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Wynn Resorts' 2Q Profit Plunges but Beats Forecast

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Published on:
Jul/31/2009

LAS VEGAS - (Associated Press) - Lower gambling revenue and continuing costs of opening its newest casino, Encore at Wynn Las Vegas, punished Wynn Resorts Ltd., but the 91 percent drop in profit it reported Thursday topped forecasts, and its shares soared.

The company, run by billionaire and major stockholder Steve Wynn, reported profit of $25.5 million, or 21 cents per share, down from $272 million, or $2.42 per share last year. Adjusted to exclude one-time items, net income totaled 9 cents per share, beating analyst expectations of a penny loss per share.

"All in all, we're satisfied as you can be in a time when the world is still uncertain," Wynn told investors in a conference call. "Small business meetings are still very slow in coming; sales tax revenues were off as you'd expect in Las Vegas. But we do cater to a well-to-do customer in both China and the United States, and we are benefiting somewhat from that."

Shares of Wynn Resorts rose $5.84, or 13 percent, to $50.15.

Revenue fell to $723.3 million, short of analysts' prediction for quarterly revenue of $739.3 million - and 12.3 percent below last year's second-quarter revenue of $825.2 million.

Wynn said he sensed that business was stabilizing for the company in Las Vegas, and he said year-over-year comparisons would look better going forward, when quarterly earnings will be compared with periods when the recession's drop in tourism already had taken hold.

The company's net casino revenues in Sin City rose only slightly - $124.3 million compared with $120.7 million during the same time one year ago - even with the addition of 82 table games and 812 slot machines at Encore.

The company's average daily win per table dropped to $5,007 from $7,742 in the second quarter of last year, and the win at each slot machine fell to $155 from $232.

Both room occupancy levels and room rates fell, and the company's two Las Vegas casinos combined generated $188 per available room during the second quarter this year, compared with $292 last year, when Wynn operated only one casino in town.

Andrew Pascal, president and chief operating officer of subsidiary Wynn Las Vegas LLC, said the unit worked to trim more costs in Las Vegas and has cut about $100 million per year. The key was adjusting the staff working on weekends compared with midweek, when business is slower, he said.

Wynn said a silver lining in the cost-cutting is that the company will make more money by running more efficiently in better times. But said he would resist further cuts.

"There is a very surreal question here: Is it intelligent to ruthlessly grind every last dime out of this place when it involves dislocating groups of your employees?" Wynn said. "Oh yes, the quarter looks better and you have one of these fancy phone calls. But is that good business? I think not.

"At this point I don't care about that last money if it means interfering with the employees and their lives, because that's our franchise," he said. "I am not going to take the knife to the last buck when it comes to payroll."

The company's casino revenue in Las Vegas rose 3 percent to $124.3 million, while non-casino revenue rose 9 percent to $231.9 million. Revenue in Macau fell 23 percent to $410.4 million from $529.9 million last year.

Its Las Vegas results are not comparable with a year ago because it opened the Encore, its second resort there, only in December, the company said.

Last week, Wynn filed for a possible initial public offering of its Macau assets on the Hong Kong Stock Exchange. The company is building the $650 million Encore at Wynn Macau, due to open next year, with 600 rooms and suites along with casino, restaurant, retail and lounge space.

Wynn and other officials declined to comment on the IPO, saying the company was in a quiet period, but Wynn said he thinks the new Encore in Macau is the prettiest building he's ever built, because it incorporates lessons he's learned through 40 years in the industry.

"It's on schedule, it's on budget, it's being built out of revenue, it'll open up in the spring and it's the best thing we've done in our lives," Wynn said.

Wynn said the company is pursuing a bid to install video gambling machines at Aqueduct racetrack in New York City. Long delays in getting video lottery terminals to the Queens racetrack are seen by some as hobbling New York's ailing thoroughbred racing industry.

Wynn said his team presented an idea to create a new experience for racetrack customers, incorporating food and beverages, entertainment and other offerings Wynn is known for.

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