Stock-Based Compensation

Wynn Resorts, Limited

The Company's 2002 Stock Incentive Plan, as amended and restated (the "WRL 2002 Plan"), allowed it to grant stock options and nonvested shares of Wynn Resorts' common stock to eligible directors, officers, employees, and consultants of the Company. Under the WRL 2002 Plan, a maximum of 12,750,000 shares of the Company's common stock was reserved for issuance.

On May 16, 2014, the Company adopted the Wynn Resorts, Limited 2014 Omnibus Incentive Plan (the "Omnibus Plan") after approval from its stockholders. The Omnibus Plan allows for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards and other share-based awards to the same eligible participants as the WRL 2002 Plan. Under the approval of the Omnibus Plan, no new awards may be made under the WRL 2002 Plan. The outstanding awards under the WRL 2002 Plan were transferred to the Omnibus Plan and will remain pursuant to their existing terms and related award agreements. The Company reserved 4,409,390 shares of its common stock for issuance under the Omnibus Plan. These shares were transferred from the remaining available amount under the WRL 2002 Plan.

The Omnibus Plan is administered by the Compensation Committee (the "Committee") of the Wynn Resorts, Limited Board of Directors. The Committee has discretion under the Omnibus Plan regarding which type of awards to grant, the vesting and service requirements, exercise price and other conditions, in all cases subject to certain limits. For stock options, the exercise price of stock options must be at least equal to the fair market value of the stock on the date of grant and the maximum term of such an award is 10 years.

As of December 31, 2018, the Company had an aggregate of 3,041,051 shares of its common stock available for grant as share-based awards under the Omnibus Plan.

Stock Options

The summary of stock option activity under the Omnibus Plan for the year ended December 31, 2018 is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of January 1, 2018	644,460		$	73.93
Granted	—		$	—
Exercised	(261,470	)	$	77.07
Forfeited or expired	(37,200	)	$	172.07
Outstanding as of December 31, 2018	345,790		$	60.99	1.25	$	14,796,122
Fully vested and expected to vest as of December 31, 2018	345,790		$	60.99	1.25	$	14,796,122
Exercisable as of December 31, 2018	285,790		$	63.91	1.44	$	11,688,722

The following is provided for stock options under the Omnibus Plan (in thousands, except weighted average grant date fair value):



	Years Ended December 31,
	2018		2017		2016
Weighted average grant date fair value	$	—	$	—	$	34.90
Intrinsic value of stock options exercised	$	22,387	$	29,716	$	3,657
Cash received from the exercise of stock options	$	20,148	$	61,506	$	3,487

As of December 31, 2018, there was $0.6 million of unamortized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 0.34 years.

Nonvested shares

The summary of nonvested share activity under the Omnibus Plan for the year ended December 31, 2018 is presented below:



	Shares		Weighted Average Grant Date Fair Value
Nonvested as of January 1, 2018	460,584		$	98.21
Granted	288,270		170.13
Vested	(96,559	)	121.51
Forfeited	(125,908	)	133.76
Nonvested as of December 31, 2018	526,387		$	127.84

The following is provided for the share awards under the Omnibus Plan (in thousands, except weighted average grant date fair value):



	Years Ended December 31,
	2018		2017		2016
Weighted average grant date fair value	$	170.13	$	109.28	$	63.56
Fair value of shares vested	$	13,024	$	45,801	$	39,380

As of December 31, 2018, there was $49.6 million of unamortized compensation expense related to nonvested shares, which is expected to be recognized over a weighted average period of 3.66 years.

Wynn Macau, Limited

The Company's majority-owned subsidiary, WML, has two stock-based compensation plans that provide awards based on shares of WML's common stock. The shares available for issuance under these plans are separate and distinct from the common stock of Wynn Resorts' share plan and are not available for issuance for any awards under the Wynn Resorts share plan.

Share Option Plan

WML adopted a stock incentive plan, effective September 16, 2009, for the grant of stock options to purchase shares of WML to eligible directors and employees of its subsidiaries (the "Share Option Plan"). The Share Option Plan is administered by WML's Board of Directors, which has the discretion on the vesting and service requirements, exercise price, performance targets to exercise if applicable and other conditions, subject to certain limits. A maximum of 518,750,000 shares have been reserved for issuance under the Share Option Plan. As of December 31, 2018, there were 507,244,000 shares available for issuance under the Share Option Plan.

The summary of stock option activity under the Share Option Plan for the year ended December 31, 2018 is presented below:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding as of January 1, 2018	7,006,000		$	2.32
Granted	4,494,000		$	2.65
Exercised	(941,600	)	$	1.94
Outstanding as of December 31, 2018	10,558,400		$	2.49	7.80	$	1,403,732
Fully vested and expected to vest as of December 31, 2018	10,558,400		$	2.49	7.80	$	1,403,732
Exercisable as of December 31, 2018	3,302,800		$	2.72	5.20	$	484,717

The following is provided for stock options under the Share Option Plan (in thousands, except weighted average grant date fair value):



	Years Ended December 31,
	2018		2017		2016
Weighted average grant date fair value	$	0.57	$	0.56	$	0.31
Intrinsic value of stock options exercised	$	1,715	$	369	$	—
Cash received from the exercise of stock options	$	1,823	$	703	$	—

As of December 31, 2018, there was $3.4 million of unamortized compensation expense related to stock options, which is expected to be recognized over a weighted average period of 4.30 years.

Share Award Plan

On June 30, 2014, the Company's majority-owned subsidiary, WML, approved and adopted the WML Employee Ownership Scheme (the "Share Award Plan"). The Share Award Plan allows for the grant of nonvested shares of WML's common stock to eligible employees. The Share Award Plan is administered by WML's Board of Directors and has been mandated under the plan to allot, issue and process the transfer of a maximum of 50,000,000 shares. The Board of Directors has discretion on the vesting and service requirements, exercise price and other conditions, subject to certain limits. As of December 31, 2018, there were 33,362,988 shares available for issuance under the Share Award Plan.

The summary of nonvested share activity under the Share Award Plan for the year ended December 31, 2018 is presented below:



	Shares		Weighted Average Grant Date Fair Value
Nonvested as of January 1, 2018	11,842,707		$	2.24
Granted	3,256,630		$	3.07
Vested	(3,565,245	)	$	3.56
Forfeited	(1,780,825	)	$	2.03
Nonvested as of December 31, 2018	9,753,267		$	2.07

The weighted average grant date fair value for shares granted during the year and the total fair value of shares vested under the Share Award Plan is presented below (in thousands, except weighted average grant date fair value):



	Years Ended December 31,
	2018		2017		2016
Weighted average grant date fair value	$	3.07	$	2.22	$	1.38
Fair value of shares vested	$	1,309	$	6,884	$	—

As of December 31, 2018, there was $12.7 million of unamortized compensation expense, which is expected to be recognized over a weighted average period of 2.82 years.

Compensation Cost

The total compensation cost for stock-based compensation plans was recorded as follows (in thousands):



	Years Ended December 31,
	2018			2017		2016
Casino	$	5,946		$	6,954	$	11,304
Rooms	437			655		374
Food and beverage	1,125			1,466		1,060
Entertainment, retail and other	111			147		82
General and administrative	28,872			34,749		30,398
Pre-opening	750			—		504
Property charges and other (1)	(2,201		)	—		—
Total stock-based compensation expense	35,040			43,971		43,722
Total stock-based compensation capitalized	11			80		92
Total stock-based compensation costs	$	35,051		$	44,051	$	43,814

(1) In 2018, reflects the reversal of compensation cost previously recognized for awards forfeited in connection with the departure of an employee.

For the year ended December 31, 2018, the Company recorded an expense of approximately $5.8 million in connection with the departure of the Company's general counsel and the related accelerated vesting of previously granted share-based awards and a $1.8 million one-time cash payment.

Certain members of the Company's executive management team receive a portion of their annual incentive bonus in shares of the Company's stock. The number of shares is determined based on the closing stock price on the date the annual incentive bonus is settled. As the number of shares is variable, the Company records a liability for the fixed monetary amount over the service period. The Company recorded stock-based compensation expense associated with these awards of $6.7 million, $23.7 million and $19.2 million, for the year ended December 31, 2018, 2017 and 2016, respectively. The Company settled the obligation for the 2018 annual incentive bonus by issuing vested shares in January 2019. The Company settled the obligation for the 2017 annual incentive bonus by issuing vested shares in December 2017 and January 2018.

During the years ended December 31, 2018, 2017 and 2016, the Company recognized income tax benefits in the Consolidated Statements of Income of $5.7 million, $10.8 million and $10.4 million, respectively, related to stock-based compensation expense. Additionally, during the years ended December 31, 2018, 2017 and 2016, the Company realized tax benefits of $4.6 million, $25.4 million and $6.7 million, respectively, related to stock option exercises and restricted stock vesting that occurred in those years.

The Company uses the Black-Scholes option pricing model to determine the estimated fair value for stock options. Dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant. Expected volatility is based on implied and historical factors related to the Company's common stock. The risk-free interest rate used for each period presented is based on the U.S. Treasury yield curve for stock options issued under the Omnibus Plan and the Hong Kong Exchange Fund rates for stock options issued under the Share Option Plan, both at the time of grant for the period equal to the expected term. Expected term represents the weighted average time between the option's grant date and its exercise date. The Company uses historical award exercise activity and termination activity in estimating the expected term for the Omnibus Plan and Share Option Plan.

There were no stock options granted under the Omnibus Plan during the years ended December 31, 2018 and 2017. The fair value of stock options granted under the Omnibus Plan during the year ended December 31, 2016 was estimated on the date of grant using an expected dividend yield of 2.0%, expected volatility of 45.4%, a risk-free interest rate of 1.1% and an expected term of 6.0 years.

The fair value of stock options granted under WML's Share Option Plan was estimated on the date of grant using the following weighted average assumptions:



	Years Ended December 31,
	2018		2017		2016
Expected dividend yield	5.7	%	5.7	%	6.3	%
Expected volatility	40.2	%	41.5	%	42.6	%
Risk-free interest rate	2.3	%	1.1	%	1.0	%
Expected term (years)	6.5		6.5		6.5