Fair Value Measurement

The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity's pricing based upon their own market assumptions. The fair value hierarchy consists of the following three levels:


•	Level I - Quoted prices for identical instruments in active markets.


•	Level II - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.


•	Level III - Instruments whose significant value drivers are unobservable.

The following table presents for each of these hierarchy levels, the Company's financial assets and liabilities that are measured at fair value on a recurring basis at September 30, 2018 and December 31, 2017:



(In thousands)	Level I		Level II		Level III		Total
At September 30, 2018:
Assets
Cash equivalents	$	35,709	$	—	$	—	$	35,709
Marketable securities	5,339		—		—		5,339
Investments	48,987		—		—		48,987
Interest rate swap contracts	—		60		—		60
Foreign currency derivatives	—		3,188		—		3,188
Other derivatives	—		78,586		—		78,586
Liabilities
Foreign currency derivatives	$	—	$	3,587	$	—	$	3,587
At December 31, 2017:
Assets
Cash equivalents	$	100,615	$	—	$	—	$	100,615
Marketable securities	10,709		—		—		10,709
Investments	9,948		—		—		9,948
Interest rate swap contracts	—		1,444		—		1,444
Foreign currency derivatives	—		3,801		—		3,801
Other derivatives	—		6,174		30,891		37,065
Liabilities
Foreign currency derivatives	$	—	$	4,475	$	—	$	4,475

The Company's cash equivalents and marketable securities are classified within Level I of the fair value hierarchy because they are valued using quoted market prices.

The Company's interest rate swap contracts, foreign currency derivatives and the embedded derivative for the interest on the RLJE Term Loans to be paid in shares of RLJE common stock (see Note 11) are classified within Level II of the fair value hierarchy as their fair values are determined based on a market approach valuation technique that uses readily observable market parameters and the consideration of counterparty risk.

On October 14, 2016, DEH and RLJE entered into a Credit and Guaranty Agreement pursuant to which DEH provided to RLJE the RLJE Term Loans and received the RLJE Warrants. Prior to July 29, 2018, the RLJE Warrants held by the Company were classified within Level III of the fair value hierarchy. The Company determined the value of the RLJE Warrants using a Black Scholes option pricing model. Inputs to the model were stock price volatility, contractual warrant terms (remaining life of the warrants), exercise price, risk-free interest rate, and the RLJE stock price. The equity volatility used was based on the equity volatility of RLJE with an adjustment for the changes in the capital structure of RLJE. In arriving at the concluded value of the warrants, a discount for the lack of marketability (DLOM) of 32% was applied. The DLOM, which is unobservable, is determined using the Finnerty Average-Strike Put Option Marketability Discount Model (Finnerty Model), which was applied with a security-specific volatility for the warrants. As a result of the Merger Agreement entered into on July 29, 2018 (see Note 6), the value of the RLJE Warrants was determined as the difference between the RLJE stock price and the per share exercise price of the RLJE Warrants. As a result of the change in valuation method, a value of $60.0 million was reclassified from Level III to Level II within the fair value hierarchy.

For the three and nine months ended September 30, 2018, the Company recorded a gain of $20.6 million and $30.2 million, respectively, related to the RLJE Warrants which is included in Miscellaneous, net in the condensed consolidated statement of income. For the three and nine months ended September 30, 2017, the Company recorded a gain of $2.0 million and $19.1 million, respectively.

At September 30, 2018, the Company does not have any assets or liabilities measured at fair value on a recurring basis that would be considered Level III.

Fair value measurements are also used in nonrecurring valuations performed in connection with acquisition accounting. These nonrecurring valuations primarily include the valuation of affiliate and customer relationships intangible assets, advertiser relationship intangible assets and property and equipment. All of our nonrecurring valuations use significant unobservable inputs and therefore fall under Level III of the fair value hierarchy.

Credit Facility Debt and Senior Notes

The fair values of each of the Company's debt instruments are based on quoted market prices for the same or similar issues or on the current rates offered to the Company for instruments of the same remaining maturities.

The carrying values and estimated fair values of the Company's financial instruments, excluding those that are carried at fair value in the condensed consolidated balance sheets, are summarized as follows:



(In thousands)	September 30, 2018
(In thousands)	Carrying Amount		Estimated Fair Value
Debt instruments:
Term Loan A Facility	$	739,061	$	748,125
4.75% Notes due August 2025	786,026		768,000
5.00% Notes due April 2024	985,700		985,000
4.75% Notes due December 2022	594,216		598,500
	$	3,105,003	$	3,099,625



(In thousands)	December 31, 2017
(In thousands)	Carrying Amount		Estimated Fair Value
Debt instruments:
Term Loan A Facility	$	737,140	$	748,125
4.75% Notes due August 2025	784,757		793,000
5.00% Notes due April 2024	984,056		1,012,500
4.75% Notes due December 2022	593,304		612,750
	$	3,099,257	$	3,166,375

Fair value estimates related to the Company's debt instruments presented above are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimates.