Fair Value Measurements

6 Months Ended

Jun. 30, 2016

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 June 30, 2016:



	Fair Value Measurements, Using
(in thousands)	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total carrying value as of June 30, 2016
Warrant consideration⁽¹⁾	—		5,700		—		5,700
Tax amortization benefit contingency⁽²⁾	—		—		160,097		160,097
Deferred acquisition payment⁽³⁾	—		—		24,712		24,712
Total	$	—	$	5,700	$	184,809	$	190,509

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:



	Fair Value Measurements, Using
(in thousands)	Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total carrying value as of December 31, 2015
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)	These liabilities relate to warrants to purchase the Company's common stock and future obligations to deliver additional such 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 six months ended June 30, 2016.


(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 Business EBITDA, as defined in the Purchase Agreement, over the two year period from January 1, 2016 to December 31, 2017. The valuation technique used did not change during the six months ended June 30, 2016.

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 the Company's Level 3 financial instruments that are measured at fair value on a recurring basis. These instruments relate to contingent consideration payable to Dow in connection with the Business Combination.



(in thousands)	Tax amortization benefit contingency		Deferred acquisition payment			Total
Balance, December 31, 2015	$	149,620	$	22,700		$	172,320
Measurement period adjustment	2,223		(2,000		)	223
Accretion⁽¹⁾	8,254		7,112			15,366
Mark to market adjustment	—		(3,100		)	(3,100		)
Balance June 30, 2016	$	160,097	$	24,712		$	184,809

(1) Accretion expense for the three months ended June 30, 2016 was $4.0 million for the tax benefit contingency and $3.6 million for the deferred acquisition payment.

- 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.

+ References + Details