Metro PCS 2007 Annual Report Download - page 130

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-31
The Company has recorded $28.0 million, $14.5 million and $2.6 million of non-cash stock-based compensation
expense in the years ended December 31, 2007, 2006 and 2005, respectively, and an income tax benefit of
$11.0 million, $5.8 million and $1.0 million, respectively.
As of December 31, 2007, there was approximately $99.2 million of unrecognized stock-based compensation cost
related to unvested share-based compensation arrangements, which is expected to be recognized over a weighted
average period of approximately 2.60 years. Such costs are scheduled to be recognized as follows: $34.9 million in
2008, $31.6 million in 2009, $24.8 million in 2010 and $7.9 million in 2011.
During the year ended December 31, 2007, the following awards were granted under the Company’ s Option
Plans:
Grants Made During the Quarter Ended
Number of
Options
Granted
Weighted
Average
Exercise
Price
Weighted
Average
Market Value
per Share
Weighted
Average
Intrinsic Value
per Share
March 31, 2007................................................................... 1,008,300 $ 11.33 $ 11.33 $ 0.00
June 30, 2007...................................................................... 5,912,098 $ 23.78 $ 23.78 $ 0.00
September 30, 2007............................................................ 906,000 $ 30.60 $ 30.60 $ 0.00
December 31, 2007............................................................. 650,600 $ 15.68 $ 15.68 $ 0.00
Compensation expense is recognized over the requisite service period for the entire award, which is generally the
maximum vesting period of the award.
The fair value of the common stock was determined contemporaneously with the option grants.
In December 2006, the Company amended stock option agreements of a former member of MetroPCS’ Board of
Directors to extend the contractual life of 405,054 vested options to purchase common stock until December 31,
2006. This amendment resulted in the recognition of additional non-cash stock-based compensation expense of
approximately $4.1 million in the fourth quarter of 2006.
In December 2006, in recognition of efforts related to the Offering and to align executive ownership with the
Company, the Company made a special stock option grant to its named executive officers and certain other eligible
employees. The Company granted stock options to purchase an aggregate of 6,885,000 shares of the Company’ s
common stock to its named executive officers and certain other officers and employees. The purpose of the grant
was also to provide retention of employees following the Company’ s initial public offering as well as to motivate
employees to return value to the Company’ s shareholders through future appreciation of the Company’ s common
stock price. The exercise price for the option grants was $11.33, which was the fair market value of the Company’ s
common stock on the date of the grant as determined by the Company’ s board of directors. In determining the fair
market value of the common stock, consideration was given to the recommendations of the Company’ s finance and
planning committee and of management based on certain data, including discounted cash flow analysis, comparable
company analysis, and comparable transaction analysis, as well as contemporaneous valuation. The stock options
granted to the named executive officers other than the Company’ s CEO and senior vice president and chief
technology officer generally vest on a four-year vesting schedule with 25% vesting on the first anniversary date of
the award and the remainder pro-rata on a monthly basis thereafter. The stock options granted to the Company’ s
CEO vest on a three-year vesting schedule with one-third vesting on the first anniversary date of the award and the
remainder pro-rata on a monthly basis thereafter. The stock options granted to the Company’ s senior vice president
and chief technology officer vest over a two-year vesting schedule with one-half vesting on the first anniversary of
the award and the remainder pro-rata on a monthly basis thereafter.
In November 2006, the Company made an election to account for its APIC pool utilizing the short cut method
provided under FSP FAS No. 123(R)-3, “Transition Election Related to Accounting for the Tax Effects of Share-
Based Payments.”
Upon adoption of SFAS No. 123(R), the Company had 946,908 options that were subject to variable accounting
under APB No. 25, and related interpretations. As the options were fully vested upon adoption of SFAS No. 123(R)
and there have been no subsequent modifications, no incremental stock-based compensation expense has been
recognized in 2006 and 2007. During the year ended December 31, 2005, $2.3 million of stock-based compensation