Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

NOTE 17 — FAIR VALUE OF FINANCIAL INSTRUMENTS

Items Measured at Fair Value on a Recurring Basis

A description of the fair value hierarchy and the Company's methodologies are included in Note 2 — Summary of Significant Accounting Policies. As of December 31, 2019 and 2018, the Company held certain assets that were required to be measured at fair value on a recurring basis, and as of December 31, 2019, the Company held beneficial interests in securitizations for which it elected the fair value option.

The following tables are a summary of fair value measurements and hierarchy level at December 31, 2019 and 2018 (in thousands):


	December 31, 2019
	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds ⁽¹⁾	$	56,435	$	56,435	$	—	$	—
Beneficial interests in securitizations	98,780		—		29,222		69,558


	December 31, 2018
	Carrying Value		Level 1		Level 2		Level 3
Assets:
Money market funds ⁽¹⁾	$	63,713	$	63,713	$	—	$	—

(1) Consist of highly liquid investments with original maturities of three months or less and classified in cash and cash equivalents in the accompanying consolidated balance sheets.

Beneficial Interests in Securitizations

Beneficial interests in securitizations include notes and certificates of the securitization trusts, the same securities as issued to other investors as described in Note 8 — Securitizations and Variable Interest Entities. Level 2 assets include beneficial interests in the most recent securitization which was completed on December 27, 2019. Given both the proximity to the end of

the reporting period and lack of observable changes in economic inputs, the Company concluded the fair value when the securitization was completed represented the fair value at December 31, 2019.

The Company's beneficial interests in securitizations which are classified as Level 3 are classified as such due to the lack of observable market data to corroborate either the non-binding market consensus prices or the non-binding broker quotes. The significant unobservable market data includes market yields. Significant increases or decreases in market yields would result in a significantly higher or lower fair value measurement.

For beneficial interests in securitizations measured at fair value on a recurring basis, the Company's transfers between levels of the fair value hierarchy are deemed to have occurred at the beginning of the reporting period on a quarterly basis. During the year ended December 31, 2019, the Company transferred beneficial interests acquired as part of the securitization transactions in March, June, and September from Level 2 to Level 3. The assets were initially classified as Level 2 due to the transactions' proximity to the end of each respective reporting period and the lack of observable changes in economic inputs. As noted above, the Company uses significant unobservable inputs to measure the fair value of these assets on a recurring basis, thus they will be classified as Level 3 in future periods. There were no transfers out of Level 3 during the year ended December 31, 2019.

The following table presents additional information about Level 3 beneficial interests in securitizations measured at fair value on a recurring basis for the year ended December 31, 2019 (in thousands):


	Year Ended December 31, 2019
Opening Balance	$	—
Transfers into Level 3	80,081
Cash receipts	(9,559)
Change in fair value	(964)
Ending Balance	$	69,558

The Company did not have any Level 2 or 3 beneficial interest in securitizations during the year ended December 31, 2018.

Fair Value of Financial Instruments

The carrying amounts of restricted cash, accounts receivable, accounts payable and accrued liabilities, and accounts payable to related party approximate fair value because their respective maturities are less than three months. The carrying value of the short-term revolving facilities were determined to approximate fair value due to their short-term duration and variable interest rates that approximate prevailing interest rates as of each reporting period. The carrying value of notes payable and sale leasebacks were determined to approximate fair value as each of the transactions were entered into at prevailing interest rates during each respective period and they have not materially changed as of or during the years ended December 31, 2019 and 2018. The carrying value of the financing of beneficial interests in securitizations were determined to approximate fair value as we entered into the transactions throughout the year ended December 31, 2019, and the interest rates remained relatively consistent.

The fair value of the Senior Notes, which are not carried at fair value on the accompanying consolidated balance sheets, was determined using Level 2 inputs based on quoted market prices for the identical liability. The fair value of the Senior Notes as of December 31, 2019 and 2018 was as follows (in thousands):


	December 31,
	2019		2018
Carrying value, net of unamortized debt issuance costs	$	591,124	$	342,869
Fair value	625,114		319,375

The fair value of finance receivables, which are not carried at fair value on the accompanying consolidated balance sheets, was determined utilizing the estimated sales price based on the historical experience of the Company. Such fair value

measurement of the finance receivables, net is considered Level 2 under the fair value hierarchy. The carrying value and fair value of the finance receivables as of December 31, 2019 and 2018 were as follows (in thousands):


	December 31,
	2019		2018
Carrying value	$	286,969	$	105,200
Fair value	304,532		109,703

Derivative Instruments

As of December 31, 2019 and 2018, the Company had no outstanding derivative instruments.

- 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.

+ References + Details