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Merger and Other Acquisitions | 12 Months Ended
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Dec. 31, 2017
Business Combinations [Abstract] |
Merger and Other Acquisitions | MERGER AND OTHER ACQUISITIONS 2017 Acquisitions During fiscal 2017, the Company completed the acquisitions of five stores in Mexico and one store in the U.S., which were not material to the Company’s consolidated financial statements. 2016 Cash America Merger On September 1, 2016, the Company completed its Merger of equals business combination with Cash America as contemplated by the Agreement and Plan of Merger, dated as of April 28, 2016 (the “Merger Agreement”), by and among the Company, Cash America and Frontier Merger Sub LLC, a wholly owned subsidiary of the Company (“Merger Sub”). Pursuant to the Merger Agreement, Cash America merged with and into Merger Sub, with Merger Sub continuing as the surviving entity in the Merger and a wholly owned subsidiary of the Company. Under the terms of the Merger Agreement, each former share of Cash America common stock issued and outstanding immediately prior to September 1, 2016 was converted to 0.84 shares of the Company’s common stock with fractional shares paid in cash. As a result, the Company issued approximately 20,181,000 shares of its common stock to former holders of Cash America common stock. Additionally, Cash America employee and director based restricted stock awards outstanding immediately prior to the Merger were fully-vested and paid out in cash in conjunction with the closing of the Merger. The Company was determined to be the accounting acquirer in the Merger. The following table summarizes the consideration transferred in connection with the Merger (in thousands, except ratio and per share amount):
| Cash America Merger
Cash America shares outstanding at September 1, 2016 | 24,025 |
Exchange ratio | 0.84 |
Shares of First Cash common stock issued | 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 |
The following amounts represent the final determination (as of the Merger date) of the fair value of identifiable assets acquired and liabilities assumed in the Merger, including adjustments made during the twelve month measurement period from the date of the Merger (in thousands):
| 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 | 224,548 |
Income taxes receivable | 25,276 |
Other current assets | 28,547 |
Investment in common stock of Enova (1) | 60,785 |
Property and equipment | 118,199 |
Goodwill (2) | 519,418 |
Intangible assets (3) | 103,250 |
Other assets | 62,994 |
Current liabilities | (95,630 | )
Customer deposits | (21,536 | )
Revolving unsecured credit facility (4) | (232,000 | )
Deferred tax liabilities | (27,120 | )
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 $1.3 million and generated net proceeds of $62.1 million.
(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 $223.0 million 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 (dollars in thousands):
|  | 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 10) and was terminated upon completion of the Merger.
In accordance with applicable accounting guidance, measurement period adjustments pertaining to the Merger were recorded during fiscal 2017 and were not retroactively reclassified to prior periods. Such measurement period adjustments were not material. Transaction costs associated with the Merger were expensed as incurred and are included in Merger and other acquisition expenses in the consolidated statements of income. These expenses included 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 acquired and liabilities assumed 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 $30.1 million, net of cash acquired before certain post-closing adjustments. Subsequent to the acquisition, $0.2 million of post closing adjustments were identified, resulting in a combined purchase price of $29.9 million, net of cash acquired and is subject to further post-closing adjustments. The purchase was composed of $27.4 million in cash paid during fiscal 2016 and remaining payables to the sellers of approximately $2.5 million. In addition, the Company assumed approximately $6.6 million 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 $2.0 million, net of cash acquired. During fiscal 2016, the Company also paid $0.6 million 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. Supplemental Pro Forma Information The following unaudited supplemental pro forma financial information for the years ended December 31, 2016 and 2015 reflects the consolidated results of operations of the Company as if the Merger, the Latin America Acquisition and the U.S. Acquisitions had occurred on January 1, 2015 (in thousands, except per share amounts):
| 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 |
Pro forma adjustments are included only to the extent they are directly attributable to the Merger and 2016 acquisitions. The unaudited pro forma results have been adjusted with respect to certain aspects of the Merger and 2016 acquisitions primarily to reflect:
• | depreciation and amortization expense that would have been recognized assuming fair value adjustments to the existing tangible and intangible assets acquired and liabilities assumed;
• | interest expense based on a lower combined weighted-average interest rate on borrowings (see Note 10) partially offset by an increase in total indebtedness primarily incurred to finance certain cash payments and transaction costs related to the Merger;
• | the elimination of losses on extinguishment of debt recognized in Cash America’s historical financial statements, as the related debt was terminated upon completion of the Merger; and
• | the inclusion in the pro forma fiscal 2015 amount of $68.8 million in Merger and other acquisition expenses incurred by both the acquirees and acquirer (excluded from the pro forma fiscal 2016 amounts).
The pro forma financial information has been prepared for informational purposes only and does not include any anticipated synergies or other potential benefits of the Merger or 2016 acquisitions. It also does not give effect to certain future charges that the Company expects to incur in connection with the Merger and 2016 acquisitions, including, but not limited to, additional professional fees, legal expenses, severance, retention and other employee-related costs, contract breakage costs and costs related to consolidation of technology systems and corporate facilities. Pro forma results do not purport to be indicative of what would have resulted had the acquisitions occurred on the date indicated or what may result in the future.

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- Definition The entire disclosure for business combinations, including leverage buyout transactions (as applicable), and divestitures. This may include a description of a business combination or divestiture (or series of individually immaterial business combinations or divestitures) completed during the period, including background, timing, and assets and liabilities recognized and reclassified or sold. This element does not include fixed asset sales and plant closings. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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