Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2016

The fair value of financial instruments is determined by reference to various market data and other valuation techniques, as appropriate. Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels. The three fair value levels are (from highest to lowest):

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Recurring Fair Value Measurements

Prior to the Merger, the Company did not have any financial assets or liabilities that were measured at fair value on a recurring basis. The Company’s financial assets that are measured at fair value on a recurring basis as of September 30, 2016 are as follows:



	September 30,		Fair Value Measurements Using
Financial assets:	2016		Level 1		Level 2		Level 3
Cash America nonqualified savings plan-related assets	$	12,229	$	12,229	$	—	$	—
Investment in common stock of Enova	54,786		54,786		—		—
	$	67,015	$	67,015	$	—	$	—

Prior to the Merger, Cash America had a nonqualified savings plan that was available to certain members of management whereby participants could contribute up to 100% of their annual bonus and up to 50% of their other eligible compensation to the plan. Upon completion of the Merger, the nonqualified savings plan was terminated and the Company is in the process of dissolving the plan and distributing the remaining assets to the participants. These assets include marketable equity securities, which are classified as Level 1 and the fair values are based on quoted market prices. The nonqualified savings plan assets are included in prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets with an offsetting liability of equal amount, which is included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets. The Company’s investment in common stock of Enova represents the Company’s available-for-sale shares of Enova common stock. See Note 5 for further information. As of September 30, 2016, the equity securities representing Enova common stock were classified as Level 1 and based on the market determined stock price of Enova. During the nine months ended September 30, 2016, there were no transfers of assets in or out of Level 1 or Level 2 fair value measurements.

Fair Value Measurements on a Nonrecurring Basis

The Company measures non-financial assets and liabilities such as property and equipment and intangible assets at fair value on a nonrecurring basis or when events or circumstances indicate that the carrying amount of the assets may be impaired.

Financial Assets and Liabilities Not Measured at Fair Value

The Company’s financial assets and liabilities as of September 30, 2016, 2015 and December 31, 2015 that are not measured at fair value in the condensed consolidated balance sheets are as follows:



	Carrying Value		Estimated Fair Value
	September 30,		September 30,		Fair Value Measurements Using
Financial assets:	2016		2016		Level 1		Level 2		Level 3
Cash and cash equivalents	$	83,356	$	83,356	$	83,356	$	—	$	—
Pawn loans	373,169		373,169		—		—		373,169
Consumer loans, net	27,792		27,792		—		—		27,792
Pawn loan fees and service charges receivable	45,708		45,708		—		—		45,708
	$	530,025	$	530,025	$	83,356	$	—	$	446,669

Financial liabilities:
Revolving unsecured credit facilities	360,000		360,000		—		360,000		—
Senior unsecured notes, outstanding principal	200,000		210,000		—		210,000		—
	$	560,000	$	570,000	$	—	$	570,000	$	—



	Carrying Value		Estimated Fair Value
	September 30,		September 30,		Fair Value Measurements Using
Financial assets:	2015		2015		Level 1		Level 2		Level 3
Cash and cash equivalents	$	72,523	$	72,523	$	72,523	$	—	$	—
Pawn loans	128,370		128,370		—		—		128,370
Consumer loans, net	1,114		1,114		—		—		1,114
Pawn loan fees and service charges receivable	18,116		18,116		—		—		18,116
	$	220,123	$	220,123	$	72,523	$	—	$	147,600

Financial liabilities:
Revolving unsecured credit facilities	68,500		68,500		—		68,500		—
Senior unsecured notes, outstanding principal	200,000		201,000		—		201,000		—
	$	268,500	$	269,500	$	—	$	269,500	$	—



	Carrying Value		Estimated Fair Value
	December 31,		December 31,		Fair Value Measurements Using
Financial assets:	2015		2015		Level 1		Level 2		Level 3
Cash and cash equivalents	$	86,954	$	86,954	$	86,954	$	—	$	—
Pawn loans	117,601		117,601		—		—		117,601
Consumer loans, net	1,118		1,118		—		—		1,118
Pawn loan fees and service charges receivable	16,406		16,406		—		—		16,406
	$	222,079	$	222,079	$	86,954	$	—	$	135,125

Financial liabilities:
Revolving unsecured credit facilities	58,000		58,000		—		58,000		—
Senior unsecured notes, outstanding principal	200,000		199,000		—		199,000		—
	$	258,000	$	257,000	$	—	$	257,000	$	—

As cash and cash equivalents have maturities of less than three months, the carrying values of cash and cash equivalents approximate fair value. Due to their short-term maturities, the carrying value of pawn loans and pawn loan fees and service charges receivable approximate fair value. Short-term loans and installment loans, collectively, represent consumer loans, net on the accompanying condensed consolidated balance sheets and are carried net of the allowance for estimated loan losses, which is calculated by applying historical loss rates combined with recent default trends to the gross consumer loan balance. The unobservable inputs used to calculate the fair value of these loans include historical loss rates, recent default trends and estimated remaining loan terms; therefore, the carrying value approximated the fair value.

The carrying value of the Company’s prior credit facilities approximated fair value as of September 30, 2015 and December 31, 2015. The carrying value of the Company’s current credit facilities (the 2016 Credit Facility and the Mexico Credit Facility) approximated fair value as of September 30, 2016. The fair value of the senior unsecured notes have been estimated based on a discounted cash flow analysis using a discount rate representing the Company’s estimate of the rate that would be used by market participants. Changes in assumptions or estimation methodologies may have a material effect on these estimated fair values.

- 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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