Merger and Other Acquisitions (Tables)

12 Months Ended

Dec. 31, 2016

The following table summarizes the consideration transferred in connection with the merger:



	Cash America Merger
Cash America shares outstanding at September 1, 2016 (in thousands)	24,025
Exchange ratio	0.84
Shares of First Cash common stock issued (in thousands)	20,181
Company common stock per share price at September 1, 2016	$	50.32
Fair value of Company common stock issued to Cash America shareholders	$	1,015,507
Cash in lieu of fractional shares paid by the Company	10
Cash America outstanding stock awards settled in cash	50,760
Aggregate merger consideration	$	1,066,277

Schedule of Preliminary Allocations of Purchase Price

The allocation of the aggregate merger consideration, subject to future measurement period adjustments, is as follows:



	Cash America Merger
Cash and cash equivalents	$	42,520
Pawn loans	234,761
Fees and service charges receivable	26,893
Consumer loans	27,549
Inventories	224,644
Income taxes receivable	23,095
Other current assets	28,324
Investment in common stock of Enova ⁽¹⁾	60,785
Property and equipment	118,381
Goodwill ⁽²⁾	522,064
Intangible assets ⁽³⁾	103,250
Other assets	62,994
Current liabilities	(95,268		)
Customer deposits	(21,536		)
Revolving unsecured credit facility ⁽⁴⁾	(232,000		)
Deferred tax liabilities	(28,002		)
Other liabilities	(32,177		)
Aggregate merger consideration	$	1,066,277

⁽¹⁾

Represents Cash America’s investment in the common stock of Enova International, Inc. (“Enova”), a publicly traded company focused on providing online consumer lending products. Prior to December 31, 2016, all of the Enova shares acquired were sold in open market transactions at an average price of $10.40 per share, which resulted in a net gain on sale of $1,299 and generated net proceeds of $62,084.

⁽²⁾

The goodwill is attributable to the excess of the aggregate merger consideration over the fair value of the net tangible and intangible assets acquired and liabilities assumed and is considered to represent the synergies and economies of scale expected from combining the operations of the Company and Cash America. This goodwill has been assigned to the U.S. operations reporting unit. Approximately $223,000 of the goodwill arising from the Merger is expected to be deductible for U.S. income tax purposes.


⁽³⁾	Intangible assets acquired and the respective useful lives assigned consist of the following:



	Amount		Useful life (in years)
Trade names	$	46,300	Indefinite
Pawn licenses	32,300		Indefinite
Customer relationships	14,700		Five
Executive non-compete agreements	8,700		Two
Franchise agreements related to check cashing operation	1,250		Indefinite
	$	103,250

The customer relationships are being amortized using an accelerated amortization method that reflects the future cash flows expected from the returning pawn customers of Cash America. The non-compete agreements are being amortized over a straight-line basis over the life of the non-compete agreements. As the trade names, pawn licenses and franchise agreements have indefinite lives, they are not amortized.


⁽⁴⁾	Represents outstanding borrowings under Cash America’s revolving unsecured credit facility that became due upon completion of the Merger. The Cash America revolving unsecured credit facility was repaid by the Company using proceeds from the 2016 Credit Facility (as described in Note 11) and was terminated upon completion of the Merger.

Transaction costs associated with the Merger are being expensed as incurred and are presented in the consolidated statements of income as merger and other acquisition expenses. These expenses include investment banking, legal, accounting, and other related third party costs associated with the Merger, including preparation for regulatory filings and shareholder approvals. See Note 4 for further information about merger and other acquisition expenses.

2016 Other Acquisitions

The Company completed other acquisitions during fiscal 2016, as described below, consistent with its strategy to continue its expansion of pawn stores in selected markets. The purchase price of each acquisition was allocated to assets and liabilities acquired based upon their estimated fair market values at the date of acquisition. The excess purchase price over the estimated fair market value of the net assets acquired has been recorded as goodwill. The goodwill arising from these acquisitions consists largely of the synergies and economies of scale expected from combining the operations of the Company and the pawn stores acquired.

The Company acquired the stock of Maxi Prenda, S.A. de C.V., the operating entity owning the pawn loans, inventories, layaways and other operating assets and liabilities of 166 pawn stores located in Mexico on January 6, 2016 and the assets of 13 pawn stores located in El Salvador on February 2, 2016 in related transactions (collectively the “Latin America Acquisition”). The combined purchase price for the all-cash transaction was $30,123, net of cash acquired before certain post-closing adjustments. Subsequent to the acquisition, $229 of post closing adjustments were identified, resulting in a combined purchase price of $29,894, net of cash acquired and is subject to further post-closing adjustments. The purchase was composed of $27,357 in cash paid during fiscal 2016 and remaining payables to the sellers of approximately $2,537. In addition, the Company assumed approximately $6,630 in peso-denominated debt from these acquisitions which was repaid in full by the Company in January 2016. The assets, liabilities and results of operations of the locations are included in the Company’s consolidated results as of the acquisition dates. The goodwill resulting from the Latin America Acquisition has been assigned to the Latin America operations reporting unit.

During fiscal 2016, three pawn stores located in the U.S. were acquired by the Company (“U.S. Acquisitions”) for an all-cash aggregate purchase price of $1,951, net of cash acquired and remaining payables to the sellers of approximately $17. During fiscal 2016, the Company also paid $575 of deferred purchase price amounts payable related to prior-year acquisitions. The goodwill resulting from the U.S. Acquisitions has been assigned to the U.S. operations reporting unit.

The allocations of the purchase prices for the Company’s other acquisitions during 2016 (the “2016 Acquisitions”) are as follows:



	U.S. Acquisitions			Latin America Acquisition			Total
Pawn loans	$	385		$	10,586		$	10,971
Fees and service charges receivable	18			885			903
Inventory	359			3,014			3,373
Other current assets	—			1,795			1,795
Property and equipment	10			6,821			6,831
Goodwill ⁽¹⁾	1,239			20,413			21,652
Intangible assets ⁽²⁾	36			405			441
Other assets	—			512			512
Deferred tax assets	—			2,392			2,392
Current liabilities	(96		)	(10,299		)	(10,395		)
Notes payable	—			(6,630		)	(6,630		)
Purchase price	$	1,951		$	29,894		$	31,845


⁽¹⁾	Substantially all of the goodwill for the U.S. Acquisitions is expected to be deductible for U.S. income tax purposes. However, the goodwill for the Latin America Acquisition is not expected to be deductible for Mexico and El Salvador income tax purposes.


⁽²⁾	Intangible assets primarily consist of customer relationships, which are generally amortized over five years.

Intangible Assets Acquired

Intangible assets acquired and the respective useful lives assigned consist of the following:



	Amount		Useful life (in years)
Trade names	$	46,300	Indefinite
Pawn licenses	32,300		Indefinite
Customer relationships	14,700		Five
Executive non-compete agreements	8,700		Two
Franchise agreements related to check cashing operation	1,250		Indefinite
	$	103,250

Pro Forma Financial Information

The following unaudited pro forma financial information reflects the consolidated results of operations of the Company as if the Merger and the 2016 Acquisitions had occurred on January 1, 2015:



	Year Ended				Year Ended
	December 31, 2016				December 31, 2015
	As Reported		Pro Forma		As Reported		Pro Forma
Total revenue	$	1,088,377	$	1,771,835	$	704,602	$	1,792,523
Net income	60,127		118,333		60,710		61,479

Net income per share:
Basic	$	1.72	$	2.44	$	2.16	$	1.27
Diluted	1.72		2.44		2.14		1.27