Fair Value Measurements

3 Months Ended

Mar. 31, 2023

Financial assets and liabilities measured at fair value on a recurring basis in the Company's consolidated financial statements as of March 31, 2023 and December 31, 2022 are summarized by type of inputs applicable to the fair value measurements as follows:


March 31, 2023	Level 1		Level 2		Level 3		Total
Assets:
Long-term investments (a)	231,260		—		51,377		282,637
Precious metal and commodity inventories recorded at fair value	36,696		—		—		36,696
Economic interests in loans (b)	—		—		4,980		4,980




Warrants (c)	—		—		3,564		3,564
Total	$	267,956	$	—	$	59,921	$	327,877

Liabilities:

Commodity contracts on precious metal and commodity inventories	$	—	$	379	$	—	$	379
Other precious metal liabilities	$	31,041	$	—	$	—	$	31,041


Total	$	31,041	$	379	$	—	$	31,420


December 31, 2022	Level 1		Level 2		Level 3		Total
Assets:
Long-term investments (a)	$	234,039	$	—	$	52,336	$	286,375

Precious metal and commodity inventories recorded at fair value	32,896		—		—		32,896
Economic interests in loans (b)	—		—		5,728		5,728

Warrants (c)	—		—		3,564		3,564

Total	$	266,935	$	—	$	61,628	$	328,563

Liabilities:

Commodity contracts on precious metal and commodity inventories	$	—	$	247	$	—	$	247
Other precious metal liabilities	30,115		—		—		30,115


Total	$	30,115	$	247	$	—	$	30,362

(a) For additional detail of the long-term investments see Note 7 – "Investments." The investment in PCS-Mosaic of $23,323 is not included in the fair value leveling tables as it is valued at cost.

(b) For additional detail of the economic interests in loans see Note 9 – "Financial Instruments".

There were no transfers of securities among the various measurement input levels during the three months ended March 31, 2023 or 2022.

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 9 - "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 financial assets measured using Level 3 inputs:


	Long Term Investments (a)		Economic Interests in Loans (b)		Warrants (b)		Total
Balance as of December 31, 2022	$	52,336	$	5,728	$	3,564	$	61,628

Sales and cash collections	(1,000)		(2,008)		—		(3,008)
Realized gains	—		1,260		—		1,260
Unrealized gains	43		—		—		43
Unrealized losses	(2)		—		—		(2)
Balance as of March 31, 2023	$	51,377	$	4,980	$	3,564	$	59,921

Balance as of December 31, 2021	$	50,085	$	6,483	$	6,929	$	63,497

Sales and cash collections	—		(1,731)		—		(1,731)
Realized gains	—		1,030		704		1,734

Unrealized losses	(764)		—		—		(764)
Balance as of March 31, 2022	$	49,321	$	5,782	$	7,633	$	62,736

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

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

Long-Term Investments - Valuation Techniques

The Company estimates the value of its investment in the STCN Note using a Binomial Lattice Model. Key inputs in the valuation 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, and maturity date. The fair value of the Company’s investment in STCN preferred stock as of March 31, 2023 and December 31, 2022 was its par value because the Company has the right to redeem and the issuer has the right to convert the instrument at the redemption value.

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 Company uses the net asset value included in quarterly statements it receives in arrears from a venture capital fund to determine the fair value of such fund and 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 9 - "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 8.94% to 35.70%, a constant default rate of 1.72% to 21.91% and a discount rate of 1.82% to 25.43%.

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, 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 ("DCF") 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 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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