Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2018

Tabular disclosure of financial instruments measured at fair value on a recurring basis

The following table presents the fair value of the Company’s financial instrument liability/(asset) that are measured at fair value on a recurring basis as of March 31, 2018:



(in thousands)	Level 1		Level 2			Level 3		Total
Tax amortization benefit contingency⁽¹⁾	$	—	$	—		$	44,490	$	44,490
Contingent consideration⁽²⁾	—		—			831		831
Interest rate contract ⁽³⁾	—		(2,244		)	—		(2,244		)
Stock appreciation rights⁽⁴⁾	—		—			176		176
Phantom shares⁽⁵⁾	—		—			286		286
Total	$	—	$	(2,244	)	$	45,783	$	43,539

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, 2017:



(in thousands)	Level 1		Level 2		Level 3		Total
Tax amortization benefit contingency⁽¹⁾	$	—	$	—	$	43,382	$	43,382
Contingent consideration⁽²⁾	—		—		693		693
Interest rate contract ⁽³⁾	—		456		—		456
Stock appreciation rights⁽⁴⁾	—		—		268		268
Phantom shares⁽⁵⁾	—		—		186		186
Total	$	—	$	456	$	44,529	$	44,985

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(1)

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, with the current portion tax effected at 35.3% and the non-current portion tax effected at 21.5% due to the Tax Cuts and Job Act (TCJA) of December 2017 enacted in the U.S and discounted to present value utilizing an appropriate market discount rate. Per the April 4, 2017 Amendment Agreement, payments due to Dow under the Tax Receivable Agreement was reduced from 85% to 50% of the applicable tax savings realized by the Company. The valuation technique used did not change during the three months ended March 31, 2018.


(2)	The fair value of the contingent consideration related to the Tecnidex acquisition.

(3)

The derivative assets and liabilities relate to an interest rate derivative that is measured at fair value using observable market inputs such as interest rates, our own credit risks as well as an evaluation of the counterparts' credit risks. The fair value for the three months ended March 31, 2018 resulted in an asset balance while the three months ended December 31, 2017 is in a liability balance.


(4)	The fair value of the stock appreciation rights was measured using a Black Scholes pricing model during the three months ended March 31, 2018. The valuation technique used did not change during the three months ended March 31, 2018.


(5)	The fair value of phantom shares are based on the fair value of the Company's common stock. The valuation technique used did not change during the three months ended March 31, 2018.

Changes in financial instruments measured at level 3 fair value on a recurring basis

The following table presents the changes during the period presented in our Level 3 financial instrument liability/(asset) that are measured at fair value on a recurring basis.



(in thousands)	Tax amortization benefit contingency		Contingent consideration related to acquisition		Interest rate contract			Stock appreciation rights			Phantom shares		Total
Balance, December 31, 2017	$	43,382	$	693	$	456		$	268		$	186	$	44,985
Accretion	1,108		—		—			—			—		1,108
Stock compensation expense	—		—		—			(92		)	100		8
Mark-to-market adjustment	—		138		(2,700		)	—			—		(2,562		)
Balance, March 31, 2018	$	44,490	$	831	$	(2,244	)	$	176		$	286	$	43,539