ACQUISITIONS

During the three months ended March 31, 2015 and 2014, net cash payments related to the acquisitions of businesses and contracts were $3.6 million and $960,000, respectively. Cash payments made during the three months ended March 31, 2015 represented the payment of merger consideration, deferred as of the acquisition date, for 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. The Progressive acquisition had no impact on the condensed consolidated financial statements for the three months ended March 31, 2014. The effect of the Company's other acquisitions on the condensed consolidated financial statements for the three months ended March 31, 2014 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. Progressive provides lease-purchase solutions through over 15,000 retail locations in 46 states. The Company believes the Progressive acquisition will be strategically transformational and will strengthen its business.

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



(In Thousands)
Proceeds from Private Placement Note Issuance	$	300,000
Proceeds from Term Loan	126,250
Proceeds from Revolving Credit Facility	65,000
Cash Consideration	185,454
Deferred Cash Consideration	29,106
Purchase Price	$	705,810

Refer to Note 4 to the consolidated financial statements in the 2014 Annual Report for additional information regarding the debt incurred to partially finance the Progressive acquisition.

The initial deferred cash consideration had $3.3 million outstanding as of March 31, 2015, related to withheld escrow amounts.

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. 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 $13.4 million is fully recoverable from the secondary escrow account and has included this indemnification asset as a receivable in the Company's 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.

Acquisition Accounting

The following table presents the summary of the estimated fair value of the assets acquired and liabilities assumed in the Progressive acquisition as of December 31, 2014, as well as adjustments made during the three months ended March 31, 2015 (referred to as the “measurement period adjustments”):



(In Thousands)	Amounts Recognized as of Acquisition Date (as adjusted)¹			Measurement Period Adjustments²			Amounts Recognized as of Acquisition Date (as adjusted)
Purchase Price	$	705,810		$	—		$	705,810

Estimated Fair Value of Identifiable Assets Acquired and Liabilities Assumed
Cash and Cash Equivalents	5,810			—			5,810
Receivables^{2, 3}	27,581			(2,356		)	25,225
Lease Merchandise²	141,185			110			141,295
Property, Plant and Equipment	4,010			—			4,010
Other Intangibles⁴	325,000			—			325,000
Prepaid Expenses and Other Assets	893			—			893
Total Identifiable Assets Acquired	504,479			(2,246		)	502,233
Accounts Payable and Accrued Expenses²	(29,104		)	3,049			(26,055		)
Deferred Income Taxes Payable²	(48,749		)	(1,026		)	(49,775		)
Customer Deposits and Advance Payments	(10,000		)	—			(10,000		)
Total Liabilities Assumed	(87,853		)	2,023			(85,830		)
Goodwill⁵	289,184			223			289,407
Net Assets Acquired	$	705,810		$	—		$	705,810

¹As previously reported in the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014.

²The measurement period adjustments related to the resolution of income tax uncertainties and sales tax exposures, which also impacted the fair value estimates of lease merchandise and receivables related to the secondary escrow amount, subsequent to the acquisition date.

³Receivables include $13.4 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 acquired was $22.7 million, of which $10.9 million was expected to be uncollectible.

⁴Identifiable intangible assets are further disaggregated in the following table.

⁵The 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, $246.0 million is expected to be deductible for tax purposes. The primary reason the purchase price of the acquisition exceeded the fair value of the net assets acquired, which resulted in the recognition of goodwill, is 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.

As of December 31, 2014, the Company made certain estimates in its acquisition accounting related to sales tax exposures and income tax accounts, as final pre-acquisition information was not available. During the three months ended March 31, 2015, the Company completed its assessment of the sales tax and income tax effects of the acquisition accounting.

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	11,000		1.0
Merchant Relationships	181,000		12.0
Total Acquired Intangible Assets¹	$	325,000

¹Acquired definite-lived intangible assets have a total weighted average life of 10.6 years.

During the three months ended March 31, 2014, the Company incurred $803,000 of transaction costs in connection with the acquisition of Progressive. These costs were included in the line item “Progressive-related transaction costs” in the condensed consolidated statements of earnings.

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:



	Three Months Ended March 31,
	2014
(In Thousands)	As Reported		Pro Forma
Revenues	$	585,423	$	732,300
Net Earnings	38,339		39,389

The unaudited pro forma financial information presented above does not purport to represent what the actual results of our operations would have been if the 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.