Theatre Acquisitions

6 Months Ended

Jun. 30, 2014

Business Combinations [Abstract]

Theatre Acquisitions

NOTE 11—THEATRE ACQUISITIONS

On May 15, 2014, the Company entered into a definitive merger agreement with Digital Cinema Destinations Corp. (“Digiplex”) for the acquisition of Digiplex by the Company. Digiplex currently operates 21 theatres and 206 screens located in 9 states. Digiplex has also entered into agreements to acquire an additional 4 theatres and 33 screens (“pipeline theatres”). Upon completion of the merger, each issued and outstanding share of Digiplex Class A common stock and Class B common stock, except for any shares owned by the Company, Digiplex or any of their respective subsidiaries, will be converted into the right to receive 0.1775 shares of the Company’s common stock, referred to as the “exchange ratio.” The exchange ratio is subject to potential reductions depending on the ability of Digiplex to complete the acquisition of each pipeline theatre. The transaction for one pipeline theatre has been terminated and the exchange ratio, as adjusted, is currently 0.1765. The merger is expected to close in the third quarter of 2014.

On November 19, 2013, the Company completed its acquisition of 9 entertainment complexes and 147 screens in three U.S. states pursuant to the terms of the Membership Interest Purchase Agreement with Muvico Entertainment, L.L.C. (“Muvico”). The acquisition supports the Company’s growth strategy. In consideration for the acquisition, the Company paid $30,608 in cash and the assumption of lease-related financing obligations of approximately $19,101. The purchase price was paid using cash on hand. In addition, the Company incurred contingent liabilities associated with the purchase. The fair value of this contingent consideration as of the acquisition date, which represents the maximum amount of future reimbursement, is $750. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement as defined in ASC 820.

The following table summarizes the preliminary purchase price and purchase price allocation for Muvico based on the fair value of net assets acquired at the acquisition date.

Cash consideration paid less cash amounts received	$	30,608
Leases and financing obligations assumed		19,101
Fair value of contingent consideration		750
Fair value of total consideration transferred	$	50,459
Inventory	$	541
Other current assets		385
Property and equipment		24,867
Deferred tax assets		3,441
Current liabilities		(2,068	)
Other liabilities		(1,150	)
Net assets acquired		26,016
Goodwill		24,443
Purchase price	$	50,459

The total non-cash consideration representing liabilities assumed in the Muvico transaction was $23,069.

The fair value of current assets and current liabilities acquired approximate their net book value at the acquisition date. The goodwill recognized of $24,443 is attributable primarily to expected synergies of achieving cost reductions and eliminating redundant administrative functions. The goodwill is deductible for tax purposes over 15 years. As of June 30, 2014, there were no changes in the recognized amounts of goodwill resulting from the acquisition of Muvico.

On August 16, 2013, the Company completed its acquisition of three theatres and 52 screens from Cinemark USA, Inc., a wholly-owned subsidiary of Cinemark Holdings, Inc. for $10,500 in cash and the assumption of lease-related financing obligations in the amount of $5,431. The results of operations of these theatres were not significant to the Company’s consolidated statements of operations. Acquisition costs associated with this purchase were not material.