Notes to the Unaudited Consolidated Financial Statements

1. BACKGROUND AND NATURE OF OPERATIONS

Description of Business

Continental Building Products, Inc. (the "Company") is a Delaware corporation. Prior to the acquisition of the gypsum division of Lafarge North America Inc. ("Lafarge N.A.") described below, the Company had no operating activity. The Company manufactures gypsum wallboard related products for commercial and residential buildings and houses. The Company operates a network of three highly efficient wallboard facilities, all located in the eastern United States and produces joint compound at one plant in the United States and at another plant in Canada.

The Acquisition

On June 24, 2013 , Lone Star Fund VIII (U.S.), L.P., (along with its affiliates and associates, but excluding the Company and companies that it owns as a result of its investment activity, “Lone Star”), entered into a definitive agreement with Lafarge N.A. to purchase the assets of its North American gypsum division for an aggregate purchase price of approximately $703 million (the "Acquisition") in cash. The closing of the Acquisition occurred on August 30, 2013 .

Secondary Public Offerings

On March 18, 2016, following a series of secondary offerings, LSF8 Gypsum Holdings, L.P. ("LSF8") sold its remaining 5,106,803 shares of the Company’s common stock at a price per share of $16.10 . Following the March 18, 2016 transaction and the concurrent repurchase by the Company of 900,000 shares of Company’s common stock from LSF8, to the best of the Company's knowledge, neither LSF8 nor any other affiliate of Lone Star held any shares of Company common stock. (See Note 11, Treasury Stock).

2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements for the Company have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions have been eliminated.

Certain information and footnote disclosures normally included for the annual financial statements prepared in accordance with

U.S. GAAP have been condensed or omitted for the interim periods presented. Management believes that the unaudited interim

financial statements include all adjustments (which are normal and recurring in nature) necessary to present fairly the financial

position of the Company and the results of operations and cash flows for the periods presented.

The results of operations for the periods presented are not necessarily indicative of the results that may be expected for the year

ending December 31, 2017. Seasonal changes and other conditions can affect the sales volumes of the Company’s products.

Therefore, the financial results for any interim period do not necessarily indicate the expected results for the year.

The financial statements should be read in conjunction with Company’s audited consolidated financial statements and the notes

thereto for the year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K for the fiscal year then

ended (the "2016 10-K"). The Company has continued to follow the accounting policies set forth in those financial statements.

Recent Adopted Accounting Pronouncements

In July 2015, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-11, “ Inventory:   Simplifying the Measurement of Inventory. ” This guidance applies to inventory valued at first-in, first-out (FIFO) or average cost and requires inventory to be measured at the lower of cost and net realizable value, rather than at the lower of cost or market. ASU 2015-11 is effective on a prospective basis for annual periods, including interim reporting periods within those periods, beginning after December 15, 2016. The Company values its inventory under the average cost method and thus will be required to adopt the standard. The Company adopted the new standard in the first quarter of 2017. The adoption of this standard did not have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting , which introduces targeted amendments intended to simplify the accounting for stock compensation. Specifically, the ASU requires all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) to be recognized as income tax expense or benefit in the income statement. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. An entity also should recognize excess tax benefits, and assess the need for a valuation allowance, regardless of whether the benefit reduces taxes payable in the current period. That is, off balance sheet accounting for net operating losses stemming from excess tax benefits would no longer be required and instead such net operating losses would be recognized when they arise. Existing net operating losses that are currently tracked off balance sheet would be recognized, net of a valuation allowance if required, through an adjustment to opening retained earnings in the period of adoption. Entities will no longer need to maintain and track an “APIC pool.” The ASU also requires excess tax benefits to be classified along with other income tax cash flows as an operating activity in the statement of cash flows. The amendments were effective for annual periods beginning after December 15, 2016. The Company adopted the new standard in the first quarter of 2017, which resulted in a favorable adjustment to income tax provision of $0.2 million .

Recent Accounting Pronouncement Not Yet Adopted

In May 2014, the FASB issued ASU No. 2014-9, Revenue from Contracts with Customers (Topic 606) , which provides accounting guidance for all revenue arising from contracts with customers and affects all entities that enter into contracts to provide goods or services to their customers. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date , which defers the effective date of ASU No. 2014-9 for all entities by one year to annual reporting periods beginning after December 15, 2017. The ASU requires retroactive application on either a full or modified basis. We will adopt the standard on January 1, 2018. We have identified a project implementation team and have identified our revenue streams. We are in the process of evaluating the various aspects of the standard and how the standard may impact how we recognize revenue. We are also evaluating the potential impact that the new guidance will have on our footnotes to the financial statements. While we have not completed our analysis, we do not anticipate that the new guidance will have a material impact on the Company's revenue accounting.

In February 2016, the FASB issued ASU 2016-02, Leases . ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset on the balance sheet. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is in the process of evaluating the impact of adoption, which is not expected to have a material impact on the Company's Consolidated Financial Statements.

In June 2016, the FASB issued ASU 2016-13, “ Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments” . This ASU is intended to introduce a revised approach to the recognition and measurement of credit losses, emphasizing an updated model based on expected losses rather than incurred losses. The provisions of this standard are effective for reporting periods beginning after December 15, 2019 and early adoption is permitted. The Company is currently evaluating the impact that this guidance may have on its Consolidated Financial Statements.

In August 2016, the FASB issued ASU 2016-15, " Classification of Certain Cash Receipts and Cash Payments". This ASU intends to add or clarify guidance on the classification of certain cash receipts and payments in the statement of cash flows.  The provisions of this standard are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, “ Intra-Entity Transfers of Assets Other Than Inventory” . The new standard requires companies to recognize the income tax effects of intercompany sales or transfers of assets, other than inventory, in the income statement as income tax expense (or benefit) in the period the sales or transfer occurs. The standard requires companies to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. The provisions of this standard are effective for fiscal years beginning after December 15, 2017, and early adoption is permitted. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017- 04, "Intangibles - Goodwill and Other". This ASU simplifies the goodwill impairment calculation by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of today’s goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., Step 1 of today’s goodwill impairment test). The standard will be applied prospectively and is effective for annual and interim impairment tests performed in periods beginning after December 15, 2019. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. The Company is currently evaluating when it will adopt the ASU and the expected impact to its Consolidated Financial Statements.

3. RECEIVABLES, NET

Trade receivables are recorded net of credit memos issued during the normal course of business.

4. INVENTORIES, NET

5. PROPERTY, PLANT AND EQUIPMENT, NET

Depreciation expense was $8.1 million and $8.4 million for the three months ended March 31, 2017 and 2016 , respectively.

6. CUSTOMER RELATIONSHIPS AND OTHER INTANGIBLES, NET

Amortization expense was $3.2 million and $3.5 million for the three months ended March 31, 2017 and 2016 , respectively.

Customer relationship assets are amortized over a 15 year period using an accelerated method that reflects the expected future cash flows from the acquired customer-list intangible asset. Trademarks are amortized on a straight-line basis over the estimated useful life of 15 years. Software development costs are amortized over a 3 year life with the expense recorded in selling and administrative expense.

7. INVESTMENT IN SEVEN HILLS

The Company is a party with an unaffiliated third-party to a paperboard liner venture named Seven Hills Paperboard, LLC ("Seven Hills") that provides the Company with a continuous supply of high-quality recycled paperboard liner to meet its ongoing production requirements.

The Company has evaluated the characteristics of its investment and determined that Seven Hills would be deemed a variable interest entity, but that it does not have the power to direct the principal activities most impacting the economic performance of Seven Hills, and is thus not the primary beneficiary. As such, the Company accounts for this investment in Seven Hills under the equity method of accounting.

Paperboard liner purchased from Seven Hills was $12.0 million and $11.8 million for the three months ended March 31, 2017 and 2016 , respectively. As of March 31, 2017 , the Company had certain purchase commitments for paper totaling $39.0 million through 2020 .

8. ACCRUED AND OTHER LIABILITIES

9. DEBT 

In connection with the Acquisition, the Company purchased certain assets from Lafarge N.A. with cash. In order to finance a portion of the consideration payable to Lafarge N.A., the Company and its subsidiary Continental Building Products Operating Company, LLC ("OpCo") entered into a first lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent (as amended on December 2, 2013, the "First Lien Credit Agreement") and a second lien credit agreement with Credit Suisse AG, as administrative agent, Credit Suisse Securities (USA) LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners, and Royal Bank of Canada, as syndication agent for term loan borrowings of $320 million and $120 million , respectively, and drew $25 million under a $50 million revolving credit facility under the First Lien Credit Agreement. The available amount under the First Lien Credit Agreement term loan was subsequently increased to $415 million . In conjunction with the initial issuance of this debt, the Company incurred $15.3 million of debt issuance costs which were being amortized using the effective interest rate method or the straight-line method which approximates the effective interest rate method, over the estimated life of the related debt. Interest under the First Lien Credit Agreement was floating. The margin applicable to the borrowing was reduced in the third quarter 2014 to 3.00% after the Company achieved a B2 rating with a stable outlook by Moody’s.

On August 18, 2016, the Company, OpCo and Continental Building Products Canada Inc. and the lenders party thereto and Credit Suisse, as Administrative Agent, entered into an Amended and Restated Credit Agreement amending and restating the First Lien Credit Agreement (the "Amended and Restated Credit Agreement"). The Amended and Restated Credit Agreement provides for a $275 million senior secured first lien term loan facility and a $75 million senior secured revolving credit facility (the "Revolver"), which mature on August 18, 2023 and August 18, 2021, respectively. Related to this debt refinancing, the Company incurred $4.7 million of discount and debt issuance costs, of which $2.5 million was recorded in Other Expense, net on the Consolidated Statement of Operations, and $2.2 million will be amortized over the term of the Amended and Restated Credit Agreement. Upon completion of this debt refinancing, the Company recognized an additional expense of $3.3 million related to losses resulting from debt extinguishment which is also reported in Other expense, net on the Consolidated Statement of Operations. The interest rate under the Amended and Restated Credit Agreement remained floating but was reduced to a spread over LIBOR of 2.75% and floor of 0.75% .

On February 21, 2017 , the Company repriced its term loan under the Amended and Restated Credit Agreement lowering its interest rate by a further 25 basis points to LIBOR plus 2.50% thereby reducing its estimated interest expense by approximately $0.8 million per annum. All other terms and conditions under the Amended and Restated Credit Agreement remained the same. In connection with the debt repricing, the Company incurred $0.7 million of debt issuance costs, which was recorded in Other Expense, net on the Consolidated Statement of Operations.

The First Lien Credit Agreement was, and the Amended and Restated Credit Agreement is, secured by the underlying property and equipment of the Company. During the three months ended March 31, 2017 , the Company made no voluntary prepayment of principal, compared to $10.0 million of voluntary prepayments in the same period 2016 . As of March 31, 2017 , the annual effective interest rate on the Amended and Restated Credit Agreement, including original issue discount and amortization of debt issuance costs, was 4.0% .

There were no amounts outstanding under the Revolver as of March 31, 2017 or December 31, 2016 . During the three months ended March 31, 2017 the Company did not have any draws under the Revolver, compared to $5.0 million which the Company borrowed and repaid in the three months ended March 31, 2016 under the applicable revolving credit facility. Interest under the Revolver is floating, based on LIBOR plus 225 basis points. In addition, the Company pays a facility fee of 50 basis points per annum on the total capacity under the Revolver. Availability under the Revolver as of March 31, 2017 , based on draws and outstanding letters of credit and absence of violations of covenants, was $73.4 million .

Under the terms of the Amended and Restated Credit Agreement, the Company is required to comply with certain covenants, including among others, the limitation of indebtedness, limitation on liens, and limitations on certain cash distributions. One single financial covenant governs all of the Company’s debt and only applies if the outstanding borrowings of the Revolver plus outstanding letters of credit are greater than $22.5 million as of the end of the quarter. The financial covenant is a total leverage ratio calculation, in which total debt less outstanding cash is divided by adjusted earnings before interest, depreciation and amortization. As the sum of outstanding borrowings under the Revolver and outstanding letters of credit were less than $22.5 million at March 31, 2017 , the total leverage ratio of no greater than 5.0 under the financial covenant was not applicable at March 31, 2017 .

10. DERIVATIVE INSTRUMENTS

The Company uses derivative instruments to manage selected commodity price and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and typically does not hedge beyond one year for commodity derivative instruments. Cash flows from derivative instruments are included in net cash provided by operating activities in the consolidated statements of cash flows.

Commodity Derivative Instruments

As of March 31, 2017 , the Company had 1,180 thousand millions of British Thermal Units ("mmBTUs") in aggregate notional amount outstanding natural gas swap contracts to manage commodity price exposures. All of these contracts mature by October 31, 2017 . The Company elected to designate these derivative instruments as cash flow hedges in accordance with FASB Accounting Standards Codification ("ASC") 815-20, Derivatives – Hedging . For derivative contracts designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is recorded to accumulated other comprehensive income, and is reclassified to earnings when the underlying forecasted transaction affects earnings. The ineffective portion of changes in the fair value of the derivative is recorded in cost of goods sold. The net unrealized gain that remained in accumulated other comprehensive loss as of March 31, 2017 was $0.2 million which is net of a tax amount of $0.1 million . No ineffectiveness was recorded on these contracts during the three months ended March 31, 2017 . The Company reassesses the probability of the underlying forecasted transactions occurring on a quarterly basis.

For the three months ended March 31, 2017 , approximately $60,000 of loss, net of $29,000 of tax, was recognized in other comprehensive income for the commodity contracts. For the three months ended March 31, 2017 , the amount of gain reclassified from accumulated other comprehensive loss into income was $6,000 . As of March 31, 2017 , there was $0.3 million recorded in other current assets and $17,000 was recorded in other current liabilities. As of December 31, 2016 , $0.4 million was recorded in other current assets.

Interest Rate Derivative Instrument

In September 2016, the Company entered into interest rate swap agreements for a combined notional amount of $100.0 million with a term of four years , which hedged the floating LIBOR on a portion of the term loan under the Amended and Restated Credit Agreement to an average fixed rate of 1.323% and LIBOR floor of 0.75% . The Company elected to designate these interest rate swaps as cash flow hedges for accounting purposes. The net unrealized gain that remained in accumulated other comprehensive loss as of March 31, 2017 was $1.3 million which is net of a tax amount of $0.7 million . For the three months ended March 31, 2017 , the amount of loss reclassified from accumulated other comprehensive loss into income was $0.1 million . For the three months ended March 31, 2017 , approximately $80,000 of gains, net of tax expense of $51,000 was recognized in other comprehensive income for the interest rate swaps. As of March 31, 2017 , there was $1.9 million recorded in other current assets. No ineffectiveness was recorded on these contracts during the three months ended March 31, 2017 .

Counterparty Risk

The Company is exposed to credit losses in the event of nonperformance by the counterparties to the Company’s derivative instruments. As of March 31, 2017 , the Company’s derivatives were in a $2.2 million net asset position. All of the Company’s counterparties have investment grade credit ratings; accordingly, the Company anticipates that the counterparties will be able to fully satisfy their obligations under the contracts. The Company’s agreements outline the conditions upon which it or the counterparties are required to post collateral. As of March 31, 2017 , the Company had no collateral posted with its counterparties related to the derivatives.

11. TREASURY STOCK

On November 4, 2015 , the Company announced that the Board of Directors approved a new stock repurchase program authorizing the Company to repurchase up to $50 million of its common stock, at such times and prices as determined by management as market conditions warrant, through December 31, 2016 . Pursuant to this authorization, on March 18, 2016 , the Company repurchased 900,000 shares of its common stock from LSF8 in a private transaction at a price per share of $16.10 , or an aggregate of approximately $14.5 million , pursuant to a stock purchase agreement dated March 14, 2016 . The Company has also repurchased shares of its common stock in the open market under this authorization. On August 3, 2016 , the Company announced the Board of Directors had approved an expansion of its stock repurchase program by $50 million , increasing the aggregate authorization from up to $50 million to up to $100 million . The program was also extended from the end of 2016 to the end of 2017 .

On February 21, 2017 , the Board of Directors further expanded our share repurchase program up to a total of $200 million of our common stock and extended the expiration date to December 31, 2018 .

All repurchased shares are held in treasury, reducing the number of shares of common stock outstanding and used in the Company’s earnings per share calculation.

12. SHARE-BASED COMPENSATION

Stock options, Restricted Stock Awards, Restricted Stock Units and Performance Restricted Stock Units

On February 22, 2017 , the Company granted certain employees 79,638 Restricted Share Units ("RSUs") that vest ratably over four years and for certain members of the Board of Directors 16,105 RSUs that vest one year from the grant date. All of these grants had a market price on the date of grant of $23.70 . Additionally, on March 21, 2017 , the Company granted a certain employee and member of the board of directors 279 RSUs and 2,501 RSUs, respectively that vest ratably over a period of four years for the employee and one year from the grant date for the member of the Board of Directors and had a market price on the date of grant of $25.75 .

On February 22, 2017 , the Company also granted certain employees 47,505 Performance Based RSUs ("PRSUs"). The PRSUs vest on December 31, 2019 , with the exact number of PRSUs vesting subject to the achievement of certain performance conditions through December 31, 2018 . The number of PRSUs earned will vary from 0% to 200% of the number of PRSUs awarded, depending on the Company’s performance relative to a cumulative two year EBITDA target for fiscal years 2017 and 2018. The market price on date of grant of $23.70 .

For the three months ended March 31, 2017 and 2016 , the Company recognized $0.7 million and $0.3 million in expenses, respectively, related to share-based compensation awards which were recorded in selling and administrative expenses. As of March 31, 2017 , there was $6.7 million of total unrecognized compensation cost related to non-vested stock options, restricted stock awards, RSUs and PRSUs. This cost is expected to be recognized over a weighted-average period of 2.6 years .

13. ACCUMULATED OTHER COMPREHENSIVE LOSS

14. INCOME TAXES

The Company’s annual estimated effective tax rate is approximately 33.6% . The Company is subject to audit examinations at federal, state and local levels by tax authorities in those jurisdictions. In addition, the Canadian operations are subject to audit examinations at federal and provincial levels by tax authorities in those jurisdictions. The tax matters challenged by the tax authorities are typically complex; therefore, the ultimate outcome of any challenges would be subject to uncertainty. The Company has not identified any issues that did not meet the recognition threshold or would be impacted by the measurement provisions of the uncertain tax position guidance.

15. EARNINGS PER SHARE

The following table shows the weighted average number of shares used in computing earnings per share and the effect on the weighted average number of shares of potentially dilutive securities. Potential dilutive common stock has no effect on income available to common stockholders. For the three months ended March 31, 2017 and 2016 , respectively, approximately, 84,456 and 154,637 share-based compensation awards were excluded from the weighted average shares outstanding because their impact would be anti-dilutive in the computation of dilutive earnings per share.

16. COMMITMENTS AND CONTINGENCIES

Commitments

The Company leases certain buildings and equipment. The Company’s facility and equipment leases may provide for escalations of rent or rent abatements and payment of pro rata portions of building operating expenses. Minimum lease payments are recognized on a straight-line basis over the minimum lease term. The total expenses under operating leases for the three months ended March 31, 2017 and 2016 was $0.8 million and $1.0 million , respectively. The Company also has non-capital purchase commitments that primarily relate to gas, gypsum, paper and other raw materials. The total amounts purchased under such commitments were $17.6 million and $17.5 million for the three months ended March 31, 2017 and 2016 .

Contingent obligations

Under certain circumstances, the Company provides letters of credit related to its natural gas and other supply purchases. As of March 31, 2017 and December 31, 2016 , the Company had outstanding letters of credit of approximately $1.6 million and $2.1 million , respectively.

Legal Matters

In the ordinary course of business, the Company executes contracts involving indemnifications standard in the industry. These indemnifications might include claims relating to any of the following: environmental and tax matters; intellectual property rights; governmental regulations and employment-related matters; customer, supplier, and other commercial contractual relationships; and financial matters. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, it is the opinion of management that these guarantees and indemnifications are not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

In the ordinary course of business, the Company is involved in certain legal actions and claims, including proceedings under laws and regulations relating to environmental and other matters. Because such matters are subject to many uncertainties and the outcomes are not predictable with assurance, the total liability for these legal actions and claims cannot be determined with certainty. When the Company determines that it is probable that a liability for environmental matters, legal actions or other contingencies has been incurred and the amount of the loss is reasonably estimable, an estimate of the costs to be incurred is recorded as a liability in the financial statements. As of March 31, 2017 and December 31, 2016 , such liabilities were not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity. While management believes its accruals for such liabilities are adequate, the Company may incur costs in excess of the amounts provided. Although the ultimate amount of liability that may result from these matters or actions is not ascertainable, any amounts exceeding the recorded accruals are not expected to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.

17. SEGMENT REPORTING

Segment information is presented in accordance with ASC 280, Segment Reporting, which establishes standards for reporting information about operating segments. It also establishes standards for related disclosures about products and geographic areas. The Company’s primary reportable segment is wallboard, which represented approximately 96.6% and 96.5% of the Company's revenues for the three months ended March 31, 2017 and 2016 , respectively. This segment produces wallboard for the commercial and residential construction sectors. The Company also manufactures finishing products, which complement the Company’s full range of wallboard products.

Revenues from the major products sold to external customers include gypsum wallboard and finishing products.

The Company’s two geographic areas consist of the United States and Canada for which it reports net sales, fixed assets and total assets.

The Company evaluates operating performance based on profit or loss from operations before certain adjustments as shown below. Revenues are attributed to geographic areas based on the location of the assets producing the revenues. The Company did not provide asset information by segment as its Chief Operating Decision Maker does not use such information for purposes of allocating resources and assessing segment performance.

18. FAIR VALUE DISCLOSURES

U.S. GAAP provides a framework for measuring fair value, establishes a fair value hierarchy of the valuation techniques used to measure the fair value and requires certain disclosures relating to fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in a market with sufficient activity.

The three-tier fair value hierarchy which prioritizes the inputs used in measuring fair value, is as follows:

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by the Company. The fair values of receivables, accounts payable, accrued costs and other current liabilities approximate the carrying values as a result of the short-term nature of these instruments.

The Company estimates the fair value of its debt by discounting the future cash flows of each instrument using estimated market rates of debt instruments with similar maturities and credit profiles. These inputs are classified as Level 3 within the fair value hierarchy. As of March 31, 2017 and December 31, 2016 , the carrying value reported in the consolidated balance sheet for the Company’s notes payable approximated its fair value.

The only assets or liabilities the Company had at March 31, 2017 that are recorded at fair value on a recurring basis are the natural gas hedges and interest rate swaps. The natural gas hedges had a positive fair value of $0.2 million as of March 31, 2017 , net of tax amount of $0.1 million , compared to a positive fair value of 0.2 million , net of tax amount of $0.1 million as of December 31, 2016 . Interest rate swaps had a positive fair value of $1.3 million as of March 31, 2017 , net of tax amount of $0.7 million , compared to a positive fair value of $1.2 million as of December 31, 2016 , net of tax amount of $0.6 million . Both the natural gas hedges and interest rate swaps are classified within Level 2 of the fair value hierarchy as they are valued using third party pricing models which contain inputs that are derived from observable market data. Generally, the Company obtains its Level 2 pricing inputs from its counterparties. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.

Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets and goodwill. These items are recognized at fair value when they are considered to be impaired.

There were no fair value adjustments for assets and liabilities measured on a non-recurring basis. The Company discloses fair value information about financial instruments for which it is practicable to estimate that value.