FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company applies the following three-level hierarchy of valuation inputs for measuring fair value:


•	Level 1 - Quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date.


•	Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations in which all significant inputs are observable market data.


•	Level 3 - Valuations derived from valuation techniques in which one or more significant inputs are unobservable.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments held by the Company:

Financial Instruments Carried at Fair Value: Derivative instruments are recorded on the consolidated balance sheets as either assets or liabilities measured at fair value. During the reporting period, the Company's derivative financial instruments consisted of interest rate swap agreements, foreign currency forward contracts and cross-currency swap agreements. The Company estimated the fair value of its interest rate swap agreements based on Level 2 valuation inputs, including fixed interest rates, LIBOR and BBR implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its British pound forward contracts based on Level 2 valuation inputs, including LIBOR implied forward interest rates, British pound LIBOR implied forward interest rates and the remaining time to maturity. The Company estimated the fair value of its cross-currency swap agreements based on Level 2 valuation inputs, including EURIBOR implied forward interest rates, BBR implied forward interest rates and the remaining time to maturity.

The Company's recurring fair value measurements using significant unobservable inputs (Level 3) relate to the Company's deferred consideration from the Freightliner acquisition in 2015 and from the HOG acquisition in 2017. The fair value of the deferred consideration liabilities were estimated by discounting, to present value, contingent payments expected to be made.

Financial Instruments Carried at Historical Cost: Since the Company's long-term debt is not actively traded, fair value was estimated using a discounted cash flow analysis based on Level 2 valuation inputs, including borrowing rates the Company believes are currently available to it for loans with similar terms and maturities.

The following table presents the Company's financial instruments carried at fair value using Level 2 inputs as of September 30, 2017 and December 31, 2016 (dollars in thousands):



	September 30, 2017		December 31, 2016
Financial instruments carried at fair value using Level 2 inputs:
Financial assets carried at fair value:
British pound forward contracts	$	16,017	$	26,359
Cross-currency swap contracts	2,203		680
Total financial assets carried at fair value	$	18,220	$	27,039
Financial liabilities carried at fair value:
Interest rate swap agreements	$	17,430	$	15,158
British pound forward contracts	568		17
Total financial liabilities carried at fair value	$	17,998	$	15,175

The following table presents the Company's financial instruments carried at fair value using Level 3 inputs as of September 30, 2017 and December 31, 2016 (amounts in thousands):



	September 30, 2017				December 31, 2016
	Local Currency		United States Dollar Equivalent		Local Currency		United States Dollar Equivalent
Financial instrument carried at fair value using Level 3 inputs:
Financial liabilities carried at fair value:
Accrued deferred consideration - Freightliner	£	27,755	$	37,172	£	25,882	$	31,933
Accrued deferred consideration - HOG	$	5,842	$	5,842	$	—	$	—

At the date of acquisition of Freightliner in 2015, the contingent liability represented the aggregate fair value of the shares transferred to the Company by the Management Shareholders in exchange for the right to receive cash consideration for the representative economic interest of approximately 6% in Freightliner in the future (deferred consideration). Each of the Management Shareholders may elect to receive one third of their respective deferred consideration valued as of March 31, 2018, 2019 and 2020. The remaining portion of the deferred consideration will be valued as of March 31, 2020 and paid by the end of 2020.

At the date of acquisition of HOG in 2017, the contingent liability represented the fair value of the deferred consideration payable to the sellers upon satisfaction of certain conditions, which the Company expects to be paid in 2021. See Note 2, Changes in Operations, for additional information regarding HOG.

The Company's contingent liabilities are adjusted each period to represent the fair value of the deferred consideration as of the balance sheet date. To do so, the Company recalculates the estimated fair value of the deferred consideration in each reporting period until it is paid in full by using a contractual formula designed to estimate the economic value of the Management Shareholders' retained interest in a manner consistent with that used to derive the Freightliner acquisition price per share on the acquisition date. In addition, the Company recalculates the HOG's deferred consideration based on the contractual formula as defined in the stock purchase agreement. These calculations effectively represent the present value of the expected payment to be made upon settlement of the deferred consideration. Accordingly, such recalculations will reflect both the impact of the time value of money and the impact of changes in the expected future performance of the acquired business, as applicable. The Company expects to recognize future changes in the contingent liabilities for the estimated fair value of the deferred consideration through other expenses within the Company's consolidated statement of operations. These future changes in the estimated fair value of the deferred consideration are not expected to be deductible for tax purposes.

The following table presents the amounts recognized, through other expenses, within the Company's consolidated statements of operations during the three and nine months ended September 30, 2017 and 2016 as a result of the change in the estimated fair value of the deferred consideration, which primarily represented the time value of money (dollars in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Freightliner	$	859	$	933	$	2,405	$	2,015
HOG	$	126	$	—	$	166	$	—

The following table presents the carrying value and fair value using Level 2 inputs of the Company's financial instruments carried at historical cost as of September 30, 2017 and December 31, 2016 (dollars in thousands):



	September 30, 2017				December 31, 2016
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial liabilities carried at historical cost:
United States term loan	$	1,253,776	$	1,259,935	$	1,415,873	$	1,422,512
U.K. term loan	124,859		127,114		121,149		121,594
Australian Credit Agreement	517,696		534,317		484,703		501,909
Partner Loan Agreement	186,729		187,999		172,154		171,435
Revolving credit facility	222,093		227,103		74,297		81,192
Other debt	2,900		2,918		4,882		4,889
Total	$	2,308,053	$	2,339,386	$	2,273,058	$	2,303,531