NOTE 4: STRATEGIC INVESTMENTS

As of September 30, 2018, we owned 214,183,714 shares, or approximately 34.75%, of Cash Converters International, which is, as a result, our unconsolidated affiliate. Our total investment in Cash Converters International was acquired between November 2009 and June 2018 for approximately $96.1 million, including the acquisition of 57,631,230 shares in June 2018 for $14.0 million (increasing our ownership by three percentage points) in connection with an underwritten placement of 123.3 million shares by Cash Converters International for AUD 39.5 million, excluding costs. Cash Converters International stated it will use the proceeds from the offering to reduce outstanding indebtedness and provide additional capital to pursue growth opportunities while maintaining sufficient working capital. Our participation in this offering, including our increased equity ownership, does not change our conclusion to account for our investment in Cash Converters International under the equity method.

Our equity in Cash Converters International’s net income (loss) was $5.5 million, $4.9 million and $(0.3) million in fiscal 2018, 2017 and 2016, respectively. Cash Converters International did not declare or pay a dividend in fiscal 2018. We recorded dividends from Cash Converters International of $1.2 million and $2.2 million in fiscal 2017 and 2016, respectively, of which the fiscal 2017 dividend was reinvested. Cash Converters International’s accumulated undistributed after-tax earnings included in our consolidated retained earnings were $15.8 million as of September 30, 2018.

The following tables present summary financial information for Cash Converters International’s most recently reported results as of September 30, 2018, 2017 and 2016 as applicable after translation to U.S. dollars:



	June 30,
	2018		2017

	(in thousands)
Current assets	$	229,105	$	155,749
Non-current assets	148,195		150,843
Total assets	$	377,300	$	306,592

Current liabilities	$	122,924	$	57,387
Non-current liabilities	15,449		48,698
Shareholders’ equity	238,927		200,507
Total liabilities and shareholders’ equity	$	377,300	$	306,592



	Fiscal Year Ended June 30,
	2018		2017		2016

	(in thousands)
Gross revenues	$	201,800	$	204,509	$	225,712
Gross profit	128,366		130,943		146,286
Net profit (loss)	17,443		15,546		(3,839		)

During fiscal 2018, the fair value of our investment in Cash Converters International, as estimated by reference to its quoted market price per share, declined from September 30, 2017 and ended below its carrying value as of September 30, 2018. As of September 30, 2018, we determined that our investment was impaired and that such impairment was other-than-temporary. In reaching this conclusion, we considered all available evidence, including the following: (i) positive earnings reported for the previous two years; (ii) resolution of Australian Securities and Investment Commission Enforceable Undertaking in May 2018; (iii) executive turnover including announcement of its chief executive officer’s departure in August 2018; (iv) outstanding Queensland class action litigation; (v) ongoing uncertainty around Australian legislative action; (vi) continued cessation of dividend payments; (vii) available analyst reports including associated future earnings and cash flow forecasts; and (viii) the prolonged drop in Cash Converters International’s stock price. As a result, we recognized an other-than-temporary impairment in Cash Converters International of $11.7 million ($9.2 million, net of taxes) in fiscal 2018.

During fiscal 2016, the fair value of our investment in Cash Converters International continued to decline from its previous value and remained below its carrying value. As of September 30, 2016, we determined that our investment was impaired and that such impairment was other-than-temporary and recognized an other-than-temporary impairment in Cash Converters International of $11.0 million ($7.2 million, net of taxes).

The above impairments increased the difference between the amount at which our investment was carried and the amount of underlying equity in net assets of Cash Converters International as discussed in Note 1 and were recorded under “Impairment of investment” in our consolidated statements of operations in the “Other International” segment. We will continue to monitor the fair value of our investment in Cash Converters International for other-than-temporary impairments in future reporting periods and may record additional impairment charges should the fair value of our investment in Cash Converters International further decline below its carrying value for an extended period of time. See Note 5 for the fair value and carrying value of our investment in Cash Converters International.