Wynn Resorts - Earnings Call - Q2 2011

Transcript

Speaker 3

Good afternoon and welcome to the Wynn Resorts' second quarter 2011 earnings call. Joining the call on behalf of the company today are Steve Wynn, Marc Schorr, Matt Maddox, Marilyn Spiegel, Scott Peterson, and on the phone, Ian Coughlan, President of Wynn Macau, and Robert Gansmo, CFO of Wynn Macau. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Now, I would like to turn the call over to Mr. Maddox. Please go ahead, sir.

Speaker 4

Hi, thank you, and good afternoon, everyone. Before we get started, I just need to remind everybody we will be making forward-looking statements under the Safe Harbor of Federal Securities laws, and those statements may or may not come true. With that, I'm going to go ahead and turn it over to Steve Wynn for the opening comments.

Speaker 5

Usually, we always say the same thing: the numbers speak for themselves. We had a great first quarter, the best in our history, and we went through it. We were just around $400 million in the first quarter. We're $447 million this time, and that quarter was about a 59% better than a year ago. In fact, for the six months, we're 62% better than a year ago. We are all in this organization heartened by the results. On July 3rd, I got a phone call. I was in a different city from my colleague Marc Schorr, and he told me that on the third day of July, we equaled in Las Vegas our cash flow, our profits of the entire year of 2010. That was a very supercharged thing to hear, but we did $271 million last year, and we hit $271 million on the 3rd of July.

For the balance of the year, everything from here on in in Las Vegas is improvement, and we benefited from a very favorable hold percentage. Marilyn is on the call, and Marilyn, I think, can give a little bit more color to the Las Vegas results other than the hold percentage. You want to do that, Marilyn?

Speaker 2

Sure, Steve, thank you. It was an amazing second quarter, and we had our gaming revenues increase 35%. We've seen volume increases in Baccarat, in other table games, and in slots very slightly, but we had amazing hold in our Baccarat business. Our international marketing partners continue to send us great customers, and we see a lot of improvement in that business. We're up over 75% on international customers.

Speaker 4

Marilyn, I want you to focus on non-casino.

Speaker 2

Oh, in non-casino, we also have a 15.7% increase, and that was helped by our hotel revenue. We had $91 million in hotel revenue, which is the highest cash revenue we've ever had at Wynn Las Vegas and Encore, and every one of the revenue areas showed increases even higher than the first quarter. We saw our food and beverage revenue increase 13%. About two-thirds of that was based upon Encore Beach Club and Surrender. We also had improvements in our catering business, and both our fine dining and our casual dining restaurants improved. We had improvement in retail. Our lease stores were up 20%. Our entertainment also improved, where we had a 22% increase, mostly due to additional shows with Garth Brooks. It was the sustainable portion of the non-gaming revenues that were there for us at a 15.7% improvement.

Speaker 5

Thank you, Marilyn. The reason that I asked Marilyn to highlight and get that specific, which ordinarily we don't do, you can read those things, but I want to point out that in the business that we're in, you don't really sustain growth unless the non-casino part of the hotel reflects the improvement. The vitality in our business comes from the non-casino portions. After all, slot machines and roulette tables and Baccarat and blackjack tables, they're the same everywhere. They're a commodity. They have no inert power in them. It's where they are and who are the people that are staying in the hotel and why they're staying in the hotel that make the difference competitively and create the franchise in our business. We, as you know, spend a great deal of money building buildings that are fanciful and emotionally satisfying for our guests.

We design to emotion as opposed to designing to a material. If marble and onyx help us get the emotion we're after, then we use marble and onyx. If it's not marble and onyx, then we don't care about marble and onyx or handwoven fabrics or crystal chandeliers and such. Color, lighting, and emotion, the emotion of our hotels is the key to, I believe, their longevity and the franchise that they have. We really don't have much else to say except that it's nice to have good business in a period in America that's in the world that's so troubled and unpredictable. Good news is good news, and if we're running against the grain, I think probably our colleagues in Las Vegas and I know our colleagues in China are enjoying improvement.

I read some of the analysts' anticipatory publications about where they thought we would come out on this quarter, and they happily for us underestimated it. That's the story. We'll take questions.

Speaker 3

Thank you. Ladies and gentlemen, if you would like to ask a question at this time, please press star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question is from the line of Joe Graff with J.P. Morgan.

Speaker 0

Hello, everyone. Marilyn, I was hoping or Matt, I was hoping that you can sort of help us understand where 2Q Las Vegas-y, but that would be with normalized hold or give us some sort of sense of that. Matt, I noticed your provision for doubtful accounts went down year over year. Can you help us understand that and whether that was driven more out of Las Vegas or Macau? I have a quick follow-up.

Speaker 5

I'll answer that part, Joe. We collected the money, and our auditors don't let us hold a reserve when we collect money.

Speaker 4

That's right. We're actually still 50% reserved on our receivables bucket in the second quarter, which is more than we were in the first quarter. On a six-month basis, you'll still see they're about the same at $13 million year over year. That's the bad debt piece.

Speaker 5

We have been doing this for 40-odd years, and not once in any of our hotels, starting at the Golden Nugget to Atlantic City to anywhere, have we ever had to take a special charge for bad debt beyond our normal reserve. We are very conservative in giving money away for people to gamble with. We do not encourage, we do not use credit as a marketing tool. We only give credit to people as a convenience to people who are well entitled to it.

Speaker 4

For a normalized EBITDA, it's in the neighborhood of $115 million. You can do the math. All the numbers are there, but that's about where we would put it.

Speaker 0

Okay, great. Obviously, the results in Macau speak for themselves. Maybe Matt or Ian, whoever wants to answer this, would be helpful to all of us as we're kind of learning about the increasing profitability of Macau. Where do you think segment margins have gone on mass and VIP? Where are they now? Where were they a year ago? As you get the volume, you're obviously generating great operating leverage there. If you could help us understand that or shed some light on that, that would be helpful.

Speaker 5

Matt will answer that question.

Speaker 4

Sure. What I would say, Joe, is we don't get into providing segment margins, but what you find is with increasing volumes, the margins are definitely going up. On the VIP side, with our increasing individual program win, we're seeing higher margins in VIP. We're also seeing higher margins in the mass casino as we're winning more in the mass casino, and it's really across the board. The 30% to 32% EBITDA margin for Wynn Macau feels very comfortable for us. We've been there for about three quarters in a row now, and that's about what I'd expect.

Speaker 5

Competition hasn't dented us, at least not yet.

Speaker 0

Great, thank you.

Speaker 3

Your next question is from the line of Sean Kelley with Bank of America.

Speaker 0

Hi, good afternoon, everyone. I just wanted to start maybe by talking a little bit more about Las Vegas. Steve, you know we continue to hear back from folks asking about that we're expecting a kind of a slowdown in the second quarter, and then you guys posted numbers that were, I think, even adjusting for hold, probably better than they were in the first quarter by the convention business. Could you give us your thoughts just about the trajectory of the improvement in Las Vegas overall? Obviously, you set the high end, and your thoughts a little bit about maybe July and August, what you're seeing, kind of looking at a little bit further?

Speaker 5

The improvements have a lot to do with good management at the property level under Marilyn, Maurice, Scott, and everybody else in the client. They've been doing a really good job. July, by our predictions, based upon our expectations, rather, was going to be the worst month of the year. We were going to experience soft midweek occupancy, and the weekends were going to be better. July was the black hole. August, as conventions pick up with Magic Show and the others around the end of the second week or the second week of the month, we build momentum and we head into October where we're sold out and much higher room rates, as you've noticed this year. We've been surprised in July by a better occupancy than we had thought.

What was surprising about it was that it showed up in the last two or three days, really late bookings this year in July. We've been picking up an extra five or six points of occupancy, and in some cases, right, Marilyn, almost we went to full occupancy to surprise this.

Speaker 2

That's correct.

Speaker 5

All within 48 or 72 hours of the days. July has been a surprise in that regard.

Speaker 0

Mark, much higher rate over.

Speaker 5

At a much higher rate. We did not lower our rates like some of our competitors did. We've come to the conclusion here, incidentally, I'd like to add this parenthetically, having tried this before and failed, we don't want to make the mistake again. This place is not set for price cutting. If we lower the price, we can fill the rooms in an instant because they're such fancy rooms, but we get people that carry their beer in from 7-Eleven, move their own bags, and don't eat in our fine dining. We can't use them. This is not a place for folks that have that kind of economy mentality. This is a place for people who expect superior service, higher quality food, beverage, and everything else. We price our property accordingly, and we stay there.

If we lose some occupancy, we will adjust our expenses accordingly, but we don't lower the price. It doesn't work for us. We tried it, and it's a failed strategy, not only for us, I think for everybody. That's the overview I could give you on that. The fourth quarter looks great. Now that we're getting through July, it gets better again. We're not doing bad. I mean, July, I took a look. We're making $1 million a day. I think that's great. Maybe you know anything over $20 million would make me real happy in July. Marilyn, how do you feel about it?

Speaker 2

We're tracking well in July. In August, we're going to have some convention business that wasn't here last year. As you say, October is going to be a dynamite month. We don't have an inch of convention space that we can still sell.

Speaker 5

There you are. Does that help you with your?

Speaker 0

That's really helpful. The other one, if I could, just on Macau real quickly. One consistent concern that I get back from a lot of folks is just on the productivity that you guys are doing. This kind of sparks the last question on, as it relates to the margins that you guys are able to put up. What are you doing now as you've removed, I think, some of the pricing there, the theoretical averages that you guys are doing on the mass market side? What else? What next are you guys able to do to continue to yield that property since you already are putting up somewhere between two and three times the kind of win for tables that any other property in the market is doing and probably any other property in the world is doing? Your strategic thoughts on that would be really helpful.

Speaker 5

I think I'll let Matt handle that one.

Speaker 4

I hate to give you the simple answer, but it's true. It's about the people at the table. We keep attracting the top end of the market, whether it's in slots, mass market, or VIP. Our tables win 50% more than the market, and our slots win three times more than the market. That's really it, Sean. It's the people sitting at the tables. As long as we're the top property in Macau, you'll see us continue to outpace the market.

Speaker 5

Actually, we've been outpacing the market for 40 years. We had the highest win per foot. In spite of being the smallest casino in Atlantic City, we made more money than everybody else. We were 168% of the average yield per foot. We were the number one place in downtown Las Vegas. As near as I can recall, ever since we opened Mirage in 1989, one of our properties has been the top one in Nevada. We took our act to Macau. We've only been there, and we're consistent. You know, we deal to a certain market segment. We're comfortable with that market segment. We think we know those people, our guests, we know what they expect, and we manage to make promises that we can keep. There's always a temptation to make big promises or to talk about big promises. When you don't deliver, it's painful.

Speaker 0

We're going to have five years, Steve, in September?

Speaker 5

What?

Speaker 0

Five years.

Speaker 5

What?

Speaker 0

In Macau.

Speaker 5

Yeah, it's September will be our fifth anniversary in the People's Republic of China in Macau. We love it there. We're so grateful to be part of that market and to be allowed to participate in that community. We find the political environment, the regulatory environment, the human resource environment that we're in to be absolutely delicious. Life is quite straightforward in China. The government is predictable. Our employees are eminently trainable. They're anxious to please. They have a fabulous attitude. Whether they're local Macau people, mainland Chinese people, folks from the Philippines, they're just wonderful. All of that's come together, you know, to help us deliver the kind of product that we've always been delivering.

Speaker 0

Great relationships with our junket partners.

Speaker 5

Yeah, that's right. Marc, I don't know if you could hear Marc. Marc pays special attention with Linda Chen to our relationships with our junket partners, and they are doing a fabulous job. As you know, most of those junket operators are everywhere. They're not just with us. What you learn from that is that junket operators need to be everywhere because they service people that move around. We do better because at the end of the day, it's the establishment that brings the people. It's the staff and the employees that keep those customers wanting to come back. The junket operator can service them, of course. It's the employees. It's the people that, it's only people that make people happy, not the stuff. It's the people. Our specialty has been our human resource stuff.

Speaker 0

That's great. Thank you very much.

Speaker 3

Your next question is from the line of Mark Strawn with Morgan Stanley.

Speaker 1

Hi, any updates to your Cotai project timeline or the land granting process there?

Speaker 5

The land granting process is continuing. We are cooperating with the government and moving along very nicely. We are conducting our soil research in preparation to the foundation beginning when the final granting takes place. We are moving right along nicely and on schedule.

Speaker 0

Thank you.

Speaker 5

With the property that, you know, it's hard to take seriously what any hotel developer says about their own stuff. I am going to say this about the Macau project, which we're going to show everybody. It's finished. We have it drawn. We have it rendered and all that stuff. We're finishing the modeling of the scale model. The hotel is another generation of an integrated resort. It is a category breaker. Since we've had, I've been doing this for 40-odd years. With DeRuyter Butler, my design partner, and Roger Thomas, the three of us are the ones that do this. We just finished a session about 15 minutes ago. This is going away, another dimension of work that we've done the last two years. This project is going to justify the time it took to create it. It's a humdinger.

We will definitely help Cotai keep the promise and Macau keep the promise that the government has set. That is to broaden the appeal of Macau to make it the destination resort in terms of entertainment, shopping, food and beverage, and conventions in all of Asia. I promise you that when it comes to those elements of entertainment, conventions, food and beverage, service and hospitality, and iconic architecture and design, the Cotai project is, by an enormous amount, the best work we've ever done.

Speaker 0

Thank you.

Speaker 5

1,500 rooms, virtually all suites, 500 table games, big theater, public entertainment in virtually every part of the building, full range of restaurants and stores, a lot of exterior and interior public entertainment, as well as performing arts in a big theater.

Speaker 0

Easy access.

Speaker 5

Access and the movement of people, we've learned new things. We are benefiting tremendously from the fact that we have been in China nearly 10 years, and we know these customers now. We're dealing from our own deck, from our own experience, as opposed to learning from Lisboa or learning from Peninsula, as we have been doing up till now. That's a big thing for us, to be able to draw upon our own deeper experience to create and respond in ways that will be very resonant with our customer base. End of answer.

Speaker 3

Your next question is from the line of John DeCree with CLSA.

Speaker 0

Hi, just a quick question on the competitive landscape, especially in your VIP segment. How do you see that shaping up, at least in the last two months since Galaxy Macau's recent opening?

Speaker 5

You know, we don't pay much attention to that, actually, because we can only make money in our own building. That's where we think the struggle has to be met and won. If you look at the numbers, as we do, you'll see that the competitive landscape for us is delightful. The other places, I think, are doing very well in addition, and that's very good news. You want to be doing well in an environment where other people are doing well and doing clever things. I was impressed with Galaxy when it opened. I went to visit it with my colleagues, and I congratulated my friends in that organization, and I have many of them from the ownership to the management level. I think they did a great job. I think Galaxy, for example, represents or it shows you what happens when organizations mature.

Galaxy was built by the Lloyd family and that organization that includes my friend Mike Meca. Galaxy was built after everybody had learned a lot about the people and what the people want, and Galaxy's responding to that. Naturally, in a big brand new property like that, they learn, and after we open these kinds of places, we adjust and amend them because no matter how long you work on the plans, when they open, they take on a life of their own. Sometimes part of that life is that you get surprises, good and bad. Venetian is doing great as far as we can see. City of Dreams has kept its promise, I think. I talk to Lawrence and Jamie Packer all the time. I think everybody's pretty happy.

You know, not to say that we're not dealing with some of the infrastructure issues that occur, but the Venetian group have their ferries running and really clicking away, bringing people to the Cotai side. Those boats were well needed. There was something where the Venetian invested a lot of money in order to have capacity that basically was built for the future, and that future is coming true very rapidly. It's a good thing we've got those ferries. I think the final work on all the ferry terminal construction on Cotai is soon to be completed.

Speaker 0

Beginning of 2012.

Speaker 5

In the beginning of 2012. In the meantime, it's working. Thousands and thousands of people are coming every day on those boats, as they do on Shuntax boats over on the peninsula. The town is keeping up with itself at an amazing growth rate. I think that Macau, in the end, is going to end up being exactly what the government wanted it to be, the great destination convention hospitality center of Asia.

Speaker 0

Next question.

Speaker 3

Your next question is from the line of Harry Curtis with Nomura Securities.

Speaker 5

Hi, Harry.

Speaker 0

Hi Steve. You've inspired me to take the wheels off of my luggage next time I check into Wynn Las Vegas.

Speaker 5

Sorry, Harry. I know the thin budget all you sell side amps are on, so I should be more considerate of you.

Speaker 0

Yes, we are pikers. Two quick questions. First of all, in Las Vegas, I'm interested in over the last 6 to 12 months, how your mix has changed. If you could make some comments about the quality of your customer base today versus 2006 and 2007. Turning to Macau, you build buildings where you generate excess demand. Why not bigger than 1,500 rooms? Will you at least be able to have a pad so that you can expand or a podium to expand that beyond 1,500 rooms?

Speaker 5

We do have room to expand. I'll answer the last part of the question because I'm on it at the moment. We do have room to add more. We're thinking also of doing something that's a little off the track, but it has been suggested to us in the past that it would be wonderful to have a reasonably sized hotel, a few hundred rooms, that does not have gaming, that is conveniently located so that government officials and others can come to Macau, enjoy all of the non-casino attractions without staying in a gambling hall. As you know, politically, that's a sensitive issue. Politicians don't go in casinos in China after they're open. I'm thinking that I'd like to maybe help meet that demand. Of course, rooms of that sort also are integrated and would be integrated with our convention facilities.

As far as why we didn't build more than 1,500 rooms, you know, Harry, we have height restrictions because of the nature of the location of Cotai. We have restrictions that are imposed upon common sense dynamics of design. How long are the hallways? How far do people have to walk? We've got population getting older, room service, baggage, housekeeping that has to service these rooms. We have rules about we don't want hallways that go on forever. When you balance size and then we make bigger rooms, you know, in Cotai, I will tell you, you know, I've never been in, if it's a modern hotel, it has a six-foot wide hallway, you know, going to the rooms. When you go to eight, that's like the villas at Wynn in Las Vegas. Our regular rooms in Cotai have eight-foot corridors, which are very palatial.

They have 11-foot ceilings in regular rooms. I mean, we decided that it was quality, not quantity. There are an awful lot of active buildings under construction now in Macau being offered by our competitors that are undoubtedly pujats. We remember who we are. We're going to cater to the 1,500 nights a day and 1,000, you know, 2,500 rooms between the two places. As we grow and the market allows, we are having much more convention space than we've ever had before, but we have room to expand our convention space and our rooms for the conventioneers as we go along. I keep an eye on the Venetian, for example, which has two hotels under construction that are more reasonably priced than a Four Seasons or a Wynn. We size the place for quality. Bigger is not necessarily better. Better is better. That's the answer to that.

In Las Vegas, I'll let Marilyn answer.

Speaker 4

Maybe I should answer.

Speaker 5

Oh, Martin, she wasn't here before. Marc should answer.

Speaker 4

Domestically, we're seeing the same customer in 2011 as we did in 2006 and 2007. The big increase in 2011 has been our international business because our brand is growing. In China, people are recognizing Wynn. When they travel to America, the place they go to is Wynn. We're seeing a much broader market internationally, over this 2011 versus 2006 and 2007.

Speaker 0

China represents over 75% of the international mix change, do you think?

Speaker 5

Yeah.

Speaker 0

Okay.

Speaker 5

Right.

Speaker 0

Very good. Thank you.

Speaker 3

Your next question is from the line of Robin Farley with UBS.

Speaker 1

Thanks. Yeah, I have a question. Steve, you've made some public comments about interest in Singapore, and I wonder if you could talk a little bit about whether you've had initial discussions, and given that there's a de-walker there till 2017, whether it's too early to have discussions and kind of what your view is on that.

Speaker 5

Naturally, anybody would be interested in Singapore. It's such a great place to be in business. I really, Robin, I don't really have anything constructive to add. As you point out, that market is dedicated to an exclusive arrangement for the next five and a half years. I think that it's easy to say that Singapore is exciting, and it is. If we were ever given the chance to be in business in Singapore, we'd be thrilled and delighted to bring our best work there. That's not a decision for us to make. That is something that will take its course in the future.

Speaker 1

Okay, great. Thanks.

Speaker 3

Your next question is from the line of David Katz with Jefferies.

Speaker 0

Afternoon. I wanted to ask about Las Vegas, if I may. Just looking at how strong the performance has been, what is your perception about how the rest of the Strip is competing? I guess I'm wondering, the properties are what they are, and perhaps other competitors on the Strip may not have had the same capital resources available to them, and whether or not you might be perceived to be taking some share from it.

Speaker 5

I don't know.

Speaker 0

I don't know.

Speaker 5

You know, we finished the last of our, I think we have a few more rooms.

Speaker 0

Villas.

Speaker 5

I think we have 11 or 12 villas that are being finished next month in the month of August. We just finished, you know, $100 million worth of remodeling and another $100 million of additions and improvements. We invested in this company in the last 24 months, $200 million. Thanks to our investments in China, we were able to benefit America. Not exactly what you hear if you watch a White House press conference. China has made it possible for us to strengthen and protect our employees and strengthen our business in Las Vegas. I had the pleasure of having dinner Thursday night, I think it was Wednesday or Thursday, Thursday night with Marilyn Spiegel and her husband Tom and Miriam and Sheldon Adelson. We had a great time, Sheldon and I didn't get into discussion of the last quarter.

Now that I think about it, I wish I'd asked him. I think they'll be coming near earnings, and you'll be hearing from MGM and Harris pretty soon. I honestly don't know, my guess would be that everybody is doing better this year than they did last year. Mark, we'll talk to those guys.

Speaker 0

From what everything has been strong at this quarter over last quarter, especially.

Speaker 5

Is the second quarter better than the first?

Speaker 0

No, the second quarter is better than the second quarter of the year.

Speaker 5

Last year, yes. I see. Did you hear that, David?

Speaker 0

I did. I guess I wish you had asked also. If I can just follow it up with one more, recognizing that groups and conventions and so forth are not, you know, not as important for you as they may be for some others, what is your concern?

Speaker 5

It's getting more important all the time. It's getting more important all the time.

Speaker 0

Okay, how would you say your sort of next year is setting up from a bookings perspective?

Speaker 5

Las Vegas, David?

Speaker 0

Yes, please.

Speaker 5

Marilyn?

Speaker 2

For 2012, we're tracking on pace with where we were in 2011 for room nights. We're obviously pushing a little rate, but we think it'll be a good convention year in 2012 also. We've grown convention this year, of course, over 10%.

Speaker 0

It sounds like the upside would be from price.

Speaker 2

Correct.

Speaker 0

Okay.

Speaker 2

You also have to remember, we have a few things. You had some big citywides that are not going to be back in Las Vegas in the first quarter, like Con Ag, Con Expo. You have a difference with Chinese New Year and Super Bowl. Last year, they converged on a singular weekend, and this year, they will be at a different time. They will take two weeks of convention space out of the component.

Speaker 5

That's a great thing when Super Bowl and Chinese New Year are on separate weekends. We hate it when they're on the same weekend.

Speaker 0

Another thing, Marilyn, we'll also have more rooms available because we were doing the remodel in most of 2010.

Speaker 2

That's right.

Speaker 5

Yeah, we had 8 or 10% of the room nights out every, wasn't it, Marilyn, about 8 or 10% as we rotated through the building?

Speaker 2

Consistently, yes.

Speaker 5

Yeah, you know, that's 4,500 rooms here.

Speaker 0

Very helpful. Appreciate it.

Speaker 5

You bet.

Speaker 3

Your next question is from the line of Bill Lerner with Union Gaming.

Speaker 0

Thanks.

Speaker 4

Hey, guys.

Speaker 5

Hi, Bill.

Speaker 0

Hi there. Steve, just two development questions for you. One in Macau, one in Vegas. Maybe you're already contemplating this formally, but doesn't it make sense to build residential or villas in Macau, number one? Then, in Vegas, especially as I hear Marilyn talk about a month like October, for example, that you know there's not an inch of meeting square footage left in Las Vegas. As we think about limited or no supply over the next several years being added back to Las Vegas, does it not make sense to expand your meeting square footage? I know you can do it east of Country Club or in that area.

Speaker 5

Here's our problem. There are a host of opportunities for expansion in Las Vegas, a host of opportunities to create tens of thousands of jobs in Las Vegas. I know that I could do 10,000 more myself. According to the Chamber of Commerce and the Visitors Convention Bureau, if we hired 10,000 employees, it would create another 20,000 additional jobs for a grand total of 30,000. I believe in Las Vegas. I think its best days are ahead of it. I'm afraid to do anything in the current political environment in the United States. You watch television and see what's going on with this debt ceiling issue and what I consider to be a total lack of leadership from the President. Nothing's going to get fixed until the President himself steps up and wrangles both parties in Congress.

Everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating. I'm saying it bluntly that this administration is the greatest wet blanket to business and progress and job creation in my lifetime. I can prove it. I could spend the next three hours giving you examples of all of us in this marketplace that are frightened to death about all the new regulations, our healthcare costs escalate, regulations coming from left and right, a President that seems, you know, that keeps using that word redistribution. My customers and the companies that provide the vitality for the hospitality and restaurant industry in the United States of America, they're frightened of this administration. It makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. You bet.

Until we change the tempo and the conversation from Washington, it's not going to change. Those of us who have business opportunities and the capital to do it are going to sit in fear of the President. You know, a lot of people don't want to say that. They say, "Oh God, don't be attacking Obama." This is Obama's deal. It's Obama that's responsible for this fear in America. The guy keeps making speeches about redistribution. Maybe we ought to do something. The businesses that don't invest, they're holding too much money. You know, we haven't heard that kind of talk except from pure socialists. Everybody's afraid of the government. There's no need, there's no need to, you know, soft-pedaling it. It's the truth. It is the truth. That's true of Democratic businessmen and Republican businessmen. I am a Democratic businessman. I support Harry Reid. I support Democrats and Republicans.

I'm telling you that the business community in this country is frightened to death of the weird political philosophy of the President of the United States. Until he's gone, everybody's going to be sitting on their thumbs.

Speaker 0

Thanks for that, Steve. How about on the Macau residential side? I don't know if you, and I suspect you want to, and it would make sense to, but can you build residential as part of your project?

Speaker 5

I guess you can. We could, but you know, the government told us they didn't want residential apartments on Cotai. They made a very specific mandate about that. Cotai was supposed to be for the hospitality industry, not for residential. I think that the Venetian has been able to, if I understand correctly, with the service apartments, that maybe they're causing us to have a change.

Speaker 0

They're not sold yet.

Speaker 5

In the early stages of Cotai, we were instructed in a contrary way by the government of Macau. Incidentally, I'm going to stay on this point for another minute. If the government, if the administration in Washington isn't frightening the dickens out of those of us who create jobs and build buildings and make lives for their employees, they're attacking China, where in the case of my company, the vitality of capital to improve Las Vegas has come from. You know, it's the double whammy. American companies that have ventured abroad to broaden their markets and bring in money have reinvested much of that in America. The rhetoric about offshore capital, there would be a lot more of it brought back here if the government did intelligent and encouraging things to bring capital back. This is a very business, job-creating, unfriendly administration, and that's the plain truth of it.

You know, you want to build condominiums. Why? You want to protect yourself in this environment. Everybody's in a defensive crouch, except for Jim Immelt, who is sort of a Judas' Coat.

Speaker 0

Thanks, Steve.

Speaker 3

Your next question is from the line of Tom Marsico with Marsico Capital Management.

Speaker 1

Hi, Steve. I just wanted to say a great quarter on behalf of everyone here at Marsico Capital. I was impressed with the results in Las Vegas, given the consumer confidence numbers that have been coming out over the last few months. I know that you speak to a lot of different business leaders. Is there a difference among your customers that you're seeing this level of business, given the terrible consumer confidence that we're seeing across the country?

Speaker 5

Hi, Tommy. We're getting a lot of our benefit in retail, food and beverage, hotel, and gaming because of the international business that's coming here. These gaming companies, certainly ours, are big exporting enterprises. We're offsetting a lot of those imports that people talk about. Foreigners, people with non-American passports, mainly Asians, mainly Chinese people, come to the United States. If they can get through Homeland Security without too much misery, if they can get a visa, they come to the United States and they leave their money here. They're generous and tasteful. They shop for fine products. They eat good food. They tip well. They create job opportunities here.

Speaker 0

It's been my understanding that the visa process for the Chinese to come to the United States is more difficult than it is to go to other countries, you know, such as France, where they've seen a tremendous impact of the Chinese going to Europe. Do you see any changes or have you been in discussion at all with the Commerce Department as far as trying to ease those restrictions?

Speaker 5

Yeah. As a matter of fact, Tom, you're quite correct. Coming to the United States is tougher than going almost anywhere else in the world. Homeland Security has, you know, we seem to have been safe more or less, but so much of it is excessive and irrational, like patting down babies and old ladies and stuff like that. It is very difficult. It's more difficult today to get to the United States for people who've been coming here for years, for decades. Our customers that are big businessmen that have been coming to America for 10, 15, 20 years are asking us for help to relieve the bureaucratic congestion of government overregulation in this area. We've talked to Homeland Security. They're aware of the problem. So is Customs and Immigration and the State Department.

When we talk to any given individual in those organizations and those bureaucracies, they're very sympathetic and they know the truth of the complaint and they know the truth of the fact that these things are very often excessive and unnecessary. Yet, there seems to be a tremendous amount of inertia to move government in America, whether it's the deficit management and coming to some kind of logical conclusion before August 2, 2011 or whenever it is, or whether it's getting visas. Everybody has a clear understanding of the problem, but when it comes to our government, it seems to be getting more and more sclerotic, more and more inflexible by its own device. It keeps growing and growing and getting more and more onerous, more and more sluggish in its responses to real problems and sluggish in its ability to take advantage of real opportunity.

It's frustrating for me because I got a front row seat.

Speaker 1

One of the things that I've noticed is that the governors of the state seem to be taking more interest in trying to get their states moving forward in changing business practices. I was listening to the governor from Massachusetts, the Democratic governor, saying that, you know, they just moved to number six on the CNBC easiest place to do business, whatever that's worth. I know that there had been some interest discussed by street analysts of the potential of gaming in Massachusetts other than Native American gaming. Could you update us on that if there's anything there?

Speaker 5

It's interesting that Massachusetts is really seriously considering legalization of some form of general casino gambling. Naturally, like we watch Texas and Miami and Florida, rather, we watch Massachusetts, and we're keeping a close eye on that. When and if the government moves, as they've suggested they're going to do in September, we'll be anxious to see the form and the business opportunity that's inherent in that legislation. If it represents business opportunity, then we would try and explore options in that marketplace. I was surprised, Tom, incidentally, when you mentioned governors. I was amazed and delighted, and I'm very respectful of the work that Governor Cuomo has done in New York. It's a Democratic governor that's showing the kind of leadership that I wish we had in Washington.

Speaker 1

Just one other question. The balance sheet is amazingly strong. Your thoughts on dividends near the end of the year on the special? I saw you took up the regular dividend, which we appreciate.

Speaker 5

We always look for opportunities to distribute money to our shareholders. I know that because I'm familiar with the investor base that covers 70% or 80% of the ownership of this company, and I know that everybody agrees with you. What Matt does at the end of the year, he takes a look at the landscape. We go through a vigorous process. Our Board of Directors is very fastidious about this and making sure that we've crossed all the T's, dotted all the I's, anticipated our financial responsibilities, and then we come up with a number that we think is available for a dividend or even a special dividend. In the last few years, as you know, Tom, it's amounted to like $26 a share, which is twice what we went public for.

Speaker 1

Yeah, that's terrific.

Speaker 5

I'm hoping that that will continue. You know, Tom, you're a keen observer of what's going on. You tell me what to expect in Washington in the next 30 days, and you get the blue ribbon.

Speaker 1

I think people are getting pretty tired of both parties acting the way that they have. I would agree with you, the lack of leadership from the president. I'd like to see him more involved. Thanks very much for all the hard work and the great results. We really appreciate it.

Speaker 5

Nice talking to you, Tom.

Speaker 1

You too.

Speaker 5

Yeah, thanks, Chuck.

Speaker 3

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

Speaker 5

Nice jump.

Speaker 1

Hi, good afternoon. Just on some of the details from the quarter, it looked like the slot win per unit per day was much higher in Macau than last year. Maybe if you could just talk about the change in the customer there or marketing or product.

Speaker 5

Sure. Mr. Schorr is here, and these are things that are near and dear to his heart.

Speaker 0

Basically, it's the same customer. We have less equipment on the floor, so that's what's going to drive up the win per unit. It's as simple as that.

Speaker 1

The market obviously grew a lot, and you know our.

Speaker 0

We just got a family.

Speaker 1

We continue to get the high end of the market.

Speaker 5

You see, more is not necessarily better. We improve the layout of our floor. We make the place more user-friendly. We're not fixed on flooding the world with gambling devices. We're much more interested in creating places where people enjoy spending time. If they want to gamble, that's their business. You know that simple mentality works for us.

Speaker 0

Quarter over quarter, we're 12% down on equipment and 40% up in win.

Speaker 5

Actually, it's a little better than a redistribution of income.

Speaker 0

Yeah, a little bit.

Speaker 5

We get the better customers gravitate to us.

Speaker 0

Mark, maybe you could then comment about Vegas, where the net slot win was down in Vegas, even though the handle was up. Was there some accounting or a number issue there that I've missed? No, it was just a different mix of people this year over last year. That's the difference in our special events. That's the difference that I see. Marilyn, do you have any?

Speaker 5

We get maybe we get a fewer big customers in one particular quarter, and you know here they play very high on the slots. We got $10,000 slot machines where you know each you get to put $30,000. One pull could be $30,000.

Speaker 0

A customer can come here.

Speaker 5

If a customer gets lucky, they win $500,000, $600,000, $800,000 a day. You know it's still a gambling hall. Marilyn, you can give your take on it.

Speaker 2

We've done a lot of work in the second quarter on the slot floor. We've tried to buy some new units, do some conversions, change out the poker mix, change the participation. Given that, we've had some customers that, frankly, may not find their same game that they wanted. We're changing the floor up to make it more comfortable and be more profitable.

Speaker 0

Okay, thank you.

Speaker 3

Your next question is from the line of Mario Gabelli with Gabelli and Company.

Speaker 5

Mario.

Speaker 0

Hello, Steve.

Speaker 5

Nice talking to you, Mario. I'm never going to forget that conversation when we were going public.

Speaker 0

I understand. Steve, you've witnessed the transformation of Las Vegas several times over. As you're looking out over the next five years, other than online gambling, I'm still trying to figure out what else changes. You know, we had some good change. We had some bad.

Speaker 5

What do you think about Mario's question?

Speaker 1

What I would say is that we continue to monitor the rollout of its gaming expansion in Asia. I think that over the next 5 to 10 years, you could see what happened in the United States in the 1990s continue to happen over there. That's where we're positioning a lot of our efforts.

Speaker 0

All right, let's reverse the question. Are you in a position of commenting on whether you considered optioning out land today, five and a half years earlier than a potential start date?

Speaker 5

No, Mario.

Speaker 0

In obviously some of those markets that others are, you know, interested in?

Speaker 5

Mario, I think what's going to happen, as it did in Macau, the government makes, these are very high-level political decisions, and it requires consensus. The government makes a decision to, let's use Macau as a perfect example of what I think will happen elsewhere. They make a decision to proceed, to change the rules, to allow casino gaming, integrated resorts, convention, and entertainment, and all the rest. They take presentations from qualified people like the Sands Corporation or any of the other fine companies or Genting or ourselves or Melco, and they have in mind where they want it to be. It isn't driven by your ability to have a piece of land.

I had no land when we got the concession in Macau, but the government said, "Okay, we want to start on the peninsula here." Sheldon Adelson was given property in Cotai because he dreamt up the idea of the Cotai Strip. If they do that in other countries, I believe that the most important thing is that you have the credential to participate and respond to what the government needs. These decisions will be made because they want to increase tourism, or they want to create jobs, or they just want to raise some money in taxes, or a combination of all three. When they change the law, they will invite people to present their credentials. They will pick somebody. They will make it possible, Mario, for you to have the right location. I don't think it's a question of getting a piece of land.

I think it's about relationships and your reputation.

Speaker 0

I was trying to open a gate for you to comment on it. The final, and I'll get off, is the notion of the debt in Las Vegas, let's say, is $1.8 billion. You have a dividend coming up, which will be paid out of the cash out of Las Vegas. Let's assume that you pay some numbers out. What are your options with monetizing, if anything, part of your non-U.S. asset base to shift where the debt is and the debt service and the cash flow items?

Speaker 5

Why do we want to shift the debt?

Speaker 0

I mean.

Speaker 5

Non-recourse debt in each of our subsidiaries, and the parent company owes nothing, not a penny.

Speaker 0

That's the key, is we make sure the parent has no debt and lots of cash.

Speaker 5

I got you. Okay? The debt we see for Las Vegas is non-recourse, but on the books, not of the holding company, but of the parent's operations.

Speaker 0

Right.

Speaker 5

When we think about it, the company that I tried to get you to invest in, or maybe you are invested, I hope, because you were with me all my life before here, Wynn Resorts has debt of zero and has had a debt of zero for several years. We intend to keep it at zero. We have all the capacity to do any deal we want. By having a lot of cash in the parent, we can go to a new jurisdiction, infuse a subsidiary with a prudent amount of equity, make an intelligent loan that has got a reasonable ratio to the project cost, have a low interest rate with long maturity, so we don't get into the kind of trouble that our neighbors up the street have gotten into trouble on a couple of occasions.

That's why we keep the money in the parent, the debt in the subs, and always the debt should be reasonable compared to the cash flow. We don't want to be, you know, Mario, let's go back to 2002 when we went public in 2005. When we opened Wynn, the project was $2.7 billion. We had $1 billion in cash that went into that project before $1 of debt was put into the construction. Then we had $1.7 billion in debt. With $2.7 billion, $1 billion in equity, and $1.7 billion in debt, you can hardly call us over-leveraged. I like that.

We like that conservative approach because it gives us a lot of flexibility, and it gives us peace of mind, and we can protect our employees, we can protect our service levels, we can take good care of our properties, even if business is lousy and the president doesn't like us.

Speaker 0

Hey, thanks, Steve. Good to listen to your comments and observations about Wynn Resorts in the year 2024.

Speaker 5

Thanks, Mario.

Speaker 3

Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I will now turn the call back over to Mr. Maddox for any final comments.

Speaker 1

Thank you, everyone. That's the end of the call.

Speaker 3

Thank you all for participating in today's conference call. You may now disconnect.