Metro PCS 2007 Annual Report Download - page 109

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-10
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 corporate and government bonds with an original maturity of over 90 days and
auction rate securities. Unrealized gains, net of related income taxes, for available-for-sale securities are reported in
accumulated other comprehensive income, 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. Historically, given
the liquidity created by auctions, the Company’ s auction rate securities were presented as current assets under short-
term investments on the Company’ s balance sheet. Given the auction rate securities held by the Company at
December 31, 2007 have experienced multiple failed auctions as the amount of securities submitted for sale has
exceeded the amount of purchase orders, the Company’ s auction rate securities are illiquid until there is a successful
auction for them. Accordingly, the entire amount of such remaining auction rate securities has been reclassified from
current to non-current assets and is presented in long-term investments on the Company’ s balance sheet as of
December 31, 2007 (See Note 4).
Restricted Short-Term Investments
Restricted short-term investments consist of money market instruments and short-term investments. In general,
these investments are pledged as collateral against letters of credit used as security for payment obligations and are
presented as current or non-current assets based on the terms of the underlying letters of credit.
Inventories
Substantially all of the Company’ s inventories are stated at the lower of average cost or market. Inventories
consist mainly of handsets that are available for sale to customers and independent retailers.
Allowance for Uncollectible Accounts Receivable
The Company maintains allowances for uncollectible accounts for estimated losses resulting from the inability of
independent retailers to pay for equipment purchases and for amounts estimated to be uncollectible from other
carriers. The following table summarizes the changes in the Company’ s allowance for uncollectible accounts (in
thousands):
2007 2006 2005
Balance at beginning of period.................................................................... $ 1,950 $ 2,383 $ 2,323
Additions:
Charged to costs and expenses .................................................................. 129 31 129
Direct reduction to revenue and other accounts......................................... 1,037 929 1,211
Deductions.................................................................................................. (208) (1,393) (1,280)
Balance at end of period .............................................................................. $ 2,908 $ 1,950 $ 2,383
Prepaid Charges
Prepaid charges consisted of the following (in thousands):
2007 2006
Prepaid vendor purchases ................................................................................................ $ 37,054 $ 16,898
Prepaid rent ..................................................................................................................... 13,996 9,089
Prepaid maintenance and support contracts..................................................................... 3,961 1,846
Prepaid insurance ............................................................................................................ 2,162 3,047
Other................................................................................................................................ 3,296 2,229
Prepaid charges................................................................................................................ $ 60,469 $ 33,109