Fair Value Measurements

6 Months Ended

Jun. 30, 2020

FAIR VALUE MEASUREMENTS

Assets and liabilities measured at fair value on a recurring basis in the Company's consolidated financial statements as of June 30, 2020 and December 31, 2019 are summarized by type of inputs applicable to the fair value measurements as follows:


June 30, 2020	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities ^(a)	$	139	$	16	$	—	$	155
Long-term investments ^(a)	180,609		—		34,110		214,719
Precious metal and commodity inventories recorded at fair value	22,013		—		—		22,013
Economic interests in loans	—		—		14,646		14,646




Warrants	—		—		2,086		2,086
Total	$	202,761	$	16	$	50,842	$	253,619

Liabilities:

Commodity contracts on precious metal and commodity inventories	$	—	$	78	$	—	$	78
Other precious metal liabilities	7,904		—		—		7,904


Total	$	7,904	$	78	$	—	$	7,982


December 31, 2019	Level 1		Level 2		Level 3		Total
Assets:
Marketable securities ^(a)	$	170	$	50	$	—	$	220
Long-term investments ^(a)	222,178		—		53,658		275,836

Precious metal and commodity inventories recorded at fair value	11,377		—		—		11,377
Economic interests in loans	—		—		18,633		18,633

Warrants	—		—		2,086		2,086

Total	$	233,725	$	50	$	74,377	$	308,152

Liabilities:

Commodity contracts on precious metal and commodity inventories	$	—	$	381	$	—	$	381
Other precious metal liabilities	11,481		—		—		11,481


Total	$	11,481	$	381	$	—	$	11,862

(a) For additional detail of the marketable securities and long-term investments see Note 8 - "Investments."

There were no transfers of securities among the various measurement input levels during the three and six months ended June 30, 2020.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date. Fair value measurements are broken down into three levels based on the reliability of inputs as follows:

Level 1 inputs are quoted prices in active markets for identical assets or liabilities as of the measurement date ("Level 1").

Level 2 inputs may include quoted prices in active markets for similar assets or liabilities, quoted prices in a market that is not active for identical assets or liabilities, or other inputs that can be corroborated by observable market data ("Level 2").

Level 3 inputs are unobservable for the asset or liability when there is little, if any, market activity for the asset or liability. Level 3 inputs are based on the best information available and may include data developed by the Company ("Level 3").

The fair value of the Company's financial instruments, such as cash and cash equivalents, trade and other receivables and accounts payable, approximates carrying value due to the short-term maturities of these assets and liabilities. Carrying cost approximates fair value for long-term debt, which has variable interest rates.

The precious metal and commodity inventories associated with the Company's fair value hedges (see Note 10 - "Financial Instruments") are reported at fair value. Fair values of these inventories are based on quoted market prices on commodity exchanges and are considered Level 1 measurements. The derivative instruments that the Company purchases in connection with its precious metal and commodity inventories, specifically commodity futures and forward contracts, are also valued at fair value. The futures contracts are Level 1 measurements since they are traded on a commodity exchange. The forward contracts are entered into with a counterparty and are considered Level 2 measurements.

Following is a summary of changes in assets measured using Level 3 inputs:


	Investments in Associated Companies ^(a)		Marketable Securities and Other ^(b)		Total
Balance as of December 31, 2019	$	52,240	$	22,137	$	74,377
Purchases	—		204		204
Sales and cash collections	(2,033)		(6,847)		(8,880)
Realized gains	—		2,660		2,660
Unrealized gains	810		—		810
Unrealized losses	(18,329)		—		(18,329)
Balance as of June 30, 2020	$	32,688	$	18,154	$	50,842

Balance as of December 31, 2018	$	40,643	$	21,274	$	61,917
Purchases	14,943		—		14,943
Sales and cash collections	—		(7,557)		(7,557)
Realized gains	—		6,677		6,677
Unrealized gains	883		—		883

Balance as of June 30, 2019	$	56,469	$	20,394	$	76,863

(a) Unrealized gains and losses are recorded in (Income) loss of associated companies, net of taxes in the Company's consolidated statements of operations.

(b) Realized and unrealized gains and losses are recorded in Realized and unrealized losses (gains) on securities, net or Financial services revenue in the Company's consolidated statements of operations.

Long-Term Investments - Valuation Techniques

The Company estimates the value of its investments in STCN convertible preferred stock and the New Note using a Monte Carlo simulation. Key inputs in these valuations include the trading price and volatility of STCN's common stock, the risk-free rate of return, as well as the dividend rate, conversion price, redemption date of the preferred stock and the maturity date of the note.

Marketable Securities and Other - Valuation Techniques

The Company determines the fair value of certain corporate securities and corporate obligations by incorporating and reviewing prices provided by third-party pricing services based on the specific features of the underlying securities.

The fair value of the derivatives held by WebBank (see Note 10 - "Financial Instruments") represent the estimated amounts that WebBank would receive or pay to terminate the contracts at the reporting date and is based on discounted cash flow analyses that consider credit, performance and prepayment. Unobservable inputs used in the discounted cash flow analyses are: a constant prepayment rate of 7.70% to 35.86%, a constant default rate of 0.87% to 27.49% and a discount rate of 1.97% to 26.28%.

Assets Measured at Fair Value on a Nonrecurring Basis

The Company's non-financial assets and liabilities measured at fair value on a non-recurring basis, when required, include goodwill and other intangible assets, any assets and liabilities acquired in a business combination, or its long-lived assets written down to fair value. To measure fair value for such assets and liabilities, the Company uses techniques including an income approach, a market approach and/or appraisals (Level 3 inputs). The income approach is based on a discounted cash flow analysis and calculates the fair value by estimating the after-tax cash flows attributable to an asset or liability and then discounting the after-tax cash flows to a present value using a risk-adjusted discount rate. Assumptions used in the discounted cash flow analysis ("DCF") require the exercise of significant judgment, including judgment about appropriate discount rates and terminal values, growth rates and the amount and timing of expected future cash flows. The discount rates, which are intended to reflect the risks inherent in future cash flow projections, used in the DCF are based on estimates of the weighted-average cost of capital of a market participant. Such estimates are derived from analysis of peer companies and consider the industry weighted-average return on debt and equity from a market participant perspective. A market approach values a business by considering the prices at which shares of capital stock, or related underlying assets, of reasonably comparable companies are trading in the public market or the transaction price at which similar companies have been acquired. If comparable companies are not available, the market approach is not used.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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