Association of Gaming Equipment Manufacturers (AGEM) Releases October 2017 Index

The composite index closed the month at 475.35 points, a gain of 17.44 points or 3.81 percent, when compared to September 2017. The AGEM Index reported a year-over-year increase for the 25th consecutive month and has climbed 153.45 points, or 47.67 percent, since October 2016.

The three broader stock market indexes produced exceptional results in October. The S&P 500 reported a month-to-month increase of 2.22 percent to 2,575.26. The Dow Jones Industrial Average increased 4.34 percent to 23,377.24, while the NASDAQ increased 3.57 percent during the period to 6,495.

Selected positive contributors to the October 2017 AGEM Index included the following:

• Aristocrat Leisure Limited (AX:ALL) contributed 14.90 points due to a 12.14 percent increase in stock price from $21.00 to $23.55.
   


• Crane Co. (CR) reported a 3.91 percent increase in stock price to $83.12 and contributed 2.63 points.
   


• Scientific Games Corporation (SGMS) contributed 2.21 points due to a 3.82 percent increase in stock price to $47.60.

Selected negative contributors included the following:

• With its stock price falling 4.28 percent to $23.50, International Game Technology PLC (IGT) contributed negative 2.77 points.
   


• Ainsworth Game Technology (AX:AGI) reported a 10.59 percent decrease in stock price to AU$2.28, contributing negative 1.00 point.

During October, several meaningful events occurred related to gaming manufacturing. Below is a summary of the recent regulatory expansion in Pennsylvania, along with the top-line results from Crane Co.

Pennsylvania Governor Tom Wolf signed legislation on October 30 authorizing a major gaming expansion, making Pennsylvania the only state to allow online play for both commercial casinos and its state lottery.

The legislation allowed for the creation of 10 “mini-casinos,” which are required to be 25 miles away from the nearest casino that is not owned by the same entity. Municipalities have until January 1, 2018, to prohibit a new casino within their jurisdiction. This prohibition may be lifted afterward, but may not be reinstated. Ten of the 12 existing casinos are eligible to bid for a mini-casino license starting at $7.5 million for slots-only and $10.0 million for slots and tables.

The legislation includes provisions for fantasy sports contests, interactive gaming, sports wagering, slot machines at non-primary locations, video gaming, multi-use gaming devices in qualified airports, casino simulcasting at Category 2 and Category 3 facilities, the operation of multistate wide-area progressive slot machines, and hybrid slot machines and skill slot machines.

Category 1 licensees may make slot machines available at up to four non-primary locations with up to 250 machines at each location. The tax rate on non-primary locations will be set at 50 percent of revenue.

VGT licensing would allow up to five VGT’s per licensed establishment, with 10 allowed at truck stops, which are broadly defined and may include almost any convenience store. The proposed tax rate is 37.5 percent of gross revenue. There are approximately 13,500 establishments eligible for a video gaming license.

Slot machine licensees will be authorized to conduct interactive gaming after paying a $2 million one-time fee. Interactive gaming revenues will be effectively taxed at 19 percent of gross revenue.

In its third quarter financial results, Crane Co. reported a robust quarter as year-over-year earnings increased by 8 percent, driven by both increased profit in its Payment & Merchandising Technologies segment and lower corporate costs. Operating profit in the third quarter of 2016 also included a $5.0 million legal settlement charge.