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Paul-Son Gaming Reports Q4 2001 and Fiscal Year-End Results

The company reported net income for its fourth quarter ended May 31, 2001, of $56,000 or $0.02 per share, compared with a net loss of $179,000, or $0.05 per share, for the prior fiscal year's fourth quarter. Sales for the three months ended May 31, 2001, were $5,120,000 compared with $5,067,000 for the same period of the prior fiscal year.

For the fiscal year ended May 31, 2001, the company incurred a net loss of $928,000, or $0.27 per share, versus a net loss of $1,171,000, or $0.34 per share for the fiscal year ended May 31, 2000. Included in the net loss for the year ended May 31, 2000, is a tax provision of $568,000 as compared with no tax provision or benefit during the year ended May 31, 2001.

The tax provision in fiscal year 2000 was recorded due to uncertainties surrounding the reliability of previously recorded future tax benefits. The company's fully reserved deferred tax benefit, which may be utilized to offset future taxable income, was $1.1 million at May 31, 2001. Sales for the fiscal year ended May 31, 2001, were $20,494,000, compared with sales of $22,662,000 for the prior fiscal year.

On Jan. 31, 2001, the company announced that it had entered into a letter of intent with Etablissments Bourgogne et Grasset and its subsidiary, The Bud Jones Co. (collectively ``B&G''), under which B&G would have entered into a combination with the company.

After a definitive agreement had not been executed by April 30, 2001, Paul-Son sent a demand letter to B&G seeking a $1 million Termination Fee pursuant to the letter of intent. B&G responded denying Paul-Son's claim for the $1 million Termination Fee and making certain unspecified claims against Paul-Son. Paul-Son thereafter commenced arbitration proceedings under the rules of the American Arbitration Association on May 11, 2001.

Subsequently, the parties agreed to stay the arbitration proceeding, with each side reserving all rights. The parties thereafter renewed confidential negotiations, which continue to this date. Although no assurance can be given that the parties will enter into a definitive agreement, and both sides have reserved all rights should no definitive agreement be reached, the parties continue to work on the negotiation of a potential transaction. Paul-Son has no current intention to comment further on the status of negotiations with B&G unless or until a definitive agreement is reached or unless negotiations are terminated or until other circumstances arise that, in Paul-Son's sole discretion, merit further public comment.

Commenting on the financial results, Eric P. Endy, chairman and chief executive officer, said, ``We are encouraged to report net income of $56,000 for the quarter ended May 31, 2001, despite relatively flat sales due to the absence of new casino openings or expansions and the adverse effect of a strengthening peso (impacting our Mexican manufacturing operations) during the quarter. We undertook aggressive measures to reduce certain of our manufacturing, selling, general and administrative expenses during the year. Our improved financial results for the quarter ended May 31, 2001, as compared to the prior year quarter, reflect the reduction in these expenses.''

Endy added, ``During the fiscal year ended May 31, 2001, we reduced our outstanding debt by $1.7 million out of cash provided from operations. Total debt is now well below $1 million. In light of decreased revenues for our last fiscal year, we are focused on increasing our sales in new markets and improving our average selling prices for our products.''

Paul-Son is a leading manufacturer and supplier of casino table game equipment in North America with manufacturing facilities in San Luis, Mexico, and, to a limited extent, Las Vegas, Nevada.

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