MPCS 2013-Q1 10-Q
Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
 
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

OR
 
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number
1-33409
METROPCS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
 
 
 
Delaware
 
20-0836269
(State or other jurisdiction
 
(I.R.S. Employer
of incorporation or organization)
 
Identification No.)
 
 
2250 Lakeside Boulevard
 
 
Richardson, Texas
 
75082-4304
(Address of principal executive offices)
 
(Zip Code)
(214) 570-5800
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer þ
 
Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
On April 19, 2013, there were 370,274,013 shares of the registrant’s common stock, $0.0001 par value, outstanding.

Table of Contents

METROPCS COMMUNICATIONS, INC.
Quarterly Report on Form 10-Q
Table of Contents
 
Page
PART I. FINANCIAL INFORMATION
 
 
 
 
 
 
PART II. OTHER INFORMATION
 
*
*
*
 ———————————— 
*
No reportable information under this item.

Table of Contents

Part I.
FINANCIAL INFORMATION
Item 1. Financial Statements
MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(Unaudited)
 
 
March 31,
2013
 
December 31,
2012
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
2,701,281

 
$
2,368,302

Short-term investments
 
—

 
244,990

Restricted cash
 
3,475,417

 
—

Inventories
 
254,871

 
259,157

Accounts receivable (net of allowance for uncollectible accounts of $331 and $476 at March 31, 2013 and December 31, 2012, respectively)
 
87,810

 
98,653

Prepaid expenses
 
97,361

 
65,069

Deferred charges
 
82,233

 
78,181

Deferred tax assets
 
3,493

 
3,493

Other current assets
 
70,238

 
69,458

Total current assets
 
6,772,704

 
3,187,303

Property and equipment, net
 
4,177,500

 
4,292,061

Restricted cash and investments
 
4,929

 
4,929

Long-term investments
 
1,679

 
1,679

FCC licenses
 
2,564,495

 
2,562,407

Other assets
 
141,239

 
141,036

Total assets
 
$
13,662,546

 
$
10,189,415

CURRENT LIABILITIES:
 
 
 
 
Accounts payable and accrued expenses
 
$
473,674

 
$
501,929

Current maturities of long-term debt
 
2,450,240

 
36,640

Deferred revenue
 
241,341

 
237,635

Other current liabilities
 
23,870

 
71,599

Total current liabilities
 
3,189,125

 
847,803

Long-term debt, net
 
5,807,170

 
4,724,112

Deferred tax liabilities
 
1,044,503

 
1,031,374

Deferred rents
 
139,291

 
136,456

Other long-term liabilities
 
90,516

 
90,763

Total liabilities
 
10,270,605

 
6,830,508

COMMITMENTS AND CONTINGENCIES (See Note 12)
 

 

STOCKHOLDERS’ EQUITY:
 
 
 
 
Preferred stock, par value $0.0001 per share, 100,000,000 shares authorized; no shares of preferred stock issued and outstanding at March 31, 2013 and December 31, 2012
 
—

 
—

Common stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 365,644,106 and 364,492,637 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively
 
37

 
37

Additional paid-in capital
 
1,839,870

 
1,826,044

Retained earnings
 
1,572,986

 
1,553,590

Accumulated other comprehensive loss
 
(7,571
)
 
(9,602
)
Less treasury stock, at cost, 1,282,141 and 1,057,237 treasury shares at March 31, 2013 and December 31, 2012, respectively
 
(13,381
)
 
(11,162
)
Total stockholders’ equity
 
3,391,941

 
3,358,907

Total liabilities and stockholders’ equity
 
$
13,662,546

 
$
10,189,415

The accompanying notes are an integral part of these condensed consolidated financial statements.

1
Table of Contents

MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share information)
(Unaudited)
 
 
 
For the Three Months Ended March 31,
 
 
 
 
2013
 
2012
REVENUES:
 
 
 
 
Service revenues
 
$
1,101,031

 
$
1,158,779

Equipment revenues
 
186,030

 
117,811

Total revenues
 
1,287,061

 
1,276,590

OPERATING EXPENSES:
 
 
 
 
Cost of service (excluding depreciation and amortization expense of $149,569 and $132,223 shown separately below)
 
372,978

 
388,927

Cost of equipment
 
437,969

 
458,864

Selling, general and administrative expenses (excluding depreciation and amortization expense of $23,598 and $20,596 shown separately below)
 
194,611

 
176,593

Depreciation and amortization
 
173,167

 
152,819

Loss on disposal of assets
 
508

 
1,120

Total operating expenses
 
1,179,233

 
1,178,323

Income from operations
 
107,828

 
98,267

OTHER EXPENSE (INCOME):
 
 
 
 
Interest expense
 
76,346

 
70,083

Interest income
 
(373
)
 
(375
)
Other (income) expense, net
 
(84
)
 
(103
)
Total other expense
 
75,889

 
69,605

Income before provision for income taxes
 
31,939

 
28,662

Provision for income taxes
 
(12,543
)
 
(7,658
)
Net income
 
$
19,396

 
$
21,004

Other comprehensive income (loss):
 
 
 
 
Unrealized gains on available-for-sale securities, net of tax of $4 and $9, respectively
 
6

 
17

Unrealized losses on cash flow hedging derivatives, net of tax benefit of $71 and $1,572, respectively
 
(115
)
 
(3,133
)
Reclassification adjustment for gains on available-for-sale securities included in net income, net of tax of $53 and $12, respectively
 
(85
)
 
(25
)
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax benefit of $1,378 and $1,448, respectively
 
2,225

 
2,887

Total other comprehensive income (loss)
 
2,031

 
(254
)
Comprehensive income
 
$
21,427

 
$
20,750

Net income per common share:
 
 
 
 
Basic
 
$
0.05

 
$
0.06

Diluted
 
$
0.05

 
$
0.06

Weighted average shares:
 
 
 
 
Basic
 
364,999,137

 
362,718,613

Diluted
 
366,556,369

 
364,283,160


The accompanying notes are an integral part of these condensed consolidated financial statements.

2
Table of Contents

MetroPCS Communications, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
 
 
For the Three Months Ended March 31,
 
 
 
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
19,396

 
$
21,004

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
173,167

 
152,819

Recovery of uncollectible accounts receivable
 
(111
)
 
(107
)
Deferred rent expense
 
2,930

 
4,792

Cost of abandoned cell sites
 
360

 
423

Stock-based compensation expense
 
9,573

 
10,156

Non-cash interest expense
 
2,195

 
1,831

Loss on disposal of assets
 
508

 
1,120

Gain on maturity or sale of investments
 
(138
)
 
(37
)
Accretion of asset retirement obligations
 
1,778

 
1,588

Deferred income taxes
 
11,505

 
14,357

Changes in assets and liabilities:
 
 
 
 
Inventories
 
4,285

 
(12,510
)
Accounts receivable, net
 
10,953

 
(2,844
)
Prepaid expenses
 
(32,312
)
 
(14,904
)
Deferred charges
 
(4,052
)
 
(29,808
)
Other assets
 
11,171

 
10,423

Accounts payable and accrued expenses
 
15,155

 
(39,803
)
Deferred revenue
 
3,706

 
15,950

Other liabilities
 
(6,618
)
 
2,454

Net cash provided by operating activities
 
223,451

 
136,904

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of property and equipment
 
(154,608
)
 
(144,016
)
Change in prepaid purchases of property and equipment
 
13,831

 
(7,352
)
Proceeds from sale of and grants received for property and equipment
 
3,323

 
477

Purchases of investments
 
—

 
(192,415
)
Proceeds from maturity of investments
 
245,000

 
162,500

Change in restricted cash and investments
 
(3,475,417
)
 
500

Acquisitions of FCC licenses and microwave clearing costs
 
(2,066
)
 
(2,584
)
Net cash used in investing activities
 
(3,369,937
)
 
(182,890
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Change in book overdraft
 
11,660

 
(2,830
)
Proceeds from debt issuance
 
3,500,000

 
—

Debt issuance costs
 
(25,821
)
 
—

Repayment of debt
 
(6,347
)
 
(6,347
)
Payments on capital lease obligations
 
(2,752
)
 
(1,558
)
Purchase of treasury stock
 
(2,219
)
 
(1,888
)
Proceeds from exercise of stock options
 
4,944

 
1,565

Net cash provided by (used in) financing activities
 
3,479,465

 
(11,058
)
INCREASE (DECREASE) CASH AND CASH EQUIVALENTS
 
332,979

 
(57,044
)
CASH AND CASH EQUIVALENTS, beginning of period
 
2,368,302

 
1,943,282

CASH AND CASH EQUIVALENTS, end of period
 
$
2,701,281

 
$
1,886,238


The accompanying notes are an integral part of these condensed consolidated financial statements.

3
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


1.
Basis of Presentation:
The accompanying unaudited condensed consolidated interim financial statements include the balances and results of operations of MetroPCS Communications, Inc. (“MetroPCS”) and its consolidated subsidiaries (collectively, the “Company”).
The condensed consolidated balance sheets as of March 31, 2013 and December 31, 2012, the condensed consolidated statements of income and comprehensive income and cash flows for the periods ended March 31, 2013 and 2012, and the related footnotes are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
The unaudited condensed consolidated financial statements included herein reflect all adjustments (consisting of normal, recurring adjustments) which are, in the opinion of management, necessary to state fairly the results for the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results to be expected for any subsequent interim period or for the fiscal year.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Company has thirteen operating segments based on geographic regions within the United States: Atlanta, Boston, Dallas/Ft. Worth, Detroit, Las Vegas, Los Angeles, Miami, New York, Orlando/Jacksonville, Philadelphia, Sacramento, San Francisco and Tampa/Sarasota. In accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 280 (Topic 280, “Segment Reporting”), the Company aggregates its thirteen operating segments into one reportable segment.
Federal Universal Service Fund (“FUSF”), E-911 and various other fees are assessed by various governmental authorities in connection with the services that the Company provides to its customers. The Company offers a family of service plans, which include all applicable taxes and regulatory fees (“tax inclusive plans”). The Company reports regulatory fees for the tax inclusive plans in cost of service on the accompanying condensed consolidated statements of income and comprehensive income. When the Company separately assesses these regulatory fees on its customers for those service plans that do not include taxes or regulatory fees, the Company reports these regulatory fees on a gross basis in service revenues and cost of service on the accompanying condensed consolidated statements of income and comprehensive income. For the three months ended March 31, 2013 and 2012, the Company recorded approximately $6.0 million and $12.9 million, respectively, of FUSF, E-911 and other fees on a gross basis. Sales, use and excise taxes for all service plans are reported on a net basis in selling, general and administrative expenses on the accompanying condensed consolidated statements of income and comprehensive income.

Recent Accounting Pronouncements

In July 2012, the FASB issued Accounting Standards Update ("ASU") 2012-02, "Intangibles - Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment," allowing entities to make a qualitative evaluation about the likelihood of impairment of an indefinite-lived intangible asset to determine whether the quantitative test is required, as opposed to required annual quantitative impairment testing.  The amendment was effective for interim and annual impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption was permitted. The Company did not elect to utilize a qualitative assessment and has performed the most recent annual quantitative impairment test as of September 30, 2012 consistent with prior years.  The implementation of this standard did not affect the Company's financial condition, results of operations or cash flows.
In February 2013, the FASB issued ASU 2013-02 "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income," which added new disclosure requirements for items reclassified out of accumulated other comprehensive income ("AOCI") to help entities improve the transparency of changes in other comprehensive income and items reclassified out of AOCI in financial statements. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2012. The implementation of this standard did affect the Company's disclosures but did not affect the Company's financial condition, results of operations or cash flows.


4
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

In February 2013, the FASB issued ASU 2013-04 "Liabilities (Topic 405): "Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation Is Fixed at the Reporting Date," which added new disclosure requirements to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date and disclose the arrangements and the total outstanding amount of the obligation for all joint parties. These disclosure requirements are incremental to the existing related-party disclosure requirements. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2013. Early adoption is permitted. The implementation of this standard is not expected to affect the Company's financial condition, results of operations or cash flows.
2.
T-Mobile Transaction:

On October 3, 2012, the Company entered into the Business Combination Agreement (as previously amended, the "Business Combination Agreement") with Deutsche Telekom AG, ("Deutsche Telekom"), T-Mobile Global, a direct wholly-owned subsidiary of Deutsche Telekom ("T-Mobile Global"), T-Mobile Global Holding,a direct wholly-owned subsidiary of Global ("T-Mobile Holding") and T-Mobile USA, Inc., a Delaware corporation and a direct wholly-owned subsidiary of T-Mobile Holding ("T-Mobile").
 
Pursuant to the terms and subject to the conditions set forth in the Business Combination Agreement, the following transactions, among others, are proposed to occur (collectively referred to as the "Proposed Transaction" or the "T-Mobile Transaction"): (1) the Company has agreed to effect a recapitalization that includes a (i) reverse stock split (the “Reverse Stock Split”) of the Company's common stock, par value $0.0001 per share (the “Common Stock”) prior to the completion of the Proposed Transaction and will have a par value $0.00001 per share ("New Common Stock") following the completion of the Proposed Transaction, pursuant to which each share of Common Stock outstanding as of the effective time of the Reverse Stock Split (the “Effective Time”) will thereafter represent one-half of a share of New Common Stock and (ii) a payment in cash (the “Cash Payment”) in an amount equal to $1.5 billion, without interest, in the aggregate to the Company's stockholders of record immediately following the Effective Time; (2) immediately following the Cash Payment, T-Mobile Holding will deliver to the Company all of its interest in T-Mobile (the "T-Mobile Stock Acquisition") and the Company will issue and deliver to T-Mobile Holding, or its designee, shares of New Common Stock equal to 74% of the fully-diluted shares of New Common Stock outstanding immediately following the Cash Payment (with the percentage ownership of fully diluted shares of New Common Stock being calculated pursuant to the Business Combination Agreement (i) under the treasury method based on the average closing price of a share of Common Stock on the New York Stock Exchange for the five trading days immediately preceding the date of the closing under the Business Combination Agreement after taking into account the Reverse Stock Split, the Cash Payment and before taking into account subsequent cash-out of stock options, if any, in connection with the Proposed Transaction, and (ii) on a grossed up basis to take into account the number of shares of New Common Stock so issued to T-Mobile Holding or its designee) (the “Stock Issuance”); and (3) on the business day immediately following the closing of the Proposed Transaction (the “Closing”), MetroPCS, Inc., a wholly-owned subsidiary of the Company (“HoldCo”), will merge with and into MetroPCS Wireless, Inc., a wholly-owned subsidiary of HoldCo (“Wireless”), with Wireless continuing as the surviving entity. Immediately thereafter, Wireless will merge with and into T-Mobile, with T-Mobile continuing as the surviving entity.

Completion of the Proposed Transaction is subject to certain conditions, including, among other things: (i) obtaining the requisite approvals from the Company's stockholders to the Stock Issuance and the amended and restated articles of incorporation effecting the Reverse Stock Split ("Required Approvals"), (ii) obtaining listing approvals from the New York Stock Exchange in connection with the Stock Issuance, (iii) the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (iv) receipt of Federal Communications Commission and other material governmental consents and approvals required to consummate the Proposed Transaction, (v) the termination of any review by the Committee on Foreign Investment in the United States with respect to the Proposed Transaction, and (vi) the absence of any statute, rule, executive order, regulation, order or injunction prohibiting the consummation of the Proposed Transaction. The obligation of each of the parties to consummate the Proposed Transaction is also conditioned upon the accuracy of the other party's representations and warranties, the other party having performed in all material respects its obligations under the Business Combination Agreement and no circumstances occurring that would reasonably be expected to have a material adverse effect on the other party.

The Business Combination Agreement grants both the Company and Deutsche Telekom the right to terminate the Business Combination Agreement under certain circumstances. Pursuant to the Business Combination Agreement, the Company will be obligated to pay Deutsche Telekom a termination fee of $150.0 million if (a) Deutsche Telekom terminates the Business Combination Agreement because there has been a change in the MetroPCS board of directors recommendation

5
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

("Recommendation Change"), (b) the Company or Deutsche Telekom terminates the Business Combination Agreement because the Required Approvals are not obtained following (i) a material breach by the Company of the covenants requiring the Company to file the proxy statement, call and hold the stockholders meeting, not solicit alternative transaction proposals or continue to recommend that its stockholders deliver the Required Approvals or (ii) a Recommendation Change, and (c) the Company or Deutsche Telekom terminates the Business Combination Agreement because the Required Approvals are not obtained (other than under the circumstances described in the immediately preceding sentence) or because the outside date has passed, and (i) an alternative transaction proposal has been made and is pending at the time of termination and, within twelve months after such termination, the Company enters into, publicly approves or submits to its stockholders for approval, an agreement with respect to an alternative transaction, or it consummates an alternative transaction (which in each case need not be the same proposal or with the same party that made the earlier proposal), or (ii) an alternative transaction proposal has been made but was withdrawn prior to the stockholder meeting at which the Company's stockholders voted not to grant the Required Approvals and, within twelve months after such termination, the Company enters into, publicly approves or submits to its stockholders for approval, an agreement with respect to an alternative transaction with the same party that made the earlier proposal that had been withdrawn. If the Business Combination Agreement is terminated due solely to a failure to obtain the necessary regulatory approvals, Deutsche Telekom must pay the Company a $250.0 million termination fee.

On March 21, 2013, the Company announced that it had received all regulatory approvals in connection with the Proposed Transaction (See Note 16).
3.
Short-term Investments:

The Company’s short-term investments consist of securities classified as available-for-sale, which are stated at fair value. The securities include U.S. Treasury securities with an original maturity of over 90 days. Unrealized gains, net of related income taxes, for available-for-sale securities are reported in accumulated other comprehensive loss, a component of stockholders’ equity, until realized. The estimated fair values of investments are based on quoted market prices as of the end of the reporting period. The Company's U.S. Treasury securities matured during the three months ended March 31, 2013, therefore, the Company had no short-term investments as of March 31, 2013. The U.S. Treasury securities reported as of December 31, 2012 had contractual maturities of less than one year.
Short-term investments, with an original maturity of over 90 days, consisted of the following (in thousands):
 
 
As of December 31, 2012
 
 
Amortized
Cost
 
Unrealized
Gain in
Accumulated
OCI
 
Unrealized
Loss in
Accumulated
OCI
 
Aggregate
Fair
Value
U.S. Treasury securities
 
$
244,862

 
$
128

 
$
—

 
$
244,990

Total short-term investments
 
$
244,862

 
$
128

 
$
—

 
$
244,990

4.
Restricted Cash:

In March 2013, Wireless issued $1.75 billion of principal amount of its 6 1/4% Senior Notes due 2021 (the “6 1/4% Senior Notes”), and $1.75 billion of principal amount of its 6 5/8% Senior Notes due 2023 (the “New 6 5/8% Senior Notes,” and, together with the 6 1/4% Senior Notes, the “2013 Notes”). If the Proposed Transaction in connection with the Business Combination Agreement has not been consummated on or before 11:59 p.m., New York City time on January 17, 2014, or if the Business Combination Agreement is terminated prior to that time, all of the 2013 Notes will be subject to a special mandatory redemption. Accordingly, Wireless is required to keep the $3.48 billion in net proceeds of the 2013 Notes offering in a segregated account and keep such net proceeds on hand in cash or cash equivalents pending the consummation of the Proposed Transaction.
5.
Derivative Instruments and Hedging Activities:
In October 2010, Wireless entered into three separate two-year interest rate protection agreements to manage its interest rate risk exposure under Wireless’ senior secured credit facility, as amended (the “Senior Secured Credit Facility”). These agreements were effective on February 1, 2012 and cover a notional amount of $950.0 million and effectively convert this portion of Wireless’ variable rate debt to fixed rate debt at a weighted average annual rate of 4.908%. These agreements expire on February 1, 2014.

6
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

In April 2011, Wireless entered into three separate three-year interest rate protection agreements to manage its interest rate risk exposure under its Senior Secured Credit Facility. These agreements were effective on April 15, 2011 and cover a notional amount of $450.0 million and effectively convert this portion of Wireless’ variable rate debt to fixed rate debt at a weighted average annual rate of 5.242%. These agreements expire on April 15, 2014.
Interest rate protection agreements are entered into to manage interest rate risk associated with Wireless’ variable-rate borrowings under the Senior Secured Credit Facility. The interest rate protection agreements have been designated as cash flow hedges. If a derivative is designated as a cash flow hedge and the hedging relationship qualifies for hedge accounting under the provisions of ASC 815 (Topic 815, “Derivatives and Hedging”), the effective portion of the change in fair value of the derivative is recorded in accumulated other comprehensive loss and reclassified to interest expense in the period in which the hedged transaction affects earnings. The ineffective portion of the change in fair value of a derivative qualifying for hedge accounting is recognized in earnings in the period of the change. For the three months ended March 31, 2013, the change in fair value did not result in ineffectiveness.
At the inception of the cash flow hedges and quarterly thereafter, the Company performs an assessment to determine whether changes in the fair values or cash flows of the derivatives are deemed highly effective in offsetting changes in the fair values or cash flows of the hedged transaction. If at any time subsequent to the inception of the cash flow hedges, the assessment indicates that the derivative is no longer highly effective as a hedge, the Company will discontinue hedge accounting and recognize all subsequent derivative gains and losses in results of operations. The Company estimates that approximately $12.6 million of net losses that are reported in accumulated other comprehensive loss at March 31, 2013 are expected to be reclassified into earnings within the next 12 months.
Cross-default Provisions

Wireless’ interest rate protection agreements contain cross-default provisions to its Senior Secured Credit Facility. Wireless’ Senior Secured Credit Facility allows interest rate protection agreements to become secured if the counterparty to the agreement is a current lender under the Senior Secured Credit Facility. If Wireless were to default on the Senior Secured Credit Facility, it would trigger these provisions, and the counterparties to the interest rate protection agreements could request immediate payment on interest rate protection agreements in net liability positions, similar to their existing rights as a lender. There are no collateral requirements in the interest rate protection agreements. The aggregate fair value of interest rate protection agreements with cross-default provisions that are in a net liability position as of March 31, 2013 is $12.6 million.

Fair Values of Derivative Instruments
(in thousands)
 
Liability Derivatives
 
 
As of March 31, 2013
 
As of December 31, 2012
 
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Derivatives designated as hedging
instruments under ASC 815
 
 
 
 
 
 
 
 
Interest rate protection agreements
 
Other current liabilities
 
$
(12,594
)
 
Other current liabilities
 
$
(13,656
)
Interest rate protection agreements
 
Other long-term liabilities
 
—

 
Other long-term liabilities
 
(2,355
)
Total derivatives designated as
hedging instruments under ASC
815
 
 
 
$
(12,594
)
 
 
 
$
(16,011
)

The Effect of Derivative Instruments on the Condensed Consolidated Statement of Income and Comprehensive Income
For the Three Months Ended March 31,
Derivatives in ASC 815 Cash
Flow Hedging Relationships
 
Amount of Gain (Loss)
Recognized in OCI on Derivative
(Effective Portion)
 
Location of Gain (Loss) Reclassified from
Accumulated OCI into
Income (Effective Portion)
 
Amount of Gain (Loss)
Reclassified from
Accumulated OCI into
Income (Effective Portion)
 
2013
 
2012
 
2013
 
2012
Interest rate protection agreements
 
$
(186
)
 
$
(4,705
)
 
Interest expense
 
$
(3,603
)
 
$
(4,336
)
6.
Intangible Assets:

The Company operates wireless broadband mobile networks under licenses granted by the FCC for a particular geographic area on spectrum allocated by the FCC for terrestrial wireless broadband services. The Company holds personal communications services (“PCS”) licenses, advanced wireless services (“AWS”) licenses, 700 MHz licenses and microwave

7
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

licenses granted or acquired on various dates. The PCS licenses previously included, and the AWS licenses currently include, the obligation and resulting costs to relocate existing fixed microwave users of the Company's licensed spectrum if the Company's use of its spectrum interferes with their systems and/or reimburse other carriers (according to FCC rules) that relocated prior users if the relocation benefits the Company's system. Accordingly, the Company incurs costs related to microwave relocation in constructing its PCS and AWS networks. FCC Licenses and relocated microwave relocation costs are recorded at cost.
The change in the carrying value of intangible assets during the three months ended March 31, 2013 is as follows (in thousands):
 
 
FCC Licenses
 
Microwave
Relocation
Costs
Balance at January 1, 2013
 
$
2,535,808

 
$
26,599

Additions
 
2,000

 
88

Disposals
 
—

 
—

Balance at March 31, 2013
 
$
2,537,808

 
$
26,687


Although PCS, AWS, 700 MHz and microwave licenses are issued with a stated term between ten and fifteen years, the renewal of PCS, AWS, 700 MHz and microwave licenses is generally a routine matter without substantial cost and the Company has determined that no legal, regulatory, contractual, competitive, economic, or other factors currently exist that limit the useful life of its PCS, AWS, 700 MHz and microwave licenses. As such, under the provisions of ASC 350, (Topic 350, “Intangibles-Goodwill and Other”), the Company's PCS, AWS, 700 MHz and microwave licenses and microwave relocation costs (collectively, the "indefinite-lived intangible assets") are not amortized because they are considered to have indefinite lives, but are tested at least annually for impairment.

In accordance with the requirements of ASC 350, the Company performs its annual indefinite-lived intangible assets impairment test as of each September 30 or more frequently if events or changes in circumstances indicate that the carrying value of the indefinite-lived intangible assets might be impaired. The impairment test consists of a comparison of estimated fair value with the carrying value. An impairment loss would be recorded as a reduction in the carrying value of the related indefinite-lived intangible assets and charged to results of operations. No impairment was recognized as a result of the test performed at September 30, 2012 as the fair value of the indefinite-lived intangible assets was in excess of the carrying value.

Furthermore, if any of the indefinite-lived intangible assets are subsequently determined to have a finite useful life, such assets would be tested for impairment in accordance with ASC 360 (Topic 360, “Property, Plant, and Equipment”), and the intangible assets would then be amortized prospectively over the estimated remaining useful life. There have been no subsequent indicators of impairment including those indicated in ASC 360. Accordingly, no subsequent interim impairment tests were performed.

Other Spectrum Acquisitions

During the three months ended March 31, 2013 and 2012, the Company closed on the acquisition of microwave spectrum including a net aggregate amount of $2.0 million and $2.1 million, respectively, in cash consideration paid.
7.
Supplemental Balance Sheet Information:

Other current liabilities consisted of the following (in thousands):

 
 
March 31,
2013
 
December 31, 2012
Deferred vendor credits (1)
 
$
—

 
$
40,111

Derivative liabilities
 
12,594

 
13,656

Other
 
11,276

 
17,832

 
 
$
23,870

 
$
71,599

 ————————————
(1)
Deferred vendor credits consists of credit memos received from a vendor that were earned upon the return of certain network equipment.

8
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

8.
Long-term Debt:
Long-term debt consisted of the following (in thousands):
 
 
March 31,
2013
 
December 31,
2012
Senior Secured Credit Facility
 
$
2,440,179

 
$
2,446,526

7 7/8% Senior Notes due 2018
 
1,000,000

 
1,000,000

6 5/8% Senior Notes due 2020
 
1,000,000

 
1,000,000

6 1/4% Senior Notes due 2021
 
1,750,000

 
—

6 5/8% Senior Notes due 2023
 
1,750,000

 
—

Capital Lease Obligations
 
324,463

 
321,740

Total long-term debt
 
8,264,642

 
4,768,266

Add: unamortized discount on debt
 
(7,232
)
 
(7,514
)
Total debt
 
8,257,410

 
4,760,752

Less: current maturities
 
(2,450,240
)
 
(36,640
)
Total long-term debt
 
$
5,807,170

 
$
4,724,112

7 7/8% Senior Notes due 2018
In September 2010, Wireless completed the sale of $1.0 billion of principal amount of 7 7/8% Senior Notes due 2018 (“7 7/8% Senior Notes”). The terms of the 7 7/8% Senior Notes are governed by the indenture, the first supplemental indenture, dated September 21, 2010, and the third supplemental indenture, dated December 23, 2010, among Wireless, the guarantors party thereto and the trustee. The net proceeds of the sale of the 7 7/8% Senior Notes were $974.0 million after underwriter fees, discounts and other debt issuance costs of $26.0 million.
6 5/8% Senior Notes due 2020
In November 2010, Wireless completed the sale of $1.0 billion of principal amount of 6 5/8% Senior Notes due 2020 (“6 5/8% Senior Notes”). The terms of the 6 5/8% Senior Notes are governed by the indenture, the second supplemental indenture, dated November 17, 2010, and the fourth supplemental indenture, dated December 23, 2010, among Wireless, the guarantors party thereto and the trustee. The net proceeds of the sale of the 6 5/8% Senior Notes were $988.1 million after underwriter fees and other debt issuance costs of approximately $11.9 million.
Consent Solicitation
In December 2012, Wireless commenced a consent solicitation, seeking to amend the indentures governing its 7 7/8% Senior Notes and 6 5/8% Senior Notes, (collectively, the "Notes"). Following the receipt of the requisite consents in the consent solicitation, Wireless, the guarantors named therein and the trustee entered into a fifth supplemental indenture, dated December 14, 2012, which will govern the 7 7/8% Senior Notes and a sixth supplemental indenture, dated December 14, 2012, which will govern the 6 5/8% Senior Notes, (the fifth and sixth supplemental indentures, the "Supplemental Indentures"). Among other things, the Supplemental Indentures modified the definition of “Change in Control” in such indentures so that the consummation of the Proposed Transaction will not be considered a change in control under the indentures governing the Notes. Upon consummation of the Proposed Transaction, the Supplemental Indentures conform the covenants, events of default and other non-economic terms previously applicable to the Notes to certain covenants, events of default and other non-economic terms that are anticipated to apply to certain notes to be sold by T-Mobile to Deutsche Telekom. Further, the Supplemental Indentures also made certain other changes to the covenants, events of default and other non-economic terms of the Notes that will apply only until such time, if any, as the Notes are assumed by T-Mobile upon the consummation of the Proposed Transaction, but that will be permanent if the Proposed Transaction is not consummated. In connection with the consent solicitation, the Company incurred $10.0 million in fees that were treated as deferred debt issuance costs.
6 1/4% Senior Notes due 2021 and 6 5/8% Senior Notes due 2023
In March 2013, Wireless completed the sale of $1.75 billion of principal amount of 6 1/4% Senior Notes. The terms of the 6 1/4% Senior Notes are governed by the indenture and the first supplemental indenture, dated March 19, 2013, among Wireless, MetroPCS, MetroPCS, Inc., all of Wireless' direct and indirect subsidiaries and Deutsche Bank Trust Company Americas, as the trustee. The net proceeds from the sale of the 6 1/4% Senior Notes were $1.74 billion after underwriter fees and

9
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

other debt issuance costs of approximately $14.9 million, which includes approximately $2.0 million in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheet as of March 31, 2013.
In March 2013, Wireless completed the sale of approximately $1.75 billion of principal amount of New 6 5/8% Senior Notes. The terms of the New 6 5/8% Senior Notes are governed by the indenture and the second supplemental indenture, dated March 19, 2013, among Wireless, MetroPCS, MetroPCS, Inc., all of Wireless' direct and indirect subsidiaries and Deutsche Bank Trust Company Americas, as the trustee. The net proceeds from the sale of the New 6 5/8% Senior Notes were $1.74 billion after underwriter fees and other debt issuance costs of approximately $14.9 million, which includes approximately $2.0 million in accounts payable and accrued expenses on the accompanying condensed consolidated balance sheet as of March 31, 2013.
The 2013 Notes are senior unsecured obligations and are guaranteed by MetroPCS, MetroPCS, Inc., and all of Wireless’ current and future direct and indirect subsidiaries. Interest on the 2013 Notes is payable semiannually in arrears on April 1 and October 1 of each year, commencing on October 1, 2013.
If the Proposed Transaction in connection with the Business Combination Agreement has not been consummated on or before 11:59 p.m., New York City time, on January 17, 2014, or if the Business Combination Agreement is terminated prior to that time, all of the 2013 Notes will be subject to a special mandatory redemption. If the special mandatory redemption occurs, the special mandatory redemption price for each series of 2013 Notes would be (i) if the special mandatory redemption occurs on or prior to September 30, 2013, 100% of the principal amount of the 2013 Notes, and (ii) if the special mandatory redemption occurs after September 30, 2013, 101% of the principal amount of the 2013 Notes, in each case plus accrued and unpaid interest to, but not including, the redemption date. If the Proposed Transaction is consummated, the 2013 Notes will be assumed by, and become the obligations of, T-Mobile, as the surviving corporation. Wireless intends to use the net proceeds from the sale of the 2013 Notes to repay the outstanding amounts owed under the Senior Secured Credit Facility, to pay liabilities under related interest rate protection agreements and to pay related fees and expenses, and the remainder of which Wireless intends to use for general corporate purposes, if the Proposed Transaction is consummated. The 2013 Notes will thereafter be guaranteed by MetroPCS, T-Mobile's wholly-owned domestic restricted subsidiaries (excluding certain designated special purpose entities, a certain reinsurance subsidiary and immaterial subsidiaries), all of T-Mobile's restricted subsidiaries that guarantee certain of its indebtedness, and any future subsidiary of MetroPCS that directly or indirectly owns any equity interests of T-Mobile.
In March 2013, Wireless and the guarantors also entered into a Registration Rights Agreement (“Registration Rights Agreement”) with Deutsche Bank Securities Inc., as representative of the initial purchasers in the 2013 Notes offering (the “Initial Purchasers”).
Under the terms of the Registration Rights Agreement, Wireless and the guarantors agree to use commercially reasonable efforts to file a registration statement covering an offer to exchange the 2013 Notes for Exchange Securities (as defined in the Registration Rights Agreement). Wireless also agreed to use commercially reasonable efforts to have such registration statement declared effective and to consummate the Exchange Offer (as defined in the Registration Rights Agreement) not later than 60 days after the date such registration statement becomes effective. Alternatively, if Wireless is unable to consummate the Exchange Offer under certain conditions, or if holders of the 2013 Notes cannot participate in, or cannot obtain freely transferable Exchange Securities in connection with the Exchange Offer for certain specified reasons, then Wireless and the Guarantors will use commercially reasonable efforts to file a shelf registration statement within the times specified in the Registration Rights Agreement to facilitate resale of the 2013 Notes. All registration expenses (subject to limitations specified in the Registration Rights Agreement) will be paid by Wireless and the guarantors.
Should Wireless fail to consummate the Exchange Offer within 360 days after the date Wireless’ merger with T-Mobile is effective; or, if a shelf registration statement is required, fail to have the shelf registration statement declared effective, or, if a shelf registration statement has become effective, fail to maintain the effectiveness thereof or the usability of the related prospectus (subject to certain exceptions) for more than 120 days in any twelve-month period, Wireless will be required to pay certain additional interest as provided in the Registration Rights Agreement.
The 2013 Notes and related deferred debt issuance costs are classified as long-term on the accompanying condensed consolidated balance sheet as of March 31, 2013 since the Company has determined that it is probable that the consummation of the Proposed Transaction will occur based on the outcome of the special meeting of stockholders held on April 24, 2013 to vote on matters relating to the Proposed Transaction (See Note 16).



10
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Senior Secured Credit Facility
In November 2006, Wireless entered into the senior secured credit facility, which consisted of a $1.6 billion term loan facility and a $100.0 million revolving credit facility. The term loan facility was repayable in quarterly installments in annual aggregate amounts equal to 1% of the initial aggregate principal amount of $1.6 billion.
In July 2010, Wireless entered into an Amendment and Restatement and Resignation and Appointment Agreement (the “Amendment”) which amended and restated the senior secured credit facility to, among other things, extend the maturity of $1.0 billion of existing term loans (“Tranche B-2 Term Loans”) under the senior secured credit facility to November 2016, increase the interest rate to LIBOR plus 3.50% on the extended portion only and reduce the revolving credit facility from $100.0 million to $67.5 million. The remaining term loans (“Tranche B-1 Term Loans”) under the senior secured credit facility were to mature in November 2013 and the interest rate continued to be LIBOR plus 2.25%. This modification did not result in a loss on extinguishment of debt.
In March 2011, Wireless entered into an Amendment and Restatement Agreement (the “New Amendment”) which further amended and restated the Senior Secured Credit Facility. The New Amendment amended the Senior Secured Credit Facility to, among other things, provide for a new tranche of term loans in the amount of $500.0 million (“Tranche B-3 Term Loans”), with an interest rate of LIBOR plus 3.75% which will mature in March 2018, and increase the interest rate to LIBOR plus 3.821% on the existing Tranche B-1 Term Loans and Tranche B-2 Term Loans. The Tranche B-3 Term Loans are repayable in quarterly installments of $1.25 million. In addition, the aggregate amount of the revolving credit facility was increased from $67.5 million to $100.0 million and the maturity of the revolving credit facility was extended to March 2016. The net proceeds from the Tranche B-3 Term Loans were $490.2 million after underwriter fees, discounts and other debt issuance costs of approximately $9.8 million.
The New Amendment also modified certain limitations under the Senior Secured Credit Facility, including limitations on Wireless' ability to incur additional debt, make certain restricted payments, sell assets, make certain investments or acquisitions, grant liens and pay dividends. In addition, Wireless is no longer subject to certain financial covenants, including maintaining a maximum senior secured consolidated leverage ratio, except under certain circumstances.

In May 2011, Wireless entered into an Incremental Commitment Agreement (the “Incremental Agreement”) which supplements the Senior Secured Credit Facility to provide for an additional $1.0 billion of Tranche B-3 Term Loans (the “Incremental Tranche B-3 Terms Loans”). The Incremental Tranche B-3 Term Loans have an interest rate of LIBOR plus 3.75% and will mature in March 2018. The Incremental Tranche B-3 Term Loans are repayable in quarterly installments of $2.5 million. A portion of the proceeds from the Incremental Tranche B-3 Term Loans was used to prepay the $535.8 million in outstanding principal under the Tranche B-1 Term Loans, with the remaining proceeds to be used for general corporate purposes, including opportunistic spectrum acquisitions. The net proceeds from the Incremental Tranche B-3 Term Loans were $455.5 million after prepayment of the Tranche B-1 Term Loans, underwriter fees, and other debt issuance costs of approximately $7.9 million. The prepayment of the Tranche B-1 Term Loans resulted in a loss on extinguishment of debt in the amount of $9.5 million. The Incremental Agreement did not modify the interest rate, maturity date or any of the other terms of the Senior Secured Credit Facility applicable to the Tranche B-2 Term Loans or the existing Tranche B-3 Term Loans.
The facilities under the Senior Secured Credit Facility are guaranteed by MetroPCS, MetroPCS, Inc. and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries. The Senior Secured Credit Facility contains customary events of default, including cross-defaults. The obligations under the Senior Secured Credit Facility are also secured by the capital stock of Wireless as well as substantially all of Wireless’ present and future assets and the capital stock and substantially all of the assets of each of its direct and indirect present and future wholly-owned subsidiaries (except as prohibited by law and certain permitted exceptions).

The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The weighted average rate as of March 31, 2013 was 4.631%, which includes the impact of the interest rate protection agreements (See Note 5).

The Senior Secured Credit Facility, related deferred debt issuance costs and liabilities under related interest rate protection agreements are classified as short-term on the accompanying condensed consolidated balance sheet as of March 31, 2013 since the Company has determined that it is probable that the consummation of the Proposed Transaction will occur based on the outcome of the special meeting of stockholders held on April 24, 2013 to vote on matters relating to the Proposed Transaction (See Note 16). In addition, under the terms of the Senior Secured Credit Facility, all amounts outstanding under the Senior Secured Credit Facility become due and payable upon the occurrence of a change in control.

11
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


Capital Lease Obligations

The Company has entered into various non-cancelable capital lease agreements, with varying expiration terms through 2028. Assets and future obligations related to capital leases are included in the accompanying condensed consolidated balance sheets in property and equipment and long-term debt, respectively. Depreciation of assets held under capital leases is included in depreciation and amortization expense. As of March 31, 2013, the Company had $11.9 million and $312.6 million of capital lease obligations recorded in current maturities of long-term debt and long-term debt, respectively.
9.
Accumulated Other Comprehensive Loss:
The following table sets forth the changes in accumulated other comprehensive loss (in thousands):
 
 
Losses on Cash Flow Hedging Derivatives (1)
 
Unrealized Gains on Available-for-Sale Securities (1)
 
Total (1)
Balance at December 31, 2012
 
$
(9,812
)
 
$
210

 
$
(9,602
)
  Other comprehensive (loss) income before reclassifications
 
(115
)
 
6

 
(109
)
  Amounts reclassified from accumulated other comprehensive income (loss)
 
2,225

 
(85
)
 
2,140

  Net current-period other comprehensive income (loss)
 
2,110

 
(79
)
 
2,031

Balance at March 31, 2013
 
(7,702
)
 
131

 
(7,571
)
 ————————————
(1)
All amounts are net of income tax.
Reclassifications out of accumulated other comprehensive loss for the three months ended March 31, 2013 are as follows (in thousands):
Details about Accumulated Other Comprehensive Income Components
 
Amount Reclassified from Accumulated Other Comprehensive Income
 
Affected Line Item in the Statement Where Net Income Is Presented
 
 
 
 
 
Losses on cash flow hedging derivatives
 
 
 
 
  Interest rate protection agreements
 
$
3,603

 
Interest expense
 
 
3,603

 
Total before tax
 
 
(1,378
)
 
Tax benefit
 
 
2,225

 
Net of tax
 
 
 
 
 
Unrealized gains on available-for-sale securities
 
 
 
 
 
 
$
(138
)
 
Interest income
 
 
(138
)
 
Total before tax
 
 
53

 
Tax expense
 
 
$
(85
)
 
Net of tax
 
 
 
 
 
Total reclassifications for the period
 
$
2,140

 
 
10.
Fair Value Measurements:
The Company follows the provisions of ASC 820 (Topic 820, “Fair Value Measurements and Disclosures”) which establishes a three-tiered fair value hierarchy that prioritizes inputs to valuation techniques used in fair value calculations. The three levels of inputs are defined as follows:
 

12
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

•
Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
•
Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
•
Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.
ASC 820 requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs. If a financial instrument uses inputs that fall in different levels of the hierarchy, the instrument will be categorized based upon the lowest level of input that is significant to the fair value calculation. The Company’s financial assets and liabilities measured at fair value on a recurring basis include cash and cash equivalents, short and long-term investments securities and derivative financial instruments.
 
Included in the Company’s cash equivalents and restricted cash are investments in money market funds consisting of U.S. Treasury securities with an original maturity of 90 days or less. Included in the Company’s short-term investments are securities classified as available-for-sale, which are stated at fair value. These securities include U.S. Treasury securities with an original maturity of over 90 days. Fair value is determined based on observable quotes from banks and unadjusted quoted market prices from identical securities in an active market at the reporting date. Quoted market prices for identical assets are observable in the active markets and are classified as Level 1 in the hierarchy.
Included in the Company’s long-term investments are certain auction rate securities, some of which are secured by collateralized debt obligations with a portion of the underlying collateral being mortgage securities or related to mortgage securities. Due to the lack of availability of observable market quotes on the Company’s investment portfolio of auction rate securities, the fair value was estimated based on valuation models that rely exclusively on unobservable Level 3 inputs including those that are based on expected cash flow streams and collateral values, including assessments of counterparty credit quality, default risk underlying the security, discount rates and overall capital market liquidity. The valuation of the Company’s investment portfolio is subject to uncertainties that are difficult to predict. Factors that may impact the Company’s valuation include changes to credit ratings of the securities as well as the underlying assets supporting those securities, rates of default of the underlying assets, underlying collateral values, discount rates, counterparty risk and ongoing strength and quality of market credit and liquidity. Significant inputs to the investments valuation are unobservable in the active markets and are classified as Level 3 in the hierarchy.
Included in the Company’s derivative financial instruments are interest rate swaps. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate inputs such as interest rates. These market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation for interest rate swaps are observable in the active markets and are classified as Level 2 in the hierarchy.
The following table summarizes assets and liabilities measured at fair value on a recurring basis at March 31, 2013, as required by ASC 820 (in thousands):
 
 
Fair Value Measurements
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
2,695,894

 
$
—

 
$
—

 
$
2,695,894

Short-term restricted cash
 
3,475,417

 
—

 
—

 
3,475,417

Long-term restricted cash and investments
 
4,929

 
—

 
—

 
4,929

Long-term investments
 
—

 
—

 
1,679

 
1,679

Total assets measured at fair value
 
$
6,176,240

 
$
—

 
$
1,679

 
$
6,177,919

Liabilities
 

 

 

 

Derivative liabilities
 
$
—

 
$
12,594

 
$
—

 
$
12,594

Total liabilities measured at fair value
 
$
—

 
$
12,594

 
$
—

 
$
12,594

 
    

13
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2012, as required by ASC 820 (in thousands):
 
 
Fair Value Measurements
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
2,364,391

 
$
—

 
$
—

 
$
2,364,391

Short-term investments
 
244,990

 
—

 
—

 
244,990

Long-term restricted cash and investments
 
4,929

 
—

 
—

 
4,929

Long-term investments
 
—

 
—

 
1,679

 
1,679

Total assets measured at fair value
 
$
2,614,310

 
$
—

 
$
1,679

 
$
2,615,989

Liabilities
 

 

 

 

Derivative liabilities
 
$
—

 
$
16,011

 
$
—

 
$
16,011

Total liabilities measured at fair value
 
$
—

 
$
16,011

 
$
—

 
$
16,011


The following table summarizes the changes in fair value of the Company’s net derivative liabilities included in Level 2 assets (in thousands):
Fair Value Measurements of Net Derivative Liabilities Using Level 2 Inputs
 
Net Derivative Liabilities
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Beginning balance
 
$
16,011

 
$
21,015

Total losses (realized or unrealized):
 

 

Included in earnings (1)
 
3,603

 
4,336

Included in accumulated other comprehensive loss
 
(186
)
 
(4,705
)
Transfers in and/or out of Level 2
 
—

 
—

Purchases, sales, issuances and settlements
 
—

 
—

Ending balance
 
$
12,594

 
$
21,384

 ————————————
(1)
Losses included in earnings that are attributable to the reclassification of the effective portion of those derivative liabilities still held at the reporting date as reported in interest expense in the condensed consolidated statements of income and comprehensive income.
The following table summarizes the changes in fair value of the Company’s Level 3 assets (in thousands):
Fair Value Measurements of Assets Using Level 3 Inputs
 
Investments
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Beginning balance
 
$
1,679

 
$
6,319

Total losses (realized or unrealized):
 

 

Included in earnings
 
—

 
—

Included in accumulated other comprehensive loss
 
—

 
—

Transfers in and/or out of Level 3
 
—

 
—

Purchases, sales, issuances and settlements
 
—

 
—

Ending balance
 
$
1,679

 
$
6,319


The carrying value of the Company’s financial instruments, with the exception of long-term debt including current maturities, reasonably approximate the related fair values as of March 31, 2013 and December 31, 2012. The fair value of the Company’s long-term debt, excluding capital lease obligations, is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. As of March 31, 2013, the carrying value and fair value of long-term debt, including current maturities, were approximately $7.9 billion and $8.1 billion, respectively. As of December 31, 2012, the carrying value and fair value of long-term debt, including current maturities, were approximately $4.4 billion and $4.6 billion, respectively.
 

14
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Although the Company has determined the estimated fair value amounts using available market information and commonly accepted valuation methodologies, considerable judgment is required in interpreting market data to develop fair value estimates. The fair value estimates are generally based on information available at March 31, 2013 and December 31, 2012.  As such, the Company’s estimates are not necessarily indicative of the amount that the Company, or holders of the instruments, could realize in a current market exchange and current estimates of fair value could differ significantly.
11.Net Income Per Common Share:
The following table sets forth the computation of basic and diluted net income per common share for the periods indicated (in thousands, except share and per share data):
 
 
Three Months Ended March 31,
 
 
2013
 
2012
Basic EPS:
 
 
 
 
Net income applicable to common stock
 
$
19,396

 
$
21,004

Amount allocable to common shareholders
 
99.6
%
 
99.2
%
Rights to undistributed earnings
 
$
19,309

 
$
20,844

Weighted average shares outstanding—basic
 
364,999,137

 
362,718,613

Net income per common share—basic
 
$
0.05

 
$
0.06

Diluted EPS:
 

 

Rights to undistributed earnings
 
$
19,309

 
$
20,844

Weighted average shares outstanding—basic
 
364,999,137

 
362,718,613

Effect of dilutive securities:
 

 

Stock options
 
1,557,232

 
1,564,547

Weighted average shares outstanding—diluted
 
366,556,369

 
364,283,160

Net income per common share—diluted
 
$
0.05

 
$
0.06

In accordance with ASC 260 (Topic 260, “Earnings Per Share”), unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents, whether paid or unpaid, are considered a “participating security” for purposes of computing earnings or loss per common share and the two-class method of computing earnings per share is required for all periods presented. Under certain of the Company's restricted stock award agreements, unvested shares of restricted stock have rights to receive non-forfeitable dividends. In accordance with ASC 260, those unvested restricted stock awards are considered a “participating security” for purposes of computing earnings per common share and are therefore included in the computation of basic and diluted earnings per common share.
For the three months ended March 31, 2013 and 2012, the Company has calculated diluted earnings per share under both the treasury stock method and the two-class method. There was not a significant difference in the per share amounts calculated under the two methods, and the two-class method is disclosed. For the three months ended March 31, 2013 and 2012, approximately 1.6 million and 2.8 million of restricted common shares issued to employees have been excluded from the computation of basic net income per common share since the shares are not vested and remain subject to forfeiture.
For the three months ended March 31, 2013 and 2012, 27.4 million and 24.2 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.
12.
Commitments and Contingencies:

The Company has entered into a broadband services agreement with a carrier for backhaul and interconnect facilities at specified prices. The term of this agreement expires on various dates through March 31, 2018. The minimum commitment under this pricing agreement is approximately $161.2 million as of March 31, 2013.
The Company has entered into sponsorship agreements with several vendors. The terms of these agreements expire on various dates through September 30, 2017. The total aggregate commitment outstanding under these agreements is approximately $23.5 million as of March 31, 2013.

15
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

The Company has entered into managed service agreements with several vendors. The terms of these agreements expire on various dates through September 30, 2017. The total aggregate commitment outstanding under these agreements is approximately $16.6 million as of March 31, 2013.

Pricing Agreements

The Company entered into a pricing agreement with a handset manufacturer for the purchase of wireless handsets at specified prices. This agreement expires on June 30, 2013. The total aggregate commitment outstanding under this pricing agreement is approximately $14.8 million as of March 31, 2013.

Litigation

The Company is involved in litigation from time to time, including litigation regarding intellectual property claims, that it considers to be in the normal course of business. Legal proceedings are inherently unpredictable, and the legal proceedings in which the Company is involved often present complex legal and factual issues. The Company intends to vigorously defend against litigation in which it is involved and, where appropriate, engage in discussions to resolve these legal proceedings on terms favorable to the Company. The Company believes that any amounts which parties to such litigation allege it is liable for are not necessarily meaningful indicators of potential liability or any relief, such as injunctive relief, which parties to such litigation seek, are not necessarily meaningful indicators whether such relief will be granted. The Company determines whether it should accrue an estimated loss for a contingency in a particular legal proceeding by assessing whether a loss is probable and can be reasonably estimated. The Company reassesses its views on estimated losses on a quarterly basis to reflect the impact of any developments in the legal proceedings in which it is involved. It is possible, however, that the business, financial condition, results of operations, and liquidity in future periods could be materially adversely affected by increased expenses, including legal and litigation expenses, significant settlement costs, relief granted or agreed to, and/or unfavorable damage awards relating to such legal proceedings. Other than the matters listed below the Company is not currently party to any pending legal proceedings that it believes could, individually or in the aggregate, have a material adverse effect on the business, financial condition, results of operations or liquidity.

Since the announcement on October 3, 2012 of the execution of the Business Combination Agreement, MetroPCS, Deutsche Telekom, T-Mobile Global, T-Mobile Holding, T-Mobile (Deutsche Telekom, T-Mobile Global, T-Mobile Holding and T-Mobile, collectively, referred to herein as the T-Mobile defendants) and the members of the MetroPCS board, referred to as the MetroPCS board members, including an officer of MetroPCS and in some cases, Deutsche Telekom and its affilitates, have been named as defendants in multiple putative stockholder derivative and class action complaints challenging the Proposed Transaction. The lawsuits include:

•
a putative class action lawsuit filed by Paul Benn, an alleged MetroPCS stockholder, on October 11, 2012 in the Delaware Court of Chancery, Paul Benn v. MetroPCS Communications, Inc. et al., Case No. C.A. 7938-CS, referred to as the Benn action;

•
a putative class action lawsuit filed by Joseph Marino, an alleged MetroPCS stockholder, on October 11, 2012 in the Delaware Court of Chancery, Joseph Marino v. MetroPCS Communications, Inc. et al., Case No. C.A. 7940-CS, referred to as the Marino action;

•
a putative class action lawsuit filed by Robert Picheny, an alleged MetroPCS stockholder, on October 22, 2012 in the Delaware Court of Chancery, Robert Picheny v. MetroPCS Communications, Inc. et al., Case No. C.A. 7971-CS, referred to as the Picheny action;

•
a putative class action filed by James S. McLearie, an alleged MetroPCS stockholder, on November 5, 2012 in the Delaware Court of Chancery, James McLearie v. MetroPCS Communications, Inc. et al., Case No. C.A. 8009-CS, referred to as the McLearie action, and together with the Benn action, the Marino action and the Picheny action, the Delaware actions;

•
a putative class action and shareholder derivative action filed by Adam Golovoy, an alleged MetroPCS stockholder, on October 10, 2012 in the Dallas, Texas County Court at Law, Adam Golovoy et al. v. Deutsche Telekom et al., Cause No. CC-12-06144-A, referred to as the Golovoy action; and


16
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

•
a putative class action and shareholder derivative action filed by Nagendra Polu and Fred Lorquet, who are alleged MetroPCS stockholders, on October 10, 2012 in the Dallas, Texas County Court at Law, Nagendra Polu et al. v. Deutsche Telekom et al., Cause No. CC-12-06170-E, referred to as the Polu action, and together with the Golovoy action, the Texas actions.

 The various plaintiffs in the lawsuits allege that the individual defendants breached their fiduciary duties by, among other things, failing to (i) obtain sufficient value for the MetroPCS stockholders in the Proposed Transaction, (ii) establish a process that adequately protected the interests of the MetroPCS stockholders, and (iii) adequately ensure that no conflicts of interest occurred. The plaintiffs also allege that the individual defendants breached their fiduciary duties by agreeing to certain terms in the Business Combination Agreement that allegedly restricted the defendants' ability to obtain a more favorable offer from a competing bidder and that such provisions, together with including certain of the provisions together with the voting support agreement and the rights agreement amendment constitute breaches of the individual defendants' fiduciary duties. The plaintiffs seek injunctive relief, unspecified damages, an order rescinding the Business Combination Agreement, unspecified punitive damages, attorney's fees, other expenses, and costs. All of the plaintiffs seek a determination that their alleged claims may be asserted on a class-wide basis. In addition, the plaintiffs in the Texas actions assert putative derivative claims, as stockholders on behalf of MetroPCS, against the individually named defendants for breach of fiduciary duty, abuse of control, gross mismanagement, unjust enrichment and corporate waste in connection with the Proposed Transaction.

In addition, an action was filed on March 28, 2013 by The Merger Fund, The Merger Fund VL, GS Master Trust, MLIS Westchester merger Arbitrage UCITS Fund, and Dunham Monthly Distribution Fund, alleged MetroPCS stockholders, in the United States District Court in New York, The Merger Fund, et al. v. MetroPCS Communications, Inc. et al., Civil Action No. 13-CV-2066 (AJN), which the Company refers to as the New York Action, alleging: (a) violations of Sections 14(a) and 20(a) of the Exchange Act and SEC Rule 14a-9 by misstating or omitting material facts from the MetroPCS proxy statement; and (b) that certain members of the Company's board of directors breached their fiduciary duties. The plaintiffs seek injunctive relief, an order rescinding the Proposed Transaction if it is consummated, unspecified damages, and costs of the litigation.

On November 5, 2012, the plaintiff in the Golovoy action filed a motion seeking to restrain and enjoin MetroPCS and the MetroPCS board members, referred to collectively as the MetroPCS defendants, from complying with the “force-the-vote” provision in the Business Combination Agreement and from declaring a distribution date under, or issuing rights certificates in conjunction with, MetroPCS' rights agreement, referred to as the Texas TRO motion. On November 12, 2012, the MetroPCS defendants filed a motion to dismiss or stay the Texas actions based on a mandatory forum selection provision in the MetroPCS bylaws, which requires that all derivative claims and all claims for breach of fiduciary duty against the MetroPCS board members must be filed and litigated only in the Delaware Court of Chancery, and sought dismissal for failure to plead standing to pursue derivative claims on behalf of MetroPCS.

On November 16, 2012, the trial court in the Golovoy action, referred to as the Texas trial court, issued a temporary restraining order, which the Company refers to as the TRO order, restraining the MetroPCS defendants from complying with the “force the vote” provision in the Business Combination Agreement and from declaring a distribution date under, or issuing rights certificates in conjunction with, MetroPCS' rights agreement, and set a temporary injunction hearing for November 29, 2012.

On November 19, 2012, the MetroPCS defendants and the T-Mobile defendants filed a petition for writ of mandamus and a motion to stay, referred to as the Texas mandamus petition, with the Court of Appeals for the Fifth District at Dallas, referred to as the Texas appellate court, to stay and overturn the TRO order based on the mandatory forum selection provision in the MetroPCS bylaws, which requires that the claims in the Texas actions must be dismissed and pursued only in the Delaware Court of Chancery, and on a lack of evidence supporting the findings in the TRO order or establishing a basis for such TRO order, and to stay the temporary injunction hearing. On November 20, 2012, the Texas appellate court stayed the Texas trial court's ruling, canceled the scheduled temporary injunction hearing, and ordered briefing on the issues raised in the petition for writ of mandamus.

On November 28, 2012, the plaintiff in the Marino action filed an amended class action complaint alleging breach of fiduciary duty by the MetroPCS board members in connection with the terms of the Business Combination Agreement, as well as alleging that MetroPCS has failed to make full and fair disclosure in the Company's preliminary proxy, for the special meeting of its stockholders to approve the Proposed Transaction, of all information and analyses presented to and considered by the MetroPCS board members, and alleging that the T-Mobile defendants aided and abetted such claimed breaches of fiduciary duty, and motions seeking expedited proceeding and discovery and to enjoin the defendants from taking any action to

17
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

consummate the business combination between MetroPCS and the T-Mobile defendants. No hearing has been set on these motions. On November 30, 2012, all of the Delaware actions were consolidated into a single action, now captioned MetroPCS Communications, Inc. Shareholder Litigation, Consolidated C.A. No. 7938-CS. The Company and the plaintiffs in the Marino action entered into a discovery stipulation under which the Company produced certain documents by January 25, 2013 and the plaintiff conducted depositions of a corporate representative of Evercore Group, L.L.C., or Evercore, the Chairman of the Special Committee and our Chief Executive Officer, which depositions were completed by February 14, 2013.  The Delaware Court of Chancery had set the preliminary injunction hearing on February 28, 2013, with plaintiffs' brief due on February 15, 2013.  On February 15, 2013, rather than file their brief, plaintiffs sent a letter to the Delaware Court of Chancery notifying the Court that plaintiffs did not intend to file a brief, that their disclosure claims had become moot based on revised proxy materials MetroPCS had filed with the SEC which contained additional disclosure, and that the preliminary injunction hearing should be removed from the Court's docket. 

On January 8, 2013, the Texas appellate court conditionally granted the Texas mandamus petition and ordered the Texas trial court to vacate the TRO order, render an order denying the Texas TRO motion, and render an order granting the MetroPCS defendants' and T-Mobile defendants' motion to stay the action until MetroPCS defendants' and T-Mobile defendants' motion to dismiss or stay the action is decided by the Texas trial court. A hearing is currently set on such motion for May 3, 2013.

On March 4, 2013, the trial court in the Polu action set a non-jury trial date of July 24, 2013. The Company has set a hearing on the Company's motion to dismiss the Polu action for June 7, 2013.

On April 15, 2013, the trial court in the New York action entered an order requiring plaintiffs to submit a status letter by May 12, 2013. On April 18, 2013, Defendants, while not admitting proper service, moved the Court to extend the deadline to answer, plead or otherwise respond to the Complaint from April 19, 2013 to May 20, 2013. That motion was granted on April 19, 2013.

The MetroPCS defendants plan to defend vigorously against the claims made in the Delaware actions, New York actions and the Texas actions.
13.
Supplemental Cash Flow Information:
 
 
Three Months Ended March 31,
 
 
2013
 
2012
 
 
(in thousands)
Cash paid for interest
 
$
67,914

 
$
72,117

Cash paid for income taxes
 
678

 
147

Non-cash investing and financing activities

The Company’s accrued purchases of property and equipment were $58.6 million and $72.3 million as of March 31, 2013 and 2012, respectively. Included within the Company’s accrued purchases are estimates by management for construction services received based on a percentage of completion.

Assets acquired under capital lease obligations were $5.5 million and $24.6 million for the three months ended March 31, 2013 and 2012, respectively.

During the three months ended March 31, 2012, the Company returned obsolete network infrastructure assets to one of its vendors in exchange for $6.5 million in credits towards the purchase of additional network infrastructure assets with the vendor.

During the three months ended March 31, 2013, the Company returned certain network infrastructure assets to one of its vendors in exchange for $40.1 million in credits towards the purchase of additional network infrastructure assets with the vendor.

18
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

14.
Related-Party Transactions:

A private equity fund affiliated with one of the Company's greater than 5% stockholders owns:
•
A less than 20% interest in a company that provides services to the Company's customers, including handset insurance programs. Pursuant to the Company's agreement with this related-party, the Company bills its customers directly for these services and remits the fees collected from its customers for these services to the related-party. In addition, the Company receives compensation for selling handsets to the related-party;
•
A less than 20% equity interest in a company that provides advertising services to the Company; and
•
A less than 60% interest in a company that provides distributed antenna systems ("DAS") leases and maintenance to wireless carriers, including the Company. These DAS leases are accounted for as capital or operating leases in the Company's financial statements. This company was no longer a related party as of April 2012 because it was no longer owned by the affiliated fund.
Transactions associated with related-parties are included in various line items in the accompanying condensed consolidated balance sheets, condensed consolidated statements of income and comprehensive income, and condensed consolidated statements of cash flows. The following tables summarize the transactions with related-parties (in millions):
 
 
March 31,
2013
 
December 31,
2012
Receivables from related-party included in other current assets
 
$
2.3

 
$
3.1

Payments due to related-party included in accounts payable and accrued expenses
 
7.6

 
13.1

 
 
Three Months Ended March 31,
 
 
2013
 
2012
Fees received by the Company as compensation included in service revenues
 
$
3.6

 
$
2.8

Fees received by the Company as compensation included in equipment revenues
 
11.9

 
4.6

Fees paid by the Company for services and related expenses included in cost of service
 
—

 
3.6

Fees paid by the Company for services included in selling, general and administrative expenses
 
2.5

 
2.2

DAS equipment depreciation included in depreciation expense
 
—

 
9.6

Capital lease interest included in interest expense
 
—

 
5.2

Capital lease payments included in financing activities
 
—

 
1.4

15.
Guarantor Subsidiaries:
In connection with Wireless’ 7 7/8% Senior Notes, 6 5/8% Senior Notes, 6 1/4% Senior Notes, New 6 5/8% Senior Notes and the Senior Secured Credit Facility, MetroPCS, together with its wholly owned subsidiaries, MetroPCS, Inc., and each of Wireless’ direct and indirect present and future wholly-owned domestic subsidiaries (the “guarantor subsidiaries”), provided guarantees which are full and unconditional as well as joint and several. Certain provisions of the Senior Secured Credit Facility, and each of the indentures and the supplemental indentures relating to the 7 7/8% Senior Notes, 6 5/8% Senior Notes, 6 1/4% Senior Notes, New 6 5/8% Senior Notes restrict the ability of Wireless to loan funds or make payments to MetroPCS or MetroPCS, Inc. However, Wireless is allowed to make certain permitted payments to MetroPCS under the terms of the Senior Secured Credit Facility, and each of the indentures and the supplemental indentures relating to the 7 7/8% Senior Notes, 6 5/8% Senior Notes, 6 1/4% Senior Notes, and New 6 5/8% Senior Notes.
The following information presents condensed consolidating balance sheet information as of March 31, 2013 and December 31, 2012, condensed consolidating statement of income and comprehensive income information for the three months ended March 31, 2013 and 2012, and condensed consolidating statement of cash flows information for the three months ended March 31, 2013 and 2012 of the parent company (MetroPCS), the issuer (Wireless), and the guarantor subsidiaries. Investments in subsidiaries held by the parent company and the issuer have been presented using the equity method of accounting.

19
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Condensed Consolidating Balance Sheet Information
As of March 31, 2013
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
1,032,779

 
$
1,667,797

 
$
705

 
$
—

 
$
2,701,281

Restricted cash
 
—

 
3,475,417

 
—

 
—

 
3,475,417

Prepaid expenses
 
259

 
1,456

 
95,646

 
—

 
97,361

Advances to subsidiaries
 
712,436

 
—

 
—

 
(712,436
)
 
—

Other current assets
 
60

 
445,760

 
52,825

 
—

 
498,645

Total current assets
 
1,745,534

 
5,590,430

 
149,176

 
(712,436
)
 
6,772,704

Property and equipment, net
 
—

 
933

 
4,176,567

 
—

 
4,177,500

Investment in subsidiaries
 
1,653,960

 
5,631,641

 
—

 
(7,285,601
)
 
—

FCC licenses
 
—

 
3,800

 
2,560,695

 
—

 
2,564,495

Other assets
 
1,679

 
115,714

 
30,454

 
—

 
147,847

Total assets
 
$
3,401,173

 
$
11,342,518

 
$
6,916,892

 
$
(7,998,037
)
 
$
13,662,546

CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
Advances from subsidiaries
 
$
—

 
$
456,868

 
$
255,568

 
$
(712,436
)
 
$
—

Current maturities of long-term debt
 
—

 
2,438,355

 
11,885

 
—

 
2,450,240

Other current liabilities
 
—

 
255,588

 
483,297

 
—

 
738,885

Total current liabilities
 
—

 
3,150,811

 
750,750

 
(712,436
)
 
3,189,125

Long-term debt, net
 
—

 
5,494,592

 
312,578

 
—

 
5,807,170

Other long-term liabilities
 
9,232

 
1,043,155

 
221,923

 
—

 
1,274,310

Total liabilities
 
9,232

 
9,688,558

 
1,285,251

 
(712,436
)
 
10,270,605

STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
 
 
Common stock
 
37

 
—

 
—

 
—

 
37

Other stockholders’ equity
 
3,391,904

 
1,653,960

 
5,631,641

 
(7,285,601
)
 
3,391,904

Total stockholders’ equity
 
3,391,941

 
1,653,960

 
5,631,641

 
(7,285,601
)
 
3,391,941

Total liabilities and stockholders’ equity
 
$
3,401,173

 
$
11,342,518

 
$
6,916,892

 
$
(7,998,037
)
 
$
13,662,546

 

20
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Condensed Consolidating Balance Sheet Information
As of December 31, 2012
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
781,987

 
$
1,585,588

 
$
727

 
$
—

 
$
2,368,302

Short-term investments
 
244,990

 
—

 
—

 
—

 
244,990

Prepaid expenses
 
—

 
1,867

 
63,202

 
—

 
65,069

Advances to subsidiaries
 
705,909

 
—

 
—

 
(705,909
)
 
—

Other current assets
 
61

 
452,906

 
55,975

 
—

 
508,942

Total current assets
 
1,732,947

 
2,040,361

 
119,904

 
(705,909
)
 
3,187,303

Property and equipment, net
 
—

 
960

 
4,291,101

 
—

 
4,292,061

Investment in subsidiaries
 
1,632,822

 
5,530,165

 
—

 
(7,162,987
)
 
—

FCC licenses
 
—

 
3,800

 
2,558,607

 
—

 
2,562,407

Other assets
 
1,679

 
120,874

 
25,091

 
—

 
147,644

Total assets
 
$
3,367,448

 
$
7,696,160

 
$
6,994,703

 
$
(7,868,896
)
 
$
10,189,415

CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
Advances from subsidiaries
 
$
—

 
$
373,343

 
$
332,566

 
$
(705,909
)
 
$
—

Current maturities of long-term debt
 
—

 
25,389

 
11,251

 
—

 
36,640

Other current liabilities
 
—

 
218,035

 
593,128

 
—

 
811,163

Total current liabilities
 
—

 
616,767

 
936,945

 
(705,909
)
 
847,803

Long-term debt, net
 
—

 
4,413,623

 
310,489

 
—

 
4,724,112

Other long-term liabilities
 
8,541

 
1,032,948

 
217,104

 
—

 
1,258,593

Total liabilities
 
8,541

 
6,063,338

 
1,464,538

 
(705,909
)
 
6,830,508

STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
 
 
Common stock
 
37

 
—

 
—

 
—

 
37

Other stockholders’ equity
 
3,358,870

 
1,632,822

 
5,530,165

 
(7,162,987
)
 
3,358,870

Total stockholders’ equity
 
3,358,907

 
1,632,822

 
5,530,165

 
(7,162,987
)
 
3,358,907

Total liabilities and stockholders’ equity
 
$
3,367,448

 
$
7,696,160

 
$
6,994,703

 
$
(7,868,896
)
 
$
10,189,415

 


21
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Condensed Consolidating Statement of Income Information
Three Months Ended March 31, 2013
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
REVENUES:
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
—

 
$
11,784

 
$
1,282,617

 
$
(7,340
)
 
$
1,287,061

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
Cost of revenues
 
—

 
11,514

 
806,773

 
(7,340
)
 
810,947

Selling, general and administrative expenses
 
—

 
270

 
194,341

 
—

 
194,611

Other operating expenses
 
—

 
(16
)
 
173,691

 
—

 
173,675

Total operating expenses
 
—

 
11,768

 
1,174,805

 
(7,340
)
 
1,179,233

Income from operations
 
—

 
16

 
107,812

 
—

 
107,828

OTHER EXPENSE (INCOME):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
—

 
69,924

 
6,422

 
—

 
76,346

Non-operating (income) expense
 
(369
)
 
(2
)
 
(86
)
 
—

 
(457
)
Earnings from consolidated subsidiaries
 
(19,027
)
 
(101,476
)
 
—

 
120,503

 
—

Total other (income) expense
 
(19,396
)
 
(31,554
)
 
6,336

 
120,503

 
75,889

Income (loss) before provision for income taxes
 
19,396

 
31,570

 
101,476

 
(120,503
)
 
31,939

Provision for income taxes
 
—

 
(12,543
)
 
—

 
—

 
(12,543
)
Net income (loss)
 
$
19,396

 
$
19,027

 
$
101,476

 
$
(120,503
)
 
$
19,396

Total other comprehensive income (loss)
 
2,031

 
2,110

 
—

 
(2,110
)
 
2,031

Comprehensive income (loss)
 
$
21,427

 
$
21,137

 
$
101,476

 
$
(122,613
)
 
$
21,427


Condensed Consolidating Statement of Income Information
Three Months Ended March 31, 2012
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
REVENUES:
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
—

 
$
4,179

 
$
1,279,751

 
$
(7,340
)
 
$
1,276,590

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
Cost of revenues
 
—

 
4,010

 
851,121

 
(7,340
)
 
847,791

Selling, general and administrative expenses
 
—

 
169

 
176,424

 
—

 
176,593

Other operating expenses
 
—

 
54

 
153,885

 
—

 
153,939

Total operating expenses
 
—

 
4,233

 
1,181,430

 
(7,340
)
 
1,178,323

(Loss) income from operations
 
—

 
(54
)
 
98,321

 
—

 
98,267

OTHER EXPENSE (INCOME):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
—

 
64,735

 
5,348

 
—

 
70,083

Non-operating (income) expense
 
(372
)
 
(2
)
 
(104
)
 
—

 
(478
)
Earnings from consolidated subsidiaries
 
(20,632
)
 
(93,077
)
 
—

 
113,709

 
—

Total other (income) expense
 
(21,004
)
 
(28,344
)
 
5,244

 
113,709

 
69,605

Income (loss) before provision for income taxes
 
21,004

 
28,290

 
93,077

 
(113,709
)
 
28,662

Provision for income taxes
 
—

 
(7,658
)
 
—

 
—

 
(7,658
)
Net income (loss)
 
$
21,004

 
$
20,632

 
$
93,077

 
$
(113,709
)
 
$
21,004

Total other comprehensive (loss) income
 
(8
)
 
(246
)
 
—

 
—

 
(254
)
Comprehensive income (loss)
 
$
20,996

 
$
20,386

 
$
93,077

 
$
(113,709
)
 
$
20,750

 




22
MetroPCS Communications, Inc. and Subsidiaries
Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)

Condensed Consolidating Statement of Cash Flows Information
Three Months Ended March 31, 2013
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Net cash (used in) provided by operating activities
 
$
(29
)
 
$
16,112

 
$
207,368

 
$
—

 
$
223,451

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Purchases of property and equipment
 
—

 
(85
)
 
(154,523
)
 
—

 
(154,608
)
Proceeds from maturity of investments
 
245,000

 
—

 
—

 
—

 
245,000

Change in restricted cash and investments
 
—

 
(3,475,417
)
 
—

 
—

 
(3,475,417
)
Change in advances – affiliates
 
3,096

 
—

 
—

 
(3,096
)
 
—

Other investing activities, net
 
—

 
17,816

 
(2,728
)
 
—

 
15,088

Net cash provided by (used in) by investing activities
 
248,096

 
(3,457,686
)
 
(157,251
)
 
(3,096
)
 
(3,369,937
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Change in advances – affiliates
 
—

 
44,291

 
(47,387
)
 
3,096

 
—

Change in book overdraft
 
—

 
11,660

 
—

 
—

 
11,660

Proceeds from debt issuance
 
—

 
3,500,000

 
—

 
—

 
3,500,000

Debt issuance costs
 
—

 
(25,821
)
 
—

 
—

 
(25,821
)
Other financing activities, net
 
2,725

 
(6,347
)
 
(2,752
)
 
—

 
(6,374
)
Net cash provided by (used in) financing activities
 
2,725

 
3,523,783

 
(50,139
)
 
3,096

 
3,479,465

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
250,792

 
82,209

 
(22
)
 
—

 
332,979

CASH AND CASH EQUIVALENTS, beginning of period
 
781,987

 
1,585,588

 
727