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Wynn Sees Better Days Ahead

4 May 2006

By Chris Jones

LAS VEGAS -- At once looking back and toward the future, Steve Wynn said Wednesday his company's recent performance exceeded historic norms but is still nowhere close to its potential.

"When you're building a franchise like this, if you can do it well enough, it lasts forever," the Wynn Resorts Ltd. chairman told analysts and investors during the company's third-quarter earnings call. "In time, we will sort out (the expenditures) that are more extraneous, we will increase productivity as we are on a regular basis, and I believe we will lower our expenses on the hotel more than inflation will raise them."

The Las Vegas-based company reported $277.2 million in net revenue from Jan. 1 through March 31, the third complete quarter since Wynn Las Vegas opened on April 28, 2005.

Wynn Resorts' quarterly loss was $11.4 million, or 12 cents per share. Operating cash flow -- a key performance indicator generally defined as earnings before interest, taxes, depreciation and amortization -- was $81.1 million.

Operating costs and expenses were $268 million.

Analysts surveyed by Thomson Financial expected earnings per share of 10 cents on revenue of $273.5 million.

Shares of Wynn Resorts closed at $73.05, down $1.48, or 1.99 percent. In after hours trading, shares fell an additional $1.04, or 1.42 percent.

"For me, the big event is Macau," said Frank Husic of Husic Capital Management, whose Wynn shares make up 4 percent of its $700 million in investments. "Without Macau, the stock is too expensive," said Husic in San Francisco.

Wynn spent several minutes discussing particular elements of Wynn Las Vegas' financial performance during its eight-plus operational months in 2005, the first three months of this year, as well as April.

Last year, the 2,700-room hotel averaged 92.1 percent occupancy with average daily room rates of $274. Those totals jumped to 95.5 percent and $293 in the third quarter, and 95.6 percent and $308 this April.

Likewise, slot winnings last year averaged $496,000 per day. That total climbed to nearly $507,000 per day in this year's first three months, and in April it approached nearly $528,000.

"Even though we're not brand-new anymore and we don't have the so-called novelty crowds, our yield-per-machine has climbed," Wynn said.

Table games winnings have been "remarkably steady," Wynn said, adding they've remained between $1.05 million and $1.1 million per day since the property opened.

The property is now generating an operating cash flow of more than $1 million per day. That total easily eclipsed that of Bellagio, the last resort Wynn opened before developing Wynn Las Vegas.

The company is moving forward with its Wynn Macau resort in the Chinese special administrative region not far from Hong Kong. The hotel-casino's first phase will open in this year's third quarter with 600 hotel rooms and a 100,000-square-foot casino.

Wynn Resorts has to date spent $554.5 million of the project's $1.2 billion budget. Phase Two will open in late 2007, and Wynn said he'll spend portions of September and October in Macau to develop a better feel for how that market plays.

"Everybody in the gaming industry knows that experience is absolutely the most powerful factor in our success, and we have none there," Wynn said. "I want to feel my customers, I want to feel my building.

"I'm trying to open the market to a better class of customer, and in order to do that there are some questions that I really sorely need to answer" through personal experience.

Wynn said his company will reveal in the next quarter its plans for additional resorts on Macau's Cotai Strip.

Wynn also discussed the pending closure of the puppet-themed Broadway import "Avenue Q," which will conclude May 28. He said the show failed to meet his expectations.

"We made money with the show, but it didn't use the 1,200 seats that I built for it," Wynn said. "As a typical casino guy, (I'm) looking for the show that will produce the most number of bodies" in the theater.

Wynn said the show's successor, "Monty Python's Spamalot," should have little trouble filling an expanded 1,500-seat theater thanks to Monty Python's widespread popularity.

The British comedy troupe created several hit films, books and albums since its televised sketch comedy program "Monty Python's Flying Circus" made its debut on the British Broadcasting Corp. in 1969. Its Broadway musical will debut at Wynn Las Vegas early next year.

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