Derivative Instruments and Hedging Activities

12 Months Ended

Sep. 30, 2014

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

Derivative instruments designated as cash flow hedging instruments

During the third quarter ended June 30, 2013, Grupo Finmart completed a $30.0 million cross-border debt offering for which it has to pay interest on a semiannual basis at a fixed rate. Grupo Finmart uses derivative instruments (cross currency forwards) to manage its exposure related to changes in foreign currency exchange rate on this instrument through its maturity on November 16, 2015. Grupo Finmart does not enter into derivative instruments for any purpose other than cash flow hedging.

Changes in the fair value of forward agreements designated as hedging instruments that effectively offset the variability of cash flows associated with exchange rate are reported in accumulated other comprehensive income. These amounts subsequently are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings.

We assess the effectiveness of the hedges using linear regression for prospective testing, and the dollar offset method for retrospective testing. A hypothetical derivative with fair value of zero is created at the beginning of the hedge relationship; changes in actual derivative and hypothetical derivatives are used to carry out the testing. Based on the results of our testing, we have no ineffectiveness as of September 30, 2014 and 2013.

The following tables set forth certain information regarding our derivative instruments designated as cash flow hedging instruments:

		Fair Value of Derivative Instruments
Derivative Instrument	Balance Sheet Location	September 30, 2014		September 30, 2013
		(in thousands)
Foreign currency forwards	Prepaid expenses and other assets	$	2,420	$	1,813

	Amount of (Loss) Gain Recognized in Other Comprehensive Income on Derivatives (Effective Portion)
	Fiscal Year Ended September 30,
Derivative Instrument	2014			2013		2012
	(in thousands)
Foreign currency forwards	$	(453	)	$	2,388	$	—

		Amount of (Loss) Gain on Derivatives Reclassified into Income from Accumulated Other Comprehensive Income (Effective Portion)
		Fiscal Year Ended September 30,
Derivative Instrument	Location of Gain	2014			2013		2012
		(in thousands)
Foreign currency forwards	Interest expense (income), net / Other income	$	(49	)	$	2,536	$	—

Derivative instruments not designated as hedging instruments

As described in Note 9, in June 2014 we issued and settled $200.0 million aggregate principal amount of Convertible Notes. We granted the initial purchasers the option to purchase up to an additional $30.0 million aggregate principal amount of Convertible Notes. On June 27, 2014, such option was exercised in full. On July 2, 2014, the purchase of the additional $30.0 million of Convertible Notes was settled. The conversion feature of the Convertible Notes can only be settled in cash and is required to be bifurcated from the Convertible Notes and treated as a separate derivative instrument. In order to offset the cash flow risk associated with the Convertible Notes Embedded Derivative, we purchased Convertible Notes Hedges, which are accounted for as derivative instruments. The Convertible Notes Embedded Derivative and the Convertible Notes Hedges are adjusted to fair value each reporting period and unrealized gains and losses are reflected in the consolidated income statements. We expect that the realized gain or loss from the Convertible Notes Hedges will substantially offset the realized loss or gain of the Convertible Notes Embedded Derivative upon maturity of the Convertible Notes. See Note 21 for additional information regarding the fair values of the Convertible Notes Embedded Derivative and the Convertible Notes Hedges.

During the fiscal year ended September 30, 2014, Grupo Finmart entered into cross currency forwards as part of the sale of certain long-term consumer loans on March 31, June 30, and September 30, 2014. See Note 20 for additional information regarding the loan sales. As part of that loan sale, Grupo Finmart also entered into agreements that transferred the rights and obligations of the cross currency forward to the trust and the agreements collectively met the definition of a foreign currency derivative which is accounted for separately. The cross currency forward and the derivative with the trust are adjusted to fair value each reporting period through earnings.

The following tables set forth certain information regarding our derivative instruments not designated as hedging instruments:

		Fair Value Asset (Liability) of Derivative Instruments
		Fiscal Year Ended September 30,
Derivative Instrument	Balance Sheet Location	2014			2013		2012
		(in thousands)
Convertible notes hedges	Other assets, net	$	36,994		$	—	$	—
Convertible notes embedded derivative	Long-term debt, less current maturities	(36,994		)	—		—
	Net balance sheet asset (liability)	$	—		$	—	$	—
Foreign currency forwards	Prepaid expenses and other assets	$	1,152		$	—	$	—
Foreign currency forwards	Other current liabilities	1,308			—		—
	Net balance sheet asset	$	2,460		$	—	$	—

		Amount of Unrealized Gain on Derivatives
		Fiscal Year Ended September 30,
Derivative Instrument	Location of Gain	2014		2013		2012
		(in thousands)
Foreign currency forwards	Other income	$	2,460	$	—	$	—