ACQUISITIONS

During the six months ended June 30, 2014 and 2013, net cash payments related to the acquisitions of businesses and contracts were $672.5 million and $2.4 million, respectively. Cash payments made during the six months ended June 30, 2014 were principally related to the April 2014 Progressive acquisition described below.

Acquisitions have been accounted for as business combinations, and the results of operations of the acquired businesses are included in the Company’s results of operations from their dates of acquisition. Progressive contributed revenues of approximately $138.9 million and losses before income taxes of approximately $323,000 from April 14, 2014 through June 30, 2014. The effect of the Company's other acquisitions on the consolidated financial statements for the six months ended June 30, 2014 and 2013 was not significant.

Progressive Acquisition

On April 14, 2014, the Company acquired a 100% ownership interest in Progressive, a leading virtual lease-to-own company, for a total purchase price of $705.8 million, inclusive of cash acquired of $5.8 million, including deferred payments of $29.1 million. Progressive provides lease-purchase solutions through over 15,000 retail locations in 46 states. We believe the Progressive acquisition will be strategically transformational for the Company and will strengthen our franchise.

The following table reconciles the total estimated purchase price of the Company's acquisition of Progressive:



(In Thousands)
Proceeds from Private Placement Note Issuance	$	300,000
Proceeds from Senior Debt Facility	126,250
Proceeds from Revolver	65,000
Cash Consideration	185,454
Deferred Cash Consideration	29,106
Estimated Purchase Price	$	705,810

Refer to Note 4 to these consolidated financial statements for additional information regarding the debt incurred to partially finance the Progressive acquisition.

Deferred cash consideration consists of $22.3 million and $3.6 million of merger consideration payable in July 2014 and January 2015, respectively, as well as $3.3 million in withheld escrow amounts that will be paid commensurate with the termination of the escrow agreements described below.

The purchase price includes a primary escrow of $35.8 million to secure indemnification obligations of the sellers relating to the accuracy of representations, warranties and the satisfaction of covenants. The primary escrow funds will be distributed 15 months from the April 14, 2014 closing date, after deducting for any claims made. In addition, the purchase price includes a secondary escrow of $15.8 million to secure indemnification obligations of the sellers relating to certain acquired tax-related contingent liabilities. The Company believes that the $15.8 million is fully recoverable from the secondary escrow account and has included this indemnification asset as a receivable in the Company's preliminary acquisition accounting. The secondary escrow is subject to current and future claims of the Company and any remaining undisputed balance is payable to the sellers 36 months from the April 14, 2014 closing date. The purchase price also includes a post-closing adjustment escrow of $1.0 million to be settled 90 days from the closing date to account for any indebtedness or transaction expenses of Progressive not otherwise paid at closing.

Preliminary Acquisition Accounting

The following table presents the summary of the preliminary estimated fair value of the assets acquired and liabilities assumed in the Progressive acquisition as of the April 14, 2014 acquisition date:



(In Thousands)
Estimated Purchase Price	$	705,810

Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed
Cash and Cash Equivalents	5,810
Receivables¹	27,581
Lease Merchandise	138,198
Property, Plant and Equipment	4,010
Other Intangibles²	333,000
Prepaid Expenses and Other Assets	893
Total Identifiable Assets Acquired	509,492
Accounts Payable and Accrued Expenses	(23,342		)
Deferred Income Taxes Payable	(48,298		)
Customer Deposits and Advance Payments	(10,000		)
Total Liabilities Assumed	(81,640		)
Goodwill³	277,958
Net Assets Acquired	$	705,810

¹Receivables include $15.8 million related to the secondary escrow amount, which the Company expects to recover prior to termination of the escrow agreement 36 months from the April 14, 2014 closing date. The gross amount due under customer-related receivables we acquired was $22.7 million, of which $10.9 million is expected to be uncollectible.

²Identifiable intangible assets are further disaggregated in the following table.

³The total goodwill recognized in conjunction with the Progressive acquisition has been assigned to the Progressive operating segment. Of the goodwill recognized as part of this acquisition, $236.3 million is expected to be deductible for tax purposes. The primary reasons the purchase price of the acquisition exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, is primarily related to synergistic value created from the combination of Progressive's virtual customer payment capabilities with the Company's leading traditional lease-to-own model. Goodwill also includes certain other intangible assets that do not qualify for separate recognition, such as an assembled workforce.

The preliminary acquisition accounting presented above is subject to refinement when the appraisals of intangible assets are finalized by the Company's independent consultants. In addition, certain contingencies that existed at the acquisition date, primarily related to sales and other tax exposures, are not expected to be resolved until final tax returns are filed related to the acquired entities. Estimates for these items have been included in the acquisition accounting and are expected to be finalized prior to the one year anniversary date of the acquisition.

The estimated intangible assets attributable to the Progressive acquisition are comprised of the following:



	Fair Value (in thousands)		Weighted Average Life (in years)
Internal Use Software	$	14,000	3.0
Technology	66,000		10.0
Trade Names and Trademarks	53,000		Indefinite
Customer Lease Contracts	19,000		1.0
Merchant Relationships	181,000		12.0
Total Acquired Intangible Assets¹	$	333,000

¹Acquired definite-lived intangible assets have a total weighted average life of 9.0 years.

During the six months ended June 30, 2014, the Company incurred $6.3 million of transaction costs in connection with the acquisition of Progressive. These costs were included in the line item “Progressive-related transaction costs” in the consolidated statements of earnings. In addition, during the six months ended June 30, 2014, the Company incurred approximately $2.3 million in debt financing costs related to the $491.3 million of new indebtedness incurred to partially finance the acquisition, which has been capitalized as a component of prepaid expenses and other assets in the consolidated balance sheets.

Pro Forma Financial Information

The following table presents unaudited consolidated pro forma information as if the acquisition of Progressive had occurred on January 1, 2013:



	Six Months Ended June 30,
	2014				2013
(In Thousands)	As Reported		Pro Forma		As Reported		Pro Forma
Revenues	$	1,257,933	$	1,427,106	$	1,143,555	$	1,325,928
Net Earnings	46,844		49,654		76,854		66,845

The unaudited pro forma financial information presented above does not purport to represent what the actual results of our operations would have been if our acquisition of Progressive had occurred on January 1, 2013, nor is it indicative of future performance. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, including, but not limited to, anticipated cost savings from operating synergies.

The unaudited pro forma financial information presented in the table above has been adjusted to give effect to adjustments that are (1) directly related to the business combination; (2) factually supportable; and (3) expected to have a continuing impact. These adjustments include, but are not limited to amortization related to fair value adjustments to intangible assets and the adjustment of interest expense to reflect the additional borrowings of the Company in conjunction with the acquisition.