Wynn Resorts reports booming profits

By Amanda Finnegan

Published Thursday, July 29, 2010 | 2:14 p.m.

Updated Thursday, July 29, 2010 | 3:22 p.m.

Wynn Resorts more than doubled its profits during the second quarter of 2010 as business continued to boom in the Macau region of China.

The Las Vegas-based casino operator reported a net income of $52.4 million, or 42 cents per share, compared to a net income of $25.5 million, or 21 cents per share, in the second quarter of 2009.

Net revenues for the quarter totaled $1 billion, compared to $723.2 million in the same period of 2009. The company said the increase was primarily driven by the 74 percent increase in revenues at Wynn Macau.

At Wynn Resorts Macau operations, net revenues were $714.4 million during the second quarter of 2010, compared to $410.4 million in the second quarter of 2009. Wynn Macau generated $216.2 million in earning before interest, taxes, depreciation and amortization, compared to $117.2 million in the same period of 2009.

In April 2010, Wynn Resorts opened its $550 million Encore Macau. The resort included 410 suites and four villas, along with restaurants, high-end stores and a casino.

Wynn Resorts will soon be adding a new property to its Asian portfolio. Wynn Resorts Chairman and Chief Executive Steve Wynn said the company presented its Cotai project to the board of directors shortly before Thursday’s earning conference call. Wynn said they now know the property’s components and what it will look like, but did not share other details besides that it will have somewhere between 1,500 and 1,600 rooms. Wynn said drawings for the project will begin in the next few weeks, and more details and financials will be presented during the third or fourth quarter.

Wynn Resorts Las Vegas operations, which include Wynn and Encore Las Vegas, posted an operating loss of $17.2 million, compared an operating loss of $8.3 million in the same quarter in 2009. Net revenue increased 1.7 percent to $318 million. The results were on target with what the company released in its preliminary earnings last week.

The company reported EBITDA totaled $65.1 million for the quarter at its Las Vegas properties, down 13.7 percent from the second quarter of 2009. Wynn attributed the EBITDA decline to higher employee health care and benefit costs, higher marketing expenses and higher repair and maintenance costs.

In June 2010, Wynn Resorts Chairman and Chief Executive Steve Wynn announced he had laid off 261 employees to reduce overstaff and return 3,700 employees to full-time work weeks and full wages. Wynn said the changes would increase payroll costs by $7.7 million. Without the layoffs, Wynn said it would have cost $10 million to bring everyone back to full-time hours and increased pay.

Wynn and Encore Las Vegas achieved an average daily hotel rate of $197 for the quarter ended June 30, down from $218 in the second quarter of 2009. The properties' occupancy was 92.6 percent, compared to 86.6 percent during the prior-year period.

Wynn said during Thursday’s conference call that the company is in the process of renovating the 5-year-old Wynn Las Vegas. The operator is spending $99 million to redo the hotel’s rooms, with a completion date expected for April 2011, Wynn said. The resort is also adding a new restaurant in the former space of Daniel Boulud and a concept from Morton’s Steakhouse owner Michael Morton. Those will open in October, Wynn said.

“One of the things that’s happening here is as the market softened, many of these companies with very bad capital structures neglected their properties rather severely, and the properties are all showing the wear and tear. The minute the place is not clean or is threadbare, it has a very a bad affected on your clientele,” Wynn said.

Net casino revenue in the first quarter of 2010 was $117.2 million, down 5.8 percent from the second quarter of 2009.

Food and beverage revenue in Las Vegas increased by 11.5 percent to $111.5 million during the quarter, primarily due to the opening of the $67 million Encore Beach Club and Surrender Nightclub in May 2010.

Wynn said the nightclub and pool club have been performing ahead of plan and have had a minimal impact of the resorts’ other clubs.

Entertainment revenue increased by about 27 percent to $15.6 million from the second quarter of 2009 as result of Garth Brooks’ performances and increased revenue from Le Rêve, the company said in the report.