永利渡假村 (WYNN) 2008 Q3 法說會逐字稿

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

Joining the call on behalf of the Company today are Steve Wynn; Marc Schorr; John Strzemp; Matt Maddox; 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.

At this time.

all participants are in a listen-only mode.

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

(Operator Instructions)

Thank you.

Now I would like to turn the call over to Mr.

Maddox.

Please go ahead, sir.

Thank you.

First, I need to remind everyone that we will be making forward-looking statements that may or may not come true under the Safe Harbor of federal securities law.

So before I turn it over to Steve, I just want to spend a couple of minutes talking about a very hot topic in the United States and in particular in gaming, liquidity and the health of someone's balance sheet.

Wynn Resorts is in an enviable position, not only in gaming, but in any industry that is capital intensive.

And here is why.

We have $1.7 billion of cash on hand.

Plus we have $500 million available on a revolving credit facility, meaning total liquidity right now is $2.2 billion.

We have approximately $500 million left to spend on Encore Wynn Las Vegas, which will open in the next couple of months.

We also have approximately $500 million left to spend on Encore Wynn Macau.

So we have roughly $1 billion of CapEx left to finish our two major projects, meaning we have over $1.2 billion of excess cash on hand before any credit for free cash flow.

What that means is we can pay off all of our debt maturities over the next three years with the cash that we have in the bank right now and still have hundreds of millions of dollars of excess cash flow.

On a ratio basis, we are also in a very good position.

We have $4.9 billion of debt.

If you back off the excess cash of $1.2 billion, that is $3.7 billion of debt.

Last 12 months EBITDA, $800 million, meaning our debt to EBITDA is around 4.5 times.

And that is before -- that is fully funded debt before our projects open.

That is a position of strength and we believe that this is going to allow us significant flexibility to navigate our way through the next three years.

With that, I'm going to turn the call over to Steve to talk about the quarter.

These conference calls have taken on a whole new dimension as the country goes through everything.

And I've always thought -- because I'd like to comment on what Matt said -- to me, from day one, even in the old company at Mirage Resorts and the Golden Nugget, I've always considered the balance sheet to be part of our marketing strategy.

You know, you design and developed these places, and of course the architects and designers do everything they can to make the building functional so the employees can give good service and to make the building pleasing and inviting so that people will come back.

But once the place is finished, as Encore will be and opened in 53 days -- 52 or 53 days -- on December 22 -- the franchise, the future, the value of the enterprise is almost totally dependent upon one thing, customer experience.

And customer experience is almost totally dependent upon the human resource factor; that is to say the staff and our ability to make them interface with the customers in a wonderful, personal, ingratiating way.

Then people love the place no matter how much marble or carpet we've got.

And they want to come back.

They are willing to pay the price.

We keep the promise with the service.

They tell their friends.

And in a high-line place, whether it is a department store or a hotel or a car, it is word of mouth that makes all the difference.

And price is the most important thing we ever say to our customers.

The public discounts almost everything we say with our commercial speech, but they do not discount price, which is why we protect ours so jealously.

If human resource engineering is the key to the franchise and the endurance and the viability of the enterprise, then the most important thing about human resource engineering is that, first of all, before you get fancy, the employees have to feel safe -- safe.

That means they are not worried about job security, they are not witnessing cutbacks and all kinds of economical things that involve cutting back on capital expenditures or improvements or keeping the place up to date and clean.

Or even worse, layoffs.

Once you do one layoff, you might as well do a thousand, because everybody is wondering who is next.

And if all of this is a simple truth and one can accept that easily, then it becomes clear that the balance sheet is a key ingredient in the marketing of the enterprise.

And I have always thought so.

And that is why when we built this hotel, before we borrowed a dime of the $2.7 billion it took to build this place, we had $1 billion in cash and we borrowed $1.7 billion.

Not exactly a highly leveraged transaction, with the help of Deutsche Bank and our other banking friends.

So that mentality, which was in place when we built the Golden Nugget into Mirage Resorts, the day that we sold the company to Kirk, the leverage was minimal.

And the leverage is that way again.

So nothing is new for us.

Our philosophy hasn't changed.

We are not going to change.

We are going to keep the promise -- whether the occupancy in this hotel is 98% or 87% or 78%, the people to check into this building, they expect us to keep the promise as if it was full.

We don't get to compromise our service by saying, gee, times are tough around the country and we can't keep the place clean, or something like that.

So, we've planned for this kind of time, not because we are prescient or we have crystal balls, but just because it is a fundamental aspect of our operating philosophy.

Encore is going to be open in a few weeks; it's the prettiest thing we've ever done.

I'm in love with the place and everybody who has seen it thinks it is terrific.

That sounds like developer speak and it is.

I will take questions.

Thank you.

(Operator Instructions) Steve Kent, Goldman Sachs.

Hi, Steve.

A couple questions.

One, can you just discuss if you've seen any changes in October revenues or trends in both Macau and in Vegas?

And then just talk about the bad debt reserve, because obviously that was a little bit different than what we've seen before.

And maybe given your experience in the industry, what kind of changes in bad debt collection have you seen in prior downturns -- changes in any customer behavior --.

Hi, Steve.

Thank you.

I'm going to let Andy take part of that answer.

But with regard to the bad debt reserve, which is my business, to a certain extent -- we had a good quarter, made a couple hundred million dollars.

And I am watching TV and reading the same things that you all are reading, and I am saying, sooner or later, that has to come a cropper in some form or another.

Now, we have always been highly reserved.

And in my entire 40-year career, I have never had a situation where I wasn't reserved enough.

I'm serious -- in about 40 years, my colleagues and I have able to understand credit and our customers well enough.

But again, we've been on the conservative end of giving credit.

We don't use credit as a marketing tool in this company.

We give credit to people who really don't need it when they ask for it.

We don't provoke playing by saying, here, we will give you more money.

We have never done that in the whole 40 years.

So as a result, we've got this terrific credit history.

We've never been underreserved -- ever.

Never had to make a special assessment.

This time, I had a chance, since we made enough money and I wasn't really worried about the stock price but about conservative financial management, I said, well, look, let's take $22 million and shove $11 million in China and $11 million in Las Vegas in anticipation of the fact that some of our customers might get in trouble, even though I hope they won't.

It was a prophylactic measure.

And our auditors agreed that such a measure in such an extraordinary moment in history wasn't unreasonable.

And they will examine it, as I will, as we go in the weeks ahead to see if it was justified; and if it wasn't, I will put it back.

But I am being very conservative.

And it's nice to be in a position where you're making enough money to be conservative.

Andy, would you talk about -- and maybe Ian -- talk about changes in revenue as you see it?

And equalize or normalize whole percentage.

Don't play with ; just talk about activity levels.

I think through the third-quarter, our business volumes (technical difficulty) I think we fared better than most here in Las Vegas.

In October, we have clearly seen more significant softening.

So most of it has been isolated to midweek business.

Our weekend business has held up fairly well, but I would say that the softening is fairly isolated to our midweek activity.

And I would say that generally it has impacted all the different sources of business fairly equally.

So walk-in business is off.

Occupancy midweek has softened.

And that has translated to reduced covers in our restaurants and lower volumes of activity on the casino floor.

So where I think we were trending anywhere from 3.5% to 6% in terms of top-line business being off through September, we are seeing more significant declines now in October.

Ian.

In Macau after September showing some weakening, October has been relatively positive.

We had a very good October holiday period, and business since then has been reasonably strong.

So we are reasonably encouraged; there's been a bit of a bounce back.

So we are looking towards the rest of the year being off a little bit, but not too consequently.

As of -- I know you were going to ask this question, somebody.

And I was looking at our EBITDA, our cash flow.

For 305 days through last tonight, we have made slightly more of an increase in China than the decrease in Las Vegas.

So as we go into these last 60 days, we got a few million dollar cushion to end up sort of like last year, but who knows what November and December will be like.

China is pretty stable for us.

Las Vegas is, as [Terry Lanning] and everybody else has said, a little murky.

It would strike me that if you were a citizen, rational, educated person, certainly someone who had the accomplishment and the success in life to be a customer of ours, if you were watching TV or reading the newspapers, you'd have to be half nuts to spend money instead of waiting around and checking things out to see how the world is going to shake out.

I mean, this is like after 9/11.

The communication -- cable communication and all the rest, they exaggerate -- everything is hyperbolic, everything is exaggerated, everything is the big story of the moment.

And in this particular case, we've got reality that is tough enough, and then when you amplify it with all of the news sources and all the talking heads and all the people that think they've got a right or weight in on this subject, not to mention the rhetoric of the campaign, all of this has -- if the public isn't jolted, then the public is totally immune to being jolted.

And so I don't take the results of the last few weeks to be indicative of the future.

Not to minimize the liquidity problems that face very important sectors of our economy.

In terms of the consumer spending, I think that what we are seeing now is almost a freeze, and like a muscle that is flexed, you can't hold it for very long.

People will relax and return to their habits sooner, I think, than later.

That is not to say that I think revenue is going to skyrocket or go through the roof or return to other levels, but I think that right now, Las Vegas is seeing pretty much some of the worst of it.

Thank you.

Joe Greff, JPMorgan.

Good afternoon, everyone.

Steve, given your liquidity position and capital strength, do you view acquisitions any differently than you have before?

Has that become more interesting to you?

No.

In the gaming industry?

You mean buying --

Or hospitality industry.

No.

No, we don't want to buy anything.

There is nothing that we see that we want to own.

We do better building our own stuff.

And we will have plenty to keep us busy by taking care of -- you know, we've got a hotel opening in a few weeks and another one opening up in a few months, 12 months from now in Macau, both of which are the proudest products that either market has ever seen.

I predict that the Encore property, when it is experienced visually by people, will represent a breakaway moment in terms of casino design.

We have done things there that we've never done before nor has anyone else.

And now that we have a chance to see it with the carpet down, I mean, this business of having no walls in the casino, having it all glass has an energy, an uplifting kind of thing that all of us in the Company are getting a great deal of pleasure out of, because it is great when something turns out good.

So we are all -- in the middle of all this confusion and uncertainty, we are all having sort of a good time looking at our new puppy.

Great.

Thank you.

And Matt, did you buy any shares back in October?

No.

No.

104 million shares outstanding, that is where it stands.

Celeste Brown, Morgan Stanley.

Good afternoon.

Steve, if you are not going to buy anything else, are you going to hoard your cash until you feel more comfortable, just like consumers are uncomfortable?

Or is there something you're thinking about in terms of your liquidity over the next couple of years, something you are thinking about doing?

Thanks.

You know, Celeste, if we can get Encore off properly -- there is this whole period that we always have, the first six months of a new hotel -- we call it a period of stabilization.

That is a very big assignment, and it takes Andy and Mark and David Sisk, Maurice Wooden and Rob Oseland, all their energies.

I think if we can do a good job at that, we will have occupied ourselves productively.

And then there is all the other ongoing stuff in China that is -- there is a market so dynamic it changes every five minutes.

It's a fascinating place; it's wonderful to do business there.

Very wonderful to do business in China; we are grateful for being there.

I think maybe we'll just sort of bide our time, pay attention to our -- watch our P's and Q's, and get this place all stabilized.

We had -- incidentally, one of the serendipitous and nice side effects of opening Encore was it gave Andy and his team a chance to react to the changing demand that Steve Kent asked about.

For example, there is no question that, as Andy says, you know, demand for midweek rooms softens.

And we've got a very, very dynamic program to open Encore.

But nevertheless, you might, in good times, project 95% occupancy.

That is what we always had for the last 40 years, 95% to 100% occupancy whenever we open a new hotel.

Let's say now you say, well, I'm not sure that we are going to be able to pass 90%, that we might be in the 80s.

Or maybe midweek you could be in the high 70s or low 80s, in a worst-case scenario in 2009.

Well, what do we do about that?

Now, I have already said numerous times that we are not a company that gets to bounce around and change staffing levels and compromise service.

We don't do that here.

This is a high-end, elite company.

We cater to a very special part of the market and that is where we are staying.

However, there are flexibilities that are available to management.

And one of the really wonderful moments that occurred is when you open a new hotel, and let's say you've got 5500 or 5600 jobs, some people transfer from Wynn and then we fill in behind them, and some people are new hires at Encore.

Well, what we are able to do is we said, let's alter the compendium.

Let's make an adjustment and do base staffing to a lower level, and we will do new hires less than we would have in boomtime and we will use steady extras.

In other words, we will transfer more people from Wynn, which allows us to take advantage of every single economy that we think is acceptable with our level of service.

And you always know how to make a place a little more efficient.

In our Company, we wait until someone quits and then we don't rehire.

That is called lowering your staffing by attrition.

Well, attrition is slower, but it also keeps everybody safe.

Well, now, we can transfer people to Encore in new jobs without laying anybody off, tighten up our staffing and use steady extras until we see the level of business at Encore and then put more people on full-time.

That gives Andy a tremendous -- I guess you would call it nozzle or valve to adjust staffing levels and payroll painlessly and invisibly to our existing employees.

That was one of the silver linings to the cloud that is hanging over Las Vegas now and whatever uncertainty we have described in Encore.

So we have in able to rig -- to use a submarine term, we are rigged for silent running, as much as one can do when you have an operation like we operate.

So, that has been an interesting thing that we are able to do, and we made that adjustment during the end of September and the beginning of October and we are set now for that.

I don't know if that is helpful to anybody.

But we don't do layoffs and we don't cut back.

But we can -- we can staff both hotels leaner when we are hiring 4500 to 5500 new people.

Anything else?

No, thank you.

That was going to be my next question, so thanks for answering it.

Rachael Rothman, Merrill Lynch.

Good afternoon.

I just wanted to follow up on the liquidity issue a little bit.

Obviously, you guys have done a tremendous job of managing your capital structure, not just keeping in a financial flexibility, but opportunistically (multiple speakers)

There's a lesson --

-- buying in volume, buying in shares.

Can you kind of prioritize for us, you know, you guys were buyers of your stock in the '80s with the stock where it is a now -- or maybe do you see your bonds as a better opportunity to drive returns for equity holders?

Or are you just going to sit with the cash as it is?

I am going to let Matt deal with that.

But I want you to know that the relation -- having the capital structure that is particularly suited to a particular business is a lesson that I've learned from Mike Milken.

Michael taught us about the importance of capital structures, like that old antidote horses for courses, and capital structures for businesses.

And in the '70s and the early '80s, Michael and I discussed -- and I must say I got an education about it -- the importance of a certain kind of capital structure for a service-intensive, labor-intensive business such as ours.

And those lessons that I got from Milken have done us -- you know, they've worked for us.

As far as what to do with the money, Mr.

Maddox is the guy that dreams about that sort of thing every night.

Rachael, the way I look at it is not just in the gaming industry, but all industries right now, people should be focused on deleveraging.

In times of uncertainty, you need to make sure your balance sheet is very, very flexible.

And the ability to deleverage and discount is a tremendous opportunity for companies, in particular if they have current -- if they have short-term maturities.

So to me, that is something that we need to be focusing on first, until we really see the smoke clear from what is going on in the US.

And, Matt, if I could, I believe that the yields are worst on some of your maturities is in the 14% range.

Have you guys made any open market purchases of any of your bonds either during the quarter or subsequent to?

We have not.

Great.

And can I ask one last question?

Sure.

Okay.

Great.

This is just kind of a bigger picture question, maybe you could educate us a little bit.

In terms of the RevPAR figures that we have seen out of -- we can just take Las Vegas as a whole, if you don't want to be specific.

Some of them have seemed higher than what I would have expected given the weak macroeconomic backdrop and your commentary about the muscle and it being like September 11.

How do we think about or how do we go about ascertaining for some of the properties generally what the right mix of cash versus non-Cash RevPAR is, and whether or not some companies may be -- I don't want to use the term inflating -- but maybe their RevPAR may be overstating the true economics of the business if that is non-cash rooms?

Andrew Pascal.

Do you have an opinion on that?

I do.

I know that we typically don't give a lot of transparency to the composition of the hotel revenues.

RevPAR for us is off about 4%, maybe a little over 4%.

I can tell you that our cash-based revenues are up slightly.

The things obviously that will impact that is -- I'm sorry --the cash-based revenues I said were off slightly.

I didn't mean to imply that they were up.

That can be impacted, obviously, by having to be more aggressive in the market, trying to stimulate demand.

And so as I alluded to earlier, I don't think it's unique to us that we have got softer business midweek, and so there's an opportunity for us to go and reward kind of our loyal customers with opportunities to come during the midweek period.

And so that clearly is going to impact the composition of your revenue.

I can't speak for anybody else.

I know that we do that.

I don't think we do it nearly as extensively as most people because we are very careful to protect the integrity of our rates.

We don't want to get into a cycle or a pattern where we start diluting or reducing what we think is the value of our product by how we price it.

And we certainly don't want people to get into a position where they just simply wait for some kind of a discounted offer or a complimentary room before they elect to come and visit us.

So those are the kinds of factors that we take into consideration when we do things that impact the composition of our revenue.

But for the most part, we've been able to maintain our RevPAR.

Cash-based business is off slightly.

And as I alluded to, with the kind of changing composition of our demand going forward, I would expect that trend to continue.

Does that help you?

Excellent, thank you.

Yes, thank you very much.

Okay, good.

Who else has a question?

Robin Farley, UBS.

Thanks, two questions.

One is I know, Matt, you were talking about the importance of deleveraging and --

Robin.

Robin, there is static on your line.

I don't know if this is any better.

Yes.

Just to be clear, you were talking about deleveraging.

So share repurchase or special dividend is ruled out for now.

Just to sort of clarify -- I think that is what you were saying, without saying it exactly.

And then my other question is it just the timeframe for [Koti] development or golf course development in Las Vegas, what are your thoughts there?

And are those thoughts impacted by what is going on with the market?

In other words, are you thinking of those as delayed now versus what you may have thought previously, given the financial markets?

Question number one, special dividend or deleveraging.

Clearly, the answer from Matt and I and the Board of Directors, our focus is on deleveraging.

Deleveraging.

Unequivocally, that is the priority in this shop, along with taking care of our new customers at Encore and our staff in both hotels.

[Koti] and the golf course.

I think that if anything, the events with the economic environment that we are in and the implications of it would tend to slow us down and make us wait and see, and certainly take away any sense of hurry or being impulsive.

I don't think there is -- again, remember, you are talking to a company that has two hotels under construction, neither one of which is open yet.

So, as far as expansion and growth, for the next 12 or 13 months, we've got openings and expansions.

If they are successful, then we are going to have an EBITDA line that is substantially bigger than the one we've had in the past.

And that will be good enough for me.

I don't have any kind of pressing need to rush into a new hotel at [Koti], especially until I have some evidence that -- some evidence that the expansions of our neighbors have been absorbed by that market.

At the present moment, there isn't one shred of evidence to indicate that the current expansions have been absorbed, let alone any additional ones.

And that concerns me a lot, because at the end of the day, whether we're talking about Las Vegas or Macau, we are part of this community.

And we drive this Company on oversaturated, overbuilt markets, where we can skim off the top level.

That is our gig; that is what we do.

And we love it when everybody else is building a lot of stuff because more people come to town and more people stop by, check us out, think that we are prettier, because bigger ain't necessarily better; better is better.

They find that out about us, and then next trip, they stay with us.

I don't need another hotel right now in order to keep that program.

I've got this one and the one next door in a few weeks, and then the one that is in Macau that is so wonderfully accepted.

And then we've got one next door to that that is the absolute all-suite hotel -- the Encore there is 404 suites and villas; it is the fanciest thing we have ever built.

And that is all we are going to do, Robin, for now.

I don't have any plans on rushing into anything else.

Okay, sounds great.

Thank you.

Bill Lerner, Deutsche Bank.

Not sure how to ask this prophylactically, so I will just give it a shot.

As you guys have increased bad debt reserves, maybe you have tightened player credits --.

Yes.

Okay.

So I guess my question then is not assuming that has happened -- since that has happened, Steve, what's happened to behavior at the high end as you have done that?

And are you inducing some sort of essentially declines at the high end right now?

No.

You know, Bill, for us -- for us, tightening means reviewing our credit files, checking everything out again.

We don't -- we are not in the face of our customers; I didn't mean to suggest that.

It's a question of how much research we do in reviewing currently the status of the people that have credit here.

But the kind of people that come to win in Macau and in Las Vegas are very -- are usually really deep.

We've got high-end business every single day.

I don't think we are inducing anybody not to play, but on the other hand, I don't want this Company to be used as a bank.

And the fact that customers may use casinos as banks will not be a new phenomenon.

My friends at Mirage Resorts that I spent 27 years with will attest to the fact that that is a thing that happens if you are not diligent and you don't watch and know how to run the floor of the casino.

People take money and don't play or -- which is the worst.

Or people take money and don't pay, which makes it no fun at all.

So we are careful.

And increasing the reserve was a real fit and proper way of putting $22 million aside at a time when people should put $22 million aside.

Maybe we will find we don't need it.

And perhaps that is true.

But we had enough of a predicate this time to do it and still stay within the guidelines of the SEC and the Internal Revenue Service and our auditors, Ernst & Young.

But we are being cautious and it's part of our general strategy.

That is helpful.

Thanks.

Larry Klatzkin, Jeffries.

Hey, Steve.

A couple of things on regulations in China.

Any feel for commission caps, lifting of visa restrictions?

I hear rumors they might be increasing the number of cities you can get the individual visas from.

Any word on what you are seeing out there?

I think I have heard some of the same rumors you have.

The reason that we don't get too excited about it either way is this -- and I think this probably makes a major difference between us and some of the other fellows over there.

We are very fortunate, privileged and grateful to be invited into the People's Republic of China and Macau.

It was the greatest break that any company ever could have had in this industry.

And we have benefited beyond words by the opportunity to be there.

The thing I have learned, with the help of some friends of mine that we go to for advice, and among them are Mr.

Kissinger and Stapleton Roy and people like that who we've asked for consult.

That it's important when you're a citizen, a corporate citizen from another country in China to listen and to fit in, to try and fit in and be helpful and useful.

When they changed the rules in Macau, they wanted to expand the market and bring in a different kind of clientele and a different kind of building.

So they chose a couple of Americans and other people to do so.

And we fit into that formula, thank goodness, and we were helpful in achieving that goal.

Now the government, as time goes by, decides that the economy of Macau is overheating, not to mention problems that are nationwide in the PRC.

But the economy of Macau is overheating.

That the cost of living is escalating too, that the regular citizens in that community are finding it difficult to pay for increasing rental in apartments.

That there is a squeeze on the cost of living in Macau.

All associated with this remarkable boom of building and expansion that we've all been a part of.

And so the central government, in conjunction with the local government, the Special Administrative Region of Edmund Ho, decides to cool it down a little.

We listened to that, because that is what you are supposed to do in China, listen.

So if they decide to cool it down, we are not salmon; we don't swim upstream.

We conform and we slow down.

And we don't get excited about it; that is part of the game, that is the business there.

You are part of a bigger picture.

You are part of a program that involves more than just your business week-to-week.

You are part of an economic, political -- geopolitical idea of changing a community.

And that can go too fast and backfire, and it started to do that.

Or it can be done at a normal rate.

Now, when the government regulates things like this, they can do so in a number of ways and, of course, each of those techniques have repercussions, which are intended.

We listen to those -- we listen to those changes, we understand why they are made and we go along with it.

And if they want to slow down, we slow down.

If they want to take it easy, we take it easy.

But most of all, what we do while we are there is take very good care of our employees, because there is a strong, strong feeling for Chinese business -- even though we read so much about the democratization of a communist country, the capitalization, the use of the capital markets and the freedoms, there is a very strong tendency or prejudice in governmental policy that is pointed at caring for the people there in a very nice, compassionate way.

So the government tends to focus on things like the living standards in Macau in the way they deal with the businesses.

And if that is the way it works over there, you best to pay attention to it.

And we do.

That is something I don't mind sharing on this conference call because I think it is relevant.

Okay.

That is fair.

Steve, I know you are not out there looking for things, but there definitely possibly over the next six months some unusual bargains and gaming assets out there.

And I know you've never really bought other people's problems, but is there a point, the right price where someone else's problem actually becomes your opportunity?

It's best never to say never.

I would have to have that explained to me.

And I don't think I would want to go any further on a hypothetical with that, because I am not thinking of anything offhand that I could respond.

Okay, that is fair.

And the Matt, CapEx for the fourth quarter, how the remaining $5 billion to be spent is broken down.

Matt.

The $500 million, that is for Encore Wynn Las Vegas.

It will be about half in the fourth quarter and the other half spread through the first two quarters of 2009.

Okay.

But Wynn Macau is really backloaded at the end of 2009.

We tend to settle up with the builder after it is open.

That will happen after January 1.

And then last question, I know in this economy, we really aren't looking in this direction, but anything going on in Japan?

We haven't heard anything new, other than the usual static that this committee or that committee is considering it.

And I know that all of the casino companies run over to Japan at the drop of a hat and tell everybody how great they are.

The fact of the matter is this reminds me of England, when everybody thought they were going to turn into Las Vegas and we didn't.

I think the changes in Japan will come very slowly, if they do.

And I don't think we'll have a clue as to what the business opportunity is until we know what the rules are -- or where.

I think you can make the same statement about a number of countries in Asia.

And that is another reason why we took our time in Macau.

We looked at Macau not only as a business opportunity, but we also said Macau is going to be our showcase.

Best we take our time.

Best we do a good job.

Because everybody -- any political or entity in Asia who is thinking that they may want to have integrated destination resorts will look to Macau to see how good we are doing.

Just as China looked to Las Vegas and that is how we got the concession, because they liked Bellagio and Mirage, our work in those two places, and Shadow Creek.

So I looked at Macau as a place where our relationship to the community, our relationship to our employees, how caring we were, how well we operated our business, what kind of a place we built, all of that would be our story.

Because, you know, owners and chairmen and presidents and executives, they can flap their jaw from now till next Sunday, and it is all self-serving claptrap.

The fact of the matter is businesses are like horses; they run true to form.

And people that do good work continue to do good work.

And if you were a country like Japan or any other country that was looking at a company that you could trust to do a good job, you would look at what was done in Macau and what was done in Las Vegas.

And that is one of the reasons why we take such good care of our property.

Because at the end of the day, if there is to be a beauty contest -- for lack of a better term -- or a selection process, the best argument we make is the work and the hotels that we are operating.

And I think that is all we've really got to do.

So I don't run around in new jurisdictions very aggressively.

I don't need to.

Anybody that is looking at gaming knows all about Wynn and the Wynn Company.

They know who built Bellagio and Mirage.

I don't need to repeat it.

It works just fine.

That is a fair comment, Steve.

Thanks.

Dennis Forst, KeyBanc.

Good afternoon.

What I wanted to ask about had to do really with CapEx also.

Matt, did you give any guidance for full '09 CapEx?

I was just explaining that Encore Wynn Las Vegas, we have around $500 million left to spend, and the same thing for Encore Wynn Macau.

Besides that, our maintenance CapEx spend is in the neighborhood of $25 million to $30 million a quarter.

So -- and I believe this quarter it was $25 million on maintenance split $14 million in Las Vegas, $11 million in Macau.

That will probably pick up next year in Las Vegas with the second property opening.

But I would say those are good [run rates].

Okay.

And then for 2010 then, we're really talking just maintenance.

In what?

In 2010, basically just maintenance CapEx, maybe some cleanup on the Macau number.

You are on to the right point, and that is what a lot of people miss.

We have become a free cash flow company with significant free cash flow in about 12 months.

So if you look at what EBITDA we're going to generate less our CapEx, it is a significant amount.

So we are in a very, very good position.

And I also want to point out we are very confident in the budget of our property.

We are in the final throes of Encore Wynn Las Vegas, and $500 million is, I would say, at the high end of what we have left to spend on that property, and the same thing at Encore Wynn Macau.

Okay.

And the Wynn Macau number escalated from 600 to 700.

Am I right about that?

Yes, I mean --

It's still changing.

It's still changing.

(inaudible) budget is around 650 right now internally, with quite a bit of contingency in it.

But we tend to round up in our disclosures, so that is why we have 700.

We made it bigger.

We made it -- we added a couple floors.

Okay.

The last question was about the tax benefit in the quarter.

Can you explain to us how the tax rate works?

Again, we had a benefit, and that is really solely because the domestic income, which is domestic EBITDA less pretty most of the interest expense and depreciation and amortization, in pre-opening -- we had around $14 million of preopening charges at Wynn Las Vegas -- caused a loss on the domestic income side.

Most of the debt is domestic debt.

$3.8 billion -- $2.8 million at Wynn Las Vegas and $1 billion at (inaudible).

So your domestic income is a loss; your foreign income is a significant gain.

So you've got (multiple speakers) taxes on domestic.

Yes.

Okay, good.

And then lastly, if you are talking about deleveraging, someone asked whether you've bought bonds, and you said no you have not.

Why haven't you bought bonds if the yields are in the midteens?

What the equity guys should really focus on are not as much the yields, but current maturity.

I think you will find companies throughout any industry, not just gaming, should be very, very focused on current maturities or debt that is going current in the next 12 months.

Because there is no assurance that the capital markets are going to come back.

So that is the debt that you need to focus on and take out first, and then after that, you start looking for yields.

Okay, good answer.

Thank you.

David Katz, Oppenheimer.

Hi, afternoon.

A lot of questions today, wow.

Lots to talk about.

Can you give us -- or try and paint us some kind of a relative picture, with Encore opening in the demand environment we are in, where are you envisioning the Encore customers coming from?

If you can give us a picture of how much is new entrants to the market, how much will be sort of out of your own and how much you expect to capture elsewhere.

Whatever you can tell us there would help.

Well, I don't want to add to any of my neighbors' woes, so if I were to answer that question candidly, I would say that our market share will increase in Las Vegas.

Does that answer your question?

I think it does pretty well.

Thank you.

Susan Berliner, JPMorgan.

Good afternoon.

I missed a couple of minutes, so I apologize if this question has been asked.

But I was wondering if you could explain, I guess, since you guys have a lot of liquidity, why you drew down on the remainder of your US revolver?

Sure.

The US revolver was to fund the project Encore Wynn Las Vegas.

And with two months to go and with the crisis going on in the financial industry, I determined that we should take the money now, because I wasn't quite sure what banks were going to be left later.

Matt got scared.

So we drew down the last $360 million.

And it is only really three months, 2.5 months of negative carry.

Because the last thing you'd want to do is not have the money to complete (technical difficulty).

Okay, great.

Thank you.

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers.

I would now like to turn the call back to Mr.

Maddox for any closing remarks.

It's Steve, and I don't want to shut anybody off.

I know it is a sensitive time.

If it's really important to answer any more questions and anybody feels urgent about it, I guess we will be glad to extend a little bit.

I know that if I were an investor, I would want to try and get as much information as I could these days.

Mainly what we tried to do today is to reiterate that in this company, first an idea, then a building or a hotel.

First an idea, then a human resource program.

What I think is most important at a time like this for people who are interested in investing in Wynn Resorts is to know what are the thoughts and the priorities of the people who are driving the car.

And that is why Matt and I and Marc Schorr and Andy Paschal and David and John Strzemp, we are all here with Ian.

And I think probably if you're paying attention, you hear a pretty consistent story from us.

And I think that more or less will tell you how we will react to situations as we go along, no matter what those exigencies or contingencies may be.

Is there anybody else that felt they got shut out of asking us a question today?

Mike Shrekgast, Longacre.

Okay, Mike.

You want to ask us a question?

Go ahead.

Yes, that would be great.

Thanks, Steve.

I was just wondering, could you guys just bridge the gap in the cash balance?

If you ended last quarter with $1.4 billion, you drew down $1 billion; that takes you to $2.4 billion.

And you ended with $1.7 billion.

That implies $700 million cash outflow.

If you net CapEx against EBITDA minus some of the cash charges, it sort of looks like there was a greater outflow of around $460 million.

Is that just the gross CapEx that I am missing?

No, what you are missing is we did repurchase stock in July that --

Oh, that was like the 330, correct?

Exactly, that we disclosed on our last conference call.

So I think that is the majority of what you are missing.

Okay.

And just real quickly, on your comment, Steve, at the beginning regarding the softness in the midweek segment.

When you look back, having built this thing right before the economy rebounded last time, I guess what is your feeling here as you look at the weekday business versus the weekend business?

I would think the weekend business, yes, you can always fill confident about the weekday business that it was maybe giving you the extra -- giving everybody the extra margin, the extra hotel dollars over the last couple of years.

I'm going to let Andy comment on that.

But look, it is what it is.

We opened Mirage in November 22 of '89.

'90 was okay, but we ran right into the recession after that.

Mirage powered through it.

Mirage powered through it.

It had better days after the recession, but it didn't get in trouble during the recession.

Andy, this business about the midweek, do you want to --?

I think historically, we have always relied midweek more heavily on the convention business than the leisure segment.

Convention business typically books much further in advance and then you layer in the leisure segment, which allows you to build your base and then you can yield up from there with your transient segment.

And so there is just a lot less certainty in what is happening with the convention business.

I think across the board, industries are just looking at how and where they are spending their money, and there is just a little less predictability there.

So I think as things start to stabilize and people get a bit more comfortable, then we would expect that those commitments will firm up and the midweek business will strengthen and we will kind of return to where we were.

It's Marc Schorr.

However, the first quarter of 2009, we see a stronger February and March bookings this year in convention business over the previous year.

Do we?

That is nice.

Anybody else before we say bye-bye?

Dan Geary, Wintergreen Advisors.

Actually, it's David Winters.

It seems like Macau is doing great and should do fabulously well over the long run, and Las Vegas has its softness.

But in general, people are missing the point.

I mean it seems like the sentiment has just been horrible, yet the Company is doing just fine and you've executed beautifully and created all kinds of asset value from basically nothing over the years.

I mean, when I listen to all of you talk for the last hour, that is what I get out of it.

Does that make sense?

The point is we are here for the long run.

I said on the last time we had one of these calls that I really didn't care about the economy in the sense that it concerned me about the company.

I am certainly concerned about the welfare of my fellow casino operators up and down the strip.

Some of them are very close friends of mine, and I'm worried about their employee base and all of that.

And I am concerned about how much expansion the market can take for their sake.

Not for mine.

For their sake.

But we are who we are.

And for the last 40 years or so -- well at least since 1989, when we opened the Mirage, but even before that in Atlantic City -- and down on Fremont Street, when was it that any hotel of ours didn't increase market share in hard times and prosper, in good times or bad?

I mean, it has been 40 years.

I mean, just take a look.

Look at Fremont Street; we made as much money at the Golden Nugget as all of the places on Fremont Street combined.

We had over 55% of the earnings of the downtown area.

Same thing happened -- the smallest casino in Atlantic City, we made most of the money.

We did more in the first quarter we opened the Golden Nugget in Atlantic City than the other four or five places combined that quarter.

I mean, the same thing was true -- we made more money with Mirage after MGM opened with 5000 rooms with our 3000 room Mirage than we did the year before they opened.

We like it when there is lots of business and people open; we love that.

And we have been consistent all this time and our philosophy hasn't changed, it's not going to change.

I don't care who owns the stock, who doesn't own the stock.

We are running the business for the long term.

And incidentally, in the Wall Street Journal today, they misquoted me.

I didn't say [Puka, puka]; I said [booga, booga], which is an attempt to be humorous and that is what the bogeyman used to say -- booga, booga.

We don't have the booga, booga chills around here.

It is nice of you all to tune in for our call, and we will do our best to deal with the ups and downs of the short-term roller coaster.

And for those of you who own our shares, be of good heart; we will be okay.

For those of you who don't, who you are short-term thinkers, stay out of the Company.

Nice talking to you.

Thank you for participating in today's Wynn Resorts, Limited third-quarter conference call.

You may now disconnect.