Theatre Acquisitions

3 Months Ended

Mar. 31, 2015

Business Combinations [Abstract]

Theatre Acquisitions

NOTE 12—THEATRE ACQUISITIONS

Digiplex

On August 15, 2014, the Company completed its acquisition of Digiplex pursuant to an Agreement and Plan of Merger with Digiplex and Badlands Acquisition Corporation, a wholly-owned subsidiary of the Company. As a result of the acquisition Digiplex is now a wholly-owned subsidiary of the Company. The acquisition of Digiplex supports the Company’s growth strategy. Digiplex operated 21 theatres and 206 screens in 9 U.S. states. 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, was converted into the right to receive 0.1765 shares of the Company’s common stock, referred to as the “exchange ratio,” or approximately 1.4 million shares of the Company’s common stock in the aggregate. In addition to the shares issued, the Company also assumed a note payable of $9,099, which the Company paid subsequent to closing.

In December 2012, Digiplex, together with Start Media LLC (“Start Media”), formed a joint venture, Start Media Digiplex, LLC (“JV”) to acquire theatre assets. As of August 15, 2014, Digiplex owned 34% of the equity of the joint venture. On August 15, 2014, in conjunction with the acquisition, the Company paid cash of $10,978 to Start Media for its 66% interest in the joint venture. Also in connection with the acquisition, the Company paid cash of $181 in lieu of 30,000 shares of Digiplex common stock held in escrow for the former owners of two Digiplex theatres.

Prior to the acquisition, Digiplex had entered into agreements to acquire an additional four theatres and 33 screens (“pipeline theatres”). The Company completed its acquisition of one pipeline theatre and ten screens on August 22, 2014 and two pipeline theatres and 18 screens on September 26, 2014. Total cash consideration paid for the pipeline theatres was approximately $5,400 and resulted in an increase to Goodwill during the year ended December 31, 2014 of approximately $3,250. The transaction for one pipeline theatre was terminated subsequent to the acquisition. The acquisition of the three pipeline theatres was not significant individually or in the aggregate to the Company’s results of operations for the year ended December 31, 2014.

The following table summarizes the preliminary purchase price for Digiplex.

Number of shares of Digiplex common stock outstanding at August 15, 2014		7,832
Exchange ratio		0.1765
Number of shares of Carmike common stock—as exchanged		1,382
Carmike common stock price on August 15, 2014	$	34.20
Estimated fair value of 1.4 million common shares issued per merger agreement	$	47,274
Cash settlement of Start Media joint venture		10,978
Cash settlement of shares held in escrow		181
Total preliminary estimated acquisition consideration	$	58,433

The following table summarizes the preliminary purchase price allocation, which is subject to the final deferred income tax computations.

	Digiplex
Total purchase price, net of cash received	$	58,004
Accounts receivable		515
Other current assets		266
Property and equipment		25,126
Intangible assets		2,190
Other assets		521
Deferred tax assets		10,211
Accounts payable		(3,359	)
Accrued expenses		(3,730	)
Unfavorable lease obligations		(5,980	)
Capital leases assumed		(850	)
Assumption of Northlight term loan		(9,099	)
Net assets acquired		15,811
Goodwill	$	42,193

Management believes that the fair value of current assets and current liabilities acquired approximate their net book value at the acquisition date. The goodwill recognized of $42,193 is attributable primarily to expected synergies of achieving cost reductions and eliminating redundant administrative functions. The goodwill is not expected to be deductible for income tax purposes. During the three months ended March 31, 2015, the Company completed its valuation of the fixed assets acquired which resulted in a decrease to property and equipment and an increase to goodwill of $668. Identifiable intangible assets recognized of $2,190 represent favorable lease obligations and will be amortized to theatre occupancy costs over the respective lease term. The Company also recognized unfavorable lease obligations of $5,980. The weighted-average useful life of the favorable lease obligations, prior to the exercise of any extension or renewals associated with the underlying leases is 6.1 years.

The results of Digiplex’s operations have been included in the consolidated financial statements since the date of acquisition. Revenue and net income of Digiplex included in the Company’s operating results for the three months ended March 31, 2015 were $12,876 and $1,071, respectively.