Wynn Resorts, Ltd. Form 8-K Summary
Business Context and Reporting Period
This Current Report on Form 8-K, dated March 9, 2006, concerns Wynn Resorts, Limited ("WRL") and its subsidiary Wynn Las Vegas, LLC ("WLV"). The filing announces a restatement of historical financial statements for the years ended December 31, 2003 and 2004, and the first three quarters of 2005. Additionally, previously reported results for the fourth quarter and full year ended December 31, 2005, are being revised.
Key Financial Metrics and Restatement Impact
The restatement is driven by the elimination of hedge accounting for interest rate swaps due to documentation deficiencies under SFAS 133. Consequently, mark-to-market adjustments are now recorded in interest and other income rather than comprehensive income.
- Cash Flow: The restatements have no effect on cash flow from operating activities.
- Accumulated Deficit: The cumulative effect of the restatement is a reduction in accumulated deficit at September 30, 2005, of $16.2 million.
- Net Loss Adjustments (WRL):
- 2003: Net loss improved from $(48.9) million to $(40.1) million (Adjustment: +$8.8 million).
- 2004: Net loss improved from $(205.6) million to $(204.2) million (Adjustment: +$1.4 million).
- 2005 (YTD Q3): Net loss improved from $(98.4) million to $(90.8) million (Adjustment: +$7.6 million).
- Net Loss Adjustments (WLV):
- 2003: Net loss improved from $(16.0) million to $(7.2) million.
- 2004: Net loss improved from $(161.9) million to $(160.5) million.
- 2005 (YTD Q3): Net loss improved from $(51.3) million to $(45.3) million.
The filing does not provide specific values for revenue, debt levels, or liquidity ratios, as the focus is strictly on the accounting adjustment to net loss.
Material Changes and Causes
The material change is the reclassification of interest rate swap accounting. The Registrants determined that their interest rate swaps, used to hedge floating-rate debt, did not meet the strict documentation requirements for hedge accounting under SFAS 133. Specifically, the repricing dates for the debt and the swaps did not match exactly, and the necessary documentation to assess ineffectiveness was not in place at inception or during the required assessment periods. Because these documentation deficiencies cannot be corrected retrospectively, hedge accounting must be eliminated.
Management Commentary, Risks, and Outlook
Management Commentary: Management and the Audit Committee determined that the financial statements for the affected periods should no longer be relied upon. The restated information will be included in the Annual Report on Form 10-K for the year ended December 31, 2005, and prospectively in Fiscal 2006 10-Qs.
Internal Controls: Management has identified a material weakness in internal control over financial reporting related to the application of SFAS 133. Additional accounting policies and internal controls have been adopted to address this issue.
Risks: The primary risk disclosed is the historical misstatement of financial results due to the improper application of hedge accounting, which has led to a loss of reliance on prior audit reports.
Investor Verification Checklist
- Verify the specific impact of the restatement on the fourth quarter and full-year 2005 results once the revised press release (Exhibit 99.1) is fully analyzed.
- Review the upcoming Form 10-K for the year ended December 31, 2005, to confirm the restated financial statements and the updated management report on internal controls.
- Confirm the details of the new internal controls implemented to prevent future SFAS 133 documentation errors.
- Assess whether the elimination of hedge accounting will result in increased volatility in future reported earnings due to mark-to-market adjustments being recorded in net income.