Fair value of financial instruments

Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, trade and other payables, accounts payable to related parties, deferred consideration and debt. We believe the carrying value of these assets and liabilities, excluding deferred consideration and debt, approximate their fair values as of September 30, 2017 and December 31, 2016.

Fair value measurements

The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair value as follows:


•	Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.


•	Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.


•	Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.

We did not have any movements in and out of Level 3 for our fair valued instruments during any of the above periods.

As of September 30, 2017, there were no financial assets or liabilities measured at fair value on a recurring basis as our deferred consideration was settled during the three months ended September 30, 2017 (see Note 7). The following table presents our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of December 31, 2016 ($ in thousands):



	December 31, 2016		Level 1		Level 2		Level 3
Fair value measurements on a recurring basis:
Deferred Consideration	$	1,836	$	—	$	—	$	1,836

The following table presents a reconciliation from the opening balances to the closing balances for our Level 3 fair valued instruments as of September 30, 2017 and December 31, 2016 ($ in thousands):



	Deferred Consideration
Balance as of December 31, 2015	$	4,145
Total losses included in earnings (or change in net assets) ⁽¹⁾	160
Settlements	(625		)
Balance as of March 31, 2016	3,680
Total losses included in earnings (or change in net assets) ⁽¹⁾	49
Settlements	(638		)
Balance as of June 30, 2016	3,091
Total losses included in earnings (or change in net assets) ⁽¹⁾	28
Settlements	(628		)
Balance as of September 30, 2016	2,491
Total gains included in earnings (or change in net assets) ⁽¹⁾	(36		)
Settlements	(619		)
Balance as of December 31, 2016	1,836
Total gains included in earnings (or change in net assets) ⁽¹⁾	(26		)
Settlements	(630		)
Balance as of March 31, 2017	1,180
Total losses included in earnings (or change in net assets) ⁽¹⁾	675
Settlements	(735		)
Balance as of June 30, 2017	1,120
Total losses included in earnings (or change in net assets) ⁽¹⁾	5
Settlements	(1,125		)
Balance as of September 30, 2017	$	—

________

⁽¹⁾ All losses and gains (other than changes in net assets) are included in interest expense in the Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income.

The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of September 30, 2017 and December 31, 2016 ($ in thousands):



	Carrying Value		Fair Value
	As of September 30, 2017		Level 1		Level 2		Level 3		Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	519,948	$	—	$	—	$	537,214	$	537,214
Revolving Credit Facility⁽¹⁾	—		—		—		—		—
Senior Notes due 2020	357,751		—		379,531		—		379,531
Total	$	877,699	$	—	$	379,531	$	537,214	$	916,745



	Carrying Value		Fair Value
	As of December 31, 2016		Level 1		Level 2		Level 3		Total
Financial liabilities not recorded at fair value:
Debt:
Term Loan	$	356,937	$	—	$	—	$	363,060	$	363,060
Revolving Credit Facility⁽¹⁾	—		—		—		—		—
Senior Notes due 2020	471,380		—		513,405		—		513,405
Total	$	828,317	$	—	$	513,405	$	363,060	$	876,465

________

⁽¹⁾We estimate that the carrying value of our revolving credit facility (the "Revolving Credit Facility") is the fair value as of September 30, 2017 and December 31, 2016. The valuation technique and significant unobservable inputs are consistent with our term loan (the "Term Loan"), but the valuation using the discounted cash flow technique approximates the carrying value as the expected term is significantly shorter in duration. We typically use our Revolving Credit Facility solely for short term liquidity.

The following table displays valuation techniques and the significant unobservable inputs for our Level 3 assets and liabilities measured at fair value as of September 30, 2017 and December 31, 2016 ($ in thousands):

Fair Value Measurements as of September 30, 2017

Fair Value

Significant Valuation Techniques

Significant Unobservable Inputs

Input

Term Loan

537,214

Discounted Cash Flow

Discount Rate

3.00%

Forward Rate

4.33

5.42%

Expected Term

79 months



			Fair Value Measurements as of December 31, 2016
	Fair Value		Significant Valuation Techniques	Significant Unobservable Inputs	Input
Deferred Consideration	$	1,836	Discounted Cash Flow	Discount Rate	4.00%
				Forward Rate	4.63	%	-	5.00%
				Expected Term	7 months
Term Loan	$	363,060	Discounted Cash Flow	Discount Rate	3.00%
				Forward Rate	4.00	%	-	5.33%
				Expected Term	32 months

Term Loan and deferred consideration

The fair value of our Term Loan and deferred consideration are estimated using cash flow projections applying market forward rates and discounted back at the appropriate discount rate. The primary sensitivity in each estimate is based on the selection of an appropriate discount rate. Fluctuations in this assumption will result in a different estimate of fair value as an increase in the discount rate would result in a decrease in the fair value.

Senior Notes due 2020

The fair value of the Senior Notes due 2020 is estimated using unadjusted quoted prices in a market that is not active. Current pricing was compiled and applied to the outstanding principal amount.