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Wynn posts net loss in fourth quarter

25 Feb 2009

By Howard Stutz

LAS VEGAS, Nevada -- Wynn Resorts Ltd. tumbled to a fourth-quarter net loss due to a nearly $100 million tax expense and falling revenues at the company's Las Vegas casinos.

The news, announced Tuesday after the close of normal trading, sent the company's shares down almost 16 percent in after-hours trading on the Nasdaq National Market, erasing the day's gains.

Wynn Resorts said its net loss in the fourth quarter ended Dec. 31 was $159.6 million, or $1.49 per share, reversing net income of $65.5 million, or 57 cents per share, a year earlier.

"There is not good news, and you've heard this up and down the Strip," Wynn Resorts Chairman Steve Wynn said during a conference call with analysts Tuesday. "Business is tough in Las Vegas. We are in the mode of protecting our culture and our employees and seeing this through."

He said the company has "$5 billion in assets" in Las Vegas, but owes $2.8 billion.

"We're underleveraged, but we're not satisfied," Wynn said.

Earlier this month, Wynn Resorts announced it was implementing plans to reduce expenses by $75 million to $100 million at Wynn Las Vegas.

Quarterly net revenues companywide fell 13.6 percent to $614.3 million from $711.3 million.

The revenue drop was driven primarily by a decline in gaming volumes, significantly lower hold percentage and an overall reduction in nongaming revenues in Las Vegas.

For all of 2008, Wynn Resorts said its net revenues were $3 billion, an 11.2 percent increase over 2007, primarily due to 35.6 percent higher revenues from Wynn Macau. In Las Vegas, revenues declined 15.1 percent for the year.

Wynn Resorts opened the $2.3 billion Encore at Wynn Las Vegas on Dec. 22, which had minimal effect on the company's results.

For the year, the company's Las Vegas casinos generated cash flow of $252.9 million, a decrease of 30.4 percent from 2007. Casino revenues were $479.7 million, a 25.3 percent decline while noncasino revenues were $776.3 million, a 3.7 percent decline. Hotel revenues dropped 6 percent in the year.

The fourth quarter was tough on Wynn Las Vegas. Cash flow fell 66.5 percent, casino revenues fell 43.3 percent and nongaming revenues fell 16.9 percent.

"Business levels in Las Vegas are funky and weak. That's the best way to describe them," Wynn said.

Wynn Macau, however, carried the company's results. Revenues for all of 2008 were $1.9 billion, a 35.6 percent increase compared with 2007, while cash flow increased 33.4 percent. In the fourth quarter, revenues grew 1.2 percent while cash flow declined 4.6 percent.

Separately, Wynn said Tuesday that his company and other Las Vegas casino operators have seen healthy companies cancel conventions since President Barack Obama criticized taxpayer-funded trips.

"I'm sure the president didn't mean to stigmatize the convention and meetings business in Las Vegas when it was conducted by companies that weren't on the government dole," Wynn said. "But that's the effect that it had."

The negative publicity associated with Las Vegas is spurring cancellations across a city already hurt by the U.S. recession, Wynn said. The chairman of "one of the healthiest companies" in the U.S. paid a $3.3 million fee to scrub a $5 million sales training event, he said.

"It's disturbing to me when the chairman of such a company feels intimidated," he said. He said he hopes "the rhetoric that is used is more considered in the future. It's been demonstrated to us that it can have unintended consequences."

Obama warned this month that companies receiving government bailout money "can't go take a trip to Las Vegas or go down to the Super Bowl on the taxpayers' dime."

Shares of Wynn closed at $25.50, up $2.22, or 9.54 percent, before earnings were announced.

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