Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2014
Income Tax Disclosure [Abstract]  

The asset and liability method is used to account for income taxes. Under this method, deferred tax assets and liabilities are recognized for tax credits and for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets unless it is more likely than not that those assets will be realized.


The Company files a consolidated federal income tax return. This return includes all entities 80% or more owned by the Company as well as the Company’s pro-rata share of taxable income from pass-through entities in which the Company holds an ownership interest. State tax returns are filed on a consolidated, combined or separate basis depending on the applicable laws relating to the Company and its subsidiaries.


The Company recorded a provision for income taxes for the year ended December 31, 2014 of $15,137,000. The Company recorded no provision for income taxes for the years ended December 31, 2013 and 2012.


A reconciliation of the differences between the United States statutory federal income tax rate and the effective tax rate as provided in the consolidated statements of operations is as follows:


    Years Ended December 31,  
    2014     2013     2012  
Statutory rate     35.0 %     35.0 %     35.0 %
Change in valuation allowance     (11.5 )     458.0       125.5  
Convertible debt instruments           (297.7 )      
Section 382 reduction to loss carryover     (24.2 )     (141.1 )     (169.4 )
State income taxes, net of federal benefit     10.0       (8.2 )     5.5  
Stock compensation           (20.9 )     (1.9 )
Change in tax status of PE Op Co.     (1.6 )            
Fair value adjustments and warrant inducements     31.8              
Domestic production gross receipts deduction     (2.0 )            
Non-deductible items     0.6       (27.7 )     3.6  
Other     (1.3 )     2.6       1.7  
Effective rate     36.8 %     0.0 %     0.0 %


Deferred income taxes are provided using the asset and liability method to reflect temporary differences between the financial statement carrying amounts and the tax bases of assets and liabilities using presently enacted tax rates and laws. The components of deferred income taxes included in the consolidated balance sheets were as follows (in thousands):


    December 31,  
    2014     2013  
Deferred tax assets:                
Net operating loss carryforwards   $ 12,385     $ 17,566  
Capital loss carryover           844  
Stock-based compensation     781       556  
Enterprise zone credits           259  
Other accrued liabilities     483       395  
Convertible debt     669        
Fixed assets           119  
Inventory     575        
Other     217       217  
Total deferred tax assets     15,110       19,956  
Deferred tax liabilities:                
Fixed assets     (24,813 )      
Investment in PE Op Co.           (11,074 )
Intangibles     (1,134 )     (1,325 )
Derivative instruments     (172 )     (226 )
Other     (278 )      
Total deferred tax liabilities     (26,397 )     (12,625 )
Valuation allowance     (4,147 )     (8,422 )
Net deferred tax liabilities   $ (15,434 )   $ (1,091 )
Classified in balance sheet as:                
Other current assets   $ 1,606     $  
Deferred tax liabilities     (17,040 )     (1,091 )
    $ (15,434 )   $ (1,091 )


A portion of the Company’s net operating loss carryforwards will be subject to provisions of the tax law that limit the use of losses incurred by a company prior to the date certain ownership changes occur. All of the Company’s net operating loss carryforwards are subject to these limitations at December 31, 2014.


Due to the limitation, a significant portion of these net operating loss carryforwards will expire regardless of whether the Company generates future taxable income. After reducing these net operating loss carryforwards for the amount which will expire, the Company had federal net operating loss carryforwards of approximately $28,321,000 and $45,250,000, and state net operating loss carryforwards of approximately $58,990,000 and $41,695,000, at December 31, 2014 and 2013, respectively. These net operating loss carryforwards expire at various dates beginning in 2015.


In assessing whether the deferred tax assets are realizable, a more likely than not standard is applied. If it is determined that it is more likely than not that deferred tax assets will not be realized, a valuation allowance must be established against the deferred tax assets. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the associated temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.


A valuation allowance has been established in the amount of $4,147,000 and $8,422,000 at December 31, 2014 and 2013, respectively, based on the Company’s assessment of the future realizability of certain deferred tax assets. For the years ended December 31, 2014 and 2013, the Company recorded a decrease in the valuation allowance of $4,275,000 and $3,133,000, respectively, attributable almost exclusively to the expected expiration of net operating loss carryforwards due to limitations caused by ownership changes as previously discussed. The valuation allowance on deferred tax assets is related to future deductible temporary differences and net operating loss carryforwards (exclusive of net operating losses associated with items recorded directly to equity) for which the Company has concluded it is more likely than not that these items will not be realized in the ordinary course of operations.


At December 31, 2014, the Company had no increase or decrease in unrecognized income tax benefits for the year as a result of uncertain tax positions taken in a prior or current period. There was no accrued interest or penalties relating to tax uncertainties at December 31, 2014. Unrecognized tax benefits are not expected to increase or decrease within the next twelve months.


The Company is subject to income tax in the United States federal jurisdiction and various state jurisdictions and has identified its federal tax return and tax returns in state jurisdictions below as “major” tax filings. These jurisdictions, along with the years still open to audit under the applicable statutes of limitation, are as follows:


Jurisdiction   Tax Years
Federal   2011 – 2013
Arizona   2011 – 2013
California   2010 – 2013
Colorado   2010 – 2013
Idaho   2011 – 2013
Oregon   2011 – 2013


However, because the Company had net operating losses and credits carried forward in several of the jurisdictions, including the United States federal and California jurisdictions, certain items attributable to closed tax years are still subject to adjustment by applicable taxing authorities through an adjustment to tax attributes carried forward to open years.