(2) Acquisitions

DirectCash Payments Inc. Acquisition

On January 6, 2017, the Company completed the acquisition of DCPayments, whereby DCPayments became a wholly-owned indirect subsidiary of the Company. In connection with the closing of the acquisition, each DCPayments common share was acquired for Canadian Dollars $19.00 in cash per common share, and the Company also repaid the outstanding third-party indebtedness of DCPayments, the combined aggregate of which represented a total transaction value of approximately $658 million Canadian Dollars (approximately $495 million U.S. dollars). The total amount paid for the acquisition at closing was financed with cash on hand and borrowings under the Company’s revolving credit facility. The purchase price has been preliminarily allocated as disclosed further below.

As a result of the DCPayments acquisition, the Company significantly increased the size of its Canadian, Mexico, and U.K. operations and entered into the Australian and New Zealand markets. With this acquisition, the Company added approximately 25,000 ATMs to its global ATM count.

The results of DCPayments operations have been included in the accompanying Consolidated Statements of Operations subsequent to the January 6, 2017 acquisition date. DCPayments contributed a $(0.2) million loss from operations in the three months ended March 31, 2017, including approximately $1.2 million in acquisition-related expenses.

The DCPayments acquisition was accounted for as a business combination using the purchase method of accounting under the provisions of ASC Topic 805, Business Combinations (“ASC 805”), with Cardtronics as the acquirer of DCPayments. In accordance with ASC 805, all assets acquired and liabilities assumed have been recorded at their estimated fair value as of the acquisition date and any excess of the purchase consideration over the fair value of the identifiable assets acquired and liabilities assumed has been recognized as goodwill. This preliminary fair value purchase allocation process resulted in a preliminary goodwill allocation of approximately $294.7 million, all of which has been assigned to the Company’s DCPayments reporting segment, which includes operations from the DCPayments operations in Australia, New Zealand, Canada, the U.K., and Mexico. The recognized goodwill is primarily attributable to expected revenue and cost synergies from the acquisition. None of the goodwill or intangible asset amounts are expected to be deductible for income tax purposes; however, the Company acquired certain tax assets in the form of accumulated net operating loss carryforwards and capital allowances, which the Company currently expects to utilize. The Company is in the process of reviewing several components of the preliminary purchase price allocation and expects to finalize its purchase accounting for this acquisition later in 2017.

The following table summarizes the preliminary estimated fair values of the assets acquired and liabilities assumed as of the acquisition date:


	(In thousands)
Cash and cash equivalents	$	28,227
Accounts and notes receivable		14,841
Inventory		977
Restricted cash		2,475
Prepaid expenses, deferred costs, and other current assets		2,879
Property and equipment		66,494
Intangible assets		186,344
Goodwill		294,676
Prepaid expenses, deferred costs, and other noncurrent assets		674
Total assets acquired	$	597,587

Current portion of other long-term liabilities	$	712
Accounts payable and other current liabilities		52,404
Asset retirement obligations		5,668
Deferred tax liability		30,769
Other long-term liabilities		12,555
Total liabilities assumed	$	102,108

Net assets acquired	$	495,479

The fair values of intangible assets acquired have been estimated utilizing an income approach, with the assistance of an independent appraisal firm. The intangible assets acquired as part of the DCPayments acquisition are being amortized on a straight-line basis, over the estimated lives. At the date of the acquisition the estimated fair values consisted of the following:


	Fair Values		Estimated Useful Lives
	(In thousands)
Merchant contracts/relationships	$	173,016		8 years
Trade names: definite-lived		13,328		3 – 5 years
Total intangible assets acquired	$	186,344

Pro Forma Results of Operations

The following table presents certain unaudited pro forma combined results of operations of the Company and the acquired DCPayments business for the three months ended March 31, 2016, after giving effect to certain pro forma and conforming accounting adjustments including: (i) amortization of acquired intangible assets, (ii) the impact of certain fair value adjustments such as depreciation on the acquired property and equipment, (iii) an interest expense adjustment for the net impact of the removal of the interest expense on the historical long-term debt of DCPayments that was repaid and the new interest expense on additional borrowings incurred by the Company to fund the acquisition, and (iv) a conforming adjustment to recognize certain DCPayments surcharge revenues on a gross basis (not reduced by merchant commission payments), consistent with the Company policy and practice, and other less significant conforming accounting adjustments.


	Three Months Ended
	March 31, 2016
	As Reported		Pro Forma
	(In thousands, excluding per share amounts)
Total revenues	$	303,247	$	365,861
Net income attributable to controlling interests and available to common shareholders		15,384		16,606

Net income per common share – basic	$	0.34	$	0.37
Net income per common share – diluted	$	0.34	$	0.36

The unaudited pro forma combined results of operations for the three months ended March 31, 2016, reflected in the table above, do not include the impact of other acquisitions completed since March 31, 2016, as these transactions did not have a material impact on the overall consolidated financial statements. These unaudited pro forma combined results of operations do not reflect the impact of any potential operating efficiencies, savings from expected synergies, or costs to integrate the operations. The unaudited pro forma combined results of operations are not necessarily indicative of the future results to be expected for the Company’s consolidated results of operations.

Other Acquisitions

On January 31, 2017, the Company completed the acquisition of Spark ATM Systems Pyt Ltd. (“Spark”), an independent ATM deployer in South Africa, with a growing network of approximately 2,300 ATMs. The initial purchase consideration of 260.7 million South African Rand (“Rand”) (approximately $19.5 million U.S. dollars), was paid in cash and included approximately 64.0 million Rand to pay off third-party debt of Spark. The total purchase consideration also includes potential additional contingent consideration of up to approximately $59.6 million. This amount is contingent upon Spark achieving certain agreed upon earnings targets in 2019 and 2020 and would be payable to the previous investors in the Spark business. As of January 31, 2017, the preliminary estimated fair value of the contingent consideration arrangement was approximately 505 million Rand (approximately $37.4 million U.S. dollars), as determined with the assistance of an independent appraisal firm using forecasted future financial projections and other Level 3 inputs (for additional information related to the Company’s fair value estimates see Note 12. Fair Value Measurements). In conjunction with the transaction, the Company preliminarily recognized property and equipment of approximately $5.3 million, intangible assets of $2.8 million, Asset Retirement Obligations (“AROs”) of approximately $0.4 million, other net liabilities of approximately $1.1 million, and goodwill of approximately $50.3 million. The purchase accounting remains preliminary, pending finalization of the related asset appraisals.

On April 13, 2016, the Company completed the acquisition of a 2,600 location ATM portfolio in the U.S. from a major financial institution. This acquisition was affected through multiple closings taking place primarily in April 2016. The total purchase consideration of approximately $13.8 million was paid in installments corresponding to each close. In conjunction with the transaction, the Company recognized property and equipment of $8.3 million, contract intangibles and prepaid merchant commissions of $7.1 million, and AROs of $1.6 million. The Company completed the purchase accounting during the fourth quarter of 2016.