e10vq
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 001-34295
SIRIUS XM RADIO INC.
(Exact name of registrant as specified in its charter)
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Delaware
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52-1700207 |
(State or other jurisdiction of
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(I.R.S. Employer Identification Number) |
incorporation or organization) |
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1221 Avenue of the Americas, 36th Floor |
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New York, New York
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10020 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (212) 584-5100
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
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(Class)
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(Outstanding as of July 30, 2010)
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COMMON STOCK, $0.001 PAR VALUE
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3,888,667,924 SHARES |
SIRIUS XM RADIO INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months |
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For the Six Months |
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Ended June 30, |
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Ended June 30, |
(in thousands, except per share data) |
|
2010 |
|
2009 |
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2010 |
|
2009 |
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Revenue: |
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Subscriber revenue, including effects of rebates |
|
$ |
601,630 |
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$ |
561,763 |
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$ |
1,181,139 |
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$ |
1,121,151 |
|
Advertising revenue, net of agency fees |
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15,797 |
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12,564 |
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30,323 |
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24,869 |
|
Equipment revenue |
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18,520 |
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10,928 |
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32,802 |
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20,837 |
|
Other revenue |
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63,814 |
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|
5,574 |
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119,280 |
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10,951 |
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| |
| |
| |
| |
Total revenue |
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699,761 |
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|
590,829 |
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1,363,544 |
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1,177,808 |
|
Operating expenses (depreciation and amortization
shown separately below): |
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Cost of services: |
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Revenue share and royalties |
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107,901 |
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95,831 |
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206,085 |
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196,297 |
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Programming and content |
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72,019 |
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72,102 |
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150,452 |
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152,511 |
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Customer service and billing |
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58,414 |
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58,833 |
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114,625 |
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119,041 |
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Satellite and transmission |
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19,982 |
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19,615 |
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40,100 |
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39,894 |
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Cost of equipment |
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7,805 |
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8,051 |
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15,724 |
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16,044 |
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Subscriber acquisition costs |
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110,383 |
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67,651 |
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199,762 |
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140,719 |
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Sales and marketing |
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56,177 |
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48,693 |
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105,294 |
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100,116 |
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Engineering, design and development |
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11,247 |
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11,944 |
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22,684 |
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21,723 |
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General and administrative |
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59,166 |
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66,716 |
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116,746 |
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126,031 |
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Depreciation and amortization |
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69,230 |
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|
77,158 |
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139,495 |
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159,524 |
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Restructuring, impairments and related costs |
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1,803 |
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27,000 |
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1,803 |
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27,614 |
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| |
| |
| |
| |
Total operating expenses |
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574,127 |
|
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553,594 |
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1,112,770 |
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1,099,514 |
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| |
| |
| |
| |
Income from operations |
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125,634 |
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37,235 |
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250,774 |
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78,294 |
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Other income (expense): |
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Interest expense, net of amounts capitalized |
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(76,802 |
) |
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(98,080 |
) |
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(154,670 |
) |
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(166,058 |
) |
Loss on extinguishment of debt and credit facilities, net |
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(31,871 |
) |
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(107,756 |
) |
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(34,437 |
) |
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(125,713 |
) |
Interest and investment income (loss) |
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378 |
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9,323 |
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(2,892 |
) |
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2,157 |
|
Other (loss) income |
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(601 |
) |
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|
749 |
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|
728 |
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1,259 |
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| |
| |
| |
| |
Total other expense |
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|
(108,896 |
) |
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(195,764 |
) |
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(191,271 |
) |
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(288,355 |
) |
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| |
| |
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Income (loss) before income taxes |
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16,738 |
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(158,529 |
) |
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59,503 |
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(210,061 |
) |
Income tax expense |
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(1,466 |
) |
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(1,115 |
) |
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(2,633 |
) |
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(2,229 |
) |
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| |
| |
| |
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Net income (loss) |
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15,272 |
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|
(159,644 |
) |
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56,870 |
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(212,290 |
) |
Preferred stock beneficial conversion feature |
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- |
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- |
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- |
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(186,188 |
) |
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| |
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Net income (loss) attributable to common stockholders |
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$ |
15,272 |
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$ |
(159,644 |
) |
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$ |
56,870 |
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$ |
(398,478 |
) |
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Net income (loss) per common share: |
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Basic |
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$ |
0.00 |
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$ |
(0.04 |
) |
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$ |
0.02 |
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$ |
(0.11 |
) |
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| |
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| |
Diluted |
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$ |
0.00 |
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$ |
(0.04 |
) |
|
$ |
0.01 |
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$ |
(0.11 |
) |
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Weighted average common shares outstanding: |
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Basic |
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3,683,595 |
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3,586,742 |
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3,682,750 |
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3,555,489 |
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Diluted |
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6,363,955 |
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3,586,742 |
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6,357,507 |
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3,555,489 |
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See accompanying Notes to the unaudited consolidated financial statements
1
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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June 30, 2010 |
|
December 31, 2009 |
(in thousands, except share and per share data) |
|
(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
258,854 |
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$ |
383,489 |
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Accounts receivable, net |
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113,341 |
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113,580 |
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Receivables from distributors |
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83,208 |
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48,738 |
|
Inventory, net |
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13,726 |
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|
16,193 |
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Prepaid expenses |
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193,440 |
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|
100,273 |
|
Related party current assets |
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5,442 |
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|
106,247 |
|
Deferred tax asset |
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77,570 |
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|
72,640 |
|
Other current assets |
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14,591 |
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18,620 |
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| |
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Total current assets |
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760,172 |
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|
859,780 |
|
Property and equipment, net |
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1,765,347 |
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1,711,003 |
|
Long-term restricted investments |
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3,396 |
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|
3,400 |
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Deferred financing fees, net |
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|
59,224 |
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|
66,407 |
|
Intangible assets, net |
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|
2,661,001 |
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|
2,695,115 |
|
Goodwill |
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1,834,856 |
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|
1,834,856 |
|
Related party long-term assets |
|
|
28,416 |
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|
111,767 |
|
Other long-term assets |
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|
88,520 |
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|
|
39,878 |
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| |
| |
Total assets |
|
$ |
7,200,932 |
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|
$ |
7,322,206 |
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| |
LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
519,181 |
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$ |
543,686 |
|
Accrued interest |
|
|
68,541 |
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|
74,566 |
|
Current portion of deferred revenue |
|
|
1,169,090 |
|
|
|
1,083,430 |
|
Current portion of deferred credit on executory contracts |
|
|
263,998 |
|
|
|
252,831 |
|
Current maturities of long-term debt |
|
|
8,280 |
|
|
|
13,882 |
|
Related party current liabilities |
|
|
12,781 |
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|
|
108,246 |
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| |
| |
Total current liabilities |
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|
2,041,871 |
|
|
|
2,076,641 |
|
Deferred revenue |
|
|
275,212 |
|
|
|
255,149 |
|
Deferred credit on executory contracts |
|
|
647,691 |
|
|
|
784,078 |
|
Long-term debt |
|
|
2,662,144 |
|
|
|
2,799,702 |
|
Long-term related party debt |
|
|
357,806 |
|
|
|
263,579 |
|
Deferred tax liability |
|
|
947,468 |
|
|
|
940,182 |
|
Related party long-term liabilities |
|
|
26,655 |
|
|
|
46,301 |
|
Other long-term liabilities |
|
|
61,657 |
|
|
|
61,052 |
|
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| |
| |
Total liabilities |
|
|
7,020,504 |
|
|
|
7,226,684 |
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| |
| |
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
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Stockholders equity: |
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|
|
|
|
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|
Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2010 and December 31, 2009: |
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Series A convertible preferred stock (liquidation preference of $51,370 at June 30, 2010 and
December 31, 2009); 24,808,959 shares issued and outstanding at June 30, 2010
and December 31, 2009 |
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|
25 |
|
|
|
25 |
|
Convertible perpetual preferred stock, series B (liquidation preference of $13 at June 30, 2010
and December 31, 2009); 12,500,000 shares issued and outstanding at June 30, 2010
and December 31, 2009 |
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13 |
|
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|
13 |
|
Convertible preferred stock, series C junior; no shares issued and outstanding at
June 30, 2010 and December 31, 2009 |
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|
- |
|
|
|
- |
|
Common stock, par value $0.001; 9,000,000,000 shares authorized at June 30, 2010 and
December 31, 2009; 3,885,905,912 and 3,882,659,087 shares issued and outstanding
at June 30, 2010 and December 31, 2009, respectively |
|
|
3,885 |
|
|
|
3,882 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(5,987 |
) |
|
|
(6,581 |
) |
Additional paid-in capital |
|
|
10,379,730 |
|
|
|
10,352,291 |
|
Accumulated deficit |
|
|
(10,197,238 |
) |
|
|
(10,254,108 |
) |
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| |
| |
Total stockholders equity |
|
|
180,428 |
|
|
|
95,522 |
|
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| |
| |
Total liabilities and stockholders equity |
|
$ |
7,200,932 |
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|
$ |
7,322,206 |
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|
|
|
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|
See accompanying Notes to the unaudited consolidated financial statements
2
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE INCOME
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|
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|
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|
|
|
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|
Series A |
|
Convertible Perpetual |
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Convertible |
|
Preferred Stock, |
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Accumulated |
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|
|
Preferred Stock |
|
Series B |
|
Common Stock |
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Other |
|
Additional |
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Total |
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|
|
|
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|
|
|
|
|
|
|
|
|
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|
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|
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Comprehensive |
|
Paid-in |
|
Accumulated |
|
Stockholders |
(in thousands, except share and per share data) |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Loss |
|
Capital |
|
Deficit |
|
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
24,808,959 |
|
|
$ |
25 |
|
|
|
12,500,000 |
|
|
$ |
13 |
|
|
|
3,882,659,087 |
|
|
$ |
3,882 |
|
|
$ |
(6,581 |
) |
|
$ |
10,352,291 |
|
|
$ |
(10,254,108 |
) |
|
$ |
95,522 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,870 |
|
|
|
56,870 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale securities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
469 |
|
|
|
- |
|
|
|
- |
|
|
|
469 |
|
Foreign currency translation adjustment,
net of tax of $10 |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
125 |
|
|
|
- |
|
|
|
- |
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
57,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock to employees
and employee
benefit plans, net of forfeitures |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,246,825 |
|
|
|
3 |
|
|
|
- |
|
|
|
1,981 |
|
|
|
- |
|
|
|
1,984 |
|
Share-based payment expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,458 |
|
|
|
- |
|
|
|
25,458 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
| |
| |
| |
| |
| |
| |
| |
| |
| |
Balance at June 30, 2010 |
|
|
24,808,959 |
|
|
$ |
25 |
|
|
|
12,500,000 |
|
|
$ |
13 |
|
|
|
3,885,905,912 |
|
|
$ |
3,885 |
|
|
$ |
(5,987 |
) |
|
$ |
10,379,730 |
|
|
$ |
(10,197,238 |
) |
|
$ |
180,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the unaudited consolidated financial statements
3
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
| Ended June 30, |
(in thousands) |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
56,870 |
|
|
$ |
(212,290 |
) |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
139,495 |
|
|
|
159,524 |
|
Non-cash interest expense, net of amortization of premium |
|
|
22,294 |
|
|
|
31,322 |
|
Provision for doubtful accounts |
|
|
15,756 |
|
|
|
16,278 |
|
Restructuring, impairments and related costs |
|
|
1,803 |
|
|
|
27,614 |
|
Amortization of deferred income related to equity method investment |
|
|
(2,137 |
) |
|
|
(1,388 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
34,437 |
|
|
|
125,713 |
|
Loss on investments |
|
|
6,065 |
|
|
|
6,353 |
|
Loss on disposal of assets |
|
|
(18 |
) |
|
|
- |
|
Share-based payment expense |
|
|
33,083 |
|
|
|
49,878 |
|
Deferred income taxes |
|
|
2,633 |
|
|
|
2,229 |
|
Other non-cash purchase price adjustments |
|
|
(120,706 |
) |
|
|
(85,223 |
) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(14,296 |
) |
|
|
8,483 |
|
Receivables from distributors |
|
|
(26,655 |
) |
|
|
12,277 |
|
Inventory |
|
|
2,467 |
|
|
|
(3,424 |
) |
Related party assets |
|
|
(701 |
) |
|
|
11,629 |
|
Prepaid expenses and other current assets |
|
|
10,245 |
|
|
|
24,052 |
|
Other long-term assets |
|
|
10,947 |
|
|
|
34,476 |
|
Accounts payable and accrued expenses |
|
|
(76,144 |
) |
|
|
(106,041 |
) |
Accrued interest |
|
|
(4,796 |
) |
|
|
997 |
|
Deferred revenue |
|
|
105,004 |
|
|
|
22,504 |
|
Related party liabilities |
|
|
(54,978 |
) |
|
|
14,060 |
|
Other long-term liabilities |
|
|
319 |
|
|
|
(2,164 |
) |
|
| |
| |
Net cash provided by operating activities |
|
|
140,987 |
|
|
|
136,859 |
|
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(169,313 |
) |
|
|
(127,811 |
) |
Sale of restricted and other investments |
|
|
9,454 |
|
|
|
- |
|
|
| |
| |
Net cash used in investing activities |
|
|
(159,859 |
) |
|
|
(127,811 |
) |
|
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Preferred stock issuance, net of costs |
|
|
- |
|
|
|
(3,712 |
) |
Long-term borrowings, net of costs |
|
|
637,406 |
|
|
|
384,876 |
|
Related party long-term borrowings, net of costs |
|
|
147,094 |
|
|
|
316,340 |
|
Payment of premiums on redemption of debt |
|
|
(24,065 |
) |
|
|
(16,572 |
) |
Repayment of long-term borrowings |
|
|
(810,977 |
) |
|
|
(427,871 |
) |
Repayment of related party long-term borrowings |
|
|
(55,221 |
) |
|
|
(100,867 |
) |
|
| |
| |
Net cash (used in) provided by financing activities |
|
|
(105,763 |
) |
|
|
152,194 |
|
|
| |
| |
Net (decrease) increase in cash and cash equivalents |
|
|
(124,635 |
) |
|
|
161,242 |
|
Cash and cash equivalents at beginning of period |
|
|
383,489 |
|
|
|
380,446 |
|
|
| |
| |
Cash and cash equivalents at end of period |
|
$ |
258,854 |
|
|
$ |
541,688 |
|
|
|
|
|
|
See accompanying Notes to the unaudited consolidated financial statements
4
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
| Ended June 30, |
(in thousands) |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash and Non-Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
|
$ |
128,176 |
|
|
$ |
157,854 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Share-based payments in satisfaction of accrued compensation |
|
|
- |
|
|
|
31,280 |
|
Common stock
issued in exchange of 21/2% Convertible Notes due 2009, including accrued interest |
|
|
- |
|
|
|
35,164 |
|
Structuring fee on 10% Senior PIK Secured Notes due 2011 |
|
|
- |
|
|
|
5,918 |
|
Preferred stock issued to Liberty Media |
|
|
- |
|
|
|
227,716 |
|
Release of restricted investments |
|
|
- |
|
|
|
138,000 |
|
Sale-leaseback of equipment |
|
|
5,305 |
|
|
|
- |
|
See accompanying Notes to the unaudited consolidated financial statements
5
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(1) Business
We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the
United States for a subscription fee through our proprietary satellite radio systems the SIRIUS
system and the XM system. The SIRIUS system consists of four in-orbit satellites with over 125
terrestrial repeaters, satellite uplink facilities and studios. The XM system consists of four
in-orbit satellites with over 650 terrestrial repeaters, satellite uplink facilities and studios.
The terrestrial repeaters receive and retransmit signals. Subscribers can also receive certain of
our music and other channels over the Internet.
Our satellite radios are primarily distributed through automakers (OEMs), nationwide through
retail locations and through our websites. We have agreements with every major automaker to offer
SIRIUS or XM satellite radios as factory- or dealer-installed equipment in their vehicles. SIRIUS
and XM radios are also offered to customers of certain daily rental car companies.
Subscription fees are our primary source of revenue, with most of our customers subscribing to
an annual, semi-annual, quarterly or monthly plan. We also derive revenue from activation and other
subscription-related fees, the sale of advertising on select non-music channels, the direct sale of
satellite radios and accessories, and other ancillary services, such as our Backseat TV, data and
weather services.
In certain cases, automakers include a subscription to our radio services in the sale or lease
price of vehicles. The length of these prepaid subscriptions varies, but is typically three to
twelve months. In many cases, we receive subscription payments from automakers in advance of the
activation of our service. We also reimburse various automakers for certain costs associated with
satellite radios installed in their vehicles.
We also have an interest in the satellite radio services offered in Canada.
Unless otherwise indicated,
|
|
|
we, us, our, the company, the companies and similar terms refer to Sirius
XM Radio Inc. and its consolidated subsidiaries; |
|
|
|
|
SIRIUS refers to Sirius XM Radio Inc. and its consolidated subsidiaries, excluding
XM Satellite Radio Inc., and its consolidated subsidiaries; and |
|
|
|
|
XM refers to XM Satellite Radio Inc. and its consolidated subsidiaries. |
In July 2008, our wholly owned subsidiary, Vernon Merger Corporation, merged with and into XM
Satellite Radio Holdings Inc., a Delaware corporation, and, as a result, XM Satellite Radio
Holdings Inc. became our wholly-owned subsidiary (the Merger). In April 2010, XM Satellite Radio
Holdings Inc. merged with and into XM Satellite Radio Inc., which was the surviving corporation of
the merger. As a result, XM Satellite Radio Inc. became a direct wholly-owned subsidiary of Sirius
XM Radio Inc.
(2) Principles of Consolidation and Basis of Presentation
Principles of Consolidation
The accompanying unaudited consolidated financial statements of Sirius XM Radio Inc. and
subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles
(GAAP), the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States
Securities and Exchange Commission (SEC) for interim financial reporting. Accordingly, these
interim financial statements do not include all of the information and footnotes required by GAAP
for complete financial statements. All significant intercompany transactions have been eliminated
in consolidation.
6
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Basis of Presentation
In the opinion of management, all normal recurring adjustments necessary for a fair
presentation of our unaudited consolidated financial statements as of June 30, 2010, and for the
three and six months ended June 30, 2010 and 2009 have been made.
Interim results are not necessarily indicative of the results that may be expected for a full
year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form
10-K for the year ended December 31, 2009, that was filed with the SEC on February 25, 2010.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this
Quarterly Report on Form 10-Q for the six months ended June 30, 2010 and have determined no events
have occurred that would require adjustment to our unaudited consolidated financial statements as
presented.
(3) Summary of Significant Accounting Policies
Use of Estimates
In presenting unaudited consolidated financial statements, management makes estimates and
assumptions that affect the reported amounts and accompanying notes. Estimates, by their nature,
are based on judgment and available information. Actual results could differ materially from those
estimates.
Significant estimates inherent in the preparation of the accompanying unaudited consolidated
financial statements include revenue recognition, asset impairment, useful lives of our satellites,
share-based payment expense, and valuation allowances against deferred tax assets. Economic
conditions in the United States could have a material impact on our accounting estimates.
Recent Accounting Pronouncements
The Financial Accounting Standards Board (FASB) updated Accounting Standards Codification
(ASC) 470 to incorporate ASU 2009-15, Accounting for Own-Share Lending
Arrangements in Contemplation of Convertible Debt Issuance, into the ASC. This standard requires
share-lending arrangements in an entitys own shares to be initially measured at fair value and
treated as an issuance cost, excluded from basic and diluted earnings per share, and requires an
entity to recognize a charge to earnings if it becomes probable the counterparty will default on
the arrangement. This guidance was adopted as of January 1, 2010, as required, on a retrospective
basis for all arrangements outstanding as of that date. The following table reflects the
retrospective adoption of ASU 2009-15 on our December 31, 2009 consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Originally |
|
|
Retrospective |
|
|
As Currently |
|
Balance Sheet Line Item: |
|
Reported |
|
Adjustments |
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred financing fees, net |
|
$ |
8,902 |
|
|
$ |
57,505 |
|
|
$ |
66,407 |
|
Related party long-term assets, net of current portion |
|
|
110,594 |
|
|
|
1,173 |
|
|
|
111,767 |
|
Long-term debt, net of current portion |
|
|
2,799,127 |
|
|
|
575 |
|
|
|
2,799,702 |
|
Long-term related party debt, net of current portion |
|
|
263,566 |
|
|
|
13 |
|
|
|
263,579 |
|
Additional paid-in capital |
|
|
10,281,331 |
|
|
|
70,960 |
|
|
|
10,352,291 |
|
Accumulated deficit |
|
|
(10,241,238 |
) |
|
|
(12,870 |
) |
|
|
(10,254,108 |
) |
7
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The following table reflects the retrospective adoption of ASU 2009-15 on our statement of
operations for the three and six months ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Six Months |
|
|
Ended June 30, 2009 |
|
Ended June 30, 2009 |
|
|
As Originally |
|
Retrospective |
|
As Currently |
|
As Originally |
|
Retrospective |
|
As Currently |
Statement
of Operations Line Item: |
|
Reported |
|
Adjustments |
|
Reported |
|
Reported |
|
Adjustments |
|
Reported |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts
capitalized |
|
$ |
(95,794 |
) |
|
$ |
(2,286 |
) |
|
$ |
(98,080 |
) |
|
$ |
(161,535 |
) |
|
$ |
(4,523 |
) |
|
$ |
(166,058 |
) |
Net (loss) income |
|
|
(157,358 |
) |
|
|
(2,286 |
) |
|
|
(159,644 |
) |
|
|
(393,955 |
) |
|
|
(4,523 |
) |
|
|
(398,478 |
) |
For the three and six months ended June 30, 2010, we recorded $2,491and $4,918 in
interest expense related to the amortization of the costs associated with the share-lending
arrangement and other issuance costs. As of June 30, 2010, the unamortized balance of the debt
issuance costs was $56,420, with $55,292 recorded in deferred financing fees, net, and $1,128
recorded in long-term related party assets. As of June 30, 2010, the estimated fair value of the
remaining 202,400,000 loaned shares was approximately $192,280.
Earnings per Share (EPS)
Basic net income (loss) per common share is calculated using the weighted average common
shares outstanding during each reporting period. Diluted net income (loss) per common share adjusts
the weighted average common shares outstanding for the potential dilution that could occur if
common stock equivalents (convertible debt and preferred stock, warrants, stock options and
restricted stock shares and units) were exercised or converted into common stock. For the three and
six months ended June 30, 2010, common stock equivalents of approximately 686,407,346 and
692,011,065, respectively, were not included in the calculation of diluted net income per common
share as the effect would have been anti-dilutive. Due to the net loss for the three and six months
ended June 30, 2009, common stock equivalents of 3,414,940,143 were excluded from net loss per
common share because they were anti-dilutive.
Accounts Receivable
Accounts receivable are stated at amounts due from customers net of an allowance for doubtful
accounts. Our allowance for doubtful accounts considers historical experience, the age of amounts
due, current economic conditions and other factors that may affect the debtors ability to pay.
Accounts receivable, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Gross accounts receivable |
|
$ |
122,513 |
|
|
$ |
122,247 |
|
Allowance for doubtful accounts |
|
|
(9,172 |
) |
|
|
(8,667 |
) |
|
|
|
|
|
Total accounts receivable, net |
|
$ |
113,341 |
|
|
$ |
113,580 |
|
|
|
|
|
|
Receivables from distributors include billed and unbilled amounts due from OEMs for
prepaid radio services in the sale or lease price of vehicles, as well as billed amounts due from
retailers. Receivables from distributors consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Billed |
|
$ |
41,840 |
|
|
$ |
25,207 |
|
Unbilled |
|
|
41,368 |
|
|
|
23,531 |
|
|
|
|
|
|
Total |
|
$ |
83,208 |
|
|
$ |
48,738 |
|
|
|
|
|
|
8
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Inventory
Inventory consists of finished goods, refurbished goods, chip sets and other raw material
components used in manufacturing radios. Inventory is stated at the lower of cost, determined on a
first-in, first-out basis, or market. We record an estimated allowance
for inventory that is considered slow moving, obsolete or whose carrying value is in excess of
net realizable value. The provision related to products purchased for resale in our direct to
consumer distribution channel and components held for resale by us is reported as a component of
Cost of equipment in our unaudited consolidated statements of operations. The provision related to
inventory consumed in our OEM and retail distribution channel is reported as a component of
Subscriber acquisition costs in our unaudited consolidated statements of operations.
Inventory, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
Raw materials |
|
$ |
15,160 |
|
|
$ |
17,370 |
|
Finished goods |
|
|
21,144 |
|
|
|
19,704 |
|
Allowance for obsolescence |
|
|
(22,578 |
) |
|
|
(20,881 |
) |
|
|
|
|
|
|
Total inventory, net |
|
$ |
13,726 |
|
|
$ |
16,193 |
|
|
|
|
|
|
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instrument could be
exchanged in an orderly transaction between market participants to sell the asset or transfer the
liability. As of June 30, 2010 and December 31, 2009, the carrying amounts of cash and cash
equivalents, accounts and other receivables, and accounts payable approximated fair value due to
the short-term nature of these instruments.
The fair value for publicly traded instruments is determined using quoted market prices while
fair value for non-publicly traded instruments is based upon estimates from a market maker and
brokerage firm. As of June 30, 2010 and December 31, 2009, the carrying value of our debt was
$3,028,230 and $3,077,163, respectively; and the fair value approximated $3,248,139 and $3,195,375,
respectively.
Reclassifications
Certain amounts in our prior period consolidated financial statements have been reclassified
to conform to our current period presentation.
(4) Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of net
tangible and identifiable intangible assets acquired in business combinations. Our annual
impairment assessment is performed as of October 1st of each year. An assessment is
performed at other times if events or circumstances indicate it is more likely than not that the
asset is impaired. During the three and six months ended June 30, 2010 and 2009, there were no
indicators of impairment and no impairment loss was recorded to our goodwill.
9
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(5) Intangible Assets
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
December 31, 2009 |
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Weighted Average |
|
Carrying |
|
Accumulated |
|
Net Carrying |
|
Carrying |
|
Accumulated |
|
Net Carrying |
|
|
Useful Lives |
|
Value |
|
Amortization |
|
Value |
|
Value |
|
Amortization |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCC licenses |
|
Indefinite |
|
$ |
2,083,654 |
|
|
$ |
- |
|
|
$ |
2,083,654 |
|
|
$ |
2,083,654 |
|
|
$ |
- |
|
|
$ |
2,083,654 |
|
Trademark |
|
Indefinite |
|
|
250,000 |
|
|
|
- |
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
- |
|
|
|
250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber relationships |
|
9 years |
|
$ |
380,000 |
|
|
$ |
(118,677 |
) |
|
$ |
261,323 |
|
|
$ |
380,000 |
|
|
$ |
(91,186 |
) |
|
$ |
288,814 |
|
Licensing agreements |
|
9.1 years |
|
|
75,000 |
|
|
|
(18,813 |
) |
|
|
56,187 |
|
|
|
75,000 |
|
|
|
(13,906 |
) |
|
|
61,094 |
|
Proprietary software |
|
6 years |
|
|
16,552 |
|
|
|
(8,430 |
) |
|
|
8,122 |
|
|
|
16,552 |
|
|
|
(6,823 |
) |
|
|
9,729 |
|
Developed technology |
|
10 years |
|
|
2,000 |
|
|
|
(383 |
) |
|
|
1,617 |
|
|
|
2,000 |
|
|
|
(283 |
) |
|
|
1,717 |
|
Leasehold interests |
|
7.4 years |
|
|
132 |
|
|
|
(34 |
) |
|
|
98 |
|
|
|
132 |
|
|
|
(25 |
) |
|
|
107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
$ |
2,807,338 |
|
|
$ |
(146,337 |
) |
|
$ |
2,661,001 |
|
|
$ |
2,807,338 |
|
|
$ |
(112,223 |
) |
|
$ |
2,695,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM trademark as indefinite life intangible assets
after considering the expected use of the assets, the regulatory and economic environment within
which they are used and the effects of obsolescence on their use.
We hold FCC licenses to operate our satellite digital audio radio service and provide
ancillary services. The following table outlines the years in which each of our licenses expire:
|
|
|
|
|
FCC license |
|
Expiration year |
|
|
|
|
|
SIRIUS FM-1 satellite
|
|
|
2017 |
|
SIRIUS FM-2 satellite
|
|
|
2017 |
|
SIRIUS FM-3 satellite
|
|
|
2017 |
|
SIRIUS FM-4 ground spare satellite
|
|
|
2017 |
|
SIRIUS FM-5 satellite
|
|
|
2017 |
|
XM-1 satellite
|
|
|
2014 |
|
XM-2 satellite
|
|
|
2014 |
|
XM-3 satellite
|
|
|
2013 |
|
XM-4 satellite
|
|
|
2014 |
|
Prior to expiration, we will be required to apply for a renewal of our FCC licenses. The
renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as
incurred. Each of the FCC licenses authorizes us to use the broadcast spectrum, which is a
renewable, reusable resource that does not deplete or exhaust over time.
In connection with the Merger, $250,000 of the purchase price was allocated to the XM
trademark. As of June 30, 2010, there were no legal, regulatory or contractual limitations
associated with the XM trademark.
We evaluate our indefinite life intangible assets for impairment on an annual basis as of
October 1st of each year. An assessment is performed at other times if events or
circumstances indicate it is more likely than not that the assets have been impaired. During the
three and six months ended June 30, 2010 and 2009, there were no indicators of impairment and no
impairment loss was recorded for intangible assets with indefinite lives.
Definite Life Intangible Assets
Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects
the estimated pattern in which the economic benefits will be consumed. Other definite life
intangible assets include certain licensing agreements, which are amortized over a weighted average
useful life of 9.1 years on a straight-line basis.
10
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Amortization expense for definite life intangible assets was $16,818 and $19,681 for the three
months ended June 30, 2010 and 2009, respectively, and $34,114 and $40,111 for the six months ended
June 30, 2010 and 2009, respectively. Expected amortization expense for each of the fiscal years
through December 31, 2014 and for periods thereafter is as follows:
|
|
|
|
|
Year ending December 31, |
|
Amount |
|
|
|
|
|
Remaining 2010 |
|
$ |
31,802 |
|
2011 |
|
|
58,850 |
|
2012 |
|
|
53,420 |
|
2013 |
|
|
47,097 |
|
2014 |
|
|
38,619 |
|
Thereafter |
|
|
97,559 |
|
|
|
|
|
|
|
|
|
Total definite life intangibles assets, net |
|
$ |
327,347 |
|
|
|
|
(6) Subscriber Revenue
Subscriber revenue consists of subscription fees, revenue derived from our agreements with
certain daily rental fleet operators, non-refundable activation and other fees as well as the
effects of rebates. Revenues received from OEMs for prepaid subscriptions included in the sale or
lease price of vehicles are also included in subscriber revenue over the service period (that is,
after sale, lease or subscriber activation).
Subscriber revenue consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Six Months |
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription fees |
|
$ |
598,217 |
|
|
$ |
556,400 |
|
|
$ |
1,172,974 |
|
|
$ |
1,109,958 |
|
Activation fees |
|
|
3,532 |
|
|
|
5,702 |
|
|
|
8,320 |
|
|
|
11,758 |
|
Effect of rebates |
|
|
(119 |
) |
|
|
(339 |
) |
|
|
(155 |
) |
|
|
(565 |
) |
|
|
|
|
|
|
|
|
|
Total subscriber revenue |
|
$ |
601,630 |
|
|
$ |
561,763 |
|
|
$ |
1,181,139 |
|
|
$ |
1,121,151 |
|
|
|
|
|
|
|
|
|
|
(7) Interest Costs
We capitalize a portion of the interest on funds borrowed to finance the construction costs of
our satellites. The following is a summary of our interest costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Six Months |
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest costs charged to expense |
|
$ |
76,802 |
|
|
$ |
98,080 |
|
|
$ |
154,670 |
|
|
$ |
166,058 |
|
Interest costs capitalized |
|
|
16,253 |
|
|
|
18,430 |
|
|
|
30,430 |
|
|
|
34,531 |
|
|
|
|
|
|
|
|
|
|
Total interest costs incurred |
|
$ |
93,055 |
|
|
$ |
116,510 |
|
|
$ |
185,100 |
|
|
$ |
200,589 |
|
|
|
|
|
|
|
|
|
|
Included in interest costs incurred is non-cash interest expense, consisting of
amortization related to original issue discounts, premiums and deferred financing fees of $11,175
and $24,656 for the three months ended June 30, 2010 and 2009, respectively, and $22,294 and
$31,322 for the six months ended June 30, 2010 and 2009, respectively.
11
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(8) Property and Equipment
Property and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Satellite system |
|
$ |
1,694,769 |
|
|
$ |
1,680,732 |
|
Terrestrial repeater network |
|
|
110,995 |
|
|
|
108,841 |
|
Leasehold improvements |
|
|
43,511 |
|
|
|
43,480 |
|
Broadcast studio equipment |
|
|
50,542 |
|
|
|
49,965 |
|
Capitalized software and hardware |
|
|
149,339 |
|
|
|
146,035 |
|
Satellite telemetry, tracking and control facilities |
|
|
56,146 |
|
|
|
55,965 |
|
Furniture, fixtures, equipment and other |
|
|
63,065 |
|
|
|
57,536 |
|
Land |
|
|
38,411 |
|
|
|
38,411 |
|
Building |
|
|
56,433 |
|
|
|
56,424 |
|
Construction in progress |
|
|
563,864 |
|
|
|
430,543 |
|
|
|
|
|
|
Total property and equipment |
|
|
2,827,075 |
|
|
|
2,667,932 |
|
Accumulated depreciation and amortization |
|
|
(1,061,728 |
) |
|
|
(956,929 |
) |
|
|
|
|
|
Property and equipment, net |
|
$ |
1,765,347 |
|
|
$ |
1,711,003 |
|
|
|
|
|
|
Construction in progress consists of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Satellite system |
|
$ |
521,888 |
|
|
$ |
398,425 |
|
Terrestrial repeater network |
|
|
17,580 |
|
|
|
19,396 |
|
Other |
|
|
24,396 |
|
|
|
12,722 |
|
|
|
|
|
|
Construction in progress |
|
$ |
563,864 |
|
|
$ |
430,543 |
|
|
|
|
|
|
Depreciation and amortization expense on property and equipment was $52,412 and $57,477
for the three months ended June 30, 2010 and 2009, respectively, and $105,381and $119,413 for the
six months ended June 30, 2010 and 2009, respectively.
Satellites
SIRIUS original three orbiting satellites were launched in 2000. A spare SIRIUS satellite was
delivered to ground storage in 2002. SIRIUS original three-satellite constellation and terrestrial
repeater network were placed into service in 2002. In June 2009, SIRIUS launched a fourth satellite
into a geostationary orbit, which was placed into service in August 2009.
SIRIUS has an agreement with Space Systems/Loral for the design and construction of a sixth
SIRIUS satellite (FM-6). In January 2008, SIRIUS entered into an agreement with International
Launch Services (ILS) to secure a satellite launch on a Proton rocket.
XM owns four orbiting satellites; XM-1 and XM-2 serve as in-orbit spares while XM-3 and XM-4
transmit the XM signal. The XM-1 through XM-4 satellites were launched in March 2001, May 2001,
February 2005 and October 2006, respectively. Space Systems/Loral has constructed a fifth
satellite, XM-5, for use in the XM system. In October 2009, we entered into an agreement with ILS
to secure a satellite launch for XM-5 on a Proton rocket.
During the six months ended June 30, 2010, we capitalized interest and expenditures related to
the construction of our satellites and related launch vehicles for FM-6 and XM-5.
12
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(9) Related Party Transactions
We had the following related party transaction balances at June 30, 2010 and December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
|
current assets |
|
long-term assets |
|
current liabilities |
|
long-term liabilities |
|
long-term debt |
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Liberty Media |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,826 |
|
|
$ |
1,974 |
|
|
$ |
10,005 |
|
|
$ |
8,523 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
357,806 |
|
|
$ |
263,579 |
|
SIRIUS Canada |
|
|
3,849 |
|
|
|
2,327 |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
XM Canada |
|
|
1,593 |
|
|
|
1,011 |
|
|
|
26,590 |
|
|
|
24,429 |
|
|
|
2,776 |
|
|
|
2,775 |
|
|
|
26,655 |
|
|
|
28,793 |
|
|
|
- |
|
|
|
- |
|
General Motors |
|
|
- |
|
|
|
99,995 |
|
|
|
- |
|
|
|
85,364 |
|
|
|
- |
|
|
|
93,107 |
|
|
|
- |
|
|
|
17,508 |
|
|
|
- |
|
|
|
- |
|
American Honda |
|
|
- |
|
|
|
2,914 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,841 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
5,442 |
|
|
$ |
106,247 |
|
|
$ |
28,416 |
|
|
$ |
111,767 |
|
|
$ |
12,781 |
|
|
$ |
108,246 |
|
|
$ |
26,655 |
|
|
$ |
46,301 |
|
|
$ |
357,806 |
|
|
$ |
263,579 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Neither General Motors nor American Honda is considered a related party following May 27,
2010, the date on which individuals nominated by General Motors and American Honda ceased to be
members of our board of directors.
Liberty Media
In February, 2009, we entered into an Investment Agreement (the Investment Agreement) with
an affiliate of Liberty Media Corporation, Liberty Radio, LLC (collectively, Liberty Media).
Pursuant to the Investment Agreement, in March 2009 we issued to Liberty Radio, LLC 12,500,000
shares of our Convertible Perpetual Preferred Stock, Series B (the Series B Preferred Stock),
with a liquidation preference of $0.001 per share in partial consideration for certain loan
investments. Liberty Media has representatives on our board of directors.
The Series B Preferred Stock is convertible into approximately 2,586,976,761 shares of our
common stock. Liberty Media has agreed not to acquire more than 49.9% of our outstanding common
stock prior to March 2012, except that Liberty Media may acquire more than 49.9% of our outstanding
common stock at any time after March 2011 pursuant to any cash tender offer for all of the
outstanding shares of our common stock that are not beneficially owned by Liberty Media or its
affiliates at a price per share greater than the closing price of the common stock on the trading
day preceding the earlier of the public announcement or commencement of such tender offer. The
Investment Agreement also provides for certain other standstill provisions during the three year
period ending in March 2012.
Liberty Media has advised us that as of June 30, 2010 and December 31, 2009, respectively, it
owned the following principal amounts of our debt, excluding discounts of $16,194 and $15,642,
respectively:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
2009 |
9⅝% Senior Notes due 2013 |
|
$ |
- |
|
|
$ |
55,221 |
|
8.75% Senior Notes due 2015 |
|
|
150,000 |
|
|
|
- |
|
9.75% Senior Secured Notes due 2015 |
|
|
50,000 |
|
|
|
50,000 |
|
11.25% Senior Secured Notes due 2013 |
|
|
87,000 |
|
|
|
87,000 |
|
13% Senior Notes due 2013 |
|
|
76,000 |
|
|
|
76,000 |
|
7% Exchangeable Senior Subordinated Notes due 2014 |
|
|
11,000 |
|
|
|
11,000 |
|
|
|
|
|
|
Total |
|
$ |
374,000 |
|
|
$ |
279,221 |
|
|
|
|
|
|
As of June 30, 2010 and December 31, 2009, we recorded $10,005 and $8,523, respectively,
related to accrued interest with Liberty Media to Related party current liabilities. We recognized
Interest expense associated with debt held by Liberty Media of $10,902 and $24,555 for the three
months ended June 30, 2010 and 2009, respectively, and $19,964 and $33,356 for the six months ended
June 30, 2010 and 2009, respectively.
13
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS Canada
In 2005, SIRIUS entered into a license and services agreement with SIRIUS Canada. Pursuant to
such agreement, SIRIUS is reimbursed for certain costs incurred to provide SIRIUS Canada service,
including certain costs incurred for the production and distribution of radios, as well as
information technology support costs. In consideration for the rights granted pursuant to this
license and services agreement, SIRIUS has the right to receive a royalty equal to a percentage of
SIRIUS Canadas gross revenues based on subscriber levels (ranging between 5% to 15%) and the
number of Canadian-specific channels made available to SIRIUS Canada. SIRIUS investment in SIRIUS
Canada is primarily non-voting shares which carry an 8% cumulative dividend.
We recorded the following revenue from SIRIUS Canada. Royalty income is included in other
revenue and dividend income is included in Interest and investment income (loss) in our unaudited
consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Royalty income |
|
$ |
1,765 |
|
|
$ |
1,326 |
|
|
$ |
3,440 |
|
|
$ |
2,170 |
|
Dividend income |
|
|
231 |
|
|
|
268 |
|
|
|
457 |
|
|
|
393 |
|
|
|
|
|
|
|
|
|
|
Total revenue from SIRIUS Canada |
|
$ |
1,996 |
|
|
$ |
1,594 |
|
|
$ |
3,897 |
|
|
$ |
2,563 |
|
|
|
|
|
|
|
|
|
|
Receivables from royalty and dividend income were fully utilized to absorb a portion of
our proportionate share of net losses generated by SIRIUS Canada during the three and six months
ended June 30, 2010 and 2009. Total costs that have been or will be reimbursed by SIRIUS Canada for
the three months ended June 30, 2010 and 2009 were $2,393 and $2,916, respectively, and for the six
months ended June 30, 2010 and 2009 were $4,835 and $4,914, respectively.
XM Canada
In 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite
radio service in Canada. The agreements have an initial ten year term and XM Canada has the
unilateral option to extend the agreements for an additional five years. XM receives a 15% royalty
for all subscriber fees earned by XM Canada each month for its basic service and an activation fee
for each gross activation of an XM Canada subscriber on XMs system. XM Canada is obligated to pay
XM a total of $70,300 for the rights to broadcast and market National Hockey League (NHL) games
for a 10-year term.
The estimated fair value of deferred revenue from XM Canada as of the Merger date was
approximately $34,000, and is amortized on a straight-line basis through 2020, the expected term of
the agreements. As of June 30, 2010 and December 31, 2009, the carrying value of deferred revenue
related to XM Canada was $29,431 and $31,568, respectively.
XM has extended a Cdn$45,000 standby credit facility to XM Canada, which can be utilized to
purchase terrestrial repeaters or finance royalty and activation fees payable to XM. The facility
matures on December 31, 2012 and bears interest at 17.75% per annum. XM has the right to convert
unpaid principal amounts into Class A subordinate voting shares of XM Canada at the price of
Cdn$16.00 per share. As of June 30, 2010 and December 31, 2009, amounts drawn by XM Canada on this
facility in lieu of payment of fees recorded in related party long-term assets were $19,666, net of
a $3,991 valuation allowance, and $18,429, respectively. The June 30, 2010 valuation allowance of
$3,991 related to the absorption of our proportionate share of net loss from our investment in XM
Canada shares.
As of June 30, 2010 and December 31, 2009, amounts due from XM Canada also included $6,924 and
$6,000, respectively, attributable to deferred programming costs and accrued interest (in addition
to the amounts drawn on the standby credit facility), all of which is reported as Related party
long-term assets.
14
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We recorded the following revenue from XM Canada as Other revenue in our unaudited
consolidated statements of operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Amortization of XM Canada deferred income |
|
$ |
694 |
|
|
$ |
694 |
|
|
$ |
1,388 |
|
|
$ |
1,388 |
|
Subscriber and activation fee royalties |
|
|
2,658 |
|
|
|
160 |
|
|
|
5,005 |
|
|
|
274 |
|
Licensing fee revenue |
|
|
750 |
|
|
|
1,500 |
|
|
|
2,250 |
|
|
|
3,000 |
|
Advertising reimbursements |
|
|
333 |
|
|
|
367 |
|
|
|
667 |
|
|
|
733 |
|
|
|
|
|
|
|
|
|
|
Total revenue from XM Canada |
|
$ |
4,435 |
|
|
$ |
2,721 |
|
|
$ |
9,310 |
|
|
$ |
5,395 |
|
|
|
|
|
|
|
|
|
|
General Motors and American Honda
XM has a long-term distribution agreement with General Motors Company (GM). GM had a
representative on our board of directors and was considered a related party through May 27, 2010.
GM is no longer a related party. During the term of the agreement, GM has agreed to distribute the
XM service. XM subsidizes a portion of the cost of XM radios and makes incentive payments to GM
when the owners of GM vehicles with factory- or dealer- installed XM radios become self-paying
subscribers to XMs service. XM also shares with GM a percentage of the subscriber revenue
attributable to GM vehicles with factory- or dealer- installed XM radios.
As part of the agreement, GM provides certain call-center related services directly to XM
subscribers who are also GM customers for which we reimburse GM.
XM makes bandwidth available to OnStar Corporation for audio and data transmissions to owners
of XM-enabled GM vehicles, regardless of whether the owner is an XM subscriber. OnStars use of
XMs bandwidth must be in compliance with applicable laws, must not compete or adversely interfere
with XMs business, and must meet XMs quality standards. XM also granted to OnStar a certain
amount of time to use XMs studios on an annual basis and agreed to provide certain audio content
for distribution on OnStars services.
XM has a long-term distribution agreement with American Honda. American Honda had a
representative on our board of directors and was considered a related party through May 27, 2010.
American Honda is no longer a related party. XM has an agreement to make a certain amount of its
bandwidth available to American Honda. American Hondas use of XMs bandwidth must be in compliance
with applicable laws, must not compete or adversely interfere with XMs business, and must meet
XMs quality standards. This agreement remains in effect so long as American Honda holds a certain
amount of its investment in us. XM makes incentive payments to American Honda for each purchaser of
a Honda or Acura vehicle that becomes a self-paying XM subscriber and shares with American Honda a
portion of the subscriber revenue attributable to Honda and Acura vehicles with installed XM
radios.
As of May 27, 2010, we had the following aggregate assets and liabilities related to GM and
America Honda:
|
|
|
|
|
|
|
Non-cash |
|
Balance
sheet line item |
|
Adjustment |
Related party current assets |
|
$ |
107,908 |
|
Related party long term assets |
|
|
73,016 |
|
Related party current liabilities |
|
|
57,996 |
|
15
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We recorded the following total related party revenue from GM and American Honda, primarily
consisting of subscriber revenue, in connection with the agreements above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010* |
|
2009 |
|
2010* |
|
2009 |
GM |
|
$ |
4,995 |
|
|
$ |
6,264 |
|
|
$ |
12,759 |
|
|
$ |
13,256 |
|
American Honda |
|
|
2,103 |
|
|
|
2,995 |
|
|
|
4,990 |
|
|
|
5,827 |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
7,098 |
|
|
$ |
9,259 |
|
|
$ |
17,749 |
|
|
$ |
19,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
GM and American Honda were considered related parties through May 27, 2010. |
We have incurred the following expenses with GM and American Honda:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
For the Six Months Ended June 30, |
|
|
2010* |
|
2009 |
|
2010* |
|
2009 |
|
|
|
|
|
|
American |
|
|
|
|
|
|
American |
|
|
|
|
|
|
American |
|
|
|
|
|
|
American |
|
|
|
GM |
|
Honda |
|
GM |
|
Honda |
|
GM |
|
Honda |
|
GM |
|
Honda |
Sales and marketing |
|
$ |
5,575 |
|
|
$ |
- |
|
|
$ |
7,537 |
|
|
$ |
- |
|
|
$ |
13,374 |
|
|
$ |
- |
|
|
$ |
15,631 |
|
|
$ |
- |
|
Revenue share and royalties |
|
|
6,756 |
|
|
|
1,337 |
|
|
|
13,982 |
|
|
|
1,530 |
|
|
|
15,823 |
|
|
|
3,167 |
|
|
|
31,655 |
|
|
|
2,965 |
|
Subscriber acquisition costs |
|
|
7,027 |
|
|
|
742 |
|
|
|
5,545 |
|
|
|
1,414 |
|
|
|
17,514 |
|
|
|
1,969 |
|
|
|
14,805 |
|
|
|
2,745 |
|
Customer service and billing |
|
|
50 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
125 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Interest expense, net of amounts capitalized |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,421 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
19,408 |
|
|
$ |
2,079 |
|
|
$ |
27,064 |
|
|
$ |
2,944 |
|
|
$ |
48,257 |
|
|
$ |
5,136 |
|
|
$ |
62,091 |
|
|
$ |
5,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
GM and American Honda were considered related parties through May 27, 2010. |
(10) Investments
Our investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2010 |
|
2009 |
Investment in SIRIUS Canada |
|
$ |
- |
|
|
$ |
- |
|
Investment in XM Canada |
|
|
- |
|
|
|
2,390 |
|
Investment in XM Canada debentures |
|
|
3,073 |
|
|
|
2,970 |
|
Auction rate certificates |
|
|
- |
|
|
|
8,556 |
|
Restricted investments |
|
|
3,396 |
|
|
|
3,400 |
|
|
|
|
|
|
Total investments |
|
$ |
6,469 |
|
|
$ |
17,316 |
|
|
|
|
|
|
Canadian Entities
Our investments in SIRIUS Canada and XM Canada (the Canadian Entities) are recorded using
the equity method since we have a significant influence, but do not control the Canadian Entities.
Under this method, our investments in the Canadian Entities, originally recorded at cost, are
adjusted quarterly to recognize our proportionate share of net earnings or losses as they occur,
rather than at the time dividends or other distributions are received, limited to the extent of our
investment in, advances to and commitments to fund the Canadian Entities. We have a 49.9% economic
interest in SIRIUS Canada and a 23.33% economic interest in XM Canada.
Our share of net earnings or losses of the Canadian Entities is recorded to Interest and
investment income (loss) in our unaudited consolidated statements of operations. As it relates to
XM Canada, this is done on a one month lag. We evaluate the Canadian Entities periodically and
record an impairment charge to Interest and investment income (loss) in our unaudited consolidated
statements of operations if we determine that decreases in fair value are considered to be
other-than temporary. In addition, any payments received from the Canadian Entities in excess of
the carrying value of our investments in, advances to and commitments to such entity is recorded to
Interest and investment income (loss) in our unaudited consolidated statements of operations.
16
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We recorded the following amounts to Interest and investment income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Six Months |
|
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Share of SIRIUS Canada net loss |
|
$ |
(1,316 |
) |
|
$ |
(1,594 |
) |
|
$ |
(3,218 |
) |
|
$ |
(2,563 |
) |
Payments received from SIRIUS Canada in excess of carrying value |
|
|
3,710 |
|
|
|
6,869 |
|
|
|
3,710 |
|
|
|
6,869 |
|
Share of XM Canada net loss |
|
|
(3,339 |
) |
|
|
4,847 |
|
|
|
(6,490 |
) |
|
|
943 |
|
Impairment of XM Canada |
|
|
- |
|
|
|
(1,700 |
) |
|
|
- |
|
|
|
(4,734 |
) |
Realized gain on sale of auction rate certificates |
|
|
- |
|
|
|
- |
|
|
|
425 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(945 |
) |
|
$ |
8,422 |
|
|
$ |
(5,573 |
) |
|
$ |
515 |
|
|
|
|
|
|
|
|
|
|
In addition, during the three and six months ended June 30, 2010, we recorded $74 and
$109, respectively, of a foreign exchange gain to Accumulated other comprehensive loss, net of tax,
related to our investment in XM Canada.
XM holds an investment in Cdn$4,000 face value of 8% convertible unsecured subordinated
debentures issued by XM Canada, for which the embedded conversion feature is bifurcated from the
host contract. The host contract is accounted for at fair value as an available-for-sale security
with changes in fair value recorded to Accumulated other comprehensive loss, net of tax. The
embedded
conversion feature is accounted for at fair value as a derivative with changes in fair value
recorded in earnings as Interest and investment income (loss). As of June 30, 2010, the carrying
values of the host contract and embedded derivative related to our investment in the debentures was
$3,070 and $3, respectively. As of December 31, 2009, the carrying values of the host contract and
embedded derivative related to our investment in the debentures was $2,961 and $9, respectively.
Auction Rate Certificates
Auction rate certificates are long-term securities structured to reset their coupon rates by
means of an auction. We accounted for our investment in auction rate certificates as
available-for-sale securities. In January 2010, our investment in the auction rate certificates was
called by the issuer at par plus accrued interest, or $9,456, resulting in a gain of $425 in the
six months ended June 30, 2010.
Restricted Investments
Restricted investments relate to deposits placed into escrow for the benefit of third parties
pursuant to programming agreements and reimbursement obligations under letters of credit issued for
the benefit of lessors of office space. As of June 30, 2010 and December 31, 2009, Long-term
restricted investments were $3,396 and $3,400, respectively.
17
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(11) Debt
Our debt consists of the following:
| | | | | | | | | | | | |
|
|
Conversion |
|
|
|
|
|
|
|
|
|
Price |
|
|
June 30, |
|
|
December 31, |
|
|
|
(per share) |
| 2010 |
| 2009 |
| | | | | | | | | | | | |
SIRIUS Debt |
|
|
|
|
|
|
|
|
|
|
|
|
31/4% Convertible Notes due 2011 (a) |
|
$ |
5.30 |
|
|
|
230,000 |
|
|
|
230,000 |
|
Less: discount |
|
|
|
|
|
|
(997 |
) |
|
|
(1,371 |
) |
Senior Secured Term Loan due 2012 (b) |
|
|
N/A |
|
|
|
- |
|
|
|
244,375 |
|
95/8% Senior Notes due 2013 (c) |
|
|
N/A |
|
|
|
- |
|
|
|
500,000 |
|
Less: discount |
|
|
|
|
|
|
- |
|
|
|
(3,341 |
) |
8.75% Senior Notes due 2015 (d) |
|
|
N/A |
|
|
|
800,000 |
|
|
|
- |
|
Less: discount |
|
|
|
|
|
|
(13,360 |
) |
|
|
- |
|
9.75% Senior Secured Notes due 2015 (e) |
|
|
N/A |
|
|
|
257,000 |
|
|
|
257,000 |
|
Less: discount |
|
|
|
|
|
|
(10,927 |
) |
|
|
(11,695 |
) |
XM Debt |
|
|
|
|
|
|
|
|
|
|
|
|
10% Senior PIK Secured Notes due 2011 (f) |
|
|
N/A |
|
|
|
- |
|
|
|
113,685 |
|
Less: discount |
|
|
|
|
|
|
- |
|
|
|
(7,325 |
) |
11.25% Senior Secured Notes due 2013 (g) |
|
|
N/A |
|
|
|
525,750 |
|
|
|
525,750 |
|
Less: discount |
|
|
|
|
|
|
(28,474 |
) |
|
|
(32,259 |
) |
13% Senior Notes due 2013 (h) |
|
|
N/A |
|
|
|
778,500 |
|
|
|
778,500 |
|
Less: discount |
|
|
|
|
|
|
(68,450 |
) |
|
|
(76,601 |
) |
9.75% Senior Notes due 2014 (i) |
|
|
N/A |
|
|
|
5,260 |
|
|
|
5,260 |
|
7% Exchangeable Senior Subordinated Notes due 2014 (j) |
|
$ |
1.875 |
|
|
|
550,000 |
|
|
|
550,000 |
|
Less: discount |
|
|
|
|
|
|
(8,391 |
) |
|
|
(9,119 |
) |
Other debt: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases |
|
|
N/A |
|
|
|
12,319 |
|
|
|
14,304 |
|
| | | | | | | | |
Total debt |
|
|
|
|
|
|
3,028,230 |
|
|
|
3,077,163 |
|
Less: current maturities |
|
|
|
|
|
|
|
|
|
|
|
|
Non-related party |
|
|
|
|
|
|
8,280 |
|
|
|
13,882 |
|
| | | | | | | | |
Total current maturities |
|
|
|
|
|
|
8,280 |
|
|
|
13,882 |
|
Total long-term |
|
|
|
|
|
|
3,019,950 |
|
|
|
3,063,281 |
|
Less: related party |
|
|
|
|
|
|
357,806 |
|
|
|
263,579 |
|
| | | | | | | | |
Total long-term, excluding related party |
|
|
|
|
|
$ |
2,662,144 |
|
|
$ |
2,799,702 |
|
| | | | | | | | |
SIRIUS Debt
(a) 31/4% Convertible Notes due 2011
In October 2004, SIRIUS issued $230,000 in aggregate principal amount of 31/4% Convertible Notes
due October 15, 2011 (the 31/4% Notes), which are convertible, at the option of the holder, into
shares of our common stock at any time at a conversion rate of 188.6792 shares of common stock for
each $1,000 principal amount, or $5.30 per share of common stock, subject to certain adjustments.
Interest is payable semi-annually on April 15 and October 15 of each year. The obligations under
the 31/4% Notes are not secured by any of our assets.
(b) Senior Secured Term Loan due 2012
In June 2007, SIRIUS entered into a term credit agreement with a syndicate of financial
institutions. The term credit agreement provided for a senior secured term loan (the Senior
Secured Term Loan) of $250,000, which was fully drawn. Interest under the Senior Secured Term Loan
was based, at our option, on (i) adjusted LIBOR plus 2.25% or (ii) the higher of (a) the prime rate
and (b) the Federal Funds Effective Rate plus 1/2 of 1.00%, plus 1.25%. On March 16, 2010, we used
net proceeds of $244,714 from the sale of our 8.75% Senior Notes due 2015 to repay the Senior
Secured Term Loan. This amount included accrued and unpaid interest of
18
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
$339. We recorded an aggregate loss on extinguishment on the Senior Secured Term Loan of
$2,450 consisting of deferred financing fees to Loss on extinguishment of debt and credit
facilities, net, in our unaudited consolidated statements of operations.
(c) 95/8% Senior Notes due 2013
In August 2005, SIRIUS issued $500,000 in aggregate principal amount of 95/8% Senior Notes due
2013 (the 95/8% Notes). The obligations under the 95/8% Notes were not secured by any of our assets.
On April 16, 2010, we used net proceeds of $534,091 from the sale of our 8.75% Senior Notes due
2015 to redeem the 95/8% Notes. This amount included accrued and unpaid interest of $10,026 and a
repayment premium of $24,065. We recorded an aggregate loss on extinguishment on the 95/8% Notes of
$27,705 consisting primarily of unamortized discount, deferred financing fees and repayment premium
to Loss on extinguishment of debt and credit facilities, net, in our unaudited consolidated
statements of operations.
(d) 8.75% Senior Notes due 2015
In March 2010, SIRIUS issued $800,000 aggregate principal amount of 8.75% Senior Notes due
April 1, 2015 (the 8.75% Notes). Interest is payable semi-annually in arrears on April 1 and
October 1 of each year, commencing on October 1, 2010, at a rate of 8.75% per annum. The 8.75%
Notes were issued for $786,000, resulting in an aggregate original issuance discount of $14,000.
Certain of the domestic wholly-owned subsidiaries of SIRIUS guarantee SIRIUS obligations under the
8.75% Notes on a senior unsecured basis. SIRIUS operates XM as an unrestricted subsidiary under the
8.75% Notes indenture.
(e) 9.75% Senior Secured Notes due 2015
In August 2009, SIRIUS issued $257,000 aggregate principal amount of 9.75% Senior Secured
Notes due September 1, 2015 (the 9.75% Notes). Interest is payable semi-annually in arrears on
March 1 and September 1 of each year at a rate of 9.75% per annum. The 9.75% Notes were issued for
$244,292, resulting in an aggregate original issuance discount of $12,708. Certain of the domestic
wholly-owned subsidiaries of SIRIUS guarantee SIRIUS obligations under the 9.75% Notes. The 9.75%
Notes and related guarantees are secured by first-priority liens on substantially all of the assets
of SIRIUS and the guarantors other than certain excluded assets (including cash, accounts
receivable and certain inventory). SIRIUS operates XM as an unrestricted subsidiary under the 9.75%
Notes indenture.
XM Debt
(f) 10% Senior PIK Secured Notes due 2011
At
December 31, 2009, XM had outstanding $113,685 aggregate principal amount of 10% Senior PIK Secured Notes due
2011 (the PIK Notes). Interest was payable on the PIK Notes semi-annually in arrears on June 1
and December 1 of each year at a rate of 10% per annum paid in cash from December 1, 2008 to
December 1, 2009; at a rate of 10% per annum paid in cash and 2% per annum paid in kind from
December 1, 2009 to December 1, 2010; and at a rate of 10% per annum paid in cash and 4% per annum
paid in kind from December 1, 2010 to the maturity date. On June 1, 2010, we redeemed all
outstanding PIK Notes at a price of 100% plus accrued interest. We recognized an aggregate loss on
extinguishment of the PIK Notes of $4,138, consisting primarily of unamortized discount, as a Loss
on extinguishment of debt and credit facilities, net, in our unaudited consolidated statements of
operations.
(g) 11.25% Senior Secured Notes due 2013
In June 2009, XM issued $525,750 aggregate principal amount of 11.25% Senior Secured Notes due
2013 (the 11.25% Notes). Interest is payable semi-annually in arrears on June 15 and December 15
of each year at a rate of 11.25% per annum. The 11.25% Notes mature on June 15, 2013. The 11.25%
Notes were issued for $488,398, resulting in an aggregate original issuance discount of $37,352.
Substantially all the domestic wholly-owned subsidiaries of XM guarantee XMs obligations
under the 11.25% Notes. The 11.25% Notes and related guarantees are secured by first-priority liens
on substantially all of the assets of XM and the guarantors.
19
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(h) 13% Senior Notes due 2013
In July 2008, XM issued $778,500 aggregate principal amount of 13% Senior Notes due 2013 (the
13% Notes). Interest is payable semi-annually in arrears on February 1 and August 1 of each year
at a rate of 13% per annum. The 13% Notes are unsecured and mature on August 1, 2013. Substantially
all the domestic wholly-owned subsidiaries of XM guarantee XMs obligations under the 13% Notes.
(i) 9.75% Senior Notes due 2014
XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the XM
9.75% Notes). Interest on the XM 9.75% Notes is payable semi-annually on May 1 and November 1 at a
rate of 9.75% per annum. The XM 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its
option, may redeem the XM 9.75% Notes at declining redemption prices at any time, subject to
certain restrictions. Substantially all the domestic subsidiaries of XM guarantee XMs obligations
under the XM 9.75% Notes.
On August 3, 2010, XM issued to holders of its outstanding XM 9.75% Notes a notice of
redemption of the 9.75% Notes at a price of 104.875% of the principal amount of the notes plus
accrued interest on August 16, 2010.
(j) 7% Exchangeable Senior Subordinated Notes due 2014
In August 2008, XM issued $550,000 aggregate principal amount of 7% Exchangeable Senior
Subordinated Notes due 2014 (the Exchangeable Notes). The Exchangeable Notes are senior
subordinated obligations of XM and rank junior in right of payment to its existing and future
senior debt and equally in right of payment with its existing and future senior subordinated debt.
Substantially all the domestic wholly-owned subsidiaries of XM have guaranteed the Exchangeable
Notes on a senior subordinated basis.
The Exchangeable Notes are not guaranteed by SIRIUS or Satellite CD Radio, Inc. Interest is
payable semi-annually in arrears on June 1 and December 1 of each year at a rate of 7% per annum.
The Exchangeable Notes mature on December 1, 2014. The Exchangeable Notes are exchangeable at any
time at the option of the holder into shares of our common stock at an initial exchange rate of
533.3333 shares of common stock per $1,000 principal amount of Exchangeable Notes, which is
equivalent to an approximate exchange price of $1.875 per share of common stock.
Covenants and Restrictions
Our debt generally requires compliance with certain financial covenants that restrict our
ability to, among other things, (i) incur additional indebtedness unless our consolidated leverage
ratio would be no greater than 6.00 to 1.00 after the incurrence of the indebtedness, (ii) incur
liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions,
(iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person,
(vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii)
make voluntary prepayments of certain debt, in each case subject to exceptions. SIRIUS operates XM
as an unrestricted subsidiary for purposes of compliance with the covenants contained in its debt
instruments.
Under our debt agreements, the following generally constitute an event of default: (i) a
default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to
comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration
of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) judgment
for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary
guarantees, subject to grace periods where applicable. If an event of default occurs and is
continuing, our debt could become immediately due and payable.
At June 30, 2010, we were in compliance with our financial debt covenants.
(12) Stockholders Equity
Common Stock, par value $0.001 per share
We were authorized to issue up to 9,000,000,000 shares of common stock as of June 30, 2010 and
December 31, 2009. There were 3,885,905,912 and 3,882,659,087 shares of common stock issued and
outstanding as of June 30, 2010 and December 31, 2009, respectively.
20
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
As
of June 30, 2010, approximately 3,692,600,000 shares of common stock were reserved for
issuance in connection with outstanding convertible debt, preferred stock, warrants, incentive
stock awards and common stock to be granted to third parties upon satisfaction of performance
targets.
To facilitate the offering of the Exchangeable Notes, we entered into share lending agreements
with Morgan Stanley Capital Services Inc. (MS) and UBS AG London Branch (UBS) in July 2008,
under which we loaned MS and UBS an aggregate of 262,400,000 shares of our common stock in exchange
for a fee of $.001 per share. The obligations of MS to us under its share lending agreement are
guaranteed by its parent company, Morgan Stanley. During the third quarter of 2009, MS returned to
us 60,000,000 shares of our common stock borrowed in July 2008, which were retired upon receipt. As
of June 30, 2010, there were 202,400,000 shares loaned under the facilities.
Under each share lending agreement, the share loan will terminate in whole or in part, as the
case may be, and the relevant borrowed shares must be returned to us upon the earliest of the
following: (i) the share borrower terminates all or a portion of the loan between it and us,
(ii) we notify the share borrower that some of the Exchangeable Notes as to which borrowed shares
relate have been exchanged, repaid or repurchased or are otherwise no longer outstanding, (iii) the
maturity date of the Exchangeable Notes, December 1, 2014, (iv) the date as of which the entire
principal amount of the Exchangeable Notes ceases to be outstanding as a result of exchange,
repayment, repurchase or otherwise or (v) the termination of the share lending agreement by the
share borrower or by us upon default by the other party, including the bankruptcy of us or the
share borrower or, in the case of the MS share lending agreement, the guarantor. A share borrower
may delay the return of borrowed shares for up to 30 business days (or under certain circumstances,
up to 60 business days) if such share borrower is legally prevented from returning the borrowed
shares to us, in which case the share borrower may, under certain circumstances, choose to pay us
the value of the borrowed shares in cash instead of returning the borrowed shares. Once borrowed
shares are returned to us, they may not be re-borrowed under the share lending agreements. There
were no requirements for the share borrowers to provide collateral.
The shares we loaned to the share borrowers are issued and outstanding for corporate law
purposes, and holders of borrowed shares (other than the share borrowers) have the same rights
under those shares as holders of any of our other outstanding common shares. Under GAAP, the
borrowed shares are not considered outstanding for the purpose of computing and reporting our net
income (loss) per common share. The accounting method may change if, due to a default by either UBS
or MS (or Morgan Stanley, as guarantor), the borrowed shares, or the equivalent value of those
shares, will not be returned to us as required under the share lending agreements.
In January 2004, SIRIUS signed a seven-year agreement with a sports programming provider. Upon
execution of this agreement, SIRIUS delivered 15,173,070 shares of common stock valued at $40,967
to that programming provider. These shares of common stock are subject to transfer restrictions
which lapse over time. We recognized share-based payment expense associated with these shares of
$219 in each of the three months ended June 30, 2010 and 2009 and $1,860 in each of the six months
ended June 30, 2010 and 2009. As of June 30, 2010, there was a $5,560 remaining balance of common
stock value included in other current assets. As of December 31, 2009, there was a $7,420 remaining
balance of common stock value included in other current assets and other long-term assets in the
amount of $5,852 and $1,568, respectively.
Preferred Stock, par value $0.001 per share
We were authorized to issue up to 50,000,000 shares of undesignated preferred stock as of June
30, 2010 and December 31, 2009. There were 24,808,959 shares of Series A Convertible Preferred
Stock (Series A Preferred Stock) issued and outstanding as of June 30, 2010 and December 31,
2009. There were 12,500,000 shares of Convertible Perpetual Preferred Stock, Series B (the Series
B Preferred Stock), issued and outstanding as of June 30, 2010 and December 31, 2009. There were
no shares of Preferred Stock, Series C Junior (the Series C Junior Preferred Stock), issued and
outstanding as of June 30, 2010 and December 31, 2009.
The Series A Preferred Stock is redeemable at the option of the holder at any time for an
equal number of shares of our common stock.
The Series B Preferred Stock is convertible into shares of our common stock at the rate of
206.9581409 shares of common stock for each share of Series B Preferred Stock, representing
approximately 40% of our outstanding shares of common stock (after giving effect to such
conversion). As the holder of the Series B Preferred Stock, Liberty Radio LLC is entitled to a
number of votes equal to the number of shares of our common stock into which each such Series B
Preferred Stock share is convertible. Liberty Radio LLC will also receive dividends and
distributions ratably with our common stock, on an as-converted basis. With respect to dividend
rights, the Series B Preferred Stock ranks evenly with our common stock, the Series A Preferred
Stock, and each other class or series
21
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
of our equity securities not expressly provided as ranking senior to the Series B Preferred
Stock. With respect to liquidation rights, the Series B Preferred Stock ranks evenly with each
other class or series of our equity securities not expressly provided as ranking senior to the
Series B Preferred Stock, and will rank senior to our common stock and the Series A Preferred
Stock.
In 2009, we accounted for the issuance of Series B Preferred Stock by recording a $227,716
increase to additional paid-in capital for the amount of allocated proceeds received and an
additional $186,188 increase to paid-in capital for the beneficial conversion feature, which was
recognized as a charge to retained earnings.
In 2009, our board of directors created and reserved for issuance in accordance with the
Rights Plan (as described below) 9,000 shares of the Series C Junior Preferred Stock. The shares of
Series C Junior Preferred Stock are not redeemable and rank, with respect to the payment of
dividends and the distribution of assets, junior to all other series of our preferred stock, unless
the terms of such series shall so provide.
Warrants
We have issued warrants to purchase shares of common stock in connection with distribution and
programming agreements, satellite purchase agreements and certain debt issuances. As of June 30,
2010, approximately 46,946,000 warrants to acquire an equal number of shares of common stock with
an average exercise price of $3.00 per share were outstanding. Warrants vest over time or upon the
achievement of milestones and expire at various times through 2015. We did not have any warrant
related expense for both the three months ended June 30, 2010 and 2009 and $0 and $2,522 for the
six months ended June 30, 2010 and 2009, respectively.
Rights Plan
In April 2009, our board of directors adopted a rights plan. The terms of the rights and the
rights plan are set forth in a Rights Agreement dated as of April 29, 2009 (the Rights Plan). The
Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our
outstanding common stock (assuming for purposes of this calculation that all of our outstanding
convertible preferred stock is converted into common stock) without the approval of our board of
directors. The Rights Plan will continue in effect until August 1, 2011, unless it is terminated
or redeemed earlier by our board of directors.
(13) Benefits Plans
We maintain five share-based benefits plans. We satisfy awards and options granted under these
plans through the issuance of new shares. We recognized share-based payment expense of $15,682 and
$29,482 for the three months ended June 30, 2010 and 2009, respectively, and $31,223 and $45,496
for the six months ended June 30, 2010 and 2009, respectively. We did not realize any income tax
benefits from share-based benefits plans during the three and six months ended June 30, 2010 and
2009 as a result of the full valuation allowance is maintained for substantially all net deferred
tax assets.
2009 Long-Term Stock Incentive Plan
In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive
Plan (the 2009 Plan). Employees, consultants and members of our board of directors are eligible
to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options,
restricted stock, restricted stock units and other stock-based awards that the compensation
committee of our board of directors may deem appropriate. Vesting and other terms of stock-based
awards are set forth in the agreements with the individuals receiving the awards. Stock-based
awards granted under the 2009 Plan are generally subject to a vesting requirement. Stock-based
awards generally expire ten years from the date of grant. Each restricted stock unit entitles the
holder to receive one share of common stock upon vesting. As of June 30, 2010, approximately
323,160,838 shares of common stock were available for future grants under the 2009 Plan.
Other Plans
SIRIUS and XM maintain four other share-based benefit plans the XM 2007 Stock Incentive
Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the XM
1998 Shares Award Plan and the XM Talent Option Plan. These plans generally provided for the grant
of stock options, restricted stock, restricted stock units and other stock-based awards. No further
awards may be made under these plans. Outstanding awards under these plans are being continued.
22
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The following table summarizes the weighted-average assumptions used to compute the fair value
of options granted to employees and members of our board of directors during the three and six
months ended June 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Six Months |
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
2.2% |
|
|
|
2.5% |
|
|
|
2.5% |
|
|
|
2.5% |
|
Expected
life of options - years |
|
|
5.11 |
|
|
|
4.71 |
|
|
|
5.06 |
|
|
|
4.71 |
|
Expected stock price volatility |
|
|
86% |
|
|
|
88% |
|
|
|
85% |
|
|
|
88% |
|
Expected dividend yield |
|
|
0% |
|
|
|
0% |
|
|
|
0% |
|
|
|
0% |
|
The following table summarizes the range of assumptions used to compute the fair value of
options granted to third parties, other than non-employee members of our board of directors, during
the three and six months ended June 30, 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
For the Six Months |
|
|
Ended June 30, |
|
Ended June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
Risk-free interest rate |
|
|
N/A |
|
|
|
1.64 - 2.54% |
|
|
|
N/A |
|
|
|
1.08 - 2.54% |
|
Expected
life - years |
|
|
N/A |
|
|
|
2.84 - 4.71 |
|
|
|
N/A |
|
|
|
2.50 - 6.19 |
|
Expected stock price volatility |
|
|
N/A |
|
|
|
88% |
|
|
|
N/A |
|
|
|
83 - 88% |
|
Expected dividend yield |
|
|
N/A |
|
|
|
0% |
|
|
|
N/A |
|
|
|
0% |
|
There were no options granted to third parties during the three and six months ended June 30,
2010.
The following table summarizes stock option activity under our share-based payment plans for
the six months ended June 30, 2010 (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual Term |
|
|
Intrinsic |
|
|
|
Shares |
|
Price |
|
(Years) |
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009 |
|
|
364,792 |
|
|
$ |
1.44 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
14,202 |
|
|
|
0.69 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(284 |
) |
|
|
0.23 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(9,674 |
) |
|
|
3.44 |
|
|
|
|
|
|
|
|
|
| | | | | | | | | | | | |
Outstanding, June 30, 2010 |
|
|
369,036 |
|
|
|
1.36 |
|
|
|
6.56 |
|
|
$ |
120,216 |
|
| | | | | | | | | | | | |
Exercisable, June 30, 2010 |
|
|
78,627 |
|
|
$ |
4.12 |
|
|
|
4.24 |
|
|
$ |
1,393 |
|
| | | | | | | | | | | | |
The weighted average grant date fair value of options granted during the six months ended June
30, 2010 and 2009 was $0.47 and $0.29, respectively. The total intrinsic value of stock options
exercised during the six months ended June 30, 2010 was $221. The total intrinsic value of stock
options exercised during the six months ended June 30, 2009 was $0; no options were exercised in
the period.
We recognized share-based payment expense associated with stock options of $10,254 and $20,060
for the three months ended June 30, 2010 and 2009, respectively, and $20,780 and $32,312 for the
six months ended June 30, 2010 and 2009, respectively.
23
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The following table summarizes the nonvested restricted stock and restricted stock unit
activity under our share-based payment plans for the six months ended June 30, 2010 (shares in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
Grant Date |
|
| | Shares | | Fair Value |
| | | | | | | | |
Nonvested, December 31, 2009 |
|
|
6,919 |
|
|
$ |
2.65 |
|
Granted |
|
|
- |
|
|
|
- |
|
Vested |
|
|
(4,191 |
) |
|
|
2.85 |
|
Forfeited |
|
|
(185 |
) |
|
|
2.69 |
|
| | | | | | |
Nonvested, June 30, 2010 |
|
|
2,543 |
|
|
$ |
2.58 |
|
|
|
|
|
|
|
|
The weighted average grant date fair value of restricted stock units granted during the six
months ended June 30, 2010 was $0; no restricted stock units were granted during the period. The
weighted average grant date fair value of restricted stock units granted during the six months
ended June 30, 2009 was $0.37. The total intrinsic value of restricted stock units that vested
during the six months ended June 30, 2010 and 2009 was $3,885 and $10,721, respectively.
We recognized share-based payment expense associated with restricted stock units and shares of
restricted stock of $2,116 and $6,000 for the three months ended June 30, 2010 and 2009,
respectively, and $4,674 and $12,857 for the six months ended June 30, 2010 and 2009, respectively.
Total unrecognized compensation costs related to unvested share-based payment awards granted
to employees and members of our board of directors at June 30, 2010 and December 31, 2009, net of
estimated forfeitures, was $95,666 and $114,068, respectively. The weighted-average period over
which the compensation expense for these awards is expected to be recognized is three years as of
June 30, 2010.
401(k) Savings Plan
We sponsor the Sirius XM Radio 401(k) Savings Plan (the Sirius XM Plan) for eligible
employees.
The Sirius XM Plan allows eligible employees to voluntarily contribute from 1% to 50% of their
pre-tax eligible earnings, subject to certain defined limits. We match 50% of an employees
voluntary contributions, up to 6% of an employees pre-tax salary, in the form of shares of common
stock. Employer matching contributions under the Sirius XM Plan vest at a rate of 331/3% for each
year of employment and are fully vested after three years of employment for all current and future
contributions. Legacy XM Plan participants are fully vested for all current and future employer
contributions. Share-based payment expense resulting from the matching contribution to the plans
was $718 and $666 for the three months ended June 30, 2010 and 2009, respectively, and $1,925 and
$1,292 for the six months ended June 30, 2010 and 2009, respectively.
We may also elect to contribute to the profit sharing portion of the Sirius XM Plan based upon
the total eligible compensation of eligible participants. These additional contributions in the
form of shares of common stock are determined by the compensation committee of our board of
directors. Employees are only eligible to receive profit-sharing contributions during any year in
which they are employed on the last day of the year. Profit-sharing contribution expense (benefit)
was $2,594 and $2,756 for the three months ended June 30, 2010 and 2009, respectively, and $3,844
and $(965) for the six months ended June 30, 2010 and 2009, respectively.
24
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(14) Commitments and Contingencies
The following table summarizes our expected contractual cash commitments as of June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2011 |
|
2012 |
|
2013 |
|
2014 |
|
Thereafter |
|
Total |
Long-term debt obligations |
|
$ |
5,341 |
|
|
$ |
234,127 |
|
|
$ |
1,539 |
|
|
$ |
1,305,386 |
|
|
$ |
555,442 |
|
|
$ |
1,057,000 |
|
|
$ |
3,158,835 |
|
Cash interest payments |
|
|
151,410 |
|
|
|
302,323 |
|
|
|
294,620 |
|
|
|
264,919 |
|
|
|
133,816 |
|
|
|
60,058 |
|
|
|
1,207,146 |
|
Satellite and transmission |
|
|
82,546 |
|
|
|
67,817 |
|
|
|
5,382 |
|
|
|
5,898 |
|
|
|
14,385 |
|
|
|
34,655 |
|
|
|
210,683 |
|
Programming and content |
|
|
99,791 |
|
|
|
167,862 |
|
|
|
127,782 |
|
|
|
33,265 |
|
|
|
10,350 |
|
|
|
4,000 |
|
|
|
443,050 |
|
Marketing and distribution |
|
|
49,562 |
|
|
|
29,117 |
|
|
|
18,764 |
|
|
|
7,015 |
|
|
|
3,090 |
|
|
|
1,500 |
|
|
|
109,048 |
|
Satellite incentive payments |
|
|
3,729 |
|
|
|
8,851 |
|
|
|
10,505 |
|
|
|
11,100 |
|
|
|
10,807 |
|
|
|
63,535 |
|
|
|
108,527 |
|
Operating lease obligations |
|
|
24,436 |
|
|
|
26,283 |
|
|
|
21,885 |
|
|
|
17,936 |
|
|
|
11,742 |
|
|
|
6,806 |
|
|
|
109,088 |
|
Other |
|
|
25,323 |
|
|
|
24,643 |
|
|
|
7,782 |
|
|
|
3 |
|
|
|
- |
|
|
|
- |
|
|
|
57,751 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
442,138 |
|
|
$ |
861,023 |
|
|
$ |
488,259 |
|
|
$ |
1,645,522 |
|
|
$ |
739,632 |
|
|
$ |
1,227,554 |
|
|
$ |
5,404,128 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt obligations. Long-term debt obligations include principal payments on
outstanding debt and capital lease obligations. Included in the chart above is the aggregate
principal balance of $5,260 of the XM 9.75% Notes. The XM 9.75% Notes, originally scheduled to
mature in 2014, were called for redemption in August 2010 and will be redeemed on August 16, 2010.
The table above continues to reflect the contractual payments of interest and principal for these
notes.
Cash interest payments. Cash interest payments include interest due on outstanding debt
through maturity.
Satellite and transmission. We have entered into agreements with third parties to operate and
maintain the off-site satellite telemetry, tracking and control facilities and certain components
of our terrestrial repeater networks. We have also entered into various agreements to design and
construct satellites and related launch vehicles for use in our systems.
SIRIUS has an agreement with Space Systems/Loral to design and construct a sixth satellite,
FM-6. In January 2008, SIRIUS entered into an agreement with ILS to secure a satellite launch on a
Proton rocket.
Space Systems/Loral has constructed a fifth satellite, XM-5, for use in the XM system. In
October 2009, we entered into an agreement with ILS to secure a satellite launch for XM-5 on a
Proton rocket.
Programming and content. We have entered into various programming agreements. Under the terms
of these agreements, we are obligated to provide payments to other entities that may include fixed
payments, advertising commitments and revenue sharing arrangements.
Marketing and distribution. We have entered into various marketing, sponsorship and
distribution agreements to promote our brand and are obligated to make payments to sponsors,
retailers, automakers and radio manufacturers under these agreements. Certain programming and
content agreements also require us to purchase advertising on properties owned or controlled by the
licensors. We also reimburse automakers for certain engineering and development costs associated
with the incorporation of satellite radios into vehicles they manufacture. In addition, in the
event certain new products are not shipped by a distributor to its customers within 90 days of the
distributors receipt of goods, we have agreed to purchase and take title to the product.
Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer
of XMs four in-orbit satellites, may be entitled to future in-orbit performance payments with
respect to two of XMs four satellites. As of June 30, 2010, we have accrued $28,575 related to
contingent in-orbit performance payments for XM-3 and XM-4 based on expected operating performance
over their fifteen year design life. Boeing may also be entitled to an additional $10,000 if XM-4
continues to operate above baseline specifications during the five years beyond the satellites
fifteen-year design life.
Space Systems/Loral, the manufacturer of SIRIUS fifth satellite, may be entitled to future
in-orbit performance payments. As of June 30, 2010, we have accrued $13,706 related to contingent
performance payments for FM-5 based on expected operating performance over its fifteen-year design
life.
Operating lease obligations. We have entered into cancelable and non-cancelable operating
leases for office space, equipment and terrestrial repeaters. These leases provide for minimum
lease payments, additional operating expense charges, leasehold
25
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
improvements and rent escalations
that have initial terms ranging from one to fifteen years, and certain leases that have options to
renew. The effect of the rent holidays and rent concessions are recognized on a straight-line basis
over the lease term, including reasonably assured renewal periods.
Other. We have entered into various agreements with third parties for general operating
purposes. In addition to the minimum contractual cash commitments described above, we have entered
into agreements with other variable cost arrangements. These future costs are dependent upon many
factors, including subscriber growth, and are difficult to anticipate; however, these costs may be
substantial. We may enter into additional programming, distribution, marketing and other agreements
that contain similar variable cost provisions.
We do not have any other significant off-balance sheet arrangements that are reasonably likely
to have a material effect on our financial condition, results of operations, liquidity, capital
expenditures or capital resources.
Legal Proceedings
FCC Merger Order. On July 25, 2008, the FCC adopted an order approving the Merger. In
September 2008, Mt. Wilson FM Broadcasters, Inc. filed a Petition for Reconsideration of the FCCs
merger order. This Petition for Reconsideration remains pending.
Advanced Recording Functionality Disputes/Atlantic Recording Corporation, BMG Music, Capital
Records, Inc., Elektra Entertainment Group Inc., Interscope Records, Motown Record Company, L.P.,
Sony BMG Music Entertainment, UMG Recordings, Inc., Virgin Records, Inc. and Warner Bros. Records
Inc. v. XM Satellite Radio Inc. Commencing in May 2006, holders of copyrights in sound recordings
and holders of copyrights in musical works brought, or threatened to bring, actions against SIRIUS
and XM in connection with the advanced recording functionality included in the XM Inno, the XM
NeXus, the XM Helix, the XM SkyFi3 line of radios, the SIRIUS S50 and the SIRIUS Stiletto line of
radios. The plaintiffs brought this action in the United States District Court for the Southern
District of New York, seeking monetary damages and equitable relief. XM has settled these claims
with the major record companies and a significant number of music publishers. XM is in discussions
to settle these claims with certain independent record companies and other music publishers.
Prior to introducing retail sales of devices with advanced recording functionality, SIRIUS
entered into agreements with the major recording companies concerning such devices. SIRIUS is in
discussions to settle the remaining claims with certain independent record companies and music
publishers.
SIRIUS and XM believe that the distribution and use of their products do not violate
applicable copyright laws. There can be no assurance regarding the ultimate outcome of these
matters and settlement discussions, or the significance, if any, to our business, consolidated
results of operations or financial position.
Other Matters. In the ordinary course of business, we are a defendant in various lawsuits and
arbitration proceedings, including actions filed by subscribers, both on behalf of themselves and
on a class action basis; former employees; parties to contracts or leases; and owners of patents,
trademarks, copyrights or other intellectual property. None of these actions are, in our opinion,
likely to have a material adverse effect on our cash flows, financial position or results of
operations.
(15) Condensed Consolidating Financial Information
Sirius Asset Management, LLC and Satellite CD Radio, Inc. (collectively, the Guarantor
Subsidiaries) are our wholly-owned subsidiaries. The Guarantor Subsidiaries have fully and
unconditionally, jointly and severally, directly or indirectly, guaranteed, on an unsecured basis,
the debt issued by us in connection with certain of our financings. Our unrestricted subsidiary,
XM, and its consolidated subsidiaries are non-guarantor subsidiaries (collectively, the
Non-Guarantor Subsidiaries).
These condensed consolidating financial statements should be read in conjunction with the
consolidated financial statements of Sirius XM Radio Inc. and Subsidiaries.
26
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Basis of Presentation
In presenting our condensed consolidating financial statements, the equity method of
accounting has been applied to (i) our interests in the Guarantor Subsidiaries and Non-Guarantor
Subsidiaries and (ii) the Guarantor Subsidiaries interests in the non-Guarantor Subsidiaries,
where applicable, even though all such subsidiaries meet the requirements to be consolidated under
GAAP.
All intercompany balances and transactions between us, the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries have been eliminated, as shown in the column Eliminations.
Our accounting bases in all subsidiaries, including goodwill and identified intangible assets,
have been pushed down to the applicable subsidiaries.
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
329,315 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
370,446 |
|
|
$ |
- |
|
|
$ |
699,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
143,579 |
|
|
|
- |
|
|
|
- |
|
|
|
122,542 |
|
|
|
- |
|
|
|
266,121 |
|
Subscriber acquisition costs |
|
|
71,557 |
|
|
|
- |
|
|
|
- |
|
|
|
38,826 |
|
|
|
- |
|
|
|
110,383 |
|
Sales and marketing |
|
|
22,104 |
|
|
|
- |
|
|
|
- |
|
|
|
34,073 |
|
|
|
- |
|
|
|
56,177 |
|
Engineering, design and development |
|
|
6,255 |
|
|
|
- |
|
|
|
- |
|
|
|
4,992 |
|
|
|
- |
|
|
|
11,247 |
|
General and administrative |
|
|
30,776 |
|
|
|
- |
|
|
|
- |
|
|
|
28,390 |
|
|
|
- |
|
|
|
59,166 |
|
Depreciation and amortization |
|
|
32,686 |
|
|
|
126 |
|
|
|
- |
|
|
|
36,418 |
|
|
|
- |
|
|
|
69,230 |
|
Restructuring, impairments and related costs |
|
|
1,101 |
|
|
|
- |
|
|
|
- |
|
|
|
702 |
|
|
|
- |
|
|
|
1,803 |
|
|
| |
| |
| |
| |
| |
| |
Total operating expenses |
|
|
308,058 |
|
|
|
126 |
|
|
|
- |
|
|
|
265,943 |
|
|
|
- |
|
|
|
574,127 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
21,257 |
|
|
|
(126 |
) |
|
|
- |
|
|
|
104,503 |
|
|
|
- |
|
|
|
125,634 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(25,202 |
) |
|
|
- |
|
|
|
- |
|
|
|
(56,879 |
) |
|
|
5,279 |
|
|
|
(76,802 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
(27,597 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,274 |
) |
|
|
- |
|
|
|
(31,871 |
) |
Loss on change in value of embedded
derivative |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(11,312 |
) |
|
|
11,312 |
|
|
|
- |
|
Interest and investment income (loss) |
|
|
31,030 |
|
|
|
- |
|
|
|
- |
|
|
|
(2,281 |
) |
|
|
(28,371 |
) |
|
|
378 |
|
Other income |
|
|
(273 |
) |
|
|
- |
|
|
|
- |
|
|
|
(203 |
) |
|
|
(125 |
) |
|
|
(601 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(785 |
) |
|
|
(126 |
) |
|
|
- |
|
|
|
29,554 |
|
|
|
(11,905 |
) |
|
|
16,738 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(412 |
) |
|
|
- |
|
|
|
(538 |
) |
|
|
(516 |
) |
|
|
- |
|
|
|
(1,466 |
) |
|
| |
| |
| |
| |
| |
| |
Net income (loss) |
|
|
(1,197 |
) |
|
|
(126 |
) |
|
|
(538 |
) |
|
|
29,038 |
|
|
|
(11,905 |
) |
|
|
15,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
stockholders |
|
$ |
(1,197 |
) |
|
$ |
(126 |
) |
|
$ |
(538 |
) |
|
$ |
29,038 |
|
|
$ |
(11,905 |
) |
|
$ |
15,272 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
283,796 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
307,033 |
|
|
$ |
- |
|
|
$ |
590,829 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
133,383 |
|
|
|
8 |
|
|
|
- |
|
|
|
121,041 |
|
|
|
- |
|
|
|
254,432 |
|
Subscriber acquisition costs |
|
|
45,342 |
|
|
|
- |
|
|
|
- |
|
|
|
22,309 |
|
|
|
- |
|
|
|
67,651 |
|
Sales and marketing |
|
|
18,191 |
|
|
|
- |
|
|
|
- |
|
|
|
30,502 |
|
|
|
- |
|
|
|
48,693 |
|
Engineering, design and development |
|
|
5,313 |
|
|
|
- |
|
|
|
- |
|
|
|
6,631 |
|
|
|
- |
|
|
|
11,944 |
|
General and administrative |
|
|
31,996 |
|
|
|
- |
|
|
|
- |
|
|
|
34,720 |
|
|
|
- |
|
|
|
66,716 |
|
Depreciation and amortization |
|
|
27,070 |
|
|
|
39 |
|
|
|
- |
|
|
|
50,049 |
|
|
|
- |
|
|
|
77,158 |
|
Restructuring, impairments and related costs |
|
|
415 |
|
|
|
- |
|
|
|
- |
|
|
|
26,585 |
|
|
|
- |
|
|
|
27,000 |
|
|
| |
| |
| |
| |
| |
| |
Total operating expenses |
|
|
261,710 |
|
|
|
47 |
|
|
|
- |
|
|
|
291,837 |
|
|
|
- |
|
|
|
553,594 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
22,086 |
|
|
|
(47 |
) |
|
|
- |
|
|
|
15,196 |
|
|
|
- |
|
|
|
37,235 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(23,828 |
) |
|
|
- |
|
|
|
- |
|
|
|
(87,926 |
) |
|
|
13,674 |
|
|
|
(98,080 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
(307 |
) |
|
|
- |
|
|
|
- |
|
|
|
(107,449 |
) |
|
|
- |
|
|
|
(107,756 |
) |
Loss on change in value of embedded
derivative |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(19,800 |
) |
|
|
19,800 |
|
|
|
- |
|
Interest and investment income (loss) |
|
|
(186,246 |
) |
|
|
- |
|
|
|
- |
|
|
|
(997 |
) |
|
|
196,566 |
|
|
|
9,323 |
|
Other income |
|
|
(4,825 |
) |
|
|
- |
|
|
|
- |
|
|
|
5,574 |
|
|
|
- |
|
|
|
749 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(193,120 |
) |
|
|
(47 |
) |
|
|
- |
|
|
|
(195,402 |
) |
|
|
230,040 |
|
|
|
(158,529 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
(537 |
) |
|
|
(578 |
) |
|
|
- |
|
|
|
(1,115 |
) |
|
| |
| |
| |
| |
| |
| |
Net income (loss) |
|
|
(193,120 |
) |
|
|
(47 |
) |
|
|
(537 |
) |
|
|
(195,980 |
) |
|
|
230,040 |
|
|
|
(159,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
stockholders |
|
$ |
(193,120 |
) |
|
$ |
(47 |
) |
|
$ |
(537 |
) |
|
$ |
(195,980 |
) |
|
$ |
230,040 |
|
|
$ |
(159,644 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
28
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
639,748 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
723,796 |
|
|
$ |
- |
|
|
$ |
1,363,544 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
287,486 |
|
|
|
- |
|
|
|
- |
|
|
|
239,500 |
|
|
|
- |
|
|
|
526,986 |
|
Subscriber acquisition costs |
|
|
128,684 |
|
|
|
- |
|
|
|
- |
|
|
|
71,078 |
|
|
|
- |
|
|
|
199,762 |
|
Sales and marketing |
|
|
38,635 |
|
|
|
- |
|
|
|
- |
|
|
|
66,659 |
|
|
|
- |
|
|
|
105,294 |
|
Engineering, design and development |
|
|
12,461 |
|
|
|
- |
|
|
|
- |
|
|
|
10,223 |
|
|
|
- |
|
|
|
22,684 |
|
General and administrative |
|
|
61,818 |
|
|
|
- |
|
|
|
- |
|
|
|
54,928 |
|
|
|
- |
|
|
|
116,746 |
|
Depreciation and amortization |
|
|
65,300 |
|
|
|
308 |
|
|
|
- |
|
|
|
73,887 |
|
|
|
- |
|
|
|
139,495 |
|
Restructuring, impairments and related costs |
|
|
1,101 |
|
|
|
- |
|
|
|
- |
|
|
|
702 |
|
|
|
- |
|
|
|
1,803 |
|
|
| |
| |
| |
| |
| |
| |
Total operating expenses |
|
|
595,485 |
|
|
|
308 |
|
|
|
- |
|
|
|
516,977 |
|
|
|
- |
|
|
|
1,112,770 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
44,263 |
|
|
|
(308 |
) |
|
|
- |
|
|
|
206,819 |
|
|
|
- |
|
|
|
250,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(47,810 |
) |
|
|
- |
|
|
|
- |
|
|
|
(116,878 |
) |
|
|
10,018 |
|
|
|
(154,670 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
(30,155 |
) |
|
|
- |
|
|
|
- |
|
|
|
(4,282 |
) |
|
|
- |
|
|
|
(34,437 |
) |
Loss on change in value of embedded
derivative |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(48,603 |
) |
|
|
48,603 |
|
|
|
- |
|
Interest and investment income (loss) |
|
|
32,759 |
|
|
|
- |
|
|
|
- |
|
|
|
(3,903 |
) |
|
|
(31,748 |
) |
|
|
(2,892 |
) |
Other income |
|
|
(273 |
) |
|
|
- |
|
|
|
- |
|
|
|
1,126 |
|
|
|
(125 |
) |
|
|
728 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(1,216 |
) |
|
|
(308 |
) |
|
|
- |
|
|
|
34,279 |
|
|
|
26,748 |
|
|
|
59,503 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
(412 |
) |
|
|
- |
|
|
|
(1,076 |
) |
|
|
(1,145 |
) |
|
|
- |
|
|
|
(2,633 |
) |
|
| |
| |
| |
| |
| |
| |
Net income (loss) |
|
|
(1,628 |
) |
|
|
(308 |
) |
|
|
(1,076 |
) |
|
|
33,134 |
|
|
|
26,748 |
|
|
|
56,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
stockholders |
|
$ |
(1,628 |
) |
|
$ |
(308 |
) |
|
$ |
(1,076 |
) |
|
$ |
33,134 |
|
|
$ |
26,748 |
|
|
$ |
56,870 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
568,354 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
609,454 |
|
|
$ |
- |
|
|
$ |
1,177,808 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
273,362 |
|
|
|
8 |
|
|
|
- |
|
|
|
250,417 |
|
|
|
- |
|
|
|
523,787 |
|
Subscriber acquisition costs |
|
|
92,082 |
|
|
|
- |
|
|
|
- |
|
|
|
48,637 |
|
|
|
- |
|
|
|
140,719 |
|
Sales and marketing |
|
|
33,484 |
|
|
|
- |
|
|
|
- |
|
|
|
66,632 |
|
|
|
- |
|
|
|
100,116 |
|
Engineering, design and development |
|
|
10,340 |
|
|
|
- |
|
|
|
- |
|
|
|
11,383 |
|
|
|
- |
|
|
|
21,723 |
|
General and administrative |
|
|
59,558 |
|
|
|
- |
|
|
|
- |
|
|
|
66,473 |
|
|
|
- |
|
|
|
126,031 |
|
Depreciation and amortization |
|
|
54,475 |
|
|
|
174 |
|
|
|
- |
|
|
|
104,875 |
|
|
|
- |
|
|
|
159,524 |
|
Restructuring, impairments and related costs |
|
|
1,029 |
|
|
|
- |
|
|
|
- |
|
|
|
26,585 |
|
|
|
- |
|
|
|
27,614 |
|
|
| |
| |
| |
| |
| |
| |
Total operating expenses |
|
|
524,330 |
|
|
|
182 |
|
|
|
- |
|
|
|
575,002 |
|
|
|
- |
|
|
|
1,099,514 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
44,024 |
|
|
|
(182 |
) |
|
|
- |
|
|
|
34,452 |
|
|
|
- |
|
|
|
78,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
(39,802 |
) |
|
|
- |
|
|
|
- |
|
|
|
(155,838 |
) |
|
|
29,582 |
|
|
|
(166,058 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
(17,637 |
) |
|
|
- |
|
|
|
- |
|
|
|
(108,076 |
) |
|
|
- |
|
|
|
(125,713 |
) |
Loss on change in value of embedded
derivative |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(78,003 |
) |
|
|
78,003 |
|
|
|
- |
|
Interest and investment income (loss) |
|
|
(301,761 |
) |
|
|
- |
|
|
|
- |
|
|
|
(7,406 |
) |
|
|
311,324 |
|
|
|
2,157 |
|
Other income |
|
|
(4,700 |
) |
|
|
- |
|
|
|
- |
|
|
|
5,959 |
|
|
|
- |
|
|
|
1,259 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(319,876 |
) |
|
|
(182 |
) |
|
|
- |
|
|
|
(308,912 |
) |
|
|
418,909 |
|
|
|
(210,061 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
(1,074 |
) |
|
|
(1,155 |
) |
|
|
- |
|
|
|
(2,229 |
) |
|
| |
| |
| |
| |
| |
| |
Net income (loss) |
|
|
(319,876 |
) |
|
|
(182 |
) |
|
|
(1,074 |
) |
|
|
(310,067 |
) |
|
|
418,909 |
|
|
|
(212,290 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
(186,188 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(186,188 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
stockholders |
|
$ |
(506,064 |
) |
|
$ |
(182 |
) |
|
$ |
(1,074 |
) |
|
$ |
(310,067 |
) |
|
$ |
418,909 |
|
|
$ |
(398,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
30
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
162,864 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
95,990 |
|
|
$ |
- |
|
|
$ |
258,854 |
|
Accounts receivable, net |
|
|
123,170 |
|
|
|
- |
|
|
|
- |
|
|
|
73,379 |
|
|
|
- |
|
|
|
196,549 |
|
Due from subsidiaries/affiliates |
|
|
148,692 |
|
|
|
3,333 |
|
|
|
- |
|
|
|
683 |
|
|
|
(152,708 |
) |
|
|
- |
|
Inventory, net |
|
|
8,299 |
|
|
|
- |
|
|
|
- |
|
|
|
5,427 |
|
|
|
- |
|
|
|
13,726 |
|
Prepaid expenses |
|
|
45,071 |
|
|
|
- |
|
|
|
- |
|
|
|
148,369 |
|
|
|
- |
|
|
|
193,440 |
|
Related party current assets |
|
|
3,849 |
|
|
|
- |
|
|
|
- |
|
|
|
1,593 |
|
|
|
- |
|
|
|
5,442 |
|
Deferred tax asset |
|
|
7,207 |
|
|
|
- |
|
|
|
- |
|
|
|
70,363 |
|
|
|
- |
|
|
|
77,570 |
|
Other current assets |
|
|
8,876 |
|
|
|
- |
|
|
|
- |
|
|
|
5,837 |
|
|
|
(122 |
) |
|
|
14,591 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
508,028 |
|
|
|
3,333 |
|
|
|
- |
|
|
|
401,641 |
|
|
|
(152,830 |
) |
|
|
760,172 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
890,937 |
|
|
|
16,493 |
|
|
|
- |
|
|
|
857,917 |
|
|
|
- |
|
|
|
1,765,347 |
|
Investment in subsidiaries/affiliates |
|
|
(568,632 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
568,632 |
|
|
|
- |
|
Restricted investments |
|
|
3,146 |
|
|
|
- |
|
|
|
- |
|
|
|
250 |
|
|
|
- |
|
|
|
3,396 |
|
Deferred financing fees, net |
|
|
1,552 |
|
|
|
- |
|
|
|
- |
|
|
|
65,137 |
|
|
|
(7,465 |
) |
|
|
59,224 |
|
Intangible assets, net |
|
|
- |
|
|
|
- |
|
|
|
83,654 |
|
|
|
2,577,347 |
|
|
|
- |
|
|
|
2,661,001 |
|
Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,834,856 |
|
|
|
1,834,856 |
|
Due from subsidiaries/affiliates |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Related party long-term assets |
|
|
347 |
|
|
|
- |
|
|
|
- |
|
|
|
28,221 |
|
|
|
(152 |
) |
|
|
28,416 |
|
Other long-term assets |
|
|
10,040 |
|
|
|
- |
|
|
|
- |
|
|
|
78,480 |
|
|
|
- |
|
|
|
88,520 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
845,418 |
|
|
$ |
19,826 |
|
|
$ |
83,654 |
|
|
$ |
4,008,993 |
|
|
$ |
2,243,041 |
|
|
$ |
7,200,932 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
292,828 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
226,786 |
|
|
$ |
(433 |
) |
|
$ |
519,181 |
|
Accrued interest |
|
|
24,715 |
|
|
|
- |
|
|
|
- |
|
|
|
43,826 |
|
|
|
- |
|
|
|
68,541 |
|
Due to subsidiaries/affiliates |
|
|
- |
|
|
|
20,551 |
|
|
|
477 |
|
|
|
131,264 |
|
|
|
(152,292 |
) |
|
|
- |
|
Current portion of deferred revenue |
|
|
610,045 |
|
|
|
- |
|
|
|
- |
|
|
|
558,682 |
|
|
|
363 |
|
|
|
1,169,090 |
|
Current portion of deferred credit on executory contracts |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
263,998 |
|
|
|
- |
|
|
|
263,998 |
|
Current maturities of long-term debt |
|
|
1,422 |
|
|
|
- |
|
|
|
- |
|
|
|
6,858 |
|
|
|
- |
|
|
|
8,280 |
|
Related party current liabilities |
|
|
5,417 |
|
|
|
- |
|
|
|
- |
|
|
|
7,364 |
|
|
|
- |
|
|
|
12,781 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
934,427 |
|
|
|
20,551 |
|
|
|
477 |
|
|
|
1,238,778 |
|
|
|
(152,362 |
) |
|
|
2,041,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
123,826 |
|
|
|
- |
|
|
|
- |
|
|
|
151,386 |
|
|
|
- |
|
|
|
275,212 |
|
Deferred credit on executory contracts |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
647,691 |
|
|
|
- |
|
|
|
647,691 |
|
Long-term debt |
|
|
1,069,881 |
|
|
|
- |
|
|
|
- |
|
|
|
1,456,873 |
|
|
|
135,390 |
|
|
|
2,662,144 |
|
Long-term related party debt |
|
|
195,369 |
|
|
|
- |
|
|
|
- |
|
|
|
159,674 |
|
|
|
2,763 |
|
|
|
357,806 |
|
Deferred tax liability |
|
|
7,217 |
|
|
|
- |
|
|
|
17,984 |
|
|
|
922,267 |
|
|
|
- |
|
|
|
947,468 |
|
Related party long-term liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
26,655 |
|
|
|
- |
|
|
|
26,655 |
|
Other long-term liabilities |
|
|
22,888 |
|
|
|
- |
|
|
|
- |
|
|
|
38,769 |
|
|
|
- |
|
|
|
61,657 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,353,608 |
|
|
|
20,551 |
|
|
|
18,461 |
|
|
|
4,642,093 |
|
|
|
(14,209 |
) |
|
|
7,020,504 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred and common stock |
|
|
3,923 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,923 |
|
Accumulated other comprehensive loss |
|
|
(5,987 |
) |
|
|
- |
|
|
|
- |
|
|
|
(5,987 |
) |
|
|
5,987 |
|
|
|
(5,987 |
) |
Additional paid-in-capital |
|
|
10,379,730 |
|
|
|
- |
|
|
|
83,654 |
|
|
|
6,060,660 |
|
|
|
(6,144,314 |
) |
|
|
10,379,730 |
|
Retained earnings (accumulated deficit) |
|
|
(11,885,856 |
) |
|
|
(725 |
) |
|
|
(18,461 |
) |
|
|
(6,687,773 |
) |
|
|
8,395,577 |
|
|
|
(10,197,238 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(1,508,190 |
) |
|
|
(725 |
) |
|
|
65,193 |
|
|
|
(633,100 |
) |
|
|
2,257,250 |
|
|
|
180,428 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity |
|
$ |
845,418 |
|
|
$ |
19,826 |
|
|
$ |
83,654 |
|
|
$ |
4,008,993 |
|
|
$ |
2,243,041 |
|
|
$ |
7,200,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non - Guarantors |
|
Eliminations |
|
Inc. |
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
171,265 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
212,224 |
|
|
$ |
- |
|
|
$ |
383,489 |
|
Accounts receivable, net |
|
|
102,276 |
|
|
|
- |
|
|
|
- |
|
|
|
60,042 |
|
|
|
- |
|
|
|
162,318 |
|
Due from subsidiaries/affiliates |
|
|
127,110 |
|
|
|
- |
|
|
|
- |
|
|
|
930 |
|
|
|
(128,040 |
) |
|
|
- |
|
Inventory, net |
|
|
12,177 |
|
|
|
- |
|
|
|
- |
|
|
|
4,016 |
|
|
|
- |
|
|
|
16,193 |
|
Prepaid expenses |
|
|
25,042 |
|
|
|
- |
|
|
|
- |
|
|
|
75,231 |
|
|
|
- |
|
|
|
100,273 |
|
Related party current assets |
|
|
2,768 |
|
|
|
- |
|
|
|
- |
|
|
|
103,479 |
|
|
|
- |
|
|
|
106,247 |
|
Deferred tax asset |
|
|
7,999 |
|
|
|
- |
|
|
|
- |
|
|
|
64,641 |
|
|
|
- |
|
|
|
72,640 |
|
Other current assets |
|
|
12,896 |
|
|
|
- |
|
|
|
- |
|
|
|
5,724 |
|
|
|
- |
|
|
|
18,620 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
461,533 |
|
|
|
- |
|
|
|
- |
|
|
|
526,287 |
|
|
|
(128,040 |
) |
|
|
859,780 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
894,485 |
|
|
|
17,113 |
|
|
|
- |
|
|
|
799,405 |
|
|
|
- |
|
|
|
1,711,003 |
|
Investment in subsidiaries/affiliates |
|
|
(600,976 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
600,976 |
|
|
|
- |
|
Restricted investments |
|
|
3,150 |
|
|
|
- |
|
|
|
- |
|
|
|
250 |
|
|
|
- |
|
|
|
3,400 |
|
Deferred financing fees, net |
|
|
3,595 |
|
|
|
- |
|
|
|
- |
|
|
|
68,571 |
|
|
|
(5,759 |
) |
|
|
66,407 |
|
Intangible assets, net |
|
|
- |
|
|
|
- |
|
|
|
83,654 |
|
|
|
2,611,461 |
|
|
|
- |
|
|
|
2,695,115 |
|
Goodwill |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,834,856 |
|
|
|
1,834,856 |
|
Due from subsidiaries/affiliates |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Related party long-term assets |
|
|
155 |
|
|
|
- |
|
|
|
- |
|
|
|
111,730 |
|
|
|
(118 |
) |
|
|
111,767 |
|
Other long-term assets |
|
|
14,350 |
|
|
|
- |
|
|
|
- |
|
|
|
25,528 |
|
|
|
- |
|
|
|
39,878 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
776,292 |
|
|
$ |
17,113 |
|
|
$ |
83,654 |
|
|
$ |
4,143,232 |
|
|
$ |
2,301,915 |
|
|
$ |
7,322,206 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
343,131 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
207,803 |
|
|
$ |
(7,248 |
) |
|
$ |
543,686 |
|
Accrued interest |
|
|
27,627 |
|
|
|
- |
|
|
|
- |
|
|
|
46,939 |
|
|
|
- |
|
|
|
74,566 |
|
Due to subsidiaries/affiliates |
|
|
- |
|
|
|
17,530 |
|
|
|
477 |
|
|
|
110,032 |
|
|
|
(128,039 |
) |
|
|
- |
|
Current portion of deferred revenue |
|
|
569,742 |
|
|
|
- |
|
|
|
- |
|
|
|
506,440 |
|
|
|
7,248 |
|
|
|
1,083,430 |
|
Current portion of deferred credit on
executory contracts |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
252,831 |
|
|
|
- |
|
|
|
252,831 |
|
Current maturities of long-term debt |
|
|
2,500 |
|
|
|
- |
|
|
|
- |
|
|
|
11,382 |
|
|
|
- |
|
|
|
13,882 |
|
Related party current liabilities |
|
|
3,934 |
|
|
|
- |
|
|
|
- |
|
|
|
104,312 |
|
|
|
- |
|
|
|
108,246 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
946,934 |
|
|
|
17,530 |
|
|
|
477 |
|
|
|
1,239,739 |
|
|
|
(128,039 |
) |
|
|
2,076,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
121,286 |
|
|
|
- |
|
|
|
- |
|
|
|
133,863 |
|
|
|
- |
|
|
|
255,149 |
|
Deferred credit on executory contracts |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
784,078 |
|
|
|
- |
|
|
|
784,078 |
|
Long-term debt |
|
|
1,109,893 |
|
|
|
- |
|
|
|
- |
|
|
|
1,494,921 |
|
|
|
194,888 |
|
|
|
2,799,702 |
|
Long-term related party debt |
|
|
102,577 |
|
|
|
- |
|
|
|
- |
|
|
|
157,032 |
|
|
|
3,970 |
|
|
|
263,579 |
|
Deferred tax liability |
|
|
7,999 |
|
|
|
- |
|
|
|
16,908 |
|
|
|
915,275 |
|
|
|
- |
|
|
|
940,182 |
|
Related party long-term liabilities |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
46,301 |
|
|
|
- |
|
|
|
46,301 |
|
Other long-term liabilities |
|
|
22,201 |
|
|
|
- |
|
|
|
- |
|
|
|
38,851 |
|
|
|
- |
|
|
|
61,052 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,310,890 |
|
|
|
17,530 |
|
|
|
17,385 |
|
|
|
4,810,060 |
|
|
|
70,819 |
|
|
|
7,226,684 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred and common stock |
|
|
3,920 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
3,920 |
|
Accumulated other comprehensive loss |
|
|
(6,581 |
) |
|
|
- |
|
|
|
- |
|
|
|
(6,581 |
) |
|
|
6,581 |
|
|
|
(6,581 |
) |
Additional paid-in-capital |
|
|
10,352,291 |
|
|
|
- |
|
|
|
83,654 |
|
|
|
6,060,660 |
|
|
|
(6,144,314 |
) |
|
|
10,352,291 |
|
Retained earnings (accumulated deficit) |
|
|
(11,884,228 |
) |
|
|
(417 |
) |
|
|
(17,385 |
) |
|
|
(6,720,907 |
) |
|
|
8,368,829 |
|
|
|
(10,254,108 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(1,534,598 |
) |
|
|
(417 |
) |
|
|
66,269 |
|
|
|
(666,828 |
) |
|
|
2,231,096 |
|
|
|
95,522 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity |
|
$ |
776,292 |
|
|
$ |
17,113 |
|
|
$ |
83,654 |
|
|
$ |
4,143,232 |
|
|
$ |
2,301,915 |
|
|
$ |
7,322,206 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF
STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non-Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
(1,534,598 |
) |
|
$ |
(417 |
) |
|
$ |
66,269 |
|
|
$ |
(666,828 |
) |
|
$ |
2,231,096 |
|
|
$ |
95,522 |
|
Net income (loss) |
|
|
(1,628 |
) |
|
|
(308 |
) |
|
|
(1,076 |
) |
|
|
33,134 |
|
|
|
26,748 |
|
|
|
56,870 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities |
|
|
469 |
|
|
|
- |
|
|
|
- |
|
|
|
469 |
|
|
|
(469 |
) |
|
|
469 |
|
Foreign currency translation
adjustment |
|
|
125 |
|
|
|
- |
|
|
|
- |
|
|
|
125 |
|
|
|
(125 |
) |
|
|
125 |
|
|
| |
| |
| |
| |
| |
| |
Total comprehensive income (loss) |
|
|
(1,034 |
) |
|
|
(308 |
) |
|
|
(1,076 |
) |
|
|
33,728 |
|
|
|
26,154 |
|
|
|
57,464 |
|
Issuance of common stock to employees
and employee benefit plans, net of forfeitures |
|
|
1,984 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,984 |
|
Share-based payment expense |
|
|
25,458 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,458 |
|
Contributed capital |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at June 30, 2010 |
|
$ |
(1,508,190 |
) |
|
$ |
(725 |
) |
|
$ |
65,193 |
|
|
$ |
(633,100 |
) |
|
$ |
2,257,250 |
|
|
$ |
180,428 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non-Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
27,538 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
113,449 |
|
|
$ |
- |
|
|
$ |
140,987 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(50,839 |
) |
|
|
- |
|
|
|
- |
|
|
|
(118,474 |
) |
|
|
- |
|
|
|
(169,313 |
) |
Sale of restricted and other
investments |
|
|
4 |
|
|
|
- |
|
|
|
- |
|
|
|
9,450 |
|
|
|
- |
|
|
|
9,454 |
|
|
| |
| |
| |
| |
| |
| |
Net cash used in investing
activities |
|
|
(50,835 |
) |
|
|
- |
|
|
|
- |
|
|
|
(109,024 |
) |
|
|
- |
|
|
|
(159,859 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings,
net of costs |
|
|
637,406 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
637,406 |
|
Related party long-term borrowings,
net of costs |
|
|
147,094 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
147,094 |
|
Restricted cash to be used for the
redemption of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Repayment of long-term borrowings |
|
|
(690,318 |
) |
|
|
|
|
|
|
|
|
|
|
(120,659 |
) |
|
|
|
|
|
|
(810,977 |
) |
Repayment of related party long term borrowings |
|
|
(55,221 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,221 |
) |
Payment of premiums |
|
|
(24,065 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(24,065 |
) |
|
| |
| |
| |
| |
| |
| |
Net cash provided by (used in)
financing activities |
|
|
14,896 |
|
|
|
- |
|
|
|
- |
|
|
|
(120,659 |
) |
|
|
- |
|
|
|
(105,763 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
and cash equivalents |
|
|
(8,401 |
) |
|
|
- |
|
|
|
- |
|
|
|
(116,234 |
) |
|
|
- |
|
|
|
(124,635 |
) |
Cash and cash equivalents at
beginning of period |
|
|
171,265 |
|
|
|
- |
|
|
|
- |
|
|
|
212,224 |
|
|
|
- |
|
|
|
383,489 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
162,864 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
95,990 |
|
|
$ |
- |
|
|
$ |
258,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
LLC |
|
Satellite CD Radio |
|
Non-Guarantors |
|
Eliminations |
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
36,662 |
|
|
$ |
4,990 |
|
|
$ |
- |
|
|
$ |
101,388 |
|
|
$ |
(6,181 |
) |
|
$ |
136,859 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(118,700 |
) |
|
|
(4,990 |
) |
|
|
- |
|
|
|
(4,121 |
) |
|
|
- |
|
|
|
(127,811 |
) |
|
| |
| |
| |
| |
| |
| |
Net cash used in investing
activities |
|
|
(118,700 |
) |
|
|
(4,990 |
) |
|
|
- |
|
|
|
(4,121 |
) |
|
|
- |
|
|
|
(127,811 |
) |
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issuance
costs, net |
|
|
(3,712 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(3,712 |
) |
Long-term borrowings,
net of costs |
|
|
(8,732 |
) |
|
|
- |
|
|
|
- |
|
|
|
387,427 |
|
|
|
6,181 |
|
|
|
384,876 |
|
Related party long-term borrowings,
net of costs |
|
|
221,247 |
|
|
|
- |
|
|
|
- |
|
|
|
95,093 |
|
|
|
- |
|
|
|
316,340 |
|
Payment of premiums on
redemption of debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(16,572 |
) |
|
|
- |
|
|
|
(16,572 |
) |
Repayment of long-term borrowings |
|
|
(172,836 |
) |
|
|
- |
|
|
|
- |
|
|
|
(255,035 |
) |
|
|
- |
|
|
|
(427,871 |
) |
Repayment of related party
long-term borrowings |
|
|
(867 |
) |
|
|
- |
|
|
|
- |
|
|
|
(100,000 |
) |
|
|
- |
|
|
|
(100,867 |
) |
|
| |
| |
| |
| |
| |
| |
Net cash provided by (used in)
financing activities |
|
|
35,100 |
|
|
|
- |
|
|
|
- |
|
|
|
110,913 |
|
|
|
6,181 |
|
|
|
152,194 |
|
|
| |
| |
| |
| |
| |
| |
Net (decrease) increase in cash
and cash equivalents |
|
|
(46,938 |
) |
|
|
- |
|
|
|
- |
|
|
|
208,180 |
|
|
|
- |
|
|
|
161,242 |
|
Cash and cash equivalents at
beginning of period |
|
|
173,647 |
|
|
|
- |
|
|
|
- |
|
|
|
206,799 |
|
|
|
- |
|
|
|
380,446 |
|
|
| |
| |
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
126,709 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
414,979 |
|
|
$ |
- |
|
|
$ |
541,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(All dollar amounts referenced in this Item 2 are in thousands, unless otherwise stated)
Special Note Regarding Forward-Looking Statements
We have included in this Quarterly Report on Form 10-Q, and from time to time, our management
may make statements that may constitute forward-looking statements within the meaning of the safe
harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. The following
cautionary statements identify important factors that could cause our actual results to differ
materially from those projected in forward-looking statements made in this Quarterly Report on Form
10-Q and in other reports and documents published by us from time to time. Any statements about our
beliefs, plans, objectives, expectations, assumptions, future events or performance are not
historical facts and may be forward-looking. These statements are often, but not always, made
through the use of words or phrases such as will likely result, are expected to, will
continue, is anticipated, estimated, intend, plan, projection and outlook. For a
discussion of other significant factors and risks that could affect our future results and
financial condition, see Risk Factors in Part I, Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2009 and Managements Discussion and Analysis of Financial Condition
and Results of Operations herein and in Part II, Item 7, of our Annual Report on Form 10-K for the
year ended December 31, 2009.
Among the significant factors that could cause our actual results to differ materially from
those expressed in the forward-looking statements are:
|
|
|
our dependence upon automakers, many of which have experienced a dramatic drop in
sales, and other third parties, such as manufacturers and distributors of satellite
radios, retailers and programming providers; |
|
|
|
|
the substantial indebtedness of SIRIUS and XM; |
|
|
|
|
the useful life of our satellites, which have experienced component failures
including, with respect to a number of satellites, failures on their solar arrays, and,
in certain cases, are not insured; and |
|
|
|
|
the competitive position of SIRIUS and XM versus other forms of audio and video
entertainment including terrestrial radio, HD radio, Internet radio, mobile phones,
iPods and other MP3 devices, and emerging next-generation networks and technologies. |
We have entered into a number of important content arrangements, including agreements with the
National Football League, Howard Stern and NASCAR, which require us to pay substantial sums. Our
agreement with Howard Stern expires in December 2010; our agreement with the NFL expires at the end
of the 2010-2011 NFL season; and our agreement with NASCAR expires in December 2011. Although
preliminary discussions have been held with the National Football League, Howard Stern and NASCAR
regarding new programming arrangements, we may not be able to secure new programming arrangements
with one or more of these providers, or enter into new agreements at costs that are acceptable to
us. If we do not secure new programming arrangements with one or more of these providers, certain
of our subscribers may elect to cancel or not to renew their subscriptions. We cannot quantify how
many subscribers may cancel or elect not to renew their subscriptions if we fail to secure new
programming arrangements with one or more of these providers; however, we have no reason to believe
that any such subscriber loss will be material to our business or financial condition taken as a
whole.
Because the risk factors referred to above could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements made by us or on our behalf, you
should not place undue reliance on any of these forward-looking statements. In addition, any
forward-looking statement speaks only as of the date on which it is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect events or circumstances
after the date on which the statement is made, to reflect the occurrence of unanticipated events or
otherwise. New factors emerge from time to time, and it is not possible for us to predict which
will arise or to assess with any precision the impact of each factor on our business or the extent
to which any factor, or a combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements.
35
Executive Summary
We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the
United States on a subscription fee basis through our proprietary satellite radio systems the
SIRIUS system and the XM system. The SIRIUS system consists of four in-orbit satellites with over
125 terrestrial repeaters, satellite uplink facilities and studios. The XM system consists of four
in-orbit satellites with over 650 terrestrial repeaters, satellite uplink facilities and studios.
The terrestrial repeaters receive and retransmit signals. Subscribers can also receive certain of
our music and other channels over the Internet, including through an application on the Apple
iPhone and Blackberry.
Our satellite radios are primarily distributed through automakers (OEMs), nationwide through
retail locations and through our websites. We have agreements with every major automaker to offer
SIRIUS or XM satellite radios as factory- or dealer-installed equipment in their vehicles. SIRIUS
and XM radios are also offered to customers of certain daily rental car companies.
As of June 30, 2010, we had 19,527,448 subscribers; 9,470,068 SIRIUS subscribers and
10,057,380 XM subscribers. Our subscriber totals include subscribers under our regular pricing
plans; discounted pricing plans; subscribers that have prepaid, including payments either made or
due from automakers and dealers for prepaid subscriptions included in the sale or lease price of a
vehicle; certain radios activated for daily rental fleet operators; certain subscribers to SIRIUS
Internet Radio and XM Radio Online, our Internet services; and certain subscribers to our weather,
traffic, data and video services.
Our primary source of revenue is subscription fees, with most of our customers subscribing on
an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and long-term
subscription plans, as well as discounts for multiple subscriptions on each platform. We also
derive revenue from activation and other subscription-related fees, the sale of advertising on
select non-music channels, the direct sale of satellite radios, components and accessories, and
other ancillary services, such as our Backseat TV, data and weather services.
In certain cases, automakers include a subscription to our radio services in the sale or lease
price of vehicles. The length of these prepaid subscriptions varies, but is typically three to
twelve months. In many cases, we receive subscription payments from automakers in advance of the
activation of our service. We also reimburse various automakers for certain costs associated with
satellite radios installed in their vehicles.
We also have an interest in the satellite radio services offered in Canada. Subscribers to the
SIRIUS Canada service and the XM Canada service are not included in our subscriber count. In May
2010, our letter of intent with ACIR DARS Mexico, S. de R.L. de C.V. to pursue a license to offer
satellite radio in Mexico was terminated.
In April 2010, XM Satellite Radio Holdings Inc. merged with and into XM Satellite Radio Inc.
XM Satellite Radio Inc., together with its subsidiaries, is operated as an unrestricted subsidiary
under the agreements governing our existing indebtedness. As an unrestricted subsidiary,
transactions between the companies are required to comply with various contractual provisions in
our respective debt agreements.
36
Actual Results of Operations
Set forth below are our results of operations for the three and six months ended June 30, 2010
compared with the three and six months ended June 30, 2009.
Total Revenue
Subscriber Revenue includes subscription fees, activation and other fees and the effects of
rebates.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, subscriber revenue
was $601,630 and $561,763, respectively, an increase of 7%, or $39,867. The increase was
primarily attributable to the 4% increase in daily weighted average subscribers, an
increase in the sale of Best of programming, rate increases on multi-subscription and
internet packages and an $11,209 decrease in the impact of purchase price accounting
adjustments attributable to acquired deferred subscriber revenues. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, subscriber revenue was
$1,181,139 and $1,121,151, respectively, an increase of 5%, or $59,988. The increase was
primarily attributable to the 2% increase in daily weighted average subscribers, an
increase in the sale of Best of programming, rate increases on multi-subscription and
internet packages and a $22,931 decrease in the impact of purchase price accounting
adjustments attributable to acquired deferred subscriber revenues. |
Future subscriber revenue will be dependent, among other things, upon the growth of our
subscriber base, conversion and churn rates, promotions, rebates offered to subscribers and
corresponding take-rates, plan mix, subscription prices and the identification of additional
revenue streams from subscribers. The impact of purchase price accounting adjustments attributable
to acquired subscriber deferred revenues will continue to decline in absolute amount and as a
percentage of reported total subscriber revenues through 2013 as balances are earned over the
acquired subscription period.
Advertising Revenue includes the sale of advertising on our non-music channels, net of agency
fees. Agency fees are based on a stated percentage per the advertising agreement applied to gross
billing revenue.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, advertising revenue
was $15,797 and $12,564, respectively, which represents an increase of 26%, or $3,233.
The increase was primarily due to more effective sales efforts and improvements in the
national market for advertising. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, advertising revenue was
$30,323 and $24,869, respectively, which represents an increase of 22%, or $5,454. The
increase was primarily due to more effective sales efforts and improvements in the
national market for advertising. |
Our advertising revenue is subject to fluctuation based on the national economic environment.
We expect advertising revenue to grow as our subscribers increase and the economy improves.
Equipment Revenue includes revenue and royalties from the sale of SIRIUS and XM radios,
components and accessories.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, equipment revenue
was $18,520 and $10,928, respectively, which represents an increase of 69%, or $7,592.
The increase was driven by royalties from increased OEM installations. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, equipment revenue was
$32,802 and $20,837, respectively, which represents an increase of 57%, or $11,965. The
increase was driven by royalties from increased OEM installations. |
We expect equipment revenue to fluctuate based on the volume and mix of equipment sales in our
direct to consumer business and OEM installations for which we receive royalty payments for our
technology.
Other Revenue includes the U.S. Music Royalty Fee, revenue from affiliates, content licensing
fees and syndication fees.
|
|
|
Three Months: For the three months ended June 30, 2010, other revenue was $63,814 and
$5,574, respectively. The increase was primarily due to the introduction of the U.S.
Music Royalty Fee in the third quarter of 2009. |
37
|
|
|
Six Months: For the six months ended June 30, 2010, other revenue was $119,280 and
$10,951, respectively. The increase was primarily due to the introduction of the U.S.
Music Royalty Fee in the third quarter of 2009. |
We expect other revenue to increase as subscribers become subject to the U.S. Music Royalty
Fee at subscription renewal dates, as our subscriber base grows and as revenues from affiliates
increase. The FCCs order approving the Merger allows us to pass through cost increases incurred
since the filing of our FCC merger application as a result of statutorily or contractually required
payments to the music, recording and publishing industries for the performance of musical
works and sound recordings or for device recording fees.
Operating Expenses
Revenue Share and Royalties include distribution and content provider revenue share, residuals
and broadcast and web streaming royalties. Residuals are monthly fees paid based upon the number of
subscribers using SIRIUS and XM radios purchased from retailers. Advertising revenue share is
recorded to revenue share and royalties in the period in which the advertising is broadcast.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, revenue share and
royalties were $107,901 and $95,831, respectively, which represents an increase of 13%,
or $12,070. The increase was primarily attributable to an increase in our revenues and
the statutory royalty rate for the performance of sound recordings, partially offset by
a decrease in the revenue sharing rate with an automaker and a $4,577 increase in the
benefit to earnings from the amortization of deferred credits on executory contracts
initially recognized in purchase price accounting. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, revenue share and
royalties were $206,085 and $196,297, respectively, which represents an increase of 5%,
or $9,788. The increase was primarily attributable to an increase in our revenues and
the statutory royalty rate for the performance of sound recordings, partially offset by
a decrease in the revenue sharing rate with an automaker and a $9,137 increase in the
benefit to earnings from the amortization of deferred credits on executory contracts
initially recognized in purchase price accounting. |
We expect these costs to increase as our revenues grow, as we expand our distribution of
SIRIUS and XM radios through automakers, and as a result of statutory increases in the royalty rate
for the performance of sound recordings. Under the terms of the Copyright Royalty Boards decision,
we paid royalties of 6.5% and 7.0% of gross revenues, subject to certain exclusions, for 2009 and
2010, respectively, and will pay royalties of 7.5% and 8.0% for 2011 and 2012, respectively. Our
next rate setting proceeding before the Copyright Royalty Board is scheduled to commence in January
2011 and the results of that proceeding may have an impact on our results of operations. The
deferred credits on executory contracts initially recognized in purchase price accounting are
expected to provide increasing benefits to revenue share and royalties through the expiration of
the acquired executory contracts, principally in 2012 and 2013.
Programming and Content includes costs to acquire, create and produce content and on-air
talent costs. We have entered into various agreements with third parties for music and non-music
programming that require us to pay license fees, share advertising revenue, purchase advertising on
media properties owned or controlled by the licensor and pay other guaranteed amounts. Purchased
advertising is recorded as a sales and marketing expense and the cost of sharing advertising
revenue is recorded as revenue share and royalties in the period in which the advertising is
broadcast.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, programming and
content expenses were $72,019 and $72,102, respectively, which represents a decrease of
$83. The decrease was primarily due to savings in content agreements, partially offset
by a $3,999 reduction in the benefit to earnings from purchase price accounting
adjustments attributable to the amortization of the deferred credit on acquired
programming executory contracts. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, programming and content
expenses were $150,452 and $152,511, respectively, which represents a decrease of 1%, or
$2,059. The decrease was primarily due to savings in content agreements and production
costs, partially offset by increases in personnel costs, general operating expenses and
a $7,742 reduction in the benefit to earnings from purchase price accounting adjustments
attributable to the amortization of the deferred credit on acquired programming
executory contracts. |
Our programming and content expenses, excluding share-based payment expense, are expected to
decrease as various agreements expire and are renewed or replaced on more cost effective terms.
The impact of purchase price accounting adjustments attributable to the amortization of the
deferred credit on acquired programming executory contracts will continue to decline, in absolute
amount and as a percentage of reported programming and content, through 2013 as acquired
programming contracts expire, principally in 2012 and 2013. Our agreements with third-party
content providers are subject to contractual expiration dates. We may
38
or may not be able to
negotiate renewals of these agreements on cost effective terms or at all. See Special Note
Regarding Forward-Looking Statements for a discussion of these risks.
Customer Service and Billing includes costs associated with the operation of third party
customer service centers and our subscriber management systems as well as bad debt expense.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, customer service and
billing expenses were $58,414 and $58,833, respectively, which represents a decrease of
1%, or $419. The decrease was primarily due to lower call center expenses as a result of
moving calls to lower cost locations. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, customer service and
billing expenses were $114,625 and $119,041, respectively, which represents a decrease
of 4%, or $4,416. The decrease was primarily due to lower call center expenses as a
result of moving calls to lower cost locations. |
We expect our customer care and billing expenses to decrease on a per subscriber basis due to
volume efficiencies, but increase overall as our subscriber base grows due to increased call
center operating costs, transaction fees and bad debt expense.
Satellite and Transmission consists of costs associated with the operation and maintenance of
our satellites; satellite telemetry, tracking and control systems; terrestrial repeater networks;
satellite uplink facilities; and broadcast studios.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, satellite and
transmission expenses were $19,982 and $19,615, respectively, which represents an
increase of 2%, or $367. The increase was primarily due to increased satellite insurance
expense, partially offset by savings in personnel costs, consulting expenses and
repeater maintenance expenses. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, satellite and
transmission expenses were $40,100 and $39,894, respectively, which represents an
increase of 1%, or $206. The increase was primarily due to increased satellite insurance
expense, partially offset by savings in personnel costs, consulting expenses and
repeater maintenance expenses. |
We expect satellite and transmission expenses, excluding share-based payment expense, to
increase as we add XM-5 and FM-6 to our in-orbit satellite fleet and continue to enhance our
terrestrial repeater networks.
Cost of Equipment includes costs from the sale of SIRIUS and XM radios, components and
accessories and provisions for inventory allowance attributable to products purchased for resale in
our direct to consumer distribution channel.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, cost of equipment
was $7,805 and $8,051, respectively, which represents a decrease of 3%, or $246. The
decrease was primarily due to lower inventory write-downs, partially offset by increased
component sales to manufacturers and distributors. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, cost of equipment was
$15,724 and $16,044, respectively, which represents a decrease of 2%, or $320. The
decrease was primarily due to lower inventory write-downs, partially offset by increased
component sales to manufacturers and distributors. |
We expect cost of equipment to vary with changes in sales, inventory, and inventory
valuations.
Subscriber Acquisition Costs include hardware subsidies paid to radio manufacturers,
distributors and automakers, including subsidies paid to automakers who include a SIRIUS or XM
radio and a prepaid subscription to our service in the sale or lease price of a vehicle; subsidies
paid for chip sets and certain other components used in manufacturing radios; device royalties for
certain radios; commissions paid to retailers and automakers as incentives to purchase, install and
activate SIRIUS and XM radios; product warranty obligations; and provisions for inventory allowance
attributable to inventory consumed in our OEM and retail distribution channels. The majority of
subscriber acquisition costs are incurred and expensed in advance of, or concurrent with, acquiring
a subscriber. Subscriber acquisition costs do not include advertising, loyalty payments to
distributors and dealers of SIRIUS and XM radios and revenue share payments to automakers and
retailers of SIRIUS and XM radios.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, subscriber
acquisition costs were $110,383 and $67,651, respectively, which represents an increase
of 63%, or $42,732. The increase was primarily a result of the 46% increase in gross
subscriber additions and higher subsidies related to the 103% increase in OEM
installations, partially offset by a $6,963 increase in the benefit to earnings from the
amortization of the deferred credit for acquired executory contracts recognized in
purchase price accounting. |
39
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, subscriber acquisition
costs were $199,762 and $140,719, respectively, which represents an increase of 42%, or
$59,043. The increase was primarily a result of the 38% increase in gross subscriber
additions and higher subsidies related to the 91% increase in OEM installations,
partially offset by a $13,987 increase in the benefit to earnings from the amortization
of the deferred credit for acquired executory contracts recognized in purchase price
accounting. |
We expect total subscriber acquisition costs to fluctuate as increases or decreases in OEM
installations, which are primarily driven by manufacturing and penetration rates, and changes in
our gross subscriber additions are accompanied by continuing declines in the costs of subsidized
components of SIRIUS and XM radios. The impact of purchase price accounting adjustments
attributable to the amortization of the deferred credit for acquired subscriber acquisition
executory contracts will vary, in absolute amount and as a percentage of reported subscriber
acquisition costs, through the expiration of the acquired contracts, principally in 2013. We intend
to continue to offer subsidies, commissions and other incentives to acquire subscribers.
Sales and Marketing includes costs for advertising, media and production, including
promotional events and sponsorships; cooperative marketing; customer retention and personnel.
Cooperative marketing costs include fixed and variable payments to reimburse retailers and
automakers for the cost of advertising and other product awareness activities.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, sales and marketing
expenses were $56,177 and $48,693, respectively, which represents an increase of 15%, or
$7,484. The increase was primarily due to additional cooperative marketing and personnel
costs, partially offset by reductions in consumer advertising, event marketing and third
party distribution support expenses. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, sales and marketing
expenses were $105,294 and $100,116, respectively, which represents an increase of 5%,
or $5,178. The increase was primarily due to additional cooperative marketing and
personnel costs, partially offset by reductions in consumer advertising, event marketing
and third party distribution support expenses. |
We expect sales and marketing expenses, excluding share-based payment expense, to increase as
we increase our advertising, retention and promotional activities.
Engineering, Design and Development includes costs to develop chip sets and new products,
research and development for broadcast information systems and costs associated with the
incorporation of our radios into vehicles manufactured by automakers.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, engineering, design
and development expenses were $11,247 and $11,944, respectively, which represents a
decrease of 6%, or $697. The decrease was primarily due to lower costs associated with
chip set development, partially offset by higher personnel costs. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, engineering, design and
development expenses were $22,684 and $21,723, respectively, which represents an
increase of 4%, or $961. The increase was primarily due to higher personnel and overhead
costs, partially offset by reductions in other research and development costs. |
We expect engineering, design and development expenses, excluding share-based payment expense,
to increase in future periods as we develop our next generation chip sets and products.
General and Administrative includes rent and occupancy, finance, legal, human resources,
information technology and investor relations costs.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, general and
administrative expenses were $59,166 and $66,716, respectively, which represents a
decrease of 11%, or $7,550. The decrease was primarily due to lower share-based payment
expense, consulting, accounting and office costs, partially offset by increased
personnel and legal costs. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, general and
administrative expenses were $116,746 and $126,031, respectively, which represents a
decrease of 7%, or $9,285. The decrease was primarily due to lower share-based payment
expense, consulting, accounting and office costs, partially offset by increased
personnel and legal costs. |
We
do not expect significant changes in future total general and administrative expenses.
40
Depreciation and Amortization represents the systematic recognition in earnings of the
acquisition cost of assets used in operations, including our satellite constellations, property,
equipment and intangible assets, over their estimated service lives.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, depreciation and
amortization expense was $69,230 and $77,158, respectively, which represents a decrease
of 10%, or $7,928. The decrease was primarily due to a $13,916 reduction in the charge
to earnings attributable to the acquired satellite constellation and subscriber
relationships, partially offset by additional depreciation recognized on assets placed
in-service subsequent to the Merger. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, depreciation and
amortization expense was $139,495 and $159,524, respectively, which represents a
decrease of 13%, or $20,029. The decrease was primarily due to a $26,114 reduction in
the charge to earnings attributable to the acquired satellite constellation and
subscriber relationships, partially offset by additional depreciation recognized on
assets placed in-service subsequent to the Merger. |
We expect depreciation and amortization expenses to increase in future periods as we complete
the construction and launch satellites, which will be partially offset by reductions in the
depreciation and amortization associated with the stepped-up basis in assets acquired in the Merger
(including intangible assets, satellites, property and equipment) through the end of their
estimated service lives, principally through 2017.
Other Income (Expense)
Interest Expense, Net of Amounts Capitalized, includes interest on outstanding debt, reduced
by interest capitalized in connection with the construction of our satellites and related launch
vehicles.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, interest expense was
$76,802 and $98,080, respectively, which represents a decrease of 22%, or $21,278. The
decrease was primarily due to decreases in the interest rates on our outstanding debt in
the three months ended June 30, 2010 compared to the three months ended June 30, 2009
and the redemption of XMs 10% Senior PIK Secured Notes due 2011 on June 1, 2010. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, interest expense was
$154,670 and $166,058, respectively, which represents a decrease of 7%, or $11,388. The
decrease was primarily due to decreases in the interest rates on our outstanding debt in
the six months ended June 30, 2010 compared to the six months ended June 30, 2009 and
the redemption of XMs 10% Senior PIK Secured Notes due 2011 on June 1, 2010. |
Loss on Extinguishment of Debt and Credit Facilities, Net, includes losses incurred as a
result of the conversion and retirement of certain debt.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, loss on
extinguishment of debt and credit facilities, net, was $31,871 and $107,756,
respectively, which represents a decrease of 70%, or $75,855. During the three months
ended June 30, 2010, the loss was incurred on the repayment of SIRIUS 95/8% Senior Notes
due 2013 and XMs 10% Senior PIK Secured Notes due 2011. During the three months ended
June 30, 2009, the loss was incurred on the repayment of the XMs Amended and Restated
Credit Agreement due 2011 and the termination of XMs Second Lien Credit Agreement. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, loss on extinguishment
of debt and credit facilities, net, was $34,437 and $125,713, respectively, which
represents a decrease of 73%, or $91,276. During the six months ended June 30, 2010, the
loss was incurred on the repayment of SIRIUS Senior Secured Term Loan due 2012 and 95/8%
Senior Notes due 2013 and XMs 10% Senior PIK Secured Notes due 2011. During the six
months ended June 30, 2009, the loss was incurred on the retirement of SIRIUS 21/2%
Convertible Notes due 2009 and the repayment of the XMs Amended and Restated Credit
Agreement due 2011 and the termination of XMs Second Lien Credit Agreement. |
Interest and Investment Income (Loss) includes realized gains and losses, dividends, interest
income, our share of SIRIUS Canadas and XM Canadas net losses and losses recorded from our
investment in XM Canada when the fair value was determined to be other than temporary.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, interest and
investment income was $378 and $9,323, respectively, which represents a decrease of 96%,
or $8,945. The decrease was primarily attributable to higher net losses at XM Canada,
lower net income at SIRIUS Canada and a decrease in payments received from SIRIUS Canada
in excess of our carrying value of our investments during the three months ended June
30, 2010. |
41
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, interest and investment
(loss) income was ($2,892) and $2,157, respectively, which represents a decrease in
income of 234%, or $5,049. The decrease in income was primarily attributable to higher
net losses at XM Canada, lower net income at SIRIUS Canada and a decrease in payments
received from SIRIUS Canada in excess of our carrying value of our investments during
the six months ended June 30, 2010. |
Income Taxes
Income Tax Expense represents the recognition of a deferred tax liability related to the
difference in accounting for our FCC licenses, which are amortized over 15 years for tax purposes
but not amortized for book purposes in accordance with GAAP.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, income tax expense
was $1,466 and $1,115, respectively, which represents an increase of 31%, or
$351 primarily related to withholding taxes for royalty income. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, income tax expense was
$2,633 and $2,229, respectively, which represents an increase of 18%, or $404 primarily
related to withholding taxes for royalty income. |
42
Subscriber Data
The following table contains actual subscriber data for the three and six months ended June
30, 2010 and 2009, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning subscribers |
|
|
18,944,199 |
|
|
|
18,599,434 |
|
|
|
18,772,758 |
|
|
|
19,003,856 |
|
Gross subscriber additions |
|
|
2,020,507 |
|
|
|
1,380,125 |
|
|
|
3,741,355 |
|
|
|
2,719,086 |
|
Deactivated subscribers |
|
|
(1,437,258 |
) |
|
|
(1,566,124 |
) |
|
|
(2,986,665 |
) |
|
|
(3,309,507 |
) |
|
| |
| |
| |
| |
Net additions |
|
|
583,249 |
|
|
|
(185,999 |
) |
|
|
754,690 |
|
|
|
(590,421 |
) |
|
| |
| |
| |
| |
Ending subscribers |
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
7,277,446 |
|
|
|
8,235,761 |
|
|
|
7,277,446 |
|
|
|
8,235,761 |
|
OEM |
|
|
12,100,665 |
|
|
|
10,081,514 |
|
|
|
12,100,665 |
|
|
|
10,081,514 |
|
Rental |
|
|
149,337 |
|
|
|
96,160 |
|
|
|
149,337 |
|
|
|
96,160 |
|
|
| |
| |
| |
| |
Ending subscribers |
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
16,077,714 |
|
|
|
15,421,414 |
|
|
|
16,077,714 |
|
|
|
15,421,414 |
|
Paid promotional |
|
|
3,449,734 |
|
|
|
2,992,021 |
|
|
|
3,449,734 |
|
|
|
2,992,021 |
|
|
| |
| |
| |
| |
Ending subscribers |
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
|
19,527,448 |
|
|
|
18,413,435 |
|
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(142,757 |
) |
|
|
(301,295 |
) |
|
|
(448,304 |
) |
|
|
(669,326 |
) |
OEM |
|
|
709,226 |
|
|
|
123,165 |
|
|
|
1,169,713 |
|
|
|
85,561 |
|
Rental |
|
|
16,780 |
|
|
|
(7,869 |
) |
|
|
33,281 |
|
|
|
(6,656 |
) |
|
| |
| |
| |
| |
Net additions |
|
|
583,249 |
|
|
|
(185,999 |
) |
|
|
754,690 |
|
|
|
(590,421 |
) |
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
304,043 |
|
|
|
(14,996 |
) |
|
|
373,782 |
|
|
|
(128,243 |
) |
Paid promotional |
|
|
279,206 |
|
|
|
(171,003 |
) |
|
|
380,908 |
|
|
|
(462,178 |
) |
|
| |
| |
| |
| |
Net additions |
|
|
583,249 |
|
|
|
(185,999 |
) |
|
|
754,690 |
|
|
|
(590,421 |
) |
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
19,139,926 |
|
|
|
18,438,473 |
|
|
|
18,962,580 |
|
|
|
18,575,219 |
|
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average self-pay monthly churn (1) |
|
|
1.8 |
% |
|
|
2.0 |
% |
|
|
1.9 |
% |
|
|
2.1 |
% |
|
| |
| |
| |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion rate (2) |
|
|
46.7 |
% |
|
|
44.3 |
% |
|
|
45.9 |
% |
|
|
44.5 |
% |
|
| |
| |
| |
| |
|
|
|
Note: |
|
See pages 52 through 58 for footnotes. |
Subscribers. At June 30, 2010, we had 19,527,448 subscribers, an increase of 1,114,013
subscribers, or 6%, from the 18,413,435 subscribers as of June 30, 2009.
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, net additions were
583,249 and (185,999), respectively, an increase in net additions of 769,248. Net
additions in our OEM channel increased 586,061 in the three months ended June 30, 2010
compared to the three months ended June 30, 2009. Net reductions in our retail channel
decreased 158,538 in the three months ended June 30, 2010 compared to the three months
ended June 30, 2009. The improvement in net additions was due to the 46% increase in
gross subscriber additions, primarily resulting from an improvement in U.S. auto sales,
and the 8% decline in deactivations resulting from improvements in the conversion rate
in paid promotional trials and average self-pay monthly churn. |
43
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, net additions were
754,690 and (590,421), respectively, an increase in net additions of 1,345,111. Net
additions in our OEM channel increased 1,084,152 in the six months ended June 30, 2010
compared to the six months ended June 30, 2009. Net reductions in our retail channel
decreased 221,022 in the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. The improvement in net additions was due to the 38% increase in gross
subscriber additions, primarily resulting from an improvement in U.S. auto sales, and
the 10% decline in deactivations resulting from improvements in the conversion rate in
paid promotional trials and average self-pay monthly churn. |
Average Self-pay Monthly Churn is derived by dividing the monthly average of self-pay
deactivations for the quarter by the average self-pay subscriber balance for the quarter. (See
accompanying footnotes on pages 52 through 58 for more details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, our average self-pay
monthly churn rate was 1.8% and 2.0%, respectively. The decrease was due to an improving
economy, the success of retention and win-back programs and reductions in non-pay
cancellations. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, our average self-pay
monthly churn rate was 1.9% and 2.1%, respectively. The decrease was due to an improving
economy, the success of retention and win-back programs and reductions in non-pay
cancellations. |
Conversion
Rate
is the percentage of vehicle owners and lessees that convert to
self-paying after an initial promotional period.
(See accompanying footnotes on pages 52 through 58 for more details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, our conversion rate
was 46.7% and 44.3%, respectively. The increase was primarily due to marketing to
promotional period subscribers and an improving economy. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, our conversion rate was
45.9% and 44.5%, respectively. The increase was primarily due to marketing to
promotional period subscribers and an improving economy. |
44
The discussion of operating results below excludes the effects of stock-based compensation and
purchase accounting adjustments associated with the Merger. Financial measures and metrics previously reported as
pro forma have been renamed adjusted.
Adjusted Results of Operations
In this report, we present certain financial performance measures that are not calculated and
presented in accordance with generally accepted accounting principles in the United States of
America (Non-GAAP). These Non-GAAP financial measures include: average monthly revenue per
subscriber, or ARPU; subscriber acquisition cost, or SAC, per gross subscriber addition; customer
service and billing expenses, per average subscriber; free cash flow; and adjusted EBITDA. These
measures include the historical results of operations of XM, including predecessor financial
information, and exclude the impact of certain purchase price accounting adjustments. We use these
Non-GAAP financial measures to manage our business, set operational goals and as a basis for
determining performance-based compensation for our employees.
The purchase price accounting adjustments include the elimination of the benefit to earnings
of deferred revenue associated with the investment in XM Canada, the recognition of subscriber
revenues not recognized in purchase price accounting and the elimination of the earnings benefit of
deferred credits on executory contracts, which are primarily attributable to third party
arrangements with an OEM and programming providers. The purchase price accounting adjustments to
EBITDA do not include the incremental depreciation and amortization for certain XM property,
equipment and intangible assets acquired in the Merger and reported
on a stepped up basis.
Our adjusted EBITDA also reallocates share-based payment expense from functional operating
expense line items to a separate line within operating expenses. We believe the exclusion of
share-based payment expense from operating expenses is useful given the significant variation in
expense that can result from changes in the fair market value of our common stock, the effect of
which is unrelated to the operational conditions that give rise to variations in the components of
our operating costs. Specifically, the exclusion of share-based payment expense in subscriber
acquisition costs is important to understand the economic impact of the direct costs incurred to
acquire subscribers and the effect over time as economies of scale are reached.
We believe these Non-GAAP financial measures provide useful information to investors regarding
our financial condition and results of operations. We believe investors find this Non-GAAP
financial performance measure useful in evaluating our core trends
because it provides a direct view of our underlying contractual
costs. We believe investors use our current and
projected adjusted EBITDA to estimate our current or prospective enterprise value and to make
investment decisions. By providing these Non-GAAP financial measures, together with the
reconciliations to the most directly comparable GAAP measure, we believe we are enhancing investors
understanding of our business and our results of operations. These Non-GAAP financial measures
should be viewed in addition to, and not as an alternative for or superior to, our reported results
prepared in accordance with GAAP. Please refer to the footnotes (pages 52 through 58) following
our discussion of results of operations for the definitions of these Non-GAAP measures, a further
discussion of the usefulness of such Non-GAAP financial measures and reconciliations to the most
directly comparable GAAP measure.
45
The following table contains our key operating metrics based on our adjusted results of
operations for the three and six months ended June 30, 2010 and 2009, respectively (in thousands, except for per subscriber amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Adjusted |
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARPU (3) |
|
$ |
11.81 |
|
|
$ |
10.66 |
|
|
$ |
11.65 |
|
|
$ |
10.57 |
|
SAC, per gross subscriber addition (4) |
|
$ |
59 |
|
|
$ |
57 |
|
|
$ |
59 |
|
|
$ |
59 |
|
Customer service and billing expenses, per average
subscriber (5) |
|
$ |
1.01 |
|
|
$ |
1.05 |
|
|
$ |
1.00 |
|
|
$ |
1.06 |
|
Free cash flow (6) |
|
$ |
108,331 |
|
|
$ |
12,694 |
|
|
$ |
(18,872 |
) |
|
$ |
9,048 |
|
Adjusted total revenue (8) |
|
$ |
705,560 |
|
|
$ |
607,836 |
|
|
$ |
1,376,122 |
|
|
$ |
1,213,317 |
|
Adjusted EBITDA (7) |
|
$ |
154,313 |
|
|
$ |
132,219 |
|
|
$ |
312,070 |
|
|
$ |
241,055 |
|
|
|
|
Note: |
|
See pages 52 through 58 for footnotes. |
ARPU is derived from total earned subscriber revenue, net advertising revenue and other
subscription-related revenue, net of purchase price accounting adjustments, divided by the number
of months in the period, divided by the daily weighted average number of subscribers for the
period. (See accompanying footnotes on pages 52 through 58 for more details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, total ARPU was
$11.81 and $10.66, respectively. The increase was driven primarily by the introduction
of the U.S. Music Royalty Fee in the third quarter of 2009, increased revenues from the
sale of Best of programming, rate increases on multi-subscription and internet
packages, and increased net advertising revenue. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, total ARPU was $11.65
and $10.57, respectively. The increase was driven primarily by the introduction of the
U.S. Music Royalty Fee in the third quarter of 2009, increased revenues from the sale of
Best of programming, rate increases on multi-subscription and internet packages, and
increased net advertising revenue. |
SAC, Per Gross Subscriber Addition is derived from subscriber acquisition costs and margins
from the direct sale of radios and accessories, excluding share-based payment expense and purchase
price accounting adjustments, divided by the number of gross subscriber additions for the period.
(See accompanying footnotes on pages 52 through 58 for more details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, SAC, per gross subscriber
addition was $59 and $57, respectively. The increase was primarily due to a 46% increase in
gross subscriber additions, a 103% increase in OEM production with factory-installed satellite
radios associated with the automotive industry recovery, partially offset by lower per radio
subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from
satellite radio manufacturers compared to the three months ended June 30, 2009. |
|
|
|
|
Six Months: For each of the six months ended June 30, 2010 and 2009, SAC, per gross
subscriber
addition was $59. We experienced a 38% increase in gross subscriber additions and an 91%
increase in OEM production with factory-installed satellite radios associated with the
automotive market recovery, partially offset by lower per radio subsidy rates for certain OEMs
and growth in subscriber reactivations and royalties from satellite radio manufacturers
compared to the six months ended June 30, 2009. |
Customer Service and Billing Expenses, Per Average Subscriber is derived from total customer
service and billing expenses, excluding share-based payment expense and purchase price accounting
adjustments, divided by the number of months in the period, divided by the daily weighted average
number of subscribers for the period. (See accompanying footnotes on pages 52 through 58 for more
details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, customer service and
billing expenses, per average subscriber was $1.01 and $1.05, respectively. The decrease
was primarily due to a lower call center expense as a result of moving calls to lower
cost locations. |
46
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, customer service and
billing expenses, per average subscriber was $1.00 and $1.06, respectively. The decrease
was primarily due to a lower call center expense as a result of moving calls to lower
cost locations. |
Free Cash Flow includes the net cash provided by (used in) operations, additions to property
and equipment, merger related costs and restricted and other investment activity. (See accompanying
footnotes on pages 52 through 58 for more details.)
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, free cash flow was
$108,331 and $12,694, respectively, an increase of $95,637. Net income plus non-cash
operating activities increased 37%, to $96,574, from $70,737, principally as a result of
improvements in our adjusted EBITDA. Changes in our operating assets and liabilities
increased by $82,850 compared to the three months ended June 30, 2009. The increase was
primarily due to increases in trade payables related to subsidies and commissions
associated with the increase in our subscriber base and growth in deferred revenue;
during the three months ended June 30, 2010, offset by growth in receivables from
subscribers, radio manufacturers and distributors and the payment of related party
obligations and accrued interest. In addition, capital expenditures in the three months
ended June 30, 2010 increased by $13,677 compared to the three months ended June 30,
2009, primarily due to increased satellite and related launch vehicle spending. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, free cash flow was
($18,872) and $9,048, respectively, a decrease of $27,920. Net income plus non-cash
operating activities increased 58%, to $189,575, from $120,010, principally as a result
of improvements in our adjusted EBITDA. Changes in our operating assets and liabilities
increased $65,437. This was offset by a reduction in cash provided by operating
activities, principally as a result of pay-downs of related party liabilities deferred
in 2009 and employee bonus payments in the first quarter of 2010 where no bonus payments
were made in 2009 and a prepayment to a programming provider in 2010 that had been paid
over the course of the year in 2009. As a result of these transactions net cash
provided by operating activities increased $4,128 to $140,987 in the six months ended
June 30, 2010 compared to the $136,859 provided by operations in the six months ended
June 30, 2009. In addition, capital expenditures in the six months ended June 30, 2010
increased $41,502 to $169,313 compared to $127,811 expended in the six months ended June
30, 2009, primarily due to increased satellite and related launch vehicle spending,
offset by $9,454 of proceeds from the sale of investment securities in the six months
ended June 30, 2010. |
Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and six
months ended June 30, 2010 compared with the three and six months ended June 30, 2009. Our adjusted
total revenue includes the recognition of deferred subscriber revenues acquired in the Merger that
are not recognized in our post-Merger results under purchase price accounting and the elimination
of the benefit in earnings from deferred revenue associated with our investment in XM Canada
acquired in the Merger. (See the accompanying footnotes on pages 52 through 58 for more details.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
(in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
601,630 |
|
|
$ |
561,763 |
|
|
$ |
1,181,139 |
|
|
$ |
1,121,151 |
|
Advertising revenue, net of agency fees |
|
|
15,797 |
|
|
|
12,564 |
|
|
|
30,323 |
|
|
|
24,869 |
|
Equipment revenue |
|
|
18,520 |
|
|
|
10,928 |
|
|
|
32,802 |
|
|
|
20,837 |
|
Other revenue |
|
|
63,814 |
|
|
|
5,574 |
|
|
|
119,280 |
|
|
|
10,951 |
|
Purchase price accounting adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue |
|
|
3,986 |
|
|
|
15,195 |
|
|
|
8,952 |
|
|
|
31,883 |
|
Other revenue |
|
|
1,813 |
|
|
|
1,812 |
|
|
|
3,626 |
|
|
|
3,626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted total revenue |
|
$ |
705,560 |
|
|
$ |
607,836 |
|
|
$ |
1,376,122 |
|
|
$ |
1,213,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months: Our adjusted total revenue grew 16%, or $97,724, in the three
months ended June 30, 2010 compared to the three months ended June 30, 2009. Subscriber
revenue increased 5%, or $28,658, in the three months ended June 30, 2010 compared to
the three months ended June 30, 2009. The increase in subscriber revenue was driven by
the increase in subscribers as well as an increase in the sale of Best of programming
and the rate increases on multi-subscription and internet packages. Advertising revenue
increased 26%, or $3,233, in the three months ended June 30, 2010 compared to the three
months ended June 30, 2009. The increase in advertising revenue was driven by
more effective sales efforts and improvements in the national market for advertising. Equipment revenue increased 69%, or
$7,592, in the three months ended June 30, 2010 compared to the three months ended June
30, 2009. The increase in equipment revenue was driven by royalties from increased OEM
installations. Other revenue increased $58,241 in the three months ended June 30, 2010
compared to the three months ended June 30, 2009. The increase in other revenue was
driven by the introduction of the U.S. Music Royalty Fee in the third quarter of 2009. |
47
|
|
|
Six Months: Our adjusted total revenue grew 13%, or $162,805, in the six months ended
June 30, 2010 compared to the six months ended June 30, 2009. Subscriber revenue
increased 3%, or $37,057, in the six months ended June 30, 2010 compared to the six
months ended June 30, 2009. The increase in subscriber revenue was driven by the increase
in subscribers as well as an increase in the sale of Best of programming and the rate
increases on multi-subscription and internet packages. Advertising revenue increased 22%,
or $5,454, in the six months ended June 30, 2010 compared to the six months ended June
30, 2009. The increase in advertising revenue was driven by more effective sales efforts and
improvements in the national
market for advertising. Equipment revenue increased 57%, or $11,965, in the six months
ended June 30, 2010 compared to the six months ended June 30, 2009. The increase in
equipment revenue was driven by royalties from increased OEM installations. Other revenue
increased $108,329 in the six months ended June 30, 2010 compared to the six months ended
June 30, 2009. The increase in other revenue was driven by the introduction of the U.S.
Music Royalty Fee in the third quarter of 2009. |
Adjusted EBITDA. Set forth below are our adjusted EBITDA for the three and six months ended
June 30, 2010 compared with the three and six months ended June 30, 2009. Adjusted EBITDA is
income (loss) from operations, excluding, if applicable: goodwill impairment; restructuring,
impairments and related costs; depreciation and amortization; purchase price accounting adjustments
and share-based payment expense. (See the accompanying footnotes on pages 52 through 58 for more
details.)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Adjusted |
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
June 30, |
|
June 30, |
(in thousands) |
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Adjusted EBITDA |
|
$ |
154,313 |
|
|
$ |
132,219 |
|
|
$ |
312,070 |
|
|
$ |
241,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months: For the three months ended June 30, 2010 and 2009, adjusted EBITDA
was $154,313 and $132,219, respectively, an increase of 17%, or $22,094. The increase
was primarily due to an increase of 16%, or $97,724, in revenues, partially offset by an
increase of 16%, or $75,630, in expenses included in adjusted EBITDA. The increase in
revenue was primarily due to the increase in our subscriber base and the introduction of
the U.S. Music Royalty Fee in the third quarter of 2009, as well as increased
advertising and equipment revenue, rate increases on multi-subscription and internet
packages, and an increase in the sale of Best of programming. The increase in expenses
was primarily driven by higher subscriber acquisition costs related to the 46% increase
in gross additions, higher revenue share and royalties expenses associated with growth
in revenues subject to revenue sharing and royalty arrangements and additional sales and
marketing costs, primarily related to co-operative marketing. |
|
|
|
|
Six Months: For the six months ended June 30, 2010 and 2009, adjusted EBITDA was
$312,070 and $241,055, respectively, an increase of 29%, or $71,015. The increase was
primarily due to an increase of 13%, or $162,805, in revenues, partially offset by an
increase of 9%, or $91,790, in expenses included in adjusted EBITDA. The increase in
revenue was primarily due to the increase in our subscriber base, the introduction of
the U.S. Music Royalty Fee in the third quarter of 2009, increased advertising and
equipment revenue, rate increases on multi-subscription and internet packages, and an
increase in the sale of Best of programming. The increase in expenses was primarily
driven by higher subscriber acquisition costs related to the 38% increase in gross
additions and higher revenue share and royalties expenses associated with growth in
revenues subject to revenue sharing and royalty arrangements. |
48
Liquidity and Capital Resources
Cash Flows for the Six Months Ended June 30, 2010 Compared with the Six Months Ended June 30, 2009
As of June 30, 2010 and December 31, 2009, we had $258,854 and $383,489, respectively, in cash
and cash equivalents. The following table presents a summary of our cash flow activity for the
periods set forth below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months |
|
|
|
|
|
| Ended June 30, |
|
|
|
|
|
2010 |
|
2009 |
|
2010 vs. 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
140,987 |
|
|
$ |
136,859 |
|
|
$ |
4,128 |
|
Net cash used in investing activities |
|
|
(159,859 |
) |
|
|
(127,811 |
) |
|
|
(32,048 |
) |
Net cash (used in) provided by financing activities |
|
|
(105,763 |
) |
|
|
152,194 |
|
|
|
(257,957 |
) |
|
| |
| |
| |
Net (decrease) increase in cash and cash equivalents |
|
|
(124,635 |
) |
|
|
161,242 |
|
|
|
(285,877 |
) |
Cash and cash equivalents at beginning of period |
|
|
383,489 |
|
|
|
380,446 |
|
|
|
3,043 |
|
|
| |
| |
| |
Cash and cash equivalents at end of period |
|
$ |
258,854 |
|
|
$ |
541,688 |
|
|
$ |
(282,834 |
) |
|
|
|
|
|
|
|
Cash Flows Provided by Operating Activities
|
|
|
Six Months: Net cash provided by operating activities increased $4,128, to $140,987,
for the six months ended June 30, 2010 from $136,859 for the six months ended June 30,
2009. The increase was primarily the result of improvements in our income from
operations and increases in deferred revenue related to the growth of our subscriber
base, offset in part by pay-downs of related party liabilities deferred in 2009,
employee bonus payments in 2010 where no bonus payments were made in 2009 and a
prepayment to a programming provider in 2010 that had been paid over the course of the
year in 2009. |
Cash Flows Used in Investing Activities
|
|
|
Six Months: Net cash used in investing activities increased $32,048, to $159,859, for
the six months ended June 30, 2010 from $127,811 for the six months ended June 30, 2009.
The increase was primarily the result of an increase of $41,502 in capital expenditures
for construction of our satellites and related launch vehicles, partially offset by
$9,450 from the sale of available-for-sale securities. |
We will incur significant capital expenditures to construct and launch our new satellites and
improve our terrestrial repeater network and broadcast and administrative infrastructure. We have
entered into various agreements to design, construct, and launch our satellites in the normal
course of business. These capital expenditures will support our growth and the resiliency of our
operations, and will also support the delivery of new revenue streams.
Cash Flows (Used in) Provided by Financing Activities
|
|
|
Six Months: Net cash used in financing activities increased $257,957, to $105,763,
for the six months ended June 30, 2010 from net cash provided by financing activities of
$152,194 for the six months ended June 30, 2009. The increase in cash used in financing
activities was primarily due to an increase of $337,460 in repayments of debt, partially
offset by an increase of $83,284 in net proceeds from the issuance of debt. During the
six months ended June 30, 2010, we received net proceeds of $784,500 from the issuance
of our 8.75% Senior Notes due 2015 while during the six months ended June 30, 2009, we
received net proceeds of $701,216 from the issuance of XMs 11.25% Senior Secured Notes
due 2013 and agreements with Liberty Media. During the six months ended June 30, 2010,
we made debt repayments of $866,198, principally to holders of SIRIUS 95/8% Senior Notes
due 2013, SIRIUS Senior Secured Term Loan due 2012 and XMs 10% Senior PIK Secured
Notes due 2011 while during the six months ended June 30, 2009, we made debt repayments
of $528,738, principally to holders of SIRIUS 21/2% Convertible Notes due 2009 and XMs
Amended and Restated Credit Agreement due 2011. During the six months ended June 30,
2010 and 2009, we paid $24,065 and $16,572 in premiums on the redemption of debt,
respectively. |
Financings and Capital Requirements
We have historically financed our operations through the sale of debt and equity securities.
The Certificate of Designations for our Series B Preferred Stock provides that, so long as Liberty
Media beneficially owns at least half of its initial equity investment,
49
Liberty Medias consent is
required for certain actions, including the grant or issuance of our equity securities and the
incurrence of debt (other than, in general, debt incurred to refinance existing debt) in amounts
greater than $10,000 in any calendar year.
Future Liquidity and Capital Resource Requirements
We have entered into various agreements to design, construct, and launch our satellites in the
normal course of business. As disclosed in Note 14 in our unaudited condensed consolidated
financial statements, as of June 30, 2010, we expect to incur capital
expenditures of approximately $82,546 and $67,817 during the remainder of 2010 and in 2011,
respectively, and an additional $60,320 over the next five years, the majority of which is
attributable to the construction and launch of our XM-5 and FM-6 satellites and related launch
vehicles.
Based upon our current plans, we believe that both SIRIUS and XM have sufficient cash, cash
equivalents and marketable securities to cover their estimated funding needs. We expect to fund
operating expenses, capital expenditures, working capital requirements, interest payments, taxes
and scheduled maturities of our current and long-term debt with existing cash and cash flow from
operations, and we believe that we will be able to generate sufficient revenues to meet our cash
requirements.
Our ability to meet our debt and other obligations depends on our future operating performance
and on economic, financial, competitive and other factors. We continually review our operations for
opportunities to adjust the timing of expenditures to ensure that sufficient resources are
maintained. Our financial projections are based on assumptions, which we believe are reasonable but
contain significant uncertainties.
Sirius XM Radio Inc. is the sole stockholder of XM Satellite Radio Inc., and its business is
operated as an unrestricted subsidiary under the agreements governing our existing indebtedness.
Under certain circumstances, SIRIUS may be unwilling or unable to contribute or loan XM capital.
Similarly, under certain circumstances, XM may be unwilling or unable to contribute or loan SIRIUS
capital. To the extent XMs funds are insufficient to support its business, XM may be required to
seek additional financing, which may not be available on favorable terms, or at all. If XM is
unable to secure additional financing, its business and results of operations may be adversely
affected.
We regularly evaluate our business plans and strategy. These evaluations often result in
changes to our business plans and strategy, some of which may be material and significantly change
our cash requirements. These changes in our business plans or strategy may include: the acquisition
of unique or compelling programming; the introduction of new features or services; significant new
or enhanced distribution arrangements; investments in infrastructure, such as satellites, equipment
or radio spectrum; and acquisitions, including acquisitions that are not directly related to our
satellite radio business. In addition, our operations are affected by the FCC order approving the
Merger, which imposed certain conditions upon, among other things, our program offerings and our
ability to increase prices.
Debt Covenants
The indentures governing our long-term debt include restrictive covenants. As of June 30,
2010, we were in compliance with our financial debt covenants.
For a discussion of our debt covenants see Note 11 to our unaudited consolidated financial
statements in Item 1 of this Quarterly Report on Form 10-Q.
Off-Balance Sheet Arrangements
We do not have any significant off-balance sheet arrangements other than those disclosed in
Note 14 to our unaudited consolidated financial statements in Item 1 of this Quarterly Report on
Form 10-Q that are reasonably likely to have a material effect on our financial condition, results
of operations, liquidity, capital expenditures or capital resources.
2009 Long-Term Stock Incentive Plan
In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive
Plan (the 2009 Plan). Employees, consultants and members of our board of directors are eligible
to receive awards under the 2009 Plan, which provides for the grant of stock options, restricted
stock, restricted stock units and other stock-based awards that the compensation committee of our
board of directors may deem appropriate. Vesting and other terms of stock-based awards are set
forth in the agreements with the individuals receiving the awards. Stock-based awards granted under
the 2009 Plan are generally subject to a vesting requirement. Stock-based awards generally expire
ten years from the date of grant. Each restricted stock unit entitles the holder to receive one
share of common stock upon vesting. As of June 30, 2010,
approximately 323,160,838 shares of common
stock were available for future grants under the 2009 Plan.
50
Other Plans
SIRIUS and XM maintain four other share-based benefit plans the XM 2007 Stock Incentive
Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan, the XM
1998 Shares Award Plan and the XM Talent Option Plan. These plans generally provide for the grant
of stock options, restricted stock, restricted stock units and other stock based awards. No further
awards may be made under these plans. Outstanding awards under these plans are being continued.
Contractual Cash Commitments
For a discussion of our Contractual Cash Commitments, refer to Note 14 to our unaudited
consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
Related Party Transactions
For a discussion of Related Party Transactions, refer to Note 9 to our unaudited
consolidated financial statements in Item 1 of this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Estimates
For a discussion of our Critical Accounting Policies and Estimates, refer to Managements
Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on
Form 10-K for the year ended December 31, 2009 and Note 3 to our unaudited consolidated financial
statements in Item 1 of this Form 10-Q. There have been no material changes to our critical
accounting policies and estimates since December 31, 2009.
51
Footnotes
(1) |
|
Average self-pay monthly churn represents the monthly average of self-pay deactivations for
the quarter divided by the average self-pay subscriber balance for the quarter. |
|
(2) |
|
We measure the percentage of vehicle owners and lessees that receive our service and convert
to self-paying after the initial promotion period. We refer to this as the conversion rate.
At the time satellite radio enabled vehicles are sold or leased, the owners or lessees
generally receive between three and twelve month trial subscriptions. Promotional periods
generally include the period of trial service plus 30 days to handle the receipt and
processing of payments. We measure conversion rate three months after the period in which the
trial service ends. Based on our experience it may take up to 90 days after the trial service
ends for vehicle owners and lessees to respond to our marketing communications and become
self-paying subscribers. |
|
(3) |
|
ARPU is derived from total earned subscriber revenue, net advertising revenue and other
subscription-related revenue, net of purchase price accounting adjustments, divided by the
number of months in the period, divided by the daily weighted average number of subscribers
for the period. Other subscription-related revenue includes amounts recognized on account of
the U.S. Music Royalty Fee since the third quarter of 2009. Purchase price accounting
adjustments include the recognition of deferred subscriber revenues not recognized in purchase
price accounting. ARPU is calculated as follows (in thousands, except for subscriber and per
subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue (GAAP) |
|
$ |
601,630 |
|
|
$ |
561,763 |
|
|
$ |
1,181,139 |
|
|
$ |
1,121,151 |
|
Net advertising revenue (GAAP) |
|
|
15,797 |
|
|
|
12,564 |
|
|
|
30,323 |
|
|
|
24,869 |
|
Other subscription-related revenue (GAAP) |
|
|
56,694 |
|
|
|
- |
|
|
|
104,641 |
|
|
|
- |
|
Purchase price accounting adjustments |
|
|
3,986 |
|
|
|
15,195 |
|
|
|
8,952 |
|
|
|
31,883 |
|
|
| |
| |
| |
| |
|
|
$ |
678,107 |
|
|
$ |
589,522 |
|
|
$ |
1,325,055 |
|
|
$ |
1,177,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
19,139,926 |
|
|
|
18,438,473 |
|
|
|
18,962,580 |
|
|
|
18,575,219 |
|
|
| |
| |
| |
| |
ARPU |
|
$ |
11.81 |
|
|
$ |
10.66 |
|
|
$ |
11.65 |
|
|
$ |
10.57 |
|
|
|
|
|
|
|
|
|
|
52
(4) |
|
SAC, per gross subscriber addition is derived from subscriber acquisition costs and margins
from the direct sale of radios and accessories, excluding share-based payment expense and
purchase price accounting adjustments, divided by the number of gross subscriber additions for
the period. Purchase price accounting adjustments include the elimination of the benefit of
amortization of deferred credits on executory contracts recognized at the Merger date
attributable to third party arrangements with an OEM. SAC, per gross subscriber addition is
calculated as follows (in thousands, except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition costs (GAAP) |
|
$ |
110,383 |
|
|
$ |
67,651 |
|
|
$ |
199,762 |
|
|
$ |
140,719 |
|
Less: margin from direct sales of radios and
accessories (GAAP) |
|
|
(10,715 |
) |
|
|
(2,877 |
) |
|
|
(17,078 |
) |
|
|
(4,793 |
) |
Add: purchase price accounting adjustments |
|
|
20,300 |
|
|
|
13,337 |
|
|
|
37,966 |
|
|
|
23,979 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
119,968 |
|
|
$ |
78,111 |
|
|
$ |
220,650 |
|
|
$ |
159,905 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
2,020,507 |
|
|
|
1,380,125 |
|
|
|
3,741,355 |
|
|
|
2,719,086 |
|
|
|
|
| |
| |
| |
SAC, per gross subscriber addition |
|
$ |
59 |
|
|
$ |
57 |
|
|
$ |
59 |
|
|
$ |
59 |
|
|
|
|
|
|
|
|
|
|
(5) |
|
Customer service and billing expenses, per average subscriber is derived from total
customer service and billing expenses, excluding share-based payment expense and purchase
price accounting adjustments, divided by the number of months in the period, divided by the
daily weighted average number of subscribers for the period. We believe the exclusion of
share-based payment expense in our calculation of customer service and billing expenses, per
average subscriber is useful given the significant variation in expense that can result from
changes in the fair market value of our common stock, the effect of which is unrelated to the
operational conditions that give rise to variations in the components of our customer service
and billing expenses. Purchase price accounting adjustments include the elimination of the
benefit associated with share-based payment arrangements recognized at the Merger date.
Customer service and billing expenses, per average subscriber is calculated as follows (in
thousands, except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service and billing expenses (GAAP) |
|
$ |
58,414 |
|
|
$ |
58,833 |
|
|
$ |
114,625 |
|
|
$ |
119,041 |
|
Less: share-based payment expense, net of purchase
price accounting adjustments |
|
|
(729 |
) |
|
|
(905 |
) |
|
|
(1,457 |
) |
|
|
(1,561 |
) |
Add: purchase price accounting adjustment |
|
|
78 |
|
|
|
126 |
|
|
|
172 |
|
|
|
243 |
|
|
| |
| |
| |
| |
|
|
$ |
57,763 |
|
|
$ |
58,054 |
|
|
$ |
113,340 |
|
|
$ |
117,723 |
|
Daily weighted average number of subscribers |
|
|
19,139,926 |
|
|
|
18,438,473 |
|
|
|
18,962,580 |
|
|
|
18,575,219 |
|
|
| |
| |
| |
| |
Customer service and billing expenses, per average
subscriber |
|
$ |
1.01 |
|
|
$ |
1.05 |
|
|
$ |
1.00 |
|
|
$ |
1.06 |
|
|
|
|
|
|
|
|
|
|
(6) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
For the Three Months Ended |
|
For the Six Months Ended |
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
178,675 |
|
|
$ |
69,988 |
|
|
$ |
140,987 |
|
|
$ |
136,859 |
|
Additions to property and equipment |
|
|
(70,348 |
) |
|
|
(56,671 |
) |
|
|
(169,313 |
) |
|
|
(127,811 |
) |
Merger related costs |
|
|
- |
|
|
|
(623 |
) |
|
|
- |
|
|
|
- |
|
Restricted and other investment activity |
|
|
4 |
|
|
|
- |
|
|
|
9,454 |
|
|
|
- |
|
|
| |
| |
| |
| |
Free cash flow |
|
$ |
108,331 |
|
|
$ |
12,694 |
|
|
$ |
(18,872 |
) |
|
$ |
9,048 |
|
|
|
|
|
|
|
|
|
|
53
(7) |
|
EBITDA is defined as net income before interest, taxes, depreciation and amortization. We
adjust EBITDA to also remove the impact of other income and expense, loss on extinguishment of
debt as well as certain non-cash charges discussed below. This measure is one of the primary
Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii)
base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP
financial performance measure that excludes (if applicable): (i) certain adjustments as a
result of the purchase price accounting for the Merger, (ii) goodwill impairment, (iii)
restructuring, impairments, and related costs, (iv) depreciation and amortization and (v)
share-based payment expense. The purchase price accounting adjustments include: (i) the
elimination of deferred revenue associated with the investment in Canadian Satellite Radio,
(ii) recognition of deferred subscriber revenues not recognized in purchase price accounting,
and (iii) elimination of the benefit of deferred credits on executory contracts, which are
primarily attributable to third party arrangements with an OEM and programming providers. We
believe adjusted EBITDA is a useful measure of the underlying trend of our operating
performance, which provides useful information about our business apart from the costs
associated with our physical plant, capital structure and purchase price accounting. We believe
investors find this Non-GAAP financial measure useful when analyzing our results and comparing
our operating performance to the performance of other communications, entertainment and media
companies. We believe that investors use current and projected adjusted EBITDA to estimate our
current or prospective enterprise value and to make investment decisions. Because we fund and
build-out our satellite radio system through the periodic raising and expenditure of large
amounts of capital, our adjusted results of operations reflect significant charges for
depreciation expense. The exclusion of depreciation and amortization expense is useful given
significant variation in depreciation and amortization expense that can result from the
potential variations in estimated useful lives, all of which can vary widely across different
industries or among companies within the same industry. We believe the exclusion of
restructuring, impairments and related costs is useful given the nature of these expenses. We
also believe the exclusion of share-based payment expense is useful given the significant
variation in expense that can result from changes in the fair market value of our common stock. |
|
|
|
Adjusted EBITDA has certain limitations in that it does not take into account the impact to our
statement of operations of certain expenses, including share-based payment expense and certain
purchase price accounting for the Merger. We endeavor to compensate for the limitations of the
Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater
prominence and descriptions of the reconciling items, including quantifying such items, to
derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results
after giving effect for these costs, should refer to net income (loss) as disclosed in our
consolidated statements of operations. Since adjusted EBITDA is a Non-GAAP financial
performance measure, our calculation of adjusted EBITDA may be susceptible to varying
calculations; may not be comparable to other similarly titled measures of other companies; and
should not be considered in isolation, as a substitute for, or superior to measures of
financial performance prepared in accordance with GAAP. The reconciliation of net income (loss)
to the adjusted EBITDA is calculated as follows (see footnotes for reconciliation of the
adjusted amounts to their respective GAAP amounts) (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net income (loss) (GAAP): |
|
$ |
15,272 |
|
|
$ |
(159,644 |
) |
|
$ |
56,870 |
|
|
$ |
(212,290 |
) |
Add back items excluded from Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase price accounting adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues (see pages 55-58) |
|
|
5,799 |
|
|
|
17,007 |
|
|
|
12,578 |
|
|
|
35,509 |
|
Operating expenses (see pages 55-58) |
|
|
(64,857 |
) |
|
|
(57,184 |
) |
|
|
(127,467 |
) |
|
|
(112,387 |
) |
Share-based
payment expense, net of purchase price accounting adjustments |
|
|
16,704 |
|
|
|
31,003 |
|
|
|
34,887 |
|
|
|
52,501 |
|
Depreciation and amortization |
|
|
69,230 |
|
|
|
77,158 |
|
|
|
139,495 |
|
|
|
159,524 |
|
Restructuring, impairments and related costs |
|
|
1,803 |
|
|
|
27,000 |
|
|
|
1,803 |
|
|
|
27,614 |
|
Interest expense, net of amounts capitalized |
|
|
76,802 |
|
|
|
98,080 |
|
|
|
154,670 |
|
|
|
166,058 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
31,871 |
|
|
|
107,756 |
|
|
|
34,437 |
|
|
|
125,713 |
|
Interest and investment income (loss) |
|
|
(378 |
) |
|
|
(9,323 |
) |
|
|
2,892 |
|
|
|
(2,157 |
) |
Other (loss) income |
|
|
601 |
|
|
|
(749 |
) |
|
|
(728 |
) |
|
|
(1,259 |
) |
Income tax expense |
|
|
1,466 |
|
|
|
1,115 |
|
|
|
2,633 |
|
|
|
2,229 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
|
$ |
154,313 |
|
|
$ |
132,219 |
|
|
$ |
312,070 |
|
|
$ |
241,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
54
(8) |
|
The following tables reconcile our actual revenues and operating expenses to our adjusted revenues
and operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Three Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
As Reported |
|
|
Accounting |
|
|
based Payment |
|
|
Adjusted |
|
(in thousands) |
|
|
|
|
Adjustments |
|
|
Expense |
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
601,630 |
|
|
$ |
3,986 |
|
|
$ |
|
|
|
$ |
605,616 |
|
Advertising revenue, net of agency fees |
|
|
15,797 |
|
|
|
|
|
|
|
|
|
|
|
15,797 |
|
Equipment revenue |
|
|
18,520 |
|
|
|
|
|
|
|
|
|
|
|
18,520 |
|
Other revenue |
|
|
63,814 |
|
|
|
1,813 |
|
|
|
|
|
|
|
65,627 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
699,761 |
|
|
$ |
5,799 |
|
|
$ |
|
|
|
$ |
705,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue share and royalties |
|
|
107,901 |
|
|
|
26,417 |
|
|
|
|
|
|
|
134,318 |
|
Programming and content |
|
|
72,019 |
|
|
|
13,702 |
|
|
|
(1,790 |
) |
|
|
83,931 |
|
Customer service and billing |
|
|
58,414 |
|
|
|
78 |
|
|
|
(729 |
) |
|
|
57,763 |
|
Satellite and transmission |
|
|
19,982 |
|
|
|
303 |
|
|
|
(1,050 |
) |
|
|
19,235 |
|
Cost of equipment |
|
|
7,805 |
|
|
|
|
|
|
|
|
|
|
|
7,805 |
|
Subscriber acquisition costs |
|
|
110,383 |
|
|
|
20,300 |
|
|
|
|
|
|
|
130,683 |
|
Sales and marketing |
|
|
56,177 |
|
|
|
3,661 |
|
|
|
(2,762 |
) |
|
|
57,076 |
|
Engineering, design and development |
|
|
11,247 |
|
|
|
148 |
|
|
|
(1,760 |
) |
|
|
9,635 |
|
General and administrative |
|
|
59,166 |
|
|
|
248 |
|
|
|
(8,613 |
) |
|
|
50,801 |
|
Depreciation and amortization (2) |
|
|
69,230 |
|
|
|
|
|
|
|
|
|
|
|
69,230 |
|
Restructuring, impairments and related costs |
|
|
1,803 |
|
|
|
|
|
|
|
|
|
|
|
1,803 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
16,704 |
|
|
|
16,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
574,127 |
|
|
$ |
64,857 |
|
|
$ |
|
|
|
$ |
638,984 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content |
|
$ |
1,662 |
|
|
$ |
128 |
|
|
$ |
|
|
|
$ |
1,790 |
|
Customer service and billing |
|
|
651 |
|
|
|
78 |
|
|
|
|
|
|
|
729 |
|
Satellite and transmission |
|
|
968 |
|
|
|
82 |
|
|
|
|
|
|
|
1,050 |
|
Sales and marketing |
|
|
2,643 |
|
|
|
119 |
|
|
|
|
|
|
|
2,762 |
|
Engineering, design and development |
|
|
1,612 |
|
|
|
148 |
|
|
|
|
|
|
|
1,760 |
|
General and administrative |
|
|
8,365 |
|
|
|
248 |
|
|
|
|
|
|
|
8,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
15,901 |
|
|
$ |
803 |
|
|
$ |
|
|
|
$ |
16,704 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the three months ended June 30, 2010 was $17,000. |
55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Three Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
based Payment |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Adjusted |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
561,763 |
|
|
$ |
15,195 |
|
|
$ |
|
|
|
$ |
576,958 |
|
Advertising revenue, net of agency fees |
|
|
12,564 |
|
|
|
|
|
|
|
|
|
|
|
12,564 |
|
Equipment revenue |
|
|
10,928 |
|
|
|
|
|
|
|
|
|
|
|
10,928 |
|
Other revenue |
|
|
5,574 |
|
|
|
1,812 |
|
|
|
|
|
|
|
7,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
590,829 |
|
|
$ |
17,007 |
|
|
$ |
|
|
|
$ |
607,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue share and royalties |
|
|
95,831 |
|
|
|
21,840 |
|
|
|
|
|
|
|
117,671 |
|
Programming and content |
|
|
72,102 |
|
|
|
17,701 |
|
|
|
(2,096 |
) |
|
|
87,707 |
|
Customer service and billing |
|
|
58,833 |
|
|
|
126 |
|
|
|
(905 |
) |
|
|
58,054 |
|
Satellite and transmission |
|
|
19,615 |
|
|
|
354 |
|
|
|
(1,310 |
) |
|
|
18,659 |
|
Cost of equipment |
|
|
8,051 |
|
|
|
|
|
|
|
|
|
|
|
8,051 |
|
Subscriber acquisition costs |
|
|
67,651 |
|
|
|
13,337 |
|
|
|
|
|
|
|
80,988 |
|
Sales and marketing |
|
|
48,693 |
|
|
|
3,173 |
|
|
|
(3,256 |
) |
|
|
48,610 |
|
Engineering, design and development |
|
|
11,944 |
|
|
|
247 |
|
|
|
(2,068 |
) |
|
|
10,123 |
|
General and administrative |
|
|
66,716 |
|
|
|
406 |
|
|
|
(21,368 |
) |
|
|
45,754 |
|
Depreciation and amortization (2) |
|
|
77,158 |
|
|
|
|
|
|
|
|
|
|
|
77,158 |
|
Restructuring, impairments and related costs |
|
|
27,000 |
|
|
|
|
|
|
|
|
|
|
|
27,000 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
31,003 |
|
|
|
31,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
553,594 |
|
|
$ |
57,184 |
|
|
$ |
|
|
|
$ |
610,778 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in
operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content |
|
$ |
1,891 |
|
|
$ |
205 |
|
|
$ |
|
|
|
$ |
2,096 |
|
Customer service and billing |
|
|
779 |
|
|
|
126 |
|
|
|
|
|
|
|
905 |
|
Satellite and transmission |
|
|
1,177 |
|
|
|
133 |
|
|
|
|
|
|
|
1,310 |
|
Sales and marketing |
|
|
3,072 |
|
|
|
184 |
|
|
|
|
|
|
|
3,256 |
|
Engineering, design and development |
|
|
1,821 |
|
|
|
247 |
|
|
|
|
|
|
|
2,068 |
|
General and administrative |
|
|
20,961 |
|
|
|
407 |
|
|
|
|
|
|
|
21,368 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
29,701 |
|
|
$ |
1,302 |
|
|
$ |
|
|
|
$ |
31,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the three months ended June 30, 2009 was $31,000. |
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Six Months Ended June 30, 2010 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
based Payment |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Adjusted |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,181,139 |
|
|
$ |
8,952 |
|
|
$ |
|
|
|
$ |
1,190,091 |
|
Advertising revenue, net of agency fees |
|
|
30,323 |
|
|
|
|
|
|
|
|
|
|
|
30,323 |
|
Equipment revenue |
|
|
32,802 |
|
|
|
|
|
|
|
|
|
|
|
32,802 |
|
Other revenue |
|
|
119,280 |
|
|
|
3,626 |
|
|
|
|
|
|
|
122,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
1,363,544 |
|
|
$ |
12,578 |
|
|
$ |
|
|
|
$ |
1,376,122 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue share and royalties |
|
|
206,085 |
|
|
|
51,772 |
|
|
|
|
|
|
|
257,857 |
|
Programming and content |
|
|
150,452 |
|
|
|
28,850 |
|
|
|
(4,900 |
) |
|
|
174,402 |
|
Customer service and billing |
|
|
114,625 |
|
|
|
172 |
|
|
|
(1,457 |
) |
|
|
113,340 |
|
Satellite and transmission |
|
|
40,100 |
|
|
|
626 |
|
|
|
(2,104 |
) |
|
|
38,622 |
|
Cost of equipment |
|
|
15,724 |
|
|
|
|
|
|
|
|
|
|
|
15,724 |
|
Subscriber acquisition costs |
|
|
199,762 |
|
|
|
37,966 |
|
|
|
|
|
|
|
237,728 |
|
Sales and marketing |
|
|
105,294 |
|
|
|
7,186 |
|
|
|
(5,462 |
) |
|
|
107,018 |
|
Engineering, design and development |
|
|
22,684 |
|
|
|
334 |
|
|
|
(3,556 |
) |
|
|
19,462 |
|
General and administrative |
|
|
116,746 |
|
|
|
561 |
|
|
|
(17,408 |
) |
|
|
99,899 |
|
Depreciation and amortization (2) |
|
|
139,495 |
|
|
|
|
|
|
|
|
|
|
|
139,495 |
|
Restructuring, impairments and related costs |
|
|
1,803 |
|
|
|
|
|
|
|
|
|
|
|
1,803 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
34,887 |
|
|
|
34,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
1,112,770 |
|
|
$ |
127,467 |
|
|
$ |
|
|
|
$ |
1,240,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in
operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content |
|
$ |
4,612 |
|
|
$ |
288 |
|
|
$ |
|
|
|
$ |
4,900 |
|
Customer service and billing |
|
|
1,285 |
|
|
|
172 |
|
|
|
|
|
|
|
1,457 |
|
Satellite and transmission |
|
|
1,919 |
|
|
|
185 |
|
|
|
|
|
|
|
2,104 |
|
Sales and marketing |
|
|
5,198 |
|
|
|
264 |
|
|
|
|
|
|
|
5,462 |
|
Engineering, design and development |
|
|
3,222 |
|
|
|
334 |
|
|
|
|
|
|
|
3,556 |
|
General and administrative |
|
|
16,847 |
|
|
|
561 |
|
|
|
|
|
|
|
17,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
33,083 |
|
|
$ |
1,804 |
|
|
$ |
|
|
|
$ |
34,887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the six months ended June 30, 2010 was $36,000. |
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Six Months Ended June 30, 2009 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
based Payment |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Adjusted |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including
effects of rebates |
|
$ |
1,121,151 |
|
|
$ |
31,883 |
|
|
$ |
|
|
|
$ |
1,153,034 |
|
Advertising revenue, net of
agency fees |
|
|
24,869 |
|
|
|
|
|
|
|
|
|
|
|
24,869 |
|
Equipment revenue |
|
|
20,837 |
|
|
|
|
|
|
|
|
|
|
|
20,837 |
|
Other revenue |
|
|
10,951 |
|
|
|
3,626 |
|
|
|
|
|
|
|
14,577 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
1,177,808 |
|
|
$ |
35,509 |
|
|
$ |
|
|
|
$ |
1,213,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses (depreciation and
amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue share and royalties |
|
|
196,297 |
|
|
|
42,635 |
|
|
|
|
|
|
|
238,932 |
|
Programming and content |
|
|
152,511 |
|
|
|
36,592 |
|
|
|
(4,717 |
) |
|
|
184,386 |
|
Customer service and billing |
|
|
119,041 |
|
|
|
243 |
|
|
|
(1,561 |
) |
|
|
117,723 |
|
Satellite and transmission |
|
|
39,894 |
|
|
|
681 |
|
|
|
(2,174 |
) |
|
|
38,401 |
|
Cost of equipment |
|
|
16,044 |
|
|
|
|
|
|
|
|
|
|
|
16,044 |
|
Subscriber acquisition costs |
|
|
140,719 |
|
|
|
23,979 |
|
|
|
|
|
|
|
164,698 |
|
Sales and marketing |
|
|
100,116 |
|
|
|
6,831 |
|
|
|
(7,735 |
) |
|
|
99,212 |
|
Engineering, design and development |
|
|
21,723 |
|
|
|
548 |
|
|
|
(3,736 |
) |
|
|
18,535 |
|
General and administrative |
|
|
126,031 |
|
|
|
878 |
|
|
|
(32,578 |
) |
|
|
94,331 |
|
Depreciation and amortization (2) |
|
|
159,524 |
|
|
|
|
|
|
|
|
|
|
|
159,524 |
|
Restructuring, impairments and
related costs |
|
|
27,614 |
|
|
|
|
|
|
|
|
|
|
|
27,614 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
52,501 |
|
|
|
52,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
$ |
1,099,514 |
|
|
$ |
112,387 |
|
|
$ |
|
|
|
$ |
1,211,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense
included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Programming and content |
|
$ |
4,381 |
|
|
$ |
336 |
|
|
$ |
|
|
|
$ |
4,717 |
|
Customer service and billing |
|
|
1,318 |
|
|
|
243 |
|
|
|
|
|
|
|
1,561 |
|
Satellite and transmission |
|
|
1,934 |
|
|
|
240 |
|
|
|
|
|
|
|
2,174 |
|
Sales and marketing |
|
|
7,358 |
|
|
|
377 |
|
|
|
|
|
|
|
7,735 |
|
Engineering, design and development |
|
|
3,188 |
|
|
|
548 |
|
|
|
|
|
|
|
3,736 |
|
General and administrative |
|
|
31,699 |
|
|
|
879 |
|
|
|
|
|
|
|
32,578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
49,878 |
|
|
$ |
2,623 |
|
|
$ |
|
|
|
$ |
52,501 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2) Purchase price accounting adjustments included in the tables above exclude the incremental
depreciation and amortization associated with the $785,000 stepped up basis in property,
equipment and intangible assets as a result of the Merger. The increased depreciation and
amortization for the six months ended June 30, 2009 was $62,000. |
(9) |
|
The following table reconciles our GAAP Net cash provided by operating activities to our
Net income plus non-cash operating activities (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended |
|
|
For the Six Months Ended |
|
|
| June 30, |
| June 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
$ |
178,675 |
|
|
$ |
69,988 |
|
|
$ |
140,987 |
|
|
$ |
136,859 |
|
Less: Changes in operating assets and liabilities, net |
|
|
(82,101 |
) |
|
|
749 |
|
|
|
48,588 |
|
|
|
(16,849 |
) |
|
| |
| |
| |
| |
Net income plus non cash operating activities |
|
$ |
96,574 |
|
|
$ |
70,737 |
|
|
$ |
189,575 |
|
|
$ |
120,010 |
|
|
|
|
|
|
|
|
|
|
58
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
As of June 30, 2010, we did not have any derivative financial instruments. We do not hold or
issue any free-standing derivatives. We hold investments in marketable securities, which consist of
certificates of deposit and investments in debt and equity securities of other entities. We
classify our investments in marketable securities as available-for-sale. These securities are
consistent
with the investment objectives contained within our investment policy. The basic objectives of
our investment policy are the preservation of capital, maintaining sufficient liquidity to meet
operating requirements and maximizing yield.
Our debt includes fixed rate instruments and the fair market value of our debt is sensitive to
changes in interest rates. Under our current policies, we do not use interest rate derivative
instruments to manage our exposure to interest rate fluctuations.
ITEM 4. CONTROLS AND PROCEDURES
Controls and Procedures
As of June 30, 2010, an evaluation was performed under the supervision and with the
participation of our management, including Mel Karmazin, our Chief Executive Officer, and David J.
Frear, our Executive Vice President and Chief Financial Officer, of the effectiveness of the design
and operation of our disclosure controls and procedures (as that term is defined in Rule 13a-15(e)
and 15d-15(e) under the Securities Exchange Act). Based on that evaluation, our management,
including our Chief Executive Officer and our Chief Financial Officer, concluded that our
disclosure controls and procedures were effective as of June 30, 2010. There has been no change in
our internal control over financial reporting (as that term is defined in Rule 13a-15(f) and
15d-15(f) under the Securities Exchange Act) during the quarter ended June 30, 2010 that has
materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
59
PART
II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
There have been no material developments with respect to the information previously reported
under Part I, Item 3, of our Annual Report on Form 10-K for the year ended December 31, 2009.
ITEM 1A. RISK FACTORS
There have been no material changes to the risk factors previously disclosed in response to
Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2009.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. (REMOVED AND RESERVED)
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
See Exhibits Index attached hereto.
60
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized on this 6th day of August 2010.
|
|
|
|
|
|
SIRIUS XM RADIO INC.
|
|
|
By: |
/s/ David J. Frear
|
|
|
|
David J. Frear |
|
|
|
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer) |
|
|
61
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Description |
4.1
|
|
|
|
Assumption and Joinder Agreement, dated as of June 1,
2010, between XM 1500 Eckington LLC and XM Investment LLC
to the Collateral Agreement, dated as of December 31,
2009, by and among XM Satellite Radio Inc. and certain
subsidiaries thereof and U.S. Bank National Association,
as collateral agent, relating to the 11.25% Senior Secured
Notes due 2013 (filed herewith). |
|
|
|
|
|
4.2 |
|
|
|
Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Holdings Inc., XM Satellite Radio Inc.,
certain subsidiaries thereof and U.S. Bank National
Association, as trustee, relating to the Senior PIK
Secured Notes due 2011 (incorporated by reference to
Exhibit 4.1 to XM Satellite Radio Inc.s Current Report
on Form 8-K filed on April 16, 2010). |
|
|
|
|
|
4.3 |
|
|
|
Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Inc., certain subsidiaries thereof and
U.S. Bank National Association, as trustee, relating to
the 11.25% Senior Secured Notes due 2013 (incorporated by
reference to Exhibit 4.2 to XM Satellite Radio Inc.s
Quarterly Report on Form 10-Q for the quarter ended March
31, 2010). |
|
|
|
|
|
4.4 |
|
|
|
Third Supplemental Indenture, dated April 14, 2010, among
XM Satellite Radio Inc., certain subsidiaries thereof and
the Bank of New York Mellon, as trustee, relating to the
13% Senior Notes due 2013 (incorporated by reference to
Exhibit 4.3 to XM Satellite Radio Inc.s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2010). |
|
|
|
|
|
4.5 |
|
|
|
Supplemental Indenture, dated April 14, 2010, among XM
Satellite Radio Inc., certain subsidiaries thereof and the
Bank of New York Mellon, as trustee, relating to the 7%
Exchangeable Senior Subordinated Notes due 2014
(incorporated by reference to Exhibit 4.4 to XM Satellite
Radio Inc.s Quarterly Report on Form 10-Q for the quarter
ended March 31,
2010). |
|
|
|
|
|
4.6 |
|
|
|
Fourth Supplemental Indenture, dated April 14, 2010, among
XM Satellite Radio Inc., certain subsidiaries thereof and
the Bank of New York Mellon, as trustee, relating to the
9.75% Senior Notes due 2014 (incorporated by reference to
Exhibit 4.5 to XM Satellite Radio Inc.s Quarterly Report
on Form 10-Q for the quarter ended March 31, 2010). |
|
|
|
|
|
31.1
|
|
|
|
Certificate of Mel Karmazin, Chief Executive Officer,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(filed herewith). |
|
|
|
|
|
31.2
|
|
|
|
Certificate of David J. Frear, Executive Vice President
and Chief Financial Officer, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002 (filed herewith). |
|
|
|
|
|
32.1
|
|
|
|
Certificate of Mel Karmazin, Chief Executive Officer,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
|
|
32.2
|
|
|
|
Certificate of David J. Frear, Executive Vice President
and Chief Financial Officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (filed herewith). |
|
|
|
|
|
100.1*
|
|
|
|
The following information from Sirius XM Radio Inc.s
Quarterly Report on Form 10-Q for the quarter ended June
30, 2010 formatted in XBRL: (i) Unaudited Consolidated
Statements of Operations for the three and six months
ended June 30, 2010 and 2009; (ii) Consolidated Balance
Sheets as of June 30, 2010 (Unaudited) and December 31,
2009; (iii) Unaudited Consolidated Statements of
Stockholders Equity as of June 30, 2010 and Comprehensive
Income for the six months ended June 30, 2010; (iv)
Unaudited Consolidated Statements of Cash Flows for the
six months ended June 30, 2010 and 2009; and (v) Notes to
Unaudited Consolidated Financial Statements tagged as
blocks of text. |
|
|
|
* |
|
Furnished with this Form 10-Q. |