Fair Value Measurements

12 Months Ended

Dec. 31, 2015

18.Fair Value Measurements

Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the fair value of the Company’s financial instruments that are measured at fair value on a recurring basis as of December 31, 2015:

(in thousands)	Level 1		Level 2		Level 3		Total
Warrant consideration(1)	$	—	$	6,000	$	—	$	6,000
Tax amortization benefit contingency(2)	—		—		149,620		149,620
Deferred acquisition payment(3)	—		—		22,700		22,700

Total	$	—	$	6,000	$	172,320	$	178,320

(1)

The warrant consideration relates to future obligations to deliver additional warrants in relation to the Business Combination. The inputs used in the fair value measurement were directly observable quoted prices for identical assets in an inactive market.

(2)

The fair value of the tax amortization benefit contingency is measured using an income approach based on the Company’s best estimate of the undiscounted cash payments to be made, tax effected at 37% and discounted to present value utilizing an appropriate market discount rate. The valuation technique used did not change during the five months ended December 31, 2015.

(3)

The fair value of the deferred acquisition payment is measured using a Black-Scholes option pricing model and based on the Company’s best estimate of the Company’s average adjusted EBITDA level over the two year period from January 1, 2016 to December 31, 2017. The valuation technique used did not change during the five months ended December 31, 2015.

There were no liabilities measured at fair value on a recurring basis at December 31, 2014. There were no transfers between Level 1 and Level 2 and no transfers out of Level 3 of the fair value hierarchy during the five months ended December 31, 2015.

The carrying amounts of cash and cash equivalents, accounts receivable, and accounts payable approximate fair value.

Changes in Financial Instruments Measured at Level 3 Fair Value on a Recurring Basis

The following tables present the changes during the periods presented in our Level 3 financial instruments that are measured at fair value on a recurring basis. These instruments relate to contingent consideration payable to Dow in relation to the Business Combination.

(in thousands)	Tax amortization benefit contingency			Deferred acquisition payment		Total
Balance, beginning of period	$	—		$	—	$	—
Initial recognition at the Closing Date	153,958			17,172		171,130
Accretion	6,733			5,129		11,862
Mark-to-market adjustment	(11,071		)	399		(10,672		)
Total realized and unrealized losses	—			—		—

Balance, end of period	$	149,620		$	22,700	$	172,320

- 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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