Metro PCS 2011 Annual Report Download - page 133

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2011, 2010 and 2009
F-27
Audits and Uncertain Tax Positions
The Company files income tax returns in the U.S. federal and certain state jurisdictions and is subject to examinations by
the Internal Revenue Service (the “IRS”) and other taxing authorities. These audits can result in adjustments of taxes due or
adjustments of the net operating losses which are available to offset future taxable income. The Company's estimate of the
potential outcome of any uncertain tax issue prior to audit is subject to management's assessment of relevant risks, facts, and
circumstances existing at that time. An unfavorable result under audit may reduce the amount of federal and state net operating
losses the Company has available for carryforward to offset future taxable income, or may increase the amount of tax due for
the period under audit, resulting in an increase to the effective rate in the year of resolution.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits are as follows (in thousands):
2011 2010 2009
Balance at beginning of period $ 6,084 $ 6,084 $ 19,328
Increases for tax provisions taken during a prior period — — —
Increases for tax provisions taken during the current period — — —
Decreases relating to settlements — — —
Decreases resulting from the expiration of the statute of limitations — — (13,244)
Balance at end of period $ 6,084 $ 6,084 $ 6,084
The net amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $4.0 million and
$4.0 million as of December 31, 2011 and 2010, respectively. Additionally, the net interest and penalties which would affect
the effective tax rate is $5.8 million and $5.3 million as of December 31, 2011 and 2010, respectively. The Company continues
to recognize both interest and penalties related to unrecognized tax benefits as a component of income tax expense. The
Company recognized gross interest and penalties of $0.6 million, $0.4 million and $0.8 million during the years ended
December 31, 2011, 2010 and 2009, respectively. Accrued gross interest and penalties were $7.6 million and $6.9 million as of
December 31, 2011 and 2010, respectively.
There is a state income tax examination currently in progress for the Company and/or certain of its subsidiaries for
various tax years. Management does not believe this examination will have a significant effect on the Company's tax position.
In January 2012, the Company finalized a settlement agreement with a state to resolve a disputed tax position. The position
was fully reserved as of December 31, 2011 and the settlement will result in an income tax benefit of $4.0 million during the
quarter ending March 31, 2012.
15. 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):
Year Ended December 31,
2011 2010 2009
Basic EPS:
Net income applicable to common stock $ 301,310 $ 193,415 $ 176,844
Amount allocable to common shareholders 99.1% 99.3% 99.6%
Rights to undistributed earnings $ 298,583 $ 192,044 $ 176,160
Weighted average shares outstanding—basic 360,410,168 353,711,045 351,898,898
Net income per common share—basic $ 0.83 $ 0.54 $ 0.50
Diluted EPS:
Rights to undistributed earnings $ 298,583 $ 192,044 $ 176,160
Weighted average shares outstanding—basic 360,410,168 353,711,045 351,898,898
Effect of dilutive securities:
Stock options 3,427,772 2,424,044 4,044,023
Weighted average shares outstanding—diluted 363,837,940 356,135,089 355,942,921
Net income per common share—diluted $ 0.82 $ 0.54 $ 0.49