Note

- Fresh Start Accounting

The Company adopted Fresh Start accounting on the Plan Effective Date in connection with the Company's emergence from bankruptcy. Although the effective date of the Restructuring Plan was

January 6, 2017,

the Company accounted for the consummation of the Restructuring Plan as if it had occurred on the Fresh Start Reporting Date,

January 1, 2017

and implemented Fresh Start reporting as of that date. The adoption of Fresh Start accounting resulted in a new reporting entity, the Successor, for financial reporting purposes. The presentation is analogous to that of a new business entity such that on the Plan Effective Date the Successor's consolidated financial statements reflect a new capital structure with

beginning retained earnings or deficit and a new basis in the identifiable assets and liabilities assumed which includes the elimination of Predecessor accumulated depreciation and accumulated amortization. Upon the Company's emergence from the Chapter

Proceeding, the Company qualified for and adopted Fresh Start accounting in accordance with the provisions set forth in ASC

852

based on the following

two

conditions: (i) holders of existing voting shares of the Predecessor immediately before the Plan Effective Date received less than

50.0%

of the voting shares of the Successor and (ii) the reorganization value of the Successor was less than its post-petition liabilities and estimated allowed claims.

As part of Fresh Start accounting, the Company was required to determine the reorganization value of the Successor upon emergence from the Chapter

Proceeding. Reorganization value approximates the fair value of the entity, before considering liabilities, and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. The fair value of the Successor's assets was determined with the assistance of a

third

-party valuation expert who used available comparable market data and quotations, discounted cash flow analysis, and other methods in determining the appropriate asset fair values. The reorganization value was allocated to the Company's individual assets based on their estimated fair values.

Enterprise value, which was used to derive reorganization value, represents the estimated fair value of an entity

’s capital structure which generally consists of long term debt and stockholders’ equity. The Successor’s enterprise value was approved by the Bankruptcy Court in support of the Restructuring Plan and was

not

to exceed

$750.0

million, which represented the mid-point of a determined range of

$600.0

million to

$900.0

million. The Successor's enterprise value of

$750.0

million was based upon

$725.9

million of New Equity and New Warrants as approved by the Bankruptcy Court and

$24.1

million of other liabilities that were

not

eliminated or discharged under the Restructuring Plan. The Successor's enterprise value was determined with the assistance of a separate

third

-party valuation expert who used available comparable market data and quotations, discounted cash flow analysis and other internal financial information and projections. This enterprise value combined with the Company’s Rights Offering was the basis for deriving equity value. The Company’s estimates of fair value are inherently subject to significant uncertainties and contingencies beyond its control. Accordingly, there can be

assurance that the estimates, assumptions, valuations, appraisals and financial projections will be realized, and actual results could vary materially. Moreover, the market value of the Company’s common stock subsequent to its emergence from bankruptcy

may

differ materially from the equity valuation derived for accounting purposes.

Machinery and Equipment

The fair value of machinery and equipment was estimated with the assistance of the

third

-party valuation expert, and the market approach, the cost approach, and the income approach were considered for each individual asset. The market approach and the cost approach were the primary approaches that were relied upon to value these assets. Although the income approach was

not

applied to value the machinery and equipment assets individually, the Company did consider the earnings of the reporting unit within which each of these assets reside. Because more than

one

approach was used to develop a valuation, the various approaches were reconciled to determine a final value conclusion.

Under the cost approach, the valuation estimate was based upon a determination of replacement cost new ("RCN"), reproduction cost new ("CRN"), or a combination of both. Once the RCN and CRN estimates were adjusted for physical and functional conditions, they were then compared to market data and other indications of value, where available, to confirm results obtained by the cost approach. Where direct RCN estimates were

not

available or deemed inappropriate, the CRN for machinery and equipment was estimated using the indirect, or trending, method in which percentage changes in applicable price indices were applied to historical costs to convert them into indications of current costs. To estimate the CRN amounts, inflation indices from established external sources were then applied to historical costs to estimate the CRN for each such asset.

The Company also developed a cost approach when market information was

not

available, or a market approach was deemed inappropriate. In doing so, an indicated value was derived by deducting physical deterioration from the RCN or CRN of each identifiable asset. Physical deterioration is the loss in value or usefulness of a property due to the using up or expiration of its useful life caused by wear and tear, deterioration, exposure to various elements, physical stresses, and similar factors.

Under the market approach, the valuation estimate was based upon an analysis of recent sales transactions for comparable assets and took into account physical, functional and economic conditions. Where comparable sales transactions could

not

be reasonably obtained, the Company utilized the percent of cost technique under the market approach, which takes into consideration general sales, sales listings, and auction data for each major asset category. This information was then used in conjunction with each asset

’s effective age to develop ratios between the sales price and RCN or CRN of similar asset types. A market-based depreciation curve was then developed and applied to asset categories where sufficient sales and auction information existed.

Economic obsolescence related to machinery and equipment was also considered and was applied to stacked and underutilized assets based upon the status of the asset. Economic obsolescence was also considered in situations in which the earnings of the applicable business segment in which the assets are employed suggest economic obsolescence. When penalizing assets for economic obsolescence, an additional economic obsolescence penalty was levied, while considering scrap value to be the floor value for an asset.

Land, Buildings and Leasehold Improvements

The fair value estimates of the real property assets were estimated with the assistance of the

third

-party valuation expert, and the market approach, the cost approach, and the income approach were considered for each of the Company's significant real property assets. The Company primarily relied upon the market and cost approaches.

In valuing the fee simple interest in the land, the Company utilized the sales comparison approach under the market approach. The sales comparison approach estimates value based upon the price in which other purchasers and sellers have agreed to transact for comparable properties. This approach is based on the principle of substitution, which states that the limits of prices, rents and rates tend to be set by the prevailing prices, rents and rates of equally desirable substitutes. In conducting the sales comparison approach, data was gathered on comparable properties and adjustments were made for factors including market conditions, size, access/frontage, zoning, location, and conditions of sale. Greatest weight was typically given to the comparable sales in proximity and similar in size to each of the owned sites.

In valuing the fee simple interest in buildings and leasehold improvements, the Company utilized the direct and indirect methods of the cost approach. For the direct method cost approach analysis, the Company

first

had to determine the RCN. In order to estimate the RCN of the buildings and leasehold improvements, various factors were considered including building size, year built, number of stories, and the breakout of the space, property history, maintenance history, and insurable value costs. For the indirect method cost approach, the Company

first

had to estimate a CRN for leasehold improvements being valued via the indirect, or trending, method of the cost approach. To estimate the CRN amounts, the Company applied published inflation indices obtained from

third

-party sources to each asset

’s historical cost to convert the known cost into an indication of current cost.

Once the RCN and CRN of the buildings and leasehold improvements was computed, the Company estimated an allowance for physical depreciation for the buildings and leasehold improvements based upon their respective age.

Intangible Assets

The financial information used to estimate the fair values of intangible assets was consistent with the information used in estimating the Company

’s enterprise value. Tradenames were valued primarily utilizing the relief from royalty method of the income approach. Significant inputs and assumptions included remaining useful lives, the forecasted revenue streams, applicable royalty rates, tax rates, and applicable discount rates. Customer relationships were considered in the analysis, but based on the valuation under the excess earnings methodology,

value was attributed to customer relationships.

The following table reconciles the enterprise value to the estimated fair value of the Successor common stock as of the Fresh Start Reporting Date (in thousands):

Enterprise value	$	750,000
Add: Cash and cash equivalents		181,242
Less: Emergence costs settled in cash post-emergence		(5,378	)
Fair value of New Equity and New Warrants, including Rights Offering		925,864
Less: Rights Offering proceeds		(200,000	)
Less: Fair value of New Warrants		(20,385	)
Fair value of Successor common stock, prior to Rights Offering	$	705,479

Shares outstanding on January 1, 2017, prior to Rights Offering shares		39,999,997
Per share value	$	17.64

The following table reconciles the enterprise value to the reorganization value of the Successor assets on the Effective Date (in thousands):

Enterprise value	$	750,000
Add: Cash and cash equivalents		181,242
Less: Emergence costs settled in cash post-emergence		(5,378	)
Add: Other current liabilities		165,501
Add: Other long-term liabilities and deferred tax liabilities		22,666
Reorganization value of Successor assets	$	1,114,031

The following table summarizes the impact of the reorganization and the Fresh Start accounting adjustments on the Company's consolidated balance sheet on the Fresh Start Reporting Date. The reorganization value has been allocated to the assets acquired based upon their estimated fair values, as shown below. The estimated fair values of certain assets and liabilities, including property, plant and equipment, other intangible assets, taxes (including uncertain tax positions), and contingencies required significant judgments and estimates (in thousands):

	Predecessor			Reorganization Adjustments				Fresh Start Adjustments				Successor

ASSETS
Current assets:
Cash and cash equivalents	$	64,583		$	116,659		(a)	$	—			$	181,242
Accounts receivable		137,222			—				—				137,222
Inventories, net		54,471			—				—				54,471
Prepaid and other current assets		37,392			—				—				37,392
Deferred tax assets		6,020			—				—				6,020
Total current assets		299,688			116,659				—				416,347
Property, plant and equipment, net		950,811			—				(350,314	)	(h)		600,497
Other assets:
Intangible assets, net		76,057			—				(15,657	)	(h)		60,400
Deferred financing costs		—			2,248		(b)		—				2,248
Other noncurrent assets		35,045			—				(506	)	(h)		34,539
Total assets	$	1,361,601		$	118,907			$	(366,477	)		$	1,114,031
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable	$	75,193		$	16,848		(c)	$	—			$	92,041
Payroll and related costs		18,287			—				—				18,287
Accrued expenses		59,129			(5,985	)	(c)		—				53,144
DIP Facility		25,000			(25,000	)	(d)		—				—
Other current liabilities		3,026			—				(997	)	(i)		2,029
Total current liabilities		180,635			(14,137	)			(997	)			165,501
Deferred tax liabilities		15,613			—				(4,613	)	(j)		11,000
Other long-term liabilities		18,577			—				(6,911	)	(i)		11,666
Total liabilities not subject to compromise		214,825			(14,137	)			(12,521	)			188,167
Liabilities subject to compromise		1,445,346			(1,445,346	)	(e)		—				—
Commitments and contingencies
Stockholders' equity:
Common stock		1,195			(640	)	(f)		—				555
Additional paid-in capital		1,009,426			926,504		(f)		(1,010,621	)	(k)		925,309
Accumulated other comprehensive loss		(2,600	)		—				2,600		(k)		—
Retained earnings (deficit)		(1,306,591	)		652,526		(g)		654,065		(l)		—
Total stockholders' equity (deficit)		(298,570	)		1,578,390				(353,956	)	(l)		925,864
Total liabilities and stockholders' equity	$	1,361,601		$	118,907			$	(366,477	)		$	1,114,031

Reorganization adjustments

(a) Represents the reorganization adjustment to cash and cash equivalents (in thousands):

Cash settlement of general unsecured and other reinstated claims	$	(33,898	)
Payment of professional fees and success fees paid		(21,657	)
Repayment of DIP Facility borrowing and accrued interest		(25,538	)
Proceeds from the Rights Offering		200,000
Payment of deferred financing costs related to the New Credit Facility		(2,248	)
Net impact to cash and cash equivalents	$	116,659

(b) Represents deferred loan costs associated with the closing of the New Credit Facility.

Accounts payable:
Pre-petition liabilities related to contract cures, 503(b)(9) claims and critical vendors	$	16,848

Accrued expenses:
Settlement of professional fees	$	(10,135	)
Reinstate liability for acquisition holdback		4,100
Settlement of accrued interest related to the DIP Facility		(538	)
Other accrued expenses		588
Net impact to accrued expenses	$	(5,985	)

(d) Represents the repayment of the DIP Facility.

(e) Represents the settlement of liabilities subject to compromise in accordance with the Restructuring Plan (in thousands):

Fair value of Successor common stock	$	(705,479	)
Fair value of New Warrants issued per the Restructuring Plan		(20,385	)
Fair value of reinstated accounts payable and accrued liabilities to be settled in cash		(20,083	)
General unsecured creditor claims settled in cash		(33,000	)
Gain on settlement of liabilities subject to compromise		(666,399	)
Net impact to liabilities subject to compromise	$	(1,445,346	)

(f) Represents the reorganization adjustments to common stock and additional paid in capital (in thousands):

Common stock:
Cancellation of Predecessor common shares	$	(1,195	)
Issuance of Successor common stock		555
Net impact to common stock	$	(640	)

Additional paid in capital:
Fair value of Successor common stock	$	705,479
Fair value of New Warrants issued per the Restructuring Plan		20,385
Proceeds from the Rights Offering		200,000
Cancellation of Predecessor common shares		1,195
Issuance of Successor common stock		(555	)
Net impact to additional paid in capital	$	926,504

(g) Represents the reorganization adjustments to retained deficit (in thousands):

Gain on settlement of liabilities subject to compromise	$	666,399
Accrual of success fee		(13,435	)
Adjustment for other expenses		(438	)
Net impact to retained deficit	$	652,526

Fresh Start adjustments

(h) Represents the Fresh Start accounting adjustments based upon the individual asset fair values.

(i) Represents the accelerated recognition of deferred gain balances of the Predecessor.

(j) Represents the tax effect of the above Fresh Start accounting adjustments.

(k) Represents the adjustment to Predecessor additional paid-in capital as a result of the elimination of Predecessor retained deficit and accumulated other comprehensive loss in accordance with ASC

852

(l) Represents the income statement impacts of the revaluation loss of

$354.0

million, after tax, and the elimination of the resulting retained deficit balance in accordance with ASC

852.