永利渡假村 (WYNN) 2007 Q4 法說會逐字稿

Good afternoon, and welcome to the Wynn Resorts, Limited fourth-quarter conference call.

Joining the call on behalf of the company today are Steve Wynn, Ron Kramer, Marc Schorr, John Strzemp, Andrew Pascal, President of Wynn Las Vegas, David Sisk, CFO of Wynn Las Vegas and on the phone, Ian Coughlan, president of Wynn Macau, and Scott Peterson, CFO of Wynn Macau.

After the speakers remarks, there will be a question-and-answer session.

(OPERATOR INSTRUCTIONS) Now, I would like to turn the call over to Mr.

Kramer.

Please go ahead, sir.

Thank you, Heather.

Good afternoon, everyone.

Before we begin, I need to remind you that today's conference call contains forward-looking statements that we are making under the Safe Harbor Provision of Federal Security Laws.

I would also like to caution you that the company's actual results could differ materially from the anticipated results in these forward-looking statements.

Please see today's press release under the caption "Forward-looking statements" for the discussion of risks that may affect our results.

In addition, we will discuss the adjusted property EBITDA, which is a non-GAAP measure, a reconciliation of those practices for the most comparable GAAP measures is included in the press release.

We are broadcasting this conference call live on www.WynnResorts.com, where you can also find the earnings release that we circulated earlier today.

I'm going to give you a brief overview and then we'll open up and take your questions.

Simply, 2007 was a great year.

We are extremely proud of our results in Macau and Las Vegas.

Fourth quarter, we generated consolidated property EBITDA, $197 million for the two property.

That is a a 23% improvement versus the same quarter in 2006.

The Wynn brand has become synonymous with quality.

Our loyal customers enjoy the intimacy of our design and appreciate the extraordinary level of service we provide.

We believe we have the top properties in each of the markets where we operate and our results reflect that pre-eminence.

In Macau, our EBITDA in the fourth quarter was $99.6 million, a 70% increase over the same period of the prior year, despite significant growth and supply during the third and fourth quarter.

In the first full year, Wynn Macau, generated $364.1 million of EBITDA.

On December 24th, 2007, we opened the Wynn Macau expansion, which increased our table offerings by approximately 40%, and nearly doubled our slot capacity.

We continue to perform well in Macau, and believe that the opening of MGM next door has helped to draw addition a traffic to our neighborhood.

In 2007, the gaming revenues for the market were up 47% and gaming revenue per visitor grew sequentially every month in 2007, an incredible testament to the depth of this market.

Trends remain strong and the year ahead looks very promising as demand continues to grow with no appreciable additional supply entering the market in the next 12 months.

In Las Vegas, the Tower Suites of Wynn Las Vegas is the only casino resort in the world to achieve both the Mobil 5 Star and the AAA 5 Diamond Award.

And we have done it two consecutive year.

We are also very proud to be the only resort in Las Vegas to be honored with the Michelin 5 Star Pavilion award - Red Pavilion Award.

Excuse me.

In the fourth quarter, Wynn Las Vegas had $97.3 million in EBITDA.

Represents a 3.8 decrease versus fourth-quarter '06, due mostly to the decline in hold percentage from 26.3 to 23.5.

During the quarter, our slot business was down modestly versus the fourth quarter of '06, due to the lower traffic resulting from the closure of the Star Dust and the Frontier.

We expect the late December operating of the Pilatzo to drive walk-in traffic to Wynn Las Vegas benefiting both our slots as well as other businesses.

Our food and beverage, retail and other departments showed solid quarter-over-quarter growth and for the full-year Wynn Las Vegas EBITDA grew over 25% reaching $417 million.

Finally, our balance sheet is strong.

At year end, we have net debt of approximately $1.7 billion, and our net leverage stood at 2.2 times providing us with excellent flexibility for future developments and shareholder value enhancing opportunities .

With that, we're going to open up and take your

(Operator instructions) Your first question comes from the line of Steven Kent with Goldman Sachs.

Hi.

Could you just give us a little bit more color on what your experience so far in January is in Las Vegas?

MGM gave some indication that things were softer in the first few weeks.

I just want to see what your experience was.

And just a little bit more color on the expansion at Wynn Macau, how that's ramping up, and if it's meeting your expectations?

This is Steve answering that question.

I don't think we want to get too forward in the quarter.

I think that it's probably a good idea to be cautious about Las Vegas market in general.

There's been -- it has been said that Las Vegas is somehow impervious to economic trends in the United States of America.

That isn't quite an accurate way of expressing it.

Las Vegas is resistant because so much of our business is booked far in advance, conventions, for example, and other things of that sort.

And so what happens in Las Vegas it's as if there's a general economic softening in the United States and surrounding territory, Las Vegas reacts to it a little later.

There's a sort of a delay built in, but it would be -- it would be unsophisticated to think that Las Vegas is somehow a magical island on to itself, immune or isolated from the effects of the cities and the communities that serve it with its visitors.

So I would be cautious, depending upon your particular view, each of you, about the general economic conditions in the United States as we go forward into the year.

I think that you probably should turn on the yellow light about how the Las Vegas market would respond.

I don't think we see any significant moment this year so far in terms of our non-casino revenue and drop in the casino and that sort of thing.

So I'm not sure that I have an intelligent answer.

The folks at MGM, of course, have a much bigger sampling.

We have just one hotel and after all, we are sort of an elitist place.

But, again, whether we are elitist or not, in spite of all the awards and the clear superiority of our product here in Las Vegas, again, I -- I would say that it -- and nature of our clientele tends to be very upscale, I still think that we are not -- we are not an island on to ourselves, nor will we ever be in Las Vegas at any hotel.

Having said that, the second part of your question - and I don't want to be too wordy about this - had to do with Macau.

We did open part of our expansion on December 24th, and march into January with a larger facility, both with VIP and general casino.

We are thrilled and delighted with the results.

Let's hope it continues as we go forward, but I don't have anything else intelligent to offer.

Okay.

Thanks.

Your next question comes from the line of Bill Lemer with deutsche bank.

One for you.

I haven't heard you weigh in yet on the Nevada Gaming Tax Proposals.

I would love to hear you generally talk to those and I think that's probably it for me after that.

That's another -- that's another item that we have to watch, and try to understand.

It moves along.

Its impact would be in 2011, if it ever comes about.

And it is the kind of -- it's the kind of thing that we're seeing around the country in every state, where the needs of the citizens, the demands of the citizens, and the ability of the government to supply them are stressed.

Las Vegas and Nevada is no different than any place else.

And we have a long way to go before we understand the full impact of that, I don't think there's much more to say on that subject.

I just want to remind everybody that there is a little asterisk on last year's Las Vegas EBITDA.

Being a grandfather and understanding how important Christmas is, both to parents and to children, we decided here in our family way that in the fourth quarter, we -- we took $5 million out of our fancy earnings for the year and gave $1,000 tax paid to all of our employees who made $40,000 or less as a Christmas present.

And we paid the tax, and I think the gross out cost us about $5 million.

When you are looking at our EBITDA, you might take that into account because it would have been more money -- instead of 97, we would have been -- what, 98, 99, so it would have been 104.

We did something sort of unusual, which I was delighted to do, and all of management thought it was the right thing to do, to make sure that so many of our employees who have families would have a merry Christmas.

So we did something unusual this year.

And I just wanted -- for those of you who are running our numbers, comparing them to last year, I should tell you that that was a special event.

We will take the next question.

Your next question comes from the line of Celeste Brown with Morgan Stanley.

Hi, guys.

Good afternoon.

First, I know you guys don't like to talk about the quarter end, but there's been a lot of press about weather impacting the ability of the people to travel in China and I would guess outside of China.

Is that impacting the market at all for Chinese new year?

It did, Celeste.

Oh, it most definitely put a bump in the first week of February.

We have people sleeping in the train station at [Gungcho] and that type of gridlock was extraordinary, and it reached into southern China, into the Gungdon Province to [Senjen], [Dun Guam] Gungcho and those types of places.

It affected everybody's business, I'm sure for about five or six days.

But Chinese new year has been robust.

It's over now.

I think the snow melted or things are back on track.

And Steve, I'm not sure I understood what you were saying about you don't expect a significant moment in Vegas.

Can you explain that a little further?

I said that we had not yet observed any significant moment in terms of the impact -- somebody mentioned in the question, I think it was Steve Kent that MGM said they saw a softening.

Yes.

Well, MGM looks across, what, 10 casinos or something.

Their sampling is enormous and they see every -- every part of the market.

We don't.

We are dealing with, well, for lack of a better term, rich folks.

So you are saying generally, your trends would be better than theirs?

Well, again, I don't want to make statements about trends.

I am responding to whether we feel a softening in the market.

I'm not sure that we can analyze that and we are prepared to make that statement yet.

It's too short.

Too quick.

Super Bowl was exciting.

The February calendar is terrific.

Forgetting for a moment hold percentage and luck as it impacts a place like this, general levels of business, we don't see a trend yet.

But, again, remind you, I don't think we are immune to such things.

If they are strong enough around us, we will feel them.

Sooner or later, I would guess.

Thank you.

Your next question comes from the line of Larry Klatzkin with Jefferies.

Hey, guys.

A couple of things.

One the Diamond Suites is more like - end of first quarter, beginning of second quarter 2010 at this point?

Well, I think that's what it's always been.

Diamond Tower you mean?

Yes, I thought it was always a little earlier in the year than that.

Okay.

The Tower is probably about 22 or 23 months out and I just came down the hall for this phone call from a final approval of some of the stuff in Diamond Tower lobby -- and I must say, that the building itself and the things that are in it is -- by any measurement of my 40 years, the most beautiful thing that Roger Thomas [Hertz Bedner] and our staff working together have ever done.

I'm quite -- I came into the conference room where we are all sitting for this call, I brought with me a carpet sample of a piece of fabric from the barroom off the lobby of Diamond.

I'm very excited.

We have never done anything like this.

It's sort of taking Four Seasons idea and putting it on steroids or warp speed or any vernacular metaphor that you want to use.

It's a statement of luxury and these 405 rooms and villas that are beyond whatever we have done in the past.

And I'm fascinated to see how the -- the Chinese culture will receive it.

But we have definitely -- we definitely swung for the fences with the Diamond.

All right.

I mean that in our Wynn Resorts terms, which are pretty -- you know, pretty swollen already.

All right.

Cool.

Cool.

And then Ron, in Vegas, you hit about -- compared to last year, $17 million of worse luck and in Macau, you did over $50 million of better luck compared to last years hold?

As we said in our prior call, we are not going to get caught up in normalizing numbers.

Okay, that's fine.

Actually, I dont think that we can normalize the numbers.

Around here, it's fascinating.

We can't do it.

We don't know how.

Okay.

As far as the project on the acres on co-tie, you made an amazing sounding project.

Do you have any more details on that that you can talk to us about?

Well, we've got Encore coming up at Christmas here in Las Vegas.

We have Diamond coming up shortly thereafter.

We are in the middle of expansion of the company that's almost doubled before we are done.

Kotai and the golf course are obviously our next move, not excluding the notion of the new jurisdiction.

As we look at the performance of our colleagues and our competitors, we adjust the size and the scope of the project.

What I have said is that we are building an extraordinarily, luxurious all-suite hotel.

And that is true.

What is adjustable in my mind is the amount of room.

And I have been trying to analyze the Venetian, for example, in the fourth quarter to see what was their real occupancy.

How many rooms they had opened and what the real average rate is.

In a new property, as you know, when we open these places, we have been on the same spot as they, you open in phases.

Until you get to the second full quarter of operations, it's a little tricky to try and get your arms around what's going on.

But we are watching this with great interest, and hoping that all of the good news continues so that we can -- so we can lay on some more size on our property at Kotai.

As we plan it and work on it, we are watching the Venetian and other projects that are underway and looking at the performance of MGM and trying to learn something.

Okay.

And you guys, -- what do you guys see for some of the improvements and access for Macau?

Do you think some of the things going on are going to be a big improvement and the market should continue to grow and the kind of pace we should in the last month?

Your question is basically at the root, asking us, do we believe that the government will be able to react efficiently and effectively to the changes in demand and the touristic development of that market?

My experience over the past six years, almost seven years in Macau -- that's how long I have been there, since we got the concession, and even a period before the concession, while we are competing for it, has been that the government of Macau and the peoples republic of China has a way of handling their business in a manner remarkably efficient and they get there very quickly.

The speed at which government reacts in China, compared to our wonderful democracy here at home is extraordinary.

And I think that the market will not be constrained because of infrastructure problems.

I think the government is terrific in that regard.

They have done things when we were getting ready to open -- there was a period of about two weeks before we were open, when Jack Binnion and I said we will not make it.

They had no street on the east side of our building.

And five days later, it was finished.

Five days later!

It was 22 June.

24.

24 June, Avenue 24 June didn't exist, and within five or six days it was finished.

Incredible.

That could never happen in the United States.

So I have tremendous confidence in the ability of the government to do almost anything they think is necessary in terms of the infrastructure.

And you know that they are behind this growth in Macau completely.

It never would have happened were it not for the government's support and encouragement.

All right, well, thanks, guys.

(OPERATOR INSTRUCTIONS) Your next question comes from the line of Robin Farley with UBS.

Thanks.

Yes, I had a couple of questions.

First, in Macau, just looking at the mass dropping down year-over-year, did you reconfigure the tables?

Did you take some tables out of the math designation to make them VIP.

I'm just trying to understand that change.

We added to the mass market and we added to the V I P.

The expansion included two new VIP rooms.

And -- and general casino.

And there are yet three more VIP casinos that are quite extraordinary coming.

Two of them this year, at the end of the year.

And then another one at the base of the Diamond Tower.

And there's a Members Only general casino in the base of the Diamond Tower.

There's quite a bit of additional capacity that comes on at the higher end of the spectrum during the end -- at the end of this year, in the fall and then as the Tower itself opens up.

We have a brand new and quite exciting entrance that is on the corner of our building that faces MGM directly within 150 feet, and the new hotel being brought by Stanley Ho's wife and Angela.

Both of those casinos are right at our door in our new diamond members only.

So we did not take anything off the floor, Robin.

Okay.

Okay.

And just to comment, Robin, that, you know, the mass market business, you know, while flat, that's after absorbing the significant increase and just to point out to you, the drop is down, but the win is actually up fourth quarter last year.

Right.

No, I was just looking at the drop as normalized without any hold impact.

Okay.

And then there's been, I guess, changes in the market in terms of VIP structure, commission structures and ways that competitors are courting VIP business.

I wonder if you could talk about to what extent your providing credit to junkets, even if it's using their commissions -- you know, just to the extent that their commissions are collateral or, I guess to any degree that you are doing that.

That's proprietary information.

I'm not going to discuss it.

Okay.

And then my last question is there were -- you know, two transactions in the fourth quarter with the equity offering and the large dividend that for the larger shareholders that didn't participate in the offering, I guess it was an equivalent of selling shares.

Given that you have plans for a major Kotai project.

We don't have a budget yet but I indicated that it's going to be big.

I guess how did that dividend kind of fit -- how does that fit into your capital plans for Kotai and timing and capital.

I think you have it a little confused.

You certainly confused me.

Can you try and give that question one more time, Robin so we can get it.

You raised equity in the $154 range and then you paid a large dividend and given that you have plans for, you know, significant capital spend in Kotai, just curious as to why the large dividend when that capital would probably have, you know, fit into your plans for Kotai.

We don't feel we have any problem raising capital and the large dividend was to give shareholders money.

And the piece you missed in between was that we did a $400 million bond deal at the Wynn Las Vegas level and at the end of the year, we looked at what our aggregate cash needs were including the undrawn facility, which is over a billion dollars at the Wynn Macau level, which theoretically would the equity for our Kotai branch.

So we have unmatched financing capability in terms of our cash and leverage and we have always done things that are shareholder friendly in terms of returning capital to our shareholders.

We did it in '06 and we have the ability to do it based on a series of transactions.

There's an advantageous tax rate for shareholders.

It was a 3% tax rate.

We'll put out the final number in March.

But I guess --

And so that's a nice thing to do for shareholders.

I guess I'm trying to understand what the timing of the share issuance was, if you didn't need it for capital raising.

When we did the equity -- It is a job and you can take this as a final statement on the subject going forward.

It is the job of the board of directors and especially the CEO to take advantage of market and that market movement is extreme.

Now, when a company increases its value by 50% in 60 days, that's an unnatural movement to value and the market also goes the other way sometimes.

These unnatural movements -- no company gets to be worth twice as much in 60 days as it was before to any intelligent person.

When that happens, we take advantage of it.

If everybody is hungry for shares, we let them have it.

And if the shares goes down, we buy them.

That policy is a statement of policy for this company.

Period.

Okay.

Great.

Thank you.

Thank you.

We have reached the end of allotted questions for today.

Are there any closing remarks.

Just that it would be nice -- we always seem to get questions every quarter from the same five or six people, and you mention there were 200 people on the call, and I was hopeful that somebody -- somebody new might have a more -- a question that attacked our business from a different angle, for example.

And if that's not the case, we'll say thank you and good-bye to everybody, but we're always anxious to hear from new people, if they are on the call besides our competitors.

Thanks, everyone.

Bye-bye.

Thank you for participating in today's Wynn Resorts limited fourth quarter conference call.

You may now disconnect.