Business Combinations

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations

Note 3: Business Combinations

Acquisition of Gazelle, Inc.,

On October 29, 2015, Outerwall Inc. entered into an asset purchase agreement (the “Agreement”) with Gazelle, Inc., a Delaware corporation ("Gazelle") that provides consumers an on-line solution for the sale and purchase of used mobile phones, computers and tablets. This taxable transaction closed on November 10, 2015. The primary reasons for the business combination were to help drive our ecoATM business to profitability, provide margin and revenue uplift opportunities, and leverage a direct-to-consumer channel for collected devices.

We accounted for the purchase of Gazelle as a business combination. Costs related to this acquisition of approximately $0.3 million were expensed during the fourth quarter of 2015 and are included within general and administrative expenses in our Consolidated Statements of Comprehensive Income.

The following table shows the consideration transferred and the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed and the resultant purchase price allocation.

Dollars in thousands	November 10, 2015
Total consideration transferred	$	17,980
Assets acquired:
Accounts receivable	$	67
Prepaid expenses and other current assets	3,963
Property and equipment	252
Intangible assets	16,000
Total assets acquired	20,282
Liabilities assumed:
Deferred revenue	(750		)
Deferred tax liabilities	(563		)
Total liabilities assumed	(1,313		)
Total net assets acquired	$	18,969
Bargain purchase gain	$	989

The assets acquired and liabilities assumed, as well as the results of operations from the date of the acquisition, are included within our ecoATM segment. The purchase priced allocation resulted in the recognition of a gain on bargain purchase of approximately $1.0 million, which was included within other, net in our Consolidated Statements of Comprehensive Income. The gain on bargain purchase is primarily the result of acquiring certain assets of Gazelle, including the Gazelle trade name, in a transaction under which the previous investors were motivated to sell due to short-term liquidity concerns.

Acquired identifiable intangible assets and their estimated useful life in years are as follows:

Dollars in thousands	Purchase Price		Estimated Useful Life in Years
Trade name	$	14,000	10
Developed technology	$	2,000	3

The following table shows the revenue and operating loss included in our Consolidated Statements of Comprehensive Income resulting from the acquisition of Gazelle since the closing date, including the amortization for acquired intangibles which are included in our ecoATM segment:

	Year Ended
Dollars in thousands	December 31, 2015
Revenue	$	13,269
Operating loss	$	948

Pro forma information

The following unaudited pro forma information represents the results of operations for Outerwall Inc. and includes the Gazelle business acquired as if the acquisition was consummated as of January 1, 2014.

	Years Ended December 31,
	(Unaudited)
Dollars in thousands	2015		2014
Pro-forma revenue	$	2,264,467	$	2,378,508
Pro-forma income from continuing operations	$	38,524	$	114,641

The unaudited pro forma results have been adjusted with respect to certain aspects of our acquisition of Gazelle to reflect:

• changes in assets to record their acquisition date fair values and the resulting changes in amortization;

• adjustments for the bargain purchase gain and costs related to the acquisition; and

• the income tax impact of the pro forma adjustments at a combined federal and state statutory rate of 37.5%.

The unaudited pro forma results do not reflect future events that may occur after the acquisition, including, but not limited to, the anticipated realization of ongoing savings from operating synergies in subsequent periods.