meaning for the Wynn name in certain of the applications based upon factors including Mr. Wynn’s prominence as a resort developer.
Federal registrations are not completely dispositive of the right to such marks. Third parties who claim prior rights with respect to similar marks may nonetheless challenge our right to obtain registrations or our use of the marks and seek to overcome the presumptions afforded by such registrations.
We have also filed applications with various foreign patent and trademark registries, including registries in Macau, China, Singapore, Hong Kong, Taiwan, Japan, certain European countries and various other jurisdictions throughout the world, to register a variety of WYNN-related trademarks and service marks in connection with a variety of goods and services. These marks include many of the same marks filed with the United States Patent and Trademark Office and include “WYNN LAS VEGAS” and “ENCORE.” Some of the applications are based upon ongoing use and others are based upon a bona fide intent to use the marks.
We recognize that our intellectual property assets, including the word and logo version of “WYNN,” are among our most valuable assets. As a result, and in connection with expansion of our resort and gaming activities
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outside the United States, we have undertaken a program to register our trademarks and other intellectual property rights in relevant jurisdictions. We have retained counsel and intend to take all steps necessary to not only acquire, but protect our intellectual property rights against unauthorized use throughout the world.
On August 6, 2004, Holdings entered into agreements with Mr. Wynn that confirm and clarify its rights to use the “Wynn” name and Mr. Wynn’s persona in connection with our casino resorts. Under a Surname Rights Agreement, Mr. Wynn has acknowledged Holdings’ exclusive, fully paid-up, perpetual, worldwide right to use, and to own and register trademarks and service marks incorporating, the “Wynn” name for casino resorts and related businesses, together with the right to sublicense the name and marks to our affiliates. Under a Rights of Publicity License, Mr. Wynn has granted Holdings the exclusive, royalty-free, worldwide right to use his full name, persona and related rights of publicity for casino resorts and related businesses, together with the ability to sublicense the persona and publicity rights to our affiliates, until October 24, 2017. Holdings has entered into sublicense agreements with us relating to our use of Mr. Wynn’s name and persona, as well as other intellectual property.
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Certain information included in this Annual Report on Form 10-K contains statements that are forward-looking, including, but not limited to, statements relating to our business strategy and development activities as well as other capital spending, financing sources, the effects of regulation (including gaming and tax regulations), expectations concerning future operations, profitability and competition. Any statements contained in this report that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, in some cases you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “would,” “could,” “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “continue” or the negative of these terms or other comparable terminology. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward-looking statements made by us. These risks and uncertainties include, but are not limited to, those set forth in Item 1A (“Risk Factors”) as well as the following:
| • | adverse tourism trends given the current domestic and international economic conditions; |
| • | volatility and weakness in world-wide credit and financial markets globally and from governmental intervention in the financial markets; |
| • | general global macroeconomic conditions; |
| • | decreases in levels of travel, leisure and consumer spending; |
| • | continued high unemployment; |
| • | fluctuations in occupancy rates and average daily room rates; |
| • | conditions precedent to funding under the agreements governing the disbursement of the proceeds of borrowings under our credit facilities; |
| • | continued compliance with all provisions in our credit agreements; |
| • | competition in the casino/hotel and resort industries and actions taken by our competitors in reaction to adverse economic conditions; |
| • | new development and construction activities of competitors; |
| • | our dependence on Stephen A. Wynn and existing management; |
| • | our dependence on Wynn Las Vegas and Encore for all of our cash flow; |
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| • | leverage and debt service (including sensitivity to fluctuations in interest rates); |
| • | changes in federal or state tax laws or the administration of such laws; |
| • | changes in state law regarding water rights; |
| • | changes in gaming laws or regulations (including the legalization of gaming in certain jurisdictions); |
| • | approvals under applicable jurisdictional laws and regulations (including gaming laws and regulations); |
| • | the impact that an outbreak of an infectious disease or the impact of a natural disaster may have on the travel and leisure industry; |
| • | the consequences of the wars in Iraq and Afghanistan, and other military conflicts in the Middle East and any future security alerts and/or terrorist attacks; and |
| • | pending or future legal proceedings. |
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 currently available to us. We undertake no obligation to publicly release any revisions to such forward-looking statements to reflect events or circumstances after the date of this report.
The following risk factors, among others, could cause our financial performance to differ significantly from the goals, plans, objectives, intentions and expectations expressed in this Annual Report on Form 10-K. If any of the following risks and uncertainties or other risks and uncertainties not currently known to us or not currently considered to be material actually occurs, our business, financial condition or operating results could be harmed substantially.
Risks Related to our Substantial Indebtedness
We are highly leveraged and future cash flow may not be sufficient for us to meet our obligations, and we might have difficulty obtaining more financing.
We have a substantial amount of consolidated debt in relation to our equity. As of December 31, 2010, we had total outstanding debt of approximately $2.6 billion. In addition, our credit agreement and indenture permit us to incur additional indebtedness in the future. Our substantial indebtedness could have important consequences. For example:
| • | if we fail to meet our payment obligations or otherwise default under the agreements governing our indebtedness, the lenders under those agreements will have the right to accelerate the indebtedness and exercise other rights and remedies against us. These rights and remedies include rights to: |
| • | repossess and foreclose upon the assets that serve as collateral; |
| • | initiate judicial foreclosure against us; and |
| • | petition a court to appoint a receiver for us or for substantially all of our assets. |
| • | we are required to use a substantial portion of our cash flow from the operations of Wynn Las Vegas and Encore to service and amortize our Wynn Las Vegas indebtedness, which will reduce the amount of available cash, if any, to fund working capital, other capital expenditures and other general corporate purposes, and may give us greater exposure to the current adverse economic and industry condition; |
| • | we may experience decreased revenues from our operations attributable to decreases in consumer spending levels due to the current adverse economic and industry conditions, and could fail to generate |
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| sufficient cash to fund our liquidity needs and/or fail to satisfy the financial and other restrictive covenants to which we are subject to under our existing indebtedness. We cannot provide assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs; |
| • | we may have a limited ability to respond to changing business and economic conditions and to withstand competitive pressures, which may affect our financial condition; |
| • | we may not be able to obtain additional financing if needed, to satisfy working capital requirements, or pay for other capital expenditures, debt service or other obligations; |
| • | while we do hedge a certain amount of our debt under our credit facilities, rates with respect to a portion of interest we pay will fluctuate with market rates and, accordingly, our interest expense will increase if market interest rates increase; and |
| • | if we fail to pay our debts generally as they become due, unsecured creditors that we fail to pay may initiate involuntary bankruptcy proceedings against us, subject to the requirements of the United States Bankruptcy Code, and such bankruptcy proceedings will delay or impair the repayment of our credit facilities and first mortgage notes. |
Under the terms of the documents governing our debt facilities, we may, subject to certain limitations, be permitted to incur additional indebtedness, including secured senior and subordinated indebtedness. If we incur additional indebtedness, the risks described above will be exacerbated.
The agreements governing our debt facilities contain certain financial covenants and other covenants that restrict our ability to engage in certain transactions and may impair our ability to respond to changing business and economic conditions.
Our debt facilities require us to satisfy various financial covenants, which include requirements for a minimum interest coverage ratio and a ratio pertaining to total debt to earnings before interest, tax, depreciation and amortization. If our operations fail to generate adequate cash flow, we may violate those covenants causing a default in our agreements. Future indebtedness or other contracts could contain covenants more restrictive than those contained in our existing debt facilities.
Our ability to comply with the terms of our outstanding facilities may be affected by general economic conditions, industry conditions and other events some of which may be beyond our control. As a result, we may not be able to maintain compliance with these covenants. Our failure to comply with the terms of our debt facilities, including failure as a result of events beyond our control, could result in an event of default, which could materially and adversely affect our operating results and our financial condition or result in our lenders taking action to enforce their security interests in our various assets.
The agreements governing our debt facilities also contain restrictions on our ability to engage in certain transactions and may limit our ability to respond to changing business and economic conditions. The debt facilities impose operating and financial restrictions on us and our restricted subsidiaries, including, among other things, limitations on the ability to:
| • | pay dividends or distributions or repurchase equity; |
| • | incur additional debt; |
| • | make investments; |
| • | create liens on assets to secure debt; |
| • | enter into transactions with affiliates; |
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| • | issue stock of, or member’s interests in, subsidiaries; |
| • | enter into sale-leaseback transactions; |
| • | engage in other businesses; |
| • | merge or consolidate with another company; |
| • | transfer and sell assets; |
| • | issue disqualified stock; |
| • | create dividend and other payment restrictions affecting subsidiaries; and |
| • | designate restricted and unrestricted subsidiaries. |
If there were an event of default under one of our debt instruments, the holders of the defaulted debt could cause all amounts outstanding with respect to that debt to be due and payable immediately. We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding debt instruments if accelerated upon an event of default, or that we would be able to repay, refinance or restructure the payments on those debt securities.
Our indebtedness is secured by a substantial portion of our assets.
Subject to applicable laws, including gaming laws, and certain agreed upon exceptions, our debt is secured by liens on substantially all of our assets. In the event of a default under our financing documents, or if we experience insolvency, liquidation, dissolution or reorganization, the holders of our secured debt instruments would first be entitled to payment from their collateral security, and only then would holders of our unsecured debt be entitled to payment from our remaining assets.
Risks Related to our Business
The loss of Stephen A. Wynn could significantly harm our business.
Our ability to maintain our competitive position is dependent to a large degree on the efforts and skills of Stephen A. Wynn, the Chairman of the Board, Chief Executive Officer and one of the principal stockholders of Wynn Resorts. In 2008, Wynn Resorts extended the term of Mr. Wynn’s employment agreement until October 2020. However, we cannot assure you that Mr. Wynn will remain with Wynn Resorts. If Wynn Resorts loses the services of Mr. Wynn, or if he is unable to devote sufficient attention to our operations for any other reason, our business may be significantly impaired.
Continued weakness or further weakening in global economic conditions may adversely affect consumer and corporate spending and tourism trends, resulting in additional deterioration in our business.
Discretionary consumer spending has been adversely affected by the current economic crisis. Worldwide, consumers are traveling less and spending less when they do travel. While showing signs of improvement and some stabilization, corporate spending on conventions and business development is still well below historical levels as businesses closely monitor their budgets. Since our business model relies on significant expenditures on luxury and discretionary items, any factors that may cause further weakness or instability in the economy may adversely affect our operations. Customer demand for luxury amenities and leisure activities that we offer may be depressed or continue to decline.
There may be excess room supply particularly in the luxury segment.
There have been large additions to the room supply in Las Vegas since December 2009. Even after the global economy begins to recover, there may be excess supply particularly in the luxury segment.
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We are entirely dependent on Wynn Las Vegas and Encore for all of our cash flow, which subjects us to greater risks than a gaming company with more operating properties.
We do not expect to have material assets or operations other than Wynn Las Vegas and Encore. We are entirely dependent upon Wynn Las Vegas and Encore for all of our cash flow. As a result, we are subject to a greater degree of risk than a gaming company with more operating properties. The risks to which we have a greater degree of exposure include the following:
| • | local economic and competitive conditions; |
| • | changes in local and state governmental laws and regulations, including gaming laws and regulations; |
| • | natural and other disasters; |
| • | an increase in the cost of utilities for our properties as a result of, among other things, power shortages in California or other western states with which Nevada shares a single regional power grid or a shortage of natural resources such as water; |
| • | a decline in the number of visitors to Las Vegas; |
| • | a decrease in gaming and non-gaming activities at Wynn Las Vegas and Encore; and |
| • | the outbreak of an infectious disease such as H1N1 or the avian flu. |
Any of the factors outlined above could negatively affect our ability to generate sufficient cash flow to make payments or maintain our covenants with respect to our debt.
Our casino, hotel, convention and other facilities face intense competition.
The casino/hotel industry is highly competitive and additional developments have recently opened or are currently underway. Resorts located on or near the Las Vegas Strip compete with other Las Vegas Strip hotels and with other hotel casinos in Las Vegas on the basis of overall atmosphere, range of amenities, level of service, price, location, entertainment, theme and size, among other factors. Wynn Las Vegas and Encore may also compete with one another.
Wynn Las Vegas and Encore also compete, to some extent, with other hotel/casino facilities in Nevada and Atlantic City, riverboat gaming facilities in other states, casino facilities on Native American lands and elsewhere in the world, as well as state lotteries and other forms of gaming. In addition, the legalization of casino gaming in or near metropolitan areas from which we attract customers could have a negative effect on our business. New or renovated casinos in Asia, including our property in Macau, could draw Asian gaming customers away from Las Vegas.
Our business relies on high-end, international customers to whom we often extend credit, and we may not be able to collect gaming receivables from our credit players or credit play may decrease.
A significant portion of our table games revenue at Wynn Las Vegas and Encore is attributable to the play of a limited number of international customers. The loss or a reduction in the play of the most significant of these customers could have a substantial negative effect on our future operating results. A continued downturn in economic conditions in the countries in which these customers reside could cause a further reduction in the frequency of visits by and revenue generated from these customers.
We conduct our gaming activities on a credit as well as a cash basis. This credit is unsecured. Table games players typically are extended more credit than slot players, and high-stakes players typically are extended more credit than patrons who tend to wager lower amounts. The collectibility of receivables from international customers could be negatively affected by future business or economic trends or by significant events in the
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countries in which these customers reside. We will extend credit to those customers whose level of play and financial resources, in the opinion of management, warrant such an extension.
In addition, high-end gaming is more volatile than other forms of gaming, and variances in win-loss results attributable to high-end gaming may have a positive or negative impact on cash flow and earnings in a particular quarter.
While gaming debts evidenced by a credit instrument, including what is commonly referred to as a “marker,” are enforceable under the current laws of Nevada, and judgments on gaming debts are enforceable in all states under the Full Faith and Credit Clause of the United States Constitution, other jurisdictions may determine that direct or indirect enforcement of gaming debts is against public policy. Although courts of some foreign nations will enforce gaming debts directly and the assets in the United States of foreign debtors may be used to satisfy a judgment, judgments on gaming debts from U.S. courts are not binding on the courts of many foreign nations. We cannot assure you that we will be able to collect the full amount of gaming debts owed to us, even in jurisdictions that enforce them. Recent dramatic changes in the economic conditions may make it more difficult to assess creditworthiness and more difficult to collect the full amount of any gaming debt owed to us. Our inability to collect gaming debts could have a significant negative impact on our operating results.
Our business is particularly sensitive to reductions in discretionary consumer spending as a result of downturns in the economy.
Consumer demand for hotel/casino resorts, trade shows and conventions and for the type of luxury amenities that we offer is particularly sensitive to downturns in the economy which adversely impact discretionary spending on leisure activities. Changes in discretionary consumer spending or consumer preferences brought about by the factors such as perceived or actual general economic conditions, high unemployment, the current housing foreclosure crisis, the current credit crisis, bank failures and the potential for additional bank failures, perceived or actual changes disposable consumer income and wealth, the current global economic recession and changes in consumer confidence in the economy, or fears of war and future acts of terrorism could reduce customer demand for the luxury amenities and leisure activities we offer, and may have a significant negative impact on our operating results.
During 2010, the economic environment in the gaming and hotel markets in Las Vegas continued to experience depressed levels of gaming revenue, visitation, and hotel room demand. While certain gaming and hotel statistics may have increased from the 2009 levels, improvement has not been significant. The average daily room rate increased 2.0%, visitation increased 2.7% to 37.3 million visitors, and Las Vegas strip gaming revenues increased 4.1%, all as compared to the year ended December 31, 2009. If these trends do not improve more significantly, our financial condition, results of operations and cash flows may be adversely affected.
We are subject to extensive state and local regulation, and licensing and gaming authorities have significant control over our operations, which could have a negative effect on our business.
The operations of Wynn Las Vegas and Encore are contingent upon maintaining all necessary regulatory licenses, permits, approvals, registrations, findings of suitability, orders and authorizations. The laws, regulations and ordinances requiring these licenses, permits and other approvals generally relate to the responsibility, financial stability and character of the owners and managers of gaming operations, as well as persons financially interested or involved in gaming operations. The scope of the approvals required to open and operate a facility is extensive. We received all approvals for the opening of Wynn Las Vegas on April 28, 2005 and Encore on December 22, 2008; however, we are subject to ongoing regulation to maintain these operations.
The Nevada Gaming Commission may, in its discretion, require the holder of any debt or securities that we or Wynn Resorts issue to file applications, be investigated and be found suitable to own our or Wynn Resorts’ securities if it has reason to believe that the security ownership would be inconsistent with the declared policies of the State of Nevada.
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Nevada regulatory authorities have broad powers to request detailed financial and other information, to limit, condition, suspend or revoke a registration, gaming license or related approval and to approve changes in our operations. Substantial fines or forfeiture of assets for violations of gaming laws or regulations may be levied. The suspension or revocation of any license which may be granted to us or the levy of substantial fines or forfeiture of assets could significantly harm our business, financial condition and results of operations. Furthermore, compliance costs associated with gaming laws, regulations and licenses are significant. Any change in the laws, regulations or licenses applicable to our business or a violation of any current or future laws or regulations applicable to our business or gaming licenses could require us to make substantial expenditures or could otherwise negatively affect our gaming operations.
We are subject to taxation by various governments and agencies. The rate of taxation could change.
We are subject to taxation in the United States at the federal, state and local level. Specific rates of taxation can be changed by legislative action. Increases in taxation could adversely affect our results.
Terrorism and the uncertainty of military conflicts, natural disasters and contagious diseases, as well as other factors affecting discretionary consumer spending, may harm our operating results.
The strength and profitability of our business depends on consumer demand for hotel casino resorts in general and for the type of luxury amenities our properties offer. Changes in consumer preferences or discretionary consumer spending could harm our business. The terrorist attacks of September 11, 2001, other terrorist activities in the United States and elsewhere, military conflicts in Iraq, Afghanistan and in the Middle East, outbreaks of infectious disease and pandemics, and natural disasters such as hurricanes, tsunamis and earthquakes, among other things, have had negative impacts on travel and leisure expenditures. We cannot predict the extent to which similar events and conditions may continue to affect us in the future. An extended period of reduced discretionary spending and/or disruptions or declines in airline travel and business conventions could significantly harm our operations. In particular, because our business relies heavily upon high-end customers, particularly international customers, factors resulting in a decreased propensity to travel internationally could have a negative impact on our operations.
In addition, other factors affecting travel and discretionary consumer spending, including general economic conditions, disposable consumer income, fears of recession and reduced consumer confidence in the economy, may negatively impact our business. Negative changes in any factors affecting discretionary spending could reduce customer demand for the products and services we offer, thus imposing practical limits on pricing and harming our operations.
Our insurance coverage may not be adequate to cover all possible losses that we could suffer, and our insurance costs may increase.
The terrorist attacks of September 11, 2001 have substantially affected the availability of insurance coverage for certain types of damages or occurrences. We currently have insurance coverage for terrorist acts included in our commercial property insurance policy with respect to Wynn Las Vegas and Encore at Wynn Las Vegas, not to exceed $1.5 billion. However, these types of acts could expose us to losses that exceed our coverage and could have a significant negative impact on our operations.
We may not have sufficient insurance coverage in the event of a catastrophic property or casualty loss. We may also suffer disruption of our business in the event of a terrorist attack or other catastrophic property or casualty loss or be subject to claims by third parties injured or harmed. While we currently carry general liability insurance and business interruption insurance, such insurance may not be adequate to cover all losses in such event. In the event that insurance premiums increase, we may not be able to maintain the insurance coverage we currently have or otherwise be able to maintain adequate insurance protection.
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If a third party successfully challenges Holdings’ ownership of, or right to use, the Wynn-related service marks, our business or results of operations could be harmed.
We have sublicensed certain Wynn-related trademarks and services from Holdings. Holdings has filed applications with the United States Patent and Trademark Office (“PTO”), to register a variety of WYNN-related trademarks and service marks in connection with a variety of goods and services. These marks include “WYNN LAS VEGAS” and “ENCORE.” Some of the applications are based upon ongoing use and others are based upon a bona fide intent to use the marks.
A common element of most of these marks is the use of the surname, “WYNN.” As a general rule, a surname (or the portion of a mark primarily constituting a surname) is not eligible for registration unless the surname has acquired “secondary meaning.” To date, Holdings has been successful in demonstrating to the PTO such secondary meaning for the Wynn name, in certain of the applications, based upon factors including Mr. Wynn’s prominence as a resort developer, but we cannot assure you that we will be successful with the other pending applications.
Even if Holdings is able to obtain registration of the WYNN-related marks, such federal registrations are not completely dispositive of the right to such marks. Third parties who claim prior rights with respect to similar marks may nonetheless challenge our right to obtain registrations or our use of the marks and seek to overcome the presumptions afforded by such registrations.
Our intellectual property assets, including the word and the logo version of “Wynn,” are among our most valuable assets. Efforts we take to acquire and protect our intellectual property rights against unauthorized use throughout the world, which may include retaining counsel and commencing litigation in various jurisdictions, may be costly and may not be successful in protecting and preserving the status and value of our intellectual property assets.
If a third party asserts other forms of intellectual property claims against us, our business or results of operations could be adversely affected.
Historically, trademarks and service marks have been the principal form of intellectual property rights relevant to the gaming industry. However, due to the increased use of technology in computerized gaming machines and in business operations generally, other forms of intellectual property rights (such as patents and copyrights) are becoming of increased relevance. It is possible that, in the future, third parties might assert superior intellectual property rights or allege that their intellectual property rights cover some aspect of our operations. The defense of such allegations may result in substantial expenses, and, if such claims are successfully prosecuted, may have a material impact on our business.
Wynn Resorts’ officers, directors and substantial stockholders are able to exert significant control over our operations and future direction.
Our ultimate parent company is Wynn Resorts. Mr. Wynn, Elaine P. Wynn, and Aruze USA, Inc., a company controlled by one of our directors, together own approximately 35.6% of Wynn Resorts’ outstanding common stock. As a result, Mr. Wynn, Elaine P. Wynn, and Aruze USA, Inc., to the extent they vote their shares in a similar manner, may be able to control all matters requiring our stockholders’ approval, including the approval of significant corporate transactions.
In November 2006, Mr. Wynn, and Aruze USA, Inc., entered into a stockholders’ agreement. On January 6, 2010, the agreement was amended and restated to, among other things, recognize Mr. Wynn’s transfer of 11,076,709 shares to Elaine P. Wynn. Pursuant to the amended and restated stockholders agreement, Elaine P. Wynn became party to the agreement in connection with her ownership of 11,076,709 shares of the Company’s common stock. Under the amended and restated stockholders’ agreement, Mr. Wynn, Elaine P. Wynn, and Aruze
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USA, Inc., have agreed to vote their shares of our common stock for a slate of directors supported by Mr. Wynn, a majority of which will be designated by Mr. Wynn, of which at least two will be independent directors, and the remaining members of which will be designated by Aruze USA, Inc. As a result of this voting arrangement, Mr. Wynn, as a practical matter, controls the slate of directors to be elected to our board of directors. In addition, with stated exceptions, the agreement requires the written consent of Mr. Wynn, Elaine P. Wynn, and Aruze USA, Inc. prior to any party selling any shares of Wynn Resorts that it owns.
In November 2006, the Board of Wynn Resorts approved an amendment of its bylaws that exempts future acquisitions of shares of Wynn Resorts’ common stock by either Mr. Wynn or Aruze USA, Inc. from Nevada’s acquisition of controlling interest statutes. The Nevada acquisition of controlling interest statutes require stockholder approval in order to exercise voting rights in connection with any acquisition of a controlling interest in certain Nevada corporations unless the articles of incorporation or bylaws of the corporation in effect on the 10th day following the acquisition of a controlling interest by certain acquiring persons provide that these statutes do not apply to the corporation or to the acquisition specifically by types of existing or future stockholders. These statutes define a “controlling interest” as (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more, of the voting power in the election of directors. As a result of the bylaw amendment, either Mr. Wynn or Aruze USA, Inc. or their respective affiliates may acquire ownership of outstanding voting shares of Wynn Resorts permitting them to exercise more than one-third but less than a majority, or a majority or more, of all of the voting power of the corporation in the election of directors, without requiring a resolution of the stockholders of the corporation granting voting rights in the control shares acquired.
Because we own real property, we are subject to extensive environmental regulation, which creates uncertainty regarding future environmental expenditures and liabilities.
We have incurred costs to comply with environmental requirements, such as those relating to discharges into the air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. Under these and other environmental requirements we may be required to investigate and clean up hazardous or toxic substances or chemical releases at our property. As an owner or operator, we could also be held responsible to a governmental entity or third parties for property damage, personal injury and investigation and cleanup costs incurred by them in connection with any contamination.
These laws typically impose cleanup responsibility and liability without regard to whether the owner or operator knew of or caused the presence of the contaminants. The liability under those laws has been interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of the responsibility. The costs of investigation, remediation or removal of those substances may be substantial, and the presence of those substances, or the failure to remediate a property properly, may impair our ability to use our property.
Any violation of the Foreign Corrupt Practices Act or applicable Anti-Money Laundering Regulation could have a negative impact on us.
We are subject to regulations imposed by the Foreign Corrupt Practices Act (the “FCPA”) and other anti-corruption laws that generally prohibit U.S. companies and their intermediaries from offering, promising, authorizing or making improper payments to foreign government officials for the purpose of obtaining or retaining business. Violations of the FCPA and other anti-corruption laws may result in severe criminal and civil sanctions as well as other penalties and the SEC and U.S. Department of Justice have increased their enforcement activities with respect to the FCPA. Internal control policies and procedures and employee training and compliance programs that we have implemented to deter prohibited practices may not be effective in prohibiting our employees, contractors or agents from violating or circumventing our policies and the law. If our employees or agents fail to comply with applicable laws or Company policies governing our international operations, the Company may face investigations, prosecutions and other legal proceedings and actions which could result in civil penalties, administrative remedies and criminal sanctions. Any determination that we have violated the
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FCPA could have a material adverse effect on our financial condition. We also deal with significant amounts of cash in our operations and are subject to various reporting and anti-money laundering regulations. Any violation of anti-money laundering laws or regulations by any of our resorts could have a negative effect on our results of operations.
Item 1B. Unresolved Staff Comments
None.
Las Vegas Land
We currently own approximately 240 acres of land on or near the Las Vegas Strip. This consists of approximately 75 acres at the northeast corner of the intersection of Las Vegas Boulevard and Sands Avenue on which Wynn Las Vegas and Encore are located, the approximately 142-acre golf course behind Wynn Las Vegas, approximately 5 acres adjacent to the golf course on which an office building is located and approximately 18 acres located across from the Wynn Las Vegas site at Koval Lane and Sands Avenue, a portion of which is improved with an employee parking garage. Our Las Vegas property, with limited exceptions, is encumbered by a first priority security interest in favor of our lenders under our first mortgage notes and bank credit facilities.
Las Vegas Water Rights
We own approximately 834 acre-feet of permitted and certificated water rights, which we currently use to irrigate the golf course. We also own approximately 151.5 acre-feet of permitted and certificated water rights for commercial use. There are significant cost savings and conservation benefits associated with using water supplied pursuant to our water rights. We anticipate using our water rights to support future development of the golf course land.
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. We are not currently party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of our security holder during the fourth quarter of 2010.
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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
There is no established trading market for our membership interests. We do not intend to list the membership interests on any national securities exchange or seek the admission thereof to trading in the National Association of Securities Dealers Automated Quotation System. We do not intend to make a market in the membership interests, nor are we obligated to do so.
Holders
Holdings owns all of the membership interests in the Company as of the date of this filing.
Distributions
We have never declared or paid cash distributions on our membership interests. We currently intend to retain all available funds and any future consolidated earnings to fund our operations and the development and growth of our business and therefore do not anticipate paying any cash distributions.
Restrictions imposed by our debt instruments significantly restrict us from making dividends or distributions. Specifically, we are restricted under the indentures governing the first mortgage notes from making certain “restricted payments” as defined in the indentures. These restricted payments include the payment of distributions to any direct or indirect holders of our membership interests. These restricted payments cannot be made unless certain financial and non-financial criteria have been satisfied. In addition, the terms of our other loan agreements contain similar restrictions.
Item 6. Selected Financial Data
The following reflects the selected consolidated financial data of Wynn Las Vegas, LLC and its subsidiaries. This data should be read together with our consolidated financial statements and notes thereto, “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the other information contained in this Annual Report on Form 10-K.
| Years Ended December 31, |
||||||||||||||||||||
| 2010 |
2009 |
2008 |
2007 |
2006 |
||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Consolidated Statements of Operations Data: |
||||||||||||||||||||
| Net revenues [1] |
$ | 1,296,556 | $ | 1,230,120 | $ | 1,099,891 | $ | 1,295,851 | $ | 1,139,348 | ||||||||||
| Pre-opening costs |
2,479 | 346 | 72,373 | 6,457 | 2,020 | |||||||||||||||
| Operating income (loss) |
(81,314 | ) | (144,279 | ) | (58,616 | ) | 199,825 | 115,047 | ||||||||||||
| Net income (loss) |
(348,329 | ) | (309,870 | ) | (129,794 | ) | 124,219 | 9,808 | ||||||||||||
| As of December 31, |
||||||||||||||||||||
| 2010 |
2009 |
2008 |
2007 |
2006 |
||||||||||||||||
| (in thousands) | ||||||||||||||||||||
| Consolidated Balance Sheet Data: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 52,540 | $ | 66,354 | $ | 123,315 | $ | 146,521 | $ | 93,820 | ||||||||||
| Restricted cash and investments [2] |
— | — | — | 31,052 | 197,517 | |||||||||||||||
| Construction in progress |
19,281 | 23,973 | 4,579 | 865,130 | 214,574 | |||||||||||||||
| Total assets |
4,108,516 | 4,254,324 | 4,584,271 | 3,647,256 | 3,119,888 | |||||||||||||||
| Total long-term obligations [3] |
2,730,738 | 2,638,083 | 2,897,328 | 2,034,603 | 1,678,597 | |||||||||||||||
| Member’s equity |
1,098,502 | 1,385,553 | 1,257,563 | 1,375,020 | 1,242,770 | |||||||||||||||
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| [1] | Wynn Las Vegas opened on April 28, 2005 and Encore opened on December 22, 2008. |
| [2] | Restricted cash and investments primarily reflect the proceeds of our debt and equity financings that were restricted for the construction of Encore. |
| [3] | Includes long-term debt, interest rate swap and long-term amounts due to affiliates. |
Item 7. 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 consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K.
Overview
We are a developer, owner and operator of destination casino resorts. We currently own and operate Wynn Las Vegas, a destination casino resort in Las Vegas, Nevada, which opened on April 28, 2005, and Encore at Wynn Las Vegas (“Encore”), a destination casino resort located adjacent to and connected to Wynn Las Vegas, which opened on December 22, 2008.
Our Resorts
The following table sets forth information about our operating properties as of February 2011:
| Hotel Rooms
& Suites |
Approximate Casino Square Footage |
Approximate Number of Table Games |
Approximate Number of Slots |
|||||||||||||
| Wynn Las Vegas |
2,716 | 110,000 | 145 | 1,840 | ||||||||||||
| Encore |
2,034 | 76,000 | 95 | 780 | ||||||||||||
Wynn Las Vegas
Wynn Las Vegas, located at the intersection of the Las Vegas Strip and Sands Avenue, occupies approximately 217 acres of land fronting the Las Vegas Strip, utilizes approximately 18 additional acres across Sands Avenue, a portion of which is improved with an employee parking garage and approximately 5 acres adjacent to the golf course on which an office building is located.
We believe Wynn Las Vegas is the preeminent destination casino resort on the Strip in Las Vegas. Wynn Las Vegas features:
| • | An approximately 110,000 square foot casino offering 24-hour gaming and a full range of games, including private baccarat salons, a poker room, and a sports book; |
| • | Luxury hotel accommodations in 2,716 spacious hotel rooms, suites and villas; |
| • | 22 food and beverage outlets; |
| • | A Ferrari and Maserati automobile dealership; |
| • | Approximately 74,000 square feet of high-end, brand-name retail shopping, including stores and boutiques featuring Alexander McQueen, Brioni, Cartier, Chanel, Dior, Graff, Louis Vuitton, Manolo Blahnik, Oscar de la Renta, Vertu and others; |
| • | Recreation and leisure facilities, including an 18-hole golf course, five swimming pools, private cabanas and full service spa and salon; and |
| • | A showroom, two nightclubs and a lounge. |
In July 2010, we commenced a project to refurbish and upgrade the rooms and suites at Wynn Las Vegas. The total project budget is approximately $83 million. The room remodel was completed in January 2011 and the
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suite remodel is expected to be completed early in the second quarter of 2011. As a part of this project, we are temporarily removing floors from service which reduces our total number of rooms available during the construction period.
Encore
We opened Encore on December 22, 2008. This resort is located immediately adjacent to and connected with Wynn Las Vegas. Encore features:
| • | An approximately 76,000 square foot casino offering 24-hour gaming and a full range of games, including a sky casino and private baccarat salons; |
| • | Luxury hotel accommodation in 2,034 all-suite rooms; |
| • | 13 food and beverage outlets; |
| • | Approximately 27,000 square feet of high-end, brand-name retail shopping, including stores and boutiques featuring Hermes, Chanel and others; |
| • | Recreation and leisure facilities including swimming pools, private cabanas and a full service spa and salon; and |
| • | A beach club, showroom, two nightclubs and lounges. |
Construction and Future Development
In response to our evaluation of our properties and the reactions of our guests, we have and expect to continue to remodel and make enhancements and refinements at both Wynn Las Vegas and Encore.
Approximately 142 acres of land immediately adjacent to both Wynn Las Vegas and Encore, is currently improved with a golf course. While we may develop this property in the future, we have no immediate plans to do so.
Current Economic and Operating Environment
Due to a number of factors affecting consumers, including a slowdown in global economies, reduced consumer and corporate spending, and high unemployment, the outlook for the gaming, travel, and entertainment industries domestically remains highly uncertain. Auto traffic into Las Vegas, airline capacity and air travel to McCarran International airport did not improve significantly year over year, resulting in continued depressed casino volumes and a reduced demand for hotel rooms. This slow down was particularly significant in the fourth quarter of 2008 and continued throughout 2010. Based on our experience over this past year and current market conditions, we have experienced some stabilization in the Las Vegas market; however, due to the still uncertain economic environment and added supply in Las Vegas, we believe that Wynn Las Vegas and Encore have, and are likely to continue to experience depressed levels of hotel occupancy rates, room rates, casino volumes and accordingly lower departmental profitability.
Results of Operations
We offer gaming, hotel accommodations, dining, entertainment, retail shopping, convention services and other amenities at Wynn Las Vegas and Encore. We currently rely solely upon the operations of Wynn Las Vegas and Encore for our operating cash flow. Concentration of our cash flows to Wynn Las Vegas and Encore exposes us to certain risks that competitors, whose operations are more diversified, may be better able to control. In addition to the concentration of operations to Wynn Las Vegas and Encore, many of our customers are high-end gaming customers who wager on credit, thus exposing us to increased credit risk. High-end gaming also increases the potential for variability in our results.
We recorded a net loss for the year ended December 31, 2010 of $348.3 million, which represents a $38.5 million increase from the net loss of $309.9 million recorded during the year ended December 31, 2009. This
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increase is primarily due to a $36.2 million increase in interest expense due to outstanding debt with a higher average interest rate and a $70.1 million loss on extinguishment of debt/exchange offer related to debt transactions during the year as described below. These expenses were offset in part by lower depreciation and amortization expense of $39.5 million primarily due to assets with a 5-year life being fully depreciated as of April 2010 at Wynn Las Vegas.
Operating Measures
Certain key operating statistics specific to the gaming industry are included in our discussion of our operational performance for the periods for which a Consolidated Statement of Operations is presented. Below are definitions of the gaming statistics discussed:
| • | “Table games win” is the amount of drop that is retained and recorded as casino revenue. |
| • | “Drop” is the amount of cash and net markers issued that are deposited in a gaming table’s drop box. |
| • | “Slot win” is the amount of “handle” (represents the total amount wagered) that is retained and recorded as casino revenue. |
| • | “Average Daily Rate” (“ADR”) is calculated by dividing total room revenue by total rooms occupied. |
| • | “Revenue per Available Room” (“REVPAR”) is calculated by dividing total room revenue by total rooms available. |
Financial results for the year ended December 31, 2010 compared to the year ended December 31, 2009.
Revenues
Net revenues for the year ended December 31, 2010 are comprised of $534.3 million in casino revenues (41.2% of total net revenues) and $762.3 million of net non-casino revenues (58.8% of total net revenues). Net revenues for the year ended December 31, 2009 were comprised of $505.8 million in casino revenues (41.1% of total net revenues) and $724.3 million of net non-casino revenues (58.9% of total net revenues).
Casino revenues are comprised of the net win from our table games and slot machine operations. We experienced an increase in casino revenues of approximately $28.5 million (or 5.6%) to $534.3 million for the year ended December 31, 2010, compared to $505.8 million for the year ended December 31, 2009. During the year ended December 31, 2010, we experienced a 3.4% increase in drop and an increase in the average table games win percentage compared to the prior year. Our average table games win percentage (before discounts) of 22.2% was within the expected range of 21% to 24% for the year ended December 31, 2010. For the year ended December 31, 2009, our average table games win percentage (before discounts) was 20.2%. Slot handle decreased 18.3% during the year ended December 31, 2010 as compared to 2009; however slot win, net of free play and progressive accruals only decreased 6.9% compared to the prior year as more play shifted to higher hold machines.
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For the year ended December 31, 2010, room revenues were approximately $308.4 million, which represents a $12.7 million (or 4%) decrease over the $321.2 million generated in the year ended December 31, 2009. We continued to experience a decrease in room rates during the year ended December 31, 2010, compared to the year ended December 31, 2009. We believe this is due to the current economic conditions in which we operate in the U.S. and the increased capacity in the Las Vegas market including the opening of a new large scale casino hotel in Las Vegas in December 2009. Also, due to our remodel of the rooms and suites at Wynn Las Vegas beginning in July 2010, we had 3.8% fewer room nights available during the year ended December 31, 2010 which contributed to a decrease in room revenues compared to the prior year. The room remodel was completed in January 2011 and the suite remodel is expected to be completed in the second quarter of 2011. See the table below for key operating measures related to our room revenue.
| Year
Ended December 31, |
||||||||
| 2010 |
2009 |
|||||||
| Average Daily Rate |
$ | 210 | $ | 217 | ||||
| Occupancy |
88.0 | % | 85.2 | % | ||||
| REVPAR |
$ | 185 | $ | 185 | ||||
Other non-casino revenues for the year ended December 31, 2010 include food and beverage revenues of approximately $417.2 million, retail revenues of approximately $83.1 million, entertainment revenues of approximately $72 million, and other revenues from outlets such as the spa and salon, of approximately $58.9 million. Other non-gaming revenues for the year ended December 31, 2009 include food and beverage revenues of approximately $385.8 million, retail revenues of approximately $85.8 million, entertainment revenues of approximately $57.1 million, and other revenues from outlets, including the spa and salon, of approximately $60.5 million. The increase in food and beverage revenue is due primarily to business in our nightclubs including the opening of the Encore Beach Club and Surrender Nightclub in May 2010. Entertainment revenues increased over the prior year primarily due to performances by Garth Brooks in the Encore Theater which started in December 2009, as well as increased revenue from our Le Rêve show.
Departmental, Administrative and Other Expenses
During the year ended December 31, 2010, departmental expenses included casino expenses of $288.3 million, room expenses of $119.4 million, food and beverage expenses of $256.2 million, and entertainment, retail and other expenses of $145.3 million. Also included are general and administrative expenses of approximately $237.7 million and approximately $15.7 million charged as a provision for doubtful accounts receivable. During the year ended December 31, 2009, departmental expenses included casino expenses of $275.3 million, room expenses of $109.2 million, food and beverage expenses of $239.8 million, and entertainment, retail and other expenses of $133.8 million. Also included are general and administrative expenses of approximately $246.8 million and approximately $12.4 million charged as a provision for doubtful accounts receivable. The increase in casino and room expenses was primarily attributable to additional customer acquisition and marketing costs. Food and beverage expenses increased commensurate with the increase in revenue.
Entertainment, retail and other expenses increased primarily as a result of performances by Garth Brooks in the Encore Theater at Wynn Las Vegas as noted above. General and administrative expenses decreased as a result of lower advertising expenses and our cost savings initiatives offset partially by higher repairs and replacement expenses associated with general property maintenance.
Management fees
Since opening Wynn Las Vegas, management fees payable to Wynn Resorts for certain corporate management services have been charged and accrued at a rate equal to 1.5% of net revenues. These fees will be
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paid upon meeting certain leverage ratios and satisfying certain other criteria set forth in our credit facilities and the first mortgage notes indentures. Management fees were $19.5 million for the year ended December 31, 2010, compared to $18.4 million for the year ended December 31, 2009.
Pre-opening costs
During the year ended December 31, 2010, we incurred $2.5 million of pre-opening costs. We incurred $0.3 million of preopening costs for the year ended December 31, 2009. Pre-opening costs incurred during the year ended December 31, 2010, were related the Encore Beach Club and Surrender Nightclub which opened in May 2010.
Depreciation and amortization
Depreciation and amortization for the year ended December 31, 2010 was $274.3 million compared to $313.8 million for the year ended December 31, 2009. This decrease is primarily due to assets with a 5-year life being fully depreciated as of April 2010 at Wynn Las Vegas, off set by depreciation of the assets of the Encore Beach Club which were placed into service in May 2010.
Property charges and other
Property charges and other for the year ended December 31, 2010, were $19 million compared to approximately $24.5 million for the year ended December 31, 2009. Property charges and other for the year ended December 31, 2010 include a contract termination payment of $14.9 million related to a management contract for certain of the nightclubs at our resorts, as well as miscellaneous renovations and abandonments at Wynn Las Vegas and Encore.
Property charges and other for the year ended December 31, 2009, include a charge of $16.7 million for the abandonment of the front porte-cochere at Encore to make way for the Encore Beach Club, the write-off of $5.3 million of aircraft purchase deposits and $2.5 million related to miscellaneous renovations and abandonments.
In response to our evaluation of our resort complex and the reactions of our guests, we continue to make enhancements. The costs relating to assets retired as a result of these enhancement and remodel efforts will be expensed as property charges.
Other non-operating costs and expenses
Interest expense was $193.4 million, net of capitalized interest of $0.6 million, for the year ended December 31, 2010, compared to $157.2 million for the year ended December 31, 2009. There was no interest capitalized during the year ended December 31, 2009. Interest expense increased approximately $36.2 million primarily due to increased interest related to the $500 million 7 7/8% First Mortgage Notes issued in October 2009, a higher rate on the 2020 Notes, as discussed below, and offset partially by reductions in amounts outstanding under the Wynn Las Vegas bank credit facilities compared to the prior year.
Changes in the fair value of our interest rate swaps are recorded as an increase (or decrease) in swap fair value in each year. We recorded an expense of approximately $4.2 million for the year ended December 31, 2010, resulting from the decrease in the fair value of our interest rate swap from December 31, 2009 to December 31, 2010. We recorded an expense of approximately $4.2 million for the year ended December 31, 2009, resulting from the decrease in the fair value of our interest rate swap from August 2009 (the date we entered into the agreement) to December 31, 2009.
As described in Note 7 to our Consolidated Financial Statements in this Annual Report on Form 10-K, in September 2010 we completed a tender offer for our outstanding $1.7 billion 6 5/8% first mortgage notes due
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2014 ( the “2014 Notes”) and subsequent call of all the remaining amounts once the tender was completed. In connection with these transactions, we recorded a loss on extinguishment of debt of $65.4 million. This included the tender consideration, the call premium and the related write off of the unamortized debt issue costs and original issue discount.
Also, as described in Note 7 to our Consolidated Financial Statements we completed an exchange offer for a portion of the 2014 Notes in April 2010. In connection with that exchange offer, the direct costs incurred with third parties of $4.6 million were expensed.
Financial results for the year ended December 31, 2009 compared to the year ended December 31, 2008.
Our financial results for the year ended December 31, 2009 are not comparable to the year ended December 31, 2008, as the year ended December 31, 2009 includes a full year of operations for Encore, whereas the prior year includes only 10 days of operations for Encore.
Revenues
Net revenues for the year ended December 31, 2009 are comprised of $505.8 million in casino revenues (41.1% of total net revenues) and $724.3 million of net non-casino revenues (58.9% of total net revenues). Net revenues for the year ended December 31, 2008 were comprised of $479.7 million in casino revenues (43.6% of total net revenues) and $620.2 million of net non-casino revenues (56.4% of total net revenues).
Casino revenues are comprised of the net win from our table games and slot machine operations. We expanded Wynn Las Vegas with the opening of Encore in December 2008, which added approximately 90 table games and approximately 800 slot machines to our casino operations. Even with these additions in capacity, we experienced only a modest increase in casino revenues of approximately $26.1 million to $505.8 million for the year ended December 31, 2009, compared to $479.7 million for the year ended December 31, 2008. During the year ended December 31, 2009, we experienced a 1.2% increase in drop and a slight increase in the average table games win percentage compared to the prior year. Our average table games win percentage (before discounts) of 20.2% for the year ended December 31, 2009, was below the expected range of 21% to 24%. For the year ended December 31, 2008, our average table games win percentage (before discounts) was 20.0%. Slot handle decreased 2.5% during the year ended December 31, 2009, as compared to 2008, and the slot win percentage was within the expected range of 4.5% to 5.5%.
For the year ended December 31, 2009, room revenues were approximately $321.2 million, which represents a $52.6 million (or 19.6%) increase over the $268.5 million generated in the year ended December 31, 2008. This increase is a result of the addition of 2,034 suites at Encore which opened in December 2008. We continued to experience a decrease in occupancy and room rates during the year ended December 31, 2009, compared to the year ended December 31, 2008. See the table below for key operating measures related to our room revenue.
| Year
Ended December 31, |
||||||||
| 2009 |
2008 |
|||||||
| Average Daily Rate |
$ | 217 | $ | 288 | ||||
| Occupancy |
85.2 | % | 91.8 | % | ||||
| REVPAR |
$ | 185 | $ | 265 | ||||
Other non-casino revenues for the year ended December 31, 2009 include food and beverage revenues of approximately $385.8 million, retail revenues of approximately $85.8 million, entertainment revenues of approximately $57.1 million, and other revenues from outlets such as the spa and salon, of approximately $60.5 million. Other non-gaming revenues for the year ended December 31, 2008 include food and beverage revenues
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of approximately $305.7 million, retail revenues of approximately $86.1 million, entertainment revenues of approximately $66.2 million, and other revenues from outlets, including the spa and salon, of approximately $49.8 million. On a comparable basis, excluding the Encore expansion, which opened in December 2008, all of our revenues have declined when compared to the prior year due to the current economic environment in which we are operating. Food and beverage revenues increased during the year ended December 31, 2009 as a result of the additional 12 food and beverage outlets located in the Encore expansion. Although we added new retail outlets at Encore, retail revenues have declined due to reduced consumer spending as a result of the current economic environment. Entertainment revenues decreased over the prior year primarily due to the closure of the Spamalot production show in July 2008. This decrease was offset in part by revenue from headliner acts that performed during 2009, including Garth Brooks, who began performing in the Encore Theater in December 2009.
Departmental, Administrative and Other Expenses
During the year ended December 31, 2009, departmental expenses included casino expense of $275.3 million, rooms expense of $109.2 million, food and beverage expense of $239.8 million, and entertainment, retail and other expense of $133.8 million. Also included are general and administrative expenses of approximately $246.8 million and approximately $12.4 million charged as a provision for doubtful accounts receivable. During the year ended December 31, 2008, departmental expenses included casino expenses of $258 million, room expenses of $73.8 million, food and beverage expenses of $188.5 million, and entertainment, retail and other expenses of $132.9 million. Also included are general and administrative expenses of approximately $199.5 million and approximately $24.9 million charged as a provision for doubtful accounts receivable. Expenses for the year ended December 31, 2009, increased compared to December 31, 2008 as a result of the Encore expansion which opened in December 2008. Our provision for doubtful accounts receivable declined during the year ended December 31, 2009 compared to the prior year. In the prior year we increased our reserves in light of the economic uncertainty that existed at that time. Due to continued strong collection experience we have reduced the additional reserves we recorded in the third quarter of 2008.
Management fees
Since opening Wynn Las Vegas, management fees payable to Wynn Resorts for certain corporate management services have been charged and accrued at a rate equal to 1.5% of net revenues. These fees will be paid upon meeting certain leverage ratios and satisfying certain other criteria set forth in our bank credit facilities and the 6 5/8% and 7 7/8% First Mortgage Notes indentures. Management fees were $18.4 million for the year ended December 31, 2009, compared to $16.5 million for the year ended December 31, 2008.
Pre-opening costs
During the year ended December 31, 2009, we incurred $0.3 million pre-opening costs compared to $72.4 million for the year ended December 31, 2008. Pre-opening costs incurred during the year ended December 31, 2008 were related to Encore which opened in December 2008.
Depreciation and amortization
Depreciation and amortization for the year ended December 31, 2009 was $313.8 million compared to $169.6 million for the year ended December 31, 2008. This increase is primarily due to depreciation on the assets of Encore, which were placed into service in December 2008.
Property charges and other
Property charges and other for the year ended December 31, 2009, were $24.5 million compared to $22.4 million for the year ended December 31, 2008. In response to the evaluation of our properties and the reactions of
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our guests, we make enhancements and refinements to the properties. Costs relating to assets retired as a result of these enhancement and remodel efforts have been expensed as property charges. Property charges and other for the year ended December 31, 2009 include a $16.7 million charge for the abandonment of the front porte-cochere at Encore at Wynn Las Vegas to make way for an addition to that property, a $5.3 million charge for the write-off of two aircraft deposits, and $2.5 million related to miscellaneous remodels, abandonments and loss on sale of equipment.
Property charges and other for the year ended December 31, 2008, include $17.8 million of costs associated with Spamalot at Wynn Las Vegas which closed in July 2008. The costs included the production rights that were included in intangible assets, show production costs that were included in other assets and certain other property and equipment. The remaining property charges were related to miscellaneous renovations and abandonments at Wynn Las Vegas.
Other non-operating costs and expenses
Interest income decreased by $4.8 million for the year ended December 31, 2009, compared to the year ended December 31, 2008. This decrease is due to the repayment of an $80 million note receivable from Wynn Resorts in July 2008, that resulted in $3.3 million of interest income in the prior year, as well as a decrease in the average interest rate earned on our invested cash balances and reduced average invested cash balances during the year ended December 31, 2009, compared to the prior year.
Interest expense was $157.2 million, net of capitalized interest of $0, for the year ended December 31, 2009, compared to $75.9 million, net of capitalized interest of $80.4 million during the year ended December 31, 2008. Interest expense increased primarily due to an $80.4 million decrease in capitalized interest with the opening of Encore. Also increasing interest expense was approximately $8.4 million of interest related to the 7 7/8% $500 million First Mortgage Notes issued in October 2009. These increases were offset by lower interest rates on our variable rate debt and lower average balances outstanding during 2009 compared to the prior year.
Changes in the fair value of our interest rate swap are recorded as increase (or decrease) in swap fair value in each year. We recorded an expense of approximately $4.2 million for the year ended December 31, 2009, resulting from the decrease in the fair value of our interest rate swap from August 2009 (the date we entered into the agreement) to December 31, 2009. We recorded an expense of approximately $0.4 million for the year ended December 31, 2008 resulting from the decrease in the fair value of our interest rate swap that matured on December 31, 2008.
We recorded a loss on early extinguishment of debt of $3.8 million during the year ended December 31, 2009. Through an offer to purchase loans outstanding under our bank credit facilities, we purchased loans with a face-value of $87.6 million for $84.4 million, reflecting a discounted price of 96.37%. In connection with this transaction, we recognized a gain of approximately $2.1 million on early retirement of debt in the fourth quarter of 2009. Offsetting this gain was the write-off of deferred financing costs totaling $5.7 million in connection with the permanent reduction in the availability under our bank credit facilities.
Liquidity and Capital Resources
Cash Flow from Operations
Our operating cash flows primarily consist of operating income generated by our resort (excluding depreciation and other non-cash charges), interest paid 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 high-end international customers who play on credit. Our ability to collect these gaming receivables may impact our operating cash flow for the period. Our rooms,
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food and beverage, and entertainment, retail and other revenue is conducted primarily on a cash basis or as a trade receivable. Accordingly, operating cash flows will be impacted by changes in operating income and accounts receivables.
Net cash provided by operations for the year ended December 31, 2010 was $104.6 million compared to $80.4 million provided by operations for the year ended December 31, 2009. Operating cash flows increased due to an improved operating loss and benefits from ordinary working capital changes, offset by higher cash interest payments.
Capital Resources
At December 31, 2010, we had approximately $52.5 million of cash and cash equivalents available for use without restriction, including for operations, debt service and retirement, new development activities, enhancements to Wynn Las Vegas and Encore and general corporate purposes. We require a certain amount of cash on hand for operations. As of December 31, 2010, we have $327.2 million of availability under our senior revolving credit facility. We anticipate such funds, together with any additional borrowings and cash generated from operations will satisfy our liquidity needs during 2011. Except for scheduled quarterly payments on one note payable, we have no debt maturities until July 2013.
Investing Activities
Capital expenditures were approximately $157.1 million for the year ended December 31, 2010, and were related primarily to the Wynn Las Vegas room and suite remodel and the Encore Beach Club and Surrender Nightclub. Capital expenditures were approximately $245 million for the year ended December 31, 2009 and were almost entirely related to the construction of Encore.
Financing Activities
Wynn Las Vegas First Mortgage Notes
In October 2009, Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp. (the “Issuers”), issued in a private offering, $500 million aggregate principal amount of 7 7/8% First Mortgage Notes due November 1, 2017 (the “2017 Notes”) at a price of 97.823% of the principal amount. The Issuers pay interest on the 2017 Notes on May 1st and November 1st of each year. Commencing November 1, 2013, the 2017 Notes are redeemable at our option at a price equal to 103.938% of the principal amount redeemed and decline ratably on November 1st of each year thereafter to zero on or after November 1, 2015. The 2017 Notes rank pari passu with the borrowings under our credit facilities and the outstanding first mortgage notes previously issued by the Issuers. The notes are senior secured obligations of the Issuers, are guaranteed by our subsidiaries (subject to some exceptions), and are secured on an equal and ratable basis by a first priority lien on substantially all the existing and future assets of the Issuers and guarantors. In accordance with the fifth amendment to the Wynn Las Vegas Credit Agreement described below, we used the proceeds of this offering to repay amounts outstanding under the Wynn Las Vegas Revolver and Wynn Las Vegas Term Loan.
On March 26, 2010, we commenced an offer to exchange all outstanding 2014 Notes for 7 7/8% First Mortgage Notes due 2020 (the “2020 Notes”), upon the terms and subject to the conditions set forth in an offering memorandum and a related letter of transmittal (the “exchange offer”). The exchange offer was conditioned upon, among other things, the tender of at least $250 million aggregate principal amount of 2014 Notes. The 2020 Notes were offered only to qualified institutional buyers and outside the United States in accordance with Rule 144A and Regulation S, respectively, under the Securities Act of 1933, as amended (the “Securities Act”). The exchange offer closed on April 28, 2010 with approximately $382 million of the 2014 Notes being validly tendered for exchange to the 2020 Notes.
We pay interest on the 2020 Notes on May 1st and November 1st of each year. Commencing May 1, 2015, the 2020 Notes are redeemable at our option at a price equal to 103.938% of the principal amount
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redeemed and decline ratably on May 1st of each year thereafter to zero on or after May 1, 2018. The 2020 Notes rank pari passu in right of payment with borrowings under our credit facilities and 2017 Notes. The 2020 Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries and secured by a first priority lien on substantially all of the existing and future assets of the Issuers and guarantors and, subject to approval from the Nevada Gaming Commission, a first priority lien on the equity interests of Wynn Las Vegas, LLC, all of which is the same collateral that secures borrowings under our credit facilities and the 2017 Notes.
The noteholders who validly tendered 2014 Notes prior to the early delivery time received an early delivery payment on April 28, 2010 of 1% of the amount tendered in cash, which totaled approximately $3.8 million. In accordance with accounting standards, this has been included as deferred financing costs and will be amortized over the life of the 2020 Notes. The direct costs of the exchange offer incurred with third parties of $4.6 million were expensed and are included in loss on extinguishment of debt / exchange offer in our Consolidated Statements of Operations.
On August 4, 2010, we issued $1.32 billion aggregate principal amount of 7 3/4% First Mortgage Notes due August 15, 2020 (the “New 2020 Notes”). The New 2020 Notes were issued at par. The New 2020 Notes were offered only to qualified institutional buyers and outside the United States in accordance with Rule 144A and Regulation S, respectively, under the Securities Act of 1933. We used the net proceeds of the offering along with the proceeds of a $50 million capital contribution from Wynn Resorts, Limited to purchase, and, as applicable, make consent payments for, any and all of the Issuers’ 2014 Notes that were validly tendered and accepted for payment pursuant to our concurrent offer to purchase and consent solicitation with respect to the 2014 Notes, and to redeem all of the 2014 Notes not tendered. On or prior to August 3, 2010, valid tenders had been received with respect to approximately $987 million of the $1.3 billion aggregate principal amount of 2014 Notes outstanding. On August 4, 2010, tendering holders received the tender offer consideration in the amount of $1,004.38, plus a consent payment of $30 for each $1,000 principal amount of 2014 Notes, which totaled $32.7 million. The consent solicitation expired on August 3, 2010 and the tender offer expired on August 18, 2010. In accordance with accounting standards the consideration and consent fees were expensed and are included in loss on extinguishment of debt / exchange offer in our Consolidated Statements of Operations.
On August 4, 2010, the Trustee, at the request of the Issuers, gave notice of redemption of any and all of the remaining 2014 Notes. The redemption price was equal to 103.313% of the aggregate principal amount of the 2014 Notes redeemed plus accrued and unpaid interest thereon to September 3, 2010. The total redemption fees paid were $10.9 million. In accordance with accounting standards, the redemption fees were expensed and are included in loss on extinguishment of debt / exchange offer in our Consolidated Statement of Operations.
Also in connection with this transaction, unamortized debt issue costs and original issue discount related to the 2014 Notes totaling $19.2 million were expensed and are included in loss on extinguishment of debt / exchange offer in our Consolidated Statements of Operations.
We pay interest on the New 2020 Notes on February 15th and August 15th of each year. Commencing August 15, 2015, the New 2020 Notes are redeemable at our option at a price equal to 103.875% of the principal amount redeemed and decline ratably on August 15th of each year thereafter to zero on or after August 15, 2018. The New 2020 Notes rank pari passu in right of payment with borrowings under our credit facilities, the 2017 Notes and the 2020 Notes. The New 2020 Notes are senior secured obligations of the Issuers, guaranteed by certain of our subsidiaries and secured on an equal and ratable basis (with certain exceptions) by a first priority lien on substantially all of the existing and future assets of the Issuers and guarantors, and, subject to prior approval from the Nevada gaming authorities, a first priority lien on the equity interests of Wynn Las Vegas, LLC, all of which is the same collateral that secures borrowings under our credit facilities, the 2017 Notes and the 2020 Notes.
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Wynn Las Vegas Credit Facilities
Concurrently with the issuance of the New 2020 Notes, we entered into a seventh amendment, dated August 4, 2010, to the Wynn Las Vegas Amended and Restated Credit Agreement (the “Credit Agreement”). After giving effect to this amendment, the maturity date with respect to a portion of the revolving credit facility and the term facility was extended to July 2015 and August 2015, respectively, and the interest margin in respect of the extended portion will increase after June 30, 2013. In addition, lenders made incremental term loans of $248.5 million having a maturity date of August 2015. The amendment made certain other changes including eliminating the maximum Consolidated Leverage Ratio and reducing the minimum Consolidated Interest Coverage Ratio to 1:00 to 1 through June 2013.
As of December 31, 2010, our Wynn Las Vegas Amended and Restated Credit Agreement consisted of a $108.5 million revolving credit facility, due July 2013 and a $258.4 million revolving credit facility due July 2015 (together the “Wynn Las Vegas Revolver”), and a fully drawn $44.3 million term loan facility due August 2013 and a fully drawn $330.6 million term loan facility due August 2015 (together the “Wynn Las Vegas Term Loan”). As of December 31, 2010, the Wynn Las Vegas Term Loan was fully drawn and we had borrowed $30.1 million under the Wynn Las Vegas Revolver. We also had $19.7 million of outstanding letters of credit that reduce our availability under the Wynn Las Vegas Revolver. We have availability of approximately $327.2 million under the Wynn Las Vegas Revolver as of December 31, 2010.
The Wynn Las Vegas Credit Facilities are obligations of Wynn Las Vegas, LLC and are guaranteed by and secured by substantially all of the assets (except the corporate aircraft) of each of its subsidiaries (other than Wynn Completion Guarantor, LLC). The obligations of Wynn Las Vegas, LLC and the guarantors under the Wynn Las Vegas Credit Facilities rank pari passu in right of payment with their existing and future senior indebtedness, including indebtedness with respect to the 2017 Notes, the 2020 Notes and the New 2020 Notes and senior in right of payment to all of their existing and future subordinated indebtedness.
As described below, during the year ended December 31, 2009, we (a) extended the maturity of the Wynn Las Vegas Revolver to July 2013, (b) received relief from certain financial covenants, (c) increased the Wynn Las Vegas Revolver by $65 million, (d) repurchased $87.6 million of Wynn Las Vegas Revolver loans at a discount, and (e) used the net proceeds received from our 2017 Notes issuance to repay amounts outstanding, including a permanent reduction of the Wynn Las Vegas Credit Facilities of $360 million.
In April 2009, we entered into a fourth amendment to our Credit Agreement. This amendment, among other things, (i) provides a waiver of the Consolidated Leverage Ratio, as defined in the Credit Agreement, until the quarter ending June 30, 2011, and increases such thresholds thereafter; (ii) provides additional flexibility with our Consolidated Interest Coverage Ratio, as defined in the Credit Agreement, by reducing such ratio from 1.75 : 1 to 1.25 : 1 beginning June 30, 2009 through March 31, 2011; and (iii) removes the dollar limit on the equity cure provisions for the purpose of the Consolidated Leverage Ratio and the Consolidated Interest Coverage Ratio over the life of the loan. In exchange for the amendments, we (i) repaid 30% of the outstanding revolver loans of lenders consenting to the extension of their commitment (approximately $238 million) and permanently reduced such lender commitments by 25%; and (ii) agreed to an increase in the interest rate spread on the Wynn Las Vegas Revolver from LIBOR plus 1.625% to LIBOR plus 3.0%.
In August 2009, pursuant to the terms of the Credit Agreement, we expanded the availability of the Wynn Las Vegas Revolver by $65 million.
In September 2009, we entered into a fifth amendment to our Credit Agreement. This amendment, among other things, (i) permitted Wynn Las Vegas to issue, on or before March 31, 2010, up to $500 million of new senior secured notes and (ii) requires that 75% of the net cash proceeds of any issuance of new senior secured notes be applied to prepay loans and reduce commitments under the Credit Agreement.
In October 2009, pursuant to an offer to purchase loans outstanding under the Credit Agreement, we purchased loans with a face value of $87.6 million for $84.4 million, reflecting a discounted price of 96.37%. As
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a result of this transaction, the Wynn Las Vegas Revolver was permanently reduced by $43.8 million and the Wynn Las Vegas Term Loan was permanently reduced by $44.8 million.
For borrowings under the Wynn Las Vegas Revolver we have historically elected Eurodollar loans, which bear interest at 1-month LIBOR and currently include a margin of 3.0% on the outstanding balance. We also incur a fee of 1.0% on the daily average of unborrowed amounts. For borrowings under the Wynn Las Vegas Term Loans we have historically elected Eurodollar loans, which bear interest at 1-month LIBOR and currently include a margin of 1.875% on the term loan due 2013 and 3% on the term loan due 2015.
The Wynn Las Vegas Credit Agreement contains a requirement that we must make mandatory repayments of indebtedness from specified percentages of excess cash flow. If our Wynn Las Vegas subsidiary meets a Consolidated Leverage Ratio, as defined in the Credit Agreement, of greater than 3.5 to 1, such repayment is defined as 50% of Excess Cash Flow, as defined in the Credit Agreement. If the Consolidated Leverage Ratio is less than 3.5 to 1, then no repayment is required. Based on the current economic conditions in which we are operating, we do not believe that Wynn Las Vegas will have excess cash flow for mandatory repayment pursuant to this provision of the Credit Agreement during the fiscal year ending December 31, 2011, and therefore we do not expect to make any mandatory repayments pursuant to this requirement during 2011.
The Wynn Las Vegas Credit Agreement contains customary covenants restricting our activities including, but not limited to: the ability to sell assets, make capital expenditures, enter into capital leases, make loans or other investments and incur additional indebtedness. In addition, we are required by the financial covenants to maintain a Consolidated Interest Coverage Ratio, as defined, not less than 1.00 to 1 as of December 31, 2010. Management believes that we are in compliance with all covenants at December 31, 2010. The Consolidated Interest Coverage Ratio remains at 1.00 : 1 through June 2013.
During the years ended December 31, 2010 and 2009, Wynn Resorts made cash capital contributions to us in the amount of $50 million and $413 million, respectively. The proceeds from these contributions were used to fund construction costs of Encore paid during 2009 and to fund paydowns of our outstanding debt as noted above.
Off-Balance Sheet Arrangements
We have not entered into any transactions with special purpose entities nor do we engage in any derivatives except for previously discussed interest rate swaps. We do not have any retained or contingent interest in assets transferred to an unconsolidated entity. At December 31, 2010, we had outstanding letters of credit totaling $19.7 million.
Contractual Obligations and Commitments
The following table summarizes our scheduled contractual commitments at December 31, 2010 (amounts in millions):
| Payments Due By Period |
||||||||||||||||||||
| Less Than 1 Year |
1 to 3 Years |
4 to 5 Years |
After 5 Years |
Total |
||||||||||||||||
| Long-term debt obligations |
$ | 1.1 | $ | 50.9 | $ | 349.6 | $ | 2,232.1 | $ | 2,633.7 | ||||||||||
| Fixed interest payments |
171.8 | 343.5 | 343.5 | 675.7 | 1,534.5 | |||||||||||||||
| Estimated variable interest payments [1] |
13.4 | 26.2 | 20.0 | 0.7 | 60.3 | |||||||||||||||
| Operating leases |
2.9 | 0.7 | 0.2 | 2.8 | 6.6 | |||||||||||||||
| Construction contracts and commitments |
27.6 | — | — | — | 27.6 | |||||||||||||||
| Employment agreements |
24.4 | 32.4 | 3.4 | — | 60.2 | |||||||||||||||
| Other [2] |
28.0 | 31.6 | 15.8 | — | 75.4 | |||||||||||||||
| Total commitments |
$ | 269.2 | $ | 485.3 | $ | 732.5 | $ | 2,911.3 | $ | 4,398.3 | ||||||||||
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| [1] | Amounts for all periods represent our estimated future interest payments on our debt facilities based upon amounts outstanding and LIBOR rates at December 31, 2010. Such rates are at historical lows as of December 31, 2010. Actual rates will vary. |
| [2] | Other includes open purchase orders and other contracts. |
Other Liquidity Matters
We are restricted under the indentures governing the 2107 Notes, the 2020 Notes and the New 2020 Notes from making certain “restricted payments” as defined in the indentures. These restricted payments include the payment of dividends or distributions to any direct or indirect holders of equity interests of Wynn Las Vegas, LLC. The restricted payments may not be made until certain other financial and non-financial criteria have been satisfied. In addition, the Credit Agreement contains similar restrictions.
We will fund our operations and capital requirements from operating cash flow and availability under our bank facility. We cannot be sure that we will generate sufficient cash flow from operations or that future borrowings, if any, will be sufficient to enable us to service and repay Wynn Las Vegas, LLC’s indebtedness and to fund our other liquidity needs. We cannot be sure that we will be able to refinance any of our indebtedness on acceptable terms or at all.
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 Las Vegas, as well as other domestic or international markets. There can be no assurances regarding the business prospects with respect to any other opportunity. Any future development would require us to obtain additional financing.
Critical Accounting Policies and Estimates
Management’s discussion and analysis of our results of operations and liquidity and capital resources are based on our consolidated financial statements. Our consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America. Certain of our accounting policies require management to apply significant judgment in defining the appropriate assumptions integral to financial estimates. On an ongoing basis, management evaluates those estimates, including those relating to the estimated lives of depreciable assets, asset impairment, allowances for doubtful accounts, accruals for customer loyalty rewards, self-insurance, contingencies, litigation and other items. Judgments are based on historical experience, terms of existing contracts, industry trends and information available from outside sources, as appropriate. However, by their nature, judgments are subject to an inherent degree of uncertainty, and therefore actual results could differ from our estimates.
Development, Construction and Property and Equipment Estimates
During the construction and development of a resort, pre-opening or start-up costs are expensed when incurred. In connection with the construction and development of our properties, significant start-up costs are incurred and charged to pre-opening costs through their respective openings. Once our properties open, expenses associated with the opening of the resorts are no longer charged as pre-opening costs.
During the construction and development stage, direct costs such as those incurred for the design and construction of our properties, including applicable portions of interest, are capitalized. Accordingly, the recorded amounts of property and equipment increase significantly during construction periods. Depreciation expense related to capitalized construction costs is recognized when the related assets are placed in service. Upon the opening of our properties, we begin recognizing depreciation expense on the resort’s fixed assets.
The remaining estimated useful lives of assets are periodically reviewed and adjusted as necessary.
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Costs of repairs and maintenance are charged to expense when incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operating income or loss.
We also evaluate our property and equipment and other long-lived assets for impairment in accordance with accounting standards for the impairment or disposal of long-lived assets. For assets to be disposed of, we recognize the asset at the lower of carrying value or fair market value less costs of disposal, as estimated based on comparable asset sales, solicited offers, or a discounted cash flow model. For assets to be held and used, we review for impairment whenever indicators of impairment exist. In reviewing for impairment we compare the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then an impairment is recorded based on the fair value of the asset, typically measured using a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs. All recognized impairment losses, whether for assets to be disposed of or assets to be held and used, are recorded as operating expenses.
Allowance for Estimated Doubtful Accounts Receivable
A substantial portion of our outstanding receivables relate to casino credit play. Credit play, through the issuance of markers, represents a significant portion of the table games volume at Wynn Las Vegas and Encore. We maintain strict controls over the issuance of markers and aggressively pursue collection from those customers who fail to pay their balances in a timely fashion. These collection efforts may include the mailing of statements and delinquency notices, personal contacts, the use of outside collection agencies, and litigation. Markers are generally legally enforceable instruments in the United States. Markers are not legally enforceable instruments in some foreign countries, but the United States assets of foreign customers may be used to satisfy judgments entered in the United States. At December 31, 2010 and 2009, approximately 75% and 68%, respectively, of our casino accounts receivable were owed by customers from foreign countries, primarily in Asia. The collectability of markers given by foreign customers is affected by a number of factors including changes in currency exchange rates and economic conditions in the customers’ home countries.
We regularly evaluate our reserve for bad debts based on a specific review of customer accounts as well as management’s prior experience with collection trends in the casino industry and current economic and business conditions. The following table presents key statistics related to our casino accounts receivables (amounts in thousands):
| December 31, 2010 |
December
31, 2009 |
|||||||
| Casino accounts receivable |
$ | 167,844 | $ | 149,786 | ||||
| Allowance for doubtful casino accounts receivable |
$ | 70,208 | $ | 66,328 | ||||
| Allowance as a percentage of casino accounts receivable |
41.8 | % | 44.3 | % | ||||
| Percentage of casino accounts receivable outstanding over 180 days |
33.3 | % | 37.9 | % | ||||
Our reserve for doubtful casino accounts receivable is based on our estimates of amounts collectible and depends on the risk assessments and judgments by our employees regarding realizability, the state of the economy and our credit policy.
At December 31, 2010, a 100 basis-point change in the allowance for doubtful accounts as a percentage of casino accounts receivable would change the provision for doubtful accounts by approximately $1.7 million.
As our customer payment experience evolves, we will continue to refine our estimated reserve for bad debts. Accordingly, the associated provision for doubtful accounts charge may fluctuate. Because individual customer account balances can be significant, the reserve and the provision can change significantly between periods, as we become aware of additional information about a customer or as changes occur in a region’s economy or legal system.
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Derivative Financial Instruments
We seek to manage our market risk, including interest rate risk associated with variable rate borrowings, through balancing fixed-rate and variable-rate borrowings and the use of derivative financial instruments. We account for derivative financial instruments in accordance with applicable accounting standards. Derivative financial instruments are recognized as assets or liabilities, with changes in fair value affecting net income or comprehensive income, as applicable. As of December 31, 2010, changes in our interest rate swap fair value is being recorded in our Consolidated Statements of Operations, as the swap does not qualify for hedge accounting.
We measure the fair value of our interest rate swaps on a recurring basis. Accounting standards establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. We categorize our interest rate swap contract as Level 2. The fair value approximates the amount we would receive (pay) if these contracts were settled at the respective valuation dates. Fair value is estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore is subject to significant estimation and a high degree of variability of fluctuation between periods. We adjust this amount by applying a non-performance valuation, considering our creditworthiness or the creditworthiness of our counterparties at each settlement date, as applicable.
Wynn Resorts’ Equity Instruments Issued to Employees—Stock-Based Compensation
Accounting standards for stock-based payments establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services or incurs a liability in exchange for goods and services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments. It requires an entity to measure the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize that cost over the service period. We use the Black-Scholes valuation model to value the equity instruments we issue. The Black-Scholes valuation model uses assumptions of expected volatility, risk-free interest rates, the expected term of options granted, and expected rates of dividends. Management determines these assumptions by reviewing current market rates, making industry comparisons and reviewing conditions relevant to our Company.
The expected volatility and expected term assumptions can significantly impact the fair value of stock options. We believe that the valuation techniques and the approach utilized to develop our assumptions are appropriate in calculating the fair value of the options we grant. We estimate the expected stock price volatility using a combination of implied and historical factors related to our stock price in accordance with applicable accounting standards. As our stock price fluctuates, this estimate will change. For example, a 10% change in the volatility assumption for 2010 would have resulted in an approximate $0.5 million change in fair value. Expected term represents the estimated average time between the option’s grant date and its exercise date. Because of our limited trading history as a public company we have elected to use the simplified method prescribed by applicable accounting standards, for companies with a limited trading history to estimate the expected term. Once we have sufficient trading history, we will estimate the expected term using historical experience for options that have been granted to employees within our stock option plan. A 10% change in the expected term assumption for 2010 would have resulted in an approximate $0.2 million change in fair value. These assumed changes in fair value would have been recognized over the vesting schedule of such awards.
Accounting standards also require the classification of stock compensation expense in the same financial statement line items as cash compensation, and therefore impacts our departmental expenses (and related operating margins), pre-opening costs and construction in progress for our development projects, and our general and administrative expenses (including corporate expenses).
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Self-Insurance Reserves
We are self-insured up to certain limits for costs of employee health coverage, workers’ compensation and general liability claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, we consider historical loss experience and make judgments about the expected level of costs per claim. Management believes the estimates of future liability are reasonable based upon its methodology; however, changes in health care costs, accident frequency and severity could materially affect the estimate for these liabilities.
Customer Loyalty Program
Our customer loyalty program relates to a slot club program whereby customers may earn points based on their level of play that may be redeemed for free credits which must be replayed in the slot machine. We accrue a liability based on the points earned times the redemption value, less an estimate for breakage, and record a related reduction in casino revenue.
Slot Machine Jackpots
With respect to base and progressive jackpots, we do not accrue a liability if we have the ability to avoid payment of the base jackpot because the machine can legally be removed from the gaming floor without payment of the base amount. Conversely, if we are unable to avoid payment of the jackpot (i.e. the incremental amount on a progressive machine) due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is accrued over the time period in which the incremental progressive jackpot amount is generated with a related reduction in casino revenue. No liability is accrued with respect to the base jackpot.
Item 7A. 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
Our primary exposure to market risk is interest rate risk associated with our debt facilities that bear interest based on floating rates. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Financing Activities.” 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 be sure that these risk management strategies have had the desired effect, and interest rate fluctuations could have a negative impact on our results of operations.
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The following table provides estimated future cash flow information derived from our best estimates of repayments at December 31, 2010 on our expected long-term indebtedness. However, we cannot predict the LIBOR rate that will be in effect in the future. As of December 31, 2010, such rates were at historic lows. Actual rates will vary. The one-month LIBOR rate at December 31, 2010 of 0.26% was used for all variable rate calculations in the table below.
| As of December 31, |
||||||||||||||||||||||||||||
| 2011 |
2012 |
2013 |
2014 |
2015 |
Thereafter |
Total |
||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
| Long-term debt: |
||||||||||||||||||||||||||||
| Fixed rate |
— | — | — | — | — | $ | 2,202.0 | $ | 2,202.0 | |||||||||||||||||||
| Average interest rate |
— | — | — | — | — | 7.8 | % | 7.8 | % | |||||||||||||||||||
| Variable rate |
$ | 1.1 | $ | 1.4 | $ | 49.5 | $ | 1.4 | $ | 348.2 | $ | 30.1 | $ | 431.7 | ||||||||||||||
| Average interest rate |
1.5 | % | 1.5 | % | 2.2 | % | 1.5 | % | 3.3 | % | 1.5 | % | 3.0 | % | ||||||||||||||
Interest Rate Swaps
As of December 31, 2010, we have one interest rate swap agreement to hedge a portion of the underlying interest rate risk on borrowings under the Wynn Las Vegas Credit Agreement. Under this swap agreement, we pay a fixed interest rate of 2.485% on borrowings of $250 million incurred under the Wynn Las Vegas Credit Agreement in exchange for receipts on the same amount at a variable interest rate based on the applicable LIBOR at the time of payment. This interest rate swap fixes the interest rate on $250 million of borrowings under the Wynn Las Vegas Credit Agreement at approximately 5.485%. This interest rate swap agreement matures in November 2012. Changes in the fair value of this interest rate swap have and will continue to be recorded as an increase/ (decrease) in swap fair value in our Consolidated Statements of Operations as the swap does not qualify for hedge accounting.
As of December 31, 2010 and 2009, our interest rate swap had an approximate liability fair value of $8.5 million and $4.2 million, respectively, and is included in long-term liabilities in the accompanying Consolidated Balance Sheets. The fair value approximates the amount we would have paid if this contract had settled at the valuation date. Fair value is estimated based upon current, and predictions of future, interest rate levels along a yield curve, the remaining duration of the instruments and other market conditions, and therefore, is subject to significant estimation and a high degree of variability of fluctuation between periods.
Other Interest Rate Swap Information
The following table provides information about our interest rate swaps, by contractual maturity dates, as of December 31, 2010 and using estimated future LIBOR rates based upon implied forward rates in the yield curve.
| Years Ending December 31, Expected Maturity Date |
||||||||||||||||||||||||||||
| 2011 |
2012 |
2013 |
2014 |
2015 |
Thereafter |
Total |
||||||||||||||||||||||
| (in millions) | ||||||||||||||||||||||||||||
| Average notional amount |
$ | — | $ | 250.0 | $ | — | $ | — | $ | — | $ | — | $ | 250.0 | ||||||||||||||
| Average pay rate |
— | 2.49 | % | — | — | — | — | 2.49 | % | |||||||||||||||||||
| Average receive rate |
— | 0.66 | % | — | — | — | — | 0.66 | % | |||||||||||||||||||
We do not use derivative financial instruments, other financial instruments or derivative commodity instruments for trading or speculative purposes.
Interest Rate Sensitivity
As of December 31, 2010, approximately 93% of our long-term debt was based on fixed rates, including the notional amount related to our interest rate swap. Based on our borrowings as of December 31, 2010, an assumed 1% change in variable rates would cause our annual interest cost to change by $1.8 million.
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Item 8. Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| Page |
||||
| 40 | ||||
| 41 | ||||
| 42 | ||||
| 43 | ||||
| 44 | ||||
| 45-71 | ||||
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Member of Wynn Las Vegas, LLC and subsidiaries:
We have audited the accompanying consolidated balance sheets of Wynn Las Vegas, LLC and subsidiaries (the “Company”) as of December 31, 2010 and 2009, and the related consolidated statements of operations, member’s equity, and cash flows for each of the three years in the period ended December 31, 2010. Our audits also included the financial statement schedule listed in the index at Item 15(a)2. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2010, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Las Vegas, Nevada
February 28, 2011
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
| December 31, |
||||||||
| 2010 |
2009 |
|||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 52,540 | $ | 66,354 | ||||
| Receivables, net |
124,814 | 110,860 | ||||||
| Inventories |
64,520 | 80,861 | ||||||
| Prepaid expenses and other |
21,188 | 25,187 | ||||||
| Total current assets |
263,062 | 283,262 | ||||||
| Property and equipment, net |
3,731,211 | 3,851,668 | ||||||
| Intangible assets, net |
12,804 | 14,875 | ||||||
| Deferred financing costs, net |
47,300 | 42,025 | ||||||
| Deposits and other assets |
50,070 | 58,733 | ||||||
| Investment in unconsolidated affiliates |
4,069 | 3,761 | ||||||
| Total assets |
$ | 4,108,516 | $ | 4,254,324 | ||||
| LIABILITIES AND MEMBER’S EQUITY | ||||||||
| Current liabilities: |
||||||||
| Current portion of long-term debt |
$ | 1,050 | $ | 1,050 | ||||
| Accounts payable |
35,837 | 28,226 | ||||||
| Accrued interest |
54,083 | 17,595 | ||||||
| Accrued compensation and benefits |
39,305 | 37,521 | ||||||
| Gaming taxes payable |
9,963 | 7,111 | ||||||
| Other accrued expenses |
17,392 | 16,198 | ||||||
| Customer deposits |
93,355 | 101,507 | ||||||
| Due to affiliates, net |
28,291 | 21,480 | ||||||
| Total current liabilities |
279,276 | 230,688 | ||||||
| Long-term debt |
2,620,484 | 2,551,520 | ||||||
| Due to affiliates, net |
101,797 | 82,339 | ||||||
| Interest rate swap |
8,457 | 4,224 | ||||||
| Total liabilities |
3,010,014 | 2,868,771 | ||||||
| Commitments and contingencies (Note 12) |
||||||||
| Member’s equity: |
||||||||
| Contributed capital |
1,973,424 | 1,912,146 | ||||||
| Accumulated deficit |
(874,922 | ) | (526,593 | ) | ||||
| Total member’s equity |
1,098,502 | 1,385,553 | ||||||
| Total liabilities and member’s equity |
$ | 4,108,516 | $ | 4,254,324 | ||||
The accompanying notes are an integral part of these consolidated financial statements.
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands)
| December 31, |
||||||||||||
| 2010 |
2009 |
2008 |
||||||||||
| Operating revenues: |
||||||||||||
| Casino |
$ | 534,286 | $ | 505,779 | $ | 479,711 | ||||||
| Rooms |
308,410 | 321,150 | 268,515 | |||||||||
| Food and beverage |
417,240 | 385,774 | 305,702 | |||||||||
| Entertainment, retail and other |
214,003 | 203,399 | 202,122 | |||||||||
| Gross revenues |
1,473,939 | 1,416,102 | 1,256,050 | |||||||||
| Less: promotional allowances |
(177,383 | ) | (185,982 | ) | (156,159 | ) | ||||||
| Net revenues |
1,296,556 | 1,230,120 | 1,099,891 | |||||||||
| Operating costs and expenses: |
||||||||||||
| Casino |
288,263 | 275,341 | 257,983 | |||||||||
| Rooms |
119,422 | 109,246 | 73,782 | |||||||||
| Food and beverage |
256,234 | 239,767 | 188,521 | |||||||||
| Entertainment, retail and other |
145,284 | 133,824 | 132,870 | |||||||||
| General and administrative |
237,678 | 246,776 | 199,540 | |||||||||
| Provision for doubtful accounts |
15,729 | 12,438 | 24,887 | |||||||||
| Management fees |
19,459 | 18,434 | 16,505 | |||||||||
| Pre-opening costs |
2,479 | 346 | 72,373 | |||||||||
| Depreciation and amortization |
274,305 | 313,759 | 169,640 | |||||||||
| Property charges and other |
19,017 | 24,468 | 22,406 | |||||||||
| Total operating costs and expenses |
1,377,870 | 1,374,399 | 1,158,507 | |||||||||
| Operating loss |
(81,314 | ) | (144,279 | ) | (58,616 | ) | ||||||
| Other income (expense): |
||||||||||||
| Interest income |
408 | 67 | 4,827 | |||||||||
| Interest expense, net of amounts capitalized |
(193,444 | ) | (157,228 | ) | (75,855 | ) | ||||||
| Decrease in swap fair value |
(4,233 | ) | (4,224 | ) | (416 | ) | ||||||
| Loss on extinguishment of debt/exchange offer |
(70,055 | ) | (3,779 | ) | — | |||||||
| Equity in income (loss) from unconsolidated affiliates |
309 | (427 | ) | 266 | ||||||||
| Other income (expense), net |
(267,015 | ) | (165,591 | ) | (71,178 | ) | ||||||
| Net loss |
$ | (348,329 | ) | $ | (309,870 | ) | $ | (129,794 | ) | |||
The accompanying notes are an integral part of these consolidated financial statements.
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONSOLIDATED STATEMENTS OF MEMBER’S EQUITY
(amounts in thousands)
| Balance at January 1, 2008 |
$ | 1,375,020 | ||
| Net loss |
(129,794 | ) | ||
| Parent company stock-based compensation |
9,502 | |||
| Contributions from Wynn Resorts, Limited |
2,835 | |||
| Balance at December 31, 2008 |
1,257,563 | |||
| Net loss |
(309,870 | ) | ||
| Parent company stock-based compensation |
8,370 | |||
| Contributions from Wynn Resorts, Limited |
429,490 | |||
| Balance at December 31, 2009 |
1,385,553 | |||
| Net loss |
(348,329 | ) | ||
| Parent company stock-based compensation |
11,278 | |||
| Contributions from Wynn Resorts, Limited |
50,000 | |||
| Balance at December 31, 2010 |
$ | 1,098,502 | ||
The accompanying notes are an integral part of these consolidated financial statements.
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
| December 31, |
||||||||||||
| 2010 |
2009 |
2008 |
||||||||||
| Cash flows from operating activities: |
||||||||||||
| Net loss |
$ | (348,329 | ) | $ | (309,870 | ) | $ | (129,794 | ) | |||
| Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||||
| Depreciation and amortization |
274,305 | 313,759 | 169,640 | |||||||||
| Stock-based compensation |
11,278 | 8,370 | 9,502 | |||||||||
| Loss from extinguishment of debt |
64,673 | 3,779 | — | |||||||||
| Amortization and write off of deferred financing costs and other |
15,705 | 19,624 | 11,078 | |||||||||
| Equity in income (loss) from unconsolidated affiliates, net of distributions. |
(309 | ) | 794 | 522 | ||||||||
| Provision for doubtful accounts |
15,729 | 12,438 | 24,887 | |||||||||
| Property charges and other |
4,068 | 24,468 | 22,406 | |||||||||
| Decrease in swap fair value |
4,233 | 4,224 | 416 | |||||||||
| Increase (decrease) in cash from changes in: |
||||||||||||
| Receivables |
(29,683 | ) | (25,016 | ) | 20,342 | |||||||
| Inventories and prepaid expenses and other assets |
19,452 | 180 | (38,706 | ) | ||||||||
| Accounts payable and accrued expenses |
41,777 | (14,227 | ) | 22,392 | ||||||||
| Due to affiliates, net |
31,746 | 41,879 | 22,455 | |||||||||
| Net cash provided by operating activities |
104,645 | 80,402 | 135,140 | |||||||||
| Cash flows from investing activities: |
||||||||||||
| Capital expenditures, net of construction payables and retention |
(157,080 | ) | (245,040 | ) | (1,129,525 | ) | ||||||
| Restricted cash and investments |
— | — | 31,052 | |||||||||
| Note receivable from Wynn Resorts, Limited |
— | — | 80,000 | |||||||||
| Deposits and other assets |
(4,796 | ) | 4,278 | (35,061 | ) | |||||||
| Due to affiliates, net |
3,597 | (8,468 | ) | 18,546 | ||||||||
| Proceeds from sale of assets |
218 | 42 | 2,537 | |||||||||
| Net cash used in investing activities |
(158,061 | ) | (249,188 | ) | (1,032,451 | ) | ||||||
| Cash flows from financing activities: |
||||||||||||
| Principal payments on long-term debt |
(1,933,238 | ) | (929,909 | ) | (1,400 | ) | ||||||
| Proceeds from issuance of long-term debt |
1,995,686 | 649,481 | 879,484 | |||||||||
| Capital contribution from the Parent |
50,000 | 412,951 | — | |||||||||
| Payments of deferred financing costs |
(72,846 | ) | (20,698 | ) | (3,979 | ) | ||||||
| Net cash provided by financing activities |
39,602 | 111,825 | 874,105 | |||||||||
| Cash and cash equivalents: |
||||||||||||
| Decrease in cash and cash equivalents |
(13,814 | ) | (56,961 | ) | (23,206 | ) | ||||||
| Balance, beginning of year |
66,354 | 123,315 | 146,521 | |||||||||
| Balance, end of year |
$ | 52,540 | $ | 66,354 | $ | 123,315 | ||||||
| Supplemental cash flow disclosures: |
||||||||||||
| Cash paid for interest, net of amounts capitalized |
$ | 147,542 | $ | 138,787 | $ | 147,209 | ||||||
| Change in construction payables and retention |
(9,599 | ) | (183,842 | ) | 99,948 | |||||||
| Capitalized stock-based compensation |
525 | 524 | 573 | |||||||||
| Capital Contribution from Parent |
— | 16,539 | 2,835 | |||||||||
The accompanying notes are an integral part of these consolidated financial statements.
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
Wynn Las Vegas, LLC was formed on April 17, 2001 as a Nevada limited liability company. Unless the context otherwise requires, all references herein to the “Company” refer to Wynn Las Vegas, LLC, a Nevada limited liability company and its consolidated subsidiaries. The sole member of the Company is Wynn Resorts Holdings, LLC (“Holdings”). The sole member of Holdings is Wynn Resorts, Limited (“Wynn Resorts”). The Company was organized primarily to construct and operate “Wynn Las Vegas,” a destination resort and casino on the “Strip” in Las Vegas, Nevada. Wynn Las Vegas opened on April 28, 2005. On December 22, 2008, the Company opened Encore at Wynn Las Vegas (“Encore”), a resort located immediately adjacent to and connected with Wynn Las Vegas.
Wynn Las Vegas Capital Corp. (“Wynn Capital”) is a wholly owned subsidiary of the Company incorporated on June 3, 2002, solely for the purpose of obtaining financing for Wynn Las Vegas. Wynn Capital is authorized to issue 2,000 shares of common stock, par value $0.01. At December 31, 2010, the Company owned the one share that was issued and outstanding. Wynn Capital has neither any significant net assets nor has had any operating activity. Its sole function is to serve as the co-issuer of the mortgage notes described below. Wynn Las Vegas, LLC and Wynn Capital together are hereinafter referred to as the “Issuers”.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. The Company’s investment in the 50%-owned joint venture operating the Ferrari and Maserati automobile dealership inside Wynn Las Vegas is accounted for under the equity method. All significant intercompany accounts and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid investments with purchase maturities of three months or less. Cash equivalents are carried at cost, which approximates fair value.
Accounts Receivable and Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of casino accounts receivable. The Company issues credit in the form of “markers” to approved casino customers following investigations of creditworthiness. At December 31, 2010 and 2009, approximately 75% and 68%, 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 these countries could affect the collectibility of such receivables.
Accounts receivable, including casino and hotel receivables, are typically non-interest bearing and are initially recorded at cost. Accounts are written off when management deems them to be uncollectible. Recoveries of accounts previously written off are recorded when received. An estimated allowance for doubtful accounts is
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
maintained to reduce the Company’s receivables to their carrying amount, which approximates fair value. The allowance is estimated based on specific review of customer accounts as well as management’s experience with collection trends in the casino industry and current economic and business conditions.
Inventories
Inventories consist of retail merchandise, food and beverage items, which are stated at the lower of cost or market value, and certain operating supplies. Cost is determined by the first-in, first-out, average and specific identification methods.
Property and Equipment
Purchases of property and equipment are stated at cost. Depreciation is provided over the estimated useful lives of the assets using the straight-line method as follows:
| Buildings and improvements |
10 to 45 years | |||
| Land improvements |
10 to 45 years | |||
| Airplane |
20 years | |||
| Furniture, fixtures and equipment |
3 to 20 years |
Costs related to improvements are capitalized, while costs of building repairs and maintenance are charged to expense as incurred. The cost and accumulated depreciation of property and equipment retired or otherwise disposed of are eliminated from the respective accounts and any resulting gain or loss is included in operating income (loss).
Capitalized Interest
The interest cost associated with major development and construction projects is capitalized and included in the cost of the project. Interest capitalization ceases once a project is substantially complete or no longer undergoing construction activities to prepare it for its intended use. When no debt is specifically identified as being incurred in connection with a construction project, the Company capitalizes interest on amounts expended on the project at the Company’s weighted average cost of borrowed money. Interest of $0.6 million, $0 and $80.4 million was capitalized for the years ended December 31, 2010, 2009 and 2008, respectively.
Intangibles
The Company’s indefinite-lived intangible assets consist primarily of water rights acquired as part of the overall purchase price of the land on which Wynn Las Vegas is located, and trademarks. Indefinite-lived intangible assets are not amortized, but are reviewed annually for impairment. The Company’s finite-lived intangible assets consist of show production rights. Finite-lived intangible assets are amortized over the shorter of their contractual terms or estimated useful lives.
Long-Lived Assets
Long-lived assets, which are not to be disposed of, including intangibles and property and equipment, are periodically reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. For assets to be held and used, the Company reviews these assets for impairment whenever indicators of impairment exist. If an indicator of impairment exists, the Company compares the estimated future cash flows of the asset, on an undiscounted basis, to the carrying value
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
of the asset. If the undiscounted cash flows exceed the carrying value, no impairment is indicated. If the undiscounted cash flows do not exceed the carrying value, then impairment is measured as the difference between fair value and carrying value, with fair value typically based on a discounted cash flow model. If an asset is still under development, future cash flows include remaining construction costs.
Deferred Financing Costs
Direct and incremental costs incurred in obtaining loans or in connection with the issuance of long-tem debt are capitalized and amortized to interest expense over the terms of the related debt agreements. Approximately $7.7 million, $9.3 million and $8.5 million, was amortized to interest expense during the years ended December 31, 2010, 2009 and 2008, respectively. Debt discounts incurred in connection with the issuance of debt has been capitalized and is being amortized to interest expense using the effective interest method.
Derivative Financial Instruments
The Company seeks to manage its market risk, including interest rate risk associated with variable rate borrowings, through balancing fixed-rate and variable-rate borrowings with the use of derivative financial instruments. The fair value of derivative financial instruments are recognized as assets or liabilities at each balance sheet date, with changes in fair value affecting net income (loss) or comprehensive income (loss) as applicable. The Company’s interest rate swaps do not qualify for hedge accounting. Accordingly, changes in the fair value of the interest rate swaps are presented as an increase (decrease) in fair value of swaps in the accompanying Consolidated Statements of Operations.
Revenue Recognition and Promotional Allowances
The Company recognizes revenues at the time persuasive evidence of an arrangement exists, the service is provided or the retail goods are sold, prices are fixed or determinable and collection is reasonably assured.
Casino revenues are measured by the aggregate net difference between gaming wins and losses, with liabilities recognized for funds deposited by customers before gaming play occurs and for chips in the customers’ possession. Hotel, food and beverage, entertainment and other operating revenues are recognized when services are performed. Entertainment, retail, and other revenue include rental income which is recognized on a time proportion basis over the lease terms. Contingent rental income is recognized when the right to receive such rental income is established according to the lease agreements. Advance deposits on rooms and advance ticket sales are recorded as customer deposits until services are provided to the customer.
Revenues are recognized net of certain sales incentives which are required to be recorded as a reduction of revenues; consequently, the Company’s casino revenues are reduced by discounts and points earned in the player’s club loyalty program.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The retail value of accommodations, food and beverage, and other services furnished to guests without charge is included in gross revenues and then deducted as promotional allowances. The estimated cost of providing such promotional allowances is primarily included in casino expenses as follows (amounts in thousands):
| Years Ended December 31, |
||||||||||||
| 2010 |
2009 |
2008 |
||||||||||
| Rooms |
$ | 40,911 | $ | 45,890 | $ | 27,292 | ||||||
| Food and beverage |
59,111 | 60,550 | 53,006 | |||||||||
| Entertainment, retail and other |
19,515 | 12,014 | 10,027 | |||||||||
| Total |
$ | 119,537 | $ | 118,454 | $ | 90,325 | ||||||
Self-Insurance Reserves
The Company is self-insured up to certain limits for costs of employee health coverage, workers’ compensation and general liability claims. Insurance claims and reserves include accruals of estimated settlements for known claims, as well as accruals of estimates for claims incurred but not yet reported. In estimating these accruals, the Company considers historical loss experience and makes judgments about the expected level of costs per claim. Management believes the estimates of future liability are reasonable based upon its methodology; however, changes in health care costs, accident frequency and severity could materially affect the estimate for these liabilities.
Customer Loyalty Program
The Company’s customer loyalty program relates to a slot club program whereby customers may earn points based on their level of play that may be redeemed for free credit that must be replayed in the slot machine. The Company accrues a liability based on the points earned times the redemption value, less an estimate for breakage, and records a related reduction in casino revenue.
Slot Machine Jackpots
With respect to base and progressive jackpots, the Company does not accrue a liability when it has the ability to avoid payment of the base jackpot because the machine can legally be removed from the gaming floor without payment of the base amount. Conversely, if the Company is unable to avoid payment of the jackpot (i.e. the incremental amount on a progressive machine) due to legal requirements, the jackpot is accrued as the obligation becomes unavoidable. This liability is accrued over the time period in which the incremental progressive jackpot amount is generated with a related reduction in casino revenue. No liability is accrued with respect to the base jackpot.
Gaming taxes
The Company is subject to taxes based on gross gaming revenue in the jurisdictions in which it operates, subject to applicable jurisdictional adjustments. These gaming taxes are an assessment on the Company’s gaming revenue and are recorded as an expense within the “Casino” line item in the accompanying Consolidated Statements of Operations. These taxes totaled $37.7 million, $36.5 million and $33.4 million for the years ended December 31, 2010, 2009 and 2008, respectively.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Advertising Costs
The Company expenses advertising costs the first time the advertising takes place. Advertising costs incurred in development periods are included in pre-opening costs. Once a project is completed, advertising costs are included in general and administrative expenses. Total advertising costs were $14.7 million, $17.3 million and $27.1 million including $11.1 million of pre-opening in 2008 related to Encore, for the years ended December 31, 2010, 2009 and 2008, respectively.
Pre-Opening Costs
Pre-opening costs, consisting primarily of direct salaries and wages, legal and consulting fees, insurance, utilities and advertising, are expensed as incurred. The Company incurred pre-opening costs in connection with the Encore Beach Club and Surrender Nightclub prior to their opening in May 2010 and Encore prior to its opening in December 2008.
Income Taxes
The Company’s operations are reported on the consolidated tax return of Wynn Resorts. As a limited liability company, the Company is considered a division of Wynn Resorts for federal income tax purposes. The Company’s financial statements recognize the current and deferred income tax consequences that result from the Company’s activities during the current and preceding periods pursuant to accounting standards related to Income Taxes, as if the Company were a separate taxpayer rather than a member of the parent company’s consolidated income tax return group. On a separate company basis, the Company is more likely than not to be unable to recognize benefit from net operating losses incurred annually since its formation. Consequently, no benefit from the current year or prior year’s tax losses has been recognized, resulting in no tax provision.
Wynn Resorts’ Equity Instruments Issued to Employees
Accounting standards require an entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognize that cost over the service period. The Company uses the Black-Scholes valuation model to determine the estimated fair value for each option grant issued. The Black-Scholes determined fair value net of estimated forfeitures is amortized as compensation cost on a straight line basis over the service period.
Further information on the Company’s stock-based compensation arrangements is included in Note 11 “Benefit Plans—Stock-Based Compensation”.
Reclassifications
Certain amounts in the prior year consolidated financial statements have been reclassified to be consistent with the current year presentation. These reclassifications had no effect on the previously reported net loss.
3. Receivables, net
Receivables, net consisted of the following (amounts in thousands):
| As of December 31, |
||||||||
| 2010 |
2009 |
|||||||
| Casino |
$ | 167,844 | $ | 149,786 | ||||
| Hotel |
16,512 | 17,490 | ||||||
| Other |
11,534 | 10,990 | ||||||
| 195,890 | 178,266 | |||||||
| Less: allowance for doubtful accounts |
(71,076 | ) | (67,406 | ) | ||||
| $ | 124,814 | $ | 110,860 | |||||
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
4. Property and Equipment, net
Property and equipment, net consisted of the following (amounts in thousands):
| As of December 31, |
||||||||
| 2010 |
2009 |
|||||||
| Land and improvements |
$ | 719,753 | $ | 692,677 | ||||
| Buildings and improvements |
2,591,246 | 2,554,224 | ||||||
| Airplane |
44,349 | 44,254 | ||||||
| Furniture, fixtures and equipment |
1,347,601 | 1,325,677 | ||||||
| Construction in progress |
19,281 | 23,973 | ||||||
| 4,722,230 | 4,640,805 | |||||||
| Less: accumulated depreciation |
(991,019 | ) | (789,137 | ) | ||||
| $ | 3,731,211 | $ | 3,851,668 | |||||
Depreciation expense for the years ended December 31, 2010, 2009 and 2008 was $265.7 million, $300.8 million and $156.4 million, respectively. The decrease during 2010 is primarily due to assets with a 5-year life at Wynn Las Vegas being fully depreciated as of April 2010. The increase during 2009 over 2008 is due to the depreciation of assets placed in service for Encore in December 2008.
5. Intangibles, net
Intangibles, net consisted of the following (amounts in thousands):
| Show Production Rights |
Water Rights |
Trademarks |
Total Intangibles, Net |
|||||||||||||
| January 1, 2009 |
$ | 9,147 | $ | 6,400 | $ | 1,334 | $ | 16,881 | ||||||||
| Additions |
— | — | 65 | 65 | ||||||||||||
| Amortization |
(2,071 | ) | — | — | (2,071 | ) | ||||||||||
| December 31, 2009 |
7,076 | 6,400 | 1,399 | 14,875 | ||||||||||||
| Amortization |
(2,071 | ) | — | — | (2,071 | ) | ||||||||||
| December 31, 2010 |
$ | 5,005 | $ | 6,400 | $ | 1,399 | $ | 12,804 | ||||||||
Show production rights represent the amounts paid to purchase the rights to present the “Le Rêve” production show. The Company expects that amortization of show production rights will be $2.1 million for each of the years 2011 through 2012, and $0.8 million in 2013.
Water rights reflect the fair value allocation determined in the purchase of the property on which Wynn Las Vegas is located in April 2000. The value of the trademarks primarily represents the costs to acquire the “Le Rêve” name. The water rights and trademarks are indefinite-lived assets and, accordingly, not amortized.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
6. Deposits and Other Assets
Deposits and other assets consisted of the following (amounts in thousands):
| As of December 31, |
||||||||
| 2010 |
2009 |
|||||||
| Entertainment production costs |
$ | 6,849 | $ | 11,826 | ||||
| Base stock |
20,082 | 22,027 | ||||||
| Deposits and other |
23,139 | 24,880 | ||||||
| $ | 50,070 | $ | 58,733 | |||||
7. Long-Term Debt
Long-term debt consisted of the following (amounts in thousands):
| As of December 31, |
||||||||
| 2010 |
2009 |
|||||||
| 6 5/8% First Mortgage Notes, due December 1, 2014, net of original issue discount of $8,214 at December 31, 2009 |
$ | — | $ | 1,626,016 | ||||
| 7 7/8% First Mortgage Notes, due November 1, 2017, net of original issue discount of $9,678 at December 31, 2010 and $10,529 at December 31, 2009 |
490,322 | 489,471 | ||||||
| 7 7/8% First Mortgage Notes, due May 1, 2020, net of original issue discount of $2,489 at December 31, 2010 |
349,521 | — | ||||||
| 7 3/4% First Mortgage Notes, due August 15, 2020 |
1,320,000 | — | ||||||
| Revolving Credit Facility, due July 15, 2013; interest at LIBOR plus 3.0% |
3,868 | 252,717 | ||||||
| Revolving Credit Facility, due July 17, 2015; interest at LIBOR plus 3.0% |
16,187 | — | ||||||
| Term Loan Facility, due August 15, 2013; interest at LIBOR plus 1.875% |
44,281 | 80,446 | ||||||
| Term Loan Facility, due August 17, 2015; interest at LIBOR plus 3.0% |
330,605 | — | ||||||
| $42 million Note Payable due April 1, 2017; interest at LIBOR plus 1.25% |
36,750 | 38,150 | ||||||
| Payable to Affiliate |
30,000 | 65,770 | ||||||
| 2,621,534 | 2,552,570 | |||||||
| Current portion of long-term debt |
(1,050 | ) | (1,050 | ) | ||||
| $ | 2,620,484 | $ | 2,551,520 | |||||
6 5/8% Wynn Las Vegas First Mortgage Notes
On December 14, 2004, the Issuers issued $1.3 billion aggregate principal amount of 6 5/8% first mortgage notes due December 1, 2014. On November 6, 2007, the Issuers issued, in a private offering, $400 million aggregate principal amount of 6 5/8% first mortgage notes due December 1, 2014 at a price of 97.25% of the principal amount. These notes were issued under the same indenture as the original $1.3 billion first mortgage notes. Both offerings are referred to herein as the “2014 Notes”. The Company paid interest on the 2014 Notes on June 1st and December 1st of each year. In August 2010, the 2014 Notes were redeemed as described below.
7 7/8% Wynn Las Vegas First Mortgage Notes
In October 2009, the Issuers issued, in a private offering, $500 million aggregate principal amount of 7 7/8% first mortgage notes due November 1, 2017 (the “2017 Notes”) at a price of 97.823% of the principal amount. Net proceeds to the Company were approximately $480 million, after deducting the original issue discount and underwriting fees and other expenses. The Company pays interest on the 2017 Notes on May 1st and
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
November 1st of each year. Commencing November 1, 2013, the 2017 Notes are redeemable at the Company’s option at a price equal to 103.938% of the principal amount redeemed and decline ratably on November 1st of each year thereafter to zero on or after November 1, 2015. The notes are senior secured obligations of the Issuers, are guaranteed by Wynn Las Vegas, LLC’s subsidiaries (subject to some exceptions), and are secured on an equal and ratable basis by a first priority lien on substantially all the existing and future assets of the Issuers and guarantors.
On March 26, 2010, the Issuers commenced an offer to exchange all outstanding 2014 Notes for 7 7/8% first mortgage notes due 2020 (the “2020 Notes”), upon the terms and subject to the conditions set forth in an offering memorandum and a related letter of transmittal (the “exchange offer”). The exchange offer was conditioned upon, among other things, the tender of at least $250 million aggregate principal amount of 2014 Notes. The 2020 Notes were offered only to qualified institutional buyers and outside the United States in accordance with Rule 144A and Regulation S, respectively, under the Securities Act of 1933, as amended (the “Securities Act”). The exchange offer closed on April 28, 2010 with $382 million of the 2014 Notes being validly tendered for exchange to the 2020 Notes.
The noteholders who validly tendered 2014 Notes prior to the early delivery time received an early delivery payment on April 28, 2010 of 1% of the amount tendered in cash, which totaled $3.8 million. In accordance with accounting standards, this has been included as deferred financing costs and will be amortized over the life of the 2020 Notes. The direct costs of the exchange offer incurred with third parties of $4.6 million were expensed and are included in loss on extinguishment of debt / exchange offer in the accompanying Consolidated Statements of Operations.
The Company pays interest on the 2020 Notes on May 1st and November 1st of each year. Commencing May 1, 2015, the 2020 Notes are redeemable at the Company’s option at a price equal to 103.938% of the principal amount redeemed and decline ratably on May 1st of each year thereafter to zero on or after May 1, 2018. The 2020 Notes rank pari passu in right of payment with borrowings under Wynn Las Vegas, LLC’s credit facilities and 2017 Notes. The 2020 Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries and secured by a first priority lien on substantially all of the existing and future assets of the Issuers and guarantors and, subject to approval from the Nevada Gaming Commission, a first priority lien on the equity interests of Wynn Las Vegas, LLC, all of which is the same collateral that secures borrowings under Wynn Las Vegas, LLC’s credit facilities and the 2017 Notes.
7 3/4% Wynn Las Vegas First Mortgage Notes
On August 4, 2010, the Issuers issued $1.32 billion aggregate principal amount of 7 3/4% first mortgage notes due August 15, 2020 (the “New 2020 Notes”). The New 2020 Notes were issued at par. The New 2020 Notes were offered only to qualified institutional buyers and outside the United States in accordance with Rule 144A and Regulation S, respectively, under the Securities Act of 1933. Wynn Las Vegas, LLC used the net proceeds of the offering along with the proceeds of a $50 million capital contribution from Wynn Resorts, Limited to purchase, and, as applicable, make consent payments for, any and all of the Issuers’ 2014 Notes that were validly tendered and accepted for payment pursuant to Wynn Las Vegas, LLC’s concurrent offer to purchase and consent solicitation with respect to the 2014 Notes, and to redeem all of the 2014 Notes not tendered. On or prior to August 3, 2010, valid tenders had been received with respect to approximately $987 million of the $1.3 billion aggregate principal amount of 2014 Notes outstanding. On August 4, 2010, tendering holders received the tender offer consideration in the amount of $1,004.38, plus a consent payment of $30 for each $1,000 principal amount of 2014 Notes, which totaled $33.9 million. The consent solicitation expired on August 3, 2010 and the tender offer expired on August 18, 2010. In accordance with accounting standards the consideration and consent fees were expensed and are included in loss on extinguishment of debt / exchange offer in the accompanying Consolidated Statements of Operations.
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On August 4, 2010, the Trustee, at the request of the Issuers, gave notice of redemption of any and all of the remaining 2014 Notes. The redemption price was equal to 103.313% of the aggregate principal amount of the 2014 Notes redeemed plus accrued and unpaid interest thereon to September 3, 2010. The total redemption fees paid were $10.9 million. In accordance with accounting standards, the redemption fees were expensed and are included in loss on extinguishment of debt / exchange offer in the accompanying Consolidated Statement of Operations.
Also in connection with this transaction, unamortized debt issue costs and original issue discount related to the 2014 Notes totaling $19.2 million were expensed and are included in loss on extinguishment of debt / exchange offer in the accompanying Consolidated Statements of Operations.
The Company pays interest on the New 2020 Notes on February 15th and August 15th of each year. Commencing August 15, 2015, the New 2020 Notes are redeemable at the Company’s option at a price equal to 103.875% of the principal amount redeemed and decline ratably on August 15th of each year thereafter to zero on or after August 15, 2018. The New 2020 Notes rank pari passu in right of payment with borrowings under Wynn Las Vegas, LLC’s credit facilities, the 2017 Notes and the 2020 Notes. The New 2020 Notes are senior secured obligations of the Issuers, guaranteed by certain of Wynn Las Vegas, LLC’s subsidiaries and secured on an equal and ratable basis (with certain exceptions) by a first priority lien on substantially all of the existing and future assets of the Issuers and guarantors, and, subject to prior approval from the Nevada gaming authorities, a first priority lien on the equity interests of Wynn Las Vegas, LLC, all of which is the same collateral that secures borrowings under Wynn Las Vegas, LLC’s credit facilities, the 2017 Notes and the 2020 Notes.
During the year ended December 31, 2009, Wynn Resorts purchased $65.8 million face amount of the 2014 Notes through open market purchases at a discount. As part of the March 2010 exchange offer discussed above, Wynn Resorts exchanged $30 million of its 2014 Notes for the 2020 Notes. The remaining $35.8 million were redeemed as part of the tender offer and redemption of all of the 2014 Notes in August 2010 as described above. As of December 31, 2010, Wynn Resorts holds $30 million of the 2020 Notes which have not been contributed to its wholly-owned subsidiary, Wynn Las Vegas. For accounting purposes the notes were treated as an extinguishment of debt by Wynn Resorts in 2009.
Wynn Las Vegas Credit Facilities
Concurrently with the issuance of the New 2020 Notes, the Company entered into a seventh amendment, dated August 4, 2010, to the Wynn Las Vegas Amended and Restated Credit Agreement (the “Credit Agreement”). After giving effect to this amendment, the maturity date with respect to a portion of the revolving credit facility and the term facility was extended to July 2015 and August 2015, respectively, and the interest margin in respect of the extended portion will increase after June 30, 2013. In addition, lenders made incremental term loans of $248.5 million having a maturity date of August 2015. The amendment made certain other changes including eliminating the maximum Consolidated Leverage Ratio and reducing the minimum Consolidated Interest Coverage Ratio to 1:00 to 1 through June 2013.
As of December 31, 2010, the Credit Agreement consisted of a $108.5 million revolving credit facility due July 2013, a $258.4 million revolving credit facility due July 2015 (together the “Wynn Las Vegas Revolver”), a fully drawn $44.3 million term loan facility due August 2013 and a fully drawn $330.6 million term loan facility due August 2015 (together the “Wynn Las Vegas Term Loan”). The Wynn Las Vegas Revolver and the Wynn Las Vegas Term Loan are together referred to as the “Wynn Las Vegas Credit Facilities.” As of December 31,
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2010, $20.1 million had been borrowed under the Wynn Las Vegas Revolver. The Company also had $19.7 million of outstanding letters of credit that reduce its availability under the Wynn Las Vegas Revolver. The Company has availability of $327.2 million under the Wynn Las Vegas Revolver as of December 31, 2010.
For purposes of calculating interest, loans under the Wynn Las Vegas Credit Facilities will be designated, at the election of Wynn Las Vegas, LLC, as Eurodollar Loans or, in certain circumstances, Base Rate Loans. As of December 31, 2010, Eurodollar Loans under the Wynn Las Vegas Revolver and Wynn Las Vegas Term Loan due August 17, 2015 bear interest initially at the Eurodollar rate plus 3.0%. Eurodollar loans under the Wynn Las Vegas Term Loan due August 15, 2013 bear interest initially at the Eurodollar rate plus 1.875%. Interest on Eurodollar Loans is payable at the end of the applicable interest period in the case of interest periods of one, two or three months, and every three months in the case of interest periods of six months. Base Rate Loans bear interest at (a) the greatest of (i) the rate most recently announced by Deutsche Bank as its “prime rate,” (ii) the Federal Funds Rate plus 1/2 of 1% per annum, and (iii) in the case of a Wynn Las Vegas Revolver loan the one month Eurodollar rate; plus (b) a borrowing margin of 2.0% for Wynn Las Vegas Revolver loans and 0.875% for Wynn Las Vegas Term Loans. Interest on Base Rate Loans will be payable quarterly in arrears. Wynn Las Vegas, LLC also pays, quarterly in arrears, 1.0% per annum on the daily average of unborrowed amounts under the Wynn Las Vegas Revolver
The Wynn Las Vegas Credit Facilities are obligations of Wynn Las Vegas, LLC, guaranteed by each of the subsidiaries of Wynn Las Vegas, LLC, other than Wynn Completion Guarantor, LLC. Subject to an intercreditor agreement, and certain exceptions, the obligations of Wynn Las Vegas, LLC and each of the guarantors under the Wynn Las Vegas Credit Facilities are secured by: (1) a first priority pledge of all member’s interests owned by Wynn Las Vegas, LLC in its subsidiaries (other than Wynn Completion Guarantor, LLC) and Wynn Resorts Holdings, LLC’s 100% member’s interest in Wynn Las Vegas, LLC; (2) first mortgages on all real property constituting Wynn Las Vegas, its golf course and Encore; and (3) a first priority security interest in substantially all other existing and future assets of Wynn Las Vegas, LLC and the guarantors, excluding an aircraft beneficially owned by World Travel, LLC.
The obligations of Wynn Las Vegas, LLC and the guarantors under the Wynn Las Vegas Credit Facilities rank equal in right of payment with their existing and future senior indebtedness, including indebtedness with respect to the 2017 Notes, the 2020 Notes and the New 2020 Notes and ranks senior in right of payment to all of their existing and future subordinated indebtedness.
In addition to scheduled amortization payments, Wynn Las Vegas, LLC is required to make mandatory prepayments of indebtedness under the Wynn Las Vegas Credit Facilities from the net proceeds of all debt offerings (other than those constituting certain permitted debt). Wynn Las Vegas, LLC is also required to make mandatory repayments of indebtedness under the Wynn Las Vegas Credit Facilities from specified percentages of excess cash flow, which percentages may decrease and/or be eliminated based on Wynn Las Vegas, LLC’s leverage ratio. Wynn Las Vegas, LLC does not expect to make any mandatory repayments pursuant to this requirement during 2011. Wynn Las Vegas, LLC has the option to prepay all or any portion of the indebtedness under the Wynn Las Vegas Credit Facilities at any time without premium or penalty.
The Credit Agreement contains customary negative covenants and financial covenants, including negative covenants that restrict Wynn Las Vegas, LLC’s ability to: incur additional indebtedness, including guarantees; create, incur, assume or permit to exist liens on property and assets; declare or pay dividends and make distributions or restrict the ability of Wynn Las Vegas, LLC’s subsidiaries to pay dividends and make distributions; engage in mergers, investments and acquisitions; enter into transactions with affiliates; enter into sale-leaseback transactions; execute modifications to material contracts; engage in sales of assets; make capital expenditures; and make optional prepayments of certain indebtedness. The financial covenants include
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maintaining a Consolidated Interest Coverage Ratio, as defined, not less than 1.00 to 1 as of December 31, 2010. Management believes that the Company was in compliance with all covenants at December 31, 2010. The Consolidated Interest Coverage Ratio remains at 1.00 to 1 through June 2013.
$42 Million Note Payable for Aircraft
On March 30, 2007, World Travel, LLC, a subsidiary of Wynn Las Vegas, entered into a loan agreement with a principal balance of $42 million. The loan is guaranteed by Wynn Las Vegas, LLC and secured by a first priority security interest in one of the Company’s aircraft. Principal payments of $350,000 plus interest are made quarterly with a balloon payment of $28 million due at maturity, April 1, 2017. Interest is calculated at 90-day LIBOR plus 125 basis points.
Fair Value of Long-term Debt
The net book value of the 2014 Notes, the 2017 Notes, the 2020 Notes and the New 2020 Notes at December 31, 2010 and 2009, was $2.2 billion and $2.2 billion, respectively. The estimated fair value of the 2014 Notes, the 2017 Notes, the 2020 Notes and the New 2020 Notes based upon most recent trades at December 31, 2010 and 2009, was approximately $2.4 billion and $2.1 billion, respectively. The net book value of the Company’s other debt instruments was $432 million and the fair value of such debt was approximately $426.5 million as of December 31, 2010.
Scheduled Maturities of Long-Term Debt
Scheduled maturities of long-term debt including the accretion of debt discounts of $12.2 million are as follows (amounts in thousands):
| Years Ending December 31, |
||||
| 2011 |
$ | 1,050 | ||
| 2012 |
1,400 | |||
| 2013 |
49,549 | |||
| 2014 |
1,400 | |||
| 2015 |
348,192 | |||
| Thereafter |
2,232,110 | |||
| $ | 2,633,701 | |||
8. Interest Rate Swap
The Company has entered into floating-for-fixed interest rate swap arrangements in order to manage interest rate risk relating to certain of its debt facilities. These interest rate swap agreements modify the Company’s exposure to interest rate risk by converting a portion of the Company’s floating-rate debt to a fixed rate. These interest rate swaps essentially fix the interest rate at the percentages noted below; however, changes in the fair value of the interest rate swaps for each reporting period have been recorded in the increase/decrease in swap fair value in the accompanying Consolidated Statements of Operations, as the interest rate swaps do not qualify for hedge accounting.
The Company measures the fair value of its interest rate swaps on a recurring basis pursuant to accounting standards for fair value measurements. These standards establish a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such
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as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions. The Company categorizes its swap contract as Level 2.
The Company currently has one interest rate swap agreement to hedge a portion of the underlying interest rate risk on borrowings under the Wynn Las Vegas Credit Agreement. Under this swap agreement, beginning November 27, 2009, the Company pays a fixed interest rate of 2.485% on borrowings of $250 million incurred under the Wynn Las Vegas Credit Agreement in exchange for receipts on the same amount at a variable interest rate based on the applicable LIBOR at the time of payment. This interest rate swap fixes the interest rate on $250 million of borrowings at approximately 5.485%. This interest rate swap agreement matures in November 2012. As of December 31, 2010 and 2009, the fair value of this interest rate swap was a liability of $8.5 million and $4.2 million, respectively, which is included in long term liabilities in the accompanying Consolidated Balance Sheets.
9. Related Party Transactions, net
Amounts Due to Affiliates, net
As of December 31, 2010, the Company’s current Due to Affiliates, net was comprised of construction payables of $10.3 million, construction retention of $3.3 million and other net amounts due to affiliates totaling $14.7 million (including corporate allocations discussed below). The long-term Due to Affiliates is management fees of $101.8 million (equal to 1.5% of net revenues and payable upon meeting certain leverage ratios as specified in the documents governing the Company’s Credit Agreement and the First Mortgage Notes indentures).
As of December 31, 2009, the Company’s current Due to Affiliates, net was comprised of construction payables of approximately $21.4 million, construction retention of approximately $1.8 million and other net amounts due to affiliates totaling $1.7 million (including corporate allocations discussed below). The long-term Due to Affiliates is management fees of $82.3 million (equal to 1.5% of revenues and payable upon meeting certain leverage ratios as specified in the documents governing the Company’s Credit Agreement and the First Mortgage Notes indentures).
The Company periodically settles amounts Due to Affiliates with cash receipts and payments, except for the management fee, which is payable upon meeting certain leverage ratios specified in the documents governing the Company’s Credit Agreement and the First Mortgage Notes indentures.
Corporate Allocations
The accompanying Consolidated Statements of Operations include allocations from Wynn Resorts for legal, accounting, human resource, information services, real estate, and other corporate support services. The corporate support service allocations have been determined on a basis that Wynn Resorts and the Company consider to be reasonable estimates of the utilization of service provided or the benefit received by the Company. Wynn Resorts maintains corporate offices at Wynn Las Vegas without charge from the Company. Through September 30, 2008, the Company settled these corporate allocation charges with Wynn Resorts on a periodic basis as discussed in “Amounts Due to Affiliates, net” above. Beginning with the fourth quarter of 2008 and ending with the third quarter of 2009, the Company was unable to and did not intend to settle this corporate allocation and accordingly, such allocations were recorded as a contribution to equity from Wynn Resorts. During the years ended December 31, 2010, 2009 and 2008, $25.9 million, $25 million, and $22 million, respectively, was charged to the Company for such corporate allocations.
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Amounts due to Officers, net
The Company periodically provides services to Stephen A. Wynn, Chairman of the Board, Chief Executive Officer and one of the principal stockholders of Wynn Resorts (“Mr. Wynn”), and certain other executive officers and directors of Wynn Resorts. These services include household services, construction work and other personal services. The cost of these services is transferred to Wynn Resorts, Limited on a periodic basis. Mr. Wynn and these other officers and directors have amounts on deposit with Wynn Resorts to prepay any such items, which are replenished on an ongoing basis as needed.
Villa Suite Lease
On March 17, 2010, Elaine P. Wynn, a director of Wynn Resorts, and Wynn Las Vegas entered into an Agreement of Lease (the “EW Lease”) for the lease of a villa suite as Elaine P. Wynn’s personal residence. The EW Lease was approved by the Audit Committee of the Board of Directors of the Company. The term of the lease commenced as of March 1, 2010 and terminated December 31, 2010. The lease is currently on a month-to-month basis. Pursuant to the terms of the EW Lease, Elaine P. Wynn will pay annual rent equal to $350,000 which amount was determined by the Audit Committee with the assistance of a third-party appraisal. Certain services for, and maintenance of, the villa suite are included in the rental. The EW Lease superseded the terms of a prior agreement.
On March 18, 2010, Mr. Wynn and Wynn Las Vegas entered into an Amended and Restated Agreement of Lease (the “SW Lease”) for a villa suite to serve as Mr. Wynn’s personal residence. The SW Lease amends and restates a prior lease. The SW Lease was approved by the Audit Committee of the Board of Directors of the Company. The term of the SW Lease commenced as of March 1, 2010 and runs concurrent with Mr. Wynn’s employment agreement with the Company; provided that either party may terminate on 90 days notice. Pursuant to the SW Lease, the rental value of the villa suite will be treated as imputed income to Mr. Wynn, and will be equal to the fair market value of the accommodations provided. Effective March 1, 2010, and for the first two years of the term of the SW Lease, the rental value will be $503,831 per year. The rental value for the villa suite will be re-determined every two years during the term of the lease by the Audit Committee, with the assistance of an independent third-party appraisal. Certain services for, and maintenance of, the villa suite are included in the rental.
The “Wynn” Surname Rights Agreement
On August 6, 2004, Holdings entered into agreements with Mr. Wynn that confirm and clarify Holding’s rights to use the “Wynn” name and Mr. Wynn’s persona in connection with casino resorts. Under the parties’ Surname Rights Agreement, Mr. Wynn granted Holdings an exclusive, fully paid-up, perpetual, worldwide license to use, and to own and register trademarks and service marks incorporating the “Wynn” name for casino resorts and related businesses, together with the right to sublicense the name and marks to its affiliates. Under the parties’ Rights of Publicity License, Mr. Wynn granted Holdings the exclusive, royalty-free, worldwide right to use his full name, persona and related rights of publicity for casino resorts and related businesses, together with the ability to sublicense the persona and publicity rights to its affiliates, until October 24, 2017. Holdings has sub-licensed rights to the “Wynn” name, persona and marks to the Company.
10. Property Charges and Other
Property charges and other for the years ended December 31, 2010, 2009 and 2008, were $19 million, $24.5 million and $22.4 million, respectively. In response to the Company’s evaluation of its resorts and the reactions of its guests, the Company makes enhancements and refinements to the resorts. Costs relating to assets retired as a result of these enhancement and remodel efforts have been expensed as property charges.
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Property charges and other for the year ended December 31, 2010 include a contract termination payment of $14.9 million related to a management contract for certain of the nightclubs at Wynn Las Vegas as well as miscellaneous renovations, abandonments and gain/loss on sale of equipment .
Property charges and other for the year ended December 31, 2009 include a $16.7 million charge for the abandonment of the front porte-cochere at Encore to make way for the Encore Beach Club, a $5.3 million charge for the write-off of two aircraft deposits, and $2.5 million related to miscellaneous remodels, abandonments and loss on sale of equipment.
Property charges and other for the year ended December 31, 2008 include $17.8 million of costs associated with Spamalot at Wynn Las Vegas which closed in mid-July 2008. Together with the producers, the Company elected to end the show’s run at Wynn Las Vegas pursuant to the contract. The charge includes production rights that were included in intangible assets, show production costs that were included in other assets and certain other property and equipment. The remaining property charges were related to miscellaneous renovations and abandonments at Wynn Las Vegas.
11. Benefit Plans
Employee Savings Plan
Wynn Resorts established a retirement savings plan under Section 401(k) of the Internal Revenue Code covering its non-union employees in July 2000. The plan allows employees to defer, within prescribed limits, a percentage of their income on a pre-tax basis through contributions to this plan. The Company matched the contributions, within prescribed limits, with an amount equal to 100% of the participant’s initial 2% tax deferred contribution and 50% of the tax deferred contribution between 2% and 4% of the participant’s compensation. Effective March 16, 2009, the Company suspended matching contributions to this plan. The Company recorded expense for matching contributions of $0, $1.2 million and $4.8 million for the years ended December 31, 2010, 2009 and 2008, respectively.
Union employees are covered by various multi-employer pension plans. The Company recorded expense of $6.8 million, $6.2 million and $4.6 million under such plans for the years ended December 31, 2010, 2009 and 2008, respectively. Information from the plans’ sponsors is not available to permit the Company to determine its share of unfunded vested benefits, if any.
Stock-Based Compensation
Wynn Resorts established the 2002 Stock Incentive Plan (the “Stock Plan”) which provides for the grant of (i) Incentive Stock Options, (ii) compensatory (i.e. nonqualified) stock options, and (iii) nonvested shares of Wynn Resorts’ common stock for employees, directors and independent contractors or consultants of Wynn Resorts and its subsidiaries, including the Company. However, only employees are eligible to receive incentive stock options.
A maximum of 12,750,000 shares of Wynn Resorts’ common stock has been reserved for issuance under the Stock Plan. As of December 31, 2010, 4,107,378 shares remain available for the grant of stock options or nonvested shares of Wynn Resorts’ common stock.
Stock Options
Options are granted at the current market price at the date of grant. The Stock Plan provides for a variety of vesting schedules determined at the time of grant. All options expire ten years from the date of grant.
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A summary of option activity under the Stock Plan that relates to employees of the Company as of December 31, 2010, and changes during the year then ended is presented below:
| Options |
Weighted Average Exercise Price |
Weighted Average Remaining Contractual Term |
Aggregate Intrinsic Value |
|||||||||||||
| Outstanding at January 1, 2010 |
2,174,592 | $ | 60.14 | |||||||||||||
| Granted |
200,000 | $ | 70.68 | |||||||||||||
| Exercised |
(811,709 | ) | $ | 53.35 | ||||||||||||
| Canceled |
(470,833 | ) | $ | 73.67 | ||||||||||||
| Outstanding at December 31, 2010 |
1,092,050 | $ | 61.28 | 7.6 | $ | 46,838,241 | ||||||||||
| Fully vested and expected to vest at December 31, 2010 |
1,005,535 | $ | 60.06 | 7.6 | $ | 43,666,843 | ||||||||||
| Exercisable at December 31, 2010 |
208,716 | $ | 54.10 | 4.7 | $ | 10,381,088 | ||||||||||
The weighted average fair value of options granted during the years ended December 31, 2010, 2009 and 2008 was $39.16, $29.04 and $60.09, respectively. The total intrinsic value of the options exercised for the years ended December 31, 2010, 2009 and 2008 was $39 million, $6 million and $1.3 million, respectively. As of December 31, 2010, there was a total of $21.6 million of unamortized compensation related to stock options, which is expected to be recognized as compensation over the vesting period of the related grants through May 2019.
Nonvested Shares
A summary of nonvested share activity under the Stock Plan that relates to employees of the Company as of December 31, 2010, and changes during the year then ended is presented below:
| Shares |
Weighted Average Grant Date Fair Value |
|||||||
| Nonvested at January 1, 2010 |
227,250 | $ | 85.72 | |||||
| Granted |
35,000 | $ | 106.07 | |||||
| Vested |
(26,000 | ) | $ | 64.01 | ||||
| Canceled |
(52,000 | ) | $ | 106.96 | ||||
| Nonvested at December 31, 2010 |
184,250 | $ | 86.65 | |||||
The weighted average grant date fair value of nonvested shares granted during the years ended December 31, 2010 and 2008 was $106.07 and $104.27, respectively. No shares were granted during 2009. The total fair value of shares vested during the year ended December 31, 2010 and 2008 was $2.8 million and $0.8 million, respectively. No shares vested during the year ended December 31, 2009. Approximately $7.3 million of unamortized compensation cost relating to nonvested shares at December 31, 2010, will be recognized as compensation over the vesting period of the related grants through December 2016.
Compensation Cost
Wynn Resorts uses the Black-Scholes valuation model to determine the estimated fair value for each option grant issued, with highly subjective assumptions, changes in which could materially affect the estimated fair value. Expected volatility is based on implied and historical factors related to Wynn Resort’s common stock.
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Expected term represents the weighted average time between the option’s grant date and its exercise date. Wynn Resorts uses the simplified method for companies with a limited trading history to estimate the expected term. The risk-free interest rate used for each period presented is based on the U.S. Treasury yield curve at the time of grant for the period equal to the expected term.
The fair value per option was estimated on the date of grant using the weighted-average assumptions noted in the table below.
| Years Ended December 31, |
||||||||||||
| 2010 |
2009 |
2008 |
||||||||||
| Expected dividend yield |
1.24 | % | 0.30 | % | — | |||||||
| Expected stock price volatility |
60.8 | % | 56.2 | % | 44.1 | % | ||||||
| Risk-free interest rate |
3.0 | % | 2.8 | % | 3.6 | % | ||||||
| Expected average life of options (years) |
6.8 | 7.3 | 9.0 | |||||||||
The total compensation cost relating both to stock options and nonvested stock for the years ended December 31, 2010, 2009 and 2008 is allocated as follows (amounts in thousands):
| Years Ended December 31, |
||||||||||||
| 2010 |
2009 |
2008 |
||||||||||
| Casino |
$ | 6,162 | $ | 4,347 | $ | 3,313 | ||||||
| Rooms |
366 | 374 | 371 | |||||||||
| Food and beverage |
301 | 306 | 845 | |||||||||
| Entertainment, retail and other |
87 | 16 | 210 | |||||||||
| General and administrative |
4,362 | 3,327 | 4,509 | |||||||||
| Preopening costs |
— | — | 254 | |||||||||
| Total stock-based compensation expense |
$ | 11,278 | $ | 8,370 | $ | 9,502 | ||||||
12. Commitments and Contingencies
Leases and other arrangements
The Company is the lessor under several retail leases and has entered into license and distribution agreements for additional retail outlets. The Company also is a party to joint venture agreements for the operation of one other retail outlet and the Ferrari and Maserati automobile dealership at Wynn Las Vegas.
The following represents the future minimum rentals to be received under the operating leases (amounts in thousands):
| Years Ending December 31, |
||||
| 2011 |
$ | 2,788 | ||
| 2012 |
2,670 | |||
| 2013 |
1,615 | |||
| 2014 |
1,368 | |||
| 2015 |
447 | |||
| Thereafter |
1,223 | |||
| $ | 10,111 | |||
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In addition, the Company is the lessee under leases for certain land, buildings and office equipment. At December 31, 2010, the Company was obligated under non-cancellable operating leases, to make future minimum lease payments as follows (amounts in thousands):
| Years Ending December 31, |
||||
| 2011 |
$ | 2,931 | ||
| 2012 |
571 | |||
| 2013 |
140 | |||
| 2014 |
140 | |||
| 2015 |
74 | |||
| Thereafter |
2,802 | |||
| $ | 6,658 | |||
Rent expense for the years ended December 31, 2010, 2009 and 2008 was $18.3 million, $8.0 million and $6.9 million, respectively.
Self-insurance
The Company is covered under a self-insured medical plan up to a maximum of $300,000 per year for each insured person. Amounts in excess of these thresholds are covered by the Company’s insurance programs, subject to customary policy limits.
Employment Agreements
The Company has entered into employment agreements with several executive officers, other members of management and certain key employees. These agreements generally have three-to five-year terms and typically indicate a base salary and often contain provisions for discretionary bonuses. Certain of the executives are also entitled to a separation payment if terminated without “cause” or upon voluntary termination of employment for “good reason” following a “change of control” (as these terms are defined in the employment contracts).
Litigation
The Company does not have any material litigation as of December 31, 2010.
Sales and Use Tax on Complimentary Meals
In March 2008, the Nevada Supreme Court ruled, in the matter captioned Sparks Nugget, Inc. vs. The State of Nevada Ex Rel. Department of Taxation, that food and non-alcoholic beverages purchased for use in providing complimentary meals to customers and to employees was exempt from sales and use tax. In July 2008, the Court denied the State’s motion for rehearing. Through April 2008, Wynn Las Vegas has paid use tax on these items and has filed for refunds for the periods from April 2005 to April 2008. The amount subject to these refunds is approximately $5.4 million. Due to the uncertainty surrounding this matter, a receivable has not been recorded as of December 31, 2010.
13. Member’s Equity
During the years ended December 31, 2010 and 2009, Wynn Resorts made cash capital contributions to the Company totaling $50 million and $413 million, respectively. The proceeds from these contributions were used to fund construction costs of Encore paid during the period and to fund paydowns of the Company’s debt.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
14. Condensed Consolidating Financial Information of Guarantors and Issuers
The following condensed consolidating financial statements present information related to the Issuers of the First Mortgage Notes and their guarantor subsidiaries (World Travel, LLC; Las Vegas Jet, LLC; Wynn Show Performers, LLC; Wynn Golf, LLC; Kevyn, LLC; and Wynn Sunrise, LLC) and non-guarantor subsidiary (Wynn Completion Guarantor, LLC) as of December 31, 2010 and 2009, and for each of the three years in the period ended December 31, 2010.
The following condensed consolidating financial statements are presented in the provided form because: (i) the guarantor subsidiaries are wholly owned subsidiaries of Wynn Las Vegas, LLC (an issuer of the First Mortgage Notes); (ii) the guarantee is considered to be full and unconditional, that is, if the Issuers fail to make a scheduled payment, the guarantor subsidiaries are obligated to make the scheduled payment immediately and, if it does not, any holder of the First Mortgage Notes may immediately bring suit directly against the guarantor subsidiaries for payment of all amounts due and payable; and (iii) the guarantee is joint and several.
62
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 2010
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Nonguarantor Subsidiary |
Eliminating Entries |
Total |
||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 52,535 | $ | — | $ | 5 | $ | — | $ | 52,540 | ||||||||||
| Receivables, net |
124,814 | — | — | — | 124,814 | |||||||||||||||
| Inventories |
64,520 | — | — | — | 64,520 | |||||||||||||||
| Prepaid expenses and other |
20,778 | 410 | — | — | 21,188 | |||||||||||||||
| Total current assets |
262,647 | 410 | 5 | — | 263,062 | |||||||||||||||
| Property and equipment, net |
3,537,264 | 193,947 | — | — | 3,731,211 | |||||||||||||||
| Intangible assets, net |
6,660 | 6,144 | — | — | 12,804 | |||||||||||||||
| Deferred financing costs, net |
47,300 | — | — | — | 47,300 | |||||||||||||||
| Deposits and other assets |
47,437 | 3 | — | 2,630 | 50,070 | |||||||||||||||
| Investment in unconsolidated affiliates |
(19,685 | ) | 4,069 | — | 19,685 | 4,069 | ||||||||||||||
| Total assets |
$ | 3,881,623 | $ | 204,573 | $ | 5 | $ | 22,315 | $ | 4,108,516 | ||||||||||
| LIABILITIES AND MEMBER’S EQUITY | ||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Current portion of long-term debt |
$ | — | $ | 1,050 | $ | — | $ | — | $ | 1,050 | ||||||||||
| Accounts payable |
35,837 | — | — | — | 35,837 | |||||||||||||||
| Accrued interest |
54,083 | — | — | — | 54,083 | |||||||||||||||
| Accrued compensation and benefits |
38,219 | 1,086 | — | — | 39,305 | |||||||||||||||
| Gaming taxes payable |
9,963 | — | — | — | 9,963 | |||||||||||||||
| Other accrued expenses |
17,361 | 31 | — | — | 17,392 | |||||||||||||||
| Customer deposits |
93,355 | — | — | — | 93,355 | |||||||||||||||
| Due to affiliates, net |
(160,735 | ) | 194,277 | (7,881 | ) | 2,630 | 28,291 | |||||||||||||
| Total current liabilities |
88,083 | 196,444 | (7,881 | ) | 2,630 | 279,276 | ||||||||||||||
| Long-term debt |
2,584,784 | 35,700 | — | — | 2,620,484 | |||||||||||||||
| Due to affiliates |
101,797 | — | — | — | 101,797 | |||||||||||||||
| Interest rate swap |
8,457 | — | — | — | 8,457 | |||||||||||||||
| Total liabilities |
2,783,121 | 232,144 | (7,881 | ) | 2,630 | 3,010,014 | ||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Member’s equity: |
||||||||||||||||||||
| Contributed capital |
1,973,424 | 12,530 | — | (12,530 | ) | 1,973,424 | ||||||||||||||
| Retained earnings (deficit) |
(874,922 | ) | (40,101 | ) | 7,886 | 32,215 | (874,922 | ) | ||||||||||||
| Total member’s equity |
1,098,502 | (27,571 | ) | 7,886 | 19,685 | 1,098,502 | ||||||||||||||
| Total liabilities and member’s equity |
$ | 3,881,623 | $ | 204,573 | $ | 5 | $ | 22,315 | $ | 4,108,516 | ||||||||||
63
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING BALANCE SHEET INFORMATION
AS OF DECEMBER 31, 2009
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Nonguarantor Subsidiary |
Eliminating Entries |
Total |
||||||||||||||||
| ASSETS | ||||||||||||||||||||
| Current assets: |
||||||||||||||||||||
| Cash and cash equivalents |
$ | 65,998 | $ | 351 | $ | 5 | $ | — | $ | 66,354 | ||||||||||
| Receivables, net |
110,860 | — | — | — | 110,860 | |||||||||||||||
| Inventories |
80,861 | — | — | — | 80,861 | |||||||||||||||
| Prepaid expenses and other |
24,864 | 323 | — | — | 25,187 | |||||||||||||||
| Total current assets |
282,583 | 674 | 5 | — | 283,262 | |||||||||||||||
| Property and equipment, net |
3,653,786 | 197,882 | — | — | 3,851,668 | |||||||||||||||
| Intangible assets, net |
8,731 | 6,144 | — | — | 14,875 | |||||||||||||||
| Deferred financing costs, net |
42,025 | — | — | — | 42,025 | |||||||||||||||
| Deposits and other assets |
58,733 | — | — | — | 58,733 | |||||||||||||||
| Investment in unconsolidated affiliates |
(16,450 | ) | 3,761 | — | 16,450 | 3,761 | ||||||||||||||
| Total assets |
$ | 4,029,408 | $ | 208,461 | $ | 5 | $ | 16,450 | $ | 4,254,324 | ||||||||||
| LIABILITIES AND MEMBER’S EQUITY | ||||||||||||||||||||
| Current liabilities: |
||||||||||||||||||||
| Current portion of long-term debt |
$ | — | $ | 1,050 | $ | — | $ | — | $ | 1,050 | ||||||||||
| Accounts payable |
28,226 | — | — | — | 28,226 | |||||||||||||||
| Accrued interest |
17,595 | — | — | — | 17,595 | |||||||||||||||
| Accrued compensation and benefits |
36,342 | 1,179 | — | — | 37,521 | |||||||||||||||
| Gaming taxes payable |
7,111 | — | — | — | 7,111 | |||||||||||||||
| Other accrued expenses |
16,153 | 45 | — | — | 16,198 | |||||||||||||||
| Customer deposits |
101,340 | 167 | — | — | 101,507 | |||||||||||||||
| Due to affiliates, net |
(163,895 | ) | 193,256 | (7,881 | ) | — | 21,480 | |||||||||||||
| Total current liabilities |
42,872 | 195,697 | (7,881 | ) | — | 230,688 | ||||||||||||||
| Long-term debt |
2,514,420 | 37,100 | — | — | 2,551,520 | |||||||||||||||
| Due to affiliates |
82,339 | — | — | — | 82,339 | |||||||||||||||
| Interest rate swap |
4,224 | — | — | — | 4,224 | |||||||||||||||
| Total liabilities |
2,643,855 | 232,797 | (7,881 | ) | — | 2,868,771 | ||||||||||||||
| Commitments and contingencies |
||||||||||||||||||||
| Member’s equity: |
||||||||||||||||||||
| Contributed capital |
1,912,146 | 12,530 | — | (12,530 | ) | 1,912,146 | ||||||||||||||
| Retained earnings (deficit) |
(526,593 | ) | (36,866 | ) | 7,886 | 28,980 | (526,593 | ) | ||||||||||||
| Total member’s equity |
1,385,553 | (24,336 | ) | 7,886 | 16,450 | 1,385,553 | ||||||||||||||
| Total liabilities and member’s equity |
$ | 4,029,408 | $ | 208,461 | $ | 5 | $ | 16,450 | $ | 4,254,324 | ||||||||||
64
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 2010
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Nonguarantor Subsidiary |
Eliminating Entries |
Total |
||||||||||||||||
| Operating revenues: |
||||||||||||||||||||
| Casino |
$ | 534,286 | $ | — | $ | — | $ | — | $ | 534,286 | ||||||||||
| Rooms |
308,368 | 42 | — | — | 308,410 | |||||||||||||||
| Food and beverage |
417,240 | — | — | — | 417,240 | |||||||||||||||
| Entertainment, retail and other |
214,312 | — | — | (309 | ) | 214,003 | ||||||||||||||
| Gross revenues |
1,474,206 | 42 | — | (309 | ) | 1,473,939 | ||||||||||||||
| Less: promotional allowances |
(177,383 | ) | — | — | — | (177,383 | ) | |||||||||||||
| Net revenues |
1,296,823 | 42 | — | (309 | ) | 1,296,556 | ||||||||||||||
| Operating costs and expenses: |
||||||||||||||||||||
| Casino |
288,263 | — | — | — | 288,263 | |||||||||||||||
| Rooms |
119,381 | 41 | — | — | 119,422 | |||||||||||||||
| Food and beverage |
256,234 | — | — | — | 256,234 | |||||||||||||||
| Entertainment, retail and other |
145,284 | — | — | — | 145,284 | |||||||||||||||
| General and administrative |
239,105 | (1,118 | ) | — | (309 | ) | 237,678 | |||||||||||||
| Provision for doubtful accounts |
15,729 | — | — | — | 15,729 | |||||||||||||||
| Management fees |
19,459 | — | — | — | 19,459 | |||||||||||||||
| Pre-opening costs |
2,479 | — | — | — | 2,479 | |||||||||||||||
| Depreciation and amortization |
270,280 | 4,025 | — | — | 274,305 | |||||||||||||||
| Property charges and other |
19,017 | — | — | — | 19,017 | |||||||||||||||
| Total operating costs and expenses |
1,375,231 | 2,948 | — | (309 | ) | 1,377,870 | ||||||||||||||
| Operating loss |
(78,408 | ) | (2,906 | ) | — | — | (81,314 | ) | ||||||||||||
| Other income (expense): |
||||||||||||||||||||
| Interest and other income |
408 | — | — | — | 408 | |||||||||||||||
| Interest expense, net of capitalized interest |
(192,806 | ) | (638 | ) | — | — | (193,444 | ) | ||||||||||||
| Decrease in swap fair value |
(4,233 | ) | — | — | — | (4,233 | ) | |||||||||||||
| Loss on extinguishment of debt/exchange offer |
(70,055 | ) | — | — | — | (70,055 | ) | |||||||||||||
| Equity in income (loss) from unconsolidated affiliates |
(3,235 | ) | 309 | 3,235 | 309 | |||||||||||||||
| Other income (expense), net |
(269,921 | ) | (329 | ) | — | 3,235 | (267,015 | ) | ||||||||||||
| Net (loss) income |
$ | (348,329 | ) | $ | (3,235 | ) | $ | — | $ | 3,235 | $ | (348,329 | ) | |||||||
65
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 2009
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Nonguarantor Subsidiary |
Eliminating Entries |
Total |
||||||||||||||||
| Operating revenues: |
||||||||||||||||||||
| Casino |
$ | 505,779 | $ | — | $ | — | $ | — | $ | 505,779 | ||||||||||
| Rooms |
321,075 | 75 | — | — | 321,150 | |||||||||||||||
| Food and beverage |
385,774 | — | — | — | 385,774 | |||||||||||||||
| Entertainment, retail and other |
202,972 | — | — | 427 | 203,399 | |||||||||||||||
| Gross revenues |
1,415,600 | 75 | — | 427 | 1,416,102 | |||||||||||||||
| Less: promotional allowances |
(185,982 | ) | — | — | — | (185,982 | ) | |||||||||||||
| Net revenues |
1,229,618 | 75 | — | 427 | 1,230,120 | |||||||||||||||
| Operating costs and expenses: |
||||||||||||||||||||
| Casino |
275,341 | — | — | — | 275,341 | |||||||||||||||
| Rooms |
109,171 | 75 | — | — | 109,246 | |||||||||||||||
| Food and beverage |
239,767 | — | — | — | 239,767 | |||||||||||||||
| Entertainment, retail and other |
133,824 | — | — | — | 133,824 | |||||||||||||||
| General and administrative |
248,566 | (2,217 | ) | — | 427 | 246,776 | ||||||||||||||
| Provision for doubtful accounts |
12,438 | — | — | — | 12,438 | |||||||||||||||
| Management fees |
18,434 | — | — | — | 18,434 | |||||||||||||||
| Pre-opening costs |
346 | — | — | — | 346 | |||||||||||||||
| Depreciation and amortization |
309,012 | 4,747 | — | — | 313,759 | |||||||||||||||
| Property charges and other |
19,206 | 5,262 | — | — | 24,468 | |||||||||||||||
| Total operating costs and expenses |
1,366,105 | 7,867 | — | 427 | 1,374,399 | |||||||||||||||
| Operating loss |
(136,487 | ) | (7,792 | ) | — | — | (144,279 | ) | ||||||||||||
| Other income (expense): |
||||||||||||||||||||
| Interest and other income |
46 | 21 | — | — | 67 | |||||||||||||||
| Interest expense, net of capitalized interest |
(156,262 | ) | (966 | ) | — | — | (157,228 | ) | ||||||||||||
| Decrease in swap fair value |
(4,224 | ) | — | — | — | (4,224 | ) | |||||||||||||
| Loss on extinguishment of debt |
(3,779 | ) | — | — | — | (3,779 | ) | |||||||||||||
| Equity in income (loss) from unconsolidated affiliates |
(9,164 | ) | (427 | ) | 9,164 | (427 | ) | |||||||||||||
| Other income (expense), net |
(173,383 | ) | (1,372 | ) | — | 9,164 | (165,591 | ) | ||||||||||||
| Net (loss) income |
$ | (309,870 | ) | $ | (9,164 | ) | $ | — | $ | 9,164 | $ | (309,870 | ) | |||||||
66
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS INFORMATION
YEAR ENDED DECEMBER 31, 2008
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Nonguarantor Subsidiary |
Eliminating Entries |
Total |
||||||||||||||||
| Operating revenues: |
||||||||||||||||||||
| Casino |
$ | 479,711 | $ | — | $ | — | $ | — | $ | 479,711 | ||||||||||
| Rooms |
268,515 | — | — | — | 268,515 | |||||||||||||||
| Food and beverage |
305,702 | — | — | — | 305,702 | |||||||||||||||
| Entertainment, retail and other |
202,388 | — | — | (266 | ) | 202,122 | ||||||||||||||
| Gross revenues |
1,256,316 | — | — | (266 | ) | 1,256,050 | ||||||||||||||
| Less: promotional allowances |
(156,159 | ) | — | — | — | (156,159 | ) | |||||||||||||
| Net revenues |
1,100,157 | — | — | (266 | ) | 1,099,891 | ||||||||||||||
| Operating costs and expenses: |
||||||||||||||||||||
| Casino |
257,983 | — | — | — | 257,983 | |||||||||||||||
| Rooms |
73,782 | — | — | — | 73,782 | |||||||||||||||
| Food and beverage |
188,521 | — | — | — | 188,521 | |||||||||||||||
| Entertainment, retail and other |
132,870 | — | — | — | 132,870 | |||||||||||||||
| General and administrative |
201,017 | (1,216 | ) | 5 | (266 | ) | 199,540 | |||||||||||||
| Provision for doubtful accounts |
24,887 | — | — | — | 24,887 | |||||||||||||||
| Management fees |
16,505 | — | — | — | 16,505 | |||||||||||||||
| Pre-opening costs |
72,373 | — | — | — | 72,373 | |||||||||||||||
| Depreciation and amortization |
165,121 | 4,519 | — | — | 169,640 | |||||||||||||||
| Property charges and other |
21,916 | 490 | — | — | 22,406 | |||||||||||||||
| Total operating costs and expenses |
1,154,975 | 3,793 | 5 | (266 | ) | 1,158,507 | ||||||||||||||
| Operating loss |
(54,818 | ) | (3,793 | ) | (5 | ) | — | (58,616 | ) | |||||||||||
| Other income (expense): |
||||||||||||||||||||
| Interest and other income |
4,205 | — | 622 | — | 4,827 | |||||||||||||||
| Interest expense, net of capitalized interest |
(73,652 | ) | (2,203 | ) | — | — | (75,855 | ) | ||||||||||||
| Decrease in swap fair value |
(416 | ) | — | — | — | (416 | ) | |||||||||||||
| Equity in income (loss) from unconsolidated affiliates |
(5,113 | ) | 266 | — | 5,113 | 266 | ||||||||||||||
| Other income (expense), net |
(74,976 | ) | (1,937 | ) | 622 | 5,113 | (71,178 | ) | ||||||||||||
| Net (loss) income |
$ | (129,794 | ) | $ | (5,730 | ) | $ | 617 | $ | 5,113 | $ | (129,794 | ) | |||||||
67
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2010
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminating Entries |
Total |
||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||
| Net (loss) income |
$ | (348,329 | ) | $ | (3,235 | ) | $ | — | $ | 3,235 | $ | (348,329 | ) | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
||||||||||||||||||||
| Depreciation and amortization |
270,280 | 4,025 | — | — | 274,305 | |||||||||||||||
| Stock-based compensation |
11,278 | — | — | — | 11,278 | |||||||||||||||
| Loss from extinguishment of debt |
64,673 | — | — | — | 64,673 | |||||||||||||||
| Amortization and write off of deferred financing costs and other |
15,705 | — | — | — | 15,705 | |||||||||||||||
| Equity in income (loss) from unconsolidated affiliates, net of distributions |
3,235 | (309 | ) | — | (3,235 | ) | (309 | ) | ||||||||||||
| Provision for doubtful accounts |
15,729 | — | — | — | 15,729 | |||||||||||||||
| Property charges and other |
4,068 | — | — | — | 4,068 | |||||||||||||||
| Decrease in swap fair value |
4,233 | — | — | — | 4,233 | |||||||||||||||
| Increase (decrease) in cash from changes in: |
||||||||||||||||||||
| Receivables |
(29,683 | ) | — | — | — | (29,683 | ) | |||||||||||||
| Inventories and prepaid expenses and other assets |
19,538 | (86 | ) | — | — | 19,452 | ||||||||||||||
| Accounts payable and accrued expenses |
42,051 | (274 | ) | — | — | 41,777 | ||||||||||||||
| Due to affiliates, net |
36,645 | (4,899 | ) | — | — | 31,746 | ||||||||||||||
| Net cash provided by (used in) operating activities |
109,423 | (4,778 | ) | — | — | 104,645 | ||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||
| Capital expenditures, net of construction payables and retention |
(156,987 | ) | (93 | ) | — | — | (157,080 | ) | ||||||||||||
| Deposits and other assets |
(4,796 | ) | — | — | — | (4,796 | ) | |||||||||||||
| Due to affiliates, net |
(2,323 | ) | 5,920 | — | — | 3,597 | ||||||||||||||
| Proceeds from sale of assets |
218 | — | — | — | 218 | |||||||||||||||
| Net cash provided by (used in) investing activities |
(163,888 | ) | 5,827 | — | — | (158,061 | ) | |||||||||||||
| Cash flows from financing activities: |
||||||||||||||||||||
| Principal payments on long-term debt |
(1,931,838 | ) | (1,400 | ) | — | — | (1,933,238 | ) | ||||||||||||
| Proceeds from issuance of long-term debt |
1,995,686 | — | — | — | 1,995,686 | |||||||||||||||
| Capital contribution from the Parent |
50,000 | — | — | — | 50,000 | |||||||||||||||
| Payments of deferred financing costs |
(72,846 | ) | — | — | — | (72,846 | ) | |||||||||||||
| Net cash provided by (used in) financing activities |
41,002 | (1,400 | ) | — | — | 39,602 | ||||||||||||||
| Cash and cash equivalents: |
||||||||||||||||||||
| Decrease in cash and cash equivalents |
(13,463 | ) | (351 | ) | — | — | (13,814 | ) | ||||||||||||
| Balance, beginning of period |
65,998 | 351 | 5 | — | 66,354 | |||||||||||||||
| Balance, end of period |
$ | 52,535 | $ | — | $ | 5 | $ | — | $ | 52,540 | ||||||||||
68
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2009
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminating Entries |
Total |
||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||
| Net (loss) income |
$ | (309,870 | ) | $ | (9,164 | ) | $ | — | $ | 9,164 | $ | (309,870 | ) | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
||||||||||||||||||||
| Depreciation and amortization |
309,012 | 4,747 | — | — | 313,759 | |||||||||||||||
| Stock-based compensation |
8,370 | — | — | — | 8,370 | |||||||||||||||
| Loss from extinguishment of debt |
3,779 | — | — | — | 3,779 | |||||||||||||||
| Amortization and write off of deferred financing costs and other |
19,624 | — | — | — | 19,624 | |||||||||||||||
| Equity in income (loss) from unconsolidated affiliates, net of distributions |
9,164 | 794 | — | (9,164 | ) | 794 | ||||||||||||||
| Provision for doubtful accounts |
12,438 | — | — | — | 12,438 | |||||||||||||||
| Property charges and other |
19,206 | 5,262 | — | — | 24,468 | |||||||||||||||
| Decrease in swap fair value |
4,224 | — | — | — | 4,224 | |||||||||||||||
| Increase (decrease) in cash from changes in: |
||||||||||||||||||||
| Receivables |
(25,021 | ) | — | 5 | — | (25,016 | ) | |||||||||||||
| Inventories and prepaid expenses and other assets |
320 | (140 | ) | — | — | 180 | ||||||||||||||
| Accounts payable and accrued expenses |
(14,274 | ) | 47 | — | — | (14,227 | ) | |||||||||||||
| Due to affiliates, net |
48,765 | (6,886 | ) | — | — | 41,879 | ||||||||||||||
| Net cash provided by (used in) operating activities |
85,737 | (5,340 | ) | 5 | — | 80,402 | ||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||
| Capital expenditures, net of construction payables and retention |
(244,904 | ) | (136 | ) | — | — | (245,040 | ) | ||||||||||||
| Deposits and other assets |
(3,810 | ) | 8,088 | — | — | 4,278 | ||||||||||||||
| Due to affiliates, net |
(7,607 | ) | (861 | ) | — | — | (8,468 | ) | ||||||||||||
| Proceeds from sale of assets |
42 | — | — | — | 42 | |||||||||||||||
| Net cash provided by (used in) investing activities |
(256,279 | ) | 7,091 | — | — | (249,188 | ) | |||||||||||||
| Cash flows from financing activities: |
||||||||||||||||||||
| Principal payments on long-term debt |
(928,509 | ) | (1,400 | ) | — | — | (929,909 | ) | ||||||||||||
| Proceeds from issuance of long-term debt |
649,481 | — | — | — | 649,481 | |||||||||||||||
| Capital contribution from the Parent |
412,951 | — | — | — | 412,951 | |||||||||||||||
| Payments of deferred financing costs |
(20,698 | ) | — | — | — | (20,698 | ) | |||||||||||||
| Net cash provided by (used in) financing activities |
113,225 | (1,400 | ) | — | — | 111,825 | ||||||||||||||
| Cash and cash equivalents: |
||||||||||||||||||||
| Increase (decrease) in cash and cash equivalents |
(57,317 | ) | 351 | 5 | — | (56,961 | ) | |||||||||||||
| Balance, beginning of period |
123,315 | — | — | — | 123,315 | |||||||||||||||
| Balance, end of period |
$ | 65,998 | $ | 351 | $ | 5 | $ | — | $ | 66,354 | ||||||||||
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
WYNN LAS VEGAS, LLC AND SUBSIDIARIES
(A WHOLLY OWNED INDIRECT SUBSIDIARY OF WYNN RESORTS, LIMITED)
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS INFORMATION
YEAR ENDED DECEMBER 31, 2008
(amounts in thousands)
| Issuers |
Guarantor Subsidiaries |
Non-guarantor Subsidiaries |
Eliminating Entries |
Total |
||||||||||||||||
| Cash flows from operating activities: |
||||||||||||||||||||
| Net (loss) income |
$ | (129,794 | ) | $ | (5,730 | ) | $ | 617 | $ | 5,113 | $ | (129,794 | ) | |||||||
| Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |
||||||||||||||||||||
| Depreciation and amortization |
165,121 | 4,519 | — | — | 169,640 | |||||||||||||||
| Stock-based compensation |
9,502 | — | — | — | 9,502 | |||||||||||||||
| Amortization and write off of deferred financing costs and other |
11,078 | — | — | — | 11,078 | |||||||||||||||
| Equity in income (loss) from unconsolidated affiliates, net of distributions |
5,113 | 522 | — | (5,113 | ) | 522 | ||||||||||||||
| Provision for doubtful accounts |
24,887 | — | — | — | 24,887 | |||||||||||||||
| Property charges and other |
21,916 | 490 | — | — | 22,406 | |||||||||||||||
| Decrease in swap fair value |
416 | — | — | — | 416 | |||||||||||||||
| Increase (decrease) in cash from changes in: |
||||||||||||||||||||
| Receivables |
20,309 | 38 | (5 | ) | — | 20,342 | ||||||||||||||
| Inventories and prepaid expenses and other assets |
(38,691 | ) | (15 | ) | — | — | (38,706 | ) | ||||||||||||
| Accounts payable and accrued expenses |
22,327 | 65 | — | — | 22,392 | |||||||||||||||
| Due to affiliates, net |
29,739 | (7,284 | ) | — | — | 22,455 | ||||||||||||||
| Net cash provided by (used in) operating activities |
141,923 | (7,395 | ) | 612 | — | 135,140 | ||||||||||||||
| Cash flows from investing activities: |
||||||||||||||||||||
| Capital expenditures, net of construction payables and retentions |
(1,128,089 | ) | (1,436 | ) | — | — | (1,129,525 | ) | ||||||||||||
| Restricted cash and investments |
— | — | 31,052 | — | 31,052 | |||||||||||||||
| Note receivable from Wynn Resorts, Limited |
80,000 | — | — | — | 80,000 | |||||||||||||||
| Deposits and other assets |
(26,161 | ) | (8,900 | ) | — | — | (35,061 | ) | ||||||||||||
| Due to affiliates, net |
31,044 | 19,166 | (31,664 | ) | — | 18,546 | ||||||||||||||
| Proceeds from sale of assets |
2,537 | — | — | — | 2,537 | |||||||||||||||
| Net cash provided by (used in) investing activities |
(1,040,669 | ) | 8,830 | (612 | ) | — | (1,032,451 | ) | ||||||||||||
| Cash flows from financing activities: |
||||||||||||||||||||
| Principal payments on long-term debt |
— | (1,400 | ) | — | — | (1,400 | ) | |||||||||||||
| Proceeds from issuance of long-term debt |
879,484 | — | — | — | 879,484 | |||||||||||||||
| Payments of deferred financing costs |
(3,979 | ) | — | — | — | (3,979 | ) | |||||||||||||
| Net cash provided by (used in) financing activities |
875,505 | (1,400 | ) | — | — | 874,105 | ||||||||||||||
| Cash and cash equivalents: |
||||||||||||||||||||
| (Decrease) increase in cash and cash equivalents |
(23,241 | ) | 35 | — | — | (23,206 | ) | |||||||||||||
| Balance, beginning of period |
146,556 | (35 | ) | — | — | 146,521 | ||||||||||||||
| Balance, end of period |
$ | 123,315 | $ | — | $ | — | $ | — | $ | 123,315 | ||||||||||
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WYNN LAS VEGAS, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
15. Quarterly Financial Information (Unaudited)
The following table presents selected quarterly financial information for 2010 and 2009 (amounts in thousands):
| Year Ended December 31, 2010 |
||||||||||||||||||||
| First |
Second |
Third |
Fourth |
Year |
||||||||||||||||
| Net revenues |
$ | 318,607 | $ | 318,321 | $ | 334,503 | $ | 325,125 | $ | 1,296,556 | ||||||||||
| Operating loss |
(34,485 | ) | (17,222 | ) | (16,195 | ) | (13,412 | ) | (81,314 | ) | ||||||||||
| Net loss |
(81,692 | ) | (68,747 | ) | (134,981 | ) | (62,909 | ) | (348,329 | ) | ||||||||||
| Year Ended December 31, 2009 |
||||||||||||||||||||
| First |
Second |
Third |
Fourth |
Year |
||||||||||||||||
| Net revenues |
$ | 291,522 | $ | 312,959 | $ | 324,461 | $ | 301,178 | $ | 1,230,120 | ||||||||||
| Operating loss |
(58,384 | ) | (8,346 | ) | (20,886 | ) | (56,663 | ) | (144,279 | ) | ||||||||||
| Net loss |
(95,464 | ) | (46,183 | ) | (63,751 | ) | (104,472 | ) | (309,870 | ) | ||||||||||
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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Disclosure Controls and Procedures. The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, 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 Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2010, the Company’s disclosure controls and procedures are 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 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 Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely discussions regarding required disclosure.
(b) Management Report on Internal Control Over Financial Reporting. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control-Integrated Framework.
Based on our assessment, management believes that, as of December 31, 2010, the Company’s internal control over financial reporting was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. The attestation report of the Company’s registered public accounting firm is not required in this annual report under the SEC’s rules, which permit the Company to provide only management’s report in this annual report.
(c) Changes in Internal Control Over Financial Reporting. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
None.
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Item 10. Directors, Executive Officers and Corporate Governance
We have omitted this section pursuant to Instruction I(2) of Form 10-K.
Item 11. Executive Compensation
We have omitted this section pursuant to Instruction I(2) of Form 10-K.
| Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
We have omitted this section pursuant to Instruction I(2) of Form 10-K.
Item 13. Certain Relationships and Related Transactions, and Director Independence
We have omitted this section pursuant to Instruction I(2) of Form 10-K.
Item 14. Principal Accountant Fees and Services
The following table shows the fees paid or accrued by us for audit and other services provided by our auditors, Ernst & Young LLP, during each of the years ended December 31, 2010 and 2009:
| Aggregate Fees |
||||||||
| Category |
2010 |
2009 |
||||||
| Audit fees |
$ | 390,419 | $ | 259,410 | ||||
| Audit-related fees |
$ | — | $ | — | ||||
| Tax fees |
$ | — | $ | — | ||||
| All other fees |
$ | — | $ | — | ||||
“Audit fees” includes the aggregate fees billed by our principal auditors for professional services rendered for the audit of our consolidated financial statements for the year ended December 31. “Audit fees” also includes amounts billed for services provided in connection with debt offerings in 2010 and 2009.
All of the principal accounting fees and services were pre-approved by the Audit Committee in 2010 and 2009. The Audit Committee pre-approves services either by: (1) approving a request from management to engage our principal auditors for a specific project at a specific fee or rate or (2) by pre-approving certain types of services that would comprise the fees within each of the above categories at our principal auditors usual and customary rates.
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Item 15. Exhibits, Financial Statement Schedules
(a)1. The following consolidated financial statements of the Company are filed as part of this report under Item 8—Financial Statements and Supplemental Data.
| • | Report of Independent Registered Public Accounting Firm |
| • | Consolidated Balance Sheets as of December 31, 2010 and 2009 |
| • | Consolidated Statements of Operations for the years ended December 31, 2010, 2009 and 2008 |
| • | Consolidated Statements of Member’s Equity for the years ended December 31, 2010, 2009 and 2008 |
| • | Consolidated Statements of Cash Flows for the years ended December 31, 2010, 2009 and 2008 |
| • | Notes to Consolidated Financial Statements |
(a)2. Financial Statement Schedules
| • | Schedule II—Valuation and Qualifying Accounts |
We have omitted all other financial statement schedules because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes to the consolidated financial statements.
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SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS
(amounts in thousands)
| Description |
Balance at January 1, 2010 |
Provisions for Doubtful Accounts |
Write-offs, Net of Recoveries |
Balance at December 31, 2010 |
||||||||||||
| Allowance for doubtful accounts |
$ | 67,406 | 15,729 | (12,059 | ) | $ | 71,076 | |||||||||
| Description |
Balance at January 1, 2009 |
Provisions for Doubtful Accounts |
Write-offs, Net of Recoveries |
Balance at December 31, 2009 |
||||||||||||
| Allowance for doubtful accounts |
$ | 65,414 | 12,438 | (10,446 | ) | $ | 67,406 | |||||||||
| Description |
Balance at January 1, 2008 |
Provisions for Doubtful Accounts |
Write-offs, Net of Recoveries |
Balance at December 31, 2008 |
||||||||||||
| Allowance for doubtful accounts |
$ | 50,604 | 24,887 | (10,077 | ) | $ | 65,414 | |||||||||
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(a)3. Exhibits
Exhibits that are not filed herewith have been previously filed with the SEC and are incorporated herein by reference.
EXHIBIT INDEX
|
Exhibit |
Description | |||
| 3.1 | Second Amended and Restated Articles of Organization of Wynn Las Vegas, LLC. (1) | |||
| 3.2 | Second Amended and Restated Operating Agreement of Wynn Las Vegas, LLC. (1) | |||
| 3.3 | First Amended and Restated Articles of Incorporation of Wynn Las Vegas Capital Corp. (1) | |||
| 3.4 | Certificate of Amendment of the Articles of Incorporation of Wynn Las Vegas Capital Corp. (1) | |||
| 3.5 | First Amended and Restated Bylaws of Wynn Las Vegas Capital Corp. (1) | |||
| 3.6 | First Amendment to the First Amended and Restated Bylaws of Wynn Las Vegas Capital Corp. (1) | |||
| 3.7 | Second Amendment to the First Amended and Restated Bylaws of Wynn Las Vegas Capital Corp. (1) | |||
| 3.8 | Articles of Organization of Kevyn, LLC. (19) | |||
| 3.9 | Operating Agreement of Kevyn, LLC. (19) | |||
| 3.10 | Amended and Restated Articles of Organization of Wynn Golf, LLC. (1) | |||
| 3.11 | First Amended and Restated Operating Agreement of Wynn Golf, LLC. (1) | |||
| 3.12 | Second Amended and Restated Articles of Organization of Las Vegas Jet, LLC. (1) | |||
| 3.13 | Second Amended and Restated Operating Agreement of Las Vegas Jet, LLC. (1) | |||
| 3.14 | Articles of Organization of Wynn Sunrise, LLC. (1) | |||
| 3.15 | First Amended and Restated Operating Agreement of Wynn Sunrise, LLC. (1) | |||
| 3.16 | Second Amended and Restated Articles of Organization of World Travel, LLC. (1) | |||
| 3.17 | Second Amended and Restated Operating Agreement of World Travel, LLC. (1) | |||
| 3.18 | First Amended and Restated Articles of Organization of Wynn Show Performers, LLC. (1) | |||
| 3.19 | First Amended and Restated Operating Agreement of Wynn Show Performers, LLC. (1) | |||
| 4.1 | Indenture, dated as of December 14, 2004, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and U.S. Bank National Association, as trustee. (3) | |||
| 4.2 | Supplemental Indenture, dated as of December 14, 2004, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and Wells Fargo Bank, National Association, as trustee. (3) | |||
| 4.3 | First Supplemental Indenture, dated as of June 29, 2005, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and U.S. Bank National Association, as trustee. (8) | |||
| 4.4 | Second Supplemental Indenture, dated as of July 29, 2005, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and U.S. Bank National Association, as trustee. (19) | |||
| 4.5 | Indenture, dated as of October 19, 2009, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and U.S. Bank National Association, as trustee. (22) | |||
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Table of Contents
|
Exhibit |
Description | |||
| 4.6 | Indenture, dated as of April 28, 2010, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein and U.S. Bank National Association, as trustee. (25) | |||
| 4.7 | Indenture, dated as of August 4, 2010, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors named therein and U.S. Bank National Association, as trustee. (26) | |||
| 4.8 | Third Supplemental Indenture, dated August 4, 2010, among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors name therein and U.S. Bank National Association, as trustee. (26) | |||
| 4.9 | Registration Rights Agreement, dated as of December 14, 2004, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantor signatories thereto and Deutsche Bank Securities Inc., Banc of America Securities LLC, Bear, Stearns & Co. Inc., J.P. Morgan Securities Inc. and SG Americas Securities, LLC. (4) | |||
| 4.10 | Registration Rights Agreement, dated as of November 6, 2007, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantor signatories thereto and Deutsche Bank Securities Inc., Banc of America Securities LLC. (16) | |||
| 4.11 | Registration Rights Agreement, dated as of October 19, 2009, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein, Deutsche Bank Securities Inc. and Banc of America Securities LLC. (22) | |||
| 4.12 | Registration Rights Agreement, dated as of April 28, 2010, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors set forth therein, Deutsche Bank Securities Inc., Banc of America Securities LLC and J.P. Morgan Securities Inc. (25) | |||
| 4.13 | Registration Rights Agreement, dated as of August 4, 2010, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., the Guarantors, Deutsche Bank Securities Inc., Banc of America Securities LLC, J.P. Morgan Securities Inc., Morgan Stanley & Co. Incorporated, RBS Securities Inc. and UBS Securities LLC. (26) | |||
| 10.1 | Amended and Restated Master Disbursement Agreement, dated as of October 25, 2007, by and among Wynn Las Vegas, LLC, Deutsche Bank Trust Company Americas, as the initial Bank Agent, and Deutsche Bank Trust Company America, as the initial Disbursement Agent. (17) | |||
| 10.2 | First Amendment to Amended and Restated Master Disbursement Agreement, dated as of October 31, 2007, by and among Wynn Las Vegas, LLC, Deutsche Bank Trust Company Americas, as the initial Bank Agent, and Deutsche Bank Trust Company America, as the initial Disbursement Agent. (15) | |||
| 10.3 | Second Amendment to Amended and Restated Master Disbursement Agreement, dated as of November 6, 2007, by and among Wynn Las Vegas, LLC, Deutsche Bank Trust Company Americas, as the Bank Agent, and Deutsche Bank Trust Company Americas, as the Disbursement Agent. (16) | |||
| 10.4 | Third Amendment to Amended and Restated Master Disbursement Agreement, dated October 19, 2009, by and among Wynn Las Vegas, LLC, Deutsche Bank Trust Company Americas, as the Bank Agent, and Deutsche Bank Trust Company Americas, as the Disbursement Agent. (22) | |||
| 10.5 | Fourth Amendment to Amended and Restated Master Disbursement Agreement, dated April 28, 2010, by and among Wynn Las Vegas, LLC, Deutsche Bank Trust Company Americas, as the Bank Agent, and Deutsche Bank Trust Company Americas, as the Disbursement Agent. (25) | |||
| 10.6 | Promissory Note and Agreement, dated May 24, 2005, by Wells Fargo Northwest, National Association, not in its individual capacity but solely as owner trustee, and World Travel, LLC; and accepted and agreed to by Bank of America, N.A., as lender and Wells Fargo Bank, National Association, not in its individual capacity but solely as collateral agent. (9) | |||
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|
Exhibit |
Description | |||
| 10.7 | Promissory Note and Agreement, dated May 24, 2005, by Wells Fargo Northwest, National Association, not in its individual capacity but solely as owner trustee, and World Travel, LLC; and accepted and agreed to by The CIT Group / Equipment Financing, Inc., as lender and Wells Fargo Bank, National Association, not in its individual capacity but solely as collateral agent. (9) | |||
| 10.8 | Aircraft Security Agreement, dated May 24, 2005, between Wells Fargo Northwest, National Association, not in its individual capacity but solely as owner trustee, World Travel, LLC and Wells Fargo Bank, National Association, not in its individual capacity but solely as collateral agent. (9) | |||
| 10.9 | Guaranty, dated May 24, 2005, by Wynn Las Vegas, LLC in favor of The CIT Group / Equipment Financing, Inc., Bank of America, N.A. and Wells Fargo Bank, National Association, not in its individual capacity but solely as collateral agent. (9) | |||
| 10.10 | Agreement of Termination, dated June 30, 2005, by and between Stephen A. Wynn and Wynn Las Vegas, LLC. (10) | |||
| 10.11 | Fifth Amended and Restated Art Rental and Licensing Agreement, dated as of July 1, 2007, between Stephen A. Wynn, as lessor, Wynn Gallery, LLC, as lessee. (27) | |||
| 10.12 | Lump Sum Agreement, by and between Wynn Las Vegas, LLC and Wadsworth Golf Construction Company, effective as of February 18, 2003. (6) | |||
| 10.13 | Completion Guaranty, dated December 14, 2004, by Wynn Completion Guarantor, LLC in favor of Deutsche Bank Trust Company Americas, as the Bank Agent, and U.S. Bank National Association, as Indenture Trustee. (4) | |||
| 10.14 | Purchase Agreement, dated October 25, 2002, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp. and Stephen A. Wynn. (2) | |||
| 10.15 | Purchase Agreement, dated October 25, 2002, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp. and Aruze USA, Inc. (2) | |||
| 10.16 | Acknowledgement and Agreement, dated as of September 1, 2004, among Wynn Las Vegas, LLC, Wells Fargo Bank, National Association and the lenders named therein. (7) | |||
| 10.17 | Third Amended and Restated Art Rental and Licensing Agreement, dated as of August 6, 2004, by and between Stephen A. Wynn and Wynn Las Vegas, LLC. (5) | |||
| 10.18 | Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated as of December 14, 2004, made by Wynn Las Vegas, LLC, as trustor, to Nevada Title Company, as trustee, for the benefit of Deutsche Bank Trust Company Americas, as collateral agent. (4) | |||
| 10.19 | Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated as of December 14, 2004, made by Wynn Sunrise, LLC, as trustor, to Nevada Title Company, as trustee, for the benefit of Deutsche Bank Trust Company Americas, as collateral agent. (4) | |||
| 10.20 | Deed of Trust, Assignment of Rents and Leases, Security Agreement and Fixture Filing, dated as of December 14, 2004, made by Wynn Golf, LLC, as trustor, to Nevada Title Company, as trustee, for the benefit of Deutsche Bank Trust Company Americas, as collateral agent. (4) | |||
| 10.21 | Guarantee and Collateral Agreement, dated as of December 14, 2004, made by Wynn Resorts Holdings, LLC, Wynn Las Vegas, LLC, Wynn Show Performers, LLC, Wynn Las Vegas Capital Corp., Wynn Golf, LLC, World Travel, LLC, Las Vegas Jet, LLC, Wynn Sunrise, LLC and the other Grantors from time to time party thereto in favor of Deutsche Bank Trust Company Americas, as administrative agent. (4) | |||
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Table of Contents
|
Exhibit |
Description | |||
| 10.22 | Intercreditor Agreement, dated as of December 14, 2004, among Deutsche Bank Trust Company Americas, as bank agent, Deutsche Bank Trust Company Americas, as collateral agent, and U.S. Bank National Association, as trustee. (3) | |||
| 10.23 | Pledge and Security Agreement, dated as of December 14, 2004, made by Wynn Resorts Holdings, LLC, Wynn Las Vegas, LLC, Wynn Show Performers, LLC, Wynn Las Vegas Capital Corp., Wynn Golf, LLC, World Travel, LLC, Las Vegas Jet, LLC, Wynn Sunrise, LLC and the other Grantors from time to time party thereto in favor of Deutsche Bank Trust Company Americas, as administrative agent. (4) | |||
| 10.24 | Management Fees Subordination Agreement, dated as of December 14, 2004, by Wynn Resorts, Limited, Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., and those subsidiaries of Wynn Las Vegas, LLC listed on Exhibit A hereto in favor of Deutsche Bank Trust Company Americas, as administrative agent, and U.S. Bank National Association, as trustee. (4) | |||
| 10.25 | Management Agreement, made as of December 14, 2004, by and among Wynn Las Vegas, LLC, Wynn Show Performers, LLC, Wynn Las Vegas Capital Corp., Wynn Golf, LLC, World Travel, LLC, Las Vegas Jet, LLC, Wynn Sunrise, LLC, and Wynn Resorts, Limited. (4) | |||
| 10.26 | Irrevocable Trust Agreement, dated as of December 14, 2004, by and among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., and Wells Fargo Bank, National Association, as Trustee. (4) | |||
| 10.27 | Amended and Restated Project Administration Services Agreement, dated December 14, 2004, between Wynn Las Vegas, LLC and Wynn Design & Development, LLC. (4) | |||
| 10.28 | Intellectual Property License Agreement, dated as of December 14, 2004, by and among Wynn Resorts Holdings, Wynn Resorts, Limited and Wynn Las Vegas, LLC. (4) | |||
| 10.29 | Agreement of Lease, dated as of March 17, 2010, by and between Wynn Las Vegas, LLC and Elaine P. Wynn. (24) | |||
| 10.30 | Amended and Restated Agreement of Lease made as of March 18, 2010, by and between Wynn Las Vegas and Stephen A. Wynn. (24) | |||
| 10.31 | Employment Agreement, dated as of November 8, 2010, between Wynn Las Vegas, LLC and Marilyn Spiegel. (27) | |||
| 10.32 | Employment Agreement, dated as of August 31, 2005, between Wynn Las Vegas, LLC and Andrew Pascal. (11) | |||
| 10.33 | First Amendment to Employment Agreement, dated December 31, 2008, by and between Wynn Las Vegas, LLC and Andrew Pascal. (13) | |||
| 10.34 | Employment Agreement, dated as of May 5, 2009 by and between Wynn Las Vegas, LLC and Scott Peterson. (23) | |||
| 10.35 | Amended and Restated Credit Agreement, dated as of August 15, 2006 among Wynn Las Vegas, LLC, as the Borrower, several lenders and agents, and Deutsche Bank Trust Company Americas, as Administrative Agent. (18) | |||
| 10.36 | First Amendment to Amended and Restated Credit Agreement dated April 9, 2007 among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (14) | |||
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|
Exhibit |
Description | |||
| 10.37 | Second Amendment to Amended and Restated Credit Agreement dated October 31, 2007 among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantors, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (15) | |||
| 10.38 | Third Amendment to Amended and Restated Credit Agreement dated as of September 17, 2008 among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantor, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas, LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (12) | |||
| 10.39 | Fourth Amendment to Amended and Restated Credit Agreement, dated as of April 17, 2009, among Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantors, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (20) | |||
| 10.40 | Fifth Amendment to Amended and Restated Credit Agreement, dated as of September 10, 2009, among Wynn Las Vegas, LLC and Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantors, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (21) | |||
| 10.41 | Sixth Amendment to Amended and Restated Credit Agreement dated as of April 28, 2010 among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantor, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent. (25) | |||
| 10.42 | Seventh Amendment to Amended and Restated Credit Agreement dated as of August 4, 2010 among Wynn Las Vegas, LLC, Wynn Las Vegas Capital Corp., Wynn Show Performers, LLC, Wynn Golf, LLC, Wynn Sunrise, LLC, World Travel, LLC, Kevyn, LLC, Las Vegas Jet, LLC, Wynn Resorts Holdings, LLC, Wynn Completion Guarantor, LLC and Deutsche Bank Trust Company Americas, as Administrative Agent on behalf of the several banks and other financial institutions or entities from time to time party to Wynn Las Vegas, LLC’s Amended and Restated Credit Agreement, dated as of August 15, 2006. (26) | |||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (27) | |||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (27) | |||
| 32 | Certification of CEO and CFO Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (27) | |||
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| (1) | Previously filed with the Registration Statement on Form S-4 (File No. 333-124052) filed by the registrant on April 13, 2005. |
| (2) | Incorporated by reference from the Current Report on Form 8-K filed by Wynn Resorts on November 18, 2002. |
| (3) | Incorporated by reference from the Current Report on Form 8-K filed by Wynn Resorts on December 17, 2004. |
| (4) | Incorporated by reference from the Annual Report on Form 10-K filed by Wynn Resorts on March 15, 2005. |
| (5) | Incorporated by reference from the Quarterly Report on Form 10-Q filed by Wynn Resorts on November 4, 2004. |
| (6) | Incorporated by reference from the Quarterly Report on Form 10-Q filed by Wynn Resorts on May 15, 2003. |
| (7) | Incorporated by reference from the Current Report on Form 8-K filed by Wynn Resorts on September 8, 2004. |
| (8) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on June 29, 2005. |
| (9) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on May 25, 2005. |
| (10) | Incorporated by reference from the Periodic Report on form 10-Q filed by Wynn Resorts, Limited on August 2, 2005. |
| (11) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on September 1, 2005. |
| (12) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on September 19, 2008. |
| (13) | Incorporated by reference from the Annual Report on Form 10-K filed by the Registrant on March 2, 2009. |
| (14) | Incorporated by reference from the Quarterly Report on Form 10-Q filed by the Registrant on August 9, 2007. |
| (15) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on November 1, 2007. |
| (16) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on November 13, 2007. |
| (17) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on October 31, 2007. |
| (18) | Incorporated by reference from the Quarterly Report on Form 10-Q filed by the Registrant on November 9, 2006. |
| (19) | Incorporated by reference from the Annual Report on Form 10-K filed by the Registrant on February 22, 2008. |
| (20) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on April 21, 2009. |
| (21) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on September 14, 2009. |
| (22) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on October 20, 2009. |
| (23) | Incorporated by reference from the Current Report on Form 8-K filed by Wynn Resorts on May 8, 2009. |
| (24) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on March 19, 2010. |
| (25) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on April 28, 2010. |
| (26) | Incorporated by reference from the Current Report on Form 8-K filed by the Registrant on August 5, 2010. |
| (27) | Filed herein. |
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Pursuant to the requirements of Section 13 or 15(d) 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 LAS VEGAS, LLC | ||||||||
| Dated: February 28, 2011 | By | /S/ MARILYN SPIEGEL | ||||||
| Marilyn Spiegel President (Principal Executive Officer) | ||||||||
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
| Signature |
Title |
Date | ||
| /S/ STEPHEN A. WYNN Stephen A. Wynn |
Chairman of the Board |
February 28, 2011 | ||
| /S/ KAZUO OKADA Kazuo Okada |
Vice Chairman of the Board |
February 28, 2011 | ||
| /S/ LINDA CHEN Linda Chen |
President, Wynn International Marketing and Director |
February 28, 2011 | ||
| /S/ RUSSELL GOLDSMITH Russell Goldsmith |
Director |
February 28, 2011 | ||
|
Dr. Ray R. Irani |
Director |
|||
| /S/ ROBERT J. MILLER Robert J. Miller |
Director |
February 28, 2011 | ||
| /S/ JOHN A. MORAN John A. Moran |
Director |
February 28, 2011 | ||
| /S/ MARC SCHORR Marc Schorr |
Director |
February 28, 2011 | ||
| /S/ ALVIN V. SHOEMAKER Alvin V. Shoemaker |
Director |
February 28, 2011 | ||
| /S/ D. BOONE WAYSON D. Boone Wayson |
Director |
February 28, 2011 | ||
| /S/ ELAINE P. WYNN Elaine P. Wynn |
Director |
February 28, 2011 | ||
| /S/ ALLAN ZEMAN Allan Zeman |
Director |
February 28, 2011 | ||
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Table of Contents
| Signature |
Title |
Date | ||
| /S/ MARILYN SPIEGEL Marilyn Spiegel |
President (Principal Executive Officer) |
February 28, 2011 | ||
| /S/ SCOTT PETERSON Scott Peterson |
Senior Vice President and |
February 28, 2011 | ||
83
Exhibit 10.11
FIFTH AMENDED AND RESTATED
ART RENTAL
AND
LICENSING AGREEMENT
between
STEPHEN A. WYNN
(Lessor)
and
WYNN LAS VEGAS, LLC
(Lessee)
Dated July 1, 2007
FIFTH AMENDED AND RESTATED
ART RENTAL AND LICENSING AGREEMENT
This Fifth Amended and Restated Art Rental and Licensing Agreement (“Agreement”), is entered into this 1st day of July, 2007 (the “Effective Date”), by and between STEPHEN A. WYNN (“Lessor”) and WYNN LAS VEGAS, LLC (“Lessee”).
R E C I T A L S
A. Lessor is the owner of the paintings and other art works identified in Exhibit A attached hereto and incorporated herein by this reference (collectively, the “Works”), which may be updated from time to time in accordance with this Agreement. Works shall only include Works deemed to be on display by Lessee as provided in Section 7.
B. Lessor wishes to lease to Lessee, and Lessee wishes to lease from Lessor, the Works, in order to publicly display the Works at various public locations within the Wynn Las Vegas resort at 3131 Las Vegas Boulevard South, Las Vegas, Nevada (the “Resort”), as well as public locations located within any connected addition or expansion of the Resort, including but not limited to the Encore expansion of the Resort.
C. By publicly displaying the Works, Lessor and Lessee desire to promote the Works and to enhance the cultural and educational opportunities for Nevada residents and visitors.
A G R E E M E N T
Based upon the foregoing and the following terms and conditions, the parties hereto agree that the foregoing recitals are true and correct and as follows:
1. Rental. Upon the terms and subject to the conditions of this Agreement, Lessor hereby grants to Lessee a continuing right to publicly display the Works in the Resort, and Lessee hereby accepts from Lessor the rental of the works. The installation layout and plan for the Works shall be subject to Lessor’s prior approval.
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2. Compliance with Law. Lessee agrees to maintain the Works on public display, make the Resort available for student tours, and take such other actions as may be necessary or appropriate for meeting the requirements of Sections 361.068, 361.186, 374.291 and 374.2911 of the Nevada Revised Statutes (“NRS”), and agrees to comply with NRS 597.720, et seq., and all other applicable laws.
3. Exhibition and Promotion. Lessee agrees (a) to exhibit the Works in a manner approved by Lessor, (b) to transport, handle, care for, and display the Works in a manner consistent with the world-class quality of the Works, (c) to maintain the Resort as a first-class facility, and (d) to promote the Works through “Openings,” “Receptions,” and public events.
4. Merchandising. To the extent, if any, that he possesses the required rights, Lessor hereby authorizes Lessee to develop, manufacture (by subcontract or otherwise), and sell such merchandising and promotional items based upon the Works as Lessee may determine in its best business judgment. To the extent, if any, that he possesses any such rights in any Work, Lessor hereby grants to Lessee a nonexclusive license for such purposes for the period of the rental of such Work hereunder. In the event that any Work is withdrawn or rental terminated, the corresponding license shall automatically terminate; provided, however, that following such termination, Lessee shall have the right to sell its remaining inventory of the applicable merchandise. The merchandise and promotional items based on the Works may include, but are not limited to, educational catalogues, educational works (including audiovisual and audio recordings), fine art reproductions, and retail merchandise based upon the Works. Lessee shall be solely responsible for clearing and/or obtaining such rights, for obtaining all required permissions, and for taking all reasonable steps necessary to obtain intellectual property protection for said items based on the Works, all of which shall, with respect to any Work, inure to the benefit of Lessee during the rental of such
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Work hereunder and to the benefit of Lessor thereafter. Notwithstanding any other provision of this Agreement (including without limitation this Section 4 and Section 11 below), Lessor does not make (and hereby disclaims) any and all representations and/or warranties to Lessee or otherwise in respect of the Works or any rights in the Works, including, but not limited to, title, quiet enjoyment, authenticity, copyright, or moral rights. Lessor shall not have any liability to Lessee in respect of any, and Lessee hereby expressly and to the full extent permitted by law waives as against Lessor all, claims. damages, expenses, fees, or losses that may be incurred by or threatened against Lessee as a result of the Works being leased to Lessee, in the possession of Lessee during the term hereof, displayed at the Resort and/or reproduced (by, on behalf of, or with the consent of Lessee) in merchandising, promotional, or other items relating to the Works.
5. Rental Fees. Lessee agrees to pay to Lessor a rental fee of One Dollar ($1.00) on the Effective Date and each anniversary of the Effective Date.
6. Additions, Withdrawals, and Termination. Lessor and Lessee may, by mutual agreement, add other art works from time to time to the Works covered by this Agreement. Lessor shall have the right to withdraw any but not all of the Works from this Agreement and terminate the rental of such Work(s) hereunder on fifteen (15) days’ written notice to Lessee. Lessee shall have the right to return any or all Works covered by this Agreement and terminate the rental of such Work(s) hereunder on thirty (30) days’ written notice to Lessor. Upon termination of the rental of any Work hereunder, Lessee shall have no further right or license with respect to such Work, except to the extent that, under Section 4 and Section 11 hereof, Lessee is specifically provided with a six-month period to discontinue sales and use of merchandise. The parties shall periodically update Exhibit A hereto to reflect Works added to or withdrawn from this Agreement. The parties shall also maintain separate records indicating which Works are added to or withdrawn from the Agreement. Notwithstanding the foregoing, and
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without prejudice to any other rights or remedies that Lessor may have hereunder, Lessor may terminate the rental of all Works hereunder (a) by delivery of notice to Lessee no less than ninety (90) days in advance of the date selected by Lessor for termination, or (b) immediately by delivery of notice to Lessee at any time if any of the following events occurs: (i) Lessor ceases to be the Chairman of the Board and Chief Executive Officer of Wynn Resorts, Limited (“Wynn Resorts”), or any successor company; (ii) there is filed any petition in bankruptcy by or against Lessee or any of Wynn Resorts’ other subsidiary companies (collectively, the “Lessee Parties”), which petition is not dismissed within ninety (90) days of its filing, or there is appointed a receiver or trustee to take possession of any of the Lessee Parties or of all or substantially all of the assets of any Lessee Parties, or there is a general assignment by any of the Lessee Parties for the benefit of creditors, or any action is taken by or against any of the Lessee Parties under any state or federal insolvency or bankruptcy act, or any similar law now or hereafter in effect, including, without limitation, the filing of execution or attachment against any of the Lessee Parties and such levy continues in effect for a period of sixty (60) calendar days; or (iii) Lessee defaults under any material provision of this Agreement and fails to cure such default within seven (7) days after it receives written notice of such default from Lessor unless such default relates to the care, custody, or protection of any of the Works, in which event such default must be cured immediately upon notice from Lessor. Upon termination of the rental of all Works hereunder, this Agreement shall automatically terminate; provided, however, that the termination of this Agreement shall not affect the obligations of the parties under Sections 5, 7, 9 or 10 hereof or any other provision that can be fulfilled only after the termination date.
7. Insurance. Lessee shall, at its expense, insure the Works on a “wall-to-wall” basis, for the full rental period hereunder (including, without limitation, terrorism insurance), in an amount equal to the value of the Works as stipulated in writing by
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Lessor, provided, however that Lessee shall not be responsible for insuring the Works during any period when the Works are not on display or are in transit to or from the Resort (the “Non-Displayed Period”). The parties agree that for purposes of this Section 7 the Non-Display Period shall also include, and the Works shall be deemed to not be on display, any time the Works are on display in the offices of Lessor (including adjacent conference room), Lessor’s executive assistants, Elaine Wynn or Elaine Wynn’s executive assistant. The parties also agree that for purposes of this Section 7, the Works shall be deemed to on display any time the Works appear in any public area of the Resort, including within the offices of any executive located in the Resort, other than the offices of Lessor (including adjacent conference room), Lessor’s executive assistants, Elaine Wynn or Elaine Wynn’s executive assistant.. Upon reasonable prior notice to Lessee, Lessor shall have the right from time to time to reasonably increase the stated value of any one or more of the Works, and require Lessee to increase the amount of insurance required by this Section 7. Lessor shall be named as an additional insured on Lessee’s insurance policy. A certificate of insurance and a copy of those portions of the insurance policy covering the Works and setting forth any exclusions to coverage shall be furnished by Lessee to Lessor, and shall be subject to Lessor’s reasonable approval as to form and content (including, without limitation, any deductible). The foregoing insurance policy shall include coverage against all risk of physical loss or damage from any external cause while in transit and on location in the Resort during the rental period hereunder. Lessee shall bear sole responsibility and shall be liable to Lessor for all loss, damage, or destruction of the Works and any of them during the rental period hereunder (including, without limitation, loss, damage, or destruction incurred during packing or crating or while in transit) other than during any Non-Displayed Period, regardless of any exceptions, exclusions, or limitations to its insurance policy covering the Works, regardless of fault or the degree of care exercised by Lessee, and regardless of the presence or supervision of, or any direction or
- 5 –
approval by, Lessor or any Lessor’s representative; provided, however, that Lessee’s liability in the event of such loss, damage, or destruction shall not exceed the value of the Works as stipulated in writing by Lessor. Lessee shall be responsible to pay any and all deductibles relating to the insurance coverage required by this Section 7. In the event any Work is lost or stolen, and then recovered after Lessor has obtained insurance proceeds, Lessor shall have the option to exchange those insurance proceeds for such Work. In the event any Work is damaged but not destroyed, Lessee agrees to be responsible for both the cost of repairing and restoring such Work and the loss in value of such Work as determined by an appraiser mutually agreed upon by the parties.
8. Security. Lessee agrees to take all reasonable steps necessary to secure and protect the Works from loss, theft or injury and to treat them in a manner consistent with maintaining its own most valuable assets at all times the Works are in its possession, control or custody, or in transit to or from Lessor. Without limiting the generality of the foregoing, Lessee shall provide for an adequate number of guards to be on duty in and around the Resort at all times while the Works are in the Resort. All Works shall be within direct sight lines of at least one guard and under direct video surveillance at all times during the rental period hereunder. Lessee shall comply with further reasonable security restrictions and arrangements as directed in writing by Lessor. Lessee represents and warrants to Lessor that the Resort is and shall be equipped with adequate fire detection/prevention systems and protected by alarm systems that are activated at all times.
9. Indemnification. Lessee shall indemnify, defend, protect, and hold harmless Lessor, his agents, heirs, assigns, and successors (collectively, “Indemnitees”) from and against any and all claims, damages, liabilities, losses, actions, complaints, or judgments, including, without limitation, attorneys’ fees, threatened against, incurred, or suffered by the Indemnitees, arising out of Lessee’s
- 6 –
breach of or failure to perform, under this Agreement, the inaccuracy when made of any representation or warranty made by Lessee, or any act or omission by or on behalf of Lessee or its respective officers, agents, employees, contractors, or representatives, relating to the Works or this Agreement.
10. Taxes. Lessee shall pay all of the following Nevada state and local taxes, along with all interest, penalties, and other additions related thereto: (a) sales and use taxes applicable to the rental of the Works pursuant hereto; and (b) except to the extent provided otherwise in the following sentence, personal property taxes applicable to each of the Works for each fiscal year during which Lessee is renting such Work hereunder. In the event that Lessor withdraws any Work from this Agreement and terminates the rental of such Work hereunder pursuant to the second sentence of Section 6 hereof, Lessor and Lessee shall make an equitable allocation of the personal property taxes applicable to such Work for the fiscal year in which such withdrawal occurs. For purposes of explanation and clarification of this Section 10, the personal property tax obligations of Lessee shall include Works that are on display in the offices of any executive located in the Resort, other than offices of Lessor (including adjacent conference room), Lessor’s executive assistants, Elaine Wynn or Elaine Wynn’s executive assistant.
11. Intellectual Properties. Lessor consents to the photography, filming, videotaping and recordation of the Works for the purpose of obtaining photographic and other copyrights in the new derivative works, which shall be owned and controlled by Lessor, but which is hereby licensed to Lessee for use in advertising, promotion, and merchandising of, and education relating to, the Works, such license to run concurrently, with respect to any Work, with the rental of such Work hereunder. In the event that any Work is withdrawn or rental terminated, the corresponding license shall automatically terminate; provided, however, that following such termination, Lessee shall have six (6) months to discontinue sales and use of the applicable merchandise.
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12. Notice. Any notice to be given pursuant to this Agreement by either party to the other shall be in writing and may be effected either by personal delivery, by mail, registered or certified, postage prepaid, with return receipt requested, or by facsimile. Notice by mail shall be sent concurrently with any facsimile notice. Notices shall be addressed to the parties at the address specified below, but each party may change such party’s address by written notice in accordance with this Section 12. Notices delivered personally shall be deemed communicated as of actual receipt; and mailed notices and facsimile notices (with a concurrent mailing) shall be deemed communicated three (3) days after mailing. Notices shall be given as follows:
| Wynn Las Vegas, LLC | Mr. Stephen A. Wynn | |||
| Legal Department | c/o Wynn Las Vegas, LLC | |||
| 3131 Las Vegas Boulevard South | 3131 Las Vegas Boulevard South | |||
| Las Vegas, Nevada 89109 | Las Vegas, Nevada 89109 | |||
| Telephone: 702-770-7000 | Telephone: 702-770-7700 |
13. Entire Agreement; Amendment. This Agreement constitutes the entire agreement between the parties and supersedes any oral or written communications between Lessor and Lessee, with respect to its subject matter, including, without limitation, that certain Fourth Amended and Restated Art Rental Licensing Agreement, as amended, between Lessor and Lessee’s affiliate, Wynn Gallery, LLC, and that certain Second Amended and Restated Art Rental and Licensing Agreement, as amended, between Lessor and Lessee’s affiliate, Wynn Resorts Holdings, LLC. This Agreement may be amended only if such amendment is set forth in writing and executed by each of the parties.
14. Governing Law. This Agreement shall in all respects be construed according to the laws of the State of Nevada, regardless of the choice or conflict of laws provisions of Nevada or any other jurisdiction.
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15. Assignment; Binding Effect. Lessor may assign any or all of his rights and obligations under this Agreement. Lessee may not assign all or any portion of its rights or obligations under this Agreement without Lessor’s prior consent. Subject to the preceding sentence, this Agreement shall be binding upon, inure to the benefit of, and be enforceable by the parties hereto and their respective heirs, legal representatives, successors, and assigns. This Agreement does not create, and shall not be construed or deemed to create, any rights or benefits enforceable by or for the benefit of any person or entity other than the parties hereto and their respective heirs, legal representatives, successors, and permitted assigns.
16. Headings; Context. All headings herein are inserted only for convenience and ease of reference and shall not be considered in the construction or interpretation of any provision of this Agreement. Whenever used in this Agreement, the singular shall include the plural and the plural shall include the singular, and the neuter gender shall include the male and female as well as an entity, all as the context and meaning of this Agreement may require.
17. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument.
[Signature page follows.]
- 9 –
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date.
| “Lessor” | ||||||
| /s/ Stephen A. Wynn |
||||||
| Stephen A. Wynn | ||||||
| “Lessee” | ||||||
| Wynn Las Vegas, LLC, | ||||||
| a Nevada limited liability company | ||||||
| By: | /s/ Andrew Pascal | |||||
| Name: | Andrew Pascal |
|||||
| Title: |
President |
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EXHIBIT A
WORKS OF ART
| Description |
Artist | |
| Rembrandt Self Portrait with Shaded Eyes, 1634. Signed and dated Rembrandt. F/ 1634 lower right. Oil on oak panel 27 7/8 X 21 3/4 inches. | Rembrandt, Harmensz van Rinj | |
| Myths, 1981 (portfolio of 10 screen prints valued at $10,000 each - Garbo, Aunt Jemima, Superman, Uncle Sam, Santa Claus, Silhouette of Any Warhol, Witch, Dracula, Mickey Mouse, Howdy Doody) | Warhol, Andy | |
| Master of Ceremonies | Shapiro, Miriam | |
| I’m Dancin’ as Fast as I can, 1984 | Shapiro, Miriam | |
| Magritte II, 1998 - Sculpture | Marisol Escobar | |
| Picasso’s Studio (Bateau Lavoir, 1908). Oil on canvas, 42 X 72 inches. | Elwes, Damian | |
| Composition with glass | Yasani, Masoud | |
| Nude After Bathus | Ludwig, Daniel |
Exhibit 10.31
Execution Version
EMPLOYMENT AGREEMENT
(“Agreement”)
- by and between -
WYNN LAS VEGAS, LLC
(“Employer”)
- and -
Marilyn Winn Spiegel
(“Employee”)
DATED: November 8th, 2010
Execution Version
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (“Agreement”) is made and entered into as of the 8th day of November 2010, by and between WYNN LAS VEGAS, LLC (“Employer”) and MARILYN WINN SPIEGEL (“Employee”).
W I T N E S S E T H:
WHEREAS, Employer is a limited liability company duly organized and existing under the laws of the State of Nevada, maintains its principal place of business at 3131 Las Vegas Boulevard South, Las Vegas, Nevada 89109, and is engaged in the business of developing, owning and operating a casino resort at such place of business; and,
WHEREAS, Employer is a wholly-owned subsidiary of Wynn Resorts, Limited, a corporation duly organized and existing under the laws of the State of Nevada (“WRL”); and
WHEREAS, in furtherance of its business, Employer has need of qualified, experienced personnel; and,
WHEREAS, Employee is an adult individual residing in Las Vegas, NV; and,
WHEREAS, Employer is willing to employ Employee, and Employee is desirous of accepting employment from Employer under the terms and pursuant to the conditions set forth herein;
NOW, THEREFORE, for and in consideration of the foregoing recitals, and in consideration of the mutual covenants, agreements, understandings, undertakings, representations, warranties and promises hereinafter set forth, and intending to be legally bound thereby, Employer and Employee do hereby covenant and agree as follows:
1. DEFINITIONS. As used in this Agreement, the words and terms hereinafter defined have the respective meanings ascribed to them, unless a different meaning clearly appears from the context:
(a) “Affiliate” – means with respect to a specified Person, any other Person who or which is (i) directly or indirectly controlling, controlled by or under common control with the specified Person, or (ii) any member, director, officer or manager of the specified Person. For purposes of this definition only, “control”, “controlling” and “controlled” mean the right to exercise, directly or indirectly, more than fifty percent (50%) of the voting power of the stockholders, members or owners and, with respect to any individual, partnership, trust or other entity or association, the possession,
directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. For purposes hereof, “Person” shall mean an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other entity of whatever nature.
(b) “Anniversary” – means each anniversary date of the Effective Date during the Term (as defined in Section 5 hereof).
(c) “Cause” – means
(i) the willful destruction by Employee of the property of Employer or an Affiliate having a material value to Employer or such Affiliate;
(ii) fraud, embezzlement, theft, or comparable dishonest activity committed by Employee (excluding acts involving a de minimis dollar value and not related to Employer or an Affiliate);
(iii) Employee’s conviction of or entering a plea of guilty or nolo contendere to any crime constituting a felony or any misdemeanor involving fraud, dishonesty or moral turpitude (excluding acts involving a de minimis dollar value and not related to Employer or an Affiliate);
(iv) Employee’s breach, neglect, refusal, or failure to materially discharge her duties (other than due to physical or mental illness) commensurate with her title and function, or Employee’s failure to comply with the lawful directions of Employer’s Board of Directors, that is not cured within fifteen (15) days after Employee has received written notice thereof from the Board;
(v) a willful and knowing material misrepresentation to Employer’s Board of Directors;
(vi) a willful violation of a material policy of Employer, which does or could result in material harm to Employer or to Employer’s reputation; or
(vii) Employee’s material violation of a statutory or common law duty of loyalty or fiduciary duty to Employer,
provided, however, that Employee’s disability due to illness or accident or any other mental or physical incapacity shall not constitute “Cause” as defined herein.
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(d) “Change of Control” “ – means the occurrence, after the Effective Date, of any of the following events:
(i) any “Person” or “Group” (as such terms are defined in Section 13(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules and regulations promulgated thereunder), excluding any Excluded Stockholder, is or becomes the “Beneficial Owner” (within the meaning of Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of WRL, Employer, or of any entity resulting from a merger or consolidation involving WRL or Employer, representing more than fifty percent (50%) of the combined voting power of the then outstanding securities of WRL, Employer or such entity;
(ii) the individuals who, as of the Effective Date, are members of WLR’s Board of Directors (the “Existing Directors”) cease, for any reason, to constitute more than fifty percent (50%) of the number of authorized directors of WRL as determined in the manner prescribed in WRL’s Articles of Incorporation and Bylaws; provided, however, that if the election, or nomination for election, by WRL’s stockholders of any new director was approved by a vote of at least fifty percent (50%) of the Existing Directors, such new director shall be considered an Existing Director; provided further, however, that no individual shall be considered an Existing Director if such individual initially assumed office as a result of either an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies by or on behalf of anyone other than the Board (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or
(iii) the consummation of (x) a merger, consolidation or reorganization to which WRL or Employer is a party, whether or not WRL or Employer is the Person surviving or resulting therefrom, or (y) a sale, assignment, lease, conveyance or other disposition of all or substantially all of the assets of WRL or Employer, in one transaction or a series of related transactions, to any Person other than WRL or Employer, where any such transaction or series of related transactions as is referred to in clause (x) or clause (y) above in this subparagraph (iii) (singly or collectively, a
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“Transaction”) does not otherwise result in a “Change in Control” pursuant to subparagraph (i) of this definition of “Change in Control”; provided, however, that no such Transaction shall constitute a “Change in Control” under this subparagraph (iii) if the Persons who were the stockholders of WRL or Employer immediately before the consummation of such Transaction are the Beneficial Owners, immediately following the consummation of such Transaction, of fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Person surviving or resulting from any merger, consolidation or reorganization referred to in clause (x) above in this subparagraph (iii) or the Person to whom the assets of WRL or Employer are sold, assigned, leased, conveyed or disposed of in any transaction or series of related transactions referred in clause (y) above in this subparagraph (iii), in substantially the same proportions in which such Beneficial Owners held voting stock in WRL or Employer immediately before such Transaction.
For purposes of the foregoing definition of “Change in Control,” the term “Excluded Stockholder” means Stephen A. Wynn, the spouse, ex-spouse, siblings, children, grandchildren or great grandchildren of Stephen A. Wynn, any trust primarily for the benefit of the foregoing persons, or any Affiliate of any of the foregoing persons.
(e) “Complete Disability” – means the inability of Employee, due to illness or accident or other mental or physical incapacity, to perform (with reasonable accommodation) Employee’s obligations under this Agreement for a period as defined by Employer’s disability plan or plans.
(f) “Confidential Information” – means any information that is possessed or developed by or for Employer or its Affiliate and which relates to the Employer’s or Affiliate’s existing or potential business or technology, which is not generally known to the public or to persons engaged in business similar to that conducted or contemplated by Employer or Affiliate, or which Employer or Affiliate seeks to protect from disclosure to its existing or potential competitors or others, and includes without limitation know how, business and technical plans, strategies, existing and proposed bids, costs, technical developments, purchasing history, existing and proposed research projects, copyrights, inventions, patents, intellectual property, data, process, process parameters, methods, practices, products, product design information, research and development data, financial records, operational manuals, pricing and price lists, computer programs and information stored or developed for use in or with computers, customer information, customer lists, supplier lists, marketing plans, financial information, financial or business
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projections, and all other compilations of information which relate to the business of Employer or Affiliate, and any other proprietary material of Employer or Affiliate, which have not been released to the general public. Confidential Information also includes information received by Employer or any of its Affiliates from others that the Employer or Affiliate has an obligation to treat as confidential. Notwithstanding anything to the contrary contained herein, the term “Confidential Information” shall not include information, data, analyses, documents, compilations or materials that (i) are when furnished or thereafter become available to the public other than as a result of a disclosure by Employee, (ii) are already in the possession of or become available to Employee from a source other than Employer or its Affiliates, or (iii) Employee demonstrates have been independently developed without a violation of this Agreement.
(g) “Effective Date” – means December 1, 2010.
(h) “Good Reason” – means the occurrence, on or after the occurrence of a Change in Control, of any of the following (except with Employee’s written consent or resulting from an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by Employer or its Affiliate promptly after receipt of notice thereof from Employee):
| (i) | Employer or an Affiliate reduces Employee’s Base Salary (as defined in Subsection 7(a) below); |
| (ii) | Employer or any of its Affiliates discontinues its bonus plan in which Employee participates as in effect immediately before the Change in Control without immediately replacing such bonus plan with a plan that is the substantial economic equivalent of such bonus plan, or amends such bonus plan so as to materially reduce Employee’s potential bonus at any given level of economic performance of Employer, its Affiliates or its successor entity; |
| (iii) | Employer or any of its Affiliates materially reduces the aggregate benefits and perquisites to Employee from those being provided immediately before the Change in Control; |
| (iv) | Employer or any of its Affiliates requires Employee to change the location of Employee’s job or office, so that Employee will be based at a location more than 25 miles from the location of Employee’s job or office immediately before the Change in Control; and |
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| (v) | Employer or any of its Affiliates reduces Employee’s responsibilities or directs Employee to report to a person of lower rank or responsibilities than the person to whom Employee reported immediately before the Change in Control; or (vi) the successor to Employer or any of its Affiliates fails or refuses expressly to assume in writing the obligations of Employer under this Agreement. |
For purposes of this Agreement, a determination by Employee that Employee has “Good Reason” shall be final and binding on Employer and Employee absent a showing of bad faith on Employee’s part.
(i) “Separation Payment” – means a lump sum equal to (A) Employee’s Base Salary for the remainder of the Term (but not less than 12 months) (as defined in Section 7(a) of this Agreement, plus (B) the bonus that was paid to Employee under Section 7(b) for the preceding bonus period (projected over 12 months if the bonus was for less than a year), plus (C) any accrued but unpaid vacation pay and unreimbursed expenses.
(g) “Trade Secrets” – means unpublished inventions or works of authorship, as well as all information possessed by or developed by or for Employer or its Affiliate, including without limitation any formula, pattern, compilation, program device, method, technique, product, system, process, design, prototype, procedure, computer programming or code that (i) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by the public or other persons who can obtain economic value from its disclosure or use; and (ii) is the subject of efforts that are reasonable to maintain its secrecy.
(h) “Work of Authorship” – means any computer program, code or system as well as any literary, pictorial, sculptural, graphic or audio visual work, whether published or unpublished, and whether copyrightable or not, in whatever form and jointly with others that (i) relates to any of Employer’s or its Affiliate’s existing or potential products, practices, processes, formulations, manufacturing, engineering, research, equipment, applications or other business or technical activities or investigations; or (ii) relates to ideas, work or investigations conceived or carried on by Employer or its Affiliate or by Employee in connection with or because of performing services for Employer or its Affiliate.
2. BASIC EMPLOYMENT AGREEMENT. Subject to the terms and pursuant to the conditions hereinafter set forth, Employer hereby employs Employee during the Term hereinafter specified to serve in a management or executive capacity, under a title,
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and with such duties not inconsistent with those set forth in Section 3 of this Agreement, as the same may be modified and/or assigned to Employee by Employer from time to time; provided, however, that no change in Employee’s duties shall be permitted if it would result in a material reduction in the level of Employee’s duties as in effect prior to the change, it being understood, that Employee shall only report directly to the Chief Operating Officer of WRL.
3. DUTIES OF EMPLOYEE. Employee shall serve as “President – Wynn Las Vegas and Encore” and Employee shall perform such duties assigned to Employee by Employer as are consistent with such position and title. Employee’s duties shall include, but not be limited to: (i) the efficient and continuous operation of Employer; (ii) the preparation of relevant budgets and allocation or relevant funds; (iii) the selection and delegation of duties and responsibilities of subordinates; (iv) the direction, review and oversight of all programs under Employee’s supervision and (v) such other and further duties as may be assigned by Employer to Employee from time to time, consistent with Employee’s position and title. The foregoing notwithstanding, Employee shall devote such time to Employer or its Affiliates as may be required by Employer, provided such duties are not inconsistent with Employee’s primary duties to Employer hereunder. Without Employee’s consent, Employee shall not be required to perform any duties hereunder at any location other than the Wynn/Encore Resort premises in Las Vegas, Nevada.
4. ACCEPTANCE OF EMPLOYMENT. Employee hereby accepts the employment set forth hereunder, under the terms and pursuant to the conditions set forth in this Agreement. Employee hereby covenants and agrees that, during the Term, Employee will devote the whole of Employee’s normal and customary working time and reasonable efforts to the performance of Employee’s duties under this Agreement and that, except upon Employer’s prior express written authorization to that effect, Employee shall not perform any services for any casino, hotel/casino or other similar gaming or gambling operation not owned by Employer or any of Employer’s Affiliates. Notwithstanding anything to the contrary contained herein, Employee may (i) serve as a director of non-affiliated entities involved in charitable, educational, religious, industry trade, public interest or public service causes, and (ii) engage in passive investing and managing personal and family investments so long as such activities do not detract from the performance of Employee’s duties in any material respect and are not inconsistent with Employer’s brand or corporate philosophy.
5. TERM. Unless sooner terminated as provided in this Agreement, the term of this Agreement (the “Term”) shall consist of five years commencing on the Effective Date of this Agreement and terminating on the fifth Anniversary of the Effective Date at which time the terms of this Agreement shall expire and shall not apply to any continued employment of Employee by Employer, except for those obligations under Paragraphs 9 and 10. Following the Term, unless the parties enter into a new written contract of employment, (a) any continued employment of Employee shall be at-will, and (b) the employment relationship may be terminated at any time by either party, with or without cause or notice.
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Concurrent with Employee’s resignation from Employer or upon the termination of Employee’s employment with Employer, Employee agrees to resign, and shall be deemed to have resigned, all other positions (including but not limited to board of director memberships) that Employee may have held immediately prior to Employee’s resignation or termination.
6. SPECIAL TERMINATION PROVISIONS. Notwithstanding the provisions of Section 5, this Agreement shall terminate upon the occurrence of any of the following events:
(a) the death of Employee;
(b) the giving of written notice from Employer to Employee of the termination of this Agreement upon the Complete Disability of Employee;
(c) the giving of written notice by Employer to Employee of the termination of this Agreement upon the discharge of Employee for Cause;
(d) the giving of written notice by Employer to Employee of the termination of this Agreement following a disapproval of this Agreement or the denial, suspension, limitation or revocation of Employee’s License (as defined in Subsection 8(b) of this Agreement);
(e) the giving of written notice by Employer to Employee of the termination of this Agreement without Cause, provided, however, that, within ten (10) calendar days after such notice, Employer must tender the Separation Payment to Employee;
(f) the giving of written notice by Employee to Employer upon a material breach of this Agreement by Employer, which material breach remains uncured for a period of thirty (30) days after the giving of such notice, provided, however, that, within ten (10) calendar days after the expiration of such cure period without the cure having been effected, Employer must tender the Separation Payment to Employee; or
(g) at Employee’s sole election in writing as provided in Section 17 of this Agreement, after both a Change of Control and as a result of Good Reason, provided, however, that, within ten (10) calendar days after the expiration of such cure period without the cure having been effected, Employer must tender the Separation Payment to Employee.
In the event of a termination of this Agreement pursuant to the provisions of Section(s) 6(a), (b), (c) or (d), Employer shall not be required to make any payments to Employee other than payment of Base Salary, vacation pay accrued but unpaid through the termination date and the reimbursement of permitted expenses. In the event of a termination of this Agreement pursuant to the provisions of Section(s) 6(e), (f) or (g), Employer must tender the Separation Payment within ten (10) days of such termination.
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7. COMPENSATION TO EMPLOYEE. For and in complete consideration of Employee’s full and faithful performance of Employee’s duties under this Agreement, Employer hereby covenants and agrees to pay to Employee, and Employee hereby covenants and agrees to accept from Employer, the following items of compensation:
(a) Base Salary. Employer hereby covenants and agrees to pay to Employee, and Employee hereby covenants and agrees to accept from Employer, a base salary at the rate of One Million Dollars ($1,000,000) per annum, payable in such weekly, bi-weekly or semi-monthly installments as shall be convenient to Employer (the “Base Salary”). Employee shall be subject to performance reviews and the Base Salary may be increased but not decreased as a result of any such review. Such Base Salary shall be exclusive of and in addition to any other benefits which Employer, in its sole discretion, may make available to Employee, including, but not limited to, any discretionary bonus, profit sharing plan, pension plan, retirement plan, disability or life insurance plan, medical and/or hospitalization plan, or any and all other benefit plans which may be in effect during the Term.
(b) Bonus Compensation. Employee will be eligible to receive a bonus at such times and in such amounts as the Compensation Committee of WRL or Employer, as the case may be, may determine in their sole and exclusive discretion, until such time as WRL or Employer, as applicable, may adopt a performance-based bonus plan, and thereafter in accordance with such plan. Employer retains the discretion to adopt, amend or terminate any bonus plan at any time.
(c) Employee Benefit Plans. Employer hereby covenants and agrees that it shall include Employee, if otherwise eligible, in any profit sharing plan, executive stock plan, pension plan, retirement plan, disability or life insurance plan, medical and/or hospitalization plan, and any other benefit plan which may be placed in effect by Employer or any of its Affiliates and generally available to employees of Employer or any of its Affiliates during the Term. All issues as to eligibility for specific benefits and payment of benefits shall be as set forth in the applicable insurance policies or plan documents. Nothing in this Agreement shall limit Employer’s or any of its Affiliates’ ability to exercise the discretion provided to it under any employee benefit plan, or to adopt, amend or terminate any benefit plan at any time.
(d) Expense Reimbursement. During the Term and provided the same are authorized by Employer, Employer shall either pay directly or reimburse Employee for Employee’s reasonable expenses incurred for the benefit of Employer in accordance with Employer’s general policy regarding
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expense reimbursement, as the same may be modified from time to time. Such reimbursable expenses shall include, but are not limited to, (i) reasonable entertainment and promotional expenses, (ii) gift and travel expenses, (iii) dues and expenses of membership in professional societies and fraternal organization, and (iv) the like. Prior to such payment or reimbursement, Employee shall provide Employer with sufficient detailed invoices of such expenses as may be required by Employer’s policy.
(e) Vacations and Holidays. Commencing as of the Effective Date, Employee shall be entitled to four weeks annual paid vacation and paid holidays in accordance with Employer’s respective standard policies.
(f) Withholdings. All compensation provided to Employee by Employer under this Section 7 shall be subject to applicable withholdings for federal, state or local income or other taxes, Social Security Tax, Medicare Tax, State Unemployment Insurance, State Disability Insurance, charitable contributions and the like.
(g) Equity Grant. The Compensation Committee of WRL has approved the grant to Employee, effective as of the Effective Date, of 25,000 shares of restricted stock of WRL in accordance with WRL’s Stock Incentive Plan (the “Grant”). Such Grant shall automatically vest, and the applicable restrictions on the subject shares shall automatically lapse, on the date that is the fifth (5th) Anniversary of the Effective Date; provided, however, that, in addition to the Employer’s obligations relating to the Separation Payment, if Employee’s employment is terminated pursuant to Section 6(e) or Section 6(f), then such Grant shall automatically vest, and the applicable restrictions on the subject shares shall automatically lapse, with respect to that portion of the Grant equal to the greater of (x) 12,500 shares of such restricted stock and (y) the number of shares of such restricted stock that would have been vested if such shares had vested, and the applicable restrictions had lapsed, pro rata on a monthly basis for the number of months during the Term that had elapsed prior to such termination. For example, if Employee’s employment is terminated without Cause in accordance with Section 6(e) or Section 6(f): (A) twenty-eight (28) months after the Effective Date, then 12,500 shares of such restricted stock shall automatically vest coincident with such termination and (B) thirty-eight (38) months after the Effective Date, then 15,833 shares of such restricted stock shall automatically vest coincident with such termination (i.e. 63% of the 25,000 restricted shares subject to the Grant due to fact that 63% of the total 60 months had elapsed during the term).
8. LICENSING REQUIREMENTS.
(a) Employer and Employee hereby covenant and agree that this Agreement and/or Employee’s employment may be subject to the approval
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of one or more gaming regulatory authorities (the “Authorities”) pursuant to the provisions of the relevant gaming regulatory statutes (the “Gaming Acts”) and the regulations promulgated thereunder (the “Gaming Regulations”). Employer and Employee hereby covenant and agree to use their best efforts to obtain any and all approvals required by the Gaming Acts and/or Gaming Regulations. In the event that (i) an approval of this Agreement or Employee’s employment by the Authorities is required for Employee to carry out Employee’s duties and responsibilities set forth in Section 3 of this Agreement, (ii) Employer and Employee have used their best efforts to obtain such approval, and (iii) this Agreement or employee’s employment is not so approved by the Authorities, then this Agreement shall immediately terminate, extinguishing any and all obligations of Employer except for the payment of Base Salary, accrued and unpaid vacation and expense reimbursement through the date of such termination.
(b) If applicable, Employer and Employee hereby covenant and agree that, in order for Employee to discharge the duties required under this Agreement, Employee must apply for or hold a license, registration, permit or other approval (the “License”) as issued by the Authorities pursuant to the terms of the relevant Gaming Act and as otherwise required by this Agreement. In the event Employee fails to apply for and secure, or the Authorities refuse to issue or renew Employee’s License, Employee, at Employer’s sole cost and expense, shall promptly defend such action and shall take such reasonable steps as may be required to either remove the objections or secure or reinstate the Authorities’ approval, respectively. The foregoing notwithstanding, if the Authorities’ final refusal to renew or maintain Employee’s License arise as a result of any of the events described in Subsection 1(c) of this Agreement, then Employer’s obligations under this Section 8 also shall not be operative and Employee shall promptly reimburse Employer upon demand for any expenses incurred by Employer pursuant to this Section 8.
(c) Employer and Employee hereby covenant and agree that the provisions of this Section 8 shall apply in the event Employee’s duties require that Employee also be licensed by governmental agencies other than the Authorities.
9. CONFIDENTIALITY.
(a) Employee hereby warrants, covenants and agrees that Employee shall not directly or indirectly use or disclose any Confidential Information, Trade Secrets, or Works of Authorship, whether in written, verbal, electronic, or model form, at any time or in any manner, except as required in the conduct of Employer’s business or as expressly authorized by Employer in writing. Employee shall take all necessary and available precautions to protect against the unauthorized disclosure of Confidential
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Information, Trade Secrets, or Works of Authorship. Employee acknowledges and agrees that such Confidential Information, Trade Secrets, or Works of Authorship are the sole and exclusive property of Employer.
(b) Employee shall not remove from Employer’s premises any Confidential Information, Trade Secrets, Works of Authorship, or any other documents pertaining to Employer’s or its Affiliate’s business, unless expressly authorized by Employer in writing. Furthermore, Employee specifically covenants and agrees not to make any duplicates, copies, or reconstructions of such materials and that, if any such duplicates, copies, or reconstructions are made, they shall become the property of Employer or its Affiliate upon their creation.
(c) Upon termination of Employee’s employment with Employer for any reason, Employee shall turn over to Employer the originals and all copies of any and all papers, documents and things, including information stored for use in or with computers and software, all files, Rolodex cards, phone books, notes, price lists, customer contracts, bids, customer lists, notebooks, books, memoranda, drawings, computer disks or drives, or other documents: (i) made, compiled by, or delivered to Employee concerning any customer served by Employer or its Affiliate or any product, apparatus, or process manufactured, used, developed or investigated by Employer; (ii) containing any Confidential Information, Trade Secret or Work of Authorship; or (iii) otherwise relating to Employee’s performance of duties under this Agreement. Employee further acknowledges and agrees that all such documents are the sole and exclusive property of Employer or its Affiliate.
(d) Employee hereby warrants, covenants and agrees that Employee shall not disclose to Employer, or any Affiliate, officer, director, employee or agent of Employer, any proprietary or confidential information or property, including but not limited to any trade secret, formula, pattern, compilation, program, device, method, technique or process, which Employee is prohibited by contract, or otherwise, to disclose to Employer (the “Restricted Information”). In the event Employer requests Restricted Information from Employee, Employee shall advise Employer that the information requested is Restricted Information and may not be disclosed by Employee.
(e) The obligations of this Section 9 are continuing and shall survive the termination of Employee’s employment with Employer for any reason.
(f) Notwithstanding anything to the contrary contained herein, following the termination of this Agreement for any reason, the conscious
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awareness of any Confidential Information by the Employee without the actual disclosure thereof, and Employee’s personal consideration of such information, without the actual disclosure thereof, in connection with her pursuit or evaluation of, involvement with or participation in, any project or activity shall not constitute a breach of this Section 9 in any manner whatsoever.
10. RESTRICTIVE COVENANT/NO SOLICITATION.
(a) Employee hereby covenants and agrees that during the Term, or for such period as Employer continues to employ or compensate Employee following the Term, whichever is longer, Employee shall not, directly or indirectly, either as a principal, agent, employee, employer, consultant, partner, member of a limited liability company, shareholder of a closely held corporation, or shareholder in excess of two percent (2%) of a publicly traded corporation, corporate officer or director, manager, or in any other individual or representative capacity, engage or otherwise participate in any manner or fashion in any business that is in competition in any manner whatsoever with the principal business activity of Employer or its Affiliates, in or about any market in which Employer or its Affiliates currently operate or have announced, publicly or otherwise, a plan to have hotel or gaming operations.
(b) Employee hereby further covenants and agrees that, during the Term and for a period of one (1) year following the expiration of the Term, Employee shall not, directly or indirectly, solicit or attempt to solicit for employment any management level employee of Employer or its Affiliates with or on behalf of any business that is in competition in any manner whatsoever with the principal business activity of Employer or its Affiliates, in or about any market in which Employer or its Affiliates operate have publicly announced, publicly or otherwise, a plan to have hotel or gaming operations.
(c) Employee hereby further covenants and agrees that the restrictive covenants contained in this Section 10 are reasonable as to duration, terms and geographical area and that they protect the legitimate interests of Employer, impose no undue hardship on Employee, and are not injurious to the public. In the event that any of the restrictions and limitations contained in this Section 10 are deemed to exceed the time, geographic or other limitations permitted by Nevada law, the parties agree that a court of competent jurisdiction shall revise any offending provisions so as to bring this Section 10 within the maximum time, geographical or other limitations permitted by Nevada law.
11. REMEDIES. Employee acknowledges that Employer has and will continue to deliver, provide and expose Employee to certain knowledge, information, practices, and procedures possessed or developed by or for Employer at a considerable
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investment of time and expense, which are protected as confidential and which are essential for carrying out Employer’s business in a highly competitive market. Employee also acknowledges that Employee will be exposed to Confidential Information, Trade Secrets, Works of Authorship, inventions and business relationships possessed or developed by or for Employer or its Affiliates, and that Employer or its Affiliates would be irreparably harmed if Employee were to improperly use or disclose such items to competitors, potential competitors or other parties. Employee further acknowledges that the protection of Employer’s and its Affiliates’ customers and businesses is essential, and understands and agrees that Employer’s and its Affiliates’ relationships with its customers and its employees are special and unique and have required a considerable investment of time and funds to develop, and that any loss of or damage to any such relationship will result in irreparable harm. Consequently, Employee covenants and agrees that any violation by Employee of Section 9 or 10 shall entitle Employer to immediate injunctive relief in a court of competent jurisdiction. Employee further agrees that no cause of action for recovery of materials or for breach of any of Employee’s representations, warranties or covenants shall accrue until Employer or its Affiliate has actual notice of such breach.
12. BEST EVIDENCE. This Agreement shall be executed in original and “Xerox” or photostatic copies and each copy bearing original signatures in ink shall be deemed an original.
13. SUCCESSION. This Agreement shall be binding upon and inure to the benefit of Employer and Employee and their respective successors and assigns.
14. ASSIGNMENT. Employee shall not assign this Agreement or delegate Employee’s duties hereunder without the express written prior consent of Employer thereto. Any purported assignment by Employee in violation of this Section 14 shall be null and void and of no force or effect. Employer shall not assign this Agreement or its duties hereunder without the express written prior consent of Employee thereto; provided, however, that Employer shall have the right to assign this Agreement to any successor to Employer’s business and assets in a bona fide transaction. Any purported assignment by Employer in violation of this Section 14 shall be null and void and of no force or effect.
15. AMENDMENT OR MODIFICATION. This Agreement may not be amended, modified, changed or altered except by a writing signed by both Employer and Employee.
16. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Nevada, without regard to conflict of laws principles.
17. NOTICES. Any and all notices required under this Agreement shall be in writing and shall be either hand-delivered or mailed, certified mail, return receipt requested, addressed to:
| TO EMPLOYER: | Wynn Las Vegas, LLC | |
| 3131 Las Vegas Boulevard South | ||
| Las Vegas, Nevada 89109 | ||
| Attn: General Counsel | ||
| TO EMPLOYEE: | Marilyn Winn Spiegel | |
| 9705 Winter Palace | ||
| Las Vegas, NV 89145 | ||
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All notices hand-delivered shall be deemed delivered as of the date actually delivered. All notices mailed shall be deemed delivered as of three (3) business days after the date postmarked. Any changes in any of the addresses listed herein shall be made by notice as provided in this Section 17.
18. INTERPRETATION. The preamble recitals to this Agreement are incorporated into and made a part of this Agreement; titles of paragraphs are for convenience only and are not to be considered a part of this Agreement.
19. SEVERABILITY. In the event any one or more provisions of this Agreement is declared judicially void or otherwise unenforceable, the remainder of this Agreement shall survive and such provision(s) shall be deemed modified or amended so as to fulfill the intent of the parties hereto.
20. WAIVER. None of the terms of this Agreement, or any term, right or remedy hereunder, shall be deemed waived unless such waiver is in writing and signed by the party to be charged therewith and in no event by reason of any failure to assert or delay in asserting any such term, right or remedy or similar term, right or remedy hereunder.
21. DISPUTE RESOLUTION. Except for a claim by either Employee or Employer for injunctive relief where such would be otherwise authorized by law to enforce Sections 9, 10 and/or 11 of this Agreement, any controversy or claim arising out of or relating to this Agreement, the breach hereof, or Employee’s employment by Employer, including without limitation any claim involving the interpretation or application of this Agreement, or claims for wrongful termination, discrimination, or other claims based upon statutory or common law, shall be submitted to binding arbitration in accordance with the employment arbitration rules then in effect of the American Arbitration (“AAA”), to the extent not inconsistent with this Section as set forth below. This Section 21 applies to any claim Employee might have against any officer, director, employee, or agent of Employer or its Affiliate, and all successors and assigns of any of them. These arbitration provisions shall survive the termination of Employee’s employment with Employer and the expiration of the Agreement.
(a) Coverage of Arbitration Agreement: The promises by Employer and Employee to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other, in addition to other consideration provided under the Agreement. The parties contemplate by this Section 21 arbitration of all clams against each of them
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to the fullest extent permitted by law except as specifically excluded by this Agreement. Only claims that are justiciable or arguably justiciable under applicable federal, state or local law are covered by this Section, and include, without limitation, any and all alleged violations of any federal, state or local law whether common law, statutory, arising under regulation or ordinance, or any other law, brought by any current or former employee. Such claims may include, but are not limited to, claims for: wages or other compensation; breach of contract; torts; work-related injury claims not covered under workers’ compensation laws; wrongful discharge; and any and all unlawful employment discrimination and/or harassment claims. This Section 21 excludes claims under state workers’ compensation or unemployment compensation statutes; claims pertaining to any of Employer’s employee welfare, insurance, benefit, and pension plans, with respect to which are applicable the filing and appeal procedures of such plans shall apply to any denial of benefits; and claims for injunctive or equitable relief for violations of non-competition and/or confidentiality agreements in Sections 9, 10 and 11.
(b) Waiver of Rights to Pursue Claims in Court and to Jury Trial: This Section 21 does not in any manner waive any rights or remedies available under applicable statutes or common law, but does waive Employer’s and Employee’s rights to pursue those rights and remedies in a judicial forum and waive any right to trial by jury of any claims covered by this Section 21(a). By signing this Agreement, the parties voluntarily agree to arbitrate any covered claims against each other. In the event of any administrative or judicial action by any agency or third party to adjudicate, on behalf of Employee, a claim subject to arbitration, Employee hereby waives the right to participate in any monetary or other recovery obtained by such agency or third party in any such action, and Employee’s sole remedy with respect to any such claim will be any award decreed by an arbitrator pursuant to the provisions of this Agreement.
(c) Initiation of Arbitration: To commence arbitration of a claim subject to this Section 21, the aggrieved party must, within the time frame provided in Section 21(d) below, make written demand for arbitration and provide written notice of that demand to the other party. If a claim is brought by Employee against Employer, such notice shall be given to Employer’s Legal Department. Such written notice must identify and describe the nature of the claim, the supporting facts, and the relief or remedy sought. In the event that either party files an action in any court to pursue any of the claims covered by this Section 21, the complaint, petition or other initial pleading commencing such court action shall be considered the demand for arbitration. In such event, the other party may move that court to compel arbitration.
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(d) Time Limit to Initiate Arbitration: To ensure timely resolution of disputes, Employee and Employer must initiate arbitration within the statute of limitations (deadline for filing) provided by applicable law pertaining to the claim, or six (6) months following the discovery of such claim by the parties hereto, whichever is shorter, except that the statute of limitations imposed by relevant law will solely apply in circumstances where such statute of limitations cannot legally be shortened by private agreement. The failure to initiate arbitration within this time limit will bar any such claim. The parties understand that Employer and Employee are waiving any longer statutes of limitations that would otherwise apply, and any aggrieved party is encouraged to give written notice of any claim as soon as possible after the event(s) in dispute so that arbitration of any differences may take place promptly.
(e) Arbitrator Selection: The parties contemplate that, except as specifically set forth in this Section 21, selection of three (3) arbitrators shall take place pursuant to the then-current rules of the AAA applicable to employment disputes. The arbitrators must be either retired judges or attorneys experienced in employment law. The parties will select three (3) arbitrators from among a list of qualified neutral arbitrators provided by AAA. If the parties are unable to agree on the arbitrators, the parties will select arbitrators by alternatively striking names from a list of qualified arbitrators provided by AAA. AAA will flip a coin to determine which party has the final strike (that is, when the list has been narrowed by striking to four arbitrators). The remaining named arbitrator will be selected.
(f) Arbitration Rights and Procedures: Employee may be represented by an attorney of his/her choice at his/her own expense. Any arbitration hearing or proceeding will take place in private, not open to the public, in Clark County, Nevada. The arbitrators shall apply the substantive law (and the law of remedies, if applicable) of Nevada (without regard to its choice of law provisions) and/or federal law when applicable. The arbitrators are without power or jurisdiction to apply any different substantive law or law of remedies or to modify any term or condition of this Agreement. The arbitrators will have no power or authority to award non-economic damages or punitive damages except where such relief is specifically authorized by an applicable federal, state or local statute or ordinance, or common law. In such a situation, the arbitrators shall specify in the award the specific statute or other basis under which such relief is granted. The applicable law with respect to privilege, including attorney-client privilege, work product, and offers to compromise must be followed. The parties will have the right to conduct reasonable discovery, including written and oral (deposition) discovery and to subpoena and/or request copies of records, documents and other relevant discoverable information consistent with the procedural rules of AAA. The arbitrators will decide disputes regarding the scope of discovery and will have
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authority to regulate the conduct of any hearing. The arbitrators will have the right to entertain a motion or request to dismiss, for summary judgment, or for other summary disposition. The parties will exchange witness lists at least 30 days prior to the hearing. The arbitrators will have subpoena power so that either Employee or Employer may summon witnesses. The arbitrators will use the Federal Rules of Evidence in connection with the admission of all evidence at the hearing. Both parties shall have the right to file post-hearing briefs. Any party, at its own expense, may arrange for and pay the cost of a court reporter to provide a stenographic record of the proceedings.
(g) Arbitrators’ Award: The decision of two (2) out of three (3) of the arbitrators shall be binding and the arbitrators will issue a written decision containing the specific issues raised by the parties, the specific findings of fact, and the specific conclusions of law. The award will be rendered promptly, typically within 30 days after conclusion of the arbitration hearing, or after the submission of post-hearing briefs if requested. The arbitrator shall have no power or authority to award any relief or remedy in excess of what a court could grant under applicable law. The arbitrators’ decision shall be final and binding on both parties. Judgment upon an award rendered by the arbitrators may be entered in any court having competent jurisdiction.
(h) Fees and Expenses: Unless the law requires otherwise for a particular claim or claims, the party demanding arbitration bears the responsibility for payment of the fee to file with AAA and the fees and expenses of the arbitrators shall be allocated by AAA under its rules and procedures. Employee and Employer shall each pay his/her/its own expenses for presentation of their cases, including but not limited to attorney’s fees, costs, and fees for witnesses, photocopying and other preparation expenses. If any party prevails on a statutory claim that affords the prevailing party attorney’s fees and costs, the arbitrators may award reasonable attorney’s fees and/or costs to the prevailing party, applying the same standards a court would apply under the law applicable to the claim.
22. PAROL. This Agreement constitutes the entire agreement between Employer and Employee, and supersedes any prior understandings, agreements, undertakings or severance policies or plans by and between Employer or its Affiliates, on the one side, and Employee, on the other side, with respect to its subject matter or Employee’s employment with Employer or its Affiliates. As of the Effective Date, this Agreement supersedes and replaces any and all prior employment agreements, change in control agreements and severance plans or agreements, whether written or oral, by and between Employee, on the one side, and Employer or any of Employer’s Affiliates, on the other side, or under which Employee is a participant. From and after the Effective Date, Employee shall be employed by Employer under the terms and pursuant to the conditions set forth in this Agreement.
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23. REVIEW BY PARTIES AND THEIR LEGAL COUNSEL. The parties represent that they have read this Agreement and acknowledge that they have discussed its contents with their respective legal counsel or have been afforded the opportunity to avail themselves of the opportunity to the extent they each wished to do so.
24. COMPLIANCE WITH IRC SECTION 409A. Notwithstanding anything herein to the contrary, (i) if at the time of Employee’s termination of employment with Employer, Employee is a “specified employee” as defined in Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then Employer will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee) until the date that is six months following Employee’s termination of employment with Employer (or the earliest date as is permitted under Section 409A of the Code without any accelerated or additional tax) and (ii) if any other payments of money or other benefits due to Employee hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by Employer, that is reasonably expected not to cause such an accelerated or additional tax. For purposes of Section 409A of the Code, each payment made under this Agreement shall be designated as a “separate payment” within the meaning of the Section 409A of the Code, and references herein to Employee’s “termination of employment” shall refer to Employee’s separation from service with Employer within the meaning of Section 409A. To the extent any reimbursements or in-kind benefits due to Employee under this Agreement constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to Employee in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).
IN WITNESS WHEREOF AND INTENDING TO BE LEGALLY BOUND THEREBY, the parties hereto have executed and delivered this Agreement as of the year and date first above written.
| WYNN LAS VEGAS, LLC | EMPLOYEE | |||||||
| By: | /s/ Marc D. Schorr |
/s/ Marilyn Winn Spiegel | ||||||
| Marc D. Schorr | Marilyn Winn Spiegel | |||||||
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Exhibit 31.1
Certification of the Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Marilyn Spiegel, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Wynn Las Vegas, LLC; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: February 28, 2011
| /S/ MARILYN SPIEGEL |
| Marilyn Spiegel President (Principal Executive Officer) |
Exhibit 31.2
Certification of the Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Scott Peterson, certify that:
| 1. | I have reviewed this Annual Report on Form 10-K of Wynn Las Vegas, LLC; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. |
| c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions): |
| a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Dated: February 28, 2011
| /S/ SCOTT PETERSON |
| Scott Peterson Chief Financial Officer and Senior Vice President (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32
Certification of CEO and CFO Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K of Wynn Las Vegas, LLC (the “Company”) for the year ended December 31, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Marilyn Spiegel, as Chief Operating Officer of the Company, and Scott Peterson, as Chief Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:
| 1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ MARILYN SPIEGEL | ||
| Name: | Marilyn Spiegel | |
| Title: |
Chief Operating Officer and President (Principal Executive Officer) | |
| Dated: |
February 28, 2011 | |
| /s/ SCOTT PETERSON | ||
| Name: |
Scott Peterson | |
| Title: |
Chief Financial Officer and Senior Vice President (Principal Financial and Accounting Officer) | |
| Dated: |
February 28, 2011 | |