June 1, 1998. Today we've sold our Chilton Vending amusement route in its entirety to American Coin Merchandisers, Inc., d/b/a Sugarloaf Creations. Sugarloaf is purchasing the assets and amusement game expertise of Chilton Vending. Our successful Chilton Billiards retail operation is not part of the transaction. It remains in the family. Chilton Vending will assist Sugarloaf and its current infrastructure in becoming amusement machine operators, which will be in addition to their skill crane, bulk, and kiddie rides operations.
My new title with American Coin is "Vice President of Amusement Game Development." I'll address this transaction over the next two months' articles, first from a strategic planning standpoint, and secondly, I'll address the emotional rollercoaster we've been on since the topic was first broached, December 6, 1997, during a trip to Boulder, Colorado. I think everyone reading this article has at one time or another thought about selling their business, if you haven't already done it. I've lived it first-hand, as others have, and it's been an invaluable learning experience I'm glad to share with you.
My father, Stan Chilton, started in the industry at a young age, in 1946. Until today, he's still been putting in eight hour days. He, along with my mother, were personally guaranteed on what seemed like a billion dollars of company bank debt. Come to think of it, I wasn't far behind them. In the last few years I had been signing the notes as well. On June 1, we paid it all off, and have a few shekels left that make it all worthwhile. It's June 9th today, and I must tell you the sleep I've experienced the last eight days has been different, as in I didn't feel that big iron ball resting on my chest when I awoke. That's reason number one. I am absolutely convinced that when you factor in the financial burden of being indebted to others, it clouds your ability to make important business decisions.
Reason number two. We've competed with Sugarloaf for a number of years and had our successes. However, with the direction I think this industry is going, the longterm prognosis - either with Sugarloaf or one of the other large national companies - has in the last few years become a concern of mine. I've always thought that an amusement operating company that can offer the highest quality of products and services, and do it on a nationwide basis, has a great deal of opportunity. When I look at reasons national companies have failed at this in the past, the primary reason in my opinion is that companies tried to put the service infrastructure in place after the sale. The service is the deal. It must be there before the installation. Not subcontracted out, or franchised, or promised for sometime in the future, but a corporate owned service network. Sugarloaf has this infrastructure.
Reason three. Chilton Vending is not in the video poker business. Nor are we in the food vending industry, or heavy into dart and pool leagues. Right or wrong, these are the big money makers in our industry today. Rather, we are a profitable mid-sized amusement vending company operating 1,813 games. I've felt for a decade that we were never earning ourselves what our efforts warranted. In a book titled "The E-Myth" by Michael Gerber, he makes a statement that "You're either in the process of selling your business to someone else, or buying it yourself, one day at a time. Be sure the price you're paying is worth it."
Reason four. I like Sugarloaf and its leadership. This company is an enigma. They've very quietly entered an industry just over 10 years ago, become publicly traded (AMCN on the national NASDAQ market), and last year had sales of over $60,000,000. This year, sales will likely be significantly higher with Sugarloaf's recently announced acquisitions. They have been a favorite stock on Wall Street for the last two years, showing major stock price increases. In the last 52 weeks, the stock has sold at $9 per share, and today trades at $17 5/8.
In our industry, you don't hear or read too much about Sugarloaf, unless it's a competitive situation. I've read more about them in Fortune magazine than I've read in our industry's trade magazines. Then, what we as operators don't know, we make up. A Sugarloaf executive asked me a few months ago why some operators they compete with don't speak favorably about the company. I explained that it isn't personal, it's just "Operator Law." That is, when you lose business to another operator, you don't like them. It doesn't matter who they are or what the facts are, or how bad a job you were doing for the account you just lost...you just don't like them.
The fact is that like it or not (and no one is prouder of a crane operation than I am of what we accomplished at Chilton Vending), Sugarloaf has redefined the national skill crane industry. They've "raised the bar" through performance and visibility. They've contributed greatly to the validation of the profitable skill crane industry. Just as Sega's GameWorks has increased the visibility of the video industry, thus increasing demand and opportunity for video simulator products for operators, so has Sugarloaf benefited the overall skill crane industry, and many skill crane operators throughout the U.S., including Chilton Vending, have benefitted.
As an example, Chilton Vending has been a Walmart crane operator going back to the mid-1980s. In one of our early Walmart crane installations, we got brave and instead of installing a 24" single crane, we installed a 48" double sized crane. This was clearly outside of the Walmart guidelines that were set forth at the time, and I heard about it. Have you seen the standard skill crane installation in a Walmart lately? The Walmart skill crane "footprint," the allotted square footage in a store available for skill cranes, is easily five times what is was just ten years ago. Sugarloaf has grown to easily be the largest operator of skill cranes in the U.S. with over 10,000 machines on location, and done it with the support of the financial community, which is no easy task. However, there are many good skill crane operators in the U.S. that have prospered greatly during this time as well, and will continue to do so.
When you have employees that work as hard as our employees do and have at Chilton Vending over the years, one of your career objectives is for them to be rewarded as well. Every Chilton Vending employee is better off financially on June 1, 1998 with Sugarloaf as their employer than they were with Chilton Vending. They were all extended offers to work for the new company and they all accepted, less one. They now receive better health benefits, better 401K benefits, company autos, and similar or improved compensation levels. All of the knowledge that Sugarloaf wanted in this transaction is possessed by our Chilton employees. They have opportunity now that we could never have offered them as Chilton employees. Mission accomplished.
Yes, we've sold out to the man. With every day that passes, I am more certain than the day before that it was absolutely the best decision for every Chilton employee, and the Chilton family.