PAULSON HISTORY PART 1
Address:
1700 South Industrial Road
Las Vegas, Nevada 89102
U.S.A.
Telephone: (702) 384-2425
Toll Free: 800-728-5766
Fax: (702) 384-1965
Website: www.paulsongaming.com
Public Company
Incorporated: 1993
Employees: 540
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.
1960s Origins
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 1 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.
