...Leverage to Remain High The continued weakness in the slots segment and, for IGT, lottery concession renewals will keep leverage elevated closer to 5x for IGT and 7x for SGMS in the near term. We believe these pressures will offset much of the merger synergy benefits. IGT has the cash flow to reduce leverage closer to its 4x target within the medium term while we see SGMS's leverage hovering well above its own target of 5x for the foreseeable future, given its tighter cash flows. FCFs Allow Deleveraging 2015 was an especially tough year for slot suppliers with a lull in new openings relative to 2014. Despite the lack of new openings, the merger integration costs and as yet unrealized synergies, IGT's FCF is solid and SGMS's FCF is closer to break-even. We estimate that both IGT's (excluding lotto concession fees) and SGMS's discretionary FCF will exceed $600 million and $150 million, respectively, after 2016 when most of the synergies will be incorporated. No Rebound for Slots We believe...
