Acquisition of Peter Piper Pizza (Peter Piper Pizza [Member])

12 Months Ended

Dec. 28, 2014

Peter Piper Pizza [Member]

Business Acquisition [Line Items]

Acquisition of Peter Piper Pizza

Acquisition of Peter Piper Pizza:

On October 15, 2014, we entered into an agreement and plan of merger to acquire Peter Piper Pizza (the “PPP Acquisition”), a leading pizza and entertainment restaurant chain operating in the southwestern United States and Mexico, for aggregate consideration paid of $113.1 million, net of cash acquired. We completed the acquisition on October 16, 2014, which was funded by a portion of the proceeds obtained from the sale leaseback transaction discussed in Note 12. “Sale Leaseback Transaction.”

The PPP Acquisition has been accounted for as a business combination using the acquisition method of accounting, whereby the purchase price was allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date, with the remaining unallocated purchase price recorded as goodwill. Fair value measurements have been applied based on assumptions that market participants would use in the pricing of the asset or liability. The purchase price allocation could change in subsequent periods, up to one year from the acquisition date. Any subsequent changes to the purchase price allocation that result in material changes to our Consolidated Financial Statements will be adjusted retroactively.

The following table summarizes the fair values assigned to the net assets acquired as of the October 16, 2014 acquisition date (in thousands):

Cash consideration paid	$	118,409
Fair value of assets acquired and liabilities assumed:
Cash and cash equivalents	5,267
Accounts receivable	511
Inventories	820
Other current assets	598
Property, plant and equipment	14,383
Favorable lease interests	2,000
Peter Piper Pizza's tradename	24,800
Franchise agreements	39,300
Other non-current assets	154
Indebtedness	(120		)
Unfavorable lease interests	(3,290		)
Deferred taxes	(12,935		)
Other current and non-current liabilities	(4,061		)
Net assets acquired	67,427
Excess purchase price allocated to goodwill	$	50,982

At the time of the acquisition, the Company believed that its enhanced market position and future domestic and international growth potential were the primary factors that contributed to a total purchase price that resulted in the recognition of goodwill. As of December 28, 2014, $0.3 million of the goodwill arising from the acquisition is expected to be deductible for tax purposes.

We incurred $3.6 million in transaction-related costs for accounting, legal, advisory and other costs in connection with the PPP acquisition. In addition, Peter Piper Pizza incurred $1.6 million in transaction-related costs including severance and lease termination costs for their corporate offices. These transaction-related costs have been recorded in “Transaction and severance costs” in our Consolidated Statement of Earnings for the 317 day period ended December 28, 2014.

We have included the operating results of Peter Piper Pizza for the 73 days from October 17, 2014 to December 28, 2014 in our Consolidated Statement of Earnings for the 317 day period ended December 28, 2014. Our consolidated results for the Successor period ended December 28, 2014 included total revenues and a net loss attributable to Peter Piper Pizza of $12.3 million and $0.6 million, respectively.

Pro Forma Financial Information

The following unaudited pro forma results of operations for the twelve months ended December 28, 2014 and December 29, 2013 assume that the acquisition of Peter Piper Pizza had occurred on December 31, 2012, the first day in fiscal year 2013, after giving effect to acquisition accounting adjustments relating to depreciation and amortization of the revalued assets and the identifiable intangible assets resulting from the Peter Piper Pizza acquisition, interest expense associated with the debt paid off in connection with the PPP acquisition, and other purchase price and transaction-related adjustments in connection with the PPP acquisition. These unaudited pro forma results are presented for informational purposes only and are not indicative of the results of operations that would have been achieved if the Peter Piper Pizza acquisition had taken place at the beginning of the earliest period presented, and exclude one-time, non-recurring costs related to the PPP acquisition, including transaction costs and executive termination benefits and share-based compensation expense related to the departure of certain Peter Piper Pizza executives. Such pro forma financial information is based on the historical financial statements of Peter Piper Pizza. The pro forma financial information presented below also assumes that the Merger had occurred on December 31, 2012 (see Note 2. “Acquisition of CEC Entertainment, Inc.”). The unaudited pro forma financial information presented below does not reflect any synergies or operating cost reductions that may be achieved.

	Twelve Months Ended
	December 28, 2014	December 29, 2013
	(in thousands)
Total revenues	887,018	885,476
Net income (loss)	5,758	(1,328	)