Metro PCS 2007 Annual Report Download - page 134

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-35
Texas Margin Tax
On May 18, 2006, the Texas Governor signed into law a Texas margin tax (“H.B. No. 3”) which restructures the
state business tax by replacing the taxable capital and earned surplus components of the current franchise tax with a
new “taxable margin” component. Because the tax base on the Texas margin tax is derived from an income-based
measure, the Company believes the margin tax is an income tax and, therefore, the provisions of SFAS No. 109
regarding the recognition of deferred taxes apply to the new margin tax. In accordance with SFAS No. 109, the
effect on deferred tax assets of a change in tax law should be included in tax expense attributable to continuing
operations in the period that includes the enactment date. Although the effective date of H.B. No. 3 is January 1,
2008, certain effects of the change should be reflected in the financial statements of the first interim or annual
reporting period that includes May 18, 2006. The Company has recorded a deferred tax liability of $0.1 million as of
December 31, 2007 and December 31, 2006 relating to H.B. No. 3. H.B. No. 3 also created provisions allowing for
future credits against the margin tax. The Company has recorded a deferred tax asset of $1.5 million as of
December 31, 2007 relating to this future credit.
Michigan Business Tax
On July 12, 2007, the Michigan Governor signed into law a new Michigan Business Tax (“MBT Act”) which
restructures the state business tax by replacing the Michigan Single Business Tax with a new two-part tax on
business income and modified gross receipts, collectively referred to as the (“BIT/GRT tax”). On September 30,
2007, the Michigan Governor signed into law a BIT/GRT tax future deduction which is intended to offset the
increased deferred tax liability and expense associated with the MBT Act. Because the main provision of the
BIT/GRT tax imposes a two-part tax on business income and modified gross receipts, the Company believes the
BIT/GRT tax and related future deduction should be accounted for under the provisions of SFAS No. 109 regarding
the recognition of deferred taxes. In accordance with SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax law should be included in tax expense attributable to continuing operations in the period that
includes the enactment date. Although the effective date of the MBT Act is January 1, 2008, certain effects of the
change should be reflected in the financial statements of the first interim or annual reporting period that includes
July 12 and September 30, 2007. The Company has recorded a deferred tax liability and offsetting asset of
$4.4 million as of December 31, 2007 relating to the MBT Act and future deduction.
17. 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):
2007 2006 2005
Basic EPS — Two Class Method:
Net income ............................................................................... $ 100,403 $ 53,806 $ 198,677
Accrued dividends and accretion:
Series D Preferred Stock......................................................... (6,647) (21,479) (21,479)
Series E Preferred Stock......................................................... (1,035) (3,339) (1,133)
Net income applicable to common stock.................................. $ 92,721 $ 28,988 $ 176,065
Amount allocable to common shareholders.............................. 88.8% 57.1% 54.4%
Rights to undistributed earnings ............................................... $ 82,330 $ 16,539 $ 95,722
Weighted average shares outstanding — basic......................... 287,692,280 155,820,381 135,352,396
Net income per common share — basic ................................... $ 0.29 $ 0.11 $ 0.71
Diluted EPS:
Rights to undistributed earnings ............................................... $ 82,330 $ 16,539 $ 95,722
Weighted average shares outstanding — basic......................... 287,692,280 155,820,381 135,352,396
Effect of dilutive securities:
Warrants ................................................................................. — 147,257 2,689,377
Stock options .......................................................................... 8,645,444 3,728,970 15,568,816
Weighted average shares outstanding — diluted...................... 296,337,724 159,696,608 153,610,589
Net income per common share — diluted ................................ $ 0.28 $ 0.10 $ 0.62