WYNN

Wynn Resorts, Ltd. - 10-Q Summary (Period Ended June 30, 2005)

Business Context and Reporting Period

This Form 10-Q covers the quarterly and six-month periods ended June 30, 2005. Wynn Resorts, Limited transitioned from a development-stage company to an operating entity following the opening of its first casino resort, Wynn Las Vegas, on April 28, 2005. The company also continues the construction of Wynn Macau and the development of the "Encore" expansion project in Las Vegas. As of August 1, 2005, there were 99,503,517 shares of common stock outstanding.

Key Financial Metrics

Note: Revenue and EBITDA figures for the six-month period are identical to the three-month period because operations commenced only in late April 2005.

Material Changes vs. Prior Period

• Revenue Generation: The company generated $201.1 million in net revenues for the quarter, compared to negligible revenue ($59,000) in the same period in 2004, driven entirely by the opening of Wynn Las Vegas.
• Net Loss: Net loss decreased by 16% to $35.2 million for the quarter compared to $41.9 million in Q2 2004. However, the six-month net loss increased by 32% to $72.8 million compared to $55.2 million in 2004, primarily due to higher pre-opening costs and depreciation.
• Operating Expenses: Pre-opening expenses for Wynn Las Vegas increased significantly ($28.1 million quarter-over-quarter) due to staffing ramp-up prior to opening. Depreciation and amortization expenses surged as assets were placed in service.
• Interest Expense: Net interest expense increased substantially as the company ceased capitalizing interest on the completed Wynn Las Vegas project and began expensing it.

Guidance, Outlook, and Risks

• Encore Project: The company expects to open the Encore expansion in the second or third quarter of 2008. The budget limit for Encore expenditures was increased to $1.4 billion. Management anticipates funding this through existing debt proceeds and Wynn Las Vegas cash flows without additional debt.
• Wynn Macau: Construction is on schedule with an expected opening in Q3 2006. The company is finalizing financing for a $345 million expansion of the Macau property.
• Liquidity: The company holds $485.8 million in cash and cash equivalents, with approximately $310 million uncommitted. Significant restricted cash ($592 million) is held for project completion guarantees and debt service.
• Risks: Key risks include the concentration of cash flow in a single property (Wynn Las Vegas), credit risk associated with high-end gaming markers (47% of receivables are from foreign customers), and the ability to complete Encore and Wynn Macau within budget and on time. The company also faces foreign currency risk regarding the Macau pataca and Hong Kong dollar.

Investor Verification Checklist

• Wynn Las Vegas Performance: Verify the sustainability of the reported Adjusted Property EBITDA of $58.7 million over a full operating quarter, given the 64-day partial period.
• Encore Funding: Confirm the approval status of the Encore Budget, Plans, and Specifications by lenders, which is required to access funds beyond the initial $100 million development limit.
• Debt Covenants: Review compliance with debt covenants, particularly regarding restricted payments and liquidity reserves required by the First Mortgage Notes and credit facilities.
• Receivables Quality: Assess the allowance for doubtful accounts, noting that nearly half of casino receivables are from foreign jurisdictions where collection may be difficult.
• Construction Costs: Monitor the final accounting for Wynn Las Vegas (estimated $2.7–$2.75 billion) to ensure no significant cost overruns impact liquidity.