Quarterly report pursuant to Section 13 or 15(d)

Security Networks Acquisition

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Security Networks Acquisition
3 Months Ended
Mar. 31, 2014
Security Networks Acquisition  
Security Networks Acquisition

(3)                                 Security Networks Acquisition

 

On August 16, 2013 (the “Closing Date”), the Company acquired all of the equity interests of Security Networks and certain affiliated entities.  The purchase price (the “Security Networks Purchase Price”) of $500,557,000 consisted of $481,834,000 in cash and 253,333 shares of Ascent Capital’s Series A common stock (par value $0.01 per share) with a Closing Date fair value of $18,723,000.  The Security Networks Purchase Price includes post-closing adjustments of $1,057,000.

 

The cash portion of the Security Networks Purchase Price was funded by cash contributions from Ascent Capital, the proceeds of the Company’s issuance of $175,000,000 in aggregate principal amount of 9.125% Senior Notes due 2020, the proceeds of incremental term loans of $225,000,000 issued under the Company’s existing credit facility and the proceeds of a $100,000,000 intercompany loan from Ascent Capital.

 

The Security Networks Acquisition was accounted for as a business combination utilizing the acquisition method in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations.  Under the acquisition method of accounting, the Security Networks Purchase Price has been allocated to Security Networks’ tangible and identifiable intangible assets acquired and liabilities assumed based on their preliminary estimates of fair value as follows (amounts in thousands):

 

Cash

 

$

3,096

 

Trade receivables

 

1,305

 

Other current assets

 

1,677

 

Property and equipment

 

1,404

 

Subscriber accounts

 

307,800

 

Dealer network and other intangible assets

 

48,500

 

Goodwill

 

176,300

 

Holdback liability, current and non-current

 

(9,620

)

Deferred income tax liabilities

 

(4,108

)

Other current and non-current liabilities

 

(25,797

)

Fair value of consideration

 

$

500,557

 

 

The preliminary estimates of fair value of assets acquired and liabilities assumed are based on available information as of the date of this report and may be revised as additional information becomes available, which primarily includes obtaining the Security Networks final short period federal and state income tax returns for 2013, which are expected to be filed in the second quarter of 2014.

 

The following table includes unaudited pro forma information for the Company, which includes the historical operating results of Security Networks prior to ownership by the Company. This pro forma information gives effect to certain adjustments, including increased amortization to reflect the fair value assigned to the subscriber accounts and dealer network and other intangible assets acquired and increased interest expense relating to the debt transactions entered into to fund the Security Networks Acquisition. The pro-forma results assume that the Security Networks Acquisition and the debt transactions had occurred on January 1, 2012 for all periods presented. They are not necessarily indicative of the results of operations that would have occurred if the acquisition had been made at the beginning of the periods presented or that may be obtained in the future.

 

 

 

Three months ended
March 31, 2013

 

 

 

(amounts in thousands,
except per share amounts)

 

As reported:

 

 

 

Net revenue

 

$

100,158

 

Net income

 

1,349

 

 

 

 

 

Supplemental pro-forma:

 

 

 

Net revenue

 

$

123,414

 

Net loss

 

(5,805

)