Fair Value Measurements

3 Months Ended

Dec. 31, 2018

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	December 31, 2018			December 31, 2017			September 30, 2018

		(in thousands)
2019 Convertible Notes Hedges — Level 2	Prepaid expenses and other current assets	$	21		$	—		$	2,552
2019 Convertible Notes Hedges — Level 2	Other assets	—			12,863			—
2019 Convertible Notes Embedded Derivative — Level 2	Current maturities of long-term-debt, net	(21		)	—			(2,552		)
2019 Convertible Notes Embedded Derivative — Level 2	Long-term debt, net	—			(12,863		)	—

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 December 31, 2018 was 36% based on historically observed market inputs.

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
	December 31, 2018		December 31, 2018		Fair Value Measurement Using
	December 31, 2018		December 31, 2018		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable, net	$	31,310	$	33,710	$	—	$	—	$	33,710
Investment in unconsolidated affiliate	35,511		35,511		35,511		—		—

Financial liabilities:
2019 Convertible Notes	$	190,076	$	190,613	$	—	$	190,613	$	—
2024 Convertible Notes	107,182		145,202		—		145,202		—
2025 Convertible Notes	121,316		134,447		—		134,447		—
8.5% unsecured notes due 2024	1,237		1,237		—		—		1,237
CASHMAX secured borrowing facility	334		1,160		—		—		1,160



	Carrying Value		Estimated Fair Value
	December 31, 2017		December 31, 2017		Fair Value Measurement Using
	December 31, 2017		December 31, 2017		Level 1		Level 2		Level 3

	(in thousands)
Financial assets:
Notes receivable, net	$	60,025	$	68,720	$	—	$	—	$	68,720
Investment in unconsolidated affiliate	45,605		42,777		42,777		—		—

Financial liabilities:
2019 Convertible Notes	$	179,835	$	201,084	$	—	$	201,084	$	—
2024 Convertible Notes	102,063		201,250		—		201,250		—



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

	(in thousands)
Financial assets:
Notes receivable, net	$	37,425	$	41,153	$	—	$	—	$	41,153
Investment in unconsolidated affiliate	49,500		49,500		49,500		—		—

Financial liabilities:
2019 Convertible Notes	$	187,433	$	189,150	$	—	$	189,150	$	—
2024 Convertible Notes	105,858		180,399		—		180,399		—
2025 Convertible Notes	119,736		161,253		—		161,253		—
8.5% unsecured notes due 2024	1,304		1,304		—		—		1,304

Based primarily 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 December 31, 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 primarily from 7% to 8%. 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.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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