NOTE 5: FAIR VALUE MEASUREMENTS

Our assets and liabilities discussed below are classified in one of the following three categories based on the inputs used to develop their fair values: Level 1 — Quoted market prices in active markets for identical assets or liabilities; Level 2 — Other observable market-based inputs or unobservable inputs that are corroborated by market data; and Level 3 — Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements

The tables below present our financial assets (liabilities) that were carried and measured at fair value on a recurring basis:



Financial Assets (Liabilities)	Balance Sheet Location	June 30, 2018			June 30, 2017			September 30, 2017

		(in thousands)
2019 Convertible Notes Hedges — Level 2	Prepaid expenses and other current assets	$	7,491		$	—		$	—
2019 Convertible Notes Hedges — Level 2	Other assets, net	—			5,900			6,591
2019 Convertible Notes Embedded Derivative — Level 2	Current maturities of long-term debt, net	(7,491		)	—			—
2019 Convertible Notes Embedded Derivative — Level 2	Long-term debt, net	—			(5,900		)	(6,591		)

We measured the fair value of the cash-settled call options pertaining to the 2.125% Cash Convertible Senior Notes Due 2019 (the “2019 Convertible Notes Hedges”) and the 2019 Convertible Notes derivative instrument (the “2019 Convertible Notes Embedded Derivative”) using the Black-Scholes-Merton model based on observable Level 1 and Level 2 inputs such as conversion price of underlying shares, current share price, implied volatility, risk free interest rate and other factors. The volatility input used as of June 30, 2018 was 36% based on observed market inputs. As an estimate of the sensitivity of the fair values of the 2019 Convertible Notes Hedges and 2019 Convertible Notes Embedded Derivative, were volatility inputs of 30% and 45% used, the fair values would have ranged from $4.9 million to $12.2 million.

There were no transfers in or out of Level 1, Level 2 or Level 3 for financial assets or liabilities measured at fair value on a recurring basis during the periods presented.

Financial Assets and Liabilities Not Measured at Fair Value

The tables below present our financial assets and liabilities that were not measured at fair value on a recurring basis:



	Carrying Value		Estimated Fair Value
	June 30, 2018		June 30, 2018		Fair Value Measurement Using
	June 30, 2018		June 30, 2018		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable, net	$	51,338	$	57,116	$	—	$	—	$	57,116
Investment in unconsolidated affiliate	61,056		49,205		49,205		—		—

Financial liabilities:
2019 Convertible Notes	$	184,823	$	197,925	$	—	$	197,925	$	—
2024 Convertible Notes	104,562		195,974		—		195,974		—
2025 Convertible Notes	118,335		168,464		—		168,464		—



	Carrying Value		Estimated Fair Value
	June 30, 2017		June 30, 2017		Fair Value Measurement Using
	June 30, 2017		June 30, 2017		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable, net	$	63,277	$	65,570	$	—	$	—	$	65,570
Investment in unconsolidated affiliate	41,725		37,306		37,306		—		—

Financial liabilities:
2019 Convertible Notes	$	206,279	$	218,500	$	—	$	218,500	$	—
Term loan facility	48,235		48,159		—		—		48,159



	Carrying Value		Estimated Fair Value
	September 30, 2017		September 30, 2017		Fair Value Measurement Using
	September 30, 2017		September 30, 2017		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable, net	$	60,975	$	74,262	$	—	$	—	$	74,262
Investment in unconsolidated affiliate	43,319		49,057		49,057		—		—

Financial liabilities:
2019 Convertible Notes	$	177,346	$	193,811	$	—	$	193,811	$	—
2024 Convertible Notes	100,870		175,016		—		175,016		—

Based on the short-term nature of cash and cash equivalents, pawn loans, pawn service charges receivable, current consumer loans, fees and interest receivable and other debt, we estimate that their carrying value approximates fair value. We consider our cash and cash equivalents to be measured using Level 1 inputs and our pawn loans, pawn service charges receivable, consumer loans, fees and interest receivable and other debt to be measured using Level 3 inputs. Significant increases or decreases in the underlying assumptions used to value pawn loans, pawn service charges receivable, consumer loans, fees and interest receivable and other debt could significantly increase or decrease these fair value estimates.

Subsequent to the sale of Prestaciones Finmart, S.A.P.I. de C.V., SOFOM, E.N.R. ("Grupo Finmart") to Alpha Holding, S.A. de C.V. (“AlphaCredit”) in September 2016, we determined that we retained a variable interest in Grupo Finmart including notes receivable. We determined that we are not the primary beneficiary of Grupo Finmart subsequent to its disposition as we lack a controlling financial interest in Grupo Finmart. We measured the fair value of the notes receivable as of June 30, 2018 under a discounted cash flow approach considering the estimated credit ratings for Grupo Finmart and AlphaCredit and as determined with external consultation, with discount rates ranging from 7% to 13%. Certain of the significant inputs used for the valuation were not observable in the market. Included in the fair value of the notes receivable is the estimated fair value of the deferred compensation fee negotiated in September 2017, of which the ultimate amount to be received is dependent upon the timing of payment of the notes receivable. Significant increases or decreases in the underlying assumptions used to value the notes receivable could significantly increase or decrease these fair value estimates.

The inputs used to generate the fair value of the investment in unconsolidated affiliate Cash Converters International were considered Level 1 inputs. These inputs are comprised of (a) the quoted stock price on the Australian Stock Exchange multiplied by (b) the number of shares we owned multiplied by (c) the applicable foreign currency exchange rate as of the end of our reporting period. We included no control premium for owning a large percentage of outstanding shares.

We measured the fair value of the 2019 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes using quoted price inputs. The 2019 Convertible Notes, 2024 Convertible Notes and 2025 Convertible Notes are not actively traded, and thus the price inputs represent a Level 2 measurement. As the quoted price inputs are highly variable from day to day, the fair value estimates disclosed above could significantly increase or decrease.