Fair Value Measurements

12 Months Ended

Sep. 30, 2013

Fair Value Disclosures [Abstract]

Fair Value Measurements

FAIR VALUE MEASUREMENTS

Recurring Fair Value Measurements

In accordance with FASB ASC 820-10, Fair Value Measurements and Disclosures, our assets and liabilities, which are carried at fair value, are classified in one of the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Other observable inputs other than quoted market prices.

Level 3: Unobservable inputs that are not corroborated by market data.

The tables below present our financial assets that are measured at fair value on a recurring basis as of September 30, 2013 and 2012:

	September 30, 2013			Fair Value Measurements Using
Financial assets (liabilities or temporary equity):				Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities	$	2,339		$	2,339	$	—	$	—
Forward contracts	1,813			—		1,813		—
Contingent consideration	(11,297		)	—		—		(11,297		)
Net financial assets (liabilities or temporary equity)	$	(7,145	)	$	2,339	$	1,813	$	(11,297	)
	September 30, 2012			Fair Value Measurements Using
Financial assets (liabilities or temporary equity):				Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities	$	4,631		$	4,631	$	—	$	—
Contingent consideration	(23,432		)	—		—		(23,432		)
Net financial assets (liabilities or temporary equity)	$	(18,801	)	$	4,631	$	—	$	(23,432	)

We measure the value of our marketable equity securities under a Level 1 input. These assets are publicly traded equity securities for which market prices are readily available. There were no transfers of assets in or out of Level 1 or Level 2 fair value measurements in the periods presented. In fiscal 2013 we recorded an impairment loss of $2.1 million. This amount is included in the impairment of investments line in our consolidated statement of operations.

Grupo Finmart measures the value of the forward contracts under a Level 2 input. To measure the fair value of the forward contracts, Grupo Finmart used estimations of expected cash flows, appropriately risk-adjusted discount rates and available observable inputs (term of the forward, notional amount, discount rates based on local and foreign rate curves, and a credit value adjustment to consider the likelihood of nonperformance).

We used an income approach to measure the fair value of the contingent consideration using a probability-weighted discounted cash flow approach, in which all outcomes were successful. The significant inputs used for the valuation are not observable in the market, as they are specifically related to Grupo Finmart, and thus this fair value measurement represents a Level 3 measurement within the fair value hierarchy. In April 2013, we paid $12.8 million in contingent consideration to Grupo Finmart's noncontrolling owners. On June 30, 2013, we recorded additional contingent consideration of $0.2 million due to Grupo Finmart's acquisition of a loan portfolio. During fiscal year 2013, we recorded accretion expense of $0.5 million, bringing the contingent consideration liability to $11.3 million at September 30, 2013. During fiscal year 2012, we recorded accretion expense of $0.5 million to bring the contingent liability to $23.4 million at September 30, 2012. These accretion expense amounts are included in administrative expenses in our consolidated statement of operations.

The fair value of temporary equity was estimated by applying an income approach and a market approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include discounts for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest.

Financial Assets and Liabilities Not Measured at Fair Value

Our financial assets and liabilities as of September 30, 2013 and 2012 that are not measured at fair value in the consolidated balance sheets are as follows:

	Carrying Value		Estimated Fair Value
	September 30, 2013		September 30, 2013		Fair Value Measurement Using
					Level 1		Level 2		Level 3
Financial assets:	(in thousands)
Cash and cash equivalents	$	36,317	$	36,317	$	36,317	$	—	$	—
Restricted cash	3,312		3,312		3,312		—		—
Pawn loans	156,637		156,637		—		—		156,637
Consumer loans, net	64,515		74,979		—		—		74,979
Pawn service charges receivable, net	30,362		30,362		—		—		30,362
Consumer loan fees receivable, net	36,588		36,588		—		—		36,588
Restricted cash, non-current	2,156		2,156		2,156		—		—
Non-current consumer loans, net	69,991		89,693		—		—		89,693
Total	$	399,878	$	430,044	$	41,785	$	—	$	388,259
Temporary equity:
Redeemable noncontrolling interest	$	55,393	$	55,557	$	—	$	—	$	55,557
Financial liabilities:
Domestic line of credit	$	140,900	$	140,900	$	—	$	140,900	$	—
Foreign currency lines of credit	30,310		31,832		—		31,832		—
Securitization borrowing facility	31,951		32,027		32,027		—		—
Unsecured Notes	39,029		38,734		15,686		23,048		—
Secured Notes	4,185		4,026		—		4,026		—
Total	$	246,375	$	247,519	$	47,713	$	199,806	$	—

	Carrying Value		Estimated Fair Value
	September 30, 2012		September 30, 2012		Fair Value Measurement Using
					Level 1		Level 2		Level 3
Financial assets:	(in thousands)
Cash and cash equivalents	$	48,477	$	48,477	$	48,477	$	—	$	—
Restricted cash	1,145		1,145		1,145		—		—
Pawn loans	157,648		157,648		—		—		157,648
Consumer loans, net	34,152		38,016		—		—		38,016
Pawn service charges receivable, net	29,401		29,401		—		—		29,401
Consumer loan fees receivable, net	30,416		30,416		—		—		30,416
Restricted cash, non-current	4,337		4,337		4,337		—		—
Non-current consumer loans, net	61,997		82,967		—		—		82,967
Total	$	367,573	$	392,407	$	53,959	$	—	$	338,448
Temporary equity:
Redeemable noncontrolling interest	$	53,681	$	53,681	$	—	—		$	53,681
Financial liabilities:
Domestic line of credit	$	130,000	$	130,000	$	—	$	130,000	$	—
Foreign currency lines of credit	29,965		30,036		—		30,036		—
Securitization borrowing facility	32,679		32,752		32,752		—		—
Unsecured Notes	22,789		21,584		—		21,584		—
Secured Notes	4,488		4,026		—		4,026		—
Total	$	219,921	$	218,398	$	32,752	$	185,646	$	—

Cash and cash equivalents and restricted cash bear interest at market rates and have maturities of less than 90 days.

The total U.S. pawn loan term ranges between 60 and 120 days, consisting of the primary term and grace period. The total Mexico pawn loan term is 40 days, consisting of the primary term and grace period.

We record pawn service charges using the interest method for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several unobservable inputs, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following two months.

Consumer loan fees and interest receivable are carried in the consolidated balance sheet net of the allowance for uncollectible consumer loan fees and interest receivable, which is based on recent loan default experience adjusted for seasonal variations and collection percentages.

Based on the short-term nature of these assets we estimate that their carrying value approximates fair value.

Consumer loans, including long-term unsecured consumer loans made by Grupo Finmart, are carried in the consolidated balance sheet net of the allowance for estimated loan losses, which is based on recent loan default experience adjusted for seasonal variations. Consumer loans, other than those made by Grupo Finmart, have relatively short maturity periods that are generally 12 months; therefore, we estimate that their carrying value approximates fair value. Consumer loans made by Grupo Finmart have an average term of approximately 30 months. We estimated the fair value of the Grupo Finmart consumer loans by applying an income approach (the present value of future cash flows). Key assumptions include an annualized probability of default as well as a discount rate based on the funding rate plus the portfolio liquidity risk.

The fair value of the redeemable noncontrolling interest was estimated by applying an income approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement. Key assumptions include discount rates representing discounts for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest.

We measure the fair value of our financial liabilities using an income approach. Fair value measurements for our domestic line of credit were calculated using discount rates based on an estimated senior secured spread plus term matched risk free rate as of the valuation dates. We utilize credit quality-related zero rate curves for Mexican Pesos built by a price vendor authorized by the Comisión Nacional Bancaria y de Valores to determine the fair value measurements of the remaining financial liabilities that are classified as Level 2. For fair value measurements that are classified as Level 1, we utilize quoted price and yield inputs from Bloomberg and a price vendor authorized by the Comisión Nacional Bancaria y de Valores.