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May. 02, 2008
Copyright © Las Vegas Review-Journal Wynn says no to layoffs despite decline Company reports 20 percent profit drop 
Wynn Resorts Ltd. will not chase short-term financial gains by laying off employees in the face of the slowing economy, casino developer Steve Wynn said Thursday during a conference call to discuss the company's earnings report. "I am telling anybody who is interested in our company that under no circumstances will I give any consideration, even for a second, in changing our service levels or disrupting our work force," Wynn said during the call in which the company reported a 20 percent decrease in income and a large drop in cash flow at the Wynn Las Vegas. Wynn also announced during the call that his company will develop two 2,600-room hotels and a convention center on the site of a golf course behind the Wynn Las Vegas. He said plans for the project will be ready by December. His comments come after Station Casinos, MGM Mirage, Harrah's Entertainment and some smaller gaming operators have confirmed hundreds of layoffs. Last week, locals gaming operator Station Casinos let go approximately 70 corporate-level workers. In mid-April, MGM Mirage said it was laying off some 440 management employees around the country. The company acknowledged that the layoffs were in response to the souring national economy but also part of a corporate belt-tightening program begun last year. Wynn said he was making the promise to not layoff workers because having them worry about "who's next" is "negative and counterproductive," no matter what kind of short-term fluctuations the economy is experiencing. "In my career, I have never had a layoff," Wynn said, noting this is the sixth slowdown he has been through in 40 years. "We don't intend to do it. We consider the morale and feeling of security our employees have is the most important asset the company owns. More than our buildings or even our concessions." Wynn Resorts said increased operating expenses helped drive down the company's income for the quarter. Net income decreased 20 percent to $46.7 million, or 41 cents per share, for the first quarter ended March 31, down from the $58.4 million, or 54 cents per share, a year earlier. The decrease comes even as revenues increased 22.5 percent to $778 million from $635.3 million. However, operating expenses outpaced revenue growth, increasing 30.4 percent. The jump was largely driven by a $123.7 million increase in casino expenses, a $20 million write-off to cancel the Strip resort's "Spamalot" production and an $11.2 million increase in depreciation costs. Companywide cash flow, defined as earnings before interest, taxes, depreciation and amortization, increased 4 percent to $197.8 million, driven by Wynn Macau. Cash flow in the Chinese enclave increased 63.8 percent to $129.4 million while a lower table hold percentage dropped the Wynn Las Vegas' cash flow 38.5 percent to $68.4 million. Wynn Resorts opened a 75,000-square-foot casino expansion in December. The Macau property generated $1.4 million in cash flow per day during the first quarter, Wynn Resorts Chief Financial Officer Matt Maddox said during the call. "The numbers out of Macau were pretty fantastic," said Robert LaFleur, an analyst with Susquehanna Financial Group, who said he thought Wynn benefited from a high-end position in the market. "Las Vegas was tougher," LaFleur said. Wynn Las Vegas experienced a softening in business volumes that adversely affected the company's bottom line. The Wynn Las Vegas experienced a 32.4 percent decrease in daily table games win and an 11.3 percent decrease in daily slot machine win per unit. Wynn pointed to figures showing slot machine revenues dropped in Las Vegas from $60.4 million to $52.7 million. He called the decline most pronounced in quarter machines. "That is exactly the narrative," LaFleur said, "which is that the downturn in Vegas is much more concentrated in the middle and low end of the market." Average daily room rates dropped $12 to $298, while revenue per available room slipped $13 to $285 per day with occupancy rates at 95.8 percent, down from 96.2 percent. Deutsche Bank analyst Bill Lerner said Wynn Resorts' business in Las Vegas was down "relatively modestly," and the company's losses were compounded by poor luck in a typically lucky three-month period that draws baccarat players during Chinese New Year. Wynn said his strategy for marketing the opening of the $2.2 billion Encore in December to high-end customers will not change even if the economy remains weak. "If the market is soft in December ... I don't care," Wynn said. "My colleagues and I are paid to run hotels in good times and fair times. I don't give a damn about the short-term market implications. This is not a company that gives a damn about short-term markets." The property will start taking reservations for the hotel on June 15. The company has begun hiring for the opening within the company, and will begin accepting outside applications July 1. The mixed-use development includes a 72,000-square-foot casino with restaurants, retail and other amenities. Wynn Resorts shares increased $2.85 cents, or 2.71 percent, to close at $108.19 on the Nasdaq National Market. The company reported earnings after the market closed. Shares fell $4.34, or 4.01 percent, to $103.85 in after-hours trading. Contact reporter Arnold M. Knightly at aknightly@reviewjournal.com or 702-477-3893. Bloomberg News and The Associated Press contributed to this report. 
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