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Executives

Matt Maddox – CFO and Treasurer

Steve Wynn – Chairman and CEO

Andy Pascal – President, Wynn Las Vegas, LLC

Ian Coughlan – President, Wynn Resorts (Macau), S.A.

Linda Chen – President, Wynn International Marketing, Ltd

Scott Peterson – SVP and CFO, Wynn Las Vegas, LLC

Tom Breitling – SVP, Strategy and Development

Analysts

Joe Greff – JP Morgan

Steve Kent – Goldman Sachs

Dennis Forst – KeyBanc

Tom Marsico – Marsico Capital

David Katz – Oppenheimer

Wynn Resorts, Limited (WYNN) Q1 2009 Earnings Call Transcript May 5, 2009 11:00 AM ET

Operator

Good morning and welcome to the Wynn Resorts Limited first quarter 2009 earnings 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 and on the phone Ian Coughlan, President Wynn Macau.

All lines have been placed on mute to prevent any background noise. 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. Maddox. Please go ahead, sir.

Matt Maddox

Thank you and good morning everyone. Before I turn it over to Steve I just need to remind everybody that we will be making forward-looking statements under the Safe Harbor provision of Federal securities laws and those statements may or may not come true. So with that I am going to go ahead and turn it over to Steve for opening remarks.

Steve Wynn

I am going to led Andy Pascal talk about Las Vegas operations in a minute and we will do the same thing separately in Macau.

Generally speaking I know that the most important question on everybody's mind must certainly be, well, how long is the, this retarded revenue and squeeze on Las Vegas going to last? Do we see any change? I know that MGM on their call were ebullient yesterday. I think that I am still going to be a little reticent to go, in that sense. I think that the economy is bouncing around I am not quite sure whether the stimulus package has been effective yet or if it's in effect. So I am cautiously optimistic that may be we have seen a bottom.

One of the things that that has marked this extreme recession in Las Vegas since September has been that the booking window normally around 70 to 90 days shortened dramatically down into the 30-day range or even some cases less last fall. We notice that as a mark of the times. And during April we saw the bookings window stretch back towards the 60 to 90 day range. And that meant that our occupancy would be strengthening, our advanced bookings strengthened, it allowed us to have little bit more running room and adjusting rates. We are still substantially if you look at our numbers we are still below what we were a year ago but we are back in the 90s and that's with additional room inventory of over 2,000 extra rooms. So in the Las Vegas center.

So I am glad about that. And the controls we put on costs has finally started to kick in this quarter and we have avoided the more dramatic layoffs that our competitors have used and instead have adopted a slower but I think in the long run more intelligent approach in terms of taking care of our employees and what I think might myself and Warren Buffet because I heard him say at the (inaudible) meeting this weekend to share the pain approach which means that we go to 32 weeks, early outs and things like that, in order jobs can be protected to the greatest extent possible and they keep their insurance and their paycheck even if it's been reduced. And we cut salaries and eliminated bonuses and did a whole bunch of things like that, and took 75 or 100 million out of the operating expenses. So we are happy about that and it's showing up in the current period.

As to how long I think it's going to last, I have this general observation about human nature, which has always been consistent with the behavior of people even if they came to Las Vegas. And that is that folks tends to want a return to their normal habitual behavior, their preferences that they had before a crisis or an interruption.

And if I can invent sort of a metaphor, if it takes negative energy or bad news of a quantity ex to deflect people from their normal behavior for a year, then, and you want to deflect people in a similar way for two years, the energy can't remain the same. You would have to increase it by fivefold. People will resist change and want to go back to their normal behavior. And unemployment in America is climbing and the administration has got to deal with that. But there is still a lot of people that do have their jobs and they come to Las Vegas and we are seeing that now. And they want to do what they always did.

So I think the perfect example of that would be the bombing of the London during World War II during the first six months people ran for the air raid shelter when is they heard the buzz bomb coming over. By the end of the first year people were in the bars and the pubs listening to the sound of the bombs until they heard the noises stop and if they calculated it was close they ducked under a table and made sure not to spill their beer.

So folks and that seemed to have been repeated in Baghdad. It was repeated in Tel Aviv with suicide bombers and we are certainly seeing a robust activity. This past weakened in Macau and Las Vegas were some of the strongest weekends I have ever seen in my life. We had a (inaudible) and we had huge business which is not to say that that will continue every day but we have been noticing that the weekends are getting very strong again and convention business was impacted, no question about it. And as soon as the chief executives in the businesses in America stop being intimidated by the administration and their comments.

And I am hoping that the President will address tourism and travel because frankly speaking the people that voted in the democratic party for the main part work in the tourism and travel industry as cooks and waiters and housekeeping all over America and this recession is very much affected all the restaurant employees, hotel employees, people that by and large are earning between $30,000 and $40,000 a year and have children to support and they are being hit very hard not only by this recession but by Federal policy that has discouraged travel for the most part.

It's been very schizophrenic. And I have criticized this in the past and I am doing it again because I think that the administration has not been mindful nor is the Congress of the negative impact on so many people that voted democratically in the last election.

So that's my overview. I think that China has been less affected than the United States. The junk in operators are being very careful. They lent a lot of money last year and they got a tremendous amount of cash out in the form of loans and I think they are being more conservative this year in giving out money so that they will be sure not to get stung by non-pays. That's a good sign though that they are being conservative. People who stay on the gambling business long enough stop trying to use credit as a marketing tool. They stopped giving money to people who are unlikely to pay. That's an earmark of the inexperienced casino executive and as time goes by if the people who have these positions survive and don't get fired or thrown out they tend to behave in a predictable and responsible way. And I am glad to see junket operators these stars are doing that.

We don't have very much money outstanding. We don't let the junket operators get ahead of us. Our other competitors in Macau have enormous amounts of money out that exceed the commissions that the junket operators receive in one month. That's a very dangerous position. We don't do that. At the end of every month they owe us nothing and we owe them nothing and we keep it that way.

So those are the general over views. I think that Las Vegas is going to survive all this. I think a lot depends on government spending and whether it's really focused at job creation or whether it's scattered and unfocused. I think that we are going to see across the country but mostly in Las Vegas, we are going to see return to consumer confidence which really affects Las Vegas. When and if the American public believe that Washington is spending these huge amounts of their money wisely and in a way that does produce a return to a decreasing unemployment number.

That's the one that's going to have the most impact on Las Vegas believe it or not. To the extent that the administration can show that the job creation is enough to stem the increasing tsunami of unemployment as it climbs past ten that's when I think the recovery in America and that's when Las Vegas will see a return. Consumer confidence is a very important factor in what happens in Las Vegas and the way people plan trips, in the way they plan meetings and any other convocations that have to do with exchange of information and then the demonstration of products. As long as people are frightened the money stays on the side and it can't be spent on meetings and conventions and other intelligent activities.

With that I think I will have Andy talk about Las Vegas in more detail.

Andy Pascal

So at the risk of being redundant here, first quarter really had three key areas of focus for us. I mean the first part of the quarter in January we were focused on launching Encore and understanding how to operate it and integrate it into Wynn Las Vegas and how to just optimize its overall performance. Once we got past the initial opening we then turned our attention to focusing and bearing down on our operating expenses and defining our overall cost structure.

Most of those measures we kind of touched upon and were implemented in the latter part of February and in through March and then March saw us shift our focus to really optimizing the composition of business that we are bringing in. We absorbed over 2,000 rooms and a whole lot of additional capacity in a very challenging market and so we tried a bunch of different things through the early part of the quarter which then gave us an opportunity to start evaluating each of them, which of those strategies and tactics made sense and which of them didn't. So we can refine our approach and really start to improve the composition of the people that we were accommodating.

And so I think that the performance in March started to reflect what we think is more in line with what we think our forward performance will be.

So with that said.

Steve Wynn

So I think if you normalize a whole percentage and get rid of the non-recurring special expenses we would be in the 70s in Las Vegas. We probably would have made little more than low 70s, which would have put us up there with equal performance or perhaps better than most anybody in town and we actually would have done a little better than last year incredibly. And considering we added another hotel here that's the least of what we should be doing. We didn't see that in December and January. And now we are getting ready to adjust the company so we get an appropriate return on our investment in Encore.

Ian, are you on the phone, my boy. There's Ian Coughlan in Macau. Do you want to talk about Macau, and tell me what you think?

Ian Coughlan

Sure. Since the turn of the year our volumes have stabilized, it's still a define weekday weekend market, either its frictions remain in place. What we've known as the gap on a month-to-month basis between visitor arrival last year and this year is narrowing. And refill pays are trending up in terms of volumes are head count to foot count and our slot program here continuing to go from strength-to-strength. Non-gaming revenues are steady. April this will be a softer month, but we had a reasonable business. And we are looking forward to a strong May. We have two holiday periods and five weekends. And we also introduced a series of cost efficiencies which will start to see the benefit of in this quarter and we are being conservative in credit issuance which you've already describe and overall things are pretty steady here.

Steve Wynn

Ian, I am going to ask Linda Chen, who is a Head of Wynn International, Chief Operating Officer in Macau and who is here in Las Vegas today because we are going to have our annual meeting of stockholders here in two hours. Linda, you have probably as much insight into the high-end part of China. You opened Mirage in 1989. You opened Bellagio, you opened MGM, you came back to us from Bellagio. You are the Senior President of this company with international marketing and the operation of all of our marketing in China. What are you seeing? How do you feel about this?

Linda Chen

I think the first quarter in '09 of course, a lot of it was down partly by the economy but a big part is by design because we don't want to be more careful with credit.

Steve Wynn

You say by design. Or your design?

Linda Chen

Our design and the junket operator being very careful and responsible with credit and everyone even customer wise they want to be more careful on what they spend on gambling money, discretionary.

Steve Wynn

We have high-end players in both America and in the People's Republic of China. And these are people by and large who still have money and haven't lost their jobs. That's the good news and the bad news in our company and what that means is they are smart people and as far as I know most everybody who is intelligent has kept their cash in their pocket more than they would ordinarily to be cautious and be careful and to not behave in such a way would be reckless and really mysterious behavior if you were watching what was going on in the world in the past four, five months and if you didn't pull in your lines you were a dope as near as I can tell.

Scott Peterson, our Chief Financial Officer from Macau has returned home in the last month and has taken up his position back in America. And, Scottie, you and Linda regulated the credit in China and you dealt with all of these major we had the best junket operators. The other hotel operators have good wins, in many cases they are the same but we have a very wonderful group of people that we have partnered with. It's a family affair in China for us. What's your thinking about this situation in China from your perspective, Scott?

Scott Peterson

I mean, I agree with Linda. We were all very cautious at first and watching both our customers behavior as well as the world's and we adjusted our policies together. And the volumes did go down but I think now they are starting to come back and as we cautiously view the world and discussions with the six-family members we have then we have been slowly coming back to what we were before but it was still a slow process.

Ian Coughlan

Offshore. What I have seen is very interesting. In China the customer themselves especially in our high-end play are still coming. Our headcounts are exactly what they were a year ago. The difference is that they are much more cautious in the size of their bet. They are still coming every single night, every single weekend. They are playing but they are very careful of their gambling spend, spreading it out.

Steve Wynn

Andy what do you say that sort of fits the description of our big customers, too.

Andy Pascal

Yes. If you look at high-end business, they are still coming and they are more cautious.

Steve Wynn

And it's reflected itself in whole percentage, the length of play has shrunk. I am happy to say not in May but we have noticed it. So more and more you see that Las Vegas isn't so much different than the rest of the world at the end of the day. I know we don't have scripted meetings in this company and we don't have scripted calls. So having, asking my colleagues questions and sharing with those of you who are listening both our competitors and our investors is I still think a healthy thing to do.

The exchange of information in the industry leads to intelligent, competitive, intelligent management and operational decisions. There is nothing wrong with that. And we have an open dialogue with most of our colleagues in the other companies as we all try and deal with a problem. After all whether in Las Vegas or Macau you are in Las Vegas and it is a community of resorts that are very interdependent. Whether we admit it openly or not, if Bellagio or Caesar's Palace or the Venetian in trouble you can bet we are two.

I am not talking about capital structure now, those are strategic decisions that are independent but in terms of revenue levels and the way we handle credit. If someone is being reckless it's bad for all of us and it chills the whole system. This whole interdependency depends upon exchange of information in central credit, it depends upon standards of discounting not price fixing but a recognition of reality.

There's a Monday morning. There's gravity to all of this. So this can't just go around free swinging. So we tends to talk to one another and these calls once every 90 days have let the digital world accelerate that because I am sure that the boys from MGM and Sans are listening and Harris because of the Las Vegas scene and because of China and that's a good thing. And I think they are all behaving. We are all acting and seeing very much the same thing.

Now depending on what we are doing our capital structure some of us are a little bit optimistic and little more aggressive in our speech than others but basically we live in the same world and if Jim Murray and Bobby Baldwin think that we are bottoming out, maybe it's true. I hope so. You think it's bottoming out? Do you think we have seen a bottom, Andrew?

Andy Pascal

It's a slow answer. It's hard to say. Clearly the rate of decline has slowed down. Thing have been stable for the last six weeks. So there's not enough data to draw that conclusion.

Steve Wynn

Let's make a forward-looking statement. As you and Tom Brighton look at reservations how does it feel to you for June-July.

Andy Pascal

I am still uncomfortable. The booking window is clearly still year-over-year is much shorter than it was which makes it a lot more difficult to predict how the summer is going to shape up.

Steve Wynn

But it's longer than it was before.

Andy Pascal

Little bit. Not materially.

Steve Wynn

You don't think materially.

Andy Pascal

No, we don't. If we look at it and break it down by segment it's still significantly shorter than it was for the same period last year. And all that does it means that we less visibility and that's been the case now for the last four or five months. So, clearly things, the fundamentals have improved over the last six weeks and we hope that continues going forward through the summer and that we have –

Steve Wynn

– that the booking window had stretched a little, did I misunderstand you.

Andy Pascal

Certain things, Steve, what you have, I think you have the deal seeking customer and so the once that are buying packages are definitely following the similar trend of booking out but in general.

Steve Wynn

So it's shoppers that are booking out.

Andy Pascal

Yes, that's right.

Steve Wynn

There's another, the industry has certainly been impacted by the Internet age. More and more of our reservations are coming through the Internet whether it's our own Web site or people like Travelocity and hotels.com, Expedia, of course, and they are shopping. The Internet is a giant buyers cartel. Maybe it will get regulated by the government one day. I think we should start taking questions.

Andy Pascal

Tom, maybe you want to bring an update on Macau Encore.

Tom Breitling

Macau Encore we've been told we will receive the building on April 30. We were going to open up part of the building earlier and then the rest during the spring. I made a decision to do it all at once for two reasons.

First of all, to have a bigger impact, to have a kind of a moment where we revealed Encore the same way we revealed this one which gives its best moment. This business is opening new hotels you really have to do it right if you want to give them the best opportunity for success. And so I extended the opening to the April 30.

So we are going to get the building on April 30. It will allow us to open it with a few practice weeks right at the beginning of May. So we are exactly 12 months out on Encore. And it's looking, I think it's the most beautiful thing we have ever done. It's going to be very well-received. It's 404, 4 or 5, all suites, the smallest rooms 1,000 square feet. It's a completely separate, completely self contained place. It has its restaurants, spa, general casino, retail, it has VIP rooms of very extraordinary nature and we are excited about it.

And we think that that's the amount of incremental business that we should have. We don't want to over expand Macau. We have a certain niche there and we want to keep it and Encore was designed to augment and increase our leverage at the top ends of the market. So, it will take us to 1,000 rooms. But it will also give us the finest rooms in Asia without exception. They are all quite extraordinary. And I think that brings us up-to-date on stuff that I could, an overview. Now times for questions.

Question-and-Answer Session

Operator

(Operator instructions). Your first question comes from the line of Joe Greff of JP Morgan.

Joe Greff – JP Morgan

Good morning everyone. Steve, your comment about adjusting for holding non-recurring item in the first quarter for Las Vegas that that would kind of put you in the vicinity of a low 70 million EBITDA range.

Steve Wynn

72.

Joe Greff – JP Morgan

72. So that basic is adjusting hold normal, applying sort of a margin structure or applying an operating expense structure relating to the changes you made in February and March.

Steve Wynn

Andrew, why don't you explain this.

Andy Pascal

That's really just normalizing our hole percentage and then taking out all the extraordinary expenses related to the opening. So advertising and launchings and some of the.

Steve Wynn

We had a campaign for the opening campaign carried through first quarter. There was a non-recurring item. That's what I meant.

Joe Greff – JP Morgan

Got you. Okay. That's helpful. And then, Matt, maybe you can help us out in terms of what the whole impact was to EBITDA in Macau in the quarter.

Matt Maddox

Yes, sure, the hold impact, we stated our ranges between 275 and 3. We held 3.6%. So you can do the math. It's all there with 10.6 billion of turnover. What I would say is almost all of that was in the junket program which is as everyone knows is a much lower margin business. So, the numbers are pretty public and if you just take the high point of the range at 3% and apply the junket margin you are there.

Joe Greff – JP Morgan

Got you. It's helpful. And my last question for you, Steve, I know you recently have talked about potential acquisitions and maybe it's kind of a nonevent at this point but how do you view acquisitions right now and what would sort of be reasonable for you to kind of consider doing. And then perhaps how do you view sort of maybe a new side business in terms of not only but just managing casino resorts?

Steve Wynn

Well, I think that as a result of the position we are in, in terms of our capital structure our cash, our interest rates and our maturities which are all what I would generally describe as beneficial in allowing us enormous freedom. I wouldn't describe us as aggressive shoppers. I would describe the attitude of my colleagues and myself and the Board of Directors as being available to enter into transaction that was advantages to the shareholders if it was clearly advantages to the shareholders we would have the kind of reach that would allow us to step up to the plate and if we could buy something at a reasonable price and we thought that it would be, it would fit with us, and that really describes either it's a Wynn Resort which means it has to be the top end stuff, because we only have one speed in our current company and that is full on top shelf service or it would have to be something that is completely noncompetitive with our existing business.

What we do have is an extraordinary amount of depth in management. We have never been quite as deep as we are now. I think there are five or six former President's in this company in operational mode, not to mention Tom Breitling and Tim Poster. We have a lot of big bench here and the best I have ever had in my 40 years and that's another thing that says to us, let's be opportunistic but it's about value.

I had the pleasure of going to the Berkshire Hathaway stockholders meeting on Saturday and having dinner and breakfast with Mr. Buffet and listening to Charlie Munger and he and his colleagues talk to (inaudible). And I think Warrens answer to a similar question was the right one. We don't necessarily say that we catch the bottom on anything. I don't know that anybody knows what the bottom is what's important is value. And if there was something that looked like value and it was also something that fit into the strategy of one of the existing companies, like MGM for example which is what's on everybody's mind at the moment then of course, I think we enter into a conversation and try and do something that was beneficial for both parties.

It happened between myself and Kirk Kerkorian in the year 2000. I wanted to increase my ownership. Kirk want to do use his words to fix a problem at MGM and we struck a deal for them to by Mirage Resorts. I think that was probably one of the best deals that Kirk ever made. It was certainly the best deal for me. I made more money in five years than I had in 27 years. And I had already made arrangements to buy the dessert in.

So, this kind of stuff comes up when and if it works for a seller and a buyer. And it's not just MGM we are talking about. We are talking about companies in China and companies in Las Vegas and elsewhere. We are open for business. We don't think that we are on fire to by something at the moment. But we do know what's going on in the industry and we keep our eyes open and we have a lot of flexibility, Joe. That's pretty much our attitude.

I was asked a question at the Milken conference. Someone said, would you buy Bellagio. And I answered the way I just did and the press being what they did the next thing they did was I was buying Bellagio. So we have to be very careful in our language and the story got exaggerated. I don't know that Bellagio is for sale and I don't know that if it were for sale that the price would be right or that it would fit with us. All I know is that we are in really good shape. We have got a really deep bench and if the opportunity is right, the stars lineup, we might be an acquirer. Something I have never done before but might possibly happen now.

Do I have a deal cooking? No, I don't. And if I did, there would be an appropriate moment to make an announcement and we would as soon as there was anything substantial to talk about. There is nothing of that sort as of this moment and I am saying so on the conference call. Next question, please. Joe, I hope that answers your question.

Joe Greff – JP Morgan

That's great, thanks, Steve.

Operator

Your next question comes from the line of Steve Kent of Goldman Sachs.

Steve Kent – Goldman Sachs

Hi, good morning. A couple things. First off, if you just look at Encore on its own could you tell us whether it was in fact positive cash flow this quarter? And how are you looking at it on an ongoing basis?

Steve Wynn

We had a lot of discussion about this last fall and we decided to follow a system that we think is better for the company. We are going to treat Nevada operations as group and we are going to treat Chinese operations as a group. And we are going to leave it there.

Steve Kent – Goldman Sachs

I guess on April trends, Steve, have RevPARs for the hotel, have they improved relative to Q1 for Las Vegas? And then also I am not sure who was speaking but earlier somebody said that on room rate or room programs that you seem to be fine-tuning that on some of the marketing programs. Could you just give some examples of how that's evolved over the past four months because it's been pretty quick.

Steve Wynn

I would like to have two people, I would like to introduce into this conversation. The first question about RevPAR will be Andrew who runs the Nevada operations and then I would like Tom to talk about the room detail. And, Tom, get near a microphone so you can be clearly heard.

Tom Breitling

RevPAR is essentially flat. There's no material change in RevPAR in April relative to what we saw in the month preceding it. So I think that addresses your first question. However, this whole notion of optimizing the composition or the mix of our business is something that we really have looked at closely because it's not just about what we command in terms of the price of your room but how much those people spend throughout the rest of your facility.

That's where we tend to focus a lot of our energies. When I spoke about how we tried a number of different thing really across just about every single channeling of our business, the leisure segment, trends [ph], convention, casino, we have structured different types of promotions and offers and ways of communicating with our customers and then after the fact, we really dug into evaluate the real profit contribution that we are able to generate prototype [ph], understand one of the things that we are doing makes sense and we should continue to do it. and so there's a bunch of things that we you know what we are not going to continue to do that going forward and there's a bunch of things that we are definitely worthwhile that we intended to a lot more of. So that's kind of what we focused on as far as combining our strategies in a way that we feel possible.

Steve Wynn

I think if there's a couple of things I think that take into effect one is weekend business, so once the weekend starts selling out I think you are starting to see sign of thing coming back and I think the last few weekends have been comparative. The other thing is that if the convention business picks up and I don't think we are going to see that until towards the end of the year or beginning the next year. That will show you (inaudible) coming back. So like Andrew said we are going through every segment and how we fine-tune this to bring in the most profitable customers. And when you can't tell people to travel but once you start seeing them travel on the weekends and we just had a very busy weekends with a lot of different events.

The visibility hasn't come back. But I would say that those are two things that I think are interesting to look at in terms of seeing the market come back really how we are fine-tuning our business. Believe me we are doing everything possible to bring in some other group filling some of these bigger group campaign.

Tom Breitling

What was interesting for us is that we have not really seen until just the last few weeks what happened with what our new machine with 4800 rooms goes full power and what if the fact achieved the kind of levels that we thought it should. And this is the first time we have seen, when the Nevada operation goes full power what kind of reach it has and it's quite impressive.

That makes those of us who are watching the place very closely on short-term very happy because it shows us that when we get the right people, (inaudible) it's pretty fancy, better than we hoped and that makes us feel good but it isn't the kind of financial predictions that makes for a public celebration because it's only been a few weekends. So it's interesting to talk about it for a second but it's very important to issue the caveat that we are looking at this thing with a microscope and that's not how you run a business.

It's the way executives get back in confirmation and I know that we have a very closely held company on this call own the place as much as I do and (inaudible) does. So I'm sharing this information openly in a candid way but when you ask these penetrating questions and you get these kind of people in the room, they can't help themselves, they are very close to the picture and I want to constantly remind the people who listen to this and especially those of you who right about it, don't get carried away with short-term news, circumspect.

Look at the history of Las Vegas. Keep your focus on the big picture. Use short-term information even current information for what it's worth. Momentary indicators; we are in a very unusual time. I think the government in the United States is more a player in all of our lives than it ever has been before. The Obama administration is spending money at a rate in terms of rapid response the administration has to get an A plus. In terms of focus of the rapid response like most rapid responses it terms to be a little helter-skelter and I am not thinking this moment at the maximum amount has been done to create jobs and I think that's the key ingredient to the recovery and return to consumer confidence will happen when the administration can cause a reversal in the publicized numbers of unemployment in America.

That means they've got to think about America as one country, not two countries, the businessmen and the hell with them, and working class where we are coming to save you. You have to have a government and administration that goes back to thinking of this as one country and recognizes that it functions as a unit. The employers are the ones that create the jobs. If you don't identify with the employers you will not get a recovery in America because you try and fix a bunch of bridges. That won't work. That's not where the people are out of work. And so we need to get a focused central government policy for job creation in America.

Operator

Your next question comes from the line of Dennis Forst of KeyBanc.

Dennis Forst – KeyBanc

Good morning. I just wanted to understand the Macau hold percentages better. With the shortened play and gamblers being somewhat more circumspect with how much they spend, I was personally surprised that the high holds in both mass market and in the junket play, do you just play lucky?

Steve Wynn

That's all. That's the beginning and ends of that conversation. We got lucky. It happens. You have good months and bad months in terms of the flip of the cards.

Dennis Forst – KeyBanc

Okay and then I think some news out of Macau for April had your market share down, did you just play unlucky or was there anything unique about April.

Steve Wynn

The explanation of the market share is our junket operators are being careful. We held a low end in April.

Dennis Forst – KeyBanc

Okay and then on the taxes.

Steve Wynn

Good luck in the first quarter is so slow, less luck in April, first part of May is rip roaring for three days. You know, it's a bouncing ball.

Dennis Forst – KeyBanc

Got you.

Steve Wynn

We had a big market share the 1st week of May. Pardon me.

Matt Maddox

We already have it. It came out.

Steve Wynn

Well it came out today. Or wasn't today.

Matt Maddox

20%.

Steve Wynn

20%. So 13, 20. This is a Ping-Pong ball. The end of the year we have been pretty consistent in 17% which is pretty good for one casino and per table we are off the charts better than the other guy.

Dennis Forst – KeyBanc

Then just on the taxes, Matt, is there any way to give us a gauge on where taxes are going? It doesn't affect EBITDA obviously but does have an impact on the EPS number.

Steve Wynn

On the take-home pay.

Matt Maddox

Again in this recorded we recorded another valuation allowance against our foreign tax credits as a conservative measure, just –

Dennis Forst – KeyBanc

Hello?

Operator

Mr. Forst?

Dennis Forst – KeyBanc

Yes, hello? Did I get disconnected?

Operator

Please hold.

Dennis Forst – KeyBanc

Why?

Matt Maddox

Hello. Can you hear us now?

Dennis Forst – KeyBanc

Yes, now I can.

Matt Maddox

Okay. So what I said was this quarter we took an additional valuation allowance against foreign tax credits. Going forward we are not anticipating the need to do that so it should be more based on the pre-tax income, whether it's, if you have a domestic loss you have a benefit and if you have income you will have income.

Dennis Forst – KeyBanc

So it will be based on the domestic.

Matt Maddox

It will be closer.

Dennis Forst – KeyBanc

Any concerns about the Federal Government doing something about closing some of these tax deferrals you have internationally?

Matt Maddox

We are monitoring everything that's going on.

Steve Wynn

The President went on television yesterday, he thought it was important enough with all the other thing going on in this country. The President thought it was important enough to go on national television to call upon Congress to put an end to people who are evading their taxes in places like the Caribbean and offshore accounts and if there's tax evaders in those offshore accounts then of course, there's Federal law that will put them in jail already. Then in one of those typical Washington leap frogs he then addressed all the companies that were outside America that weren't paying their taxes.

Another example of gross misunderstanding by the administration. Companies are making money offshore and bringing the money home to invest it in America. And they are entitled to the tax credits when they pay taxes abroad, that tax counts as a credit against America. If the administration would double tax everybody outside America it would create more unemployment, more of stagnation, more bad news and this is what happens when you have inexperienced people in government.

I happened to see that on the plane coming back from Washington yesterday and that's the kind of lack of focus, populous (inaudible) that is characterized unfortunately some of the comments from the administration which led the companies that did not take TARP funds, canceling conventions and trips to cities in Orlando, New Orleans and Dallas and Chicago and Las Vegas putting people out of work in the hospitality industry and we need a government that knows what it's doing and it has some people in it that have some managerial understanding of how our country works.

Dennis Forst – KeyBanc

Well said. Thank you.

Operator

Your next question comes from the line of Corey Gilchrist of Marsico Capital.

Tom Marsico – Marsico Capital

This is Tom Marsico for Corey.

Steve Wynn

Hi Tom.

Tom Marsico – Marsico Capital

Hi, how are you doing, Steve?

Steve Wynn

Such a big boss [ph].

Tom Marsico – Marsico Capital

I was wondering since I don't had a chance often to have Linda available, if she can talk about the success of the stimulus program in China so we can see how a command economy is dealing with the problems with the worldwide economy? And then maybe just mention a little bit about the leadership in Macau and the changes that might happen with Edmund Ho leaving.

Steve Wynn

Just before Linda does what she would like Tom, it's nice to have a major owner of the company on the call in person and, Linda, would you talk to Tom's question.

Linda Chen

I am sure you guys all know about China stimulus and I think the difference between China and perhaps United States is they put plan much faster in action. If they put a stimulus plan in they can get it in action probably within a few months while it takes us most of a year. It's a lot on I would say infrastructure which creates jobs which is good for overall picture. China also looked at what you probably read that Hong Kong has opened up R&B, which is a currency trade settlement for trades that are done in China. So which is also a towards Hong Kong bank industry. And so things like that are more in line with Chinese government to stabilize I guess the economy and then also create more unemployment which is a long-term solution.

Tom Marsico – Marsico Capital

Linda, have you noticed in talking to your customers, the customers that run a lot of these businesses if they are more confident as a result of the stimulus programs that have been enacted. And then maybe talk a little bit about what you are seeing in Guangdong province where the low ends manufacturing in China has been more consolidated and what's happening there? And then a little bit about the Visa program through Hong Kong and how that's potential helping Macau or not having an impact on Macau .

Linda Chen

Sure, there's one tier the lower tier manufactured in Guangdong worker. We all know that there are tons of factories that were closed at the very beginning, however, the once, the bigger on players have sustained and they are coming back. What you saw yesterday the first trade numbers are up in China. Those are coming back because I believe people have do stuff [ph] with their inventory. They are starting to reorder again which is good for the whole export industry.

And as far as visitors and Visa in China there is not a formal relaxation of policy. However, we have experienced that there's no shortage of people coming. If you come to Macau on a Monday or a Friday evening the lines could take you hours to go through if you are not a local resident. So there's definitely enough people that are coming through the border regardless whether they have formally relaxed the policy or not. There has been a formal relaxation between Hong Kong and Shenzhen which is the similarity of Macau to (inaudible). Not to speculate however, if Hong Kong and Shenzhen.

Steve Wynn

Can you say that again, there has been a relaxation between Shenzhen and Hong Kong, which is a neighboring city in Guangdong province just as Zhuhai is a neighboring city to Macau. I just want to do say that so people listening would know what Linda meant.

Linda Chen

Of course it's not just to speculate that between Zhuhai and Macau, not however, it's the same analogy where the relaxation of Visa could be coming. However, like I said right now whether it's a formal policy now we experience in more visitor that are coming back. And as far as the change in administration I think so far there is one or two leading candidates Friday end close to end of summer we will know who is running and however, the government is very stable, we have the full central government support on Macau side. So I don't think there will be a major change to any policy regarding to our industry.

Steve Wynn

If I can add to that, Tom, we are familiar with the personalities involved in this process and I think that it would be safe to say the transition will be seamless and that is since 1979 in December when Chou Peng [ph] took over his Chairman of the Standing Committee or the Central Committee of the Communist Party that has been true in the People's Republic of China now for 30 odd years and it will definitely be true in Macau. I don't think that those of us who are invested in China should consider the change in administration from Edmund Ho to the next chief executive as a material event. It will be one of great public interest but the men and the most likely candidates who will prevail represent a seamless transfer and I am very confident in that statement.

I do think that in China the response of the government is very intelligent, very focused as compared to the United States, for example. All of us who have been there for the last seven or eight years have increasing respect for the intelligence and the thoughtfulness that goes into the public policy in China. It's very considerate. Even though there has been much written about the change in Visa policy, it was a tremendous overheating of the economy in Macau when those restrictions or when those tightening took place. The cost of living was going up much faster than wages and the citizens of Macau were suffering. Our employees all of them.

You know that last year we had to give a 10% cost of living raise to our base line employees? Voluntarily, the government made no suggestions but we saw that rents were going up faster than any either wages. It was some roof [ph] in the midst of all this prosperity and fancy earnings by companies, Chinese and American in South China. Living standards were not improving and they did what they thought they should do and it turned out to be intelligent. It had some negative effects on more aggressive developers in the marketplace and I am sure those effects are temporary but it was the right thing to do in terms of public policy. They are very smart over there and they don't flop around and waste energy, very cool. We are very comfortable being in business there as well as being grateful.

Tom Marsico – Marsico Capital

Thanks very much.

Operator

Your next question comes from the line of David Katz of Oppenheimer.

David Katz – Oppenheimer

Hi, good morning. Can I just take a moment and ask about your financial strategy going forward? You have done a couple of equity offerings. And obviously put that to good use. But if you could talk about how you think about the timing of those from the perspective that you could perhaps look and say, well, we raised some money at $19 and here we are at some higher level, you could also argue it the other way and say we are at this higher level in part because we went ahead and raised some money. If you could just.

Steve Wynn

I agree that's true, we are at these higher levels because of the shape we are in. I think you can pay for capital structure these days as opposed to how few shares you have outstanding.

Matt Maddox

And David if I could just address that our focus and I have been saying this for nine months is maturities. It's not yield it's debt maturities. So what we have effectively done over the last four months, we have $1.3 billion of debt maturing between now and 2011. We pushed out 900 million of that to 2013. We have relaxed all of our covenants so that our pure focus is on operating the business and we raised equity two times, once in November and once in March at an average price in the mid 30s to make sure that our balance sheet was rock solid and that there are no questions about Wynn and its financial flexibility and what it's basically done is its set us up to focus our efforts on a number of thing and the balance sheet is not going to prohibit us from doing anything unlike most of our competitors.

Steve Wynn

You have to keep your eye on the maturities. Matt mentioned that. We are so short-term focused and Wall Street is as usual so myopic that you want to sends them to the optometrist. Maturities. Maturities. It doesn't matter what happens week-to-week. You got to take a look at the companies on this street here and say, what are their maturities like and what are their financial capacities. That's the way you evaluate these companies in this environment if you have got a brain in your head. And you have to be able look before 2000 and you have to be able to go past next month, you have to actual will be able to contemplate and to visualize 2012, for example.

David Katz – Oppenheimer

If I may just follow that up in that context, then, with some of the oncoming supply which is intended at the high-end customers coming to Las Vegas, I know you have made some earlier comments about it but if you could talk about some of your strategies heading out into next year if that's far enough and if you want to go to 2012 that would be great too.

Steve Wynn

Okay. So we are talking about Aria that's the competitor that's upcoming that are going to open the city center, right?

David Katz – Oppenheimer

Yes.

Steve Wynn

Let's call us spade a spade. There's old Bellagio, Caesars Palace and Venetian. And then there is Aria. I am not sure what Fountain Blue is yet or when it's coming online but Aria is has been announced by MGM to be the most beautiful thing that anybody has ever seen, a dramatic hotel, Bobby told me that it was Bobby Baldwin it was going be prettiest thing in town. Let's take the man at his word.

There's nothing that we could have done in my 40 years of experience to build a pretty hotel at Wynn in a lovely place at in my view almost been prettier at Encore, it's got bigger rooms, all many suites, we did everything in 40 years of experience could make you do to create a place physically that had everything it needed and then we recruited and interviewed 160,000 people to create the workforce we have got here and we trained them constantly because the only thing that matter is guest experience.

All this talk about capital investment and the structures and the architects, all that I am going to tell you in a word is baloney, it's 10% of the franchise. What matters here is customer experience. And this company has done everything in its power to make sure that customer experience even in hard times is not compromised. And that will determine our future. It's what we do in this building that is where we make our money. We don't care about Bellagio. We don't care about Aria. We don't care about any of that stuff. We care about what happens to people in this building.

Now, I have been building these hotels for the past 40 years against the stimulus competition. People thought that Caesars Palace was untouchable. Well, nobody went over 300 million except Caesars. It was a glass ceiling. Bellagio went 400 million out of the box. Everybody says 400 million was a miracle and 90 goes to (inaudible). Bellagio came out of the box with 500 million in casino revenue.

Nobody could go past 500 million. We came out of the box in '06 with 600 million odd in the casino and 700 million in Wynn with 2700 rooms. That tell you what our attitude is towards competition. It's not that we are disdainful. We respect our competitors. But we recognize that the only way we make money is by taking care of people in our own building. So I don't give a damn what the hell goes on up and down the street. I only care what happens in my building and all of our strategies boil down to two words, customer experience. And that is fundamentally human resource engineering in this property. Because it's people that give people a good experience, not carpets, hand woven fabrics or fancy marble or crystal chandeliers. And we got our share of all that stuff.

So do our competitors. Anybody can buy that junk. And if they don't have good taste, if they don't it themselves they can rent it with a good concise. The question is, which can't rent is customer experience. You got to have an organization that delivers that day in and day out 24 hours a day.

Now if any of you listening to this phone call wants to know what our competitive posture is, get on an airplane, come out to Las Vegas, go visit the other hotels and then do your own little market survey and walk through this building, engage any employee that works here and see what happens. Come to your own conclusions. The only market survey that means it's worth a damn, it's the one that you do yourself and take the time to go look for yourself. That's the way it's going to be tomorrow and the day after tomorrow and next year and the year after. Period. End of speech.

David Katz – Oppenheimer

Thank you very much.

Operator

Ladies and gentlemen, I apologize we have reached the allotted time for questions-and-answers. I will now return the call to management for closing remarks.

Steve Wynn

Matt.

Matt Maddox

Now, that will conclude the earnings call.

Steve Wynn

Tom Breitling, Andy, John Strzemp, Marc Schorr, Linda, we forgot Scott?

Scott Peterson

We told you everything we know actually. Our competitors would be happy to know that we are now exhausted. Good by everybody. See you in 90 days.

Operator

Thank you. That does conclude today's Wynn Resorts Limited first quarter 2009 earnings conference call. You may now disconnect.

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Source: Wynn Resorts, Limited Q1 2009 Earnings Call Transcript
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