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Howard Stutz

Casino Earnings: Wynn Loses $35.2 Million

2 August 2005

Wynn Las Vegas earned $8.2 million during the Strip resort's first 64 days, the company announced Monday.

But when $43.4 million in pre-opening expenses for the $2.7 billion resort are factored into the equation, Wynn Resorts Ltd. said, the company's net loss was $35.2 million for the second quarter that ended June 30.

During the quarter, Wynn Las Vegas generated $201.1 million in revenue, an average of $3.1 million a day. The net gaming revenue for the period was $98.7 million, $34.2 million from slot machines and $62 from table games ($2.5 million was generated from other areas of the casino).

Wynn Resort's adjusted earnings per share was 8 cents, in line with the 8 cents predicted by Thomson First Call analysts. When the pre-opening costs are figured, the net loss was 36 cents per share.

While gaming analysts considered the results a positive sign for the Strip resort, it will take an analysis of earnings through the end of the year to determine the property's performance.

"Out of the box, these are very strong earnings," said Deutsche Bank gaming analyst Marc Falcone. "The pre-opening expenses for a property of this magnitude were expected. When you look at the demand during the quarter, the performance and the results were a very positive sign."

Brian Gordon, a partner in Las Vegas-based Applied Analysis, a financial consulting firm, said a true indicator of Wynn Las Vegas' potential will be gleaned by the third -and fourth-quarter earnings reports.

"You really want to see how the property performs during a typical operating period," Gordon said. "There was a lot of buildup to the Wynn Las Vegas opening."

The 2,716-room Wynn Las Vegas was unveiled April 28, and the company took an unusual step to publicly announce initial earnings for the resort's first 34 days on June 2.

While the company said in a statement Monday that Wynn Las Vegas "continued to perform strongly throughout June," average daily revenue actually decreased from May.

In the first 34 days, Wynn Las Vegas' total daily revenue averaged $4.1 million; for the last 30 days of the quarter, the average daily revenue was $2 million. The gaming win averaged $1.9 million a day for the first 34 days and $1.1 million a day the last 30 days.

Wynn Resorts did not have a conference call to announce the company's earnings and released the operating results after the close of stock market trading. Wynn shares closed at $56.67, up 37 cents or 0.66 percent. In after-hours trading, shares in the company were up more than 2 percent.

"They were pretty clear they weren't going to have a conference call for this quarter," Falcone said. "But, they said we could call them and ask them anything we wanted."

During the quarter, the casino's pre-opening costs totaled $36.9 million, including expenses associated with hiring and training employees, marketing expenses, and various other items. The company said the pre-opening costs were included in the budget.

Wynn Resorts Chairman and Chief Executive Officer Steve Wynn called the revenue generated by slot machines, table games and retail, "outstanding." He said the casino employed more workers than necessary to help with the expected opening rush of customers.

"We deliberately and substantially overstaffed in order to offset our expected initial disadvantages in productivity," Wynn said. "We had more than 9,000 employees working with approximately 58 newly integrated operating systems. In the upcoming months, our main focus will be on raising margins through increased operational efficiencies."

Since the resort's opening, Wynn Las Vegas had an average daily room rate of $284 and occupancy of available guest rooms was 90.1 percent. The revenue generated per available room was $255 per day for the quarter.

Nongaming revenues totaled $127.3 million; food and beverage was $48.1 million, retail was $16.9 million and entertainment operations were $9.6 million.