Paul-Son Gaming Corporation
Paul-Son Gaming Corporation
Sales: $36.2 million (2003)
Stock Exchanges: NASDAQ
Ticker Symbol: PSON
NAIC: 339932 Game, Toy, and Children's Vehicle Manufacturing
Paul-Son Gaming Corporation is a Las Vegas-based company that manufactures a wide variety of casino table game equipment. Although the company is best known for its playing cards, chips, and dice, it also makes table game layouts, gaming furniture, and table accessories such as dealing shoes, chip trays, and drop boxes. To a lesser degree Paul-Son offers scaled-down accessories and gaming furniture for the home market. The company's main manufacturing facilities are located in San Luis, Mexico, and sales offices are maintained in Reno, Nevada; Atlantic City, New Jersey; Gulfport, Mississippi; Portland, Oregon; and Ontario, Canada.
Paul-Son was founded by Paul S. Endy, Jr., in 1963. He was born in Monterey Park, California in 1928 and learned the gaming business from his father. After college, Endy worked as an electrician for Bethlehem Steel, then took a job with T.R. King & Company, a gaming supply distributorship and dice manufacturing operation owned by his father and a partner. During the 1940s and 1950s, the company was the leading supplier of cards and chips to California's legal card rooms. Endy emerged as his father's top salesman, but when his father retired in 1963, Endy, who did not get along with the partner, decided not to succeed his father at T.R King. Rather, he planned on moving his family to Utah where he would work on a ranch. Traveling ahead of his wife, he stopped at Las Vegas, where by chance he noticed in a local newspaper an ad for a bankruptcy sale of a dice manufacturer. He quickly changed his plans, borrowed $40,000 from his father, and bought the dice company. Endy sent his family back to California while he launched his new business, which he called Paul-Son Dice and Card Company. "Paul-Son" was a reference to his standing as Paul Endy's son.
The new business struggled during the early years, with Endy living in a 16-foot trailer behind the manufacturing facility and showering with a garden hose. Years later, Endy told Forbes, "If we got an order for 500 dice, we'd say, 'Wow, what a week.'" He took on a partner, Curley Ashworth, who handled operations while Endy packed up a van with merchandise and drove to California ten days a months selling to his father's old customers and eventually stealing them away from T.R. King. In 1974, Paul-Son opened an office in Reno, Nevada, to serve the casinos in that city and received a major boost later during that decade when New Jersey legalized casino gambling in Atlantic City. Paul-Son opened an office in Atlantic City in 1978. According to Forbes, Paul-Son held a major advantage entering this market: "a known record in a business where huge amounts of cash change hands and tamper-proof equipment is imperative. Says Endy: 'In this business they [casino operators] want to know who they're doing business with.'"
Growth in the 1980s
In 1983, Endy's son, Eric P. Endy, who held a master's degree in audiology, joined the company. As the casino business grew, so did Paul-Son, which expanded beyond cards and dice to offer chips and furniture. Each new casino required layouts and tables and an initial supply of chips, playing cards, and dice, but the real volumes came in replacement sales. Cards and dice had to be replaced every few hours, felt was worn down after just two months, and even chips lasted only about five years. In 1982, much of the manufacturing was moved to San Luis, Mexico, close to the Arizona border, as a way to cut costs. The elder Endy, seeing that major manufacturers, such as automakers, were setting up plants in Mexico, decided to follow suit, transferring dice, chip, and furniture making operations to the new site. Only playing cards and felt table layouts continued to be produced in Las Vegas. As a result, Paul-Son was able to lower prices and gain a competitive edge.
Aside from price, the company also produced a quality products, which were becoming increasing more sophisticated. Paul-Son was the first to embed a small piece of encoded microfilm in chips to help prevent counterfeiting. In the early 1990s, the company developed a proprietary molding system that made it possible to produce full-color graphics on a chip. While previous chips featured an inlay of the casino's logo less than an inch in diameter, the Paul-Son molded chip had an inlay that measured 1⅜ inches, almost the entire surface of the 1.54-inch chip. This allowed for more detailed graphics, which Paul-Son was able to do in-house with computers. While many of the new chips simply featured a larger version of the casino's logo, the new technology led to the idea of special-event chips, including those that commemorated the Super Bowl, championship boxing events, and even the wedding of Donald Trump to Marla Maples. The chips cost some 60 cents each to casinos, but many customers opted to keep the $5 or $25 chips as a souvenir rather than cash them in. Any chip not cashed in meant more profit to the casinos, which quickly embraced the idea of special-event chips.
In 1988, Congress passed The Indian Gaming Regulatory Act, granting Native American tribes "the exclusive right to regulate gaming on Indian lands if the gaming activity is not specifically prohibited by federal law and is conducted within a State which does not, as a matter of criminal law and public policy, prohibit such gaming activity." As a result, new casinos began opening across the country on tribal lands, resulting in increased business for Paul-Son. The idea behind tribal gaming was to encourage economic development and promote tribal self-sufficiency, and soon states turned to gaming as a way to fund their own programs, establishing legalized casinos, in particular on riverboats in such places as Gulfport and Greenville, Mississippi. Although Paul-Son did some international business, selling to casinos in Monte Carlo, the Caribbean, England, and South Africa, 90 percent of its sales came from the domestic market. During the first five years of the 1990s, the number of table games at U.S. casinos grew from 6,200 to 10,000. As a result, the company's revenues grew from $7.4 million at the start of the decade to $22.8 million in 1994, and net income improved from break-even to $1.4 million.
To take advantage in the explosion in casino gaming, Paul-Son began taking steps to become a public company. In December 1993, Paul-Son Gaming Corporation was formed to house all of the Paul-Son subsidiaries, and in March 1994 the company made an initial public offering of stock, underwritten by an investment banking group headed by Rodman & Renshaw, Inc. Paul-Son sold 44 percent of the company, netting $11 million, which was earmarked to pay down debt and for expansion.
Paul-Son produced mixed results after going public. In 1994, it forged a joint venture with JP Retail Enterprises of Louisiana, its distributor in the state, and opened a retail store, "Jacks or Bettor," to sell dice, chips, and playing cards as well as clothing, jewelry, and memorabilia with gaming motifs to the general public. Early in 1995, Paul-Son opened a new 45,000-square-foot manufacturing facility in San Luis to help meet the increasing demand for replacement products. The company also installed a new state-of-the-art playing card cartoning machine capable of packaging 2,000 decks of playing cards per hour, a 50 percent increase over the speed of previous equipment. The system could also wrap bridge size and blackjack size cards simultaneously and possessed optics able to detect a deck's color and automatically assemble the appropriate box. However, the company also suffered setbacks. Craps was rapidly losing popularity because it was deemed too complicated by younger gamblers, thus cutting into the sale of dice. During fiscal 1995, two riverboat operations in New Orleans and a dockside casino in Mississippi folded, leaving Paul-Son and other creditors unpaid. To prevent a future occurrence, Paul-Son adopted stricter credit policies for riverboat casinos.
Challenges in the Late 1990s and Beyond
In 1997, Paul-Son acquired a 66,400-square-foot playing card plant located adjacent to its San Luis facility, allowing the company to consolidate its playing card operations in Mexico, a move that it hoped would make its playing cards more competitive in the marketplace. Also in 1997, Paul-Son entered into a joint venture with DeBartolo Entertainment to form Brand One Marketing to market collectible and commemorative chips and playing cards, as well as to pursue marketing opportunities outside the gaming industry. Paul-Son bought out DeBartolo's share in Brand One a year later. Despite these steps, Paul-Son failed to realize its growth potential in the eyes of investors, especially in light of the consolidation that was taking place in the gaming supply industry. In October 1997, the company hired Ladenburg Thalmann & Company as a financial advisor to review strategic alternatives, including the sale of the company. Mergers & Restructuring quoted one analyst as saying, "I don't know why someone would buy them." He added that the company should have transformed itself into a fully integrated gaming manufacturer instead of devoting so much of its resources to manufacturing dice, which was labor intensive, and playing cards, which anyone could make. Most of a casino's revenues now came from slot machines and video poker. In 1998, Paul-Son attempted to grow the business by forming a new Games Division to develop and lease new casino gaming products. The first offering was "Paul-Son's Draw Poker," a five-person game played on a blackjack-size table. Players did not play against the dealer or others players. Instead, they chose among Draw Poker, Jokers Wild, and Dueces Wild and were permitted to draw up to five new cards. Hands are then compared to a pay table to determine winnings.
Paul-Son Gaming Corporation manufactures and supplies casino table game equipment such as casino chips, table layouts, playing cards, dice and gaming furniture.
In October 1998, Paul Endy was on a fishing trip in Mexico when he suffered a severe stroke. He was transported to southern California to be hospitalized. Eric Endy stepped in as chief executive officer on an interim basis while his father recovered, but that post became permanent in April 1999 when his father died. The company was now majority owned by the Paul S. Endy, Jr., who carried on his father's legacy. Paul-Son continued to offer the same traditional products, although in 1999 it turned to the Internet, establishing a Web site on which its products could be purchased.
Three years after announcing it might consider selling the business, Paul-Son began posting a string of quarterly losses. Then, in January 2001, the company announced it had signed a letter of intent to combine with the French company Establissements Bourgogne et Grasset SA and its subsidiary The Bud Jones Company, Inc. Bourgogne et Grasset had been founded in 1923 and primarily served casinos in Europe and the Far East, providing plaques, jetons, chips, roulette wheels, layouts, tables, and accessories and equipment. In October 2000, it acquired Bud Jones, a Las Vegas-based company founded in 1965 that manufactured and distributed casino gaming equipment and accessories. By merging operations, the companies hoped to become the leader in the global casino table game market.
The merger fell through, however, and in April 2001 Paul-Son placed a demand on Bourgogne et Grasset for a $1 million termination fee, which was part of the letter of intent. More than a year would pass before the two sides could iron out the terms of a new deal, but in April 2002 they finally reached an agreement, which in September Paul-Son stockholders approved. Although Bourgogne et Grasset and Bud Jones became subsidiaries of Paul-Son, the transaction was really a reverse merger. Bourgogne et Grasset received a controlling interested in the company, and Bourgogne et Grasset's controlling stockholder, Francois Carrette, took over as chairman of the board while its CEO, Gerard Charlier, became Paul-Son's president and CEO. Eric Endy stayed on as executive president, but the company his father had founded 40 years earlier was now set to embark on a new chapter in its history.
Establissements Bourgogne et Grasset; Paul-Son Gaming Supplies, Inc.; Paul-Son Mexicana, S.A. de C.V.
Midwest Game Supply.
- Paul Endy founds company.
- The company opens an office in Reno, Nevada.
- Another office opens in Atlantic City, New Jersey.
- The company is taken public.
- Paul Endy dies.
- The company combines with Bourgogne et Grasset.
Cohen, Judy Radler, "A Deal in Paul-Son Gaming's Cards," Mergers & Restructuring, October 13, 1997.
"Founder of Casino Supply Company Dies," Las Vegas Review-Journal, April 15, 1999.
Hawk, Joe, "Gaming-Supply Company Cashing in on … Chips Cards, and Dice," Las Vegas Review-Journal, August 9, 1993, p. 1e.
Randall, Lane, "'Let the Big Guy Come,'" Forbes, December 5, 1994, p. 72.