FAIR VALUE MEASUREMENTS

3 Months Ended

Mar. 31, 2020

The Company’s derivatives (interest rate swap and interest rate cap agreements, income tax receivable agreement and noncontrolling interests subject to put provisions) are accounted for at fair value and are classified and disclosed in one of the following three categories:

Level 1: Financial instruments with unadjusted, quoted prices listed on active market exchanges.

Level 2: Financial instruments determined using prices for recently traded financial instruments with similar underlying terms, as well as directly or indirectly observable inputs, such as interest rates and yield curves that are observable at commonly quoted intervals.

Level 3: Financial instruments not actively traded on a market exchange. This category includes situations where there is little, if any, market activity for the financial instrument. The prices are determined using significant unobservable inputs or valuation techniques.

The asset or liability fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. There were no changes in the methodologies used at March 31, 2020.

Derivative agreements—See “Note 8 — Debt” for a discussion of the Company’s methodology for estimating fair value of interest rate swap and interest rate cap agreements.

Income Tax Receivable Agreement—The fair value of the Company’s income tax receivable agreement, entered into on April 26, 2016 in connection with the Company’s initial public offering (“TRA”), relies upon both Level 2 data and Level 3 data. The liability is remeasured at fair value each reporting period with the change in fair value recognized as Change in fair value of income tax receivable agreement in the Company’s Consolidated Statements of Operations. The fair value is calculated using a Monte Carlo simulation-based approach that relies on significant assumptions about the Company’s stock price, stock volatility and risk-free rate as well as the timing and amounts of options exercised. Changes in assumptions based on future events, including the price of the Company’s common stock, will impact the fair value for the TRA. See “Note 13 — Related Party Transactions” for further discussion of the TRA.

Noncontrolling interests subject to put provisions—See “Note 7 — Noncontrolling Interests Subject to Put Provisions” for a discussion of the Company’s methodology for estimating fair value of noncontrolling interests subject to put provisions.

Transfers among levels are calculated on values as of the transfer date. There were no transfers into or out of Level 3 during the three months ended March 31, 2020 and the year ended December 31, 2019.



	March 31, 2020
	Total		Level 1		Level 2		Level 3
Assets
Interest rate derivative agreements (included in Prepaid expenses and other current assets)	$	153	$	—	$	153	$	—
Total Assets	$	153	$	—	$	153	$	—
Liabilities
Tax Receivable Agreement Liability (included in Income tax receivable agreement payable with a portion included in Accrued expenses and other current liabilities)	$	1,300	$	—	$	—	$	1,300
Interest rate swap agreement (included in Accrued expense and other current liabilities)	2,235		—		2,235		—
Interest rate swap agreement (included in Other long-term liabilities)	632		—		632		—
Total Liabilities	$	4,167	$	—	$	2,867	$	1,300
Temporary Equity
Noncontrolling interests subject to put provisions	$	127,737	$	—	$	—	$	127,737



	December 31, 2019
	Total		Level 1		Level 2		Level 3
Assets
Interest rate derivative agreements (included in Prepaid expenses and other current assets)	$	143	$	—	$	143	$	—
Total Assets	$	143	$	—	$	143	$	—
Liabilities
Tax Receivable Agreement Liability (included in Income tax receivable agreement payable)	$	3,000	$	—	$	—	$	3,000
Interest rate swap agreement (included in Accrued expenses and other current liabilities)	783		—		783		—
Interest rate swap agreement (included in Other long-term liabilities)	725		—		725		—
Total Liabilities	$	4,508	$	—	$	1,508	$	3,000
Temporary Equity
Noncontrolling interests subject to put provisions	$	126,483	$	—	$	—	$	126,483

The following table provides the fair value rollforward for the three months ended March 31, 2020 for the TRA liability, which is classified as a Level 3 financial instrument:



Balance at December 31, 2019	$	3,000
Options exercised and dividend equivalent payment vesting	(1		)
Total realized/unrealized losses:
Included in earnings and reported as Change in fair value of income tax receivable agreement	(1,699		)
Balance at March 31, 2020	$	1,300

There are no unrealized gains or losses reported in Other Comprehensive Income related to Level 3 financial instruments.

The carrying amounts reported in the accompanying Consolidated Balance Sheets for cash, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature.

The fair value of the Company’s debt is estimated using Level 2 inputs based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. The Company estimated the fair value of the 2017 Term B Loan Facility, as defined in “Note 8 — Debt” to be $362,780 as of March 31, 2020, compared to a carrying value of $426,800. As of December 31, 2019, the Company estimated the fair value of the first lien term loans to be $407,550 compared to the carrying value of $429,000.

- 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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