Tax Receivable Agreement Liability

9 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

Tax Receivable Agreement Liability

Tax Receivable Agreement Liability

In connection with the IPO, the Company entered into a tax receivable agreement ("TRA") with Parent 2 that provides for the payment by the Company to Parent 2 of 90% of the amount of cash savings, if any, in U.S. federal, state, local and non-U.S. income tax that the Company realizes (or in some circumstances are deemed to realize) as a result of the utilization of the Company and the Company’s subsidiaries’ (i) depreciation and amortization deductions, and any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis the Company has in its assets at the consummation of the IPO, (ii) net operating losses, (iii) tax credits and (iv) certain other tax attributes. In the first quarter of 2017, the Company recorded a liability of $203.8 million, with a corresponding offset to additional paid-in capital for the TRA. At the end of each reporting period, any changes in the Company's estimate of the liability will be recorded in the consolidated statement of operations as a component of other income (expense). The timing and amount of future tax benefits associated with the TRA are subject to change, and future payments may be required which could be materially different from the current estimated liability. The TRA will remain in effect until all tax benefits have been used or expired, unless the agreement is terminated early. During the three and nine months ended September 30, 2017, there was no change in the TRA liability that was recorded in the statements of operations. As of September 30, 2017, the TRA liability was $203.8 million. There have been no payments related to the TRA from inception to September 30, 2017.

Income Taxes

For the three and nine months ended September 30, 2017, the Company's effective tax rates were 46.4% and 41.3%, respectively. The variance from the statutory federal tax rate was primarily due to state income taxes and non-deductible items. For the three and nine months ended September 30, 2016, the Company's effective tax rates were 11.4% and 21.5%, respectively. The variance from the statutory federal tax rate was primarily due to state income taxes and non-deductible items.