MPCS 2012-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, 2012

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 23, 2012, there were 363,186,192 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,
2012
 
December 31,
2011
CURRENT ASSETS:
 
 
 
 
Cash and cash equivalents
 
$
1,886,238

 
$
1,943,282

Short-term investments
 
329,911

 
299,972

Inventories
 
252,158

 
239,648

Accounts receivable (net of allowance for uncollectible accounts of $559 and $601 at March 31, 2012 and December 31, 2011, respectively)
 
80,973

 
78,023

Prepaid expenses
 
70,644

 
55,712

Deferred charges
 
104,777

 
74,970

Deferred tax assets
 
7,215

 
7,214

Other current assets
 
35,434

 
44,772

Total current assets
 
2,767,350

 
2,743,593

Property and equipment, net
 
4,007,177

 
4,017,999

Restricted cash and investments
 
2,076

 
2,576

Long-term investments
 
6,319

 
6,319

FCC licenses
 
2,541,657

 
2,539,041

Other assets
 
184,628

 
173,403

Total assets
 
$
9,509,207

 
$
9,482,931

CURRENT LIABILITIES:
 
 
 
 
Accounts payable and accrued expenses
 
$
452,025

 
$
512,346

Current maturities of long-term debt
 
34,610

 
33,460

Deferred revenue
 
261,655

 
245,705

Other current liabilities
 
29,743

 
25,212

Total current liabilities
 
778,033

 
816,723

Long-term debt, net
 
4,726,077

 
4,711,021

Deferred tax liabilities
 
831,745

 
817,106

Deferred rents
 
124,784

 
120,028

Other long-term liabilities
 
90,792

 
90,453

Total liabilities
 
6,551,431

 
6,555,331

COMMITMENTS AND CONTINGENCIES (See Note 9)
 

 

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, 2012 and December 31, 2011
 
—

 
—

Common stock, par value $0.0001 per share, 1,000,000,000 shares authorized, 363,128,204 and 362,460,395 shares issued and outstanding at March 31, 2012 and December 31, 2011, respectively
 
36

 
36

Additional paid-in capital
 
1,795,586

 
1,784,273

Retained earnings
 
1,180,422

 
1,159,418

Accumulated other comprehensive loss
 
(9,549
)
 
(9,295
)
Less treasury stock, at cost, 778,662 and 602,881 treasury shares at March 31, 2012 and December 31, 2011, respectively
 
(8,719
)
 
(6,832
)
Total stockholders’ equity
 
2,957,776

 
2,927,600

Total liabilities and stockholders’ equity
 
$
9,509,207

 
$
9,482,931

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,
 
 
 
 
2012
 
2011
REVENUES:
 
 
 
 
Service revenues
 
$
1,158,779

 
$
1,050,217

Equipment revenues
 
117,811

 
144,160

Total revenues
 
1,276,590

 
1,194,377

OPERATING EXPENSES:
 
 
 
 
Cost of service (excluding depreciation and amortization expense of $132,223 and $111,828 shown separately below)
 
388,927

 
341,417

Cost of equipment
 
458,864

 
409,262

Selling, general and administrative expenses (excluding depreciation and amortization expense of $20,596 and $16,867 shown separately below)
 
176,593

 
169,771

Depreciation and amortization
 
152,819

 
128,695

Loss (gain) on disposal of assets
 
1,120

 
(105
)
Total operating expenses
 
1,178,323

 
1,049,040

Income from operations
 
98,267

 
145,337

OTHER EXPENSE (INCOME):
 
 
 
 
Interest expense
 
70,083

 
56,561

Interest income
 
(375
)
 
(515
)
Other (income) expense, net
 
(103
)
 
(255
)
Total other expense
 
69,605

 
55,791

Income before provision for income taxes
 
28,662

 
89,546

Provision for income taxes
 
(7,658
)
 
(33,168
)
Net income
 
$
21,004

 
$
56,378

Other comprehensive income (loss):
 
 
 
 
Unrealized gains on available-for-sale securities, net of tax of $9 and $62, respectively
 
17

 
99

Unrealized (losses) gains on cash flow hedging derivatives, net of tax benefit of $1,572 and tax of $376, respectively
 
(3,133
)
 
600

Reclassification adjustment for gains on available-for-sale securities included in net income, net of tax of $12 and $65, respectively
 
(25
)
 
(103
)
Reclassification adjustment for losses on cash flow hedging derivatives included in net income, net of tax benefit of $1,448 and $1,780, respectively
 
2,887

 
2,877

Total other comprehensive (loss) income
 
(254
)
 
3,473

Comprehensive income
 
$
20,750

 
$
59,851

Net income per common share:
 
 
 
 
Basic
 
$
0.06

 
$
0.16

Diluted
 
$
0.06

 
$
0.15

Weighted average shares:
 
 
 
 
Basic
 
362,718,613

 
356,988,270

Diluted
 
364,283,160

 
361,406,194


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,
 
 
 
 
2012
 
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
Net income
 
$
21,004

 
$
56,378

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
152,819

 
128,695

(Recovery of) provision for uncollectible accounts receivable
 
(107
)
 
166

Deferred rent expense
 
4,792

 
4,094

Cost of abandoned cell sites
 
423

 
56

Stock-based compensation expense
 
10,156

 
11,284

Non-cash interest expense
 
1,831

 
1,993

Loss (gain) on disposal of assets
 
1,120

 
(105
)
Gain on sale of investments
 
(37
)
 
(168
)
Accretion of asset retirement obligations
 
1,588

 
1,313

Deferred income taxes
 
14,357

 
32,257

Changes in assets and liabilities:
 
 
 
 
Inventories
 
(12,510
)
 
(124,800
)
Accounts receivable, net
 
(2,844
)
 
1,250

Prepaid expenses
 
(14,904
)
 
(10,306
)
Deferred charges
 
(29,808
)
 
(18,679
)
Other assets
 
10,423

 
8,645

Accounts payable and accrued expenses
 
(39,803
)
 
28,083

Deferred revenue
 
15,950

 
17,542

Other liabilities
 
2,454

 
615

Net cash provided by operating activities
 
136,904

 
138,313

CASH FLOWS FROM INVESTING ACTIVITIES:
 
 
 
 
Purchases of property and equipment
 
(144,016
)
 
(187,032
)
Change in prepaid purchases of property and equipment
 
(7,352
)
 
(10,371
)
Proceeds from sale of property and equipment
 
477

 
573

Purchase of investments
 
(192,415
)
 
(162,378
)
Proceeds from maturity of investments
 
162,500

 
200,000

Change in restricted cash and investments
 
500

 
—

Acquisitions of FCC licenses and microwave clearing costs
 
(2,584
)
 
(1,528
)
Cash used in asset acquisitions
 
—

 
(8,000
)
Net cash used in investing activities
 
(182,890
)
 
(168,736
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
Change in book overdraft
 
(2,830
)
 
52,887

Proceeds from debt issuance, net of discount
 
—

 
497,500

Debt issuance costs
 
—

 
(6,830
)
Repayment of debt
 
(6,347
)
 
(5,250
)
Payments on capital lease obligations
 
(1,558
)
 
(2,940
)
Purchase of treasury stock
 
(1,888
)
 
(2,456
)
Proceeds from exercise of stock options
 
1,565

 
22,531

Net cash (used in) provided by financing activities
 
(11,058
)
 
555,442

(DECREASE) INCREASE CASH AND CASH EQUIVALENTS
 
(57,044
)
 
525,019

CASH AND CASH EQUIVALENTS, beginning of period
 
1,943,282

 
796,531

CASH AND CASH EQUIVALENTS, end of period
 
$
1,886,238

 
$
1,321,550


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

3
Table of Contents
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, 2012 and December 31, 2011, the condensed consolidated statements of income and comprehensive income and cash flows for the periods ended March 31, 2012 and 2011, 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. Certain amounts reported in previous periods have been reclassified to conform to the current period presentation. 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, 2012 and 2011, the Company recorded $12.9 million and $18.0 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 May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement - Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs," addressing how to measure fair value and what disclosures to provide about fair value measurements. This amendment is largely consistent with the existing GAAP guidance, but aligned the international guidance and eliminated unnecessary wording differences between GAAP and International Financial Reporting Standards ("IFRS"). The amendment was effective for interim and annual periods beginning after December 15, 2011, and should be applied prospectively. The implementation of this standard did not affect the Company's financial condition, results of operations, or cash flows.

In June 2011, the FASB issued ASU 2011-05 "Statement of Comprehensive Income," which revises the manner in which entities present comprehensive income in their financial statements, requiring entities to report components of comprehensive income in either (1) a continuous statement of comprehensive income or (2) two separate but consecutive statements. The amendments were effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2011 and should be applied retrospectively. The implementation of this standard did not affect the Company's financial condition, results of operations, or cash flows.



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


2.
Asset Acquisition:
In October 2010, the Company entered into an asset purchase agreement to acquire 10 MHz of AWS spectrum and certain related network assets adjacent to the Northeast metropolitan areas for a total purchase price of $49.2 million. In November 2010, the Company closed on the acquisition of the network assets and paid a total of $41.1 million in cash. In February 2011, the Company closed on the acquisition of the 10 MHz of AWS spectrum and paid $8.0 million in cash. In June 2011, the Company completed its final settlement of costs and received $0.5 million in cash as reimbursement for pre-acquisition payments made on behalf of the seller. The Company used the relative fair values of the assets acquired to allocate the purchase price, of which $35.6 million was allocated to property and equipment and $13.6 million was allocated to Federal Communications Commission (“FCC”) licenses.
 
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 income (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 U.S. Treasury securities reported as of March 31, 2012 have 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 March 31, 2012
 
 
Amortized
Cost
 
Unrealized
Gain in
Accumulated
OCI
 
Unrealized
Loss in
Accumulated
OCI
 
Aggregate
Fair
Value
Equity securities
 
$
7

 
$
—

 
$
(6
)
 
$
1

U.S. Treasury securities
 
329,892

 
18

 
—

 
329,910

Total short-term investments
 
$
329,899

 
$
18

 
$
(6
)
 
$
329,911

 
 
 
As of December 31, 2011
 
 
Amortized
Cost
 
Unrealized
Gain in
Accumulated
OCI
 
Unrealized
Loss in
Accumulated
OCI
 
Aggregate
Fair
Value
Equity securities
 
$
7

 
$
—

 
$
(6
)
 
$
1

U.S. Treasury securities
 
299,939

 
32

 
—

 
299,971

Total short-term investments
 
$
299,946

 
$
32

 
$
(6
)
 
$
299,972


4.
Derivative Instruments and Hedging Activities:
In March 2009, MetroPCS Wireless, Inc. (“Wireless”) entered into three separate two-year interest rate protection agreements to manage the Company’s interest rate risk exposure under Wireless’ senior secured credit facility, as amended (the “Senior Secured Credit Facility”). These agreements were effective on February 1, 2010 and covered a notional amount of $1.0 billion and effectively converted this portion of Wireless’ variable rate debt to fixed rate debt at a weighted average annual rate of 5.927%. These agreements expired on February 1, 2012.
In October 2010, Wireless entered into three separate two-year interest rate protection agreements to manage its interest rate risk exposure under its 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%. The monthly interest settlement periods began on February 1, 2012. These agreements expire on February 1, 2014.
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.

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


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 income (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, 2012, 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, 2012 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, 2012 is $21.4 million.

Fair Values of Derivative Instruments
(in thousands)
 
Liability Derivatives
 
 
As of March 31, 2012
 
As of December 31, 2011
 
 
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
 
$
(12,550
)
 
Other current liabilities
 
$
(11,644
)
Interest rate protection agreements
 
Other long-term liabilities
 
(8,834
)
 
Other long-term liabilities
 
(9,371
)
Total derivatives designated as
hedging instruments under ASC
815
 
 
 
$
(21,384
)
 
 
 
$
(21,015
)


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)
 
2012
 
2011
 
2012
 
2011
Interest rate protection agreements
 
$
(4,705
)
 
$
976

 
Interest expense
 
$
(4,336
)
 
$
(4,676
)
 
5.
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, and 700 MHz 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

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


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 related microwave relocation costs are recorded at cost.
The change in the carrying value of intangible assets during the three months ended March 31, 2012 is as follows (in thousands):
 
 
FCC Licenses
 
Microwave
Relocation
Costs
Balance at January 1, 2012
 
$
2,513,770

 
$
25,271

Additions
 
2,100

 
516

Disposals
 
—

 
—

Balance at March 31, 2012
 
$
2,515,870

 
$
25,787


Although PCS, AWS and 700 MHz licenses are issued with a stated term between ten and fifteen years, the renewal of PCS, AWS and 700 MHz 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 and 700 MHz licenses. As such, under the provisions of ASC 350, (Topic 350, “Intangibles-Goodwill and Other”), the Company's PCS, AWS and 700 MHz 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 30th 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, 2011. Further, there have been no subsequent indicators of impairment including those indicated in ASC 360 (Topic 360, “Property, Plant, and Equipment”). Accordingly, no subsequent interim impairment tests were performed.

Other Spectrum Acquisitions

During the three months ended March 31, 2012, the Company closed on the acquisition of microwave spectrum in the net aggregate amount of $2.1 million in cash.
In April 2012, the Company closed on the acquisition of microwave spectrum in the net aggregate amount of $19.8 million in cash.
6.
Long-term Debt:
Long-term debt consisted of the following (in thousands):
 
 
March 31,
2012
 
December 31,
2011
Senior Secured Credit Facility
 
$
2,465,568

 
$
2,471,916

7 7/8% Senior Notes
 
1,000,000

 
1,000,000

6 5/8% Senior Notes
 
1,000,000

 
1,000,000

Capital Lease Obligations
 
303,454

 
281,167

Total long-term debt
 
4,769,022

 
4,753,083

Add: unamortized discount on debt
 
(8,335
)
 
(8,602
)
Total debt
 
4,760,687

 
4,744,481

Less: current maturities
 
(34,610
)
 
(33,460
)
Total long-term debt
 
$
4,726,077

 
$
4,711,021


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


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, discounts and other debt issuance costs of approximately $11.9 million.
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 continues 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 amends and restates 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 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.

In May 2011, Wireless entered into an Incremental Commitment Agreement (the “Incremental Agreement”) which supplements the New Amendment 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 were 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 New Amendment 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).

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


The New Amendment 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.
The interest rate on the outstanding debt under the Senior Secured Credit Facility is variable. The weighted average rate as of March 31, 2012 was 4.602%, which includes the impact of the interest rate protection agreements (See Note 4).
Capital Lease Obligations
The Company has entered into various non-cancelable capital lease agreements, with varying expiration terms through 2027. 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, 2012, the Company had $9.2 million and $294.3 million of capital lease obligations recorded in current maturities of long-term debt and long-term debt, respectively.
 
7.
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:
 
•
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 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. Significant inputs to the valuation 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 Level 1 and Level 2 inputs such as

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


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, 2012, as required by ASC 820 (in thousands):
 
 
Fair Value Measurements
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
1,733,860

 
$
—

 
$
—

 
$
1,733,860

Short-term investments
 
329,911

 
—

 
—

 
329,911

Restricted cash and investments
 
2,076

 
—

 
—

 
2,076

Long-term investments
 
—

 
—

 
6,319

 
6,319

Total assets measured at fair value
 
$
2,065,847

 
$
—

 
$
6,319

 
$
2,072,166

Liabilities
 

 

 

 

Derivative liabilities
 
$
—

 
$
21,384

 
$
—

 
$
21,384

Total liabilities measured at fair value
 
$
—

 
$
21,384

 
$
—

 
$
21,384

 
The following table summarizes assets and liabilities measured at fair value on a recurring basis at December 31, 2011, as required by ASC 820 (in thousands):
 
 
Fair Value Measurements
 
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
Cash equivalents
 
$
1,815,538

 
$
—

 
$
—

 
$
1,815,538

Short-term investments
 
299,972

 
—

 
—

 
299,972

Restricted cash and investments
 
2,576

 
—

 
—

 
2,576

Long-term investments
 
—

 
—

 
6,319

 
6,319

Total assets measured at fair value
 
$
2,118,086

 
$
—

 
$
6,319

 
$
2,124,405

Liabilities
 

 

 

 

Derivative liabilities
 
$
—

 
$
21,015

 
$
—

 
$
21,015

Total liabilities measured at fair value
 
$
—

 
$
21,015

 
$
—

 
$
21,015

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,
 
 
2012
 
2011
Beginning balance
 
$
21,015

 
$
8,309

Total losses (realized or unrealized):
 

 

Included in earnings (1)
 
4,336

 
4,676

Included in accumulated other comprehensive income (loss)
 
(4,705
)
 
976

Transfers in and/or out of Level 2
 
—

 
—

Purchases, sales, issuances and settlements
 
—

 
—

Ending balance
 
$
21,384

 
$
2,657

 ————————————
(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.

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


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
 
Long-Term Investments
 
 
Three Months Ended March 31,
 
 
2012
 
2011
Beginning balance
 
$
6,319

 
$
6,319

Total losses (realized or unrealized):
 

 

Included in earnings
 
—

 
—

Included in accumulated other comprehensive income (loss)
 
—

 
—

Transfers in and/or out of Level 3
 
—

 
—

Purchases, sales, issuances and settlements
 
—

 
—

Ending balance
 
$
6,319

 
$
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, 2012 and December 31, 2011. 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 issues or on the current rates offered to the Company for debt of the same remaining maturities and are classified as Level 1 in the hiearchy. As of March 31, 2012, the carrying value and fair value of long-term debt, including current maturities, were approximately $4.5 billion. As of December 31, 2011, the carrying value and fair value of long-term debt, including current maturities, were $4.5 billion and $4.4 billion, respectively.
 
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 based on information available at March 31, 2012 and December 31, 2011 and have not been revalued since those dates. 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.
8.
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,
 
 
2012
 
2011
Basic EPS:
 
 
 
 
Net income applicable to common stock
 
$
21,004

 
$
56,378

Amount allocable to common shareholders
 
99.2
%
 
99.2
%
Rights to undistributed earnings
 
$
20,844

 
$
55,904

Weighted average shares outstanding—basic
 
362,718,613

 
356,988,270

Net income per common share—basic
 
$
0.06

 
$
0.16

Diluted EPS:
 

 

Rights to undistributed earnings
 
$
20,844

 
$
55,904

Weighted average shares outstanding—basic
 
362,718,613

 
356,988,270

Effect of dilutive securities:
 

 

Stock options
 
1,564,547

 
4,417,924

Weighted average shares outstanding—diluted
 
364,283,160

 
361,406,194

Net income per common share—diluted
 
$
0.06

 
$
0.15

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. During the three months ended March 31, 2012 and 2011, the Company issued

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


restricted stock awards. Unvested shares of restricted stock are participating securities such that they have rights to receive non-forfeitable dividends. In accordance with ASC 260, the unvested restricted stock was considered a “participating security” for purposes of computing earnings per common share and was therefore included in the computation of basic and diluted earnings per common share.
Under certain of the Company's restricted stock award agreements, unvested shares of restricted stock have rights to receive non-forfeitable dividends. For the three months ended March 31, 2012 and 2011, 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, 2012 and 2011, approximately 2.8 million and 3.0 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, 2012 and 2011, 24.2 million and 16.7 million, respectively, of stock options were excluded from the calculation of diluted net income per common share since the effect was anti-dilutive.
9.
Commitments and Contingencies:

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. The Company is not currently party to any pending legal proceedings that the Company believes could, individually or in the aggregate, have a material adverse effect on the Company's business, financial condition, results of operations or liquidity. However, legal proceedings are inherently unpredictable, and the matters in which the Company is involved often present complex legal and factual issues. The Company intends to vigorously pursue defenses in litigation in which it is involved and where appropriate engage in discussions to resolve these matters on terms favorable to the Company. The Company believes that any amounts which parties to such litigation allege the Company is liable for are not necessarily meaningful indicators of the Company's potential liability. 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 matters in which it is involved. It is possible, however, that the Company's business, financial condition, results of operations, and liquidity in future periods could be materially adversely affected by increased expense, including legal and litigation expenses, significant settlement costs and/or unfavorable damage awards relating to such matters.
10.
Supplemental Cash Flow Information:
 
 
Three Months Ended March 31,
 
 
2012
 
2011
 
 
(in thousands)
Cash paid for interest
 
$
72,117

 
$
52,038

Cash paid for income taxes
 
147

 
427

Non-cash investing and financing activities
The Company’s accrued purchases of property and equipment were $72.3 million and $116.2 million as of March 31, 2012 and 2011, 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 $24.6 million and $12.5 million for the three months ended March 31, 2012 and 2011, 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.

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


11.
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.
•
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 is no longer a related party as of April 2012.
Transactions associated with the related-parties described above 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,
2012
 
December 31,
2011
Network service fees included in prepaid expenses
 
$
1.5

 
$
1.5

Receivables from related-party included in other current assets
 
2.4

 
0.7

DAS equipment included in property and equipment, net
 
388.2

 
383.1

Deferred network service fees included in other assets
 
7.7

 
8.2

Payments due to related-party included in accounts payable and accrued expenses
 
7.9

 
6.6

Current portion of capital lease obligations included in current maturities of long-term debt
 
8.2

 
7.1

Non-current portion of capital lease obligations included in long-term debt, net
 
261.5

 
240.1

Deferred DAS service fees included in other long-term liabilities
 
1.4

 
1.4

 
 
 
Three Months Ended March 31,
 
 
2012
 
2011
Fees received by the Company as compensation included in service revenues
 
$
2.8

 
$
2.5

Fees received by the Company as compensation included in equipment revenues
 
4.6

 
4.6

Fees paid by the Company for services and related expenses included in cost of service
 
3.6

 
1.8

Fees paid by the Company for services included in selling, general and administrative expenses
 
2.2

 
1.7

DAS equipment depreciation included in depreciation expense
 
9.6

 
8.8

Capital lease interest included in interest expense
 
5.2

 
4.6

Capital lease payments included in financing activities
 
1.4

 
2.7

12.
Guarantor Subsidiaries:
In connection with Wireless’ 7 7/8% Senior Notes, 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, the indentures and the supplemental indentures relating to the 7 7/8% Senior Notes and 6 5/8% Senior Notes restrict the ability of Wireless to loan funds 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, the indentures and the supplemental indentures relating to the 7 7/8% Senior Notes and 6 5/8% Senior Notes.
The following information presents condensed consolidating balance sheet information as of March 31, 2012 and December 31, 2011, condensed consolidating statement of income information for the three months ended March 31, 2012 and 2011, and condensed consolidating statement of cash flows information for the three months ended March 31, 2012 and 2011

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


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.

Subsequent to the issuance of the Company's consolidated financial statements on Form 10-Q for the period ended March 31, 2011, management identified certain errors in the presentation of the condensed consolidating statement of cash flows information contained in this footnote. The errors were the result of (i) certain cash equivalent money market investments being incorrectly reported in the Parent column of the condensed consolidating balance sheet information that should have been reported in the Issuer column at March 31, 2011 which resulted in a cash inflow from changes in advances from affiliates being reported in the Parent column and a corresponding cash outflow from changes in advances from affiliates being reported in the Issuer column of the condensed consolidating statement of cash flows information; and (ii) a misclassification of investment in subsidiaries as an investing activity as opposed to an operating activity to offset earnings from subsidiaries resulting from the application of the equity method of accounting. Accordingly, the comparative historical condensed consolidating statement of cash flows information presented herein has been corrected. The "Guarantor Subsidiaries" and "Consolidated" columns were not impacted by these corrections. This reporting error did not have any impact on the Company's condensed consolidated statement of cash flows for the three months ended March 31, 2011. The impact to the comparative historical condensed consolidated statement of cash flows for the three months ended March 31, 2011 is as follows:

 
 
Parent
As
Previously
Reported
 
Parent
As
Corrected
 
Issuer
As
Previously Reported
 
Issuer
As
Corrected
 
Eliminations
As
Previously Reported
 
Eliminations
As
Corrected
 
 
(in thousands)
Net cash provided by (used in) operating activities
 
$
55,924

 
$
52

 
$
(27,413
)
 
$
(169,651
)
 
$
(198,110
)
 
$
—

Investment in subsidiaries
 
(55,872
)
 
—

 
(142,238
)
 
—

 
198,110

 
—

Change in advances - affiliates
 
511,844

 
6,844

 
(398,041
)
 
106,959

 
(113,803
)
 
(113,803
)
Net cash provided by (used in) investing activities
 
493,594

 
44,466

 
(555,465
)
 
91,773

 
84,307

 
(113,803
)
Increase (decrease) in cash and cash equivalents
 
569,593

 
64,593

 
(44,571
)
 
460,429

 
—

 
—

Cash and cash equivalents, end of period
 
1,077,442

 
572,442

 
243,371

 
748,371

 
—

 
—


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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


Condensed Consolidating Balance Sheet Information
As of March 31, 2012
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
629,757

 
$
1,255,752

 
$
729

 
$
—

 
$
1,886,238

Prepaid expenses
 
265

 
853

 
69,526

 
—

 
70,644

Deferred charges
 
—

 
104,777

 
—

 
—

 
104,777

Advances to subsidiaries
 
678,720

 
169,491

 
—

 
(848,211
)
 
—

Other current assets
 
330,007

 
330,440

 
45,244

 
—

 
705,691

Total current assets
 
1,638,749

 
1,861,313

 
115,499

 
(848,211
)
 
2,767,350

Property and equipment, net
 
—

 
1,202

 
4,005,975

 
—

 
4,007,177

Investment in subsidiaries
 
1,318,343

 
4,822,061

 
—

 
(6,140,404
)
 
—

FCC licenses
 
—

 
3,800

 
2,537,857

 
—

 
2,541,657

Other assets
 
6,319

 
141,072

 
47,363

 
(1,731
)
 
193,023

Total assets
 
$
2,963,411

 
$
6,829,448

 
$
6,706,694

 
$
(6,990,346
)
 
$
9,509,207

CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
Advances from subsidiaries
 
—

 
—

 
848,211

 
(848,211
)
 
—

Other current liabilities
 
—

 
234,840

 
543,193

 
—

 
778,033

Total current liabilities
 
—

 
234,840

 
1,391,404

 
(848,211
)
 
778,033

Long-term debt, net
 
—

 
4,431,843

 
294,234

 
—

 
4,726,077

Deferred credits
 
5,635

 
827,841

 
124,784

 
(1,731
)
 
956,529

Other long-term liabilities
 
—

 
16,581

 
74,211

 
—

 
90,792

Total liabilities
 
5,635

 
5,511,105

 
1,884,633

 
(849,942
)
 
6,551,431

STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
 
 
Common stock
 
36

 
—

 
—

 
—

 
36

Other stockholders’ equity
 
2,957,740

 
1,318,343

 
4,822,061

 
(6,140,404
)
 
2,957,740

Total stockholders’ equity
 
2,957,776

 
1,318,343

 
4,822,061

 
(6,140,404
)
 
2,957,776

Total liabilities and stockholders’ equity
 
$
2,963,411

 
$
6,829,448

 
$
6,706,694

 
$
(6,990,346
)
 
$
9,509,207

 

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Notes to Condensed Consolidated Interim Financial Statements
(Unaudited)


Condensed Consolidating Balance Sheet Information
As of December 31, 2011
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CURRENT ASSETS:
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
657,289

 
$
1,285,266

 
$
727

 
$
—

 
$
1,943,282

Prepaid expenses
 
—

 
386

 
55,326

 
—

 
55,712

Deferred charges
 
—

 
74,970

 
—

 
—

 
74,970

Advances to subsidiaries
 
671,193

 
245,866

 
—

 
(917,059
)
 
—

Other current assets
 
300,068

 
331,009

 
38,552

 
—

 
669,629

Total current assets
 
1,628,550

 
1,937,497

 
94,605

 
(917,059
)
 
2,743,593

Property and equipment, net
 
—

 
1,378

 
4,016,621

 
—

 
4,017,999

Investment in subsidiaries
 
1,297,957

 
4,728,985

 
—

 
(6,026,942
)
 
—

FCC licenses
 
—

 
3,800

 
2,535,241

 
—

 
2,539,041

Other assets
 
6,319

 
137,985

 
39,612

 
(1,618
)
 
182,298

Total assets
 
$
2,932,826

 
$
6,809,645

 
$
6,686,079

 
$
(6,945,619
)
 
$
9,482,931

CURRENT LIABILITIES:
 
 
 
 
 
 
 
 
 
 
Advances from subsidiaries
 
—

 
—

 
917,059

 
(917,059
)
 
—

Other current liabilities
 
—

 
243,247

 
573,476

 
—

 
816,723

Total current liabilities
 
—

 
243,247

 
1,490,535

 
(917,059
)
 
816,723

Long-term debt, net
 
—

 
4,437,924

 
273,097

 
—

 
4,711,021

Deferred credits
 
5,226

 
813,498

 
120,028

 
(1,618
)
 
937,134

Other long-term liabilities
 
—

 
17,019

 
73,434

 
—

 
90,453

Total liabilities
 
5,226

 
5,511,688

 
1,957,094

 
(918,677
)
 
6,555,331

STOCKHOLDERS’ EQUITY:
 
 
 
 
 
 
 
 
 
 
Common stock
 
36

 
—

 
—

 
—

 
36

Other stockholders’ equity
 
2,927,564

 
1,297,957

 
4,728,985

 
(6,026,942
)
 
2,927,564

Total stockholders’ equity
 
2,927,600

 
1,297,957

 
4,728,985

 
(6,026,942
)
 
2,927,600

Total liabilities and stockholders’ equity
 
$
2,932,826

 
$
6,809,645

 
$
6,686,079

 
$
(6,945,619
)
 
$
9,482,931

 


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


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) expenses
 
(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


Condensed Consolidating Statement of Income Information
Three Months Ended March 31, 2011
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
REVENUES:
 
 
 
 
 
 
 
 
 
 
Total Revenues
 
$
—

 
$
4,483

 
$
1,197,944

 
$
(8,050
)
 
$
1,194,377

OPERATING EXPENSES:
 
 
 
 
 
 
 
 
 
 
Cost of revenues
 
—

 
4,302

 
754,427

 
(8,050
)
 
750,679

Selling, general and administrative expenses
 
—

 
187

 
169,584

 
—

 
169,771

Other operating expenses
 
—

 
94

 
128,496

 
—

 
128,590

Total operating expenses
 
—

 
4,583

 
1,052,507

 
(8,050
)
 
1,049,040

(Loss) income from operations
 
—

 
(100
)
 
145,437

 
—

 
145,337

OTHER EXPENSE (INCOME):
 
 
 
 
 
 
 
 
 
 
Interest expense
 
—

 
52,376

 
4,185

 
—

 
56,561

Non-operating (income) expenses
 
(506
)
 
(7
)
 
(257
)
 
—

 
(770
)
Earnings from consolidated subsidiaries
 
(55,872
)
 
(142,238
)
 
—

 
198,110

 
—

Total other (income) expense
 
(56,378
)
 
(89,869
)
 
3,928

 
198,110

 
55,791

Income (loss) before provision for income taxes
 
56,378

 
89,769

 
141,509

 
(198,110
)
 
89,546

(Provision) benefit for income taxes
 
—

 
(33,897
)
 
729

 
—

 
(33,168
)
Net income (loss)
 
$
56,378

 
$
55,872

 
$
142,238

 
$
(198,110
)
 
$
56,378

Total other comprehensive (loss) income
 
(4
)
 
3,477

 
—

 
—

 
3,473

Comprehensive income (loss)
 
$
56,374

 
$
59,349

 
$
142,238

 
$
(198,110
)
 
$
59,851

 



17
Table of Contents
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, 2012
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
72

 
$
(103,395
)
 
$
240,227

 
$
—

 
$
136,904

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

 
(251
)
 
(143,765
)
 
—

 
(144,016
)
Purchase of investments
 
(192,415
)
 
—

 
—

 
—

 
(192,415
)
Proceeds from maturity of investments
 
162,500

 
—

 
—

 
—

 
162,500

Change in advances – affiliates
 
2,634

 
86,266

 
—

 
(88,900
)
 
—

Other investing activities, net
 
—

 
(2,957
)
 
(6,002
)
 
—

 
(8,959
)
Net cash (used in) provided by investing activities
 
(27,281
)
 
83,058

 
(149,767
)
 
(88,900
)
 
(182,890
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Change in advances – affiliates
 
—

 
—

 
(88,900
)
 
88,900

 
—

Change in book overdraft
 
—

 
(2,830
)
 
—

 
—

 
(2,830
)
Proceeds from exercise of options
 
1,565

 
—

 
—

 
—

 
1,565

Other financing activities, net
 
(1,888
)
 
(6,347
)
 
(1,558
)
 
—

 
(9,793
)
Net cash (used in) provided by financing activities
 
(323
)
 
(9,177
)
 
(90,458
)
 
88,900

 
(11,058
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
 
(27,532
)
 
(29,514
)
 
2

 
—

 
(57,044
)
CASH AND CASH EQUIVALENTS, beginning of period
 
657,289

 
1,285,266

 
727

 
—

 
1,943,282

CASH AND CASH EQUIVALENTS, end of period
 
$
629,757

 
$
1,255,752

 
$
729

 
$
—

 
$
1,886,238

 

Condensed Consolidating Statement of Cash Flows Information
Three Months Ended March 31, 2011
 
 
 
Parent
 
Issuer
 
Guarantor
Subsidiaries
 
Eliminations
 
Consolidated
 
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Net cash provided by (used in) operating activities
 
$
52

 
$
(169,651
)
 
$
307,912

 
$
—

 
$
138,313

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

 
(4,815
)
 
(182,217
)
 
—

 
(187,032
)
Purchase of investments
 
(162,378
)
 
—

 
—

 
—

 
(162,378
)
Proceeds from maturity of investments
 
200,000

 
—

 
—

 
—

 
200,000

Change in advances - affiliates
 
6,844

 
106,959

 
—

 
(113,803
)
 
—

Other investing activities, net
 
—

 
(10,371
)
 
(8,955
)
 
—

 
(19,326
)
Net cash provided by (used in) investing activities
 
44,466

 
91,773

 
(191,172
)
 
(113,803
)
 
(168,736
)
CASH FLOWS FROM FINANCING ACTIVITIES:
 
 
 
 
 
 
 
 
 
 
Change in advances - affiliates
 
—

 
—

 
(113,803
)
 
113,803

 
—

Change in book overdraft
 
—

 
52,887
<