Summary of Significant Accounting Policies and Procedures (Policies) | 9 Months Ended |
Sep. 30, 2013 |
Accounting Policies [Abstract] | ' |
Basis of Presentation and Principles of Consolidation | ' |
Basis of Presentation and Principles of Consolidation |
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The accompanying unaudited condensed consolidated financial statements, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for a fair statement of the results of operations for the interim periods covered and the consolidated financial position of the Company at the date of the balance sheets. This Quarterly Report on Form 10-Q should be read in conjunction with the Company’s audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission on March 27, 2013. The interim results presented herein are not necessarily indicative of the results of operations that may be expected for the full fiscal year ending December 31, 2013, or any other future period. As noted in Note 4, the Company acquired Paramount Energy on September 6, 2013. The acquisition was accounted for as a business combination and has been consolidated in the Company’s condensed consolidated financial statements. |
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The condensed consolidated financial statements reflect the accounts and operations of the Company and those of its subsidiaries in which the Company has a controlling financial interest. In accordance with the provisions of Financial Accounting Standards Board, or FASB, Accounting Standards Codification Section 810, or ASC 810, Consolidation, the Company consolidates any variable interest entity, or VIE, of which it is the primary beneficiary. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in entities, such as variable interest entities, through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if that party has the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance, and the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE in which it has a majority ownership interest when the Company is not considered the primary beneficiary. The Company has determined that it is the primary beneficiary in a number of VIEs—refer to Note 8, VIE Arrangements. The Company evaluates its relationships with the VIEs on an ongoing basis to ensure that it continues to be the primary beneficiary. All intercompany transactions and balances have been eliminated in consolidation. |
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Reclassifications | ' |
Reclassifications |
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Prior period goodwill balance was reclassified in the condensed consolidated financial statements and accompanying notes in order to enhance their comparability to the current period balances. The reclassifications did not impact prior period results of operations or cash flows. |
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Use of Estimates | ' |
Use of Estimates |
The preparation of the condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. The Company regularly makes significant estimates and assumptions including, but not limited to, the estimates which affect the estimated selling price of undelivered elements for revenue recognition purposes, the collectibility of accounts receivable, the valuation of inventories, the estimated total costs for long-term contracts used as a basis of determining percentage of completion for such contracts, the estimated fair value and residual values of solar energy systems subject to leases, accounting for business combinations, the estimates fair values and useful lives of acquired intangible assets, the estimated fair value of noncontrolling interests from business acquisitions, the useful lives of solar energy systems, property and equipment and intangible assets, the determination of accrued liabilities, the discount rates used to estimate the fair value of investment tax credits, the valuation of stock-based compensation, and the determination of valuation allowances associated with deferred tax assets. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ materially from those estimates. |
Fair Value of Financial Instruments | ' |
Fair Value of Financial Instruments |
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ASC 820, Fair Value Measurements, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. |
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ASC 820 requires that the valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 establishes a three tier value hierarchy, which prioritizes inputs that may be used to measure fair value as follows: |
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| • | | Level 1—Observable inputs that reflect quoted prices for identical assets or liabilities in active markets. | |
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| • | | Level 2—Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. | |
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| • | | Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. | |
As of September 30, 2013 and December 31, 2012, there were no fair value measurements of assets and liabilities subsequent to initial recognition. |
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The Company’s financial instruments include customer deposits, distributions payable to noncontrolling interests, borrowings under lines of credit, and long-term debt. The carrying values of its financial instruments other than its long-term debt approximate their fair values due to the fact that they were short-term in nature at September 30, 2013 and December 31, 2012 (Level 1). The Company estimates the fair value of its long-term debt based on rates currently offered for debt of similar maturities and terms (Level 3). The Company has estimated the fair value of its long-term debt to approximate its carrying value. |
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Business Combinations | ' |
Business Combinations |
The Company accounts for business acquisitions under ASC 805, Business Combinations. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued, and liabilities assumed at the acquisition date. Costs that are directly attributable to the acquisition are expensed as incurred. Identifiable assets, including intangible assets, acquired and liabilities, including contingent liabilities, assumed in the acquisition are measured initially at their fair values at the acquisition date. Any noncontrolling interests in the acquired business are also initially measured at fair value. The Company recognizes goodwill if the aggregate fair value of the total purchase consideration and the noncontrolling interests is in excess of the aggregate fair value of the identifiable assets acquired and the liabilities assumed. |
Long-Lived Assets | ' |
Long-Lived Assets |
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The Company’s long-lived assets include property and equipment, solar energy systems leased and to be leased, and intangible assets acquired through business combinations. Intangible assets with definite useful lives are amortized over their estimated useful lives, which range from 3 to 30 years. The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of a long-lived asset, or group of assets as appropriate, may not be recoverable. If the aggregate undiscounted future net cash flows from a long-lived asset is less than its carrying value, then the Company would recognize an impairment loss based on the discounted future net cash flows. |
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Goodwill | ' |
Goodwill |
Goodwill represents the difference between the purchase price and the aggregate fair value of the identifiable assets acquired and the liabilities assumed in a business combination. The Company tests goodwill for impairment annually, in the fourth quarter of each fiscal year, and whenever events or changes in circumstances indicate that the carrying value of goodwill may exceed its fair value, at the consolidated-level, which is the sole reporting unit. When assessing goodwill for impairment, the Company considers its market capitalization adjusted for a control premium and, if necessary, the Company’s discounted cash flow model, which involves significant assumptions and estimates, including the Company’s future financial performance, weighted-average cost of capital, and interpretation of currently enacted tax laws. Circumstances that could indicate impairment and require the Company to perform an impairment test include a significant decline in the Company’s financial results, a significant decline in the Company’s market capitalization relative to its net book value, an unanticipated change in competition or the Company’s market share, a significant change in the Company’s strategic plans, and an adverse action by a regulator. |
Warranties | ' |
Warranties |
The Company warrants its products for various periods against defects in material or installation workmanship. The Company generally provides a warranty on the generating and non-generating parts of the solar energy systems it sells of typically between five to twenty years. The manufacturer’s warranty on the solar energy systems’ components, which is typically passed through to customers, has a warranty period ranging from one to twenty-five years. The changes in the accrued warranty balance, recorded as a component of accrued and other current liabilities on the condensed consolidated balance sheets, consisted of the following (in thousands): |
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Nine Months Ended |
September 30, 2013 |
Balance – beginning of the period | | $ | 4,019 | |
Provision charged to warranty expense | | | 2,168 | |
Less warranty claims | | | (206 | ) |
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Balance – end of the period | | $ | 5,981 | |
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Solar Energy Systems Performance Guarantees | ' |
Solar Energy Systems Performance Guarantees |
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The Company guarantees certain specified minimum solar energy production output for systems leased to customers. The Company monitors the solar energy systems to ensure that these outputs are being achieved. The Company evaluates if any amounts are due to its customers. As of December 31, 2012 and September 30, 2013, the Company had recorded liabilities of $0.6 million and $0.9 million, respectively, as accrued and other current liabilities in the condensed consolidated financial statements, relating to these guarantees based on the Company’s assessment of its exposure. |
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Deferred U.S. Treasury Grants Income | ' |
Deferred U.S. Treasury Grants Income |
The Company is eligible for U.S. Treasury grants received or receivable on eligible property as defined under Section 1603 of the American Recovery and Reinvestment Act of 2009, as amended by the Tax Relief Unemployment Insurance Reauthorization and Job Creation Act of December 2010, which includes solar energy system installations, upon approval by the U.S. Treasury Department. For solar energy systems under lease pass-through arrangements the Company reduces the financing obligation and records deferred income for the U.S. Treasury grants which are paid directly to the investors upon receipt of the grants by the investors. The benefit of the U.S. Treasury grants is recorded as deferred income and is amortized on a straight-line basis over the estimated useful lives of the related solar energy systems of 30 years. The amortization of the deferred income is recorded as a reduction to depreciation expense which is a component of the cost of revenue of operating leases in the condensed consolidated statement of operations. A catch up adjustment is recorded in the period in which the grant is approved by the U.S. Treasury Department or received by lease pass-through investors to recognize the portion of the grant that matches proportionally the amortization for the period between the date of placement in service of the solar energy systems and approval by the U.S. Treasury Department or receipt by lease pass-through investors of the associated grant. The changes in deferred U.S. Treasury grants income during the nine months ended September 30, 2013 were as follows (in thousands): |
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Balance as of December 31, 2012 | | $ | 298,260 | |
U.S. Treasury grants received and receivable by the company | | | 121,318 | |
U.S. Treasury grants received by investors under lease pass-through arrangements | | | 18,590 | |
Amortized during the period as a credit to depreciation expense | | | (11,448 | ) |
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Balance as of September 30, 2013 | | $ | 426,720 | |
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Of the balance outstanding as of September 30, 2013, $411.3 million is presented as noncurrent deferred U.S. Treasury grants income in the condensed consolidated balance sheets. |
Deferred Investment Tax Credits Revenue | ' |
Deferred Investment Tax Credits Revenue |
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The Company’s solar energy systems are eligible for investment tax credits, or ITCs, that accrue to eligible property under the Internal Revenue Code. Under Section 50(d)(5) of the Internal Revenue Code and the related regulations, a lessor of qualifying property may elect to treat the lessee as the owner of such property for the purposes of claiming government ITCs associated with such property. These regulations enable the ITCs to be separated from the ownership of the property and allow the transfer of these ITCs. Under the lease pass-through structures, the Company can make a tax election to pass through the ITCs to the investor, who is the legal lessee of the property. The Company is therefore able to monetize the ITCs to investors who can utilize them in return for cash payments. The Company considers the monetization of ITCs to constitute one of the key elements of realizing the value associated with solar energy systems. The Company therefore views the proceeds from the monetization of ITCs to be a component of revenue generated from the solar energy systems. |
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For lease pass-through structures, the Company allocates a portion of the aggregate payments received from the investor to the estimated fair value of the assigned ITCs and the balance to the future customer lease payments that are also assigned to the investors. The estimated fair value of the ITCs are determined by discounting the estimated cash flows impact of the ITCs using an appropriate discount rate that reflects a market interest rate. |
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The Company recognizes the revenue associated with the monetization of ITCs in accordance with ASC 605-10-S99, Revenue Recognition-Overall-SEC Materials. The revenue associated with the monetization of the ITCs is recognized when (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services have been rendered, (3) the sales price is fixed or determinable, and (4) collection of the related receivable is reasonably assured. The ITCs are subject to recapture under the Internal Revenue Code if the underlying solar energy system either ceases to be a qualifying property or undergoes a change in ownership within five years of its placed in service date. The recapture amount decreases on the anniversary of the placed in service date. As the Company has an obligation to ensure the solar energy system is in service and operational for a term of five years to avoid any recapture of the ITCs, the Company recognizes revenue as the recapture provisions lapse assuming the other aforementioned revenue recognition criteria have been met. The monetized ITCs are initially recorded as deferred revenue on the condensed consolidated balance sheet and subsequently one-fifth of the monetized ITCs is recognized as revenue in the condensed consolidated statement of operations on each anniversary of the solar energy system’s placed in service date over the next five years. |
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The Company guarantees its fund investors that in the event of a subsequent recapture of the ITCs by the taxing authority due to the Company’s noncompliance with the applicable ITC guidelines, the Company will compensate the investor for any recaptured credits. The Company has concluded that the likelihood of a recapture event is remote and consequently has not recorded any liability in the condensed consolidated financial statements for any potential recapture exposure. |
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The balance of deferred investment tax credits revenue, which is included as part of deferred revenue in the condensed consolidated balance sheets, as of September 30, 2013 and December 31, 2012 was $76.3 million and $0, respectively. No revenue has been recognized in the condensed consolidated statements of operations to date related to the monetization of investment tax credits. |
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Comprehensive Income (Loss) | ' |
Comprehensive Income (Loss) |
The Company accounts for comprehensive income (loss) in accordance with ASC 220, Comprehensive Income. Under ASC 220, the Company is required to report comprehensive income (loss), which includes the Company’s net loss, as well as other comprehensive income (loss). There were no differences between comprehensive loss as defined by ASC 220 and net loss as reported in the Company’s accompanying condensed consolidated statements of operations for the periods presented. |
Segment Information | ' |
Segment Information |
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Operating segments are defined as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the executive team, comprising the chief executive officer, the chief operating officer, the chief revenue officer, and the chief financial officer. Based on the financial information presented to and reviewed by the chief operating decision maker in deciding how to allocate the resources and in assessing the performance of the Company, the Company has determined that it has a single operating and reporting segment, solar energy and energy efficiency products and services. The Company’s principal operations, revenue and decision-making functions are located in the United States. |
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Basic and Diluted Net Income (Loss) Per Share | ' |
Basic and Diluted Net Income (Loss) Per Share |
The Company’s basic net income (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Prior to the Company’s initial public offering of its common stock, the Company’s convertible redeemable preferred stock was entitled to receive dividends of up to $0.01 per share when and if dividends were declared on the common stock and thereafter participate pro rata on an as converted basis with the common stock holders on any distributions to common stockholders. They were therefore participating securities. As a result, the Company calculates the net income (loss) per share using the two-class method. Accordingly, the net income (loss) attributable to common stockholders is derived from the net income (loss) for the period and, in periods in which the Company has net income attributable to common stockholders, an adjustment is made for the noncumulative dividends and allocations of earnings to participating securities based on their outstanding shareholder rights. Under the two-class method, the net loss attributable to common stockholders is not allocated to the convertible redeemable preferred stock as the convertible redeemable preferred stock did not have a contractual obligation to share in the Company’s losses. |
The diluted net income (loss) per share attributable to common stockholders is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method or the as-if converted method as applicable. In periods when the Company incurred a net loss attributable to common stockholders, convertible redeemable preferred stock, stock options, restricted stock units, warrants to purchase common stock, and warrants to purchase convertible redeemable preferred stock were considered to be common stock equivalents but have been excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect is antidilutive. |
Recently Issued Accounting Standard | ' |
Recently Issued Accounting Standard |
In July 2013, the FASB issued Accounting Standards Update, or ASU, No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists, to specify when an unrecognized tax benefit should be presented as a liability versus an offset against a deferred tax asset. The ASU is effective prospectively for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013. The Company is currently assessing the impact of the ASU on the Company’s consolidated financial statements. |