Metro PCS 2007 Annual Report Download - page 113

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-14
Stock-Based Compensation
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123(R),
“Share-Based Payment,” (“SFAS No. 123(R)”), which replaces SFAS No. 123, “Accounting for Stock-Based
Compensation,” (“SFAS No. 123”) and supersedes Accounting Principles Board (“APB”) Opinion No. 25,
“Accounting for Stock Issued to Employees,” and its related interpretations (“APB No. 25”). Prior to the first quarter
of 2006, the Company measured stock-based compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by APB No. 25, as allowed by SFAS No. 123. The Company
elected the modified prospective transition method. Under that transition method, compensation expense recognized
beginning on that date includes: (a) compensation expense for all share-based payments granted prior to, but not yet
vested as of, January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions
of SFAS No. 123, and (b) compensation expense for all share-based payments granted on or after January 1, 2006,
based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123(R). Although there
was no material impact on the Company’ s financial position, results of operations or cash flows from the adoption of
SFAS No. 123(R), the Company reclassified all deferred equity compensation on the consolidated balance sheet to
additional paid-in capital upon its adoption. The period prior to the adoption of SFAS No. 123(R) does not reflect
any restated amounts.
The following table illustrates the effect on net income applicable to common stock (in thousands, except per
share data) and net income per common share as if the Company had elected to recognize compensation costs based
on the fair value at the date of grant for the Company’ s common stock awards consistent with the provisions of
SFAS No. 123 (See Note 14 for assumptions used in the fair value method):
2005
Net income applicable to common stock — as reported................................................ $ 176,065
Add: Amortization of deferred compensation determined under the intrinsic method for
employee stock awards, net of tax............................................................................... 1,584
Less: Total stock-based employee compensation expense determined under the fair value
method for employee stock awards, net of tax ............................................................ (3,227)
Net income applicable to common stock — pro forma ................................................. $ 174,422
Basic net income per common share:
As reported ................................................................................................................... $ 0.71
Pro forma...................................................................................................................... $ 0.70
Diluted net income per common share:
As reported .................................................................................................................... $ 0.62
Pro forma...................................................................................................................... $ 0.62
The pro forma amounts presented above may not be representative of the future effects on reported net income
since the pro forma compensation expense is allocated over the periods in which options become exercisable, and
new option awards may be granted each year.