Wynn has loss but cuts debt


An increase in revenues in Macau, coupled with a modest recovery in Las Vegas, were not enough to overcome a charge to eliminate debt that caused Wynn Resorts Ltd. to report a loss for the third quarter.

Wynn Resorts said Tuesday that it lost $22.5 million, or 27 cents a share, for the third quarter, compared with a profit of $34.2 million, or 28 cents a share, for the same period last year. On an adjusted basis, the casino operator would have earned 39 cents a share, up from 33 cents.

"We had a nice quarter," said Steve Wynn, founder, chairman and chief executive of Wynn Resorts in a conference call with analysts. "It wasn't bad in Las Vegas. I believe we've seen the bottom in Las Vegas. I don't know when it will recover, but business has been pretty good all around."

In a regulatory filing with the Securities and Exchange Commission, Wynn Resorts attributed most of the third-quarter loss to the elimination of $64.2 million of debt. As of Sept. 30, total debt outstanding was $3.2 billion, while the company had $1.9 billion in cash.

Revenue jumped to $1 billion from $773.1 million, due largely to a nearly 49.7 percent increase in revenue from Macau, the company said.

Wynn said that October, which includes China's Golden Week holiday, was the company's best month ever in Macau. "We made over $90 million," he said.

The average estimate of analysts polled by Yahoo Finance had been for Wynn Resorts to earn 39 cents a share on revenues of $990.8 million in the third quarter.

"Wynn has come through the economic downturn the least scathed of its global peers, largely on the strength of its Macau operations," said Credit Suisse analyst Joel Simkins in a research report. "It successfully executed its luxury strategy in Macau to deliver results that have consistently exceeded expectations."

Barbara Cappaert, a credit analyst with KCDP Advisors, said the operating results for Las Vegas showed promise, which "we find encouraging."

"Macau continues to wow with the level of demand" and the earnings before interest, taxes, depreciation and amortization, or EBITDA, the properties generate, she said in a note to clients.

Shares of Wynn Resorts jumped $3.31, or 3.03 percent, to $112.57 on heavy volume of 4.52 million shares traded Tuesday on the Nasdaq National Market.

Wynn also said that the company's board of directors approved a cash dividend of $8 per share payable on Dec. 7 to stockholders of record as of Nov. 23.

"It's good news," Wynn said. "Our shareholders should be the principal beneficiaries of our actions."

In the third quarter, net revenues in Macau were $671.4 million, compared with $448.5 million in the third quarter of 2009. Cash flow, measured as adjusted property earnings before interest, taxes, depreciation and amortization, rose 38 percent to $274.5 million.

Macau EBITDA climbed 55 percent to $198 million, and Las Vegas gained 9.3 percent to $76.5 million.

For the third quarter, net revenues for the company's Las Vegas operations were $334.5 million, while net casino revenues were down 3.9 percent to $138.4 million. Table games earned $545.1 million, and slot machine handle of $690.6 million was 18.8 percent below the comparable period in 2009.

"Our remodel of the Wynn is proceeding," Wynn said. "It has caused our room rates to increase, while our baccarat room is closed until December."

Wynn told analysts that nightclub revenues were expected to be between $150 million and $160 million in the current quarter, with a 45 percent margin.

Wynn updated analysts on the company's Cotai project, which once completed would join two other hotels and casinos -- Wynn Macau and Encore at Wynn Macau -- in the territory off Hong Kong controlled by China.

Encore at Wynn Macau, with its higher-limit tables, has been well received by Wynn customers and has greatly contributed to the growth in revenues at Wynn Macau, the company said.

"We are feeling terrific about China," Wynn said. "We are ready to begin soil testing and site clearance on the Cotai project. We expect to begin site clearance next week. All that will be done by the end of 2011."

Wynn said the Cotai project should be "finished and opened for business in 2015" at a cost of between $2 billion and $3 billion.

He said the exact cost would be released early next year, when the project's budget was completed.

Wynn described the new project as the best work the company has done in 42 years. Wynn said he expected to begin showing renderings and models of the Cotai project within the next few weeks.

Opportunities in Japan have been put on hold for casino operators as political instability has put the process of opening the country to casinos on hold.

"We are following the situation very closely," Wynn said. "Where it all ends up is murky at this point."

Wynn Resorts and other casino operators have been waiting to enter the Japanese market. Legislators have not been able to set a date on when a draft law would be introduced in parliament.

He said officials were still studying the matter and would report to the parliament. Wynn didn't know when a draft law might be introduced.

Contact reporter Chris Sieroty at csieroty @reviewjournal.com or 702-477-3893.

 

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