Fair Value Measurements

3 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 14: 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 December 31, 2013, December 31, 2012 and September 30, 2013:

	December 31, 2013			Fair Value Measurements Using
Financial assets (liabilities or temporary equity):				Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities	$	2,092		$	2,092	$	—	$	—
Forward contracts	1,952			—		1,952		—
Contingent consideration	(16,120		)	—		—		(16,120		)
Net financial assets (liabilities or temporary equity)	$	(12,076	)	$	2,092	$	1,952	$	(16,120	)
	December 31, 2012			Fair Value Measurements Using
Financial assets (liabilities or temporary equity):				Level 1		Level 2		Level 3
	(in thousands)
Marketable equity securities	$	4,588		$	4,588	$	—	$	—
Contingent consideration	(28,386		)	—		—		(28,386		)
Net financial assets (liabilities or temporary equity)	$	(23,798	)	$	4,588	$	—	$	(28,386	)
	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	(16,089		)	—		—		(16,089		)
Net financial assets (liabilities or temporary equity)	$	(11,937	)	$	2,339	$	1,813	$	(16,089	)

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. At December 31, 2013 our marketable equity securities were in an unrealized loss position. The aggregate amount of unrealized losses at December 31, 2013 was nominal and we currently believe that the fair value decline is temporary.

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, and thus this fair value measurement represents a Level 3 measurement within the fair value hierarchy. During the three month period ended December 31, 2013, we recorded nominal accretion expense, bringing the total contingent consideration liability to $16.1 million. During the three month period ended December 31, 2012, we recorded accretion expense of $0.2 million and $4.8 million of additional contingent consideration, attributable to the Go Cash acquisition, bringing the contingent liability to $28.4 million at December 31, 2012. These amounts are included in administrative expenses in our condensed consolidated statement of operations.

Financial Assets and Liabilities Not Measured at Fair Value

Our financial assets and liabilities as of December 31, 2013, December 31, 2012 and September 30, 2013, that are not measured at fair value in the condensed consolidated balance sheets, are as follows:

	Carrying Value		Estimated Fair Value
	December 31, 2013		December 31, 2013		Fair Value Measurement Using
					Level 1		Level 2		Level 3
Financial assets:	(in thousands)
Cash and cash equivalents	$	38,486	$	38,486	$	38,486	$	—	$	—
Restricted cash	4,019		4,019		4,019		—		—
Pawn loans	153,421		153,421		—		—		153,421
Consumer loans, net	82,807		90,377		—		—		90,377
Pawn service charges receivable, net	30,842		30,842		—		—		30,842
Consumer loan fees receivable, net	40,181		40,181		—		—		40,181
Restricted cash, non-current	2,742		2,742		2,742		—		—
Non-current consumer loans, net	60,750		69,309		—		—		69,309
Total	$	413,248	$	429,377	$	45,247	$	—	$	384,130
Temporary equity:
Redeemable noncontrolling interest	$	57,578	$	55,557	$	—	$	—	$	55,557
Financial liabilities:
Domestic line of credit	$	146,500	$	146,500	$	—	$	146,500	$	—
Foreign currency lines of credit	32,838		33,801		—		33,801		—
Securitization borrowing facility	32,147		32,225		32,225		—		—
Unsecured Notes	36,381		36,673		16,523		20,150		—
Secured Notes	4,160		4,001		—		4,001		—
Total	$	252,026	$	253,200	$	48,748	$	204,452	$	—
	Carrying Value		Estimated Fair Value
	December 31, 2012		December 31, 2012		Fair Value Measurement Using
					Level 1		Level 2		Level 3
Financial assets:	(in thousands)
Cash and cash equivalents	$	46,668	$	46,668	$	46,668	$	—	$	—
Restricted cash	1,133		1,133		1,133		—		—
Pawn loans	162,150		162,150		—		—		162,150
Consumer loans, net	40,470		43,374		—		—		43,374
Pawn service charges receivable, net	31,077		31,077		—		—		31,077
Consumer loan fees receivable, net	34,073		34,073		—		—		34,073
Restricted cash, non-current	1,994		1,994		1,994		—		—
Non-current consumer loans, net	66,615		80,199		—		—		80,199
Total	$	384,180	$	400,668	$	49,795	$	—	$	350,873
Temporary equity:
Redeemable noncontrolling interest	$	49,323	$	49,323	$	—	$	—	$	49,323
Financial liabilities:
Domestic line of credit	$	142,600	$	142,600	$	—	$	142,600	$	—
Foreign currency lines of credit	33,652		33,924		—		33,924		—
Securitization borrowing facility	32,338		32,430		32,430		—		—
Unsecured Notes	22,560		21,839		—		21,839		—
Secured Notes	4,390		4,205		—		4,205		—
Total	$	235,540	$	234,998	$	32,430	$	202,568	$	—

	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	$	—

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 the assets discussed above 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 ranging from 10% to 18%, 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 rates 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.