CJ 2017 Annual Report

December 31, 2016 Revolving Credit Facility $ 284,400 Five-Year Term Loans 569,250 Seven-Year Term Loans 480,150 Total debt subject to compromise 1,333,800 Accrued interest on debt subject to compromise 37,516 Accounts payable and other estimated allowed claims 60,780 Related party payables 13,250 Total liabilities subject to compromise $ 1,445,346 Reorganization Items The Company classifies all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 Proceeding as reorganization items in its consolidated statements of operations. In addition, the Company reports professional fees and related costs associated with and incurred during the Chapter 11 Proceeding as reorganization items. The components of reorganization items are as follows (in thousands): Year Ended December 31, 2016 On January 1, 2017 Gain on settlement of liabilities subject to compromise $ — $ 666,399 Net loss on fresh start fair value adjustments — (358,557) Professional fees (41,240) (13,435) Contract termination settlements (20,383) — Revision of estimated claims (782) — Related party settlement 5,226 — Vendor claims adjustment 1,849 (438) Total reorganization items $ (55,330) $ 293,969 While the Company's emergence from bankruptcy is complete, certain administrative activities will continue under the authority of the Bankruptcy Court for the next several months. C&J ENERGY SERVICES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 86 Note 3 - 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 no 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 11 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 11 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.