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Tickers in this Article: IGT, WMS, BYI
A global recession means consumers are reeling from job losses, falling personal asset levels and overall uncertainty regarding their finances. The mathematically challenged continue to hit the slot machines hoping to win back their losses, but most consumers are cutting back on this disposable income spending making on-balance casino traffic decline substantially.

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Quarterly Recap
As a result, slot-machine manufacturer International Game Technology (NYSE:IGT) looks to be losing its shirt to the games, with first-quarter results further shedding light on its struggles. Quarterly sales in gaming operations fell 6% to $313.3 million. Product sales fell 8% to $288.3 million, on acute weakness in overseas machine sales (down 57%) as gambling growth slowed significantly in major markets, such as Macau, China. The machine sales in North America held up incredibly well, growing 51% as non-machine sales in the region increased slightly, but were not enough to offset the dire global trends. (Find out where to turn when looking to invest in a tumultuous market, check out Industries That Thrive On Recession.)

Most expense categories grew, with SG&A up almost 15% and research and development and other operating costs up year over year. Lower sales and higher costs worked to amplify the fall in profitability, illustrating the extent to which orders have dried up from major casino operators including MGM Grand, Harrah's and Station Casinos. Additionally, IGT has also found itself losing market share to competitors such as Bally Technologies (NYSE:BYI) and WMS Industries (NYSE:WMS), with management quipping that its "competitors have done a better job of understanding how to price their products, particularly in the premium space."

A hefty restructuring charge to navigate economic and competitive challenges pushed reported net income down 42%, and this would have been even worse had income tax expense not fallen a whopping 80%. Yet IGT stayed cash flow positive, generating $149.5 million in cash flow from operations for the quarter. Subtracting $76 million in capex led to positive free cash flow of $73.5 billion, or approximately $0.25 per share.

This left plenty of capital to pay the quarterly dividend and management relayed during the quarterly conference call that it plans to keep its current dividend policy. It did suspend its share buyback program but boasted to still having "a great business that generates cash.", which is impressive given the current challenges it is facing.

Bottom Line
Despite the challenges to IGT's operations, based off current market capitalization levels, the company is still larger than its two key competitors in Bally and WMS Industries. Bally recently pulled ahead in terms of bottom line profitability, with a net margin of 12.3% versus 11.9% for IGT in the past 12 months. Bally has a lower forward P/E multiple, and both Bally and WMS Industries have lower debt levels as a percent of total capitalization. This makes the competition worth a further look from an investment standpoint, but neither competitor currently pays a dividend. However, IGT sports a yield of 4.9%, providing some income for those willing to wait around for gambling trends to perk up and see if IGT can regain a leadership position in terms of overall growth. (Can your principles make you richer or poorer? Find out if it pays to pick your portfolio based on ethics Socially Responsible Investing Vs. Sin Stocks.)

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