UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
|
|
|
þ |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
|
|
|
|
FOR FISCAL YEAR ENDED DECEMBER 31, 2009 |
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
|
|
|
|
|
Commission |
|
|
|
I.R.S. Employer |
File |
|
|
|
Identification |
Number |
|
Exact name of Registrant As Specified in its Charter |
|
Number |
|
000-27441
|
|
XM SATELLITE RADIO HOLDINGS INC. |
|
54-1878819 |
333-39178
|
|
XM SATELLITE RADIO INC. |
|
52-1805102 |
DELAWARE
(State or other jurisdiction of incorporation or organization of both registrants)
1500 ECKINGTON PLACE, NE
WASHINGTON, DC 20002-2194
(Address of principal executive offices) (Zip code)
202-380-4000
(Registrants telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
Not Applicable
(Title of Classes)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule
405 of the Securities Act. Yes o No þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section
13 or 15(d) of the Act. Yes o No þ
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 o No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of the registrants knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. þ
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):
|
|
|
|
|
|
|
|
|
XM Satellite Radio Holdings Inc.
|
|
Large Accelerated Filer
|
|
o
|
|
Accelerated Filer
|
|
o |
|
|
Non-Accelerated Filer
|
|
þ
|
|
Smaller Reporting Company
|
|
o |
|
XM Satellite Radio Inc.
|
|
Large Accelerated Filer
|
|
o
|
|
Accelerated Filer
|
|
o |
|
|
Non-Accelerated Filer
|
|
þ
|
|
Smaller Reporting Company
|
|
o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Act). Yes o No þ
The aggregate market value of the registrants common stock held by non-affiliates of the
registrant on June 30, 2009 was $0.
Indicate the number of shares outstanding of each of the issuers classes of common stock, as
of the latest practicable date.
|
|
|
(Class) |
|
(Outstanding as of January 31, 2010) |
XM SATELLITE RADIO HOLDINGS INC. |
|
|
COMMON STOCK, $0.01 PAR VALUE |
|
|
(all shares are issued to Sirius XM Radio Inc.)
|
|
100 SHARES |
XM
SATELLITE RADIO INC.
COMMON STOCK, $0.10 PAR VALUE
(all shares are issued to XM Satellite Radio Holdings Inc.) |
|
125 SHARES |
DOCUMENTS INCORPORATED BY REFERENCE
THE REGISTRANTS MEET THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS I(1)(a) AND (b) OF FORM 10-K
AND ARE THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT.
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
INDEX TO FORM 10-K
|
|
|
* |
|
Omitted pursuant to General Instructions I(2)(c) of Form 10-K. |
EXPLANATORY NOTE
This Annual Report on Form 10-K is a combined report being filed by two separate registrants:
XM Satellite Radio Holdings Inc. and XM Satellite Radio Inc. XM Satellite Radio Holdings Inc.s
principal wholly owned subsidiary is XM Satellite Radio Inc. XM Satellite Radio Holdings Inc. also
fully and unconditionally guarantees certain of XM Satellite Radio Inc.s debt securities. The two
companies information presented in this report has been combined. The combined report includes XM
Satellite Radio Holdings Inc.s consolidated financial statements as the only set of financial
statements. An explanation of the differences between the companies is set forth in Note 1 to the
consolidated financial statements in Item 8 of this Annual Report on Form 10-K. Condensed
consolidating financial information regarding XM Satellite Radio Inc. is set forth in Note 16 to
the consolidated financial statements in Item 8 of this Annual Report on Form 10-K.
On July 28, 2008, Vernon Merger Corporation, a wholly owned subsidiary of Sirius XM Radio Inc.
merged with and into XM Satellite Radio Holdings Inc. and as a result XM Holdings became a wholly
owned subsidiary of SIRIUS (the Merger).
Unless otherwise indicated,
|
|
|
we, us, our, the company, XM Holdings and similar terms refer to XM
Satellite Radio Holdings Inc. and its consolidated subsidiaries (including XM); |
|
|
|
SIRIUS refers to Sirius XM Radio Inc. and its consolidated subsidiaries; |
|
|
|
XM refers only to XM Satellite Radio Inc. and its consolidated subsidiaries. |
The SIRIUS satellite radio business is conducted by SIRIUS; and the XM satellite radio
business is conducted principally by XM. XM Holdings is primarily a holding company, although XM
Holdings owns the former corporate headquarters and data center of XM and leases these buildings to
XM; owns the XM-5 and portions of the XM-3 and XM-4 satellites; holds the investment in XM Canada;
and holds certain cash accounts.
Special Note Regarding Forward-Looking Statements
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 Annual
Report on Form 10-K 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.
Any forward-looking statements are qualified in their entirety by reference to the factors
discussed throughout this Annual Report on Form 10-K and in other reports and documents published
by us from time to time, particularly the risk factors described under Risk Factors in Item 1A of
this Annual Report on Form 10-K.
Among the significant factors that could cause our actual results to differ materially from
those expressed in the forward-looking statements are:
|
|
|
general economic conditions, which has adversely affected our business; |
|
|
|
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 XM Holdings 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 |
|
|
|
our competitive position versus other forms of audio entertainment
including terrestrial radio, HD radio, Internet radio, mobile phones, iPods and other MP3
devices, and emerging next-generation networks and technologies. |
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 combination of factors, may cause actual results to differ materially from
those contained in any forward-looking statements.
1
PART I
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 system. In July 2008,
SIRIUS wholly owned subsidiary, Vernon Merger Corporation, merged (the Merger) with and into us
and, as a result, we are now a wholly owned subsidiary of SIRIUS. Our system consists of four
in-orbit satellites, over 650 terrestrial repeaters that receive and retransmit signals, satellite
uplink facilities and studios. Subscribers can also receive certain of our music and other
channels over the Internet.
As of December 31, 2009, we had 9,749,100 subscribers. Our subscriber totals include:
|
|
|
subscribers under our regular and discounted pricing plans; |
|
|
|
subscribers that have prepaid, including payments either made or due from
automakers for prepaid subscriptions included in the sale or lease price of a new vehicle; |
|
|
|
certain radios activated for daily rental fleet programs; |
|
|
|
certain subscribers to XM Online, our Internet service; and |
|
|
|
certain subscribers to our weather, traffic and data services. |
Our primary source of revenue is subscription fees, with most of our customers subscribing to
an annual, semi-annual, quarterly or monthly plan. We offer discounts for prepaid and long-term
subscriptions as well as discounts for multiple subscriptions. Since the Merger, we have
introduced new programming packages and made certain changes to the pricing of our services. In
October 2008, we introduced best of programming to subscribers for an additional $4.04 per month.
In March 2009, we increased the price of our discounted second radio subscription plan from $6.99
to $8.99 per month. In March 2009, we began offering XM Online, our Internet service, to our
subscribers for an additional $2.99 per month. Effective July 29, 2009, we began adding a U.S.
Music Royalty Fee to subscriber invoices. The U.S. Music Royalty Fee is $1.98 a month on our base
$12.95 subscriptions and $.97 for base plans that are eligible for a second radio discount. We
also derive revenue from activation and other 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 data and weather services.
Our satellite radios are primarily distributed through automakers (OEMs); nationwide through
retail locations; and through our website. We have agreements with several major automakers to
offer XM satellite radios as factory or dealer-installed equipment in their vehicles. XM radios
are also offered to customers of rental car companies.
XM Satellite Radio Inc. was incorporated on December 15, 1992 in the State of Delaware. XM
Satellite Radio Holdings Inc. was formed as a holding company for XM on May 16, 1997.
Programming
We offer a dynamic programming lineup of more than 135 channels of commercial-free music,
sports, news, talk, entertainment, and traffic and weather. The channel line-up for the XM service
is available at xmradio.com.
Our subscription packages allow most listeners to customize and enhance our standard
programming lineup. The Best of SIRIUS package offers to XM subscribers the Howard Stern
channels, Martha Stewart Living Radio, SIRIUS NFL Radio, SIRIUS NASCAR Radio, Playboy Radio and
play-by-play NFL games and college sports programming. Our Best of XM package offers to SIRIUS
subscribers Oprah Radio, The Virus, XM Public Radio, MLB Home Plate, NHL Home Ice, The PGA Tour
Network, and select play-by-play of NBA and NHL games and college sports programming.
We also offer family friendly, mostly music and mostly
sports, news and talk packages.
We make changes to our programming lineup from time to time as we strive to attract new
subscribers and offer content that appeals to a broad range of audiences and to our existing
subscribers.
Music Programming
We offer 71 channels of commercial-free music. We offer an extensive selection of music
genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin and classical. Within
each genre we offer a range of formats, styles and recordings.
All of our original music channels are broadcast commercial free. Certain of our music
channels are programmed by third parties and air commercials. Our channels are produced,
programmed and hosted by a team of experts in their fields, and each channel is operated as an
individual radio station, with a distinct format and branding. We also from time to time provide
special features, such as our Artist Confidential series which provides interviews and performances
from some of the biggest names in music, and an array of pop up channels featuring the music of
particular artists.
2
Sports Programming
Live play-by-play sports is an important part of our programming strategy. We are the
Official Satellite Radio Partner of Major League Baseball (MLB), the NBA, NHL, and the PGA Tour,
and broadcast most major college sports, including NCAA Division I football and basketball games.
Soccer coverage includes matches from the Barclays English Premier League and UEFA Champions
League. We also air FIS Alpine Skiing and World Cup events and horse racing.
We offer many exclusive talk channels and programs such as MLBs Home Plate and Chris Mad
Dog Russos Mad Dog Unleashed on Mad Dog Radio, as well as simulcasts of select ESPN television
shows, including SportsCenter.
Talk and Entertainment Programming
We offer a multitude of talk and entertainment channels for a variety of audiences. Our
diverse spectrum of talk programming is a significant differentiator from terrestrial radio and
other audio entertainment providers.
Our talk radio offerings feature dozens of popular talk personalities, most creating shows
that air exclusively on our service, including POTUS, Oprah Winfrey, Rosie ODonnell, Opie and
Anthony and Bob Edwards.
News and Information Programming
We offer a wide range of national, international and financial news programming.
We also offer continuous, local traffic reports for 21 metropolitan markets throughout the
United States. We broadcast these reports, together with local and national weather reports from
The Weather Channel.
We also air a range of political call-in talk shows on a variety of channels including our
exclusive channel, POTUS.
Distribution of Radios
Automakers
Our primary means of distributing satellite radios is through the sale and lease of new
vehicles. We have agreements with several automakers Acura/Honda, Ferrari, General Motors,
Hyundai, Infiniti/Nissan, Lexus, Toyota, Scion and Porsche to offer XM satellite radios as
factory or dealer-installed equipment in their vehicles.
Many automakers include a subscription to our radio service in the sale or lease price of
their vehicles. In many cases, we receive subscription payments from automakers in advance of the
activation of our service. We share with certain automakers a portion of the revenues we derive
from subscribers using vehicles equipped to receive our service. We also reimburse various
automakers for certain costs associated with the satellite radios installed in their vehicles,
including in certain cases hardware costs, tooling expenses and promotional and advertising
expenses.
Retail
We sell satellite radios directly to consumers through our website. Satellite radios are also
marketed and distributed through major national and regional retailers. We develop in-store
merchandising materials and provide sales force training for several retailers.
Previously Owned Vehicles
We expect to acquire an increasing number of subscribers through the sale and lease of
previously owned vehicles with factory installed satellite radios. We have entered into agreements
with several automakers to market subscriptions to purchasers and lessees of vehicles which include
satellite radios sold through their certified pre-owned programs.
We intend to develop systems and methods to identify purchasers and lessees of used vehicles
which include satellite radios, and expect to make other efforts to market and sell satellite radio
subscriptions to owners of used vehicles.
Our Satellite Radio System
Our satellite radio system is designed to provide clear reception in most areas despite
variations in terrain, buildings and other obstructions. Subscribers can receive our transmissions
in all outdoor locations where the satellite radio has an unobstructed line-of-sight with one of
our satellites or is within range of one of our terrestrial repeaters. We continually monitor our
infrastructure and regularly evaluate improvements in technology.
3
The FCC has allocated the portion of the S-band located between 2320 MHz and 2345 MHz
exclusively for satellite radio. We use 12.5 MHz of this bandwidth to transmit our signal. Uplink
transmissions (from the ground to our satellites) use 12.5 MHz of bandwidth in the 7060-7072.5 MHz
band.
Our satellite radio system has three principal components:
|
|
|
satellites, terrestrial repeaters and other satellite facilities; |
Satellites, Terrestrial Repeaters and Other Satellite Facilities
Satellites. We own four orbiting satellites; two of which, XM-3 and XM-4, currently transmit
the XM signal and two of which, XM-1 and XM-2, serve as in-orbit spares. Each of these satellites
was manufactured by Boeing Satellite Systems International. The XM satellites were launched in
March 2001, May 2001, February 2005 and October 2006, respectively. The XM satellites are deployed
in geostationary orbits at 85° West Longitude and 115° West Longitude.
Space Systems/Loral is constructing a fifth satellite, XM-5, for use in our system. XM-5 is a
Loral FS-1300 model satellite. We have an agreement with International Launch Services to launch
XM-5 during the third quarter of 2010 on a Proton rocket.
Satellite Insurance. We currently have in-orbit insurance on XM-3 and XM-4, our primary
operating satellites, but do not carry insurance coverage for XM-1 and XM-2, our in-orbit spare
satellites.
These policies provide coverage for a total, constructive total or partial loss of the
satellites that occurs during annual (or multi-year) in-orbit periods. The insurance does not
cover the full cost of constructing, launching and insuring new satellites, nor will it protect us
from the adverse effect on business operations due to the loss of a satellite. The policies
contain standard commercial satellite insurance provisions, including coverage exclusions.
Terrestrial Repeaters. In some areas with high concentrations of tall buildings, such as
urban centers, signals from our satellites may be blocked and reception of satellite signals can be
adversely affected. In many of these areas, we have deployed terrestrial repeaters to supplement
satellite coverage. We operate over 650 terrestrial repeaters.
Other Satellite Facilities. Our satellites are monitored, tracked and controlled by Telesat
Canada, a satellite operator. In addition, we operate backup stations in the United States.
Studios
The programming on our system originates principally from studios in New York City and
Washington D.C., and, to a lesser extent, from smaller studio facilities in Chicago and Nashville.
The New York City offices house SIRIUS corporate headquarters. Both the New York City and
Washington D.C. offices house facilities for programming origination, programming personnel and
facilities to transmit programming.
Satellite Radios
We design, establish specifications for, source or specify parts and components for, and
manage various aspects of the logistics and production of XM radios. We do not manufacture radios.
We have authorized manufacturers to produce and distribute XM brand radios, and have licensed our
technology to various electronics manufacturers to develop, manufacture and distribute radios under
various consumer brands. We directly import certain radios distributed through our website. To
facilitate the sale of XM radios, we often subsidize a portion of the radio manufacturing costs to
reduce the hardware price to consumers.
XM radios are manufactured in three principal configurations as in-dash radios, Dock & Play
radios and portable or wearable radios.
|
|
|
In-dash radios are integrated into vehicles and allow the user to listen to AM,
FM or satellite radio with the push of a button. Aftermarket in-dash radios are available
at retailers nationally, and to automakers for factory or dealer installation. |
|
|
|
Dock & Play radios enable subscribers to transport their XM radios easily to
and from their cars, trucks, homes, offices, boats or other locations with available
adapter kits. Dock & Play radios adapt to existing audio systems through FM modulation or
direct audio connection and can be easily installed. Audio systems and boom boxes, which
enable subscribers to use their XM radios virtually anywhere, are available for various
models of Dock & Play radios. |
|
|
|
Portable or wearable radios offer live satellite radio on the go and recorded
satellite, MP3 and WMA content. The XMp3 allows consumers to record up to one hundred
hours of XM and Best of Sirius programming, and is capable of recording up to five
channels simultaneously.
|
4
XM commercial audio systems are also available.
We have introduced an interoperable radio, called MiRGE, containing both SIRIUS and XM chip
sets. This radio has a unified control interface allowing for easy switching between the two
satellite radio networks. We have introduced the XM SkyDock, which connects to an Apple iPhone or
iPod touch and provides live XM satellite radio using the control capabilities of the iPhone or
iPod touch,
Internet Radio
We simulcast music channels and select non-music channels over the Internet. Access to XM
Online is offered to subscribers for a fee. We developed and introduced an application for the
Apple iPhone and iPod touch that permits consumers to access and XM Online on such devices. We
expect to introduce similar applications to allow consumers to access XM Online on other personal
mobile devices. Subscribers to XM Online are not included in our subscriber count, unless the
service is purchased separately and not as part of a subscription to the XM satellite radio
service.
Canada
XM Canada, a Canadian corporation in which we have an ownership interest, offers satellite
radio service in Canada. XM Canada offers 130 channels of music and news, sports, talk and
entertainment programming. Subscribers to the XM Canada service are not included in our subscriber
count.
Other Services
Commercial Accounts. The XM music service is also available for commercial establishments.
Commercial accounts are available through providers of in-store entertainment solutions and
directly from us. Commercial subscribers are included in our subscriber count.
XM Content Through Mobile Phone Carriers. We offer between 20 and 25 music and comedy
channels to mobile phone users through relationships with certain mobile phone carriers.
Subscribers to these services are not included in our subscriber count.
Subscribers to the following services are not included in our subscriber count, unless the
applicable service is purchased by the subscriber separately and not as part of a subscription to
the XM satellite radio service:
Real-Time Traffic Services. We offer services that provide graphic information as to road
closings, traffic flow and incident data to consumers with compatible in-vehicle navigation
systems.
Real-Time Weather Services. We offer several real-time weather services designed for
in-vehicle, marine and/or aviation use.
FCC Conditions
In order to demonstrate to the FCC that the Merger was in the public interest, we agreed to
implement a number of voluntary commitments. These programming, public interest and qualified
entity channels, equipment, subscription rates, and other service commitments are summarized as
follows:
Programming
Best of Both Programming: We offer customers the ability to receive the best of SIRIUS
programming at a monthly cost of $16.99.
Mostly Music or News, Sports and Talk Programming: We offer customers an option of mostly
music programming or mostly news, sports and talk programming at a cost of $9.99 per month.
Discounted Family-Friendly Programming: We offer consumers a family-friendly version of XM
programming at a cost of $11.95 a month, representing a discount of $1.00 per month. We also offer
XM customers a family-friendly version of the best of programming. This programming costs $14.99
per month, representing a discount of $2.00 per month from the cost of the best of programming.
5
Public Interest Channels
We agreed to set aside four percent of the full-time audio channels on the XM platform for
non-commercial, educational and informational programming within the meaning of the FCC rules that
govern similar obligations of direct broadcast satellite providers. We also committed not to
select a programmer to fill more than one non-commercial, educational or informational channel on
the XM platform as long as demand by programming providers for such channels exceeds available
supply.
Qualified Public Entity Channels
We agreed to enter into long-term leases or other agreements to provide to a Qualified Entity
or Entities, defined as an entity or entities that are majority-owned by persons who are African
American, not of Hispanic origin; Asian or Pacific Islanders; American Indians or Alaskan Natives;
or Hispanics, rights to four percent of the full-time audio channels on the XM platform. As
digital compression technology enables us to broadcast additional full-time audio channels, we will
ensure that four percent of full-time audio channels on the XM platform are reserved for a
Qualified Entity or Entities.
The Qualified Entity or Entities will not be required to make any lease payments for such
channels. We will have no editorial control over these channels. The FCC is expected to inform us
how it plans to select these Qualified Entities. In February 2009, the FCC commenced a proceeding
to determine the method to select these Qualified Entities but has not completed this proceeding.
We will implement our commitment to enter into long-term leases or other agreements to provide a
Qualified Entity or Entities audio channels on the XM platform when the FCC completes its pending
proceeding and directs us how to legally implement this requirement.
Equipment
We are required to provide, on commercially reasonable terms, our intellectual property
necessary to permit any device manufacturer to develop equipment that can deliver our satellite
radio services. Chip sets for satellite radios, which include the encryption, conditional access
and security technology necessary to access our satellite radio services, may be purchased by
licensees from manufacturers in negotiated transactions with such manufacturers. We have agreed
not to enter into any agreement that grants, or that would have the effect of granting, a device
manufacturer an exclusive right to manufacture, market and sell equipment that can deliver our
satellite radio services.
We have also agreed not to execute any agreement or take any other action that would bar, or
have the effect of barring, a car manufacturer or other third party from including non-interfering
HD radio chips, iPod compatibility, or other audio technology in an automobile or audio device.
Subscription Rates
We have agreed not to raise the retail price for, or reduce the number of channels in, our
basic $12.95 per month subscription package or our new programming packages described above until
July 28, 2011. Under the FCCs order approving the Merger, we may 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. Effective July 29, 2009, we began adding
a U.S. Music Royalty Fee to subscriber invoices. The U.S. Music Royalty Fee is $1.98 a month on
our base $12.95 subscriptions and $.97 for base plans that are eligible for a second radio
discount. Subscription packages, such as our News, Sports and Talk package, that contain little
music are not subject to the U.S. Music Royalty Fee. Amounts collected on account of the U.S.
Music Royalty Fee are being used to partially offset payments to the music industry. A summary of
the costs passed through pursuant to U.S. Music Royalty Fee is available on our website.
Interoperable Radios
We agreed to offer for sale an interoperable radio and began offering such radio in early
2009.
Local Programming and Advertising
We have committed not to originate local programming or advertising through our repeater
network.
Transactions between SIRIUS, XM Holdings and XM
Promptly following the Merger, SIRIUS and XM began to integrate their operations, and agreed
to share the costs of certain day-to-day functions. For example, XM transferred its employees to
SIRIUS, and SIRIUS, in turn, has agreed to provide various services to both companies necessary to
support their business, such as product development, sales, marketing, finance, accounting,
information technology, programming, human resources, public relations, investor relations, legal
and other general management services. XM and SIRIUS share equally the costs of these employees.
SIRIUS and XM also agreed to share programming and rationalize their channel line-ups, and to share
equally the costs of certain programming that appears on both platforms. In addition, SIRIUS and
XM have agreed to jointly market radios and coordinate rebate and warranty support programs to
subscribers who purchase radios at retail or via their websites. In general, SIRIUS and XM share
equally the costs of this marketing and sales coordination.
6
SIRIUS and XM have also sought opportunities to jointly increase revenues. SIRIUS and XM have
agreed to offer their respective subscribers programming packages that include best of
programming from the other service. Each of SIRIUS and XM retains all the respective revenue
generated from its respective best of programming package. The companies have also made
arrangements to have XM radios offered in RadioShack, a retailer that was previously exclusive to
SIRIUS.
XM Holdings and XM are operated as unrestricted subsidiaries under the agreements governing
SIRIUS existing debt. As unrestricted subsidiaries, transactions among the companies are required
to comply with various contractual provisions in our respective debt instruments. The agreements
between XM and SIRIUS are intended to permit both companies to share in the benefits of the
inter-company arrangements in approximately equal proportion. The terms of the agreements between
XM and SIRIUS are intended to be no more favorable to one company or the other than those that
could be obtained at the time in an arms-length dealing with an unaffiliated firm or person.
Certain operations have not yet been integrated in any significant respect. SIRIUS and XM
expect to enter into additional arrangements as they continue to integrate their operations and
pursue opportunities to realize cost savings and increase revenues.
From time to time, we continue to evaluate options to further integrate SIRIUS and XM by
completing either or both of a merger between XM Holdings and XM or a merger between SIRIUS and XM
Holdings and/or XM.
Competition
We face significant competition for both listeners and advertisers. In addition to
pre-recorded entertainment purchased or playing in cars, homes and using portable players, we
compete with the following providers of radio or other audio services:
Traditional AM/FM Radio
We compete with traditional AM/FM radio. Many traditional radio companies are substantial
entities owning large numbers of radio stations or other media properties. The radio broadcasting
industry is highly competitive.
Unlike satellite radio, traditional AM/FM radio has had a well established demand for its
services and offers free broadcasts paid for by commercial advertising rather than by a
subscription fee. Many radio stations offer information programming of a local nature, such as
local news and sports. By attracting listeners to their stations, traditional AM/FM radio reduces
the likelihood that customers would be willing to pay for our subscription services and by offering
free broadcasts they impose limits on what we can charge for our services. Some AM/FM radio
stations have reduced the number of commercials per hour, expanded the range of music played on the
air and experimented with new formats in order to lure customers away from satellite radio.
HD Radio
Many radio stations have begun broadcasting digital signals, which have a clarity similar to
our signals. These stations do not charge a subscription fee for their digital signals but do
generally carry advertising. A group of major broadcast radio networks have created a coalition to
jointly market digital radio services. According to this coalition, nearly 2,000 radio stations
are currently broadcasting primary signals with HD Radio technology and broadcasting approximately
1,000 new FM multicast channels (HD2/HD3), and manufacturers are marketing and distributing digital
receivers. To the extent that traditional AM/FM radio stations adopt digital transmission
technology, any competitive advantage that we enjoy over traditional radio because of our clearer
digital signal would be lessened. Traditional AM/FM broadcasters are also aggressively entering
Internet radio and wireless internet-based distribution arrangements. Approximately 15 automakers
have committed to installing HD Radio equipment as either a factory standard or factory option,
including Ford, Volkswagen, BMW, Mercedes-Benz, Kia and Hyundai.
Internet Radio
Internet radio broadcasts have no geographic limitations and can provide listeners with radio
programming from around the country and the world. Major media companies and online-only
providers, including Clear Channel, CBS, and Pandora, make high fidelity digital streams available
through the Internet for free or, in some cases, for a fraction of the cost of a satellite radio
subscription. In addition, there has been wide proliferation of mobile Internet enabled
smartphones, many of which have the capability of interfacing with vehicles. These smartphones can
typically play recorded or cached content and access live Internet radio via browsers or dedicated
applications. Internet based radio products have also been announced for vehicles, although their
adoption is currently nascent. The past few years have seen a steady increase in the audio quality
of Internet radio streams and in the amount of audio content available via the Web, resulting in a
steady increase in Internet radio audience metrics. We expect that improvements from higher
bandwidths and wider programming selection are likely to continue making Internet radio an
increasingly significant competitor in the near future. These services already compete directly
with our Internet offerings and with our home line of products through the use of home stereo media
adapters, media-centric PCs, and specialized IP-based audio consoles.
7
Portable Audio Devices
The Apple iPod® is a portable digital music player that allows users to download
and purchase music through Apples iTunes® Music Store, as well as convert music on
compact disc to digital files. iPods® are compatible with certain car stereos and
various home speaker systems, and certain automakers have entered into arrangements with
manufacturers of portable media players that are expected to enhance this compatibility.
Availability of music in the public MP3 audio standard has been growing in recent years with sound
files available on the websites of online music retailers, artists and record labels and through
numerous file sharing software programs. In addition, many emerging artists give away their music
for free via blogs and other websites in order to increase live event ticket sales, which are often
more profitable to emerging artists than music sales. These MP3 files can be played instantly,
burned to a compact disc or stored in various portable players available to consumers.
Internet-based audio formats are becoming increasingly competitive as quality improves and costs
are reduced. In addition, many current generation portable audio devices, such as the iPod touch,
also contain WiFi connections enabling direct Internet connections for purchasing additional music
or streaming music that is not stored on the local device.
Direct Broadcast Satellite and Cable Audio
A number of companies provide specialized audio services through either direct broadcast
satellite or cable audio systems. These services are targeted to fixed locations, mostly in-home.
The radio service offered by direct broadcast satellite and cable audio is often included as part
of a package of digital services with video service, and video customers generally do not pay an
additional monthly charge for the audio service.
Digital Media Services
We face increased competition from businesses that deliver or plan to deliver media content
through mobile phones and other wireless devices. The audio entertainment marketplace continues to
evolve rapidly, with a steady emergence of new media platforms and portable devices that compete
with our service now or that could compete with those services in the future.
Traffic News Services
A number of providers also compete with our traffic service. Clear Channel and Tele Atlas
deliver nationwide traffic information for the top 50 markets to in-vehicle navigation systems
using RDS/TMC, the radio broadcast standard technology for delivering traffic and travel
information to drivers. The in-dash navigation market in which we primarily compete is also being
threatened by increasingly capable smartphones that provide advanced navigation functionality,
including live traffic. For instance, the Motorola Droid, Google Nexus One, Palm Pre, and Apple
iPhone 3GS all include GPS functionality with turn-by-turn navigationalthough these services
often require more expensive data plans or other fees.
Government Regulation
As an operator of a privately owned satellite system, we are regulated by the FCC under the
Communications Act of 1934, principally with respect to:
|
|
|
the licensing of our satellite system; |
|
|
|
preventing interference with or to other users of radio frequencies; and |
|
|
|
compliance with FCC rules established specifically for U.S. satellites and
satellite radio services. |
Any assignment or transfer of control of our FCC licenses must be approved by the FCC. The
FCCs order approving the Merger requires us to comply with certain voluntary commitments we made
as part of the FCC merger proceeding. We believe we comply with those commitments.
In 1997, XM was a winning bidder for an FCC license to operate a satellite digital audio radio
service and provide other ancillary services. Our FCC licenses for our satellites expire in 2013
and 2014. We anticipate that, absent significant misconduct on our part, the FCC will renew our
licenses to permit operation of our satellites for their useful lives, and grant a license for any
replacement satellites.
In some areas with high concentrations of tall buildings, such as urban centers, signals from
our satellites may be blocked and reception can be adversely affected. In many of these areas, we
have installed terrestrial repeaters to supplement our satellite signal coverage. The FCC has not
yet established rules governing terrestrial repeaters. Rulemaking on the subject has been initiated
by the FCC and is still pending. Many comments have been filed as part of this and related
rulemakings. The comments cover many topics relating to the operation of our terrestrial
repeaters, but principally seek to protect adjoining wireless services from interference. We
cannot predict the outcome or timing of these FCC proceedings and the final rules adopted by the
FCC may limit our ability to deploy additional terrestrial repeaters, require us to reduce the
power of our existing terrestrial repeaters or fail to protect us from interference by adjoining
spectrum holders. In the interim, the FCC has granted us special temporary authority (STA) to
operate our terrestrial repeaters and offer service on a non-harmful interference basis to other
wireless services. Following the FCCs review of whether certain repeaters had been operating at
variance to the specifications in their STAs, both XM and SIRIUS entered into consent decrees in
2008 requiring both remedial action and a voluntary contribution to the federal government. We
believe the repeaters operated by us comply with the consent decree, the STAs and applicable FCC
rules.
8
We design, establish specifications for, source or specify parts and components for, manage
various aspects of the logistics and production of, and, in most cases, obtain FCC certifications
for, satellite radios, including satellite radios that include FM modulators. Part 15 of the FCCs
rules establish a number of requirements relating to FM modulators, including emissions and
frequency rules. Following the FCCs review of whether the FM transmitters in certain XM radios
comply with the FCCs emissions and frequency rules, we entered into consent decrees in 2008
requiring both remedial action and a voluntary contribution to the federal government. We believe
our radios that are in production comply with the consent decree and applicable FCC rules.
We are required to obtain export licenses from the United States government to deliver
components of our satellite radio systems and related technical data. In addition, the delivery of
satellites and the supply of related ground control equipment, technical data, and satellite
communication/control services to destinations outside the United States and to foreign persons is
subject to strict export control and prior approval requirements from the United States government
(including prohibitions on the sharing of certain satellite-related goods and services with China).
Changes in law or regulations relating to communications policy or to matters affecting our
services could adversely affect our ability to retain our FCC licenses or the manner in which we
operate.
Copyrights to Programming
In connection with our music programming, we must negotiate and enter into royalty
arrangements with two sets of rights holders: holders of copyrights in musical works (that is, the
music and lyrics) and holders of copyrights in sound recordings (that is, the actual recording of a
work).
Musical works rights holders, generally songwriters and music publishers, are represented by
performing rights organizations such as the American Society of Composers, Authors and Publishers
(ASCAP), Broadcast Music, Inc. (BMI), and SESAC, Inc. (SESAC). These organizations negotiate
fees with copyright users, collect royalties and distribute them to the rights holders. We have
arrangements with all of these organizations.
Sound recording rights holders, typically large record companies, are primarily represented by
SoundExchange, an organization which negotiates licenses, and collects and distributes royalties on
behalf of record companies and performing artists. Under the Digital Performance Right in Sound
Recordings Act of 1995 and the Digital Millennium Copyright Act of 1998, we may negotiate royalty
arrangements with the sound recording copyright owners, or if negotiation is unsuccessful, the
royalty rate is established by the Copyright Royalty Board (the CRB) of the Library of Congress.
In January 2008, the CRB issued a decision regarding the royalty rate payable by XM under the
statutory license covering the performance of sound recordings over its satellite radio service for
the six-year period starting January 1, 2007 and ending December 31, 2012. Our next rate setting
proceeding before the CRB is scheduled to commence in January 2011. Under the terms of the CRBs
decision, we paid a royalty of 6.0%, 6.0% and 6.5% of gross revenues, subject to certain
exclusions, for 2007, 2008 and 2009, respectively. Under this decision, we will pay a royalty of
7.0% for 2010, 7.5% for 2011 and 8.0% for 2012.
Trademarks
We have registered, and intend to maintain, the trademark XM with the United States Patent
and Trademark Office in connection with the transmission services offered by us. We are not aware
of any material claims of infringement or other challenges to our right to use the XM trademark
in the United States. We also have registered, and intend to maintain, trademarks for the names of
certain of our channels. We have also registered the trademark, XM, and the logo, in Canada. We
have granted a license to use our trademark in Canada to XM Canada.
Personnel
As of January 1, 2010, we did not have any employees. SIRIUS has agreed to provide various
services necessary to support our business, such as product development, sales, marketing, finance,
accounting, information technology, programming, human resources, public relations, investor
relations, legal and other general management services. We share equally with SIRIUS the costs of
these employees.
9
Corporate Information
Our executive offices are located at 1500 Eckington Place, NE, Washington, DC 20002 and our
telephone number is (202) 380-4000. Our internet address is xmradio.com. Our annual, quarterly
and current reports, and amendments to those reports, filed or furnished pursuant to Section 14(a)
or 15(d) of the Securities Exchange Act of 1934 may be accessed free of charge through our website
after we have electronically filed such material with, or furnished it to, the SEC. XMradio.com
(including any other reference to such address in this Annual Report) is an inactive textual
reference only, meaning that the information contained on or accessible from the website is not
part of this Annual Report on Form 10-K and is not incorporated in this report by reference.
Executive Officers of the Registrant
Certain information regarding our executive officers is provided below:
|
|
|
|
|
|
|
Name |
|
Age |
|
Position |
Mel Karmazin
|
|
|
66 |
|
|
President |
David J. Frear
|
|
|
53 |
|
|
Treasurer |
Patrick L. Donnelly
|
|
|
48 |
|
|
Secretary |
Mel Karmazin has served as our President since the Merger and has served as SIRIUS Chief
Executive Officer and a member of its board of directors since November 2004. Prior to joining
SIRIUS, Mr. Karmazin was President and Chief Operating Officer and a member of the board of
directors of Viacom Inc. from May 2000 until June 2004. Prior to joining Viacom, Mr. Karmazin was
President and Chief Executive Officer of CBS Corporation from January 1999 and a director of CBS
Corporation from 1997 until its merger with Viacom in May 2000. He was President and Chief
Operating Officer of CBS Corporation from April 1998 through December 1998. Mr. Karmazin joined CBS
Corporation in December 1996 as Chairman and Chief Executive Officer of CBS Radio and served as
Chairman and Chief Executive Officer of the CBS Station Group (Radio and Television) from May 1997
to April 1998. Prior to joining CBS Corporation, Mr. Karmazin served as President and Chief
Executive Officer of Infinity Broadcasting Corporation from 1981 until its acquisition by CBS
Corporation in December 1996. Mr. Karmazin served as Chairman, President and Chief Executive
Officer of Infinity from December 1998 until the merger of Infinity Broadcasting Corporation with
Viacom in February 2001.
David J. Frear has served as our Treasurer since the Merger and has served as SIRIUS
Executive Vice President and Chief Financial Officer since June 2003. From July 1999 through
February 2003, Mr. Frear was Executive Vice President and Chief Financial Officer of Savvis
Communications Corporation, a global managed service provider, delivering internet protocol
applications for business customers. From October 1999 through February 2003, Mr. Frear also
served as a director of Savvis. Mr. Frear was an independent consultant in the telecommunications
industry from August 1998 until June 1999. From October 1993 to July 1998, Mr. Frear was Senior
Vice President and Chief Financial Officer of Orion Network Systems Inc., an international
satellite communications company that was acquired by Loral Space & Communications Ltd. in March
1998. From 1990 to 1993, Mr. Frear was Chief Financial Officer of Millicom Incorporated, a
cellular, paging and cable television company. Prior to joining Millicom, he was an investment
banker at Bear, Stearns & Co., Inc. and Credit Suisse.
Patrick L. Donnelly has served as our Secretary since the Merger and has served as SIRIUS
Executive Vice President, General Counsel and Secretary since May 1998. From June 1997 to May
1998, he was Vice President and deputy general counsel of ITT Corporation, a hotel, gaming and
entertainment company that was acquired by Starwood Hotels & Resorts Worldwide, Inc. in February
1998. From October 1995 to June 1997, he was assistant general counsel of ITT Corporation. Prior
to October 1995, Mr. Donnelly was an attorney at the law firm of Simpson Thacher & Bartlett LLP.
Employment Agreements
Mel Karmazin
In June 2009, SIRIUS amended its employment agreement with Mel Karmazin. The amendment (i)
extended the term of his employment agreement through December 31, 2012, (ii) increased his base
salary from $1,250,000 per year to $1,500,000 per year beginning on January 1, 2010, and (iii)
provided for the grant of an option to purchase 120,000,000 shares of SIRIUS common stock, at an
exercise price of $0.430 per share (the closing price of SIRIUS common stock on the date of the
amendment).
These options vest in equal installments on each of December 31, 2010, December 31, 2011, June
30, 2012 and December 31, 2012. The vesting of these stock options accelerates upon the
termination of Mr. Karmazins employment by SIRIUS without cause, by him for good reason, upon his
death or disability and in the event of a change of control. These options will generally expire
on December 31, 2014; provided that if the parties subsequently agree to extend the term of his
employment agreement through December 31, 2013 or later, then the term of these options will
automatically extend until the later of (i) December 31, 2015 and (ii) the date that is one year
following the date that such new employment agreement expires.
10
In the event that any payment SIRIUS makes, or benefit SIRIUS provides, to Mr. Karmazin would
require him to pay an excise tax under Section 280G of the Internal Revenue Code, SIRIUS has agreed
to pay Mr. Karmazin the amount of such tax and such additional amount as may be necessary to place
him in the exact same financial position that he would have been in if the excise tax was not
imposed.
David J. Frear
Mr. Frear has agreed to serve as SIRIUS Executive Vice President and Chief Financial Officer
through July 2011. SIRIUS pays Mr. Frear an annual salary of $750,000, and annual bonuses in an
amount determined each year by the Compensation Committee of its board of directors.
If Mr. Frears employment is terminated without cause or he terminates his employment for good
reason, SIRIUS is obligated to pay him a lump sum payment equal to the sum of his annual salary and
the annual bonus last paid to him and to continue his medical and life insurance benefits for one
year.
In the event that any payment we make, or benefit SIRIUS provides, to Mr. Frear would require
him to pay an excise tax under Section 280G of the Internal Revenue Code, SIRIUS has agreed to pay
Mr. Frear the amount of such tax and such additional amount as may be necessary to place him in the
exact same financial position that he would have been in if the excise tax was not imposed.
Patrick L. Donnelly
In January 2010, SIRIUS entered into a new employment agreement with Patrick L. Donnelly to
continue to serve as its Executive Vice President, General Counsel and Secretary, through January
13, 2014. The employment agreement provides for an initial base salary of $575,000, with specified
increases. If Mr. Donnellys employment is terminated without cause or he terminates his
employment for good reason, SIRIUS is obligated to pay him a lump sum payment equal to his then
annual salary and the cash value of the bonus last paid or payable to him in respect of the
preceding fiscal year and to continue his health and life insurance benefits for one year. SIRIUS
obligations to pay the foregoing amounts are subject to Mr. Donnellys execution of a valid release
of claims against SIRIUS and his compliance with certain restrictive covenants. SIRIUS has also
agreed to indemnify Mr. Donnelly for any excise taxes that may be imposed on him under Section 280G
of the Internal Revenue Code.
In connection with the execution of the employment agreement, SIRIUS granted Mr. Donnelly an
option to purchase 13,163,495 shares of its common stock at an exercise price of $0.6669 per share
(the last sale price of SIRIUS common stock on the Nasdaq Global Select Market prior to the
execution of the employment agreement). The option will generally vest in four equal installments
on each of January 14, 2011, January 14, 2012, January 14, 2013 and January 14, 2014, subject to
earlier acceleration or termination under certain circumstances.
Additional information regarding the compensation for Messrs. Karmazin, Frear and Donnelly
will be included in SIRIUS definitive proxy statement for its 2010 annual meeting of stockholders
scheduled to be held on Thursday, May 27, 2010.
11
In addition to the other information in this Annual Report on Form 10-K, including the
information under the caption Competition, the following risk factors should be considered
carefully in evaluating us and our business. This Annual Report on Form 10-K contains
forward-looking statements within the meaning of the federal securities laws. Actual results and
the timing of events could differ materially from those projected in forward-looking statements due
to a number of factors, including those set forth below and elsewhere in this Annual Report on Form
10-K. See Special Note Regarding Forward-Looking Statements.
Our business and our financial condition have been adversely affected by general economic
conditions.
The purchase of a satellite radio subscription is discretionary, and we believe that our
business and our financial condition have been adversely affected by general economic conditions.
In addition, the dramatic slowdown in auto sales negatively impacted our subscriber growth in 2008
and 2009.
Demand for our service is difficult to predict.
We cannot estimate with any certainty whether consumer demand for our service will be
sufficient for us to continue to increase the number of subscribers to our service. Our satellite
radio service has experienced a decrease in new subscriptions from retail subscribers and most new
subscription growth has come from new and used automobiles.
Failure of third parties to perform could adversely affect our business.
Our business depends in part on the efforts of various third parties, including:
|
|
|
manufacturers that build and distribute satellite radios; |
|
|
|
companies that manufacture and sell integrated circuits for satellite radios; |
|
|
|
programming providers and on-air talent, including Howard Stern; |
|
|
|
retailers that market and sell satellite radios and promote subscriptions to
our services; and |
|
|
|
vendors that have designed or built, and vendors that support or operate,
important elements of our systems, such as our satellites and customer service facilities. |
If one or more of these third parties do not perform in a sufficient or timely manner, our
business could be adversely affected. In addition, a number of third parties on which we depend
have, and may in the future, experience financial difficulties or file for bankruptcy protection.
Such third parties may not be able to perform their obligations to us in a timely manner, if at
all, as a result of their financial condition or may be relieved of their obligations to us as part
of seeking bankruptcy protection.
We design, establish specifications, source or specify parts and components, and manage
various aspects of the logistics and production of radios. As a result of these activities, we may
be exposed to liabilities associated with the design, manufacture and distribution of radios that
the providers of an entertainment service would not customarily be subject to, such as liabilities
for design defects, patent infringement and compliance with applicable laws, as well as the costs
of returned product.
Programming is an important part of our service, and the costs to renew our programming
arrangements may be more than anticipated.
Third-party content is an important part of our satellite radio service, and we compete with
many entities for content. We have entered into a number of important content arrangements,
including an agreement with Major League Baseball (MLB), which require us to pay substantial
sums. Our agreement with MLB expires at the end of the 2012 MLB season. As these agreements
expire, we may not be able to negotiate renewals of one or more of these agreements, or renew such
agreements at costs we believe are attractive.
In addition, we may not be able to obtain additional third-party content within the costs
contemplated by our business plans.
We employ, or independently contract with, on-air talent who maintain significant loyal
audiences in or across various demographic groups. There can be no assurance that this on-air
talent will remain with us or that we will be able to retain their respective audiences. If we
lose the services of one or more of them, or fail to attract qualified replacement personnel, it
could harm our business and future prospects.
12
We must maintain and pay license fees for music rights.
We must maintain music programming royalty arrangements with, and pay license fees to, BMI,
ASCAP and SESAC. These organizations negotiate with copyright users, collect royalties and
distribute them to songwriters and music publishers. We have agreements with ASCAP and SESAC
through December 2011. We do not have a definitive agreement with BMI, and we continue to operate
under an interim agreement with BMI. There can be no assurance that the BMI royalty fee will
remain at the current level when the pending agreement is finalized.
Under the Digital Performance Right in Sound Recordings Act of 1995 and the Digital Millennium
Copyright Act of 1998, we pay royalties to copyright owners of sound recordings. Those royalty
rates may be established through negotiation or, if negotiation is unsuccessful, by the CRB. Our
next rate setting proceeding before the CRB is scheduled to commence in January 2011, and, if
negotiations prove unsuccessful, these royalty rates may not remain at their current levels
following the proceeding.
Higher than expected costs of attracting new subscribers, higher subscriber turnover or weaker than
expected advertising revenue could each adversely affect our financial performance and operating
results.
We are spending substantial funds on advertising and marketing and in transactions with
automakers, radio manufacturers, retailers and others to obtain and attract subscribers. If the
costs of attracting new subscribers are greater than expected, our financial performance and
operating results could be adversely affected.
We are experiencing, and expect to continue to experience, subscriber turnover, or churn. If
we are unable to retain our current subscribers, or the costs of retaining subscribers are higher
than we expect, our financial performance and operating results could be adversely affected. We
cannot predict how successful we will be at retaining customers who purchase or lease vehicles that
include a subscription to their satellite radio service. During 2009, we converted approximately
47.6% of the customers who received a promotional subscription as part of the purchase or lease of
a new vehicle to a self-paying subscription. Over the same period, we have experienced churn of
our self-pay subscribers of approximately 2.03% per month.
We cannot predict the amount of churn we will experience over the longer term. Our inability
to retain customers who either purchase or lease new vehicles with our service beyond the
promotional period, or who purchase or lease a new vehicle that includes a prepaid subscription to
our services, and self-pay subscriber churn could adversely affect our financial performance and
results of operations.
Our ability to generate advertising revenues is directly affected by general economic
conditions, the number of subscribers to our service and the amount of time subscribers spend
listening to the talk and entertainment channels or the traffic and weather services. General
economic conditions are affecting our ad revenues. Our ability to generate advertising revenues
also depends on several factors, including the level and type of penetration of our services,
competition for advertising dollars from other media, and changes in the advertising industry and
the economy generally. We directly compete for audiences and advertising revenues with traditional
AM/FM radio stations and other media, some of which maintain longstanding relationships with
advertisers.
We may from time to time modify our business plan, and these changes could adversely affect us and
our financial condition.
We regularly evaluate our plans and strategy. These evaluations often result in changes to
our plans and strategy, some of which may be material and significantly change our cash
requirements. These changes in our plans or strategy may include: the acquisition or termination
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.
Our substantial indebtedness could adversely affect our ability to raise additional capital to fund
our operations and could limit our ability to react to changes in the economy or our industry.
As of December 31, 2009, we had an aggregate principal amount of approximately $1.7 billion of
indebtedness. Our substantial indebtedness has important consequences. For example, it:
|
|
|
increases our vulnerability to general adverse economic and industry
conditions; |
|
|
|
requires us to dedicate a substantial portion of our cash flow from operations
to payments on indebtedness, reducing the availability of cash flow to fund working
capital, capital expenditures and other general corporate activities; |
|
|
|
limits our ability to borrow additional funds or make capital expenditure; |
|
|
|
limits our flexibility in planning for, or reacting to, changes in our business
and the audio entertainment industry; and |
|
|
|
may place us at a competitive disadvantage compared to other competitors.
|
13
A substantial portion of our cash flows from operations is dedicated to the payment of
principal and interest on our indebtedness and will not be available for other purposes, including
our operations, capital expenditures, investments in new technologies and future business
opportunities.
The instruments governing our indebtedness contain covenants that, among other things,
restrict our ability to incur more debt, pay dividends, make distributions, make certain
investments, repurchase stock, create liens, enter into transactions with affiliates, enter into
sale lease-back transactions, merge or consolidate, and transfer or sell assets. Failure to comply
with the covenants contained in the indentures and agreements governing this debt could result in
an event of default, which, if not cured or waived, could cause us to seek the protection of the
bankruptcy laws, discontinue operations or seek a purchaser for our business or assets.
Our business might never become profitable.
As of December 31, 2009, we had an accumulated deficit of approximately $6.7 billion. We
expect our cumulative net losses to grow as we make payments under various contracts, incur
marketing and subscriber acquisition costs and make interest payments on existing debt. As of
December 31, 2009, we had total debt of approximately $1.7 billion. If we are unable ultimately to
consistently generate sufficient revenues to become profitable, we may not be able to make the
required payments on our indebtedness and could ultimately default on our commitments.
Our business depends in large part upon automakers, a number of whom have experienced a sharp
decline in sales, have reduced production and are experiencing extreme financial difficulties.
The sale and lease of vehicles with satellite radios is an important source of subscribers for
our satellite radio services. We have agreements with every major automaker to include satellite
radios in new vehicles, although these agreements do not require automakers to install specific or
minimum quantities of radios in any given period. Economic conditions, particularly the dramatic
slowdown in auto sales, negatively impacted subscriber growth for our services in 2008 and 2009.
Our subscription growth is dependent, in large part, on sales and vehicle production by
automakers. Automotive sales and production are dependent on many factors, including the
availability of consumer credit, general economic conditions, consumer confidence and fuel costs.
To the extent vehicle sales by automakers continue to decline, or the penetration of
factory-installed satellite radios in those vehicles is reduced, and there is no offsetting growth
in vehicle sales or increased penetration by other automakers, subscriber growth for our satellite
radio services will be adversely impacted.
Rapid technological and industry changes could adversely impact our services.
The audio entertainment industry is characterized by rapid technological change, frequent new
product innovations, changes in customer requirements and expectations, and evolving standards. If
we are unable to keep pace with these changes, our business may be unsuccessful. Products using
new technologies, or emerging industry standards, could make our technologies less competitive in
the marketplace.
Consumers could pirate our services.
Individuals who engage in piracy may be able to obtain or rebroadcast our satellite radio
service or access the internet transmission of our services without paying the subscription fee.
Although we use encryption technologies to mitigate the risk of signal theft, such technologies may
not be adequate to prevent theft of the signals. If signal theft becomes widespread, it could harm
our business.
Failure of our satellites would significantly damage our business and potential satellite losses
may not be covered by insurance.
We operate four in-orbit satellites, including two satellites that are used for backup
purposes only. The useful lives of these satellites will vary and depend on a number of factors,
including:
|
|
|
degradation and durability of solar panels; |
|
|
|
quality of construction; |
|
|
|
random failure of satellite components, which could result in significant
damage to or loss of a satellite; |
|
|
|
amount of fuel the satellites consume; and |
|
|
|
damage or destruction by electrostatic storms or collisions with other objects
in space. |
14
We placed our XM-3 and XM-4 satellites into service during the second quarter of 2005 and
during the fourth quarter of 2006, respectively. Our XM-1 and XM-2 satellites experienced
progressive degradation problems common to early Boeing 702 class satellites and now serve as
in-orbit spares. We estimate that the XM-3 and XM-4 satellites will meet their 15-year predicted
useful lives, and that XM-1 and XM-2 satellites useful lives will end in 2011. An operational
failure or loss of XM-3 or XM-4 would, at least temporarily, affect the quality of our service, and
could interrupt the continuation of our service and harm our business. We expect to launch the
XM-5 satellite, which will serve as an in-orbit spare for the SIRIUS and XM services, in the third
quarter of 2010. In the event of any satellite failure prior to that time, we would need to rely
on our back-up satellites, XM-1 and XM-2. There can be no assurance that restoring service through
XM-1 and XM-2 would allow XM to maintain adequate broadcast signal strength through the date on
which XM-5 is brought into service, particularly if XM-1 or XM-2 were to suffer unanticipated
additional performance degradation or experience an operational failure.
In addition, our network of terrestrial repeaters communicates with our satellites. If the
satellites communicating with our repeater network fail unexpectedly, the services would be
disrupted for several hours or longer.
In the ordinary course of operation, satellites experience failures of component parts and
operational and performance anomalies. Components on our in-orbit satellites have failed and from
time to time we have experienced anomalies in the operation and performance of these satellites.
These failures and anomalies are expected to continue in the ordinary course, and we cannot predict
if any of these future events will have a material adverse effect on our operations or the useful
life of our existing in-orbit satellites.
We maintain in-orbit insurance covering our primary satellites broadcasting our service, but
do not maintain insurance on our back-up satellites. Any insurance proceeds will not fully cover
our losses in the event of a satellite failure or significant degradation. For example, the
policies covering the insured satellites do not cover the full cost of constructing, launching and
insuring new satellites or our in-orbit spare satellites, nor will they cover, and we do not have
protection against, business interruption, loss of business or similar losses. Our insurance
contains customary exclusions, material change and other conditions that could limit recovery under
those policies. Further, any insurance proceeds may not be received on a timely basis in order to
launch a spare satellite or construct and launch a replacement satellite or take other remedial
measures. In addition, the policies are subject to limitations involving uninsured losses, large
satellite performance deductibles and policy limits that may not be sufficient to cover losses.
Our broadcast studios, terrestrial repeater networks, satellite uplink facilities or other ground
facilities could be damaged by natural catastrophes or terrorist activities.
An earthquake, tornado, flood, terrorist attack or other catastrophic event could damage our
broadcast studios, terrestrial repeater networks or satellite uplink facilities, interrupt our
service and harm our business. We do not have replacement or redundant facilities that can be used
to assume the functions of our terrestrial repeater network. We do have redundant facilities that
can be used to assume immediately many of the functions of the broadcast studios and satellite
uplink facilities in the event of a catastrophic event.
Any damage to the satellites that transmit to our terrestrial repeater network would likely
result in degradation of our service for some subscribers and could result in complete loss of
service in certain or all areas. Damage to our satellite uplink facilities could result in a
complete loss of our service until we could transfer our operations to our back-up facilities.
Electromagnetic interference from others could damage our business.
Our satellite radio service may be subject to interference caused by other users of radio
frequencies, such as Wireless Communications Service (WCS) users. The FCC is seeking comment on
proposals by certain WCS licensees for modification of rules regarding their operations in spectrum
adjacent to satellite radio, including rule changes to facilitate mobile broadband services in the
WCS frequencies. We are participating actively in this proceeding and have opposed the changes
requested by WCS licensees out of a concern for their impact on the reception of satellite radio
service. We cannot predict the outcome of the FCC proceeding, or the impact on satellite radio
reception.
Failure to comply with FCC requirements could damage our business.
We hold FCC licenses and authorizations to operate commercial satellite radio services in the
United States, including authorizations for satellites and terrestrial repeaters, and related
authorizations. The FCC generally grants licenses and authorizations for a fixed term. Although
we expect our licenses and authorizations to be renewed in the ordinary course upon their
expiration, there can be no assurance that this will be the case. Any assignment or transfer of
control of any of our FCC licenses or authorizations must be approved in advance by the FCC.
15
The operation of our satellite radio system is subject to significant regulation by the FCC
under authority granted through the Communications Act and related federal law. We are required,
among other things, to operate only within specified frequencies; to meet certain conditions
regarding the interoperability of our satellite radios with those of other licensed satellite radio
systems; to coordinate our satellite radio services with radio systems operating in the same range
of frequencies in neighboring countries; and to coordinate our communications links to our
satellites with other systems that operate in the same frequency band. Non-compliance by us with
these requirements or other conditions or with other applicable FCC rules and regulations could
result in fines, additional license conditions, license revocation or other detrimental FCC
actions. There is no guarantee that Congress will not modify the statutory framework governing our
services, or that the FCC will not modify its rules and regulations in a manner that would have a
material impact on our operations.
The terms of our licenses, the order of the FCC approving the Merger, and the consent decree
we entered into with the FCC require us to meet certain conditions. We have agreed to implement a
number of voluntary commitments, including programming, minority and public interest, equipment,
subscription rates and other service commitments. Non-compliance with these conditions could
result in fines, additional license conditions, license revocation or other detrimental FCC
actions.
The FCC has not yet issued final rules permitting us to operate and deploy terrestrial
repeaters to fill gaps in our satellite coverage. We are operating our terrestrial repeaters on a
non-interference basis pursuant to grants of special temporary authority from the FCC. The FCCs
final terrestrial repeater rules may require us to reduce the power of our terrestrial repeaters or
limit our ability to deploy additional repeaters. If the FCC requires us to reduce significantly
the number or power of our terrestrial repeaters, this would have an adverse effect on the quality
of our service in certain markets and/or cause us to alter our terrestrial repeater infrastructure
at a substantial cost. If the FCC limits our ability to deploy additional terrestrial repeaters,
our ability to improve any deficiencies in our service quality that may be identified in the future
would be adversely affected.
Changes in consumer protection laws and their enforcement could damage our business.
We engage in extensive marketing efforts to attract and retain subscribers to our service. We
employ a wide variety of communications tools as part of our marketing campaigns, including print,
television, radio and online advertising; telemarketing efforts; and email solicitations. The
United States Federal Trade Commission, the FCC and various states agencies have responsibility for
consumer protection and have jurisdiction over components of our consumer marketing efforts.
Consumer protection laws, rules and regulations are extensive and have developed rapidly.
Consumer protection laws in certain jurisdictions cover nearly all aspects of our marketing
efforts, including the content of our advertising, the terms of consumer offers. and the manner in
which we communicate with subscribers and prospective subscribers. We are engaged in considerable
efforts to ensure that all our activities comply with federal and state laws, rules and regulations
relating to consumer protection. Modifications to federal and state laws, rules and regulations
concerning consumer protection, including decisions by federal and state courts and agencies
interpreting these laws, could have an adverse impact on our ability to attract and retain
subscribers to our service. While we monitor the changes in and interpretations of these laws in
consumer-related settlements and decisions, and while we believe that we are in material compliance
with applicable laws, there can be no assurances that new laws or regulations will not be enacted
or adopted, or preexisting laws or regulations will not be more strictly enforced, which might
adversely affect our operations.
The unfavorable outcome of pending or future litigation could have a material adverse effect.
We are parties to several legal proceedings arising out of various aspects of our business.
We are defending all claims against us. The outcome of these proceedings may not be favorable, and
an unfavorable outcome may have a material adverse effect on our business or financial results.
Our business may be impaired by third-party intellectual property rights.
Development of our system has depended upon the intellectual property that we have developed,
as well as intellectual property licensed from third parties. If the intellectual property that we
have developed or use is not adequately protected, others will be permitted to and may duplicate
portions of our satellite radio systems or services without liability. In addition, others may
challenge, invalidate, render unenforceable or circumvent our intellectual property rights, patents
or existing sublicenses or we may face significant legal costs in connection with defending and
enforcing those intellectual property rights. Some of the know-how and technology we have
developed, and plan to develop, is not now, nor will it be, covered by U.S. patents or trade secret
protections. Trade secret protection and contractual agreements may not provide adequate
protection if there is any unauthorized use or disclosure. The loss of necessary technologies
could require us to obtain substitute technology of lower quality performance standards, at greater
cost or on a delayed basis, which could harm us.
Other parties may have patents or pending patent applications, which will later mature into
patents or inventions that may block our ability to operate our system or license technologies. We
may have to resort to litigation to enforce our rights under license agreements or to determine the
scope and validity of other parties proprietary rights in the subject matter of those licenses.
This may be expensive. Also, we may not succeed in any such litigation.
16
Third parties may assert claims or bring suit against us for patent, trademark or copyright
infringement, or for other infringement or misappropriation of intellectual property rights. Any
such litigation could result in substantial cost, and diversion of effort and adverse findings in
any proceeding could subject us to significant liabilities to third parties; require us to seek
licenses from third parties; block our ability to operate our systems or license our technology; or
otherwise adversely affect our ability to successfully develop and market our satellite radio
system.
Liberty Media Corporation has significant influence over our business and affairs and its interests
may differ from ours.
Liberty Media Corporation holds preferred stock that is convertible into approximately 40% of
the issued and outstanding shares of SIRIUS common stock. Pursuant to the terms of the preferred
stock held by Liberty Media, we cannot take certain actions, such as certain issuances of equity or
debt securities, without the consent of Liberty Media. Additionally, Liberty Media has the right
to designate six members of SIRIUS fifteen-member board of directors. As a result, Liberty Media
has significant influence over our business and affairs. The interests of Liberty Media may differ
from our interests. The extent of Liberty Medias stock ownership in SIRIUS also may have the
effect of discouraging offers to acquire control of SIRIUS.
Our net operating loss carryforwards could be substantially limited if SIRIUS experiences an
ownership change as defined in the Internal Revenue Code.
We have generated a federal net operating loss carryforward of approximately $4 billion
through the year ended December 31, 2009, and we may generate net operating loss carryforwards in
future years.
Section 382 of the Internal Revenue Code of 1986, as amended (the Code), contains rules that
limit the ability of a company that undergoes an ownership change, which is generally any change in
ownership of more than 50% of its stock over a three-year period, to utilize its net operating loss
carryforwards and certain built-in losses recognized in years after the ownership change. These
rules generally operate by focusing on ownership changes among stockholders owning directly or
indirectly 5% or more of the stock of a company and any change in ownership arising from a new
issuance of stock by the company.
If our parent company, SIRIUS, undergoes an ownership change for purposes of Section 382 as a
result of future transactions involving SIRIUS common stock, including purchases or sales of stock
between 5% stockholders, SIRIUS ability to use its net operating loss carryforwards and to
recognize certain built-in losses would be subject to the limitations of Section 382. Depending on
the resulting limitation, a significant portion of our net operating loss carryforwards could
expire before we would be able to use them. Our inability to utilize our net operating loss
carryforwards could have a negative impact on our long-term financial position and results of
operations.
In April 2009, SIRIUS board of directors adopted a shareholder rights plan designed to
preserve shareholder value and the value of certain tax assets primarily associated with net
operating loss carryforwards and built-in losses under Section 382 of the Code. SIRIUS has agreed
to submit this shareholder rights plan to a vote of its stockholders. If SIRIUS stockholders do
not approve this shareholder rights plan prior to June 30, 2010 it will terminate in accordance
with its terms.
17
|
|
|
ITEM 1B. |
|
UNRESOLVED STAFF COMMENTS |
None.
Below is a list of the principal properties that we own or lease:
|
|
|
|
|
Location |
|
Purpose |
|
Own/Lease |
Washington, DC
|
|
Office and studio/production facilities
|
|
Own |
Washington, DC
|
|
Office facilities and data center
|
|
Own |
Deerfield Beach, FL
|
|
Office and technical/engineering facilities
|
|
Lease |
New York, NY
|
|
Studio/production facilities @ Jazz at Lincoln Center
|
|
Lease |
Nashville, TN
|
|
Studio/production facility
|
|
Lease |
We also own or lease other small facilities that we use as offices for our advertising sales
personnel, studios and warehouse and maintenance space. These facilities are not material to our
business or operations.
In addition, we lease space at approximately 700 locations for use in connection with the
terrestrial repeater network that supports our service. In general, these leases are for space on
building rooftops and communications towers. None of these individual leases is material to our
business or operations.
|
|
|
ITEM 3. |
|
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 actions against XM in connection with the
advanced recording functionality included in the XM Inno, the XM NeXus, the XM Helix and the XM
SkyFi3line 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.
We have settled these claims with the major record companies and a significant number of music
publishers. We are in discussions to settle these claims with certain independent record companies
and other music publishers.
We believe that the distribution and use of our 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.
|
|
|
ITEM 4. |
|
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS |
Omitted pursuant to General Instructions I(2)(c) of Form 10-K.
18
PART II
|
|
|
ITEM 5. |
|
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES |
Prior to the completion of the Merger, our common stock was traded on the Nasdaq Global Select
Market under the symbol XMSR.
|
|
|
ITEM 6. |
|
SELECTED FINANCIAL DATA |
Our selected financial data set forth below with respect to the consolidated statements of
operations for the year ended December 31, 2009 and from August 1, 2008 through December 31, 2008
(the Successor Periods) and from January 1, 2008 through July 31, 2008 and for the year ended
December 31, 2007 (the Predecessor Periods) and with respect to the consolidated balance sheets at
December 31, 2009 and 2008, are derived from our audited consolidated financial statements included
in Item 8 of this Annual Report on Form 10-K. Our selected financial data set forth below with
respect to the consolidated statements of operations for the years ended December 31, 2006 and
2005, and with respect to the consolidated balance sheets at December 31, 2007, 2006 and 2005 are
derived from our predecessor audited consolidated financial statements which are not included in
this Annual Report on Form 10-K. This selected financial data should be read in conjunction with
the Consolidated Financial Statements and related notes thereto included in Item 7 of this Annual
Report and Managements Discussion and Analysis of Financial Condition and Results of Operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through December 31, |
|
|
|
Through July 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
2008 |
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statements of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
1,297,341 |
|
|
$ |
511,154 |
|
|
|
$ |
731,194 |
|
|
$ |
1,136,542 |
|
|
$ |
933,417 |
|
|
$ |
558,266 |
|
Net loss |
|
|
(246,830 |
) |
|
|
(6,438,185 |
) |
|
|
|
(322,458 |
) |
|
|
(682,381 |
) |
|
|
(718,872 |
) |
|
|
(666,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
As of December 31, |
|
|
|
As of December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
2007 |
|
|
2006 |
|
|
2005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
212,155 |
|
|
$ |
206,740 |
|
|
|
$ |
156,686 |
|
|
$ |
218,216 |
|
|
$ |
710,991 |
|
Restricted investments |
|
|
250 |
|
|
|
120,250 |
|
|
|
|
275 |
|
|
|
2,098 |
|
|
|
5,488 |
|
Total assets |
|
|
4,076,508 |
|
|
|
4,311,279 |
|
|
|
|
1,609,230 |
|
|
|
1,840,618 |
|
|
|
2,223,661 |
|
Long-term debt, net of current portion |
|
|
1,659,532 |
|
|
|
1,413,596 |
|
|
|
|
1,480,639 |
|
|
|
1,286,179 |
|
|
|
1,035,584 |
|
Stockholders (deficit) equity (1) |
|
|
(701,896 |
) |
|
|
(575,554 |
) |
|
|
|
(984,303 |
) |
|
|
(397,880 |
) |
|
|
80,948 |
|
|
|
|
(1) |
|
No cash dividends were declared or paid in any of the periods presented. |
19
|
|
|
ITEM 7. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the
federal securities laws. Actual results and the timing of events could differ materially from those
projected in forward-looking statements due to a number of factors, including those described under
Item 1A Risk Factors and elsewhere in this Annual Report. See Explanatory Note and Special
Note Regarding Forward-Looking Statements.
(All dollar amounts referenced in this Item 7 are in thousands, unless otherwise stated.)
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 system. On July
28, 2008, XM Satellite Radio Holdings Inc. merged with and into Vernon Merger Corporation, a wholly
owned subsidiary of SIRIUS; and as a result, XM Satellite Radio Holdings Inc. is now a wholly owned
subsidiary of SIRIUS. Our system consists of four in-orbit satellites, over 650 terrestrial
repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers
can also receive certain of our music and other channels over the Internet, including through an
application on the Apple iPhone.
Our satellite radios are primarily distributed through automakers (OEMs); nationwide through
retail locations; and through our website. We have agreements with major automakers to offer
satellite radios as factory or dealer-installed equipment in their vehicles. Our radios are also
offered to customers of rental car companies.
As of December 31, 2009, we had 9,749,100 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 programs; certain subscribers to XM Radio Online, our Internet service; and certain
subscribers to our weather, traffic and data 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 pre-paid and long-term
subscriptions as well as discounts for multiple subscriptions. We also derive revenue from
activation and other 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 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 months.
We also reimburse various automakers for certain costs associated with satellite radios installed
in their vehicles.
We also have an interest in a satellite radio service offered in Canada. Subscribers to the
Canadian Satellite Radio Holdings Inc. (XM Canada) service are not included in our subscriber
count.
XM Satellite Radio Holdings Inc., together with its subsidiaries, operates as an unrestricted
subsidiary under the agreements governing SIRIUS existing indebtedness. As an unrestricted
subsidiary, transactions between the companies are required to comply with various contractual
provisions in our respective debt instruments.
Unaudited Actual and Pro Forma Information
Our discussion of our unaudited pro forma information includes non-GAAP financial results that
assume the Merger occurred on January 1, 2008. These financial results exclude the impact of
purchase price accounting adjustments and refinancing transactions related to the Merger. The
discussion also includes the following non-GAAP financial measures: average self-pay monthly churn;
conversion rate; average monthly revenue per subscriber, or ARPU; subscriber acquisition cost, or
SAC, as adjusted, per gross subscriber addition; customer service and billing expenses, as
adjusted, per average subscriber; free cash flow; and adjusted income (loss) from operations. We
believe this non-GAAP financial information provides meaningful supplemental information regarding
our operating performance and is used for internal management purposes, when publicly providing the
business outlook, and as a means to evaluate period-to-period comparisons. Please refer to the
footnotes (pages 43 through 56) following our discussion of results of operations for the
definitions and a further discussion of the usefulness of such non-GAAP financial information and
reconciliation to GAAP.
20
Unaudited Actual and Pro Forma Subscribers and Metrics. The following tables contain our
actual and pro forma subscriber and key operating metrics for the three months and two years ended
December 31, 2009 and 2008, respectively:
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months
Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Beginning subscribers |
|
|
9,704,886 |
|
|
|
9,896,072 |
|
Gross subscriber additions |
|
|
895,199 |
|
|
|
794,809 |
|
Deactivated subscribers |
|
|
(850,985 |
) |
|
|
(840,140 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
3,659,504 |
|
|
|
4,319,632 |
|
OEM |
|
|
5,988,148 |
|
|
|
5,442,724 |
|
Rental |
|
|
101,448 |
|
|
|
88,385 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(118,142 |
) |
|
|
(99,114 |
) |
OEM |
|
|
147,511 |
|
|
|
54,873 |
|
Rental |
|
|
14,845 |
|
|
|
(1,090 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
9,040,022 |
|
|
|
9,095,579 |
|
Paid promotional |
|
|
709,078 |
|
|
|
755,162 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
142,540 |
|
|
|
178,879 |
|
Paid promotional |
|
|
(98,326 |
) |
|
|
(224,210 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.8 |
% |
Conversion rate (2)(7) |
|
|
47.5 |
% |
|
|
47.4 |
% |
ARPU (3)(7) |
|
$ |
10.94 |
|
|
$ |
10.67 |
|
SAC, as adjusted, per gross subscriber addition (4)(7) |
|
$ |
57 |
|
|
$ |
61 |
|
Customer service and billing expenses, as adjusted,
per average
subscriber (5)(7) |
|
$ |
1.11 |
|
|
$ |
1.20 |
|
Total revenue |
|
$ |
370,408 |
|
|
$ |
337,476 |
|
Free cash flow (6)(7) |
|
$ |
29,561 |
|
|
$ |
(3,918 |
) |
Adjusted income (loss) from operations (8) |
|
$ |
82,360 |
|
|
$ |
25,657 |
|
Net loss |
|
$ |
(4,686 |
) |
|
$ |
(88,998 |
) |
Note: See pages 43 through 56 for footnotes.
Subscribers. At December 31, 2009, we had 9,749,100 subscribers, a decrease of 101,641
subscribers, or 1%, from the 9,850,741 subscribers as of December 31, 2008. Net subscriber
additions increased 89,545, or 198%, in the three months ended December 31, 2009 compared to 2008.
Net subscriber additions in our OEM channel increased 92,638, or 169%, in the three months ended
December 31, 2009 compared to 2008. Net subscriber additions in our retail channel decreased
19,028, or 19%, in the three months ended December 31, 2009 compared to 2008. Deactivation rates
for self-pay subscriptions in the quarter increased to 2.0% per month reflecting reductions in
consumer discretionary spending, subscriber response to our increase in prices for
multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge
for our upgraded streaming service and the introduction of the U.S. Music Royalty Fee.
21
ARPU. ARPU is derived from total earned subscriber revenue and net advertising revenue,
divided by the number of months in the period, divided by the daily weighted average number of
subscribers for the period. See accompanying footnotes for more details. For the three months ended
December 31, 2009 and 2008, total ARPU was $10.94 and $10.67, respectively. The increase was driven
mainly by the sale of Best of programming, increased rates on our multi-subscription packages and
revenues earned on our internet packages, partially offset by lower advertising revenue.
SAC, As Adjusted, Per Gross Subscriber Addition. SAC, as adjusted, 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 divided by the number of gross subscriber
additions for the period. See accompanying footnotes for more details. For the three months ended
December 31, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $57 and $61,
respectively. The decrease in SAC was primarily driven by fewer OEM installations relative to gross
subscriber additions and lower OEM subsidies, offset by onetime aftermarket product related charges
compared to 2008.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. Customer service
and billing expenses, as adjusted, per average subscriber is derived from total customer service
and billing expenses, excluding share-based payment expense, divided by the number of months in the
period, divided by the daily weighted average number of subscribers for the period. See
accompanying footnotes for more details. For the three months ended December 31, 2009 and 2008,
customer service and billing expenses, as adjusted, per weighted average subscriber was $1.11 and
$1.20, respectively. The decrease was primarily due to decreases in personnel costs and customer
call center expenses.
Adjusted Income (Loss) from Operations. We refer to net income (loss) before interest and
investment income; interest expense, net of amounts capitalized; income tax expense; loss on
extinguishment of debt and credit facilities, net; (gain) loss on investments; other expense
(income); restructuring, impairments and related costs; depreciation and amortization; and
share-based payment expense as adjusted income (loss) from operations. See accompanying footnotes
for more details. For the three months ended December 31, 2009 and 2008, our adjusted income (loss)
from operations was $82,360 and $25,657, respectively. Adjusted income (loss) from operations was
favorably impacted by an increase of 10%, or $32,932, in revenues and a decrease of 8%, or $23,771,
in total expenses included in adjusted income (loss) from operations. The increase in revenue was
due mainly to increased rates on multi-subscription packages, the introduction of the U.S. Music
Royalty Fee, revenues earned on internet packages and the sale of Best of programming, partially
offset by decreased equipment revenue. The decreases in expenses were primarily driven by lower
programming and content costs, lower customer service and billing expenses and lower legal and
consulting costs in general and administrative expenses.
22
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Beginning subscribers |
|
|
9,850,741 |
|
|
|
9,026,837 |
|
Gross subscriber additions |
|
|
3,184,559 |
|
|
|
3,956,653 |
|
Deactivated subscribers |
|
|
(3,286,200 |
) |
|
|
(3,132,749 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
3,659,504 |
|
|
|
4,319,632 |
|
OEM |
|
|
5,988,148 |
|
|
|
5,442,724 |
|
Rental |
|
|
101,448 |
|
|
|
88,385 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(660,128 |
) |
|
|
(278,374 |
) |
OEM |
|
|
545,424 |
|
|
|
1,075,088 |
|
Rental |
|
|
13,063 |
|
|
|
27,190 |
|
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
9,040,022 |
|
|
|
9,095,579 |
|
Paid promotional |
|
|
709,078 |
|
|
|
755,162 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
(55,557 |
) |
|
|
907,297 |
|
Paid promotional |
|
|
(46,084 |
) |
|
|
(83,393 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.7 |
% |
Conversion rate (2)(7) |
|
|
47.6 |
% |
|
|
50.7 |
% |
ARPU (7)(10) |
|
$ |
10.81 |
|
|
$ |
10.57 |
|
SAC, as adjusted, per gross subscriber addition (7)(11) |
|
$ |
54 |
|
|
$ |
68 |
|
Customer service and billing expenses, as adjusted,
per average subscriber (7)(12) |
|
$ |
1.10 |
|
|
$ |
1.22 |
|
Total revenue |
|
$ |
1,351,406 |
|
|
$ |
1,283,902 |
|
Free cash flow (7)(13) |
|
$ |
219,368 |
|
|
$ |
(288,112 |
) |
Adjusted income (loss) from operations (14) |
|
$ |
273,544 |
|
|
$ |
(78,822 |
) |
Net loss |
|
$ |
(247,712 |
) |
|
$ |
(480,796 |
) |
Note: See pages 43 through 56 for footnotes.
Subscribers. At December 31, 2009, we had 9,749,100 subscribers, a decrease of 101,641
subscribers, or 1%, from the 9,850,741 subscribers as of December 31, 2008. The decrease was
principally the result of 46,084 fewer paid promotional trials due to the decline in North American
auto sales and 55,557 fewer self-pay subscribers compared to December 31, 2008. Deactivation rates
for self-pay subscriptions in the year increased to 2.0% per month reflecting reductions in
consumer discretionary spending, subscriber response to our increase in prices for
multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge
for our upgraded streaming service and the introduction of the U.S. Music Royalty Fee.
ARPU. For the years ended December 31, 2009 and 2008, total ARPU was $10.81 and $10.57,
respectively. Increases in subscriber revenue were driven mainly by the sale of Best of
programming, increased rates on our multi-subscription packages and revenues earned on our internet
packages, partially offset by lower ad revenue.
23
SAC, As Adjusted, Per Gross Subscriber Addition. For the years ended December 31, 2009 and
2008, SAC, as adjusted, per gross subscriber addition was $54 and $68, respectively. The decrease
was primarily driven by lower aftermarket inventory charges, fewer OEM installations relative to
gross subscriber additions and lower OEM subsidies in the year ended December 31, 2009 compared to
2008.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the year ended
December 31, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted
average subscriber was $1.10 and $1.22, respectively. The decline was primarily due to decreases in
personnel costs and customer call center expenses.
Adjusted Income (Loss) from Operations. For the years ended December 31, 2009 and 2008, our
adjusted income (loss) from operations was $273,544 and ($78,822), respectively. Adjusted income
(loss) from operations was favorably impacted by an increase of 5%, or $67,504, in revenues and a
decrease of 21%, or $284,862, in total expenses included in adjusted income (loss) from operations.
The increase in revenue was due mainly to an increase in weighted average subscribers as well as
increased rates on multi-subscription packages, the introduction of the U.S. Music Royalty Fee,
revenues earned on internet packages and the sale of Best of programming, partially offset by
decreased equipment revenue. The decreases in expenses were primarily driven by lower subscriber
acquisition costs, lower sales and marketing discretionary spend and lower legal and consulting
costs in general and administrative expenses.
Unaudited Pro Forma Results of Operations. Set forth below are certain pro forma items that
give effect to the Merger as if it had occurred on January 1, 2008. The pro forma information below
does not give effect to any adjustments as a result of the purchase price accounting for the
Merger. See footnote 8 (pages 44 to 45) and footnote 14 (pages 48 to 49) for a reconciliation of
net income (loss) to adjusted income (loss) from operations.
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
313,158 |
|
|
$ |
309,523 |
|
Advertising revenue, net of agency fees |
|
|
5,232 |
|
|
|
4,845 |
|
Equipment revenue |
|
|
11,892 |
|
|
|
15,640 |
|
Other revenue |
|
|
40,126 |
|
|
|
7,468 |
|
|
|
|
|
|
|
|
Total revenue |
|
|
370,408 |
|
|
|
337,476 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
13,413 |
|
|
|
16,401 |
|
Programming and content |
|
|
40,469 |
|
|
|
49,057 |
|
Revenue share and royalties |
|
|
68,530 |
|
|
|
72,087 |
|
Customer service and billing |
|
|
32,227 |
|
|
|
35,450 |
|
Cost of equipment |
|
|
4,126 |
|
|
|
7,279 |
|
Sales and marketing |
|
|
47,245 |
|
|
|
49,301 |
|
Subscriber acquisition costs |
|
|
58,726 |
|
|
|
56,602 |
|
General and administrative |
|
|
19,348 |
|
|
|
20,256 |
|
Engineering, design and development |
|
|
3,964 |
|
|
|
5,386 |
|
Depreciation and amortization |
|
|
25,042 |
|
|
|
26,251 |
|
Share-based payment expense |
|
|
4,209 |
|
|
|
13,321 |
|
Restructuring, impairments and related costs |
|
|
2,640 |
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
319,939 |
|
|
|
351,391 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
50,469 |
|
|
|
(13,915 |
) |
Other expense |
|
|
(54,426 |
) |
|
|
(74,792 |
) |
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(3,957 |
) |
|
|
(88,707 |
) |
Income tax expense |
|
|
(729 |
) |
|
|
(291 |
) |
|
|
|
|
|
|
|
Net loss |
|
|
(4,686 |
) |
|
|
(88,998 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(4,686 |
) |
|
$ |
(88,998 |
) |
|
|
|
|
|
|
|
24
Highlights for the Three Months Ended December 31, 2009. Our revenue grew 10%, or $32,932, in
the three months ended December 31, 2009 compared to 2008. Subscriber revenue increased 1%, or
$3,635, in the three months ended December 31, 2009 compared to 2008. The increase in subscriber
revenue was driven by the sale of Best of programming and the price increases to our
multi-subscription and internet packages. Advertising revenue increased 8%, or $387, in the three
months ended December 31, 2009 compared to 2008. Equipment revenue decreased 24%, or $3,748, in the
three months ended December 31, 2009 compared to 2008. The decrease in equipment revenue was driven
by a decrease in aftermarket manufacturing revenues and fewer component sales compared to the three
months ended December 31, 2008. Other revenue increased 437%, or $32,658, in the three months
ended December 31, 2009 compared to 2008. The increase in other revenue was driven by the U.S.
Music Royalty Fee introduced in the third quarter of 2009. The overall increase in revenue,
combined with a decrease of 8%, or $23,771, in adjusted operating costs (total operating expense
excluding restructuring, impairments and related costs, depreciation and amortization, impairment
of goodwill and share-based payment expense), resulted in improved adjusted income (loss) from
operations of $82,360 in the three months ended December 31, 2009 compared to $25,657 in 2008.
Satellite and transmission costs decreased 18%, or $2,988, in the three months ended December
31, 2009 compared to 2008 due to reductions in repeater maintenance costs and personnel costs. Programming
and content costs decreased 18%, or $8,588, in the three months ended December 31, 2009 compared to
2008, due mainly to reductions in personnel and on-air talent costs as well as savings on content
agreements. Revenue share and royalties decreased 5%, or $3,557, primarily due to decreases in our
royalties due to certain automakers, partially offset by an increase in the statutory royalty rate
for the performance of sound recordings. Customer service and billing costs decreased 9%, or
$3,223, in the three months ended December 31, 2009 compared to 2008 primarily due to decreases in
personnel costs and customer call center expenses. Cost of equipment decreased 43%, or $3,153, in
the three months ended December 31, 2009 as a result of a decrease in inventory write-downs, fewer
component sales and lower average cost per units sold.
Sales and marketing costs decreased 4%, or $2,056, in the three months ended December 31, 2009
compared to 2008 due to reduced advertising and cooperative marketing spend, as well as reductions
to personnel costs and third party distribution support expenses. Subscriber acquisition costs
increased $2,124, or 4%, in the three months ended December 31, 2009 compared to 2008. This
increase was driven by onetime aftermarket product related charges,
partially offset by fewer OEM installations relative to gross subscriber additions.
General and administrative costs decreased 4%, or $908 in the three months ended December 31,
2009 compared to 2008. Engineering, design and development costs decreased 26%, or $1,422, in the
three months ended December 31, 2009 compared to 2008, due to lower costs associated with
development, tooling and testing of radios as well as lower personnel costs.
Restructuring, impairments and related costs were $2,640 mainly due to charges related to
compensation incurred as part of the Merger integration.
Other expenses decreased 27%, or $20,366, in the three months ended December 31, 2009 compared
to 2008 driven mainly by decreases in loss on investments of $22,307.
25
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,238,217 |
|
|
$ |
1,181,860 |
|
Advertising revenue, net of agency fees |
|
|
18,708 |
|
|
|
32,753 |
|
Equipment revenue |
|
|
29,574 |
|
|
|
32,388 |
|
Other revenue |
|
|
64,907 |
|
|
|
36,901 |
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,351,406 |
|
|
|
1,283,902 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
49,954 |
|
|
|
72,712 |
|
Programming and content |
|
|
175,661 |
|
|
|
192,066 |
|
Revenue share and royalties |
|
|
277,135 |
|
|
|
288,242 |
|
Customer service and billing |
|
|
127,317 |
|
|
|
140,015 |
|
Cost of equipment |
|
|
16,175 |
|
|
|
32,312 |
|
Sales and marketing |
|
|
137,420 |
|
|
|
197,936 |
|
Subscriber acquisition costs |
|
|
185,559 |
|
|
|
270,662 |
|
General and administrative |
|
|
89,916 |
|
|
|
140,715 |
|
Engineering, design and development |
|
|
18,725 |
|
|
|
28,064 |
|
Depreciation and amortization |
|
|
85,476 |
|
|
|
136,129 |
|
Share-based payment expense |
|
|
40,496 |
|
|
|
55,188 |
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,236,088 |
|
|
|
1,554,041 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
115,318 |
|
|
|
(270,139 |
) |
Other expense |
|
|
(360,567 |
) |
|
|
(200,739 |
) |
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(245,249 |
) |
|
|
(470,878 |
) |
Income tax (expense) benefit |
|
|
(2,463 |
) |
|
|
(2,475 |
) |
|
|
|
|
|
|
|
Net loss |
|
|
(247,712 |
) |
|
|
(473,353 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
(7,443 |
) |
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(247,712 |
) |
|
$ |
(480,796 |
) |
|
|
|
|
|
|
|
Highlights for the Year Ended December 31, 2009. Our revenue grew 5%, or $67,504, in the year
ended December 31, 2009 compared to 2008. Subscriber revenue grew 5%, or $56,357, in the year ended
December 31, 2009 compared to 2008. This revenue growth was driven by the sale of Best of
programming, rate increases on our multi-subscription and Internet packages. Advertising revenue
decreased 43%, or $14,045, in the year ended December 31, 2009 compared to 2008. The decrease in
advertising revenue was driven by the current economic environment. Equipment revenue decreased 9%,
or $2,814, in the year ended December 31, 2009 compared to 2008. The decrease in equipment revenue was driven by a decrease in
aftermarket manufacturing revenues and fewer component sales. Other revenue increased 76%, or $28,006, in the year ended
December 31, 2009 compared to 2008. The increase in other revenue was driven by the U.S. Music
Royalty Fee introduced in the third quarter of 2009. The overall increase in revenue, combined with
a decrease of 21%, or $284,862, in adjusted operating costs (total operating expenses excluding
restructuring, impairments and related costs, depreciation and amortization, impairment of goodwill
and share-based payment expense), resulted in improved adjusted income (loss) from operations of
$273,544 in the year ended December 31, 2009 compared to ($78,822) in 2008.
Satellite and transmission costs decreased 31%, or $22,758, in the year ended December 31,
2009 compared to 2008 due to reductions in maintenance costs and personnel costs. Programming and
content costs decreased 9%, or $16,405, in the year ended December 31, 2009 compared to 2008, due
mainly to reductions in personnel and on-air talent costs as well as savings on certain content
agreements. Revenue share and royalties decreased 4%, or $11,107, in the year ended December 31,
2009 compared to 2008, primarily due to decreases in our royalties due to certain automakers,
partially offset by an increase in the statutory royalty rate for the performance of sound
recordings. Customer service and billing costs decreased 9%, or $12,698, in the year ended December
31, 2009 compared to 2008 due to scale efficiencies. Cost of equipment decreased 50%, or $16,137,
in the year ended December 31, 2009 compared to 2008 as a result of a decrease in direct to
customer sales and lower inventory write-downs.
26
Sales and marketing costs decreased 31%, or $60,516, in the year ended December 31, 2009
compared to 2008 due to reduced advertising and cooperative marketing spend as well as reductions
to personnel costs and third party distribution support expenses. Subscriber acquisition costs
decreased 31%, or $85,103, in the year ended December 31, 2009 compared to 2008. The decrease was
primarily driven by lower aftermarket inventory charges, fewer OEM installations relative to gross
subscriber additions and lower OEM subsidies in the year ended December 31, 2009. Subscriber
acquisition costs also decreased as a result of the 20% decline in gross additions during the year
ended December 31, 2009.
General and administrative costs decreased 36%, or $50,799, mainly due to the absence of
certain legal and regulatory charges incurred in 2008 and lower personnel costs. Engineering,
design and development costs decreased 33%, or $9,339, in the year ended December 31, 2009 compared
to 2008, due to lower costs associated with development, tooling and testing of radios as well as
lower personnel costs.
Restructuring, impairments and related costs increased $32,254, mainly due to a loss of
$24,196 on capitalized installment payments for the launch of a satellite which are expected to
provide no future benefit due to the counterpartys bankruptcy filing, and to charges related to
revisions in estimated cash flows for vacated leases.
Other expenses increased 80%, or $159,828, in the year ended December 31, 2009 compared to
2008 driven mainly by an increase in the loss on extinguishment of debt and credit facilities of
$115,884 and an increase in interest expense of $79,690, partially offset by a decrease of $31,746
in loss on investments. The loss on the extinguishment of debt and credit facilities was incurred
on the full repayment of our Amended and Restated Credit Agreement, termination of our Second-Lien
Credit Agreement and a portion of our 10% Senior PIK Secured Notes due 2011. Interest expense
increased due primarily to the issuance of the 13% Senior Notes due 2013 and the 7% Exchangeable
Senior Subordinated Notes due 2014 in the third quarter of 2008 and the execution of the Amended
and Restated Credit Agreement in the first quarter of 2009.
Unaudited Actual Results of Operations
Our discussion of our results of operations, along with the selected financial information in
the tables that follow, includes the following non-GAAP financial measures: average self-pay
monthly churn; conversion rate; average monthly revenue per subscriber, or ARPU; subscriber
acquisition cost, or SAC, as adjusted, per gross subscriber addition; customer service and billing
expenses, as adjusted, per average subscriber; free cash flow; and adjusted income (loss) from
operations. We believe these non-GAAP financial measures provide meaningful supplemental
information regarding our operating performance and are used for internal management purposes, when
publicly providing the business outlook, and as a means to evaluate period-to-period comparisons.
Please refer to the footnotes (pages 43 through 56) following our discussion of results of
operations for the definitions and a further discussion of the usefulness of such non-GAAP
financial measures.
Unaudited Actual Subscribers and Metrics. The following tables contain our actual subscriber
and key operating metrics for the three months ended December 31, 2009 and 2008, respectively and
three years ended December 31, 2009, 2008 and 2007, respectively:
27
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Beginning subscribers |
|
|
9,704,886 |
|
|
|
9,896,072 |
|
Gross subscriber additions |
|
|
895,199 |
|
|
|
794,809 |
|
Deactivated subscribers |
|
|
(850,985 |
) |
|
|
(840,140 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
3,659,504 |
|
|
|
4,319,632 |
|
OEM |
|
|
5,988,148 |
|
|
|
5,442,724 |
|
Rental |
|
|
101,448 |
|
|
|
88,385 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(118,142 |
) |
|
|
(99,114 |
) |
OEM |
|
|
147,511 |
|
|
|
54,873 |
|
Rental |
|
|
14,845 |
|
|
|
(1,090 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
9,040,022 |
|
|
|
9,095,579 |
|
Paid promotional |
|
|
709,078 |
|
|
|
755,162 |
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
142,540 |
|
|
|
178,879 |
|
Paid promotional |
|
|
(98,326 |
) |
|
|
(224,210 |
) |
|
|
|
|
|
|
|
Net additions |
|
|
44,214 |
|
|
|
(45,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.8 |
% |
Conversion rate (2)(7) |
|
|
47.5 |
% |
|
|
47.4 |
% |
ARPU (7)(16) |
|
$ |
10.74 |
|
|
$ |
9.98 |
|
SAC, as adjusted, per gross subscriber addition (7)(17) |
|
$ |
37 |
|
|
$ |
37 |
|
Customer service and billing expenses, as adjusted,
per average
subscriber (7)(18) |
|
$ |
1.11 |
|
|
$ |
1.20 |
|
Total revenue |
|
$ |
362,802 |
|
|
$ |
315,551 |
|
Free cash flow (7)(19) |
|
$ |
29,561 |
|
|
$ |
(3,918 |
) |
Adjusted income (loss) from operations (20) |
|
$ |
137,587 |
|
|
$ |
66,015 |
|
Net loss |
|
$ |
98,301 |
|
|
$ |
(1,584,162 |
) |
|
|
|
Note: See pages 43 through 56 for footnotes. |
Subscribers. At December 31, 2009, we had 9,749,100 subscribers, a decrease of 101,641
subscribers, or 1%, from the 9,850,741 subscribers as of December 31, 2008. Net subscriber
additions increased 89,545, or 198%, in the three months ended December 31, 2009 compared to 2008.
Net subscriber additions in our OEM channel increased 92,638, or 169%, in the three months ended
December 31, 2009 compared to 2008. Net subscriber additions in our retail channel decreased
19,028, or 19%, in the three months ended December 31, 2009 compared to 2008. Deactivation rates
for self-pay subscriptions in the quarter increased to 2.0% per month reflecting reductions in
consumer discretionary spending, subscriber response to our increase in prices for
multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge
for our streaming service and the introduction of the U.S. Music Royalty Fee.
28
ARPU. For the three months ended December 31, 2009 and 2008, total ARPU was $10.74 and $9.98,
respectively. The increase was driven by the revenue earned for Best of programming, increased
rates on multi-subscription packages and internet subscriptions.
We expect ARPU to fluctuate based on promotion, rebates offered to
subscribers and corresponding take-rates, plan mix, subscription prices, advertising sales and the identification of additional revenue
from subscribers.
SAC, As Adjusted, Per Gross Subscriber Addition. For each of the three months ended December
31, 2009 and 2008, SAC, as adjusted, per gross subscriber addition was $37.
We expect SAC, as adjusted, per gross subscriber addition to decline as the costs of
subsidized components of XM radios decrease in the future. Our SAC, as adjusted, per gross
subscriber addition will continue to be impacted by changes in our mix of OEM and retail additions.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the three
months ended December 31, 2009 and 2008, customer service and billing expenses, as adjusted, per
weighted average subscriber was $1.11 and $1.20, respectively. The decrease was primarily due to
decreases in personnel costs and customer call center expenses.
We expect customer service and billing expenses, as adjusted, per average subscriber to
decrease on an annual basis as our subscriber base grows due to scale efficiencies in our call
centers and other customer care and billing operations.
Adjusted Income (Loss) from Operations. For the three months ended December 31, 2009 and 2008,
our adjusted income from operations was $137,587 and $66,015, respectively, an increase of $71,572.
The increase was primarily driven by improvements in operating expense areas, excluding
restructuring, impairments and related cost, depreciation and amortization, impairment of goodwill
and share-based payment expense, totaling $24,321 and an increase in total revenue of $47,251.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Beginning subscribers |
|
|
9,850,741 |
|
|
|
9,026,837 |
|
|
|
7,628,552 |
|
Gross subscriber additions |
|
|
3,184,559 |
|
|
|
3,956,653 |
|
|
|
3,893,773 |
|
Deactivated subscribers |
|
|
(3,286,200 |
) |
|
|
(3,132,749 |
) |
|
|
(2,495,488 |
) |
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
1,398,285 |
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
9,026,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
3,659,504 |
|
|
|
4,319,632 |
|
|
|
4,598,006 |
|
OEM |
|
|
5,988,148 |
|
|
|
5,442,724 |
|
|
|
4,367,636 |
|
Rental |
|
|
101,448 |
|
|
|
88,385 |
|
|
|
61,195 |
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
9,026,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(660,128 |
) |
|
|
(278,374 |
) |
|
|
192,560 |
|
OEM |
|
|
545,424 |
|
|
|
1,075,088 |
|
|
|
1,154,100 |
|
Rental |
|
|
13,063 |
|
|
|
27,190 |
|
|
|
51,625 |
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
1,398,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
9,040,022 |
|
|
|
9,095,579 |
|
|
|
8,188,282 |
|
Paid promotional |
|
|
709,078 |
|
|
|
755,162 |
|
|
|
838,555 |
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
9,749,100 |
|
|
|
9,850,741 |
|
|
|
9,026,837 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
(55,557 |
) |
|
|
907,297 |
|
|
|
1,120,258 |
|
Paid promotional |
|
|
(46,084 |
) |
|
|
(83,393 |
) |
|
|
278,027 |
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
(101,641 |
) |
|
|
823,904 |
|
|
|
1,398,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
|
|
8,256,659 |
|
|
|
|
|
|
|
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.7 |
% |
|
|
1.8 |
% |
Conversion rate (2)(7) |
|
|
47.6 |
% |
|
|
50.7 |
% |
|
|
52.7 |
% |
ARPU (7)(21) |
|
$ |
10.41 |
|
|
$ |
10.24 |
|
|
$ |
10.83 |
|
SAC, as adjusted, per gross subscriber addition (7)(22) |
|
$ |
35 |
|
|
$ |
60 |
|
|
$ |
73 |
|
Customer service and billing expenses, as adjusted,
per average
subscriber (7)(23) |
|
$ |
1.10 |
|
|
$ |
1.22 |
|
|
$ |
1.25 |
|
Total revenue |
|
$ |
1,297,341 |
|
|
$ |
1,242,348 |
|
|
$ |
1,136,542 |
|
Free cash flow (7)(24) |
|
$ |
219,368 |
|
|
$ |
(288,112 |
) |
|
$ |
(286,245 |
) |
Adjusted income (loss) from operations (25) |
|
$ |
455,569 |
|
|
$ |
(18,727 |
) |
|
$ |
(238,042 |
) |
Net loss |
|
$ |
(246,830 |
) |
|
$ |
(6,760,643 |
) |
|
$ |
(682,381 |
) |
Subscribers. At December 31, 2009, we had 9,749,100 subscribers, a decrease of 101,641
subscribers, or 1%, from the 9,850,741 subscribers as of December 31, 2008. The decrease was
principally the result of 46,084 fewer paid promotional trials due to the decline in North American
auto sales and 55,557 fewer self-pay subscribers compared to December 31, 2008. Deactivation rates
for self-pay subscriptions in the year increased to 2.0% per month reflecting reductions in
consumer discretionary spending, subscriber response to our increase in prices for
multi-subscription accounts, channel line-up changes in 2008, the institution of a monthly charge
for our streaming service and the introduction of the U.S. Music Royalty Fee.
We ended 2008 with 9,850,741 subscribers, an increase of 823,904 subscribers, or 9%. Since
December 31, 2007, 278,374 net retail subscribers deactivated and 1,075,088 net OEM subscribers
activated, resulting in a decrease of 6% and an increase of 25% in retail and OEM subscribers,
respectively. Gross additions in our OEM channel continued to grow as automakers continued to
increase the portion of their vehicles which incorporates satellite radio.
ARPU. For the years ended December 31, 2009 and 2008, total ARPU was $10.41 and $10.24,
respectively. The increase was driven by the revenue earned for Best of programming, increased
rates on multi-subscription packages and internet subscriptions.
For the years ended December 31, 2008 and 2007, total ARPU was $10.24 and $10.83,
respectively. The decrease was driven by an increase in the mix of discounted OEM promotional
trials, subscriber win-back programs, second subscribers, the effects of purchase price accounting
adjustments and subscriber growth exceeding the growth in advertising revenues.
We expect ARPU to fluctuate based
on the growth of our subscriber base, promotions, rebates offered to subscribers and corresponding
take-rates, plan mix, subscription prices, advertising sales and the identification of additional
revenue from subscribers.
SAC, As Adjusted, Per Gross Subscriber Addition. For the years ended December 31, 2009 and
2008, SAC, as adjusted, per gross subscriber addition was $35 and $60, respectively. The decrease
was primarily driven by the effect of purchase price accounting adjustments, lower aftermarket
inventory charges, fewer OEM installations relative to gross subscriber additions and lower OEM
subsidies.
For the years ended December 31, 2008 and 2007, SAC, as adjusted, per gross subscriber
addition was $60 and $73, respectively. The decrease was primarily driven by the effect of purchase
price accounting adjustments and improved equipment margin.
We expect SAC, as adjusted, per gross subscriber addition to decline as the costs of
subsidized components of XM radios decrease in the future. Our SAC, as adjusted, per gross
subscriber addition will continue to be impacted by changes in our mix of OEM and retail additions.
Customer Service and Billing Expenses, As Adjusted, Per Average Subscriber. For the years
ended December 31, 2009 and 2008, customer service and billing expenses, as adjusted, per weighted
average subscriber was $1.10 and $1.22, respectively. The decline was primarily due to decreases in
personnel costs and customer call center expenses.
For the years ended December 31, 2008 and 2007, Customer service and billing expenses, as
adjusted, per average subscriber was $1.22 and $1.25, respectively. The decrease was
primarily due to efficiencies across a larger subscriber base.
We expect customer service and billing expenses, as adjusted, per average subscriber to
decrease on an annual basis as our subscriber base grows due to scale efficiencies in our call
centers and other customer care and billing operations.
Adjusted Income (Loss) from Operations. For the years ended December 31, 2009 and 2008, our
adjusted income from operations was $455,569 and ($18,727), respectively, an increase of $474,296.
The increase was primarily driven by improvements in operating expense areas, excluding
restructuring, impairments and related cost, depreciation and amortization, impairment of goodwill
and share-based payment expense, totaling $419,303 and an increase in total revenue of $54,993.
30
For the years ended December 31, 2008 and 2007, adjusted income (loss) from operations was
($18,727) and ($238,042), respectively, a decrease of $219,315. The decrease was primarily driven
by an increase in subscriber revenue of $107,506 as a result of a 9% increase in our subscriber
base, a net benefit from the effect of purchase price accounting adjustments of $60,096 and
improvements in subscriber acquisition costs and general and administrative expenses of $20,195 and
$24,808, respectively.
Results of Operations
Set forth below are our actual results of operations for the three months ended December 31,
2009 and 2008 and three years ended December 31, 2009, 2008 and 2007. As a result of the
consummation of the Merger, the financial results have been presented separately for Predecessor
Entity period January 1, 2008 through July 31, 2008, and for the Successor Entity period August
31, 2008 through December 31, 2008. For comparative purposes, we combined the Predecessor Entity
and Successor Entity periods in our discussions below, as we believe this combination is useful
to provide the reader a more accurate comparison. This combination is not a GAAP measure and it is
provided to enhance the readers understanding of the results of operations for the periods
presented. See footnote 26 (page 56) for more details on this combination. See footnote 20 (pages
52 to 53) and footnote 25 (pages 54 to 55) for a reconciliation of net income (loss) to adjusted
income (loss) from operations.
31
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
307,365 |
|
|
$ |
289,424 |
|
Advertising revenue, net of agency fees |
|
|
5,232 |
|
|
|
4,845 |
|
Equipment revenue |
|
|
11,892 |
|
|
|
15,640 |
|
Other revenue |
|
|
38,313 |
|
|
|
5,642 |
|
|
|
|
|
|
|
|
Total revenue |
|
|
362,802 |
|
|
|
315,551 |
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
13,498 |
|
|
|
17,394 |
|
Programming and content |
|
|
22,505 |
|
|
|
29,575 |
|
Revenue share and royalties |
|
|
44,358 |
|
|
|
52,593 |
|
Customer service and billing |
|
|
32,551 |
|
|
|
35,948 |
|
Cost of equipment |
|
|
4,126 |
|
|
|
7,279 |
|
Sales and marketing |
|
|
43,782 |
|
|
|
47,153 |
|
Subscriber acquisition costs |
|
|
40,871 |
|
|
|
37,383 |
|
General and administrative |
|
|
21,807 |
|
|
|
28,107 |
|
Engineering, design and development |
|
|
4,873 |
|
|
|
6,467 |
|
Impairment of goodwill |
|
|
|
|
|
|
1,574,208 |
|
Depreciation and amortization |
|
|
45,319 |
|
|
|
59,690 |
|
Restructuring, impairments and related costs |
|
|
2,640 |
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
276,330 |
|
|
|
1,895,797 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
86,472 |
|
|
|
(1,580,246 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
789 |
|
|
|
(667 |
) |
Interest expense, net of amounts capitalized |
|
|
(62,910 |
) |
|
|
(59,357 |
) |
Gain (loss) on change in value of embedded derivatives |
|
|
78,169 |
|
|
|
80,124 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
(4,021 |
) |
|
|
|
|
Loss on investments |
|
|
(366 |
) |
|
|
(22,673 |
) |
Other income (expense) |
|
|
897 |
|
|
|
(1,052 |
) |
|
|
|
|
|
|
|
Total other income (expense) |
|
|
12,558 |
|
|
|
(3,625 |
) |
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
99,030 |
|
|
|
(1,583,871 |
) |
Income tax expense |
|
|
(729 |
) |
|
|
(291 |
) |
|
|
|
|
|
|
|
Net income (loss) |
|
|
98,301 |
|
|
|
(1,584,162 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
98,301 |
|
|
$ |
(1,584,162 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
306 |
|
|
$ |
712 |
|
Programming and content |
|
|
(758 |
) |
|
|
1,191 |
|
Customer service and billing |
|
|
324 |
|
|
|
499 |
|
Sales and marketing |
|
|
(84 |
) |
|
|
1,030 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
General and administrative |
|
|
2,459 |
|
|
|
7,851 |
|
Engineering, design and development |
|
|
909 |
|
|
|
1,080 |
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
3,156 |
|
|
$ |
12,363 |
|
|
|
|
|
|
|
|
Highlights for the Three Months Ended December 31, 2009. Our revenue grew 15%, or $47,251, in
the three months ended December 31, 2009 compared to 2008. Subscriber revenue increased 6%, or
$17,941, in the three months ended December 31, 2009
compared to 2008. The increase in subscriber revenue was driven by the sale of Best of
programming and the rate increases to our multi-subscription and internet packages. Advertising
revenue increased 8%, or $387, in the three months ended December 31, 2009 compared to 2008.
Equipment revenue decreased 24%, or $3,748, in the three months ended December 31,
32
2009 compared to
2008. The decrease in equipment revenue was driven by a decrease in aftermarket manufacturing
revenues and fewer component sales compared to the three months ended December 31, 2008. Other
revenue increased 579%, or $32,671, in the three months ended December 31, 2009 compared to 2008.
The increase in other revenue was driven by the U.S. Music Royalty Fee introduced in the third
quarter of 2009. The overall increase in revenue, combined with a decrease of 10%, or $24,321, in
adjusted operating costs (total operating expense excluding restructuring, impairments and related
costs, depreciation and amortization, impairment of goodwill and share-based payment expense),
resulted in improved adjusted income from operations of $137,587 in the three months ended December
31, 2009 compared to $66,015 in 2008.
Satellite and transmission costs decreased 22%, or $3,896, in the three months ended December
31, 2009 compared to 2008 due to reductions in maintenance costs and personnel costs. Programming
and content costs decreased 24%, or $7,070, in the three months ended December 31, 2009 compared to
2008, due mainly to reductions in personnel and on-air talent costs as well as savings on content
agreements. Revenue share and royalties decreased 16%, or $8,235, primarily due to decreases in our
royalties due to certain automakers, partially offset by an increase in the statutory royalty rate
for the performance of sound recordings. Customer service and billing costs decreased 9%, or
$3,397, in the three months ended December 31, 2009 compared to 2008 primarily due to decreases in
personnel costs and customer call center expenses. Cost of
equipment decreased 43%, or $3,153, in the three months ended December 31, 2009 as a result of a
decrease in inventory write-downs, fewer component sales, and lower average cost per units sold.
Sales and marketing costs decreased 7%, or $3,371, in the three months ended December 31, 2009
compared to 2008 due to reduced advertising and cooperative marketing spend, as well as reductions
to personnel costs and third party distribution support expenses. Subscriber acquisition costs
increased 9%, or $3,488, in the three months ended December 31, 2009 compared to 2008. This
increase was driven by onetime aftermarket product related charges partially offset by fewer OEM
installations relative to gross subscriber additions and lower OEM subsidies.
General and administrative costs decreased 22%, or $6,300, mainly due to the absence of
certain legal and regulatory costs incurred in 2008 and lower personnel costs. Engineering, design
and development costs decreased 25%, or $1,594, in the three months ended December 31, 2009
compared to 2008, due to lower costs associated with development, tooling and testing of radios as
well as lower personnel costs.
Restructuring, impairments and related costs were $2,640 mainly due to charges related to
compensation incurred as part of the Merger integration.
Other expenses decreased 446%, or $16,183, in the three months ended December 31, 2009
compared to 2008 driven mainly by a decrease of $22,307 in loss on investments, partially offset by
an increase of $3,553 in interest expense and a decrease of $1,955 in gain on change in value of
embedded derivative.
33
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Years Ended December 31, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,191,403 |
|
|
$ |
1,143,327 |
|
|
$ |
1,033,776 |
|
Advertising revenue, net of agency fees |
|
|
18,708 |
|
|
|
32,753 |
|
|
|
39,148 |
|
Equipment revenue |
|
|
29,574 |
|
|
|
32,388 |
|
|
|
28,333 |
|
Other revenue |
|
|
57,656 |
|
|
|
33,880 |
|
|
|
35,285 |
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,297,341 |
|
|
|
1,242,348 |
|
|
|
1,136,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
50,450 |
|
|
|
76,418 |
|
|
|
81,036 |
|
Programming and content |
|
|
106,858 |
|
|
|
164,777 |
|
|
|
183,900 |
|
Revenue share and royalties |
|
|
187,355 |
|
|
|
257,738 |
|
|
|
256,344 |
|
Customer service and billing |
|
|
128,719 |
|
|
|
142,714 |
|
|
|
126,776 |
|
Cost of equipment |
|
|
16,175 |
|
|
|
32,312 |
|
|
|
62,003 |
|
Sales and marketing |
|
|
128,347 |
|
|
|
202,158 |
|
|
|
269,930 |
|
Subscriber acquisition costs |
|
|
124,395 |
|
|
|
238,948 |
|
|
|
259,143 |
|
General and administrative |
|
|
113,497 |
|
|
|
163,766 |
|
|
|
188,574 |
|
Engineering, design and development |
|
|
21,671 |
|
|
|
34,703 |
|
|
|
33,077 |
|
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
183,059 |
|
|
|
187,196 |
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,101,502 |
|
|
|
8,097,639 |
|
|
|
1,647,979 |
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
195,839 |
|
|
|
(6,855,291 |
) |
|
|
(511,437 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,637 |
|
|
|
6,309 |
|
|
|
14,084 |
|
Interest expense, net of amounts capitalized |
|
|
(289,845 |
) |
|
|
(181,092 |
) |
|
|
(116,605 |
) |
Gain (loss) on change in value of embedded derivatives |
|
|
(33,534 |
) |
|
|
322,347 |
|
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
(115,884 |
) |
|
|
|
|
|
|
(3,693 |
) |
Loss on investments |
|
|
(7,026 |
) |
|
|
(38,772 |
) |
|
|
(56,156 |
) |
Other income (expense) |
|
|
3,446 |
|
|
|
(4,226 |
) |
|
|
2,019 |
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(440,206 |
) |
|
|
104,566 |
|
|
|
(160,351 |
) |
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(244,367 |
) |
|
|
(6,750,725 |
) |
|
|
(671,788 |
) |
Income tax (expense) benefit |
|
|
(2,463 |
) |
|
|
(2,475 |
) |
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(246,830 |
) |
|
|
(6,753,200 |
) |
|
|
(670,849 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
(7,443 |
) |
|
|
(11,532 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(246,830 |
) |
|
$ |
(6,760,643 |
) |
|
$ |
(682,381 |
) |
|
|
|
|
|
|
|
|
|
|
34
Year Ended December 31, 2009 Compared with Year Ended December 31, 2008 and Year Ended December 31,
2008 Compared with Year Ended December 31, 2007
Total Revenue
Subscriber Revenue. Subscriber revenue includes subscription fees, activation and other fees
and the effects of rebates.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, subscriber revenue was
$1,191,403 and $1,143,327, respectively, an increase of 4%, or $48,076. The increase was
attributable to the sale of Best of programming, increased internet and
multi-subscription rates and higher average subscribers, offset partially by the effect
from purchase price accounting adjustments. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, subscriber revenue was
$1,143,327 and $1,033,776, respectively, an increase of 11%, or $109,551. The increase was
attributable to the 9% growth of subscribers to our service in 2008. |
The following table contains a breakdown of our subscriber revenue for the periods presented
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
|
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
|
|
|
|
Year Ended |
|
|
Through |
|
|
|
Through |
|
|
Year Ended |
|
|
|
December 31, |
|
|
December 31, |
|
|
|
July 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Subscription fees |
|
$ |
1,188,195 |
|
|
$ |
472,800 |
|
|
|
$ |
659,775 |
|
|
$ |
1,016,720 |
|
Activation fees |
|
|
3,488 |
|
|
|
319 |
|
|
|
|
11,855 |
|
|
|
19,354 |
|
Effect of rebates |
|
|
(280 |
) |
|
|
(662 |
) |
|
|
|
(760 |
) |
|
|
(2,298 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber revenue |
|
$ |
1,191,403 |
|
|
$ |
472,457 |
|
|
|
$ |
670,870 |
|
|
$ |
1,033,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Future subscriber revenue will be dependent upon, among other things, the growth of our
subscriber base, promotions, rebates offered to subscribers and corresponding take-rates, plan mix,
subscription prices and the identification of additional revenue streams from subscribers.
Advertising Revenue. Advertising revenue includes the sale of advertising on our non-music
channels, net of agency fees. Agency fees are based on a contractual rate applied to gross billing
revenue.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, net advertising revenue
was $18,708 and $32,753, respectively, which represents a decrease of 43%, or $14,045. The
decrease was driven by the current economic environment. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, net advertising revenue
was $32,753 and $39,148, respectively, which represents a decrease of 16%, or $6,395. The
decrease was driven by lower advertising spot sales compared to 2007. |
Our advertising revenue is subject to fluctuation based on the national economic environment.
We believe general economic conditions have negatively affected our advertising revenue in recent
quarters. We expect advertising revenue to grow as our subscribers increase, as the economy
improves and as we increase the size and effectiveness of our advertising sales force.
Equipment Revenue. Equipment revenue includes revenue and royalties from the sale of radios,
components and accessories.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, equipment revenue was
$29,574 and $32,388, respectively, a decrease of 9%, or $2,814. The decrease was primarily
due to a decrease in the number of radios sold through our direct to consumer distribution
channel and fewer component sales. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, equipment revenue was
$32,388 and $28,333, respectively, an increase of 14%, or $4,055. The increase was
primarily due to an increase in royalties partially offset by a decrease in the number of
radios sold through our direct to consumer distribution channel. |
We expect equipment revenue to increase as we introduce new products and as sales grow through
our direct to consumer distribution channel.
Other Revenue. Other revenue consists primarily of U.S. Music Royalty Fees, revenue related to
various agreements with XM Canada, as well as other miscellaneous revenue that includes content
licensing fees, technology licensing fees and billing fees.
35
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, other revenue was $57,656
and $33,880, respectively, an increase of 70%, or $23,776. The increase was primarily due
to the U.S. Music Royalty Fee introduced in the third quarter of 2009. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, other revenue was $33,880
and $35,285, respectively, a decrease of 4%, or $1,405. |
Future other revenue will be dependent upon, among other things, the growth of subscriber
base, new content and technology agreements and the development of other sources of revenue.
Operating Expenses
Satellite and Transmission. Satellite and transmission expenses consist of costs associated
with the operation and maintenance of our satellites; satellite telemetry, tracking and control
system; terrestrial repeater network; satellite uplink facility; and broadcast studios.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, satellite and
transmission expenses were $50,450 and $76,418, respectively, a decrease of 34%, or
$25,968. The decrease was primarily due to lower maintenance and repeater network expenses
as well as lower personnel costs. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, satellite and
transmission expenses were $76,418 and $81,036, respectively, a decrease of 6%, or $4,618.
As of December 31, 2008 and 2007, we had over 700 terrestrial repeaters in operation.
Satellite and transmission expense decreased compared to December 31, 2007 primarily as a
result of decreased terrestrial repeater network costs. |
We expect satellite and transmission expenses, excluding share-based payment expense, to
increase as we add to our in-orbit satellite fleet.
Programming and Content. Programming and content expenses include 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 the
advertising is broadcast.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, programming and content
expenses were $106,858 and $164,777, respectively, a decrease of 35%, or $57,919. The
decrease was primarily attributable to the lower costs recognized subsequent to the Merger
due to the impact of purchase price accounting adjustments, reductions in personnel and
on-air talent costs, as well as savings on various content agreements. |
|
|
|
2008 vs. 2007:For the years ended December 31, 2008 and 2007, programming and content
expenses were $164,777 and $183,900, respectively, a decrease of 10%, or $19,123. The
decrease was primarily attributable to the lower costs recognized subsequent to the Merger
due to the impact of purchase price accounting adjustments. |
Our programming and content expenses, excluding share-based payment expenses, are expected to
decrease as a result of the Merger, as we reduce duplicate programming and content costs.
Revenue Share and Royalties. 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 radios purchased from retailers. Advertising
revenue share is recorded to revenue share and royalties in the period the advertising is
broadcast.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, revenue share and
royalties were $187,355 and $257,738, respectively, a decrease of 27% or $70,383. This
decrease was primarily attributable to the effect of purchase price accounting, offset by
an increase in our revenues and an increase in the statutory royalty rate due for the
performance of sound recordings. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, revenue share and
royalties were $257,738 and $256,344, respectively, an increase of 1%, or $1,394. This
increase was primarily attributable to the determination of the royalty rate under the
statutory license covering the performance of sound recordings by the Copyright Royalty
Board; and a 11% growth in our subscription revenue. |
We expect these costs to increase as our revenues grow, as we expand our distribution of
radios through automakers and retailers, and as a result of increases in the royalty for the
performance of sound recordings.
Customer Service and Billing. Customer service and billing expenses include costs associated
with the operation of third party customer service centers and our subscriber management system as
well as bad debt expense.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, customer service and
billing expenses were $128,719 and $142,714, respectively, a decrease of 10%, or $13,995.
The decrease was primarily due to decreases in personnel costs and customer call center
expenses. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, customer service and
billing expenses were $142,714 and $126,776, respectively, an increase of 13%, or $15,938.
This increase was primarily due to higher call center operating costs necessary to
accommodate the increase in our subscriber base and higher total transaction fees on the
larger customer base. |
36
We expect our customer care and billing expenses to decrease on a per subscriber basis, but
increase overall as our subscriber base grows due to increased call center operating costs,
transaction fees and bad debt expense.
Cost of Equipment. Cost of equipment includes costs from the sale of our radios, components
and accessories.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, cost of equipment was
$16,175 and $32,312, respectively, a decrease of 50%, or $16,137. The decrease was
primarily attributed to fewer radios sold through our direct to consumer distribution
channel, lower inventory related charges for obsolescence, and lower component sales. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, cost of equipment was
$32,312 and $62,003, respectively, a decrease of 48%, or $29,691. The decrease was
primarily attributed to fewer radios sold through our direct to consumer distribution
channel and lower inventory related charges for obsolescence. |
We expect cost of equipment to vary in the future with changes in sales through our direct to
consumer distribution channel.
Sales and Marketing. Sales and marketing expenses include costs for advertising, media and
production, including promotional events and sponsorships; cooperative marketing; customer
retention and compensation. Cooperative marketing costs include fixed and variable payments to
reimburse retailers and automakers for the cost of advertising and other product awareness
activities.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, sales and marketing
expenses were $128,347 and $202,158, respectively, a decrease of 37%, or $73,811. This
decrease was primarily attributable to lower consumer advertising, reduced cooperative
marketing spend with our distributors, reduced personnel costs and the effect of purchase
price accounting. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, sales and marketing
expenses were $202,158 and $269,930, respectively, a decrease of 25%, or $67,772. This
decrease was primarily attributable to lower consumer advertising and reduced cooperative
marketing spend with our distributors. |
We expect sales and marketing expenses, excluding share-based payment expense, to decrease as
we consolidate our advertising and promotional activities with SIRIUS, gain efficiencies in
marketing management and eliminate overlapping distribution support costs.
Subscriber Acquisition Costs. Subscriber acquisition costs include hardware subsidies paid to
radio manufacturers, distributors and automakers, including subsidies paid to automakers who
include our radio and a prepaid subscription to our service in the sale or lease price of a new
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 our radios; product warranty obligations; and compensation costs
associated with stock-based awards granted in connection with certain distribution agreements. The
majority of subscriber acquisition costs are incurred and expensed in advance or concurrent with
acquiring a subscriber. Subscriber acquisition costs do not include advertising, loyalty payments
to distributors and dealers of our radios and revenue share payments to automakers and retailers of
our radios.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, subscriber acquisition
costs were $124,395 and $238,948, respectively, a decrease of 48%, or $114,553. This
decrease was primarily driven by purchase price accounting adjustments associated with the
Merger, lower aftermarket inventory charges, lower retail and OEM subsidies due to better
product economics and fewer OEM installations due to the weakening automotive market. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, subscriber acquisition
costs were $238,948 and $259,143, respectively, a decrease of 8%, or $20,195. This decrease
was primarily driven by purchase price accounting adjustments associated with the Merger,
along with lower retail and OEM subsidies due to better product economics. |
We expect total subscriber acquisition costs to fluctuate as increases or decreases in our
gross subscriber additions are accompanied by continuing declines in the costs of subsidized
components of our radios. We intend to continue to offer subsidies, commissions and other
incentives to acquire subscribers.
37
General and Administrative. General and administrative expenses include rent and occupancy,
finance, legal, human resources, information technology and investor relations costs.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, general and
administrative expenses were $113,497 and $163,766, respectively, a decrease of 31%, or
$50,269. This decrease was the result of lower costs for certain Merger, litigation and
regulatory matters. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, general and
administrative expenses were $163,766 and $188,574, respectively, a decrease of 13% or
$24,808. This decrease was the result of increased costs in 2007, including increased
compensation costs and increased legal fees associated with regulatory inquiries. |
We expect total general and administrative expenses, excluding share-based payment expense, to
decrease in future periods as we gain efficiencies in staff, facilities, and information technology
costs.
Engineering, Design and Development. Engineering, design and development expenses include
costs to develop our future generation of chip sets and new products, research and development for
broadcast information systems and costs associated with the incorporation of radios into vehicles
manufactured by automakers.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, engineering, design and
development expenses were $21,671 and $34,703, respectively, a decrease of 38%, or $13,032.
This decrease was primarily attributable to reduced development, tooling and testing of
radios as well as lower personnel costs. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, engineering, design and
development expenses were $34,703 and $33,077, respectively, an increase of 5%, or $1,626.
This increase was primarily attributable to increased OEM and product development costs. |
We expect engineering, design and development expenses, excluding share-based payment expense,
to increase in future periods as we increase development of our next generation chip sets.
Other Income (Expense)
Interest and Investment Income. Interest and investment income includes realized gains and
losses, dividends and interest income, including amortization of the premium and discount arising
at purchase.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, interest and investment
income was $2,637 and $6,309, respectively, a decrease of 58%, or $3,672. The decrease was
primarily attributable to a lower average cash balance and lower interest rates in 2009. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, interest and investment
income was $6,309 and $14,084, respectively, a decrease of 55%, or $7,775. The decrease was
primarily attributable to lower interest rates in 2008 and a lower cash balance. |
Interest Expense. Interest expense includes interest on outstanding debt, reduced by interest
capitalized in connection with the construction of our new satellite and launch vehicle.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, interest expense was
$289,845 and $181,092, respectively, an increase of 60%, or $108,753. Interest expense
increased significantly due to the additional debt issuances in July and August 2008 as a
result of the Merger, the financing transactions in February and March 2009, and the impact
of the purchase price adjustments which set the existing debt at fair value and caused
interest expense to increase. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, interest expense was
$181,092 and $116,605, respectively, an increase of 55%, or $64,487. Interest expense
increased significantly due to the additional debt issuances in July and August 2008 as a
result of the Merger, as well as the impact of the purchase price adjustments which set the
existing debt at fair value and caused interest expense to increase. The increase in our
interest expense was partially offset by the capitalized interest associated with satellite
construction and the related launch vehicle. |
We expect interest expense to increase as a result of changes in the GAAP recognition and
reporting requirements for share lending arrangements which were adopted as of January 1, 2010.
EITF No. 09-1 will require us to recognize an aggregate increase of $257,000 in deferred financing
costs associated with our 7% Exchangeable Senior Subordinated Notes due 2014, which will be
amortized to interest expense over the six year life of the notes under the effective interest
method.
38
Gain (loss) on change in value of embedded derivative. We are required to account for the
conversion feature of our exchangeable debt, which is exchangeable into SIRIUS common stock,
separately and recognize the changes in the fair value of these embedded derivatives in earnings.
The fair value of the derivative will be impacted by the value of the underlying SIRIUS common
shares.
|
|
|
2009 vs. 2008: For the year ended December 31, 2009, we recorded a loss on change in
value of embedded derivative of $33,534, and for the year ended December 31, 2008, we
recorded a gain on change in value of embedded derivative of $322,347. As a result of the
Merger, we recorded derivative liabilities reflecting the fair value of the embedded
derivative as of the Merger date. Subsequent to July 28, 2008, the SIRIUS stock price
decreased significantly resulting in a decreased fair value and a gain on the change in
value of the derivative. During the year ended December 31, 2009, the SIRIUS stock price
increased resulting in an increased fair value and a loss on the change in value of the
derivative. |
|
|
|
2008 vs. 2007: For the year ended December 31, 2008, we recorded a gain on change in
value of embedded derivative of $322,347. As a result of the Merger, we recorded derivative
liabilities reflecting the fair value of the embedded derivative as of the Merger date.
Subsequent to July 28, 2008, the SIRIUS stock price decreased significantly resulting in a
decreased fair value and a gain on the change in value of the derivative. |
Loss on extinguishment of debt and credit facilities, net. Loss on extinguishment of debt and
credit facilities, net includes losses incurred as a result of the conversion of certain of our
debt instruments.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, Loss on extinguishment of
debt and credit facilities, net was $115,884 and $0, respectively. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, Loss on extinguishment of
debt and credit facilities, net was $0 and $3,693, respectively. |
Gain (loss) on investments. Gain (loss) on investments includes our share of XM Canadas net
losses and losses recorded from our investment in XM Canada when the decrease in fair value was
determined to be other than temporary.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, loss on investments was
$7,026 and $38,772, respectively, a decrease of 82%, or $31,746. The decrease was primarily
attributable to the inclusion of our share of XM Canadas net income for the year ended
December 31, 2009, net of impairments versus our share of XM Canadas net loss for the year
ended December 31, 2008, net of impairments. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, loss on investments was
$38,772 and $56,156, respectively, a decrease of 31%, or $17,384. |
Income Taxes
Income Tax Expense. Income tax expense primarily represents the recognition of a deferred tax
liability related to the difference in accounting for our FCC license and trade name, which is
amortized over 15 years for tax purposes but not amortized for book purposes in accordance with
GAAP.
|
|
|
2009 vs. 2008: For the years ended December 31, 2009 and 2008, income tax expense was
$2,463 and $2,475, respectively. |
|
|
|
2008 vs. 2007: For the years ended December 31, 2008 and 2007, income tax expense
(benefit) was $2,475 and ($939), respectively. |
Liquidity and Capital Resources
Cash Flows for the Year Ended December 31, 2009 Compared with the Year Ended December 31, 2008 and
Year Ended December 31, 2008 Compared with the Year Ended December 31, 2007
As of December 31, 2009 and 2008, we had $212,155 and $206,740, 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
Combined |
|
|
Predecessor Entity |
|
|
|
|
|
|
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
Year Ended |
|
|
|
|
|
|
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
December 31, |
|
|
|
|
|
|
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2008 |
|
|
2007 |
|
|
2009 vs. 2008 |
|
|
2008 vs. 2007 |
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
$ |
272,833 |
|
|
$ |
7,239 |
|
|
|
$ |
(251,086 |
) |
|
$ |
(243,847 |
) |
|
$ |
(154,730 |
) |
|
$ |
516,680 |
|
|
$ |
(89,117 |
) |
Net cash (used in) provided by investing activities |
|
|
(53,465 |
) |
|
|
11,953 |
|
|
|
|
(65,668 |
) |
|
|
(53,715 |
) |
|
|
(131,515 |
) |
|
|
250 |
|
|
|
77,800 |
|
Net cash (used in) provided by financing activities |
|
|
(213,953 |
) |
|
|
(631,973 |
) |
|
|
|
979,589 |
|
|
|
347,616 |
|
|
|
224,715 |
|
|
|
(561,569 |
) |
|
|
122,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
|
|
5,415 |
|
|
|
(612,781 |
) |
|
|
|
662,835 |
|
|
|
50,054 |
|
|
|
(61,530 |
) |
|
|
(44,639 |
) |
|
|
111,584 |
|
Cash and cash equivalents at beginning of period |
|
|
206,740 |
|
|
|
819,521 |
|
|
|
|
156,686 |
|
|
|
156,686 |
|
|
|
218,216 |
|
|
|
50,054 |
|
|
|
(61,530 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
212,155 |
|
|
$ |
206,740 |
|
|
|
$ |
819,521 |
|
|
$ |
206,740 |
|
|
$ |
156,686 |
|
|
$ |
5,415 |
|
|
$ |
50,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
Cash Flows Provided by (Used in) Operating Activities
|
|
|
2009 vs. 2008: Net cash provided by operating activities increased $516,680 to $272,833
for the year ended December 31, 2009 from net cash used in operating activities of $243,847
for the year ended December 31, 2008. The increase was primarily the result of a decreased
net loss, net of non-cash operating activities of $283,606, and a decrease in cash used in
other operating assets and liabilities of $233,074. |
|
|
|
2008 vs. 2007: Net cash used in operating activities for the year ended December 31,
2008 was $243,847, consisting of a net loss of $6,760,643 adjusted for net non-cash
expenses of $6,536,177 and $19,381 used in working capital as well as other operating
activities. For the year ended December 31, 2007, the net cash used in operating activities
was $154,730. The increase in the net cash used in operating activities was primarily
attributable to a $120,000 escrow payment made to a programming partner during 2008. |
Cash Flows (Used in) Provided by Investing Activities
|
|
|
2009 vs. 2008: Net cash used in investing activities decreased $250 to $53,465 for the
year ended December 31, 2009 from $53,715 for the year ended December 31, 2008. |
|
|
|
2008 vs. 2007: Net cash used in investing activities was $53,715, consisting of $44,290
in capital expenditures for the year ended December 31, 2008 compared with net cash used in
investing activities of $131,515 for the year ended December 31, 2007. The $77,800 decrease
was primarily a result of a decrease in capital expenditures of $89,048 offset by other
investing activities. |
We will incur significant capital expenditures to construct and launch our new satellite and
improve our terrestrial repeater network and broadcast and administrative infrastructure. These
capital expenditures will support our growth and the resiliency of our operations, and will also
support the delivery of future new revenue streams.
Cash Flows (Used in) Provided by Financing Activities
|
|
|
2009 vs. 2008: Net cash used in financing activities increased $561,569 to $213,953 for
the year ended December 31, 2009 from net cash provided by financing activities of $347,616
for the year ended December 31, 2008. The increase in cash used in financing activities was
primarily due to a decrease of $1,072,716 in net proceeds from the issuance of debt, offset
partially by a decrease in debt payment of $439,258 and a decrease of $68,777 in payments
to a noncontrolling interest. |
|
|
|
2008 vs. 2007: Net cash provided by financing activities was $347,616, consisting of
$1,554,933 of net proceeds from long-term borrowings offset partially by repayments of
long-term borrowings of $1,118,353 for the year ended December 31, 2008. Net cash provided
by financing activities was $224,715 for the year ended December 31, 2007. The increase of
$122,901 was primarily due to the proceeds received from Merger-related debt issuances
during July and August 2008, offset by debt extinguishments in August and September 2008. |
Financings and Capital Requirements
We have historically financed our operations through the sale of debt and equity securities.
The Certificate of Designations for SIRIUS Series B Preferred Stock provides that so long as
Liberty beneficially owns at least half of its initial equity investment, we need the consent of
Liberty for certain actions, including the grant or issuance of SIRIUS equity securities and the
incurrence of debt (other than, in general, debt incurred to refinance existing debt) in amounts
greater than a stated threshold.
Future Liquidity and Capital Resource Requirements
The 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.
We operate as unrestricted subsidiaries under the agreements governing SIRIUS existing
indebtedness. Under certain circumstances, SIRIUS may be unwilling or unable to contribute or loan
us capital to support our operations. To the extent our funds are insufficient to support our
business, we may be required to seek additional financing, which may not be available on favorable
terms, or at all. If we are unable to secure additional financing, our business and results of
operations may be adversely affected.
We regularly evaluate our plans and strategy. These evaluations often result in changes to our
plans and strategy, some of which may be material and significantly change our cash requirements.
These changes in our 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 will also be affected by the FCC order approving the Merger which
imposed certain conditions upon, among other things, our ability to increase prices.
40
Off-Balance Sheet Arrangements
We are required under the terms of certain agreements to deposit monies in escrow, which place
restrictions on our cash and cash equivalents. As of December 31, 2008, $120,000 was classified as
restricted investments as a result of obligations under escrow deposits. In February 2009, we
released to a programming provider $120,000 held in escrow in satisfaction of future obligations
under our agreement with them.
We do not have any significant off-balance sheet arrangements other than those disclosed in
Note 14 to our consolidated financial statements in Item 8 of this Form 10-K that are reasonably
likely to have a material effect on our financial condition, results of operations, liquidity,
capital expenditures or capital resources.
Contractual Cash Commitments
For a discussion of our Contractual Cash Commitments refer to Note 14 to our consolidated
financial statements in Item 8 of this Annual Report on Form 10-K.
Related Party Transactions
For a discussion of Related Party Transactions refer to Note 8 to our consolidated financial
statements in Item 8 of this Annual Report on Form 10-K.
Critical Accounting Policies and Estimates
Our consolidated financial statements are prepared in accordance with GAAP, which require
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the periods. Accounting estimates require the use of significant management
assumptions and judgments as to future events, and the effect of those events cannot be predicted
with certainty. The accounting estimates will change as new events occur, more experience is
acquired and more information is obtained. We evaluate and update our assumptions and estimates on
an ongoing basis and use outside experts to assist in that evaluation when we deem necessary. We
have disclosed all significant accounting policies in Note 3 to the consolidated financial
statements included in this report. We have identified the following policies, which were discussed
with the audit committee of our board of directors, as critical to our business and understanding
our results of operations.
Fair Value of Assets Acquired and Liabilities Assumed. On July 28, 2008, Vernon Merger
Corporation, a wholly-owned subsidiary of SIRIUS, merged with and into XM Holdings, with XM
Holdings becoming a wholly-owned subsidiary of SIRIUS. The application of purchase accounting
resulted in the transaction being valued at $5,836,363 and our recording of pushed down goodwill
totaling $6,601,046.
Long-Lived Assets. We carry our long-lived assets at cost less accumulated depreciation. We
review our long-lived assets for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset is not recoverable. At the time an impairment in value of a
long-lived asset is identified, the impairment is measured as the amount by which the carrying
amount of a long-lived asset exceeds its fair value. To determine fair value, we employ an expected
present value technique, which utilizes multiple cash flow scenarios that reflect the range of
possible outcomes and an appropriate discount rate.
We evaluate our indefinite life intangible assets for impairment on an annual basis. During
the year ended December 31, 2008, we recorded $6,601,046 of goodwill impairment. At December 31,
2009, our intangible assets with indefinite lives totaled $2,250,000, and the remaining unamortized
total basis of our intangible assets with definite lives was $361,461.
Useful Life of Broadcast/Transmission System. Our satellite system includes the costs of
our satellite construction, launch vehicles, launch insurance, capitalized interest, spare
satellite, terrestrial repeater network and satellite uplink facility. We monitor our satellites
for impairment whenever events or changes in circumstances indicate that the carrying amount of the
asset is not recoverable. We operate four in-orbit satellites, two of which function as in-orbit
spares. The two in-orbit spare satellites were launched in 2001 while the other two satellites were
launched in 2005 and 2006. We estimate that the XM-3 and XM-4 satellites will meet their 15 year
predicted useful lives, and that XM-1 and XM-2 satellites useful lives will end in 2011. We are
constructing an additional XM satellite which is in storage awaiting its launch.
41
Certain of our in-orbit satellites have experienced circuit failures on their solar arrays. We
continue to monitor the operating condition of our in-orbit satellites. If events or circumstances
indicate that the useful lives of our in-orbit satellites have changed, we will modify the
depreciable life accordingly. If we were to revise our estimates, our depreciation expense would
change, for example, a 10% decrease in the expected useful lives of satellites and spacecraft
control facilities during 2009 would have resulted in approximately $6,425 of additional
depreciation expense.
Revenue Recognition. We derive revenue primarily from subscribers, advertising and direct
sales of merchandise. Revenue from subscribers consists of subscription fees; revenue derived from
our agreements with daily rental fleet programs; non-refundable activation and other fees; and the
effects of rebates. Revenue is recognized as it is realized or realizable and earned.
We recognize subscription fees as our services are provided. Prepaid subscription fees are
recorded as deferred revenue and amortized to revenue ratably over the term of the applicable
subscription plan.
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 months. Prepaid
subscription fees received from certain automakers are recorded as deferred revenue and amortized
to revenue ratably over the service period, which commences upon retail sale and activation. We
reimburse automakers for certain costs associated with the satellite radio installed in the
applicable vehicle at the time the vehicle is manufactured. The associated payments to the
automakers are included in Subscriber acquisition costs. These payments are included in Subscriber
acquisition costs because we are responsible for providing the service to the customers, including
being obligated to the customers in the case of an interruption of service.
Activation fees are recognized ratably over the estimated term a subscriber will use the
activated radio, estimated to be approximately 3.5 years during 2009. The estimated term of
subscriber equipment usage is based on historical experience. If we were to revise our estimate,
for example, a 10% decrease to the estimated term of a subscriber relationship during 2009 would
have resulted in approximately $1,162 of additional activation fees.
We record an estimate of rebates that are paid by us to subscribers as a reduction to revenue
in the period the subscriber activates service. For certain rebate promotions, a subscriber must
remain active for a specified period of time to be considered eligible. In those instances, the
estimate is recorded as a reduction to revenue over the required activation period. We estimate the
effects of mail-in rebates based on actual take-rates for rebate incentives offered in prior
periods, adjusted as deemed necessary based on take-rate data available at the time. In subsequent
periods, estimates are adjusted when necessary. For instant rebate promotions, we record the
consideration paid to the consumer as a reduction to revenue in the period the customer
participates in the promotion.
We recognize revenue from the sale of advertising as the advertising is broadcast. Agency fees
are calculated based on a stated percentage applied to gross billing revenue for our advertising
inventory and are reported as a reduction of advertising revenue. We pay certain third parties a
percentage of advertising revenue. Advertising revenue is recorded gross of such revenue share
payments as we are the primary obligor in the transaction. Advertising revenue share payments are
recorded to revenue share and royalties during the period in which the advertising is broadcast.
Equipment revenue and royalties from the sale of satellite radios, components and accessories
is recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to
customers are recorded as revenue. Shipping and handling costs associated with shipping goods to
customers are reported as a component of cost of equipment.
Revenue arrangements with multiple deliverables are divided into separate units of accounting
when the products and services meet certain criteria and consideration is allocated among the
separate units of accounting based on their relative fair values.
Income Taxes. Deferred income taxes are recognized for the tax consequences related to
temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are expected to affect
taxable income. A valuation allowance is recognized when necessary based on the weight of all
available evidence, it is considered more-likely-than-not that all or some portion of the deferred
tax assets will not be realized. Income tax expense is the sum of current income tax plus the
change in deferred tax assets and liabilities.
42
Footnotes to Results of Operations
|
|
|
(1) |
|
Average self-pay monthly churn represents the monthly average of self-pay deactivations by
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 of sale, vehicle owners and lessees generally receive a three month prepaid trial
subscription and we receive a subscription fee from the OEM. 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 and net advertising revenue, divided by
the number of months in the period, divided by the daily weighted average number of
subscribers for the period. ARPU is calculated as follows (in thousands, except for subscriber
and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber revenue |
|
$ |
313,158 |
|
|
$ |
309,523 |
|
Net advertising revenue |
|
|
5,232 |
|
|
|
4,845 |
|
|
|
|
|
|
|
|
Total subscriber and net advertising revenue |
|
$ |
318,390 |
|
|
$ |
314,368 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
ARPU |
|
$ |
10.94 |
|
|
$ |
10.67 |
|
|
|
|
(4) |
|
SAC, as adjusted, 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, divided by the number of gross subscriber additions for the period. SAC, as adjusted,
per gross subscriber addition is calculated as follows (in thousands, except for subscriber
and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
58,726 |
|
|
$ |
56,602 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
(Less) Add: margin from direct sales of radios
and accessories |
|
|
(7,766 |
) |
|
|
(8,361 |
) |
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
50,960 |
|
|
$ |
48,241 |
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
895,199 |
|
|
|
794,809 |
|
SAC, as adjusted, per gross subscriber
addition |
|
$ |
57 |
|
|
$ |
61 |
|
43
|
|
|
(5) |
|
Customer service and billing expenses, as adjusted, per average subscriber is derived
from total customer service and billing expenses, excluding share-based payment expense,
divided by the number of months in the period, divided by the daily weighted average number
of subscribers for the period. Customer service and billing expenses, as adjusted, per
average subscriber is calculated as follows (in thousands, except for subscriber and per
subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Customer service and billing expenses |
|
$ |
32,645 |
|
|
$ |
36,036 |
|
Less: share-based payment expense |
|
|
(418 |
) |
|
|
(586 |
) |
|
|
|
|
|
|
|
Customer service and billing expenses, as
adjusted |
|
$ |
32,227 |
|
|
$ |
35,450 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
Customer service and billing expenses, as
adjusted,
per average subscriber |
|
$ |
1.11 |
|
|
$ |
1.20 |
|
|
|
|
(6) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
44,215 |
|
|
$ |
1,636 |
|
Additions to property and equipment |
|
|
(14,654 |
) |
|
|
(5,554 |
) |
Restricted and other investment activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
29,561 |
|
|
$ |
(3,918 |
) |
|
|
|
|
|
|
|
|
|
|
(7) |
|
Average self-pay monthly churn; conversion rate; ARPU; SAC, as adjusted, per gross subscriber
addition; customer service and billing expenses, as adjusted, per average subscriber; and free
cash flow are not measures of financial performance under GAAP. We believe these non-GAAP
financial measures provide meaningful supplemental information regarding our operating
performance and are used by us for budgetary and planning purposes; when publicly providing
our business outlook; as a means to evaluate period-to-period comparisons; and to compare our
performance to that of our competitors. We believe that investors also use our current and
projected metrics to monitor the performance of our business and to make investment decisions. |
|
|
|
We believe the exclusion of share-based payment expense in our calculations of SAC, as
adjusted, per gross subscriber addition and customer service and billing expenses, as adjusted,
per average subscriber is useful given the significant variation in expense that can result
from changes in the fair market value of SIRIUS common stock, the effect of which is unrelated
to the operational conditions that give rise to variations in the components of our subscriber
acquisition costs and customer service and billing expenses. Specifically, the exclusion of
share-based payment expense in our calculation of SAC, as adjusted, per gross subscriber
addition is critical in being able to understand the economic impact of the direct costs
incurred to acquire a subscriber and the effect over time as economies of scale are reached. |
|
|
|
These non-GAAP financial measures are used in addition to and in conjunction with results
presented in accordance with GAAP. These non-GAAP financial measures 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. |
|
(8) |
|
We refer to net income (loss) before interest and investment income; interest expense, net of
amounts capitalized; income tax expense; loss on extinguishment of debt and credit facilities,
net; (gain) loss on investments; other expense (income); restructuring, impairments and
related costs; depreciation and amortization; and share-based payment expense as adjusted
income (loss) from operations. Adjusted income (loss) from operations is not a measure of
financial performance under GAAP. We believe adjusted income (loss) from operations is a
useful measure of our operating performance. We use adjusted income (loss) from operations for
budgetary and planning purposes; to assess the relative profitability and on-going performance
of our consolidated operations; to compare our performance from period-to-period; and to
compare our performance to that of our competitors. We also believe adjusted income (loss)
from operations is useful to investors to compare our operating performance to the performance
of other communications, entertainment and media companies. We believe that investors use
current and projected adjusted income (loss) from operations to estimate our current or
prospective enterprise value and to make investment decisions. |
44
|
|
|
|
|
Because we fund and build-out our satellite radio system through the periodic raising and
expenditure of large amounts of capital, our results of operations reflect significant charges
for interest and depreciation expense. We believe adjusted income (loss) from operations
provides useful information about the operating performance of our business apart from the
costs associated with our capital structure and physical plant. The exclusion of interest and
depreciation and amortization expense is useful given fluctuations in interest rates and
significant variation in depreciation and amortization expense that can result from the amount
and timing of capital expenditures and 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 taxes is appropriate for comparability purposes as the tax
positions of companies can vary because of their differing abilities to take advantage of tax
benefits and because of the tax policies of the various jurisdictions in which they operate. We
believe the exclusion of restructuring, impairments and related costs is useful given the
non-recurring 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 Sirius common stock. To compensate for the exclusion of taxes, other
expense (income), depreciation and amortization and share-based payment expense, we separately
measure and budget for these items. |
|
|
|
There are material limitations associated with the use of adjusted income (loss) from
operations in evaluating our company compared with net loss, which reflects overall financial
performance, including the effects of taxes, other (income) expense, depreciation and
amortization, restructuring, impairments and related costs and share-based payment expense. We
use adjusted income (loss) from operations to supplement GAAP results to provide a more
complete understanding of the factors and trends affecting the business than GAAP results
alone. Investors that wish to compare and evaluate our operating results after giving effect
for these costs, should refer to net loss as disclosed in our consolidated statements of
operations. Since adjusted income (loss) from operations is a non-GAAP financial measure, our
calculation of adjusted income (loss) from operations 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 the pro forma unadjusted net loss to the pro forma adjusted income (loss)
from operations is calculated as follows (see footnotes for reconciliation of the pro forma
amounts to their respective GAAP amounts) (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Reconciliation of Net loss to Adjusted income (loss)
from operations: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,686 |
) |
|
$ |
(88,998 |
) |
Add back Net loss items excluded from Adjusted income
(loss) from operations: |
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(789 |
) |
|
|
667 |
|
Interest expense, net of amounts capitalized |
|
|
51,725 |
|
|
|
50,400 |
|
Income tax expense |
|
|
729 |
|
|
|
291 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
4,021 |
|
|
|
|
|
Loss on investments |
|
|
366 |
|
|
|
22,673 |
|
Other (income) expense |
|
|
(897 |
) |
|
|
1,052 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
50,469 |
|
|
|
(13,915 |
) |
Restructuring, impairments and related costs |
|
|
2,640 |
|
|
|
|
|
Depreciation and amortization |
|
|
25,042 |
|
|
|
26,251 |
|
Share-based payment expense |
|
|
4,209 |
|
|
|
13,321 |
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations |
|
$ |
82,360 |
|
|
$ |
25,657 |
|
|
|
|
|
|
|
|
There are material limitations associated with the use of a pro forma unadjusted results of
operations in evaluating our company compared with our GAAP results of operations, which
reflects overall financial performance. We use pro forma unadjusted results of operations to
supplement GAAP results to provide a more complete understanding of the factors and trends
affecting the business than GAAP results alone. Investors that wish to compare and evaluate our
operating results after giving effect for these costs, should refer to results of operations as
disclosed in our consolidated statements of operations. Since pro forma unadjusted results of
operations is a non-GAAP financial measure, our 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.
45
|
|
|
(9) |
|
The following tables reconcile our GAAP results of operations to our non-GAAP pro forma
unadjusted results of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Three Months Ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
Allocation of |
|
|
|
|
|
|
|
|
|
|
Purchase Price |
|
|
Share-based |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
Payment |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Pro Forma |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
307,365 |
|
|
$ |
5,793 |
|
|
$ |
|
|
|
$ |
313,158 |
|
Advertising revenue, net of agency fees |
|
|
5,232 |
|
|
|
|
|
|
|
|
|
|
|
5,232 |
|
Equipment revenue |
|
|
11,892 |
|
|
|
|
|
|
|
|
|
|
|
11,892 |
|
Other revenue |
|
|
38,313 |
|
|
|
1,813 |
|
|
|
|
|
|
|
40,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
362,802 |
|
|
|
7,606 |
|
|
|
|
|
|
|
370,408 |
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
13,498 |
|
|
|
327 |
|
|
|
(412 |
) |
|
|
13,413 |
|
Programming and content |
|
|
22,505 |
|
|
|
17,361 |
|
|
|
603 |
|
|
|
40,469 |
|
Revenue share and royalties |
|
|
44,358 |
|
|
|
24,172 |
|
|
|
|
|
|
|
68,530 |
|
Customer service and billing |
|
|
32,551 |
|
|
|
94 |
|
|
|
(418 |
) |
|
|
32,227 |
|
Cost of equipment |
|
|
4,126 |
|
|
|
|
|
|
|
|
|
|
|
4,126 |
|
Sales and marketing |
|
|
43,782 |
|
|
|
3,522 |
|
|
|
(59 |
) |
|
|
47,245 |
|
Subscriber acquisition costs |
|
|
40,871 |
|
|
|
17,855 |
|
|
|
|
|
|
|
58,726 |
|
General and administrative |
|
|
21,807 |
|
|
|
350 |
|
|
|
(2,809 |
) |
|
|
19,348 |
|
Engineering, design and development |
|
|
4,873 |
|
|
|
205 |
|
|
|
(1,114 |
) |
|
|
3,964 |
|
Depreciation and amortization |
|
|
45,319 |
|
|
|
(20,277 |
) |
|
|
|
|
|
|
25,042 |
|
Restructuring, impairments and related costs |
|
|
2,640 |
|
|
|
|
|
|
|
|
|
|
|
2,640 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
4,209 |
|
|
|
4,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
276,330 |
|
|
|
43,609 |
|
|
|
|
|
|
|
319,939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
86,472 |
|
|
|
(36,003 |
) |
|
|
|
|
|
|
50,469 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
789 |
|
|
|
|
|
|
|
|
|
|
|
789 |
|
Interest expense, net of amounts capitalized |
|
|
(62,910 |
) |
|
|
11,185 |
|
|
|
|
|
|
|
(51,725 |
) |
Gain (loss) on change in value of embedded derivatives |
|
|
78,169 |
|
|
|
(78,169 |
) |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
(4,021 |
) |
|
|
|
|
|
|
|
|
|
|
(4,021 |
) |
Loss on investments |
|
|
(366 |
) |
|
|
|
|
|
|
|
|
|
|
(366 |
) |
Other income |
|
|
897 |
|
|
|
|
|
|
|
|
|
|
|
897 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
12,558 |
|
|
|
(66,984 |
) |
|
|
|
|
|
|
(54,426 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
99,030 |
|
|
|
(102,987 |
) |
|
|
|
|
|
|
(3,957 |
) |
Income tax expense |
|
|
(729 |
) |
|
|
|
|
|
|
|
|
|
|
(729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
98,301 |
|
|
|
(102,987 |
) |
|
|
|
|
|
|
(4,686 |
) |
Add: net income (loss) attributable to noncontrolling
interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
98,301 |
|
|
$ |
(102,987 |
) |
|
$ |
|
|
|
$ |
(4,686 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included
in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
306 |
|
|
$ |
106 |
|
|
$ |
|
|
|
$ |
412 |
|
Programming and content |
|
|
(758 |
) |
|
|
155 |
|
|
|
|
|
|
|
(603 |
) |
Customer service and billing |
|
|
324 |
|
|
|
94 |
|
|
|
|
|
|
|
418 |
|
Sales and marketing |
|
|
(84 |
) |
|
|
143 |
|
|
|
|
|
|
|
59 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
2,459 |
|
|
|
350 |
|
|
|
|
|
|
|
2,809 |
|
Engineering, design and development |
|
|
909 |
|
|
|
205 |
|
|
|
|
|
|
|
1,114 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
3,156 |
|
|
$ |
1,053 |
|
|
$ |
|
|
|
$ |
4,209 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Three Months Ended December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
Allocation of |
|
|
|
|
|
|
|
|
|
|
Purchase Price |
|
|
Share-based |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
Payment |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments (a) |
|
|
Expense |
|
|
Pro Forma |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
289,424 |
|
|
$ |
20,099 |
|
|
$ |
|
|
|
$ |
309,523 |
|
Advertising revenue, net of agency fees |
|
|
4,845 |
|
|
|
|
|
|
|
|
|
|
|
4,845 |
|
Equipment revenue |
|
|
15,640 |
|
|
|
|
|
|
|
|
|
|
|
15,640 |
|
Other revenue |
|
|
5,642 |
|
|
|
1,826 |
|
|
|
|
|
|
|
7,468 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
315,551 |
|
|
|
21,925 |
|
|
|
|
|
|
|
337,476 |
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
17,394 |
|
|
|
(214 |
) |
|
|
(779 |
) |
|
|
16,401 |
|
Programming and content |
|
|
29,575 |
|
|
|
20,755 |
|
|
|
(1,273 |
) |
|
|
49,057 |
|
Revenue share and royalties |
|
|
52,593 |
|
|
|
19,494 |
|
|
|
|
|
|
|
72,087 |
|
Customer service and billing |
|
|
35,948 |
|
|
|
88 |
|
|
|
(586 |
) |
|
|
35,450 |
|
Cost of equipment |
|
|
7,279 |
|
|
|
|
|
|
|
|
|
|
|
7,279 |
|
Sales and marketing |
|
|
47,153 |
|
|
|
3,312 |
|
|
|
(1,164 |
) |
|
|
49,301 |
|
Subscriber acquisition costs |
|
|
37,383 |
|
|
|
19,219 |
|
|
|
|
|
|
|
56,602 |
|
General and administrative |
|
|
28,107 |
|
|
|
306 |
|
|
|
(8,157 |
) |
|
|
20,256 |
|
Engineering, design and development |
|
|
6,467 |
|
|
|
281 |
|
|
|
(1,362 |
) |
|
|
5,386 |
|
Impairment of goodwill |
|
|
1,574,208 |
|
|
|
(1,574,208 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
59,690 |
|
|
|
(33,439 |
) |
|
|
|
|
|
|
26,251 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
13,321 |
|
|
|
13,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,895,797 |
|
|
|
(1,544,406 |
) |
|
|
|
|
|
|
351,391 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
|
(1,580,246 |
) |
|
|
1,566,331 |
|
|
|
|
|
|
|
(13,915 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(667 |
) |
|
|
|
|
|
|
|
|
|
|
(667 |
) |
Interest expense, net of amounts capitalized |
|
|
(59,357 |
) |
|
|
8,957 |
|
|
|
|
|
|
|
(50,400 |
) |
Gain (loss) on change in value of embedded derivatives |
|
|
80,124 |
|
|
|
(80,124 |
) |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investments |
|
|
(22,673 |
) |
|
|
|
|
|
|
|
|
|
|
(22,673 |
) |
Other expense |
|
|
(1,052 |
) |
|
|
|
|
|
|
|
|
|
|
(1,052 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(3,625 |
) |
|
|
(71,167 |
) |
|
|
|
|
|
|
(74,792 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(1,583,871 |
) |
|
|
1,495,164 |
|
|
|
|
|
|
|
(88,707 |
) |
Income tax expense |
|
|
(291 |
) |
|
|
|
|
|
|
|
|
|
|
(291 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(1,584,162 |
) |
|
|
1,495,164 |
|
|
|
|
|
|
|
(88,998 |
) |
Add: net income (loss) attributable to noncontrolling
interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(1,584,162 |
) |
|
$ |
1,495,164 |
|
|
$ |
|
|
|
$ |
(88,998 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included
in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
712 |
|
|
$ |
67 |
|
|
$ |
|
|
|
$ |
779 |
|
Programming and content |
|
|
1,191 |
|
|
|
82 |
|
|
|
|
|
|
|
1,273 |
|
Customer service and billing |
|
|
499 |
|
|
|
87 |
|
|
|
|
|
|
|
586 |
|
Sales and marketing |
|
|
1,030 |
|
|
|
134 |
|
|
|
|
|
|
|
1,164 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
7,851 |
|
|
|
306 |
|
|
|
|
|
|
|
8,157 |
|
Engineering, design and development |
|
|
1,080 |
|
|
|
282 |
|
|
|
|
|
|
|
1,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
12,363 |
|
|
$ |
958 |
|
|
$ |
|
|
|
$ |
13,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes impairment of goodwill. |
47
|
|
|
(10) |
|
ARPU is calculated as follows (in thousands, except for subscriber and per subscriber
amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber revenue |
|
$ |
1,238,217 |
|
|
$ |
1,181,860 |
|
Net advertising revenue |
|
|
18,708 |
|
|
|
32,753 |
|
|
|
|
|
|
|
|
Total subscriber and net advertising
revenue |
|
$ |
1,256,925 |
|
|
$ |
1,214,613 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
ARPU |
|
$ |
10.81 |
|
|
$ |
10.57 |
|
|
|
|
(11) |
|
SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands,
except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
185,559 |
|
|
$ |
270,662 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
(Less) Add: margin from direct sales of radios
and accessories |
|
|
(13,399 |
) |
|
|
(76 |
) |
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
172,160 |
|
|
$ |
270,586 |
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
3,184,559 |
|
|
|
3,956,653 |
|
SAC, as adjusted, per gross subscriber
addition |
|
$ |
54 |
|
|
$ |
68 |
|
|
|
|
(12) |
|
Customer service and billing expenses, as adjusted, per average subscriber is calculated
as follows (in thousands, except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Customer service and billing expenses |
|
$ |
129,172 |
|
|
$ |
142,907 |
|
Less: share-based payment expense |
|
|
(1,855 |
) |
|
|
(2,892 |
) |
|
|
|
|
|
|
|
Customer service and billing expenses, as
adjusted |
|
$ |
127,317 |
|
|
$ |
140,015 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
Customer service and billing expenses, as
adjusted,
per average subscriber |
|
$ |
1.10 |
|
|
$ |
1.22 |
|
|
|
|
(13) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
272,833 |
|
|
$ |
(243,847 |
) |
Additions to property and equipment |
|
|
(53,465 |
) |
|
|
(44,290 |
) |
Restricted and other investment activity |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
219,368 |
|
|
$ |
(288,112 |
) |
|
|
|
|
|
|
|
48
|
|
|
(14) |
|
Adjusted income (loss) from operations is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
For the Years Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net loss to Adjusted income (loss) from
operations: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(247,712 |
) |
|
$ |
(473,353 |
) |
Add back Net loss items excluded from Adjusted income
(loss) from
operations: |
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(2,637 |
) |
|
|
(6,309 |
) |
Interest expense, net of amounts capitalized |
|
|
243,740 |
|
|
|
164,050 |
|
Income tax expense (benefit) |
|
|
2,463 |
|
|
|
2,475 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
115,884 |
|
|
|
|
|
Loss on investments |
|
|
7,026 |
|
|
|
38,772 |
|
Other (income) expense |
|
|
(3,446 |
) |
|
|
4,226 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
115,318 |
|
|
|
(270,139 |
) |
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
Depreciation and amortization |
|
|
85,476 |
|
|
|
136,129 |
|
Share-based payment expense |
|
|
40,496 |
|
|
|
55,188 |
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations |
|
$ |
273,544 |
|
|
$ |
(78,822 |
) |
|
|
|
|
|
|
|
49
|
|
|
(15) |
|
The following tables reconcile our GAAP results of operations to our non-GAAP pro forma
unadjusted results of operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Year Ended December 31, 2009 |
|
|
|
|
|
|
|
Purchase Price |
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
Allocation of Share- |
|
|
|
|
(in thousands) |
|
As Reported |
|
|
Adjustments |
|
|
based Payment Expense |
|
|
Pro Forma |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,191,403 |
|
|
$ |
46,814 |
|
|
$ |
|
|
|
$ |
1,238,217 |
|
Advertising revenue, net of agency fees |
|
|
18,708 |
|
|
|
|
|
|
|
|
|
|
|
18,708 |
|
Equipment revenue |
|
|
29,574 |
|
|
|
|
|
|
|
|
|
|
|
29,574 |
|
Other revenue |
|
|
57,656 |
|
|
|
7,251 |
|
|
|
|
|
|
|
64,907 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,297,341 |
|
|
|
54,065 |
|
|
|
|
|
|
|
1,351,406 |
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
50,450 |
|
|
|
1,339 |
|
|
|
(1,835 |
) |
|
|
49,954 |
|
Programming and content |
|
|
106,858 |
|
|
|
72,069 |
|
|
|
(3,266 |
) |
|
|
175,661 |
|
Revenue share and royalties |
|
|
187,355 |
|
|
|
89,780 |
|
|
|
|
|
|
|
277,135 |
|
Customer service and billing |
|
|
128,719 |
|
|
|
453 |
|
|
|
(1,855 |
) |
|
|
127,317 |
|
Cost of equipment |
|
|
16,175 |
|
|
|
|
|
|
|
|
|
|
|
16,175 |
|
Sales and marketing |
|
|
128,347 |
|
|
|
13,507 |
|
|
|
(4,434 |
) |
|
|
137,420 |
|
Subscriber acquisition costs |
|
|
124,395 |
|
|
|
61,164 |
|
|
|
|
|
|
|
185,559 |
|
General and administrative |
|
|
113,497 |
|
|
|
1,602 |
|
|
|
(25,183 |
) |
|
|
89,916 |
|
Engineering, design and development |
|
|
21,671 |
|
|
|
977 |
|
|
|
(3,923 |
) |
|
|
18,725 |
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
(106,305 |
) |
|
|
|
|
|
|
85,476 |
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
32,254 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
40,496 |
|
|
|
40,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,101,502 |
|
|
|
134,586 |
|
|
|
|
|
|
|
1,236,088 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
195,839 |
|
|
|
(80,521 |
) |
|
|
|
|
|
|
115,318 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,637 |
|
|
|
|
|
|
|
|
|
|
|
2,637 |
|
Interest expense, net of amounts capitalized |
|
|
(289,845 |
) |
|
|
46,105 |
|
|
|
|
|
|
|
(243,740 |
) |
Gain (loss) on change in value of embedded
derivatives |
|
|
(33,534 |
) |
|
|
33,534 |
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt and credit
facilities, net |
|
|
(115,884 |
) |
|
|
|
|
|
|
|
|
|
|
(115,884 |
) |
Loss on investments |
|
|
(7,026 |
) |
|
|
|
|
|
|
|
|
|
|
(7,026 |
) |
Other income |
|
|
3,446 |
|
|
|
|
|
|
|
|
|
|
|
3,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
(440,206 |
) |
|
|
79,639 |
|
|
|
|
|
|
|
(360,567 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(244,367 |
) |
|
|
(882 |
) |
|
|
|
|
|
|
(245,249 |
) |
Income tax expense |
|
|
(2,463 |
) |
|
|
|
|
|
|
|
|
|
|
(2,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(246,830 |
) |
|
|
(882 |
) |
|
|
|
|
|
|
(247,712 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(246,830 |
) |
|
$ |
(882 |
) |
|
$ |
|
|
|
$ |
(247,712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
1,378 |
|
|
$ |
457 |
|
|
$ |
|
|
|
$ |
1,835 |
|
Programming and content |
|
|
2,610 |
|
|
|
656 |
|
|
|
|
|
|
|
3,266 |
|
Customer service and billing |
|
|
1,402 |
|
|
|
453 |
|
|
|
|
|
|
|
1,855 |
|
Sales and marketing |
|
|
3,778 |
|
|
|
656 |
|
|
|
|
|
|
|
4,434 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
23,581 |
|
|
|
1,602 |
|
|
|
|
|
|
|
25,183 |
|
Engineering, design and development |
|
|
2,946 |
|
|
|
977 |
|
|
|
|
|
|
|
3,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
35,695 |
|
|
$ |
4,801 |
|
|
$ |
|
|
|
$ |
40,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Year Ended December 31, 2008 |
|
|
|
As Reported |
|
|
Purchase Price |
|
|
|
|
|
|
|
|
|
January 1, 2008 Through |
|
|
August 1, 2008 Through |
|
|
Accounting |
|
|
Allocation of Share- |
|
|
|
|
(in thousands) |
|
July 31, 2008 |
|
|
December 31, 2008 |
|
|
Adjustments (a) |
|
|
based Payment Expense |
|
|
Pro Forma |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
670,870 |
|
|
$ |
472,457 |
|
|
$ |
38,533 |
|
|
$ |
|
|
|
$ |
1,181,860 |
|
Advertising revenue, net of agency fees |
|
|
22,743 |
|
|
|
10,010 |
|
|
|
|
|
|
|
|
|
|
|
32,753 |
|
Equipment revenue |
|
|
13,397 |
|
|
|
18,991 |
|
|
|
|
|
|
|
|
|
|
|
32,388 |
|
Other revenue |
|
|
24,184 |
|
|
|
9,696 |
|
|
|
3,021 |
|
|
|
|
|
|
|
36,901 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
731,194 |
|
|
|
511,154 |
|
|
|
41,554 |
|
|
|
|
|
|
|
1,283,902 |
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
46,566 |
|
|
|
29,852 |
|
|
|
424 |
|
|
|
(4,130 |
) |
|
|
72,712 |
|
Programming and content |
|
|
117,156 |
|
|
|
47,621 |
|
|
|
34,667 |
|
|
|
(7,378 |
) |
|
|
192,066 |
|
Revenue share and royalties |
|
|
166,606 |
|
|
|
91,132 |
|
|
|
30,504 |
|
|
|
|
|
|
|
288,242 |
|
Customer service and billing |
|
|
82,947 |
|
|
|
59,767 |
|
|
|
193 |
|
|
|
(2,892 |
) |
|
|
140,015 |
|
Cost of equipment |
|
|
20,013 |
|
|
|
12,299 |
|
|
|
|
|
|
|
|
|
|
|
32,312 |
|
Sales and marketing |
|
|
126,054 |
|
|
|
76,104 |
|
|
|
5,393 |
|
|
|
(9,615 |
) |
|
|
197,936 |
|
Subscriber acquisition costs |
|
|
174,083 |
|
|
|
64,865 |
|
|
|
31,714 |
|
|
|
|
|
|
|
270,662 |
|
General and administrative |
|
|
116,444 |
|
|
|
47,322 |
|
|
|
1,083 |
|
|
|
(24,134 |
) |
|
|
140,715 |
|
Engineering, design and development |
|
|
23,045 |
|
|
|
11,658 |
|
|
|
400 |
|
|
|
(7,039 |
) |
|
|
28,064 |
|
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
(6,601,046 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
88,749 |
|
|
|
94,310 |
|
|
|
(46,930 |
) |
|
|
|
|
|
|
136,129 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,188 |
|
|
|
55,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
961,663 |
|
|
|
7,135,976 |
|
|
|
(6,543,598 |
) |
|
|
|
|
|
|
1,554,041 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
|
(230,469 |
) |
|
|
(6,624,822 |
) |
|
|
6,585,152 |
|
|
|
|
|
|
|
(270,139 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
3,013 |
|
|
|
3,296 |
|
|
|
|
|
|
|
|
|
|
|
6,309 |
|
Interest expense, net of amounts capitalized |
|
|
(73,937 |
) |
|
|
(107,155 |
) |
|
|
17,042 |
|
|
|
|
|
|
|
(164,050 |
) |
Gain (loss) on change in value of embedded
derivatives |
|
|
|
|
|
|
322,347 |
|
|
|
(322,347 |
) |
|
|
|
|
|
|
|
|
Loss on extinguishment of debt and credit
facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investments |
|
|
(13,010 |
) |
|
|
(25,762 |
) |
|
|
|
|
|
|
|
|
|
|
(38,772 |
) |
Other income (expense) |
|
|
900 |
|
|
|
(5,126 |
) |
|
|
|
|
|
|
|
|
|
|
(4,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(83,034 |
) |
|
|
187,600 |
|
|
|
(305,305 |
) |
|
|
|
|
|
|
(200,739 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
|
(313,503 |
) |
|
|
(6,437,222 |
) |
|
|
6,279,847 |
|
|
|
|
|
|
|
(470,878 |
) |
Income tax expense |
|
|
(1,512 |
) |
|
|
(963 |
) |
|
|
|
|
|
|
|
|
|
|
(2,475 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
|
(315,015 |
) |
|
|
(6,438,185 |
) |
|
|
6,279,847 |
|
|
|
|
|
|
|
(473,353 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
(7,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(322,458 |
) |
|
$ |
(6,438,185 |
) |
|
$ |
6,279,847 |
|
|
$ |
|
|
|
$ |
(480,796 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
2,745 |
|
|
$ |
1,282 |
|
|
$ |
103 |
|
|
$ |
|
|
|
$ |
4,130 |
|
Programming and content |
|
|
4,949 |
|
|
|
2,152 |
|
|
|
277 |
|
|
|
|
|
|
|
7,378 |
|
Customer service and billing |
|
|
1,869 |
|
|
|
831 |
|
|
|
192 |
|
|
|
|
|
|
|
2,892 |
|
Sales and marketing |
|
|
7,047 |
|
|
|
2,068 |
|
|
|
500 |
|
|
|
|
|
|
|
9,615 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
13,200 |
|
|
|
9,851 |
|
|
|
1,083 |
|
|
|
|
|
|
|
24,134 |
|
Engineering, design and development |
|
|
4,675 |
|
|
|
1,790 |
|
|
|
574 |
|
|
|
|
|
|
|
7,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
34,485 |
|
|
$ |
17,974 |
|
|
$ |
2,729 |
|
|
$ |
|
|
|
$ |
55,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes impairment of goodwill. |
|
(16) |
|
ARPU is calculated as follows (in thousands, except for subscriber and per subscriber
amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber revenue |
|
$ |
307,365 |
|
|
$ |
289,424 |
|
Net advertising revenue |
|
|
5,232 |
|
|
|
4,845 |
|
|
|
|
|
|
|
|
Total subscriber and net advertising
revenue |
|
$ |
312,597 |
|
|
$ |
294,269 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
ARPU |
|
$ |
10.74 |
|
|
$ |
9.98 |
|
51
|
|
|
(17) |
|
SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands,
except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
40,871 |
|
|
$ |
37,383 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
(Less) Add: margin from direct sales of radios
and accessories |
|
|
(7,766 |
) |
|
|
(8,361 |
) |
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
33,105 |
|
|
$ |
29,022 |
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
895,199 |
|
|
|
794,809 |
|
SAC, as adjusted, per gross subscriber
addition |
|
$ |
37 |
|
|
$ |
37 |
|
|
|
|
(18) |
|
Customer service and billing expenses, as adjusted, per average subscriber is calculated
as follows (in thousands, except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Customer service and billing expenses |
|
$ |
32,551 |
|
|
$ |
35,948 |
|
Less: share-based payment expense |
|
|
(324 |
) |
|
|
(499 |
) |
|
|
|
|
|
|
|
Customer service and billing expenses, as
adjusted |
|
$ |
32,227 |
|
|
$ |
35,449 |
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,703,031 |
|
|
|
9,825,521 |
|
Customer service and billing expenses, as
adjusted,
per average subscriber |
|
$ |
1.11 |
|
|
$ |
1.20 |
|
|
|
|
(19) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
Net cash provided by (used in)
operating activities |
|
$ |
44,215 |
|
|
$ |
1,636 |
|
Additions to property and equipment |
|
|
(14,654 |
) |
|
|
(5,554 |
) |
Restricted and other investment activity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
29,561 |
|
|
$ |
(3,918 |
) |
|
|
|
|
|
|
|
52
|
|
|
(20) |
|
Adjusted income (loss) from operations is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
For the Three Months Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Reconciliation of Net income (loss) to Adjusted income
(loss) from operations: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
98,301 |
|
|
$ |
(1,584,162 |
) |
Add back Net income (loss) items excluded from Adjusted
income (loss) from
operations: |
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(789 |
) |
|
|
667 |
|
Interest expense, net of amounts capitalized |
|
|
62,910 |
|
|
|
59,357 |
|
Income tax expense |
|
|
729 |
|
|
|
291 |
|
(Gain) loss on change in value of embedded derivatives |
|
|
(78,169 |
) |
|
|
(80,124 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
4,021 |
|
|
|
|
|
Loss on investments |
|
|
366 |
|
|
|
22,673 |
|
Other (income) expense |
|
|
(897 |
) |
|
|
1,052 |
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
86,472 |
|
|
|
(1,580,246 |
) |
Impairment of goodwill |
|
|
|
|
|
|
1,574,208 |
|
Restructuring, impairments and related costs |
|
|
2,640 |
|
|
|
|
|
Depreciation and amortization |
|
|
45,319 |
|
|
|
59,690 |
|
Share-based payment expense |
|
|
3,156 |
|
|
|
12,363 |
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations |
|
$ |
137,587 |
|
|
$ |
66,015 |
|
|
|
|
|
|
|
|
53
|
|
|
(21) |
|
ARPU is calculated as follows (in thousands, except for subscriber and per subscriber
amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Subscriber revenue |
|
$ |
1,191,403 |
|
|
$ |
1,143,327 |
|
|
$ |
1,033,776 |
|
Net advertising revenue |
|
|
18,708 |
|
|
|
32,753 |
|
|
|
39,148 |
|
|
|
|
|
|
|
|
|
|
|
Total subscriber and net advertising
revenue |
|
$ |
1,210,111 |
|
|
$ |
1,176,080 |
|
|
$ |
1,072,924 |
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
|
|
8,256,659 |
|
ARPU |
|
$ |
10.41 |
|
|
$ |
10.24 |
|
|
$ |
10.83 |
|
|
|
|
(22) |
|
SAC, as adjusted, per gross subscriber addition is calculated as follows (in thousands,
except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
124,395 |
|
|
$ |
238,948 |
|
|
$ |
259,143 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
|
|
(9,167 |
) |
(Less) Add: margin from direct sales of radios
and accessories |
|
|
(13,399 |
) |
|
|
(76 |
) |
|
|
33,670 |
|
|
|
|
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
110,996 |
|
|
$ |
238,872 |
|
|
$ |
283,646 |
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
3,184,559 |
|
|
|
3,956,653 |
|
|
|
3,893,773 |
|
SAC, as adjusted, per gross subscriber
addition |
|
$ |
35 |
|
|
$ |
60 |
|
|
$ |
73 |
|
|
|
|
(23) |
|
Customer service and billing expenses, as adjusted, per average subscriber is calculated as
follows (in thousands, except for subscriber and per subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Customer service and billing expenses |
|
$ |
128,719 |
|
|
$ |
142,714 |
|
|
$ |
126,776 |
|
Less: share-based payment expense |
|
|
(1,402 |
) |
|
|
(2,700 |
) |
|
|
(2,483 |
) |
|
|
|
|
|
|
|
|
|
|
Customer service and billing expenses, as
adjusted |
|
$ |
127,317 |
|
|
$ |
140,014 |
|
|
$ |
124,293 |
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
9,687,489 |
|
|
|
9,572,997 |
|
|
|
8,256,659 |
|
Customer service and billing expenses, as
adjusted,
per average subscriber |
|
$ |
1.10 |
|
|
$ |
1.22 |
|
|
$ |
1.25 |
|
|
|
|
(24) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
$ |
272,833 |
|
|
$ |
(243,847 |
) |
|
$ |
(154,730 |
) |
Additions to property and equipment |
|
|
(53,465 |
) |
|
|
(44,290 |
) |
|
|
(133,338 |
) |
Restricted and other investment activity |
|
|
|
|
|
|
25 |
|
|
|
1,823 |
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
219,368 |
|
|
$ |
(288,112 |
) |
|
$ |
(286,245 |
) |
|
|
|
|
|
|
|
|
|
|
54
|
|
|
(25) |
|
Adjusted income (loss) from operations is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual |
|
|
|
For the Year Ended December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net loss to Adjusted income (loss) from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(246,830 |
) |
|
$ |
(6,753,200 |
) |
|
$ |
(670,849 |
) |
Add back Net loss items excluded from Adjusted income
(loss) from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(2,637 |
) |
|
|
(6,309 |
) |
|
|
(14,084 |
) |
Interest expense, net of amounts capitalized |
|
|
289,845 |
|
|
|
181,092 |
|
|
|
116,605 |
|
Income tax expense (benefit) |
|
|
2,463 |
|
|
|
2,475 |
|
|
|
(939 |
) |
Loss (gain) on change in value of embedded derivatives |
|
|
33,534 |
|
|
|
(322,347 |
) |
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
115,884 |
|
|
|
|
|
|
|
3,693 |
|
Loss on investments |
|
|
7,026 |
|
|
|
38,772 |
|
|
|
56,156 |
|
Other (income) expense |
|
|
(3,446 |
) |
|
|
4,226 |
|
|
|
(2,019 |
) |
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
195,839 |
|
|
|
(6,855,291 |
) |
|
|
(511,437 |
) |
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
183,059 |
|
|
|
187,196 |
|
Share-based payment expense |
|
|
35,695 |
|
|
|
52,459 |
|
|
|
86,199 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations |
|
$ |
455,569 |
|
|
$ |
(18,727 |
) |
|
$ |
(238,042 |
) |
|
|
|
|
|
|
|
|
|
|
55
|
|
|
(26) |
|
The following tables combine our Predecessor and Successor GAAP Results of operations for
the years ended December 31, 2009, 2008 and 2007 (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
Combined |
|
|
Predecessor Entity |
|
|
|
For the Year |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
For the Year |
|
|
For the Year |
|
|
|
Ended |
|
|
Through |
|
|
|
Through |
|
|
Ended |
|
|
Ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
December 31, 2008 |
|
|
December 31, 2007 |
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,191,403 |
|
|
$ |
472,457 |
|
|
|
$ |
670,870 |
|
|
$ |
1,143,327 |
|
|
$ |
1,033,776 |
|
Advertising revenue, net of agency fees |
|
|
18,708 |
|
|
|
10,010 |
|
|
|
|
22,743 |
|
|
|
32,753 |
|
|
|
39,148 |
|
Equipment revenue |
|
|
29,574 |
|
|
|
18,991 |
|
|
|
|
13,397 |
|
|
|
32,388 |
|
|
|
28,333 |
|
Other revenue |
|
|
57,656 |
|
|
|
9,696 |
|
|
|
|
24,184 |
|
|
|
33,880 |
|
|
|
35,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,297,341 |
|
|
|
511,154 |
|
|
|
|
731,194 |
|
|
|
1,242,348 |
|
|
|
1,136,542 |
|
Operating expenses (depreciation and amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
50,450 |
|
|
|
29,852 |
|
|
|
|
46,566 |
|
|
|
76,418 |
|
|
|
81,036 |
|
Programming and content |
|
|
106,858 |
|
|
|
47,621 |
|
|
|
|
117,156 |
|
|
|
164,777 |
|
|
|
183,900 |
|
Revenue share and royalties |
|
|
187,355 |
|
|
|
91,132 |
|
|
|
|
166,606 |
|
|
|
257,738 |
|
|
|
256,344 |
|
Customer service and billing |
|
|
128,719 |
|
|
|
59,767 |
|
|
|
|
82,947 |
|
|
|
142,714 |
|
|
|
126,776 |
|
Cost of equipment |
|
|
16,175 |
|
|
|
12,299 |
|
|
|
|
20,013 |
|
|
|
32,312 |
|
|
|
62,003 |
|
Sales and marketing |
|
|
128,347 |
|
|
|
76,104 |
|
|
|
|
126,054 |
|
|
|
202,158 |
|
|
|
269,930 |
|
Subscriber acquisition costs |
|
|
124,395 |
|
|
|
64,865 |
|
|
|
|
174,083 |
|
|
|
238,948 |
|
|
|
259,143 |
|
General and administrative |
|
|
113,497 |
|
|
|
47,322 |
|
|
|
|
116,444 |
|
|
|
163,766 |
|
|
|
188,574 |
|
Engineering, design and development |
|
|
21,671 |
|
|
|
11,658 |
|
|
|
|
23,045 |
|
|
|
34,703 |
|
|
|
33,077 |
|
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
94,310 |
|
|
|
|
88,749 |
|
|
|
183,059 |
|
|
|
187,196 |
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,101,502 |
|
|
|
7,135,976 |
|
|
|
|
961,663 |
|
|
|
8,097,639 |
|
|
|
1,647,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
195,839 |
|
|
|
(6,624,822 |
) |
|
|
|
(230,469 |
) |
|
|
(6,855,291 |
) |
|
|
(511,437 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,637 |
|
|
|
3,296 |
|
|
|
|
3,013 |
|
|
|
6,309 |
|
|
|
14,084 |
|
Interest expense, net of amounts capitalized |
|
|
(289,845 |
) |
|
|
(107,155 |
) |
|
|
|
(73,937 |
) |
|
|
(181,092 |
) |
|
|
(116,605 |
) |
(Loss) gain on change in value of embedded derivatives |
|
|
(33,534 |
) |
|
|
322,347 |
|
|
|
|
|
|
|
|
322,347 |
|
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
(115,884 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,693 |
) |
Loss on investments |
|
|
(7,026 |
) |
|
|
(25,762 |
) |
|
|
|
(13,010 |
) |
|
|
(38,772 |
) |
|
|
(56,156 |
) |
Other income (expense) |
|
|
3,446 |
|
|
|
(5,126 |
) |
|
|
|
900 |
|
|
|
(4,226 |
) |
|
|
2,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(440,206 |
) |
|
|
187,600 |
|
|
|
|
(83,034 |
) |
|
|
104,566 |
|
|
|
(160,351 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(244,367 |
) |
|
|
(6,437,222 |
) |
|
|
|
(313,503 |
) |
|
|
(6,750,725 |
) |
|
|
(671,788 |
) |
Income tax (expense) benefit |
|
|
(2,463 |
) |
|
|
(963 |
) |
|
|
|
(1,512 |
) |
|
|
(2,475 |
) |
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(246,830 |
) |
|
|
(6,438,185 |
) |
|
|
|
(315,015 |
) |
|
|
(6,753,200 |
) |
|
|
(670,849 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
(7,443 |
) |
|
|
(11,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(246,830 |
) |
|
$ |
(6,438,185 |
) |
|
|
$ |
(322,458 |
) |
|
$ |
(6,760,643 |
) |
|
$ |
(682,381 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
1,378 |
|
|
$ |
1,282 |
|
|
|
$ |
2,745 |
|
|
$ |
4,027 |
|
|
$ |
5,024 |
|
Programming and content |
|
|
2,610 |
|
|
|
2,152 |
|
|
|
|
4,949 |
|
|
|
7,101 |
|
|
|
8,855 |
|
Customer service and billing |
|
|
1,402 |
|
|
|
831 |
|
|
|
|
1,869 |
|
|
|
2,700 |
|
|
|
2,483 |
|
Sales and marketing |
|
|
3,778 |
|
|
|
2,068 |
|
|
|
|
7,047 |
|
|
|
9,115 |
|
|
|
24,452 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,167 |
|
General and administrative |
|
|
23,581 |
|
|
|
9,851 |
|
|
|
|
13,200 |
|
|
|
23,051 |
|
|
|
28,289 |
|
Engineering, design and development |
|
|
2,946 |
|
|
|
1,790 |
|
|
|
|
4,675 |
|
|
|
6,465 |
|
|
|
7,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
35,695 |
|
|
$ |
17,974 |
|
|
|
$ |
34,485 |
|
|
$ |
52,459 |
|
|
$ |
86,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
ITEM 7A. |
|
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS |
As of December 31, 2009, we did not hold or issue any free-standing derivatives. Upon
completion of the Merger, the 7% Exchangeable Senior Subordinated Notes due 2014 became settleable
in SIRIUS common stock and were subsequently accounted for as embedded derivatives. In the event
the debt holders exercise their exchange option, SIRIUS intends to issue common stock to fulfill
the obligation.
We hold investments in marketable securities, which consist of certificates of deposit,
auction rate certificates and investment in debt and equity securities of other entities. We
classify our marketable securities as available-for-sale. We hold an investment in auction rate
certificates which are classified 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 and variable 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 8. |
|
CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
See Index to Consolidated Financial Statements contained in Item 15 herein.
|
|
|
ITEM 9. |
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
None.
|
|
|
ITEM 9A. |
|
CONTROLS AND PROCEDURES |
Controls and Procedures
As of December 31, 2009, an evaluation was performed under the supervision and with the
participation of our management, including Mel Karmazin, our President, and David J. Frear, our
Treasurer, of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on that evaluation, our management, including our President and our Treasurer,
concluded that our disclosure controls and procedures were effective as of December 31, 2009. There
has been no change in our internal control over financial reporting that has materially affected,
or is reasonably likely to materially affect, our internal control over financial reporting during
the quarter ended December 31, 2009.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting as defined in Rule 13a-15(f) under the Exchange Act. We have performed an
evaluation under the supervision and with the participation of our management, including our
President and our Treasurer, of the effectiveness of our internal control over financial reporting.
Our management used the framework in Internal Control-Integrated Framework issued by the Committee
of Sponsoring Organizations to perform this evaluation. Based on that evaluation, our management,
including our President and Treasurer, concluded that our internal control over financial reporting
was effective as of December 31, 2009.
Audit Report of the Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2009 has
been audited by KPMG LLP, an independent registered public accounting firm, as stated in their
audit report appearing on page F-3 of this Annual Report on
Form 10-K.
|
|
|
ITEM 9B. |
|
OTHER INFORMATION |
None.
57
PART III
|
|
|
ITEM 10. |
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
Omitted pursuant to General Instructions I(2)(c) of Form 10-K.
|
|
|
ITEM 11. |
|
EXECUTIVE COMPENSATION |
Omitted pursuant to General Instructions I(2)(c) of Form 10-K.
|
|
|
ITEM 12. |
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS |
Omitted pursuant to General Instructions I(2)(c) of Form 10-K.
|
|
|
ITEM 13. |
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE |
Omitted pursuant to General Instructions I(2)(c) of Form 10-K.
|
|
|
ITEM 14. |
|
PRINCIPAL ACCOUNTING FEES AND SERVICES |
Independent Registered Public Accounting Firm
During the fiscal years ended December 31, 2009 and 2008, our independent registered public
accounting firm, KPMG LLP, billed us the following fees:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
|
December 31, 2009 |
|
|
Through December 31, 2008 |
|
|
|
Through July 31, 2008 |
|
Audit Fees (1) |
|
$ |
426,592 |
|
|
$ |
453,127 |
|
|
|
$ |
287,857 |
|
Audit-Related Fees (2) |
|
|
25,000 |
|
|
|
25,000 |
|
|
|
|
271,541 |
|
Tax Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other Fees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
451,592 |
|
|
$ |
478,127 |
|
|
|
$ |
559,398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes fees for integrated audit, quarterly reviews and regulatory filings. |
|
(2) |
|
Includes fees for agreed upon procedures engagements and benefit plan audits. |
All Audit-Related Fees were approved by the Audit Committee of SIRIUS. None of the hours
expended on KPMGs engagement to audit our financial statements for the fiscal years ended
December 31, 2009 and December 31, 2008 were attributed to work performed by persons other than
KPMGs full-time, permanent employees.
58
PART IV
|
|
|
ITEM 15. |
|
EXHIBITS AND CONSOLIDATED FINANCIAL STATEMENT SCHEDULES |
(a) |
|
Financial Statements, Financial Statement Schedules and Exhibits |
|
(1) |
|
Financial Statements. See Index to Consolidated Financial Statements appearing on
page F-1. |
|
(2) |
|
Financial Statement Schedules. See Index to Consolidated Financial Statements
appearing on page F-1. |
(a)(2) The following Consolidated Financial Statement Schedule is filed as part of this report and
attached hereto as page F-44: |
Schedule II Valuation and Qualifying Accounts.
All other schedules for which provision is made in the applicable accounting regulations of
the Commission have been included in the Consolidated Financial Statements of Sirius XM Radio Inc.
or the notes thereto, are not required under the related instructions or are inapplicable, and
therefore have been omitted.
See Exhibit Index appearing on pages E-1 through E-6 for a list of exhibits filed or
incorporated by reference as part of this Annual Report on Form 10-K.
59
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 25th day of February 2010.
|
|
|
|
|
|
XM Satellite Radio Holdings Inc.
|
|
|
By: |
/s/ David J. Frear
|
|
|
|
David J. Frear |
|
|
|
Treasurer
(Principal Financial Officer and
Principal Accounting Officer) |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Mel Karmazin
(Mel Karmazin)
|
|
President and
Director (Principal
Executive Officer)
|
|
February 25, 2010 |
|
|
|
|
|
/s/ David J. Frear
(David J. Frear)
|
|
Treasurer and
Director (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
February 25, 2010 |
|
|
|
|
|
|
|
Secretary and Director
|
|
February 25, 2010 |
(Patrick L. Donnelly) |
|
|
|
|
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 25th day of February 2010.
|
|
|
|
|
|
XM Satellite Radio Inc.
|
|
|
By: |
/s/ David J. Frear
|
|
|
|
David J. Frear |
|
|
|
Treasurer
(Principal Financial Officer and
Principal Accounting Officer) |
|
|
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
|
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ Mel Karmazin
(Mel Karmazin)
|
|
President and
Director (Principal
Executive Officer)
|
|
February 25, 2010 |
|
|
|
|
|
/s/ David J. Frear
(David J. Frear)
|
|
Treasurer and
Director (Principal
Financial Officer and
Principal Accounting
Officer)
|
|
February 25, 2010 |
|
|
|
|
|
/s/ Patrick L. Donnelly
(Patrick L. Donnelly)
|
|
Secretary and Director
|
|
February 25, 2010 |
61
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
F-2 |
|
|
|
|
|
|
|
|
|
F-4 |
|
|
|
|
|
|
|
|
|
F-5 |
|
|
|
|
|
|
|
|
|
F-6 |
|
|
|
|
|
|
|
|
|
F-8 |
|
|
|
|
|
|
|
|
|
F-9 |
|
|
|
|
|
|
|
|
|
F-43 |
|
F-1
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder of XM Satellite Radio Holdings Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of XM Satellite Radio Holdings
Inc. and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders deficit and comprehensive loss, and cash flows for the year ended
December 31, 2009 and the period from August 1, 2008 to December 31, 2008 (Successor periods), and
from January 1, 2008 to July 31, 2008 and for the year ended December 31, 2007 (Predecessor
periods). Our audits also included the financial statement schedule listed in the Index at
Item 15(a). These consolidated financial statements and financial statement schedule are the
responsibility of the Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the aforementioned consolidated financial statements present fairly,
in all material respects, the financial position of XM Satellite Radio Holdings Inc. and
subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for
the Successor periods and Predecessor periods in conformity with U.S. generally accepted accounting principles.
Also in our opinion, the related financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
As discussed in note 1 to the consolidated financial statements, effective July 28, 2008,
Vernon Merger Corporation, a wholly owned subsidiary of Sirius XM Radio Inc., acquired all of the
outstanding stock of, and merged into, XM Satellite Radio Holdings, Inc. in a business combination
accounted for as a purchase. As a result of the acquisition, the consolidated financial information
for the periods after the acquisition is presented on a different cost basis than that for the
periods before the acquisition and, therefore, is not comparable.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the Companys internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February
25, 2010 expressed an unqualified opinion on the effectiveness of the Companys internal control
over financial reporting.
/s/ KPMG LLP
McLean, VA
February 25, 2010
F-2
Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholder of XM Satellite Radio Holdings Inc.:
We have audited XM Satellite Radio Holdings Inc and subsidiaries internal control over
financial reporting as of December 31, 2009, based on criteria established in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (the COSO criteria). XM Satellite Radio Holdings Inc.s management is responsible for
maintaining effective internal control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Item 9A.
Our responsibility is to express an opinion on the companys internal control over financial
reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects. Our audit included obtaining an understanding of internal
control over financial reporting, assessing the risk that a material weakness exists, testing and
evaluating the design and operating effectiveness of internal control based on the assessed risk,
and performing such other procedures as we considered necessary in the circumstances. We believe
that our audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting
principles. A companys internal control over financial reporting includes those policies and
procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the companys assets that could have
a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that
the degree of compliance with the policies or procedures may deteriorate.
In our opinion, XM Satellite Radio Holdings Inc. maintained, in all material respects,
effective internal control over financial reporting as of December 31, 2009, based on the COSO
criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the consolidated balance sheets of XM Satellite Radio Holdings
Inc. and subsidiaries as of December 31, 2009 and 2008 and the related consolidated statements of
operations, stockholders deficit and comprehensive loss, and cash flows for the year ended
December 31, 2009 and the period from August 1, 2008 to December 31, 2008 (Successor periods), and
the period from January 1, 2008 to July 31, 2008 and for the year ended December 31, 2007
(Predecessor periods), and our report dated February 25, 2010 expressed an unqualified opinion on
those consolidated financial statements.
/s/
KPMG LLP
McLean, VA
February 25, 2010
F-3
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,191,403 |
|
|
$ |
472,457 |
|
|
|
$ |
670,870 |
|
|
$ |
1,033,776 |
|
Advertising revenue, net of agency fees |
|
|
18,708 |
|
|
|
10,010 |
|
|
|
|
22,743 |
|
|
|
39,148 |
|
Equipment revenue |
|
|
29,574 |
|
|
|
18,991 |
|
|
|
|
13,397 |
|
|
|
28,333 |
|
Other revenue |
|
|
57,656 |
|
|
|
9,696 |
|
|
|
|
24,184 |
|
|
|
35,285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,297,341 |
|
|
|
511,154 |
|
|
|
|
731,194 |
|
|
|
1,136,542 |
|
Operating expenses (depreciation and amortization
shown separately below) (1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
50,450 |
|
|
|
29,852 |
|
|
|
|
46,566 |
|
|
|
81,036 |
|
Programming and content |
|
|
106,858 |
|
|
|
47,621 |
|
|
|
|
117,156 |
|
|
|
183,900 |
|
Revenue share and royalties |
|
|
187,355 |
|
|
|
91,132 |
|
|
|
|
166,606 |
|
|
|
256,344 |
|
Customer service and billing |
|
|
128,719 |
|
|
|
59,767 |
|
|
|
|
82,947 |
|
|
|
126,776 |
|
Cost of equipment |
|
|
16,175 |
|
|
|
12,299 |
|
|
|
|
20,013 |
|
|
|
62,003 |
|
Sales and marketing |
|
|
128,347 |
|
|
|
76,104 |
|
|
|
|
126,054 |
|
|
|
269,930 |
|
Subscriber acquisition costs |
|
|
124,395 |
|
|
|
64,865 |
|
|
|
|
174,083 |
|
|
|
259,143 |
|
General and administrative |
|
|
113,497 |
|
|
|
47,322 |
|
|
|
|
116,444 |
|
|
|
188,574 |
|
Engineering, design and development |
|
|
21,671 |
|
|
|
11,658 |
|
|
|
|
23,045 |
|
|
|
33,077 |
|
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
94,310 |
|
|
|
|
88,749 |
|
|
|
187,196 |
|
Restructuring, impairments and related costs |
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,101,502 |
|
|
|
7,135,976 |
|
|
|
|
961,663 |
|
|
|
1,647,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
195,839 |
|
|
|
(6,624,822 |
) |
|
|
|
(230,469 |
) |
|
|
(511,437 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,637 |
|
|
|
3,296 |
|
|
|
|
3,013 |
|
|
|
14,084 |
|
Interest expense, net of amounts capitalized |
|
|
(289,845 |
) |
|
|
(107,155 |
) |
|
|
|
(73,937 |
) |
|
|
(116,605 |
) |
(Loss) gain on change in value of embedded derivatives |
|
|
(33,534 |
) |
|
|
322,347 |
|
|
|
|
|
|
|
|
|
|
Loss on extinguishment of debt and credit facilities, net |
|
|
(115,884 |
) |
|
|
|
|
|
|
|
|
|
|
|
(3,693 |
) |
Loss on investments |
|
|
(7,026 |
) |
|
|
(25,762 |
) |
|
|
|
(13,010 |
) |
|
|
(56,156 |
) |
Other income (expense) |
|
|
3,446 |
|
|
|
(5,126 |
) |
|
|
|
900 |
|
|
|
2,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other (expense) income |
|
|
(440,206 |
) |
|
|
187,600 |
|
|
|
|
(83,034 |
) |
|
|
(160,351 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(244,367 |
) |
|
|
(6,437,222 |
) |
|
|
|
(313,503 |
) |
|
|
(671,788 |
) |
Income tax (expense) benefit |
|
|
(2,463 |
) |
|
|
(963 |
) |
|
|
|
(1,512 |
) |
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(246,830 |
) |
|
|
(6,438,185 |
) |
|
|
|
(315,015 |
) |
|
|
(670,849 |
) |
Add: net loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
(11,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
$ |
(246,830 |
) |
|
$ |
(6,438,185 |
) |
|
|
$ |
(322,458 |
) |
|
$ |
(682,381 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating
expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
1,378 |
|
|
$ |
1,282 |
|
|
|
$ |
2,745 |
|
|
$ |
5,024 |
|
Programming and content |
|
|
2,610 |
|
|
|
2,152 |
|
|
|
|
4,949 |
|
|
|
8,855 |
|
Customer service and billing |
|
|
1,402 |
|
|
|
831 |
|
|
|
|
1,869 |
|
|
|
2,483 |
|
Sales and marketing |
|
|
3,778 |
|
|
|
2,068 |
|
|
|
|
7,047 |
|
|
|
24,452 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,167 |
|
General and administrative |
|
|
23,581 |
|
|
|
9,851 |
|
|
|
|
13,200 |
|
|
|
28,289 |
|
Engineering, design and development |
|
|
2,946 |
|
|
|
1,790 |
|
|
|
|
4,675 |
|
|
|
7,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
35,695 |
|
|
$ |
17,974 |
|
|
|
$ |
34,485 |
|
|
$ |
86,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the consolidated financial statements.
F-4
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
(in thousands, except share and per share data) |
|
2009 |
|
|
2008 |
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
212,155 |
|
|
$ |
206,740 |
|
Accounts receivable, net |
|
|
60,042 |
|
|
|
52,727 |
|
Inventory, net |
|
|
4,016 |
|
|
|
4,489 |
|
Prepaid expenses |
|
|
75,199 |
|
|
|
37,351 |
|
Related party current assets |
|
|
103,479 |
|
|
|
108,613 |
|
Deferred tax asset |
|
|
64,641 |
|
|
|
38,051 |
|
Other current assets |
|
|
4,585 |
|
|
|
12,361 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
524,117 |
|
|
|
460,332 |
|
Property and equipment, net |
|
|
799,405 |
|
|
|
874,588 |
|
FCC license |
|
|
2,000,000 |
|
|
|
2,000,000 |
|
Restricted investments |
|
|
250 |
|
|
|
120,250 |
|
Deferred financing fees, net |
|
|
5,307 |
|
|
|
4,797 |
|
Intangible assets, net |
|
|
611,461 |
|
|
|
688,671 |
|
Related party long-term assets |
|
|
110,439 |
|
|
|
128,357 |
|
Other long-term assets |
|
|
25,529 |
|
|
|
34,284 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,076,508 |
|
|
$ |
4,311,279 |
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS DEFICIT |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
198,219 |
|
|
$ |
237,299 |
|
Accrued interest |
|
|
46,939 |
|
|
|
50,543 |
|
Current portion of deferred revenue |
|
|
509,216 |
|
|
|
419,707 |
|
Current portion of deferred credit on executory contracts |
|
|
252,831 |
|
|
|
234,774 |
|
Current maturities of long-term debt |
|
|
11,382 |
|
|
|
355,739 |
|
Related party current liabilities |
|
|
181,918 |
|
|
|
83,930 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,200,505 |
|
|
|
1,381,992 |
|
Deferred revenue |
|
|
162,656 |
|
|
|
131,255 |
|
Deferred credit on executory contracts |
|
|
784,078 |
|
|
|
1,037,190 |
|
Long-term debt |
|
|
1,502,349 |
|
|
|
1,413,596 |
|
Long-term related party debt |
|
|
157,183 |
|
|
|
|
|
Deferred tax liability |
|
|
915,274 |
|
|
|
886,475 |
|
Related party long-term liabilities |
|
|
17,508 |
|
|
|
|
|
Other long-term liabilities |
|
|
38,851 |
|
|
|
36,325 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
4,778,404 |
|
|
|
4,886,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
Stockholders deficit: |
|
|
|
|
|
|
|
|
Common stock, par value $0.01; 1,000 shares authorized;
100 shares
issued and outstanding as of December 31, 2009 and 2008 |
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss, net of tax |
|
|
(6,581 |
) |
|
|
(7,871 |
) |
Additional paid-in capital |
|
|
5,989,700 |
|
|
|
5,870,502 |
|
Accumulated deficit |
|
|
(6,685,015 |
) |
|
|
(6,438,185 |
) |
|
|
|
|
|
|
|
Total stockholders deficit |
|
|
(701,896 |
) |
|
|
(575,554 |
) |
|
|
|
|
|
|
|
Total liabilities and stockholders deficit |
|
$ |
4,076,508 |
|
|
$ |
4,311,279 |
|
|
|
|
|
|
|
|
See accompanying Notes to the consolidated financial statements.
F-5
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Convertible |
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders |
|
(in thousands, except share data) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Deficit |
|
|
Balance at January 1, 2007 |
|
|
5,393,252 |
|
|
$ |
54 |
|
|
|
305,781,515 |
|
|
$ |
3,058 |
|
|
|
|
|
|
$ |
|
|
|
$ |
3,093,894 |
|
|
$ |
(3,498,476 |
) |
|
$ |
3,590 |
|
|
$ |
(397,880 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(670,849 |
) |
|
|
|
|
|
|
(670,849 |
) |
Net loss attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,532 |
) |
|
|
|
|
|
|
(11,532 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
125 |
|
Realized gain on available-for-sale
securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
125 |
|
Foreign currency translation adjustment,
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,126 |
|
|
|
5,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(677,005 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of shares of Class A common stock |
|
|
|
|
|
|
|
|
|
|
27,412 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
301 |
|
|
|
|
|
|
|
|
|
|
|
302 |
|
Issuance of shares of Class A common stock
to third party |
|
|
|
|
|
|
|
|
|
|
1,853,412 |
|
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
21,981 |
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
Issuance of shares of Class A common stock
from redemption of warrants |
|
|
|
|
|
|
|
|
|
|
152,898 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
31 |
|
|
|
|
|
|
|
|
|
|
|
32 |
|
Issuance of shares of Class A common stock
through share-based payment plans |
|
|
|
|
|
|
|
|
|
|
1,086,871 |
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
7,900 |
|
|
|
|
|
|
|
|
|
|
|
7,910 |
|
Issuance of shares of restricted Class A
common stock, net of cancellations |
|
|
|
|
|
|
|
|
|
|
8,100,285 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
(81 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based payment expense and
amortization of restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,199 |
|
|
|
|
|
|
|
|
|
|
|
64,199 |
|
Restricted shares withheld for tax
upon vesting |
|
|
|
|
|
|
|
|
|
|
(317,911 |
) |
|
|
(3 |
) |
|
|
|
|
|
|
|
|
|
|
(3,858 |
) |
|
|
|
|
|
|
|
|
|
|
(3,861 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
|
5,393,252 |
|
|
$ |
54 |
|
|
|
316,684,482 |
|
|
$ |
3,167 |
|
|
|
|
|
|
$ |
|
|
|
$ |
3,184,367 |
|
|
$ |
(4,180,857 |
) |
|
$ |
8,966 |
|
|
$ |
(984,303 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period January 1, 2008
through July 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(315,015 |
) |
|
|
|
|
|
|
(315,015 |
) |
Net loss attributable to noncontrolling interest
for the
period January 1, 2008 through July 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
|
|
|
|
(7,443 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale
securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(910 |
) |
|
|
(910 |
) |
Foreign currency translation adjustment,
net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(277 |
) |
|
|
(277 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period
January 1, 2008 through July 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323,645 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of shares of Class A common stock
from redemption of warrants |
|
|
|
|
|
|
|
|
|
|
1,251 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
Issuance of shares of Class A common stock
through share-based payment plans |
|
|
|
|
|
|
|
|
|
|
156,431 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
974 |
|
|
|
|
|
|
|
|
|
|
|
975 |
|
Issuance of shares of restricted Class A
common stock, net of cancellations |
|
|
|
|
|
|
|
|
|
|
2,966,507 |
|
|
|
29 |
|
|
|
|
|
|
|
|
|
|
|
(29 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash share-based payment expense and
amortization of restricted stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,485 |
|
|
|
|
|
|
|
|
|
|
|
34,485 |
|
Restricted shares withheld for tax upon
vesting |
|
|
|
|
|
|
|
|
|
|
(198,282 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
(2,532 |
) |
|
|
|
|
|
|
|
|
|
|
(2,534 |
) |
Acquisition transactions |
|
|
(5,393,252 |
) |
|
|
(54 |
) |
|
|
(319,610,389 |
) |
|
|
(3,196 |
) |
|
|
100 |
|
|
|
|
|
|
|
2,619,098 |
|
|
|
4,503,315 |
|
|
|
(7,779 |
) |
|
|
7,111,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
100 |
|
|
$ |
|
|
|
$ |
5,836,363 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
5,836,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the consolidated financial statements.
F-6
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Convertible |
|
|
Class A |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders |
|
(in thousands, except share data) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Deficit |
|
|
Successor entity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at August 1, 2008 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
100 |
|
|
$ |
|
|
|
$ |
5,836,363 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
5,836,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period August 1, 2008
through December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,438,185 |
) |
|
|
|
|
|
|
(6,438,185 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,040 |
) |
|
|
(1,040 |
) |
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,831 |
) |
|
|
(6,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the period
August 1, 2008 through December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,446,056 |
) |
Contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(701 |
) |
|
|
|
|
|
|
|
|
|
|
(701 |
) |
Compensation in connection with the issuance
of share-based awards |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,924 |
|
|
|
|
|
|
|
|
|
|
|
34,924 |
|
Restricted shares withheld for tax upon vesting |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
100 |
|
|
$ |
|
|
|
$ |
5,870,502 |
|
|
$ |
(6,438,185 |
) |
|
$ |
(7,871 |
) |
|
$ |
(575,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc.
and Subsidiaries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(246,830 |
) |
|
|
|
|
|
|
(246,830 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
473 |
|
|
|
473 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
817 |
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(245,540 |
) |
Non-cash capital contributions from SIRIUS XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,198 |
|
|
|
|
|
|
|
|
|
|
|
119,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
100 |
|
|
$ |
|
|
|
$ |
5,989,700 |
|
|
$ |
(6,685,015 |
) |
|
$ |
(6,581 |
) |
|
$ |
(701,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the consolidated financial statements.
F-7
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
(in thousands) |
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss XM Satellite Radio Holdings Inc. and Subsidiaries |
|
$ |
(246,830 |
) |
|
$ |
(6,438,185 |
) |
|
|
$ |
(322,458 |
) |
|
$ |
(682,381 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
191,781 |
|
|
|
94,310 |
|
|
|
|
88,749 |
|
|
|
187,196 |
|
Impairment of goodwill |
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
|
|
|
|
|
Non-cash interest expense |
|
|
82,357 |
|
|
|
23,674 |
|
|
|
|
7,023 |
|
|
|
9,733 |
|
Provision for doubtful accounts |
|
|
15,649 |
|
|
|
7,529 |
|
|
|
|
8,523 |
|
|
|
12,740 |
|
Amortization of deferred income related to equity method investment |
|
|
(2,776 |
) |
|
|
(1,156 |
) |
|
|
|
(5,829 |
) |
|
|
(9,993 |
) |
Loss on investments |
|
|
7,026 |
|
|
|
25,762 |
|
|
|
|
13,010 |
|
|
|
56,156 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
115,884 |
|
|
|
|
|
|
|
|
|
|
|
|
3,693 |
|
Restructuring, impairments and related costs |
|
|
26,411 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based payment expense |
|
|
35,695 |
|
|
|
17,974 |
|
|
|
|
34,485 |
|
|
|
86,199 |
|
(Gain) loss on change in value of embedded derivatives |
|
|
33,534 |
|
|
|
(322,347 |
) |
|
|
|
|
|
|
|
|
|
Deferred income taxes |
|
|
2,463 |
|
|
|
963 |
|
|
|
|
1,512 |
|
|
|
(939 |
) |
Other non-cash purchase price adjustments |
|
|
(202,054 |
) |
|
|
(68,106 |
) |
|
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
1,643 |
|
|
|
|
7,412 |
|
|
|
11,524 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(22,964 |
) |
|
|
(12,832 |
) |
|
|
|
7,597 |
|
|
|
(14,054 |
) |
Inventory |
|
|
473 |
|
|
|
(1,273 |
) |
|
|
|
5,558 |
|
|
|
5,718 |
|
Related party assets |
|
|
23,052 |
|
|
|
758 |
|
|
|
|
2,050 |
|
|
|
3,448 |
|
Prepaid expenses and other current assets |
|
|
1,115 |
|
|
|
(8,800 |
) |
|
|
|
(20,599 |
) |
|
|
(3,480 |
) |
Restricted investments |
|
|
|
|
|
|
|
|
|
|
|
(120,000 |
) |
|
|
|
|
Other long-term assets |
|
|
61,726 |
|
|
|
(10,346 |
) |
|
|
|
378 |
|
|
|
(3,265 |
) |
Accounts payable and accrued expenses |
|
|
(51,549 |
) |
|
|
(9,310 |
) |
|
|
|
(30,477 |
) |
|
|
73,676 |
|
Accrued interest |
|
|
551 |
|
|
|
21,158 |
|
|
|
|
12,558 |
|
|
|
(1,655 |
) |
Deferred revenue |
|
|
90,532 |
|
|
|
32,526 |
|
|
|
|
47,599 |
|
|
|
91,834 |
|
Related party liabilities |
|
|
81,953 |
|
|
|
11,627 |
|
|
|
|
6,557 |
|
|
|
19,287 |
|
Other long-term liabilities |
|
|
28,804 |
|
|
|
40,624 |
|
|
|
|
5,266 |
|
|
|
(167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
272,833 |
|
|
|
7,239 |
|
|
|
|
(251,086 |
) |
|
|
(154,730 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(53,465 |
) |
|
|
(13,447 |
) |
|
|
|
(30,843 |
) |
|
|
(133,338 |
) |
Purchase of restricted and other investments |
|
|
|
|
|
|
|
|
|
|
|
(34,825 |
) |
|
|
|
|
Sale of restricted and other investments |
|
|
|
|
|
|
25,400 |
|
|
|
|
|
|
|
|
1,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(53,465 |
) |
|
|
11,953 |
|
|
|
|
(65,668 |
) |
|
|
(131,515 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants and stock options |
|
|
|
|
|
|
|
|
|
|
|
964 |
|
|
|
8,244 |
|
Long-term borrowings, net of costs |
|
|
388,399 |
|
|
|
531,743 |
|
|
|
|
1,023,190 |
|
|
|
284,238 |
|
Related party long-term borrowings, net of costs |
|
|
93,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of premiums on redemption of debt |
|
|
(17,075 |
) |
|
|
(18,693 |
) |
|
|
|
|
|
|
|
(3,693 |
) |
Payments to noncontrolling interest |
|
|
|
|
|
|
(61,880 |
) |
|
|
|
(6,897 |
) |
|
|
(9,486 |
) |
Repayment of long-term borrowings |
|
|
(579,095 |
) |
|
|
(1,083,143 |
) |
|
|
|
(35,210 |
) |
|
|
(52,544 |
) |
Repayment of long-term related party borrowings |
|
|
(100,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net |
|
|
|
|
|
|
|
|
|
|
|
(2,458 |
) |
|
|
(2,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(213,953 |
) |
|
|
(631,973 |
) |
|
|
|
979,589 |
|
|
|
224,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
5,415 |
|
|
|
(612,781 |
) |
|
|
|
662,835 |
|
|
|
(61,530 |
) |
Cash and cash equivalents at beginning of period |
|
|
206,740 |
|
|
|
819,521 |
|
|
|
|
156,686 |
|
|
|
218,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
212,155 |
|
|
$ |
206,740 |
|
|
|
$ |
819,521 |
|
|
$ |
156,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash and Non-Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
|
$ |
198,662 |
|
|
$ |
62,360 |
|
|
|
$ |
54,626 |
|
|
$ |
108,742 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash capital contributions from SIRIUS XM |
|
|
119,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquired through capital leases |
|
|
1,208 |
|
|
|
|
|
|
|
|
4,465 |
|
|
|
9,453 |
|
Release of restricted investments |
|
|
120,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the consolidated financial statements.
F-8
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO 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 system. Our system
consists of four in-orbit satellites, over 650 terrestrial repeaters that receive and retransmit
signals, satellite uplink facilities and studios. Subscribers can also receive certain of our
music and other channels over the Internet.
On July 28, 2008 XM Satellite Radio Holdings Inc. (XM Holdings) merged with and into Vernon
Merger Corporation, a wholly owned subsidiary of Sirius Satellite Radio Inc. (the Merger) and, as
a result, XM Holdings is now a wholly owned subsidiary of SIRIUS. Sirius Satellite Radio Inc. was
later renamed Sirius XM Radio Inc. (SIRIUS). The accounting for the Merger has been pushed-down
in the accompanying consolidated financial statements. XM, together with its subsidiaries, is
operated as an unrestricted subsidiary under SIRIUS existing indebtedness. As an unrestricted
subsidiary, transactions between the companies are required to comply with various contractual
provisions in our debt instruments. For purposes of these Notes to consolidated financial
statements, we, us, our, the company, and similar terms refer to XM Satellite Radio
Holdings Inc. and its consolidated subsidiaries.
Our satellite radios are primarily distributed through automakers (OEMs), nationwide through
retail locations and our website. We have agreements with major automakers to offer our satellite
radios as factory or dealer-installed equipment in their vehicles. Our radios are also offered to
customers of rental car companies.
Our primary source of revenue is subscription fees, with most of our customers subscribing to
an annual, semi-annual, quarterly or monthly plan. We offer discounts for prepaid and long-term
subscriptions as well as discounts for multiple subscriptions on each platform. We also derive
revenue from activation and other 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 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 months.
We also reimburse various automakers for certain costs associated with satellite radios installed
in their vehicles.
We also have an interest in a satellite radio service offered in Canada through our affiliate,
Canadian Satellite Radio Holdings Inc. (XM Canada).
XM Satellite Radio Inc. (XM) was incorporated on December 15, 1992 in the State of Delaware.
XM Holdings was formed as a holding company for XM on May 16, 1997.
As of December 31, 2009, the principal differences between the financial conditions of XM
Holdings and XM were:
|
|
|
the ownership by XM Holdings of the corporate headquarters and data center buildings and
the lease of these buildings to XM; |
|
|
|
XM-1, XM-2, and the transponders of XM-3 and XM-4 are owned by XM; and XM-5 and the bus
portions of XM-3 and XM-4 are owned by XM Holdings; |
|
|
|
the presence at XM Holdings of additional indebtedness, primarily the 10% Senior PIK
Secured Notes due 2011 (of which $58,800 is held by XM) and $227,515 of 14.75% PIK Notes
due 2014 issued by XM Holdings to XM in December 2009, neither of which is guaranteed by
XM; |
|
|
|
the investment by XM Holdings in XM Canada (including related revenue and deferred
income); and |
|
|
|
the existence of additional cash balances at XM Holdings. |
F-9
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Accordingly, the results of operations for XM and its subsidiaries are substantially the same
as the results of operations for XM Holdings and its subsidiaries except that XM has:
|
|
|
additional rent, less depreciation and amortization expense and less other income, in
each case principally related to XMs rental of its corporate headquarters and data center
buildings from XM Holdings, which are intercompany transactions that have been eliminated
in XM Holdings consolidated financial statements; |
|
|
|
less interest expense, principally related to the additional indebtedness at XM
Holdings, and gains and losses on embedded derivatives; |
|
|
|
less revenue associated with the amortization of deferred income and equity in losses
from XM Holdings investment in XM Canada; |
|
|
|
no gains or losses on XM Holdings investment in XM Canada; and |
|
|
|
less interest income because of additional cash balances at XM Holdings. |
(2) Principles of Consolidation and Basis of Presentation
Principles of Consolidation
The accompanying consolidated financial statements of XM Satellite Radio Holdings Inc. and
subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles
(GAAP). All significant intercompany transactions have been eliminated in consolidation.
Basis of Presentation
XM Holdings operates as an unrestricted subsidiary of SIRIUS under its existing indebtedness.
As an unrestricted subsidiary, transactions between the companies are required to comply with
various contractual restrictions in our existing debt instruments. SIRIUS allocates certain
expenses to us based on the estimated costs incurred by SIRIUS that pertain to us. Additionally,
certain costs incurred by us benefit SIRIUS and are allocated to SIRIUS based on estimated costs
incurred by us pertaining to SIRIUS. We settle amounts due between the parties on a semi-monthly
and monthly basis, except for share-based payment arrangements which are settled at times agreed to
between us and SIRIUS. Our financial position, results of operations and cash flows could differ
from those that might have resulted had we operated autonomously. As a result of the Merger,
certain of our predecessor accounting policies were changed to conform with SIRIUS current
accounting policies. These changes have not had, and are not expected to have, a material impact on
our consolidated financial statements.
In connection with the Merger, our assets and liabilities were adjusted to fair value at the
acquisition date by application of push-down accounting. Accordingly, results of operations may
not be comparable between the accompanying Successor and Predecessor periods.
We have evaluated events subsequent to the balance sheet date and prior to filing of this
Annual Report on Form 10-K for the year ended December 31, 2009 through February 25, 2010 and
determined there have not been any events that have occurred that would require adjustment to our
consolidated financial statements.
(3) Summary of Significant Accounting Policies
Use of Estimates
In presenting consolidated financial statements, management makes estimates and assumptions
that affect the amounts reported and accompanying notes. Additionally, estimates were used when
recording the fair values of our assets acquired and liabilities assumed in the Merger. 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 consolidated financial
statements include revenue recognition, asset impairment, useful lives of our satellites, valuation
of embedded derivatives and valuation allowances against deferred tax assets. The economic
conditions in the United States have impacted our business. Such conditions could have a material
impact to our accounting estimates.
F-10
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Recent Accounting Pronouncements
In September 2009, Accounting Standards Codification (ASC) became the source of
authoritative GAAP recognized by the Financial Accounting Standards Board (FASB) for
nongovernmental entities, except for certain FASB Statements not yet
incorporated into ASC. Rules and interpretive releases of the SEC under federal securities
laws are also sources of authoritative GAAP for registrants. The discussion below includes the
applicable ASC reference.
In July 2009, the FASB proposed an update to ASC 470 to incorporate the previously ratified
EITF No. 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt
Issuance, into the ASC. This proposed standard would require 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 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. We will recognize an aggregate increase in the deferred financing costs associated with our
7% Exchangeable Senior Subordinated Notes due 2014 of approximately $257,000 as of the Merger date,
offset by approximately $30,000 of accumulated amortization through December 31, 2009.
We adopted ASC 810-10-65, Transition and Open Effective Date Information, which requires a
parent with one or more less-than-wholly-owned subsidiaries to disclose, on the face of the
consolidated financial statements, the amount of consolidated net income attributable to the parent
and noncontrolling interest. We adopted this guidance effective January 1, 2009, which impacted the
Predecessor periods results of operations.
We adopted ASC 855, Subsequent Events, which requires disclosure of events occurring after the
balance sheet date but before financial statements are issued or are available to be issued. We
adopted this guidance effective April 1, 2009, with no impact on our consolidated results of
operations or financial position.
In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles, which integrated existing accounting
standards with other authoritative guidance to provide a single source of authoritative GAAP for
nongovernmental entities. Statement 168 has not been incorporated into ASC and is effective for
interim and annual periods ending after September 15, 2009. We adopted this guidance effective July
1, 2009, with no impact on our consolidated results of operations or financial position.
Revenue Recognition
We derive revenue primarily from subscribers, advertising and direct sales of merchandise.
Revenue from subscribers consists of subscription fees; agreements with daily rental fleet
programs; non-refundable activation and other fees; and the effects of rebates. Revenue is
recognized as it is realized or realizable and earned.
We recognize subscription fees as our services are provided. Prepaid subscription fees are
recorded as deferred revenue and amortized to revenue ratably over the term of the applicable
subscription plan.
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 months. Prepaid
subscription fees received from certain automakers are recorded as deferred revenue and amortized
to revenue ratably over the service period, which commences upon retail sale and activation. We
reimburse automakers for certain costs associated with the satellite radio installed in the
applicable vehicle at the time the vehicle is manufactured. The associated payments to the
automakers are included in Subscriber acquisition costs. These payments are included in Subscriber
acquisition costs because we are responsible for providing the service to the customers, including
being obligated to the customers in the case of an interruption of service.
Activation fees are recognized ratably over the estimated term a subscriber will use the
activated radio, estimated to be approximately 3.5 years during 2009. The estimated term of
subscriber equipment usage is based on historical experience.
We record an estimate of rebates that are paid by us to subscribers as a reduction to revenue
in the period the subscriber activates service. For certain rebate promotions, a subscriber must
remain active for a specified period of time to be considered eligible. In those instances, the
estimate is recorded as a reduction to revenue over the required activation period. We estimate the
effects of mail-in rebates based on actual take-rates for rebate incentives offered in prior
periods, adjusted as deemed necessary based on take-rate data available at the time. In subsequent
periods, estimates are adjusted when necessary. For instant rebate promotions, we record the
consideration paid to the consumer as a reduction to revenue in the period the customer
participates in the promotion.
We recognize revenue from the sale of advertising as the advertising is broadcast. Agency fees
are calculated based on a stated percentage applied to gross billing revenue for our advertising
inventory and are reported as a reduction of Advertising revenue. We pay certain third parties a
percentage of Advertising revenue. Advertising revenue is recorded gross of such revenue share
payments as we are the primary obligor in the transaction. Advertising revenue share payments are
recorded to Revenue share and royalties during the period in which the advertising is broadcast.
F-11
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Equipment revenue and royalties from the sale of satellite radios, components and accessories
is recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to
customers are recorded as revenue. Shipping and handling costs associated with shipping goods to
customers are reported as a component of Cost of equipment.
Programming Costs
Programming costs which are for a specified number of events are amortized on an
event-by-event basis; programming costs which are for a specified season or period are amortized
over the season or period on a straight-line basis. We allocate a portion of
certain programming costs which are related to sponsorship and marketing activities to sales
and marketing expenses on a straight-line basis over the term of the agreement.
Advertising Costs
Media is expensed when aired and advertising production costs are expensed as incurred. Market
development funds are fixed and variable payments to reimburse retailers for the cost of
advertising and other product awareness activities. Fixed market development funds are expensed
over the periods specified in the applicable agreement; variable costs are expensed at the time a
subscriber is activated. For the year ended December 31, 2009, the periods August 1, 2008 through
December 31, 2008 and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007,
we recorded advertising costs of $66,805, $28,384, $46,418 and $141,529, respectively. These costs
are reflected in Sales and marketing expense in our consolidated statements of operations.
Stock-Based Compensation
We account for equity instruments granted to employees in accordance with ASC 718,
Compensation Stock Compensation. ASC 718 requires all share-based compensation payments to be
recognized in the financial statements based on fair value using an option pricing model. ASC 718
requires forfeitures to be estimated at the time of grant and revised in subsequent periods if
actual forfeitures differ from initial estimates. We use the Black-Scholes-Merton option-pricing
model to value stock option awards and have elected to treat awards with graded vesting as a single
award.
Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used
for the expected life, expected stock price volatility and risk-free interest rates. We estimate
the fair value of awards granted using the hybrid approach for volatility, which weights observable
historical volatility and implied volatility of qualifying actively traded options on SIRIUS
common stock (Successor periods), and implied volatility on XM Holdings common stock (Predecessor
periods). The expected life assumption represents the weighted-average period stock-based awards
are expected to remain outstanding. These expected life assumptions are established through a
review of historical exercise behavior of stock-based award grants with similar vesting periods.
Where historical patterns do not exist, contractual terms are used. The risk-free interest rate
represents the daily treasury yield curve rate at the grant date based on the closing market bid
yields on actively traded U.S. treasury securities in the over-the-counter market for the expected
term. Our assumptions may change in future periods.
Equity instruments granted to non-employees are accounted for in accordance with ASC 505,
Equity. The final measurement date for the fair value of equity instruments with performance
criteria is the date that each performance commitment for such equity instrument is satisfied or
there is a significant disincentive for non-performance.
Stock-based awards granted to employees, non-employees and members of our Predecessor board of
directors include warrants, stock options, restricted stock and restricted stock units.
Upon completion of the Merger, all outstanding vested and unvested options and warrants to
purchase our common stock outstanding under our equity-based plans were converted into options and
warrants to purchase shares of SIRIUS common stock at the same ratio of exchange of XM Holdings for
SIRIUS common stock in the Merger. Additionally, unvested restricted stock awards outstanding under
our equity-based plans at the time of the Merger were converted into unvested restricted stock
awards of SIRIUS common stock at the same exchange ratio. Compensation expense is recognized under
these grants in the accompanying financial statements. SIRIUS will satisfy awards and options
granted under these plans through the issuance of new shares. In the Successor period, compensation
cost associated with our benefit plans is pushed down from SIRIUS based on the employees providing
services to us.
F-12
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Subscriber Acquisition Costs
Subscriber acquisition costs include hardware subsidies paid to radio manufacturers,
distributors and automakers, including subsidies paid to automakers who include our radio and a
prepaid subscription to our service in the sale or lease price of a new 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 our radios; product warranty obligations; and compensation costs associated with
stock-based awards granted in connection with certain distribution agreements. The majority of
subscriber acquisition costs are incurred and expensed in advance or concurrent with acquiring a
subscriber. Subscriber acquisition costs do not include advertising, loyalty payments to
distributors and dealers of our radios and revenue share payments to automakers and retailers of
our radios.
Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment,
receipt of product or activation. Commissions paid to retailers and automakers are expensed upon
either the sale or activation of radios.
We record product warranty obligations in accordance with ASC 460, Guarantees, which requires
a guarantor to recognize, at the inception of a guarantee, a liability for the fair value of the
obligation undertaken by issuing the guarantee. We warrant that certain products sold through our
retail and direct to consumer distribution channels will perform in all material respects in
accordance with specifications in effect at the time of the purchase of the products by the
customer. We recorded a liability for costs that we
expect to incur under our warranty obligations when the product is shipped from the manufacturer.
Factors affecting the warranty liability include the number of units sold and historical and
anticipated rates of claims and costs per claim. We periodically assess the adequacy of our
warranty liability based on changes in these factors.
Research & Development Costs
Research and development costs are expensed as incurred and primarily include the cost of new
product development, chip set design, software development and engineering. For the year ended
December 31, 2009, the periods August 1, 2008 through December 31, 2008 and January 1, 2008 through
July 31, 2008 and the year ended December 31, 2007, we recorded research and development costs of
$21,671, $11,658, $23,045 and $33,077, respectively. These costs are reported as a component of
Engineering, design and development expense in our consolidated statements of operations.
Income Taxes
Deferred income taxes are recognized for the tax consequences related to temporary differences
between the carrying amount of assets and liabilities for financial reporting purposes and the
amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect taxable income. A
valuation allowance is recognized when necessary based on the weight of all available evidence, it
is considered more-likely-than-not that all or some portion of the deferred tax assets will not be
realized. Income tax expense is the sum of current income tax plus the change in deferred tax
assets and liabilities.
ASC 740, Income Taxes, requires a company to first determine whether it is
more-likely-than-not (defined as a likelihood of more than fifty percent) that a tax position will
be sustained based on its technical merits as of the reporting date, assuming that taxing
authorities will examine the position and have full knowledge of all relevant information. A tax
position that meets this more-likely-than-not threshold is then measured and recognized at the
largest amount of benefit that is greater than fifty percent likely to be realized upon effective
settlement with a taxing authority.
Subsequent to the Merger, we became a part of the SIRIUS consolidated group for income tax
return filing purposes; however, our provision for income taxes is recorded as if we filed
separately. We report revenues net of any tax assessed by a governmental authority that is both
imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a
customer in our consolidated statements of operations.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash on hand, money market funds, certificates of
deposit, in-transit credit card receipts and highly liquid investments with an original maturity of
three months or less when purchased. Cash and cash equivalents are stated at fair market value.
F-13
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
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:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Gross accounts receivable |
|
$ |
65,399 |
|
|
$ |
58,926 |
|
Allowance for doubtful accounts |
|
|
(5,357 |
) |
|
|
(6,199 |
) |
|
|
|
|
|
|
|
Total accounts receivable, net |
|
$ |
60,042 |
|
|
$ |
52,727 |
|
|
|
|
|
|
|
|
Inventory
Inventory consists of finished goods, refurbished goods, 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 and obsolete or whose carrying value is in excess of net realizable value. The provision
related to products purchased for our direct to consumer distribution channel is reported as a
component of Cost of equipment in our consolidated statements of operations. The remaining
provision is reported as a component of Subscriber acquisition costs in our consolidated statements
of operations.
Inventory, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
5,002 |
|
|
$ |
5,781 |
|
Finished goods |
|
|
4,975 |
|
|
|
6,898 |
|
Allowance for obsolescence |
|
|
(5,961 |
) |
|
|
(8,190 |
) |
|
|
|
|
|
|
|
Total inventory, net |
|
$ |
4,016 |
|
|
$ |
4,489 |
|
|
|
|
|
|
|
|
Investments
Marketable
Securities Marketable securities consist of certificates of deposit, auction rate
certificates and investments in debt and equity securities of other entities. Our investment policy
objectives are the preservation of capital, maintenance of liquidity to meet operating requirements
and yield maximization. Marketable securities are classified as available-for-sale securities and
carried at fair market value. Unrealized gains and losses on available-for-sale securities are
included in Accumulated other comprehensive (loss) income, net of tax, as a separate component of
Stockholders deficit. Realized gains and losses, dividends and interest income, including
amortization of the premium or discount arising at purchase, are included in Interest and
investment income. The specific-identification method is used to determine the cost of all
securities and the basis by which amounts are reclassified from Accumulated other comprehensive
(loss) income into earnings.
We received proceeds from the sale or maturity of marketable securities of $0, $0, $0, and
$1,823 for the year ended December 31, 2009, the periods August 1, 2008 through December 31, 2008
and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007, respectively. We
recorded $473 of net unrealized gains on marketable securities for the year ended December 31, 2009
and $1,040 of net unrealized losses on marketable securities for the year ended December 31, 2008.
Restricted Investments We have escrow deposits, certificates of deposit, money market funds
and interest-bearing accounts which are restricted as to their withdrawal. We received proceeds
from the release of restricted investments of $0, $25,400, $0, and $0 for the year ended December
31, 2009, the periods August 1, 2008 through December 31, 2008 and January 1, 2008 through July 31,
2008 and the year ended December 31, 2007, respectively.
Equity Method Investments Investments in which we have the ability to exercise significant
influence but not control are accounted for pursuant to the equity method of accounting. We
recognize our proportionate share of net earnings or losses of our affiliates as they occur as a
component of Other (expense) income in our consolidated statements of operations. We evaluate our
equity method investments for impairment whenever events or changes in circumstances indicate that
the carrying amounts of such investments may not be recoverable. The difference between the
carrying value and the estimated fair value of our equity method investment is recognized as an
impairment loss when the loss is deemed to be other than temporary.
F-14
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Cost Method Investments Investments in equity securities that do not have readily
determinable fair values and in which we do not have a controlling interest or are unable to exert
significant influence are recorded at cost.
ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for input
into valuation techniques as follows: i) Level 1 input unadjusted quoted prices in active markets
for identical instrument; ii) Level 2 input observable market data for same or similar instrument
but not Level 1; and iii) Level 3 input unobservable inputs developed using managements
assumptions about the inputs used for pricing the asset or liability. We use Level 3 inputs to fair
value our investments in auction rate certificates issued by student loan trusts and the 8%
convertible unsecured subordinated debentures issued by XM Canada, as well as to fair value the
embedded derivatives associated with our 10% senior secured discount convertible notes and our 7%
exchangeable senior subordinated notes. See Note 9, Investments and Note 11, Debt, respectively.
Investments are periodically reviewed for impairment and a write down is recorded whenever
declines in fair value below carrying value are determined to be other than temporary. In making
this determination, we consider, among other factors, the severity and duration of the decline as
well as the likelihood of a recovery within a reasonable timeframe.
Property and Equipment
Property and equipment, including satellites, are stated at cost less accumulated depreciation
and amortization. Equipment under capital leases is stated at the present value of minimum lease
payments. Depreciation and amortization are calculated using the straight-line method over the
following estimated useful lives:
|
|
|
Satellite system |
|
2 - 15 years |
Terrestrial repeater network |
|
3 - 15 years |
Broadcast studio equipment |
|
3 - 15 years |
Capitalized software and hardware |
|
3 - 7 years |
Satellite telemetry, tracking and control facilities |
|
3, 4, 11 or 15 years |
Furniture, fixtures, equipment and other |
|
2 - 7 years |
Building and improvements |
|
14 - 47 years |
Leasehold improvements |
|
Lesser of useful life or remaining lease term |
We review long-lived assets, such as property and equipment, and purchased intangibles subject
to amortization for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated
future cash flows, an impairment charge is recognized for the amount by which the carrying amount
exceeds the fair value of the asset.
Goodwill and Other Intangible Assets
Goodwill represents the purchase price paid by SIRIUS in excess of the net amount assigned to
our identifiable assets acquired and liabilities assumed by SIRIUS in the Merger. During 2008, we
recognized an impairment charge of $6,601,046, resulting in the complete elimination of goodwill as
of December 31, 2008.
Other intangible assets with indefinite lives are tested for impairment at least annually or
more frequently if indicators of impairment exist.
Other intangible assets with finite useful lives are amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment under the provisions
of ASC 360-10-35, Property, Plant and Equipment/Overall/Subsequent Measurement.
Restructuring Accruals
In connection with the Merger, we identified $74,473 of costs associated with reductions in
staffing levels and consolidations, which was comprised of $66,515 in severance and related
benefits and $7,958 in lease and other contract termination costs. These costs were recognized as
assumed liabilities in the business combination. During 2009, we identified an additional $2,622
in severance and related benefits and $3,882 in lease and other contract termination costs.
During 2009 and 2008, we paid $32,036 and $38,676, respectively, in severance and related benefits
and lease and other contract termination costs and the balance as of December 31, 2009 was $10,265.
F-15
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Reclassifications
Certain amounts in our prior period consolidated financial statements have been reclassified
to conform to our current period presentation.
Allocations
SIRIUS allocates various expenses to us based on the estimated costs incurred by SIRIUS that
pertain to us. Certain costs incurred by us benefit SIRIUS and are charged to SIRIUS based on
estimated costs incurred by us pertaining to SIRIUS.
(4) Intangible Assets
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
Net |
|
|
Gross |
|
|
|
|
|
Net |
|
|
|
Weighted Average |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
|
|
Useful Lives |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Indefinite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCC licenses |
|
Indefinite |
|
$ |
2,000,000 |
|
|
$ |
|
|
|
$ |
2,000,000 |
|
|
$ |
2,000,000 |
|
|
$ |
|
|
|
$ |
2,000,000 |
|
Trademark |
|
Indefinite |
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
Definite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber relationships |
|
9 years |
|
$ |
380,000 |
|
|
$ |
(91,186 |
) |
|
$ |
288,814 |
|
|
$ |
380,000 |
|
|
$ |
(29,226 |
) |
|
$ |
350,774 |
|
Proprietary software |
|
6 years |
|
|
16,552 |
|
|
|
(6,823 |
) |
|
|
9,729 |
|
|
|
16,552 |
|
|
|
(2,285 |
) |
|
|
14,267 |
|
Developed technology |
|
10 years |
|
|
2,000 |
|
|
|
(283 |
) |
|
|
1,717 |
|
|
|
2,000 |
|
|
|
(83 |
) |
|
|
1,917 |
|
Licensing agreements |
|
9.1 years |
|
|
75,000 |
|
|
|
(13,906 |
) |
|
|
61,094 |
|
|
|
75,000 |
|
|
|
(4,090 |
) |
|
|
70,910 |
|
Leasehold interests |
|
7.4 years |
|
|
132 |
|
|
|
(25 |
) |
|
|
107 |
|
|
|
908 |
|
|
|
(105 |
) |
|
|
803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
$ |
2,723,684 |
|
|
$ |
(112,223 |
) |
|
$ |
2,611,461 |
|
|
$ |
2,724,460 |
|
|
$ |
(35,789 |
) |
|
$ |
2,688,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite Life Intangible Assets
We have identified our FCC licenses and our trademark as indefinite life intangible assets
after considering the expected use of the assets, the regulatory and economic environment within
which they are being 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. Our FCC licenses for our satellites expire in 2013 and 2014. Prior to the
expirations, 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. The
FCC licenses authorize 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 our trademark.
As of December 31, 2009 there are no legal, regulatory or contractual limitations associated with
our trademark.
We evaluate our indefinite life intangible assets for impairment on an annual basis. During
the year ended December 31, 2009 and the period August 1, 2008 through December 31, 2008, no
impairment loss was recorded for intangible assets with indefinite lives.
Definite Life Intangible Assets
Definite life intangible assets consist primarily of subscriber relationships of $380,000 that
were fair valued as a result of the Merger. 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 of
$75,000, which are being amortized over a weighted average useful life of 9.1 years on a
straight-line basis.
F-16
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Amortization expense was $76,587, $35,789, $0 and $0 for the year ended December 31, 2009, the
periods August 1, 2008 through December 31, 2008 and January 1, 2008 through July 31, 2008 and the
year ended December 31, 2007, respectively. Expected amortization expense for each of the fiscal
years through December 31, 2013 and for periods thereafter is as follows:
|
|
|
|
|
Year ending December 31, |
|
Amount |
|
|
2010 |
|
$ |
65,916 |
|
2011 |
|
|
58,850 |
|
2012 |
|
|
53,420 |
|
2013 |
|
|
47,097 |
|
2014 |
|
|
38,619 |
|
Thereafter |
|
|
97,559 |
|
|
|
|
|
|
|
|
|
|
Total intangibles, net |
|
$ |
361,461 |
|
|
|
|
|
(5) Subscriber Revenue
Subscriber revenue consists of subscription fees, non-refundable activation and other fees and
the effects of rebates. Revenues received from automakers for prepaid subscriptions included in the
sale or lease price of vehicles are also included in subscriber revenue over the service period,
after sale or subscriber activation.
Subscriber revenue consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription fees |
|
$ |
1,188,195 |
|
|
$ |
472,800 |
|
|
|
$ |
659,775 |
|
|
$ |
1,016,720 |
|
Activation fees |
|
|
3,488 |
|
|
|
319 |
|
|
|
|
11,855 |
|
|
|
19,354 |
|
Effect of rebates |
|
|
(280 |
) |
|
|
(662 |
) |
|
|
|
(760 |
) |
|
|
(2,298 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber revenue |
|
$ |
1,191,403 |
|
|
$ |
472,457 |
|
|
|
$ |
670,870 |
|
|
$ |
1,033,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6) 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest costs charged to expense |
|
$ |
289,845 |
|
|
$ |
107,155 |
|
|
|
$ |
73,937 |
|
|
$ |
116,605 |
|
Interest costs capitalized |
|
|
33,508 |
|
|
|
10,737 |
|
|
|
|
6,852 |
|
|
|
7,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest costs incurred |
|
$ |
323,353 |
|
|
$ |
117,892 |
|
|
|
$ |
80,789 |
|
|
$ |
123,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in interest costs incurred is non-cash interest expense, consisting of amortization
related to original issue discounts and deferred financing fees. This non-cash interest was
$82,357, $23,674, $7,023 and $9,733 for the year ended December 31, 2009, the periods August 1,
2008 through December 31, 2008 and January 1, 2008 through July 31, 2008 and the year ended
December 31, 2007, respectively.
F-17
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(7) Property and Equipment
Property and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Satellite system |
|
$ |
490,126 |
|
|
$ |
490,126 |
|
Terrestrial repeater network |
|
|
41,604 |
|
|
|
41,850 |
|
Leasehold improvements |
|
|
7,250 |
|
|
|
6,762 |
|
Broadcast studio equipment |
|
|
7,957 |
|
|
|
7,804 |
|
Capitalized software and hardware |
|
|
53,772 |
|
|
|
53,986 |
|
Satellite telemetry, tracking and control facilities |
|
|
32,877 |
|
|
|
33,542 |
|
Furniture, fixtures, equipment and other |
|
|
27,418 |
|
|
|
26,076 |
|
Land |
|
|
38,100 |
|
|
|
38,100 |
|
Building |
|
|
53,851 |
|
|
|
53,887 |
|
Construction in progress |
|
|
223,083 |
|
|
|
181,856 |
|
|
|
|
|
|
|
|
Total property and equipment |
|
|
976,038 |
|
|
|
933,989 |
|
Accumulated depreciation and amortization |
|
|
(176,633 |
) |
|
|
(59,401 |
) |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
799,405 |
|
|
$ |
874,588 |
|
|
|
|
|
|
|
|
Depreciation and amortization expense on property and equipment was $115,194, $58,521, $88,749
and $187,196 for the year ended December 31, 2009, the periods August 1, 2008 through December 31,
2008 and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007, respectively.
Satellites
We own four orbiting satellites; two of which, XM-3 and XM-4, currently transmit our signal
and two of which, XM-1 and XM-2, serve as in-orbit spares. Our satellites were launched in March
2001, May 2001, February 2005 and October 2006.
Space Systems/Loral has constructed our fifth satellite, XM-5, for use in our system. In 2006,
we entered into an agreement with Sea Launch to secure a launch for XM-5. In June 2009, Sea Launch
filed for bankruptcy protection under Title 11 of the United States Code and as a result, we
recorded a charge of $24,196 to Restructuring, impairments and related costs in our consolidated
statements of operations for amounts previously paid, including capitalized interest. In October
2009, XM Holdings terminated its satellite launch agreement with Sea Launch with the consent of the
Bankruptcy Court. In October 2009, SIRIUS entered into an agreement with International Launch
Services (ILS) to secure a satellite launch for XM-5 on a Proton rocket.
(8) Related Party Transactions
We had the following related party balances at December 31, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
Related party |
|
|
|
current assets |
|
|
long-term assets |
|
|
current liabilities |
|
|
long-term liabilities |
|
|
long-term debt |
|
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Media |
|
$ |
|
|
|
$ |
|
|
|
$ |
646 |
|
|
$ |
|
|
|
$ |
4,589 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
157,183 |
|
|
$ |
|
|
XM Canada |
|
|
1,011 |
|
|
|
1,844 |
|
|
|
24,429 |
|
|
|
12,061 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors |
|
|
99,554 |
|
|
|
104,575 |
|
|
|
85,364 |
|
|
|
116,296 |
|
|
|
93,107 |
|
|
|
63,023 |
|
|
|
17,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
American Honda |
|
|
2,914 |
|
|
|
2,194 |
|
|
|
|
|
|
|
|
|
|
|
3,841 |
|
|
|
4,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SIRIUS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,381 |
|
|
|
16,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
103,479 |
|
|
$ |
108,613 |
|
|
$ |
110,439 |
|
|
$ |
128,357 |
|
|
$ |
181,918 |
|
|
$ |
83,930 |
|
|
$ |
17,508 |
|
|
$ |
|
|
|
$ |
157,183 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liberty Media
Liberty Media Corporation and its affiliate, Liberty Media, LLC (collectively, Liberty
Media), is the holder of SIRIUS Convertible Perpetual Preferred Stock, Series B (the Series B
Preferred Stock), has representatives on SIRIUS board of directors and is considered a related
party. See Note 11, Debt, to our consolidated financial statements for further information
regarding indebtedness previously owed to Liberty Media.
F-18
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Investment Agreement
On February 17, 2009, SIRIUS entered into an Investment Agreement (the Investment Agreement)
with Liberty Media. Pursuant to the Investment Agreement, in March 2009 SIRIUS issued to Liberty
Radio, LLC 12,500,000 shares of Series B Preferred Stock with a liquidation preference of $0.001
per share in partial consideration for certain loan investments.
As a result of SIRIUS issuance of Series B Preferred Stock to Liberty Radio, LLC, we recorded
a $113,280 increase to additional paid-in capital.
Loan Investments
On February 17, 2009, XM entered into a Credit Agreement with Liberty Media Corporation, as
administrative agent and collateral agent, and Liberty Media, LLC, as lender. On March 6, 2009, XM
amended and restated that credit agreement (the Second-Lien Credit Agreement) with Liberty Media
Corporation. In June 2009, XM repaid all amounts due and terminated the Second-Lien Credit
Agreement in connection with the issue and sale of our 11.25% Senior Secured Notes due 2013.
On March 6, 2009, XM amended and restated the $100,000 Term Loan, dated as of June 26, 2008
and the $250,000 Credit Agreement, dated as of May 5, 2006. These facilities were combined as term
loans into the Amended and Restated Credit Agreement, dated as of March 6, 2009. Liberty Media,
LLC, purchased $100,000 aggregate principal amount of such loans from the existing lenders. In June
2009, XM used a portion of the net proceeds from the sale of our 11.25% Senior Secured Notes due
2013 to extinguish the Amended and Restated Credit Agreement.
Liberty Media has advised us that as of December 31, 2009 it owned the following principal
amounts of our debt:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
11.25% Senior Secured Notes due 2013 |
|
$ |
87,000 |
|
|
$ |
|
|
13% Senior Notes due 2013 |
|
|
76,000 |
|
|
|
|
|
7% Exchangeable Senior Subordinated Notes due 2014 |
|
|
11,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
174,000 |
|
|
$ |
|
|
|
|
|
|
|
|
|
As of December 31, 2009, we recorded $4,589 related to accrued interest with Liberty Media to
Related party current liabilities. We recognized Interest expense related to Liberty Media of
$41,098 for the year ended December 31, 2009.
XM Canada
In 2005, we entered into agreements to provide XM Canada with the right to offer XM satellite
radio service in Canada. The agreements have an initial term of ten years and XM Canada has the
unilateral option to extend the term of the agreements for an additional five years at no
additional cost beyond the current financial arrangements. XM Canada has expressed its intent to
exercise this option at the end of the initial term of the agreements. We have the right to receive
a 15% royalty for all subscriber fees earned by XM Canada each month for its basic service and a
nominal activation fee for each gross activation of an XM Canada subscriber on XMs system. XM
Canada is obligated to pay us a total of $71,800 for the rights to broadcast and market National
Hockey League (NHL) games for the 10-year term of our contract with the NHL. We recognize these
payments on a gross basis as a principal obligor pursuant to the provisions of ASC 605, Revenue
Recognition.
The estimated fair value of deferred revenue from XM Canada as of the Merger date was
approximately $34,000, and is being amortized on a straight-line basis over the remaining expected
term of the agreements. As of December 31, 2009 and 2008, the carrying value of Deferred revenue
related to XM Canada was $31,568 and $36,002, respectively.
We have extended a Cdn$45,000 standby credit facility to XM Canada which can be utilized to
purchase terrestrial repeaters or finance the payment of subscription fees. The facility matures on
December 31, 2012 and bears interest at a rate of 17.75% per annum. We have 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 December 31, 2009 and 2008, amounts drawn by XM Canada on this facility
in lieu of payment of subscription fees recorded in Related party long-term assets were $18,429 and
$8,311, respectively.
As of December 31, 2009 and 2008, amounts due from XM Canada (in addition to the amounts drawn
on the standby credit facility) recorded in Related party long-term assets were $6,000 and $3,750,
respectively.
F-19
XM SATELLITE RADIO HOLDINGS 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 consolidated
statements of operations, in connection with the agreements above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of XM Canada deferred income |
|
$ |
2,776 |
|
|
$ |
1,156 |
|
|
|
$ |
5,829 |
|
|
$ |
9,993 |
|
Subscriber and activation fees royalties |
|
|
11,603 |
|
|
|
97 |
|
|
|
|
422 |
|
|
|
333 |
|
Licensing fee revenue |
|
|
6,000 |
|
|
|
2,500 |
|
|
|
|
3,500 |
|
|
|
4,875 |
|
Advertising reimbursements |
|
|
1,067 |
|
|
|
366 |
|
|
|
|
833 |
|
|
|
1,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue from XM Canada |
|
$ |
21,446 |
|
|
$ |
4,119 |
|
|
|
$ |
10,584 |
|
|
$ |
16,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors and American Honda
We have a long-term distribution agreement with General Motors Company (GM). GM has a
representative on SIRIUS board of directors and is considered a related party. During the term of
the agreement, GM has agreed to distribute the XM service. We subsidize a portion of the cost of XM
radios and make incentive payments to GM when the owners of GM vehicles with installed XM radios
become subscribers to XMs service. We also share with GM a percentage of the subscriber revenue
attributable to GM vehicles with 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 our
bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with
our business, and must meet our quality standards. We also granted to OnStar a certain amount of
time to use our studios on an annual basis and agreed to provide certain audio content for
distribution on OnStars services.
We have an agreement to make a certain amount of our bandwidth available to American Honda.
American Honda has a representative on SIRIUS board of directors and is considered a related
party. American Hondas use of our bandwidth must be in compliance with applicable laws, must not
compete or adversely interfere with our business, and must meet our quality standards. This
agreement remains in effect so long as American Honda holds a certain amount of its investment in
SIRIUS. We make 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.
We recorded the following total revenue from GM and American Honda, primarily consisting of
subscriber revenue, in connection with the agreements above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Motors |
|
$ |
31,037 |
|
|
$ |
16,803 |
|
|
|
$ |
25,394 |
|
|
$ |
36,047 |
|
American Honda |
|
|
12,254 |
|
|
|
7,504 |
|
|
|
|
10,599 |
|
|
|
18,385 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
43,291 |
|
|
$ |
24,307 |
|
|
|
$ |
35,993 |
|
|
$ |
54,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We have incurred the following expenses with GM and American Honda:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
|
|
|
|
|
|
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
|
|
|
|
Year Ended |
|
|
Through |
|
|
|
Through |
|
|
Year Ended |
|
|
|
December 31, 2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
December 31, 2007 |
|
|
|
General |
|
|
American |
|
|
General |
|
|
American |
|
|
|
General |
|
|
American |
|
|
General |
|
|
American |
|
|
|
Motors |
|
|
Honda |
|
|
Motors |
|
|
Honda |
|
|
|
Motors |
|
|
Honda |
|
|
Motors |
|
|
Honda |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
$ |
31,595 |
|
|
$ |
500 |
|
|
$ |
16,115 |
|
|
$ |
815 |
|
|
|
$ |
28,377 |
|
|
$ |
1,575 |
|
|
$ |
47,067 |
|
|
$ |
1,672 |
|
Revenue share and royalties |
|
|
58,992 |
|
|
|
6,541 |
|
|
|
36,305 |
|
|
|
2,051 |
|
|
|
|
79,869 |
|
|
|
1,901 |
|
|
|
111,169 |
|
|
|
843 |
|
Subscriber acquisition costs |
|
|
34,895 |
|
|
|
5,397 |
|
|
|
30,975 |
|
|
|
3,433 |
|
|
|
|
88,300 |
|
|
|
4,675 |
|
|
|
145,338 |
|
|
|
6,003 |
|
Customer service and billing |
|
|
268 |
|
|
|
|
|
|
|
119 |
|
|
|
|
|
|
|
|
90 |
|
|
|
|
|
|
|
230 |
|
|
|
|
|
Interest expense, net of amounts capitalized |
|
|
4,644 |
|
|
|
|
|
|
|
51 |
|
|
|
|
|
|
|
|
488 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
130,394 |
|
|
$ |
12,438 |
|
|
$ |
83,565 |
|
|
$ |
6,299 |
|
|
|
$ |
197,124 |
|
|
$ |
8,151 |
|
|
$ |
303,804 |
|
|
$ |
8,518 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS
SIRIUS allocates certain expenses to us based on the estimated costs incurred by SIRIUS that
pertain to us. Additionally, certain costs incurred by us benefit SIRIUS and are allocated to
SIRIUS based on estimated costs incurred by us pertaining to SIRIUS. We settle amounts due between
the parties on a semi-monthly and monthly basis, except for share-based payment arrangements which
are settled at times agreed to between us and SIRIUS. Our financial position, results of operations
and cash flows could differ from those that might have resulted had we operated autonomously.
We recorded total advertising revenue allocated from SIRIUS of $12,326 and $265 for the year
ended December 31, 2009 and the period August 1, 2008 through December 31, 2008, respectively.
We recognized total allocated net operating expenses with SIRIUS of $170,704 and $20,914 for
the year ended December 31, 2009 and the period August 1, 2008 through December 31, 2008,
respectively.
(9) Investments
Investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Investment in XM Canada |
|
$ |
2,390 |
|
|
$ |
8,873 |
|
Investment in XM Canada debentures |
|
|
2,970 |
|
|
|
2,542 |
|
Auction rate certificates |
|
|
8,556 |
|
|
|
7,985 |
|
Restricted investments |
|
|
250 |
|
|
|
120,250 |
|
|
|
|
|
|
|
|
Total investments |
|
$ |
14,166 |
|
|
$ |
139,650 |
|
|
|
|
|
|
|
|
XM Canada
Our investment in XM Canada is recorded using the equity method since we have significant
influence, but less than a controlling voting interest in XM Canada. Under this method, our
investment in XM Canada is adjusted quarterly to recognize our 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 XM Canada. We have a 23.33%
economic interest in XM Canada.
Our share of net earnings or losses of XM Canada is recorded (on a one-month lag) to Gain
(loss) on investments in our consolidated statements of operations. We evaluate our investment in
XM Canada periodically and record an impairment charge to Gain (loss) on investments in our
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 Investments in
excess of the carrying value of our investments in, advances to and commitments to such entity is
recorded to Gain (loss) on investments in our consolidated statements of operations.
We recorded the following amounts to Gain (loss) on investments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
Share of XM Canada net loss |
|
$ |
(2,292 |
) |
|
$ |
(9,309 |
) |
|
|
$ |
(10,385 |
) |
|
$ |
(16,491 |
) |
Impairment of XM Canada |
|
|
(4,734 |
) |
|
|
(16,453 |
) |
|
|
|
|
|
|
|
(35,824 |
) |
Impairment of WorldSpace (1) |
|
|
|
|
|
|
|
|
|
|
|
(2,625 |
) |
|
|
(3,841 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(7,026 |
) |
|
$ |
(25,762 |
) |
|
|
$ |
(13,010 |
) |
|
$ |
(56,156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
In 2008, WorldSpace, Inc. filed for reorganization under the Bankruptcy Code and we wrote
off our investment. |
In addition, during the year ended December 31, 2009, we recorded $543 as a foreign
exchange gain to Accumulated other comprehensive loss, net of tax, related to our investment in XM
Canada.
F-21
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We hold 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 as an available-for-sale security at fair value
with changes in fair value recorded to Accumulated other comprehensive loss, net of tax. The
embedded conversion feature is accounted for as a derivative at fair value with changes in fair
value recorded in earnings as Interest and investment income. As of December 31, 2009, the carrying
value of the host contract and embedded derivative related to our investment in the debentures was
$2,961 and $9, respectively. As of December 31, 2008, the carrying value of the host contract and
embedded derivative related to our investment in the debentures was $2,540 and $2, respectively.
Auction Rate Certificates
Auction rate certificates are long-term securities structured to reset their coupon rates by
means of an auction. We account 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 approximately
$900 in the first quarter of 2010.
Restricted Investments
Restricted investments relate to deposits placed into escrow for the benefit of third parties
pursuant to programming agreements.
(10) Fair Value
The following table summarizes the fair value of our financial instruments at December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using |
|
|
|
Quoted Prices in Active |
|
|
Significant Other |
|
|
Significant |
|
|
|
|
|
|
Markets for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
Carrying |
|
(in thousands) |
|
Assets (Level 1) |
|
|
Inputs (Level 2) |
|
|
Inputs (Level 3) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate securities |
|
|
N/A |
|
|
|
N/A |
|
|
$ |
8,556 |
|
|
$ |
8,556 |
|
Debentures
and embedded derivatives |
|
|
N/A |
|
|
|
N/A |
|
|
|
2,970 |
|
|
|
2,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
|
|
|
$ |
11,526 |
|
|
$ |
11,526 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt-related embedded derivatives |
|
$ |
|
|
|
$ |
|
|
|
$ |
56,192 |
|
|
$ |
56,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
$ |
|
|
|
$ |
|
|
|
$ |
56,192 |
|
|
$ |
56,192 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the changes in the Level 3 fair-value category for the year ended
December 31, 2009. We classify financial instruments in Level 3 of the fair-value hierarchy when
there is reliance on at least one significant unobservable input to the valuation model. In
addition to these unobservable inputs, the valuation models for Level 3 financial instruments
typically also rely on a number of inputs that are readily observable either directly or
indirectly. Thus, the gains and losses presented below include changes in the fair value related to
both observable and unobservable inputs. Fair values are determined using lattice models or market
quotes. We recognized net unrealized (losses) gains in earnings of ($33,392), $321,583, ($551) and
$20 for the year ended December 31, 2009, the periods August 1, 2008 through December 31, 2008 and
January 1, 2008 through July 31, 2008 and the year ended December 31, 2007, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) |
|
|
|
|
|
|
|
Debentures and |
|
|
Debt-Related |
|
|
|
Auction Rate Securities |
|
|
Embedded Derivatives |
|
|
Embedded Derivatives |
|
Balance at December 31, 2008 |
|
$ |
7,985 |
|
|
$ |
2,542 |
|
|
$ |
22,658 |
|
Total gains and losses (realized /unrealized) |
|
|
|
|
|
|
142 |
|
|
|
33,534 |
|
Included in other comprehensive income |
|
|
571 |
|
|
|
286 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
8,556 |
|
|
$ |
2,970 |
|
|
$ |
56,192 |
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2009 and 2008, the aggregate carrying value of our long-term debt was
$1,614,722 and $1,746,677 (excludes embedded derivatives), respectively; while the aggregate fair
value approximated $1,992,362 and $760,897, respectively.
F-22
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The fair value for publicly traded instruments is determined using quoted market prices and,
for non-publicly traded instruments, fair value is based upon estimates from a market maker and
brokerage firm.
(11) Debt
Our debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion |
|
|
|
|
|
|
Price (per |
|
|
December 31, |
|
|
|
SIRIUS share) |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
10% Convertible Senior Notes due 2009 (a) |
|
$ |
10.87 |
|
|
$ |
|
|
|
$ |
400,000 |
|
Less: discount |
|
|
|
|
|
|
|
|
|
|
(17,367 |
) |
10% Senior Secured Discount Convertible Notes due 2009 (b) |
|
$ |
0.69 |
|
|
|
|
|
|
|
33,249 |
|
Less: discount |
|
|
|
|
|
|
|
|
|
|
(5,471 |
) |
10% Senior PIK Secured Notes due 2011 (c) |
|
|
N/A |
|
|
|
113,685 |
|
|
|
|
|
Less: discount |
|
|
|
|
|
|
(7,711 |
) |
|
|
|
|
11.25% Senior Secured Notes due 2013 (d) |
|
|
N/A |
|
|
|
525,750 |
|
|
|
|
|
Less: discount |
|
|
|
|
|
|
(32,259 |
) |
|
|
|
|
13% Senior Notes due 2013 (e) |
|
|
N/A |
|
|
|
778,500 |
|
|
|
778,500 |
|
Less: discount |
|
|
|
|
|
|
(76,602 |
) |
|
|
(90,018 |
) |
9.75% Senior Notes due 2014 (f) |
|
|
N/A |
|
|
|
5,260 |
|
|
|
5,260 |
|
7% Exchangeable Senior Subordinated Notes due 2014 (g) |
|
$ |
1.875 |
|
|
|
550,000 |
|
|
|
550,000 |
|
Less: discount |
|
|
|
|
|
|
(256,205 |
) |
|
|
(280,842 |
) |
Senior Secured Term Loan due 2009 |
|
|
N/A |
|
|
|
|
|
|
|
100,000 |
|
Senior Secured Revolving Credit Facility due 2009 |
|
|
N/A |
|
|
|
|
|
|
|
250,000 |
|
Add: premium |
|
|
|
|
|
|
|
|
|
|
151 |
|
Other debt: |
|
|
|
|
|
|
|
|
|
|
|
|
Capital leases |
|
|
N/A |
|
|
|
14,304 |
|
|
|
23,215 |
|
Embedded derivatives (h) |
|
|
|
|
|
|
56,192 |
|
|
|
22,658 |
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
1,670,914 |
|
|
|
1,769,335 |
|
Less: current maturities |
|
|
|
|
|
|
11,382 |
|
|
|
355,739 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term |
|
|
|
|
|
|
1,659,532 |
|
|
|
1,413,596 |
|
Less: related party |
|
|
|
|
|
|
157,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term, excluding related party |
|
|
|
|
|
$ |
1,502,349 |
|
|
$ |
1,413,596 |
|
|
|
|
|
|
|
|
|
|
|
|
(a) 10% Convertible Senior Notes due 2009
We issued $400,000 aggregate principal amount of 10% Convertible Senior Notes due 2009 (the
10% Convertible Notes).
In February 2009, we exchanged $172,485 aggregate principal amount of the outstanding 10%
Convertible Notes for a like principal amount of XM Holdings 10% Senior PIK Secured Notes due
2011. We accounted for the exchange as a modification of debt and recorded $2,008 to General and
administrative expense in our consolidated statements of operations and $10,990 of additional debt
discount in our consolidated balance sheets.
In July 2009, we used a portion of the net proceeds received from the issuance of our 11.25%
Senior Secured Notes due 2013 plus cash on hand to purchase at par $179,065 aggregate principal
amount of the 10% Convertible Notes. We recorded a loss of $3,285 related to the unamortized
discount to Loss on extinguishment of debt and credit facilities in our consolidated statements of
operations as a result of this transaction.
Interest was payable semi-annually at a rate of 10% per annum. The remaining balance of
$48,450 of the 10% Convertible Notes matured on December 1, 2009 and were paid in cash.
(b) 10% Senior Secured Discount Convertible Notes due 2009
XM Holdings (with XM as co-obligors) had outstanding $33,249 aggregate principal amount of 10%
Senior Secured Discount Convertible Notes due 2009 (the 10% Discount Convertible Notes). Interest
was payable semi-annually at a rate of 10% per annum. The 10% Discount Convertible Notes matured on
December 31, 2009 and were paid in cash.
F-23
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(c) 10% Senior PIK Secured Notes due 2011
In February 2009, we exchanged $172,485 aggregate principal amount of outstanding 10%
Convertible Notes for a like principal amount of XM Holdings 10% Senior PIK Secured Notes due 2011
(the PIK Notes). Interest is payable on the PIK Notes semiannually 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.
The PIK Notes are fully and unconditionally guaranteed by XM 1500 Eckington LLC and XM
Investment LLC (together, the Subsidiary Guarantors) and are secured by a first-priority lien on
substantially all of the property of the Subsidiary Guarantors. XM Holdings may, at its option,
redeem some or all of the PIK Notes at any time at 100% of the principal amount prepaid, together
with accrued and unpaid interest, if any.
We paid a fee equal to, at each exchanging noteholders election, either (i) 833 shares of
SIRIUS common stock (the Structuring Fee Shares) for every $1 principal amount of 10%
Convertible Notes exchanged or (ii) an amount in cash equal to $0.05 for every $1 principal amount
of 10% Convertible Notes exchanged. The total number of Structuring Fee Shares delivered was
59,178,819, and the aggregate cash delivered was approximately $5,100.
In October 2009, we purchased $58,800 aggregate principal amount of the PIK Notes at a price
of $60,499, which included accrued interest of $2,287. We recorded a net loss of $3,869, related to
the unamortized discount and the discount on the purchase, to Loss on extinguishment of debt and
credit facilities, net, in our consolidated statements of operations as a result of this
transaction.
(d) 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.
XM Holdings and the domestic subsidiaries of XM that guarantee certain of the indebtedness of
XM and its restricted subsidiaries 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 Holdings, XM and the guarantors.
(e) 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, are unsecured and mature on August 1, 2013.
(f) 9.75% Senior Notes due 2014
XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the
9.75% Notes). Interest on the 9.75% Notes is payable semi-annually on May 1 and November 1 at a
rate of 9.75% per annum. The 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its
option, may redeem the 9.75% Notes at declining redemption prices at any time on or after May 1,
2010, subject to certain restrictions. Prior to May 1, 2010, XM may redeem the 9.75% Notes, in
whole or in part, at a price equal to 100% of the principal amount thereof, plus a make-whole
premium and accrued and unpaid interest to the date of redemption.
In March 2009, XM executed and delivered a Third Supplemental Indenture (the 9.75% Notes
Supplemental Indenture). The 9.75% Notes Supplemental Indenture amended the indenture to eliminate
substantially all of the restrictive covenants, eliminated certain events of default and modified
or eliminated certain other provisions contained in the indenture and the 9.75% Notes.
(g) 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.
XM Holdings, XM Equipment Leasing LLC and XM Radio Inc. have guaranteed the Exchangeable Notes on a
senior subordinated basis.
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 SIRIUS common stock at an
initial exchange rate of 533.3333 shares of SIRIUS common stock per $1,000 principal amount of
Exchangeable Notes, which is equivalent to an approximate exchange price of $1.875 per share of
SIRIUS common stock.
F-24
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(h) Embedded Derivatives
We issued convertible debt securities, including the 10% Convertible Senior Notes due 2009,
the 10% Senior Secured Discount Convertible Notes due 2009 and 7% Exchangeable Senior Subordinated
Notes due 2014 containing non-detachable conversion or exchange features. Upon completion of the
Merger, these debt agreements were amended such that the settlement of conversion features is into
shares of SIRIUS common stock.
The convertible and exchangeable features are embedded derivatives, and subsequent to the
Merger are required to be separated from the host contract for accounting purposes in accordance
with SFAS No. 133, Accounting for Hedging and Derivative Instruments. The embedded derivatives are
recorded as derivative liabilities and included in our debt balances in our statement of financial
position and the changes in fair value of those derivatives are
reported as (loss) gain on change in value of embedded derivatives in the period in which the fair value changes.
Due to the change in fair value of these embedded derivatives, we
recognized ($33,534) and $322,347 to (Loss) gain on change in value of embedded derivatives during the year ended December
31, 2009 and the period August 1, 2008 through December 31, 2008. The balance of derivative
liabilities was $56,192 and $22,658 as of December 31, 2009 and 2008, respectively.
Expired Credit Arrangements
Amended and Restated Credit Agreement due 2011
In March 2009, we amended and restated the $100,000 Senior Secured Term Loan due 2009, dated
as of June 26, 2008, and the $250,000 Senior Secured Revolving Credit Facility due 2009, dated as
of May 5, 2006. These facilities were combined as term loans into the Amended and Restated Credit
Agreement, dated as of March 6, 2009. Liberty Media LLC purchased $100,000 aggregate principal
amount of such loans from the lenders.
In June 2009, we used net proceeds from the sale of our 11.25% Notes to repay amounts due
under and extinguish the Amended and Restated Credit Agreement. We paid a repayment premium of
$6,500. We recorded an aggregate loss on extinguishment of the Amended and Restated Credit
Agreement of $49,996 consisting primarily of the unamortized discount, deferred financing fees and
unaccreted portion of the repayment premium to Loss on extinguishment of debt and credit
facilities, net, in our consolidated statements of operations.
Second-Lien Credit Agreement
In February 2009, we entered into a Credit Agreement (the Credit Agreement) with Liberty
Media Corporation, as administrative agent and collateral agent. The Credit Agreement provided for
a $150,000 term loan. On March 6, 2009, we amended and restated the XM Credit Agreement (the
Second-Lien Credit Agreement) with Liberty Media Corporation.
In June 2009, we terminated the Second-Lien Credit Agreement in connection with the sale of
the 11.25% Notes and repaid all amounts due thereunder. We recorded a loss on termination of the
Second-Lien Credit Agreement of $57,663 related to deferred financing fees to Loss on
extinguishment of debt and credit facilities, net, in our consolidated statements of operations.
Covenants and Restrictions
Our non-convertible debt generally requires compliance with certain covenants that restrict
our ability to, among other things, (i) incur additional 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. XM Holdings operates as
an unrestricted subsidiary of SIRIUS for purposes of compliance with the covenants contained in our
debt instruments. If we fail to comply with these covenants, our debt could become immediately
payable.
At December 31, 2009, we were in compliance with all financial covenants.
F-25
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(12) Benefit Plans
The following table summarizes the range of weighted-average assumptions used to compute
reported share-based payment expense for the periods set forth below:
|
|
|
|
|
|
|
Predecessor Entity |
|
|
January 1, 2008 |
|
Year Ended |
|
|
Through |
|
December 31, |
|
|
July 31, 2008 |
|
2007 |
|
|
|
|
|
Risk-free interest rate |
|
3.36% |
|
3.45% - 4.92% |
Expected life of options years |
|
4.36 |
|
4.13 - 6.00 |
Expected stock price volatility |
|
58% |
|
41% - 60% |
Expected dividend yield |
|
N/A |
|
N/A |
The following table summarizes stock option activity under our share-based payment plans
(shares in thousands) (all Predecessor amounts have been adjusted to reflect the application of the
exchange ratio in the Merger):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual Term |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
(Years) |
|
|
Value |
|
Predecessor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2006 |
|
|
72,882 |
|
|
$ |
4.00 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
2,841 |
|
|
$ |
2.74 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(5,000 |
) |
|
$ |
1.55 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(2,688 |
) |
|
$ |
5.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2007 |
|
|
68,035 |
|
|
$ |
4.08 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
1,408 |
|
|
$ |
2.41 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(719 |
) |
|
$ |
1.32 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(1,013 |
) |
|
$ |
3.80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, July 31, 2008 |
|
|
67,711 |
|
|
$ |
4.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(333 |
) |
|
$ |
3.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008 |
|
|
67,378 |
|
|
$ |
4.09 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(27,448 |
) |
|
$ |
4.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2009 |
|
|
39,930 |
|
|
$ |
4.15 |
|
|
|
4.26 |
|
|
$ |
|
|
Exercisable, December 31, 2009 |
|
|
38,943 |
|
|
$ |
4.19 |
|
|
|
4.17 |
|
|
$ |
|
|
The weighted average grant date fair value of options granted for the year ended December 31,
2009, the periods August 1, 2008 through December 31, 2008 and January 1, 2008 through July 31,
2008 and the year ended December 31, 2007 was $0, $0, $1.19 and $1.39, respectively. The total
intrinsic value of stock options exercised for the year ended December 31, 2009, the
periods August 1, 2008 through December 31, 2008 and January 1, 2008 through July 31, 2008 and the
year ended December 31, 2007 was $0, $0, $817 and $7,391, respectively.
We recognized share-based payment expense associated with stock options of $2,380, $4,194,
$6,119 and $21,768 for the year ended December 31, 2009, the periods August 1, 2008 through
December 31, 2008 and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007,
respectively.
F-26
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The following table summarizes the non-vested restricted stock and restricted stock unit
activity under our share-based payment plans (shares in thousands) (all Predecessor amounts have
been adjusted to reflect the application of the exchange ratio in the Merger):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
Predecessor Entity: |
|
|
|
|
|
|
|
|
Nonvested, December 31, 2006 |
|
|
15,673 |
|
|
$ |
4.19 |
|
Granted |
|
|
22,224 |
|
|
|
2.58 |
|
Vested |
|
|
(4,660 |
) |
|
$ |
4.61 |
|
Forfeited |
|
|
(899 |
) |
|
$ |
3.39 |
|
|
|
|
|
|
|
|
|
Nonvested, December 31, 2007 |
|
|
32,338 |
|
|
$ |
3.05 |
|
Granted |
|
|
14,447 |
|
|
$ |
2.79 |
|
Vested |
|
|
(12,613 |
) |
|
$ |
3.06 |
|
Forfeited |
|
|
(833 |
) |
|
$ |
2.81 |
|
|
|
|
|
|
|
|
|
Non-Vested, July 31, 2008 |
|
|
33,339 |
|
|
$ |
2.93 |
|
|
|
|
|
|
|
|
|
|
Successor Entity: |
|
|
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(15,342 |
) |
|
$ |
2.97 |
|
Forfeited |
|
|
(1,898 |
) |
|
$ |
3.04 |
|
|
|
|
|
|
|
|
|
Nonvested, December 31, 2008 |
|
|
16,099 |
|
|
$ |
2.87 |
|
Granted |
|
|
|
|
|
|
|
|
Vested |
|
|
(8,476 |
) |
|
$ |
2.98 |
|
Forfeited |
|
|
(1,417 |
) |
|
$ |
2.89 |
|
|
|
|
|
|
|
|
|
Nonvested, December 31, 2009 |
|
|
6,206 |
|
|
$ |
2.71 |
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of restricted stock units granted for the year
ended December 31, 2009, the periods August 1, 2008 through December 31, 2008 and January 1, 2008
through July 31, 2008 and the year ended December 31, 2007 was $0, $0, $2.79 and $2.58,
respectively. The total intrinsic value of restricted stock units that vested for the year ended
December 31, 2009, the periods August 1, 2008 through December 31, 2008 and January 1, 2008 through
July 31, 2008 and the year ended December 31, 2007 was $2,992, $30,863, $13,149 and $11,763,
respectively.
We recognized share-based payment expense associated with restricted stock units and shares of
restricted stock of $13,187, $8,073, $28,366 and $42,378 for the year ended December 31, 2009, the
periods August 1, 2008 through December 31, 2008 and January 1, 2008 through July 31, 2008 and the
year ended December 31, 2007, respectively.
Additionally, we recognized total allocated share-based payment expense with SIRIUS of $20,128
and $5,707 for the year ended December 31, 2009 and the period August 1, 2008 through December 31,
2008, respectively.
Total unrecognized compensation costs related to unvested share-based payment awards granted
at December 31, 2009 and 2008, net of estimated forfeitures, was $7,549 and $25,051, respectively.
401(k) Savings Plans
During the second quarter of 2009, we merged the XM Satellite Radio 401(k) Savings Plan (the
Savings Plan) into the Sirius Satellite Radio 401(k) Savings Plan (the Sirius Plan), which is
sponsored by SIRIUS. Eligible employees under the Savings Plan became subject to the contribution,
matching and vesting rules of the Sirius Plan.
The Sirius Plan allows eligible employees to voluntarily contribute from 1% to 50% of their
pre-tax salary subject to certain defined limits. SIRIUS matches 50% of an employees voluntary
contributions, up to 6% of an employees pre-tax salary, in the form of shares of SIRIUS common
stock. Matching contributions under the Sirius Plan vest at a rate of 331/3% for each year of
employment and are fully vested after three years of employment. Expense resulting from matching
contribution to the plans was $2,189 (which included $1,891 allocated from SIRIUS), $620, $2,132
and $2,018 for the year ended December 31, 2009, the periods August 1, 2008 through December 31,
2008 and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007, respectively.
F-27
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(13) Income Taxes
Our income tax expense consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
|
|
|
$ |
|
|
|
|
$ |
|
|
|
$ |
|
|
State |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign |
|
|
249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current taxes |
|
|
249 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal |
|
|
2,013 |
|
|
|
828 |
|
|
|
|
1,300 |
|
|
|
(807 |
) |
State |
|
|
201 |
|
|
|
135 |
|
|
|
|
212 |
|
|
|
(132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred taxes |
|
|
2,214 |
|
|
|
963 |
|
|
|
|
1,512 |
|
|
|
(939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax expense (benefit) |
|
$ |
2,463 |
|
|
$ |
963 |
|
|
|
$ |
1,512 |
|
|
$ |
(939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table indicates the significant elements contributing to the difference between
the federal tax benefit at the statutory rate and at our effective rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
Predecessor Entity |
|
|
|
Year Ended |
|
|
August 1, 2008 |
|
|
|
January 1, 2008 |
|
|
Year Ended |
|
|
|
December 31, |
|
|
Through |
|
|
|
Through |
|
|
December 31, |
|
|
|
2009 |
|
|
December 31, 2008 |
|
|
|
July 31, 2008 |
|
|
2007 |
|
Federal tax benefit, at statutory rate |
|
$ |
(87,184 |
) |
|
$ |
(2,253,028 |
) |
|
|
$ |
(112,331 |
) |
|
$ |
(239,162 |
) |
State income tax benefit, net of federal benefit |
|
|
(8,718 |
) |
|
|
(225,303 |
) |
|
|
|
(11,233 |
) |
|
|
(23,916 |
) |
Change in state tax rates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in taxes resulting from permanent
differences, net |
|
|
|
|
|
|
2,544,726 |
|
|
|
|
11,415 |
|
|
|
1,181 |
|
Other |
|
|
3,652 |
|
|
|
1 |
|
|
|
|
164 |
|
|
|
|
|
Change in valuation allowance |
|
|
94,713 |
|
|
|
(65,433 |
) |
|
|
|
113,497 |
|
|
|
260,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense (benefit) |
|
$ |
2,463 |
|
|
$ |
963 |
|
|
|
$ |
1,512 |
|
|
$ |
(939 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The tax effects of temporary differences that give rise to significant portions of the
deferred tax assets and deferred tax liabilities are presented below:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Net operating loss carryforwards |
|
$ |
1,508,362 |
|
|
$ |
1,143,292 |
|
GM payments and liabilities |
|
|
311,235 |
|
|
|
506,106 |
|
Deferred revenue |
|
|
195,869 |
|
|
|
214,258 |
|
Severance accrual |
|
|
1,821 |
|
|
|
17,237 |
|
Accrued bonus |
|
|
|
|
|
|
4,276 |
|
Expensed cost capitalized for tax |
|
|
59,327 |
|
|
|
75,998 |
|
Loan financing costs |
|
|
17,288 |
|
|
|
27,890 |
|
Investments |
|
|
61,643 |
|
|
|
63,786 |
|
Stock based compensation |
|
|
40,467 |
|
|
|
31,904 |
|
Property and equipment |
|
|
16,303 |
|
|
|
13,258 |
|
Other |
|
|
12,464 |
|
|
|
45,811 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets |
|
|
2,224,779 |
|
|
|
2,143,816 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
Carrying value of debt instruments |
|
|
(89,441 |
) |
|
|
(89,525 |
) |
FCC license |
|
|
(754,498 |
) |
|
|
(752,174 |
) |
Other intangible assets |
|
|
(251,360 |
) |
|
|
(265,138 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liabilities |
|
|
(1,095,299 |
) |
|
|
(1,106,837 |
) |
|
|
|
|
|
|
|
|
|
Net deferred tax assets before valuation allowance |
|
|
1,129,480 |
|
|
|
1,036,979 |
|
Valuation allowance |
|
|
(1,980,113 |
) |
|
|
(1,885,400 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax liability |
|
$ |
(850,633 |
) |
|
$ |
(848,421 |
) |
|
|
|
|
|
|
|
The difference in the net deferred tax liability of $850,633 and $848,421 at December 31, 2009
and 2008, respectively, is primarily a result of the amortization of the FCC license which is
amortized over 15 years for tax purposes but not amortized for book purposes. This net deferred tax
liability cannot be offset against our deferred tax assets under GAAP since it relates to an
indefinite-lived asset and is not anticipated to reverse in the same period.
At December 31, 2009, we had net operating loss (NOL) carryforwards of approximately
$3,918,000 for federal and state income tax purposes available to offset future taxable income.
These NOL carryforwards expire on various dates beginning in 2014.
As a result of the Merger, we had a Section 382 ownership change. The ownership change does
not limit our ability to utilize future tax deductions and no adjustments were made to our gross
deferred tax assets as a result of the Merger.
Future changes in our ownership may limit our ability to utilize our deferred tax assets.
Realization of our deferred tax assets is dependent upon future earnings; accordingly, a full
valuation allowance was recorded against the assets.
(14) Commitments and Contingencies
The following table summarizes our expected contractual cash commitments as of December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands) |
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
2014 |
|
|
Thereafter |
|
|
Total |
|
Long-term debt obligations |
|
$ |
11,382 |
|
|
$ |
116,580 |
|
|
$ |
27 |
|
|
$ |
1,304,250 |
|
|
$ |
555,260 |
|
|
$ |
|
|
|
$ |
1,987,499 |
|
Cash interest payments |
|
|
200,219 |
|
|
|
210,850 |
|
|
|
205,239 |
|
|
|
169,791 |
|
|
|
38,756 |
|
|
|
|
|
|
|
824,855 |
|
Lease obligations |
|
|
18,634 |
|
|
|
7,693 |
|
|
|
4,434 |
|
|
|
2,102 |
|
|
|
1,524 |
|
|
|
1,114 |
|
|
|
35,501 |
|
Satellite and transmission |
|
|
45,467 |
|
|
|
626 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,635 |
|
|
|
54,728 |
|
Programming and content |
|
|
56,466 |
|
|
|
110,016 |
|
|
|
100,321 |
|
|
|
20,678 |
|
|
|
14,350 |
|
|
|
|
|
|
|
301,831 |
|
Satellite performance
incentive payments |
|
|
4,384 |
|
|
|
4,695 |
|
|
|
5,030 |
|
|
|
5,392 |
|
|
|
5,784 |
|
|
|
37,048 |
|
|
|
62,333 |
|
Marketing and distribution |
|
|
10,198 |
|
|
|
9,272 |
|
|
|
9,033 |
|
|
|
3,000 |
|
|
|
4,500 |
|
|
|
|
|
|
|
36,003 |
|
Other |
|
|
3,743 |
|
|
|
395 |
|
|
|
53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,191 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
350,493 |
|
|
$ |
460,127 |
|
|
$ |
324,137 |
|
|
$ |
1,505,213 |
|
|
$ |
620,174 |
|
|
$ |
46,797 |
|
|
$ |
3,306,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Long-term debt obligations. Long-term debt obligations include principal payments on
outstanding debt.
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 network. We have also entered into various agreements to design and
construct satellites for use in our systems and to launch those satellites.
Space Systems/Loral has constructed a fifth satellite, XM-5, for use in our system. In October
2009, SIRIUS entered into an agreement with International Launch Services (ILS) to secure a
satellite launch for XM-5 on a Proton rocket. We expect to launch XM-5 in the third quarter of
2010.
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 our four in-orbit satellites, may be entitled to future in-orbit performance payments with
respect to two of our four satellites. As of December 31, 2009, we have accrued $28,723 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.
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 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. Total rent expense recognized in connection with leases was $19,408, $8,539,
$11,982 and $20,300 for the year ended December 31, 2009, the periods August 1, 2008 through
December 31, 2008 and January 1, 2008 through July 31, 2008 and the year ended December 31, 2007,
respectively.
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 provisions.
We are required under the terms of certain agreements to deposit monies in escrow, which place
restrictions on cash and cash equivalents. As of December 31, 2009 and 2008, $250 and $120,250,
respectively, were classified as Restricted investments as a result of obligations under these
escrow deposits.
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 actions against XM in connection with the
advanced recording functionality included in the XM Inno, the XM NeXus, the XM Helix and the XM
SkyFi3line 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.
F-30
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We have settled these claims with the major record companies and a significant number of music
publishers. We are in discussions to settle these claims with certain independent record companies
and other music publishers.
We believe that the distribution and use of our 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) Quarterly Financial Data Unaudited
Our quarterly results of operations are summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity |
|
|
|
For the Three Months Ended |
|
|
|
March 31 |
|
|
June 30 |
|
|
September 30 |
|
|
December 31 |
|
|
|
|
|
2009: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
302,234 |
|
|
$ |
306,831 |
|
|
$ |
325,473 |
|
|
$ |
362,802 |
|
Cost of services |
|
|
(129,187 |
) |
|
|
(120,449 |
) |
|
|
(122,477 |
) |
|
|
(117,444 |
) |
Income from operations |
|
|
23,348 |
|
|
|
19,372 |
|
|
|
66,647 |
|
|
|
86,472 |
|
Net (loss) income |
|
|
(110,283 |
) |
|
|
(191,997 |
) |
|
|
(42,851 |
) |
|
|
98,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor Entity |
|
|
|
Successor Entity |
|
|
|
|
|
|
|
|
|
|
|
July 1, 2008 |
|
|
|
August 1, 2008 |
|
|
For the Three |
|
|
|
For the Three Months Ended |
|
|
Through |
|
|
|
Through |
|
|
Months Ended |
|
|
|
March 31, 2008 |
|
|
June 30, 2008 |
|
|
July 31, 2008 |
|
|
|
September 30, 2008 |
|
|
December 31, 2008 |
|
Total revenue |
|
$ |
308,454 |
|
|
$ |
318,035 |
|
|
$ |
104,704 |
|
|
|
$ |
195,603 |
|
|
$ |
315,551 |
|
Cost of services |
|
|
(183,386 |
) |
|
|
(188,413 |
) |
|
|
(61,488 |
) |
|
|
|
(97,882 |
) |
|
|
(142,789 |
) |
Loss from operations |
|
|
(93,684 |
) |
|
|
(82,718 |
) |
|
|
(54,066 |
) |
|
|
|
(5,044,576 |
)(1) |
|
|
(1,580,246 |
)(1) |
Net loss |
|
|
(129,269 |
) |
|
|
(119,572 |
) |
|
|
(73,618 |
) |
|
|
|
(4,854,023 |
)(1) |
|
|
(1,584,162 |
)(1) |
|
|
|
(1) |
|
Includes goodwill impairment losses of $5,026,838 and $1,574,208 for the period August 1,
2008 through September 30, 2008, and for the three months ended December 31, 2008,
respectively. |
(16) Condensed Consolidating Financial Information
XM 1500 Eckington LLC, XM Investment LLC, XM Satellite Radio Inc. and its wholly owned
subsidiaries, XM Radio Inc. and XM Equipment Leasing LLC (collectively, the XM Holdings Guarantor
Subsidiaries) are wholly owned subsidiaries of XM Holdings. The XM Holdings Guarantor Subsidiaries
have fully and unconditionally, jointly and severally, directly or indirectly, guaranteed, on an
unsecured basis, certain of the debt issued by XM Holdings.
XM Radio Inc. and XM Equipment Leasing LLC (collectively, the XM Guarantor Subsidiaries) are
wholly owned subsidiaries of XM. The XM Guarantor Subsidiaries have fully and unconditionally,
jointly and severally, directly or indirectly, guaranteed, on an unsecured basis, the debt issued
by XM in connection with certain of XMs financings.
These condensed consolidating financial statements should be read in conjunction with the
consolidated financial statements of XM Satellite Radio Holdings Inc. and Subsidiaries.
Basis of Presentation
In presenting our condensed consolidating financial statements of XM Holdings and XM, the
equity method of accounting has been applied to (i) XM Holdings interests in the XM Holdings
Guarantor Subsidiaries, (ii) XMs interests in the XM Guarantor Subsidiaries and (iii) XMs
interests in the XM Non-Guarantor Subsidiaries, where applicable, even though all such subsidiaries
meet the requirements to be consolidated under GAAP. All intercompany balances and transactions
between XM Holdings, the XM Holdings Guarantor Subsidiaries, XM 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.
F-31
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
|
|
|
|
Equipment |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio Holdings |
|
(in thousands) |
|
Radio Inc. |
|
|
XM Radio Inc. |
|
|
Leasing LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Inc. |
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
205,376 |
|
|
$ |
|
|
|
$ |
16 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
205,392 |
|
|
$ |
262 |
|
|
$ |
5,615 |
|
|
$ |
886 |
|
|
$ |
|
|
|
$ |
212,155 |
|
Accounts receivable, net |
|
|
60,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
60,042 |
|
Due from subsidiaries/affiliates |
|
|
72,064 |
|
|
|
784,768 |
|
|
|
63,941 |
|
|
|
774,293 |
|
|
|
(105,444 |
) |
|
|
1,589,622 |
|
|
|
|
|
|
|
48,768 |
|
|
|
6,216 |
|
|
|
(1,644,606 |
) |
|
|
|
|
Inventory, net |
|
|
4,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,016 |
|
Prepaid expenses |
|
|
75,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,199 |
|
Related party current assets |
|
|
106,612 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106,612 |
|
|
|
153 |
|
|
|
|
|
|
|
|
|
|
|
(3,286 |
) |
|
|
103,479 |
|
Deferred tax asset |
|
|
64,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,641 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,641 |
|
Other current assets |
|
|
4,385 |
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
4,449 |
|
|
|
(60 |
) |
|
|
196 |
|
|
|
|
|
|
|
|
|
|
|
4,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
592,335 |
|
|
|
784,768 |
|
|
|
64,021 |
|
|
|
774,293 |
|
|
|
(105,444 |
) |
|
|
2,109,973 |
|
|
|
355 |
|
|
|
54,579 |
|
|
|
7,102 |
|
|
|
(1,647,892 |
) |
|
|
524,117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
463,882 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
463,882 |
|
|
|
265,847 |
|
|
|
57,157 |
|
|
|
12,519 |
|
|
|
|
|
|
|
799,405 |
|
Investment in subsidiaries/affiliates |
|
|
2,864,002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,864,002 |
) |
|
|
|
|
|
|
(427,314 |
) |
|
|
|
|
|
|
|
|
|
|
427,314 |
|
|
|
|
|
FCC license |
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
Restricted investments |
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
250 |
|
Deferred financing fees, net |
|
|
5,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,307 |
|
Intangible assets, net |
|
|
611,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
611,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
611,461 |
|
Related party long-term assets |
|
|
396,556 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
396,556 |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
(286,315 |
) |
|
|
110,439 |
|
Other long-term assets |
|
|
9,562 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,562 |
|
|
|
13,916 |
|
|
|
2,051 |
|
|
|
|
|
|
|
|
|
|
|
25,529 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
4,943,355 |
|
|
$ |
2,784,768 |
|
|
$ |
64,021 |
|
|
$ |
774,293 |
|
|
$ |
(2,969,446 |
) |
|
$ |
5,596,991 |
|
|
$ |
(146,998 |
) |
|
$ |
113,787 |
|
|
$ |
19,621 |
|
|
$ |
(1,506,893 |
) |
|
$ |
4,076,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
230,106 |
|
|
$ |
|
|
|
$ |
105 |
|
|
$ |
|
|
|
$ |
(43,793 |
) |
|
$ |
186,418 |
|
|
$ |
11,875 |
|
|
$ |
295 |
|
|
$ |
72 |
|
|
$ |
(441 |
) |
|
$ |
198,219 |
|
Accrued interest |
|
|
44,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,478 |
|
|
|
2,461 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,939 |
|
Due to subsidiaries/affiliates |
|
|
1,593,030 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,651 |
) |
|
|
1,531,379 |
|
|
|
110,413 |
|
|
|
4,810 |
|
|
|
714 |
|
|
|
(1,647,316 |
) |
|
|
|
|
Current portion of deferred revenue |
|
|
506,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
506,440 |
|
|
|
2,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
509,216 |
|
Current portion of deferred credit
on executory contracts |
|
|
252,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
252,831 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
252,831 |
|
Current maturities of long-term debt |
|
|
11,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,382 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,382 |
|
Current maturities of long-term
related party debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party current liabilities |
|
|
169,413 |
|
|
|
|
|
|
|
143 |
|
|
|
|
|
|
|
|
|
|
|
169,556 |
|
|
|
11,766 |
|
|
|
977 |
|
|
|
516 |
|
|
|
(897 |
) |
|
|
181,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,807,680 |
|
|
|
|
|
|
|
248 |
|
|
|
|
|
|
|
(105,444 |
) |
|
|
2,702,484 |
|
|
|
139,291 |
|
|
|
6,082 |
|
|
|
1,302 |
|
|
|
(1,648,654 |
) |
|
|
1,200,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
135,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,363 |
|
|
|
27,293 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
162,656 |
|
Deferred credit on executory contracts |
|
|
784,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
784,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
784,078 |
|
Long-term debt |
|
|
1,396,375 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,396,375 |
|
|
|
105,974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,502,349 |
|
Long-term related party debt |
|
|
157,183 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
157,183 |
|
|
|
282,340 |
|
|
|
|
|
|
|
|
|
|
|
(282,340 |
) |
|
|
157,183 |
|
Deferred tax liability |
|
|
156,442 |
|
|
|
758,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
915,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
915,274 |
|
Related party long-term liability |
|
|
17,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,508 |
|
Other long-term liabilities |
|
|
43,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43,379 |
|
|
|
|
|
|
|
(1,315 |
) |
|
|
|
|
|
|
(3,213 |
) |
|
|
38,851 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
5,498,008 |
|
|
|
758,832 |
|
|
|
248 |
|
|
|
|
|
|
|
(105,444 |
) |
|
|
6,151,644 |
|
|
|
554,898 |
|
|
|
4,767 |
|
|
|
1,302 |
|
|
|
(1,934,207 |
) |
|
|
4,778,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,581 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,581 |
) |
Additional paid-in-capital |
|
|
(563,335 |
) |
|
|
1,781,641 |
|
|
|
57,853 |
|
|
|
691,811 |
|
|
|
(2,531,305 |
) |
|
|
(563,335 |
) |
|
|
5,989,700 |
|
|
|
99,348 |
|
|
|
17,615 |
|
|
|
446,372 |
|
|
|
5,989,700 |
|
Retained earnings (deficit) |
|
|
8,682 |
|
|
|
244,295 |
|
|
|
5,920 |
|
|
|
82,482 |
|
|
|
(332,697 |
) |
|
|
8,682 |
|
|
|
(6,685,015 |
) |
|
|
9,672 |
|
|
|
704 |
|
|
|
(19,058 |
) |
|
|
(6,685,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(554,653 |
) |
|
|
2,025,936 |
|
|
|
63,773 |
|
|
|
774,293 |
|
|
|
(2,864,002 |
) |
|
|
(554,653 |
) |
|
|
(701,896 |
) |
|
|
109,020 |
|
|
|
18,319 |
|
|
|
427,314 |
|
|
|
(701,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity (deficit) |
|
$ |
4,943,355 |
|
|
$ |
2,784,768 |
|
|
$ |
64,021 |
|
|
$ |
774,293 |
|
|
$ |
(2,969,446 |
) |
|
$ |
5,596,991 |
|
|
$ |
(146,998 |
) |
|
$ |
113,787 |
|
|
$ |
19,621 |
|
|
$ |
(1,506,893 |
) |
|
$ |
4,076,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-32
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
|
|
|
|
Equipment |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio Holdings |
|
(in thousands) |
|
Radio Inc. |
|
|
XM Radio Inc. |
|
|
Leasing LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Inc. |
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
199,938 |
|
|
$ |
|
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
199,953 |
|
|
$ |
5,923 |
|
|
$ |
760 |
|
|
$ |
104 |
|
|
$ |
|
|
|
$ |
206,740 |
|
Accounts receivable, net |
|
|
52,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,727 |
|
Due from subsidiaries/affiliates |
|
|
554,882 |
|
|
|
605,231 |
|
|
|
55,425 |
|
|
|
742,499 |
|
|
|
(1,957,994 |
) |
|
|
43 |
|
|
|
|
|
|
|
42,213 |
|
|
|
5,337 |
|
|
|
(47,593 |
) |
|
|
|
|
Inventory, net |
|
|
4,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,489 |
|
Prepaid expenses |
|
|
37,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
37,351 |
|
Related party current assets |
|
|
108,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,482 |
|
|
|
131 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,613 |
|
Deferred tax asset |
|
|
38,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,051 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
38,051 |
|
Other current assets |
|
|
12,039 |
|
|
|
|
|
|
|
64 |
|
|
|
|
|
|
|
|
|
|
|
12,103 |
|
|
|
155 |
|
|
|
258 |
|
|
|
|
|
|
|
(155 |
) |
|
|
12,361 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
1,007,959 |
|
|
|
605,231 |
|
|
|
55,504 |
|
|
|
742,499 |
|
|
|
(1,957,994 |
) |
|
|
453,199 |
|
|
|
6,209 |
|
|
|
43,231 |
|
|
|
5,441 |
|
|
|
(47,748 |
) |
|
|
460,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
577,368 |
|
|
|
|
|
|
|
3,912 |
|
|
|
|
|
|
|
|
|
|
|
581,280 |
|
|
|
221,011 |
|
|
|
59,454 |
|
|
|
12,843 |
|
|
|
|
|
|
|
874,588 |
|
Investment in subsidiaries/affiliates |
|
|
2,625,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,625,148 |
) |
|
|
|
|
|
|
(351,193 |
) |
|
|
|
|
|
|
|
|
|
|
351,193 |
|
|
|
|
|
FCC license |
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000 |
|
Restricted investments |
|
|
120,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,250 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,250 |
|
Deferred financing fees, net |
|
|
4,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,797 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,797 |
|
Intangible assets, net |
|
|
688,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688,671 |
|
Related party long-term assets |
|
|
128,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,357 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,357 |
|
Other long-term assets |
|
|
12,830 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,830 |
|
|
|
19,400 |
|
|
|
2,054 |
|
|
|
|
|
|
|
|
|
|
|
34,284 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
5,165,380 |
|
|
$ |
2,605,231 |
|
|
$ |
59,416 |
|
|
$ |
742,499 |
|
|
$ |
(4,583,142 |
) |
|
$ |
3,989,384 |
|
|
$ |
(104,573 |
) |
|
$ |
104,739 |
|
|
$ |
18,284 |
|
|
$ |
303,445 |
|
|
$ |
4,311,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
237,139 |
|
|
$ |
|
|
|
$ |
97 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
237,236 |
|
|
$ |
153 |
|
|
$ |
268 |
|
|
$ |
84 |
|
|
$ |
(442 |
) |
|
$ |
237,299 |
|
Accrued interest |
|
|
47,118 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
47,118 |
|
|
|
3,425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,543 |
|
Due to subsidiaries/affiliates |
|
|
1,929,803 |
|
|
|
271 |
|
|
|
3,121 |
|
|
|
26,373 |
|
|
|
(1,957,994 |
) |
|
|
1,574 |
|
|
|
|
|
|
|
3,669 |
|
|
|
493 |
|
|
|
(5,736 |
) |
|
|
|
|
Current portion of deferred revenue |
|
|
416,931 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
416,931 |
|
|
|
2,776 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
419,707 |
|
Current portion of deferred credit
on executory contracts |
|
|
234,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,774 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,774 |
|
Current portion of long-term debt |
|
|
135,257 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135,257 |
|
|
|
220,482 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
355,739 |
|
Related party current liabilities |
|
|
83,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83,930 |
|
|
|
4,057 |
|
|
|
|
|
|
|
|
|
|
|
(4,057 |
) |
|
|
83,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,084,952 |
|
|
|
271 |
|
|
|
3,218 |
|
|
|
26,373 |
|
|
|
(1,957,994 |
) |
|
|
1,156,820 |
|
|
|
230,893 |
|
|
|
3,937 |
|
|
|
577 |
|
|
|
(10,235 |
) |
|
|
1,381,992 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
101,187 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
101,187 |
|
|
|
30,068 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
131,255 |
|
Deferred credit on executory contracts |
|
|
1,037,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037,190 |
|
Long-term debt |
|
|
1,248,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,248,643 |
|
|
|
164,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,413,596 |
|
Deferred tax liability |
|
|
134,301 |
|
|
|
752,174 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
886,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
886,475 |
|
Other long-term liabilities |
|
|
32,805 |
|
|
|
(38 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,767 |
|
|
|
45,067 |
|
|
|
(1,315 |
) |
|
|
|
|
|
|
(40,194 |
) |
|
|
36,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
5,639,078 |
|
|
|
752,407 |
|
|
|
3,218 |
|
|
|
26,373 |
|
|
|
(1,957,994 |
) |
|
|
4,463,082 |
|
|
|
470,981 |
|
|
|
2,622 |
|
|
|
577 |
|
|
|
(50,429 |
) |
|
|
4,886,833 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,871 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,871 |
) |
Additional paid-in-capital |
|
|
(673,156 |
) |
|
|
1,781,641 |
|
|
|
55,262 |
|
|
|
691,811 |
|
|
|
(2,528,715 |
) |
|
|
(673,157 |
) |
|
|
5,870,502 |
|
|
|
99,347 |
|
|
|
17,557 |
|
|
|
556,253 |
|
|
|
5,870,502 |
|
Retained earnings (deficit) |
|
|
199,458 |
|
|
|
71,183 |
|
|
|
936 |
|
|
|
24,315 |
|
|
|
(96,433 |
) |
|
|
199,459 |
|
|
|
(6,438,185 |
) |
|
|
2,770 |
|
|
|
150 |
|
|
|
(202,379 |
) |
|
|
(6,438,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(473,698 |
) |
|
|
1,852,824 |
|
|
|
56,198 |
|
|
|
716,126 |
|
|
|
(2,625,148 |
) |
|
|
(473,698 |
) |
|
|
(575,554 |
) |
|
|
102,117 |
|
|
|
17,707 |
|
|
|
353,874 |
|
|
|
(575,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity (deficit) |
|
$ |
5,165,380 |
|
|
$ |
2,605,231 |
|
|
$ |
59,416 |
|
|
$ |
742,499 |
|
|
$ |
(4,583,142 |
) |
|
$ |
3,989,384 |
|
|
$ |
(104,573 |
) |
|
$ |
104,739 |
|
|
$ |
18,284 |
|
|
$ |
303,445 |
|
|
$ |
4,311,279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009 (SUCCESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
|
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio Holdings |
|
(in thousands) |
|
Radio Inc. |
|
|
XM Radio Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
1,294,794 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,294,794 |
|
|
$ |
2,776 |
|
|
$ |
10,078 |
|
|
$ |
1,329 |
|
|
$ |
(11,636 |
) |
|
$ |
1,297,341 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
489,530 |
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
|
|
|
|
489,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
489,557 |
|
Sales and marketing |
|
|
128,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,347 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
128,347 |
|
Subscriber acquisition costs |
|
|
124,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,395 |
|
General and administrative |
|
|
119,152 |
|
|
|
|
|
|
|
34 |
|
|
|
|
|
|
|
427 |
|
|
|
119,613 |
|
|
|
1,531 |
|
|
|
1,252 |
|
|
|
331 |
|
|
|
(9,230 |
) |
|
|
113,497 |
|
Engineering, design and development |
|
|
21,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,671 |
|
Depreciation and amortization |
|
|
178,626 |
|
|
|
|
|
|
|
6,503 |
|
|
|
|
|
|
|
|
|
|
|
185,129 |
|
|
|
4,284 |
|
|
|
1,924 |
|
|
|
444 |
|
|
|
|
|
|
|
191,781 |
|
Restructuring, impairments and related costs |
|
|
8,058 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,058 |
|
|
|
24,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32,254 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,069,779 |
|
|
|
|
|
|
|
6,564 |
|
|
|
|
|
|
|
427 |
|
|
|
1,076,770 |
|
|
|
30,011 |
|
|
|
3,176 |
|
|
|
775 |
|
|
|
(9,230 |
) |
|
|
1,101,502 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
225,015 |
|
|
|
|
|
|
|
(6,564 |
) |
|
|
|
|
|
|
(427 |
) |
|
|
218,024 |
|
|
|
(27,235 |
) |
|
|
6,902 |
|
|
|
554 |
|
|
|
(2,406 |
) |
|
|
195,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
12,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,688 |
|
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
(10,604 |
) |
|
|
2,637 |
|
Interest expense, net of amounts
capitalized |
|
|
(278,729 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(278,729 |
) |
|
|
(25,488 |
) |
|
|
|
|
|
|
|
|
|
|
14,372 |
|
|
|
(289,845 |
) |
Gain (loss) on change in value of
embedded derivative |
|
|
(33,534 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,534 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,534 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
(108,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(108,142 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,742 |
) |
|
|
(115,884 |
) |
Gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,026 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,026 |
) |
Other income (expense) |
|
|
(12,161 |
) |
|
|
179,807 |
|
|
|
11,548 |
|
|
|
58,167 |
|
|
|
(235,835 |
) |
|
|
1,526 |
|
|
|
(183,314 |
) |
|
|
|
|
|
|
|
|
|
|
185,234 |
|
|
|
3,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
income taxes |
|
|
(194,863 |
) |
|
|
179,807 |
|
|
|
4,984 |
|
|
|
58,167 |
|
|
|
(236,262 |
) |
|
|
(188,167 |
) |
|
|
(242,510 |
) |
|
|
6,902 |
|
|
|
554 |
|
|
|
178,854 |
|
|
|
(244,367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for)
income taxes |
|
|
4,086 |
|
|
|
(6,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,610 |
) |
|
|
(4,320 |
) |
|
|
|
|
|
|
|
|
|
|
4,467 |
|
|
|
(2,463 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(190,777 |
) |
|
|
173,111 |
|
|
|
4,984 |
|
|
|
58,167 |
|
|
|
(236,262 |
) |
|
|
(190,777 |
) |
|
|
(246,830 |
) |
|
|
6,902 |
|
|
|
554 |
|
|
|
183,321 |
|
|
|
(246,830 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: net loss attributable to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss): XM Satellite
Radio Holdings Inc. and Subsidiaries |
|
$ |
(190,777 |
) |
|
$ |
173,111 |
|
|
$ |
4,984 |
|
|
$ |
58,167 |
|
|
$ |
(236,262 |
) |
|
$ |
(190,777 |
) |
|
$ |
(246,830 |
) |
|
$ |
6,902 |
|
|
$ |
554 |
|
|
$ |
183,321 |
|
|
$ |
(246,830 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-34
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD AUGUST 1, 2008 THROUGH DECEMBER 31, 2008 (SUCCESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio Holdings |
|
|
Leasing (702-4), |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Inc. |
|
|
LLT |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Revenue |
|
$ |
510,048 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
510,048 |
|
|
$ |
1,156 |
|
|
$ |
4,409 |
|
|
$ |
3,817 |
|
|
$ |
551 |
|
|
$ |
(8,827 |
) |
|
$ |
511,154 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
240,506 |
|
|
|
|
|
|
|
(11 |
) |
|
|
|
|
|
|
176 |
|
|
|
240,671 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
240,671 |
|
Sales and marketing |
|
|
76,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
76,104 |
|
Subscriber acquisition costs |
|
|
64,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,865 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,865 |
|
General and administrative |
|
|
49,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,817 |
|
|
|
493 |
|
|
|
|
|
|
|
469 |
|
|
|
143 |
|
|
|
(3,600 |
) |
|
|
47,322 |
|
Engineering, design and development |
|
|
11,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,658 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,601,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,601,046 |
|
Depreciation and amortization |
|
|
88,957 |
|
|
|
|
|
|
|
3,891 |
|
|
|
|
|
|
|
|
|
|
|
92,848 |
|
|
|
1,158 |
|
|
|
|
|
|
|
579 |
|
|
|
257 |
|
|
|
(532 |
) |
|
|
94,310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
531,907 |
|
|
|
|
|
|
|
3,880 |
|
|
|
|
|
|
|
176 |
|
|
|
535,963 |
|
|
|
6,602,697 |
|
|
|
|
|
|
|
1,048 |
|
|
|
400 |
|
|
|
(4,132 |
) |
|
|
7,135,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(21,859 |
) |
|
|
|
|
|
|
(3,880 |
) |
|
|
|
|
|
|
(176 |
) |
|
|
(25,915 |
) |
|
|
(6,601,541 |
) |
|
|
4,409 |
|
|
|
2,769 |
|
|
|
151 |
|
|
|
(4,695 |
) |
|
|
(6,624,822 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
3,785 |
|
|
|
|
|
|
|
247 |
|
|
|
24,561 |
|
|
|
(24,807 |
) |
|
|
3,786 |
|
|
|
(490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,296 |
|
Interest expense, net of amounts
capitalized |
|
|
(122,318 |
) |
|
|
|
|
|
|
|
|
|
|
(247 |
) |
|
|
24,808 |
|
|
|
(97,757 |
) |
|
|
(13,068 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,670 |
|
|
|
(107,155 |
) |
Gain (loss) on change in value of
embedded derivative |
|
|
321,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
321,542 |
|
|
|
805 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
322,347 |
|
Loss on extinguishment of debt and credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,762 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(25,762 |
) |
Other income (expense) |
|
|
18,312 |
|
|
|
72,147 |
|
|
|
4,568 |
|
|
|
|
|
|
|
(96,258 |
) |
|
|
(1,231 |
) |
|
|
202,834 |
|
|
|
(2,821 |
) |
|
|
|
|
|
|
|
|
|
|
(203,908 |
) |
|
|
(5,126 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
income taxes |
|
|
199,462 |
|
|
|
72,147 |
|
|
|
935 |
|
|
|
24,314 |
|
|
|
(96,433 |
) |
|
|
200,425 |
|
|
|
(6,437,222 |
) |
|
|
1,588 |
|
|
|
2,769 |
|
|
|
151 |
|
|
|
(204,933 |
) |
|
|
(6,437,222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for)
income taxes |
|
|
|
|
|
|
(963 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(963 |
) |
|
|
(963 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
963 |
|
|
|
(963 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
199,462 |
|
|
|
71,184 |
|
|
|
935 |
|
|
|
24,314 |
|
|
|
(96,433 |
) |
|
|
199,462 |
|
|
|
(6,438,185 |
) |
|
|
1,588 |
|
|
|
2,769 |
|
|
|
151 |
|
|
|
(203,970 |
) |
|
|
(6,438,185 |
) |
Add: net loss attributable to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss): XM Satellite
Radio Holdings Inc. and Subsidiaries |
|
$ |
199,462 |
|
|
$ |
71,184 |
|
|
$ |
935 |
|
|
$ |
24,314 |
|
|
$ |
(96,433 |
) |
|
$ |
199,462 |
|
|
$ |
(6,438,185 |
) |
|
$ |
1,588 |
|
|
$ |
2,769 |
|
|
$ |
151 |
|
|
$ |
(203,970 |
) |
|
$ |
(6,438,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-35
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE PERIOD JANUARY 1, 2008 THROUGH JULY 31, 2008 (PREDECESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Leasing (702-4), |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLT |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Revenue |
|
$ |
725,314 |
|
|
$ |
104,112 |
|
|
$ |
6,394 |
|
|
$ |
|
|
|
$ |
(110,506 |
) |
|
$ |
725,314 |
|
|
$ |
5,829 |
|
|
$ |
21,001 |
|
|
$ |
7,676 |
|
|
$ |
757 |
|
|
$ |
(29,383 |
) |
|
$ |
731,194 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
433,011 |
|
|
|
|
|
|
|
21 |
|
|
|
|
|
|
|
256 |
|
|
|
433,288 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
433,288 |
|
Sales and marketing |
|
|
126,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
126,054 |
|
Subscriber acquisition costs |
|
|
174,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,083 |
|
General and administrative |
|
|
120,349 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
120,349 |
|
|
|
287 |
|
|
|
|
|
|
|
611 |
|
|
|
181 |
|
|
|
(4,984 |
) |
|
|
116,444 |
|
Engineering, design and development |
|
|
23,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,045 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,045 |
|
Depreciation and amortization |
|
|
85,302 |
|
|
|
|
|
|
|
6,990 |
|
|
|
|
|
|
|
|
|
|
|
92,292 |
|
|
|
112 |
|
|
|
|
|
|
|
811 |
|
|
|
360 |
|
|
|
(4,826 |
) |
|
|
88,749 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
961,844 |
|
|
|
|
|
|
|
7,011 |
|
|
|
|
|
|
|
256 |
|
|
|
969,111 |
|
|
|
399 |
|
|
|
|
|
|
|
1,422 |
|
|
|
541 |
|
|
|
(9,810 |
) |
|
|
961,663 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(236,530 |
) |
|
|
104,112 |
|
|
|
(617 |
) |
|
|
|
|
|
|
(110,762 |
) |
|
|
(243,797 |
) |
|
|
5,430 |
|
|
|
21,001 |
|
|
|
6,254 |
|
|
|
216 |
|
|
|
(19,573 |
) |
|
|
(230,469 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,618 |
|
|
|
|
|
|
|
369 |
|
|
|
34,193 |
|
|
|
(34,562 |
) |
|
|
2,618 |
|
|
|
395 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,013 |
|
Interest expense, net of amounts
capitalized |
|
|
(108,239 |
) |
|
|
|
|
|
|
|
|
|
|
(369 |
) |
|
|
34,560 |
|
|
|
(74,048 |
) |
|
|
(3,950 |
) |
|
|
(13,558 |
) |
|
|
|
|
|
|
|
|
|
|
17,619 |
|
|
|
(73,937 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,010 |
) |
Other income (expense) |
|
|
25,362 |
|
|
|
|
|
|
|
152 |
|
|
|
|
|
|
|
(25,728 |
) |
|
|
(214 |
) |
|
|
(309,811 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
310,925 |
|
|
|
900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
income taxes |
|
|
(316,789 |
) |
|
|
104,112 |
|
|
|
(96 |
) |
|
|
33,824 |
|
|
|
(136,492 |
) |
|
|
(315,441 |
) |
|
|
(320,946 |
) |
|
|
7,443 |
|
|
|
6,254 |
|
|
|
216 |
|
|
|
308,971 |
|
|
|
(313,503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for)
income taxes |
|
|
|
|
|
|
(1,348 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,348 |
) |
|
|
(1,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,348 |
|
|
|
(1,512 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(316,789 |
) |
|
|
102,764 |
|
|
|
(96 |
) |
|
|
33,824 |
|
|
|
(136,492 |
) |
|
|
(316,789 |
) |
|
|
(322,458 |
) |
|
|
7,443 |
|
|
|
6,254 |
|
|
|
216 |
|
|
|
310,319 |
|
|
|
(315,015 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: net loss attributable to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
(7,443 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss): XM Satellite
Radio Holdings Inc. and Subsidiaries |
|
$ |
(316,789 |
) |
|
$ |
102,764 |
|
|
$ |
(96 |
) |
|
$ |
33,824 |
|
|
$ |
(136,492 |
) |
|
$ |
(316,789 |
) |
|
$ |
(322,458 |
) |
|
$ |
7,443 |
|
|
$ |
6,254 |
|
|
$ |
216 |
|
|
$ |
302,876 |
|
|
$ |
(322,458 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-36
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2007 (PREDECESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Leasing (702-4), |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLT |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Revenue |
|
$ |
1,126,518 |
|
|
$ |
161,248 |
|
|
$ |
10,963 |
|
|
$ |
|
|
|
$ |
(172,211 |
) |
|
$ |
1,126,518 |
|
|
$ |
9,993 |
|
|
$ |
31,825 |
|
|
$ |
9,262 |
|
|
$ |
1,276 |
|
|
$ |
(42,332 |
) |
|
$ |
1,136,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
709,570 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
457 |
|
|
|
710,059 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710,059 |
|
Sales and marketing |
|
|
269,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,930 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
269,930 |
|
Subscriber acquisition costs |
|
|
259,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
259,143 |
|
General and administrative |
|
|
193,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,886 |
|
|
|
518 |
|
|
|
|
|
|
|
2,115 |
|
|
|
444 |
|
|
|
(8,389 |
) |
|
|
188,574 |
|
Engineering, design and development |
|
|
33,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,077 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33,077 |
|
Depreciation and amortization |
|
|
177,568 |
|
|
|
|
|
|
|
12,090 |
|
|
|
|
|
|
|
|
|
|
|
189,658 |
|
|
|
2,707 |
|
|
|
|
|
|
|
1,389 |
|
|
|
617 |
|
|
|
(7,175 |
) |
|
|
187,196 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,643,174 |
|
|
|
|
|
|
|
12,122 |
|
|
|
|
|
|
|
457 |
|
|
|
1,655,753 |
|
|
|
3,225 |
|
|
|
|
|
|
|
3,504 |
|
|
|
1,061 |
|
|
|
(15,564 |
) |
|
|
1,647,979 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(516,656 |
) |
|
|
161,248 |
|
|
|
(1,159 |
) |
|
|
|
|
|
|
(172,668 |
) |
|
|
(529,235 |
) |
|
|
6,768 |
|
|
|
31,825 |
|
|
|
5,758 |
|
|
|
215 |
|
|
|
(26,768 |
) |
|
|
(511,437 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
5,885 |
|
|
|
|
|
|
|
695 |
|
|
|
58,754 |
|
|
|
(59,449 |
) |
|
|
5,885 |
|
|
|
8,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,084 |
|
Interest expense, net of amounts
capitalized |
|
|
(178,354 |
) |
|
|
|
|
|
|
|
|
|
|
(695 |
) |
|
|
59,449 |
|
|
|
(119,600 |
) |
|
|
(3,306 |
) |
|
|
(20,293 |
) |
|
|
(491 |
) |
|
|
(28 |
) |
|
|
27,113 |
|
|
|
(116,605 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,923 |
) |
|
|
(770 |
) |
|
|
|
|
|
|
(3,693 |
) |
Gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,156 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(56,156 |
) |
Other income (expense) |
|
|
43,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(43,864 |
) |
|
|
80 |
|
|
|
(638,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
640,764 |
|
|
|
2,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before
income taxes |
|
|
(645,181 |
) |
|
|
161,248 |
|
|
|
(464 |
) |
|
|
58,059 |
|
|
|
(216,532 |
) |
|
|
(642,870 |
) |
|
|
(683,320 |
) |
|
|
11,532 |
|
|
|
2,344 |
|
|
|
(583 |
) |
|
|
641,109 |
|
|
|
(671,788 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit from (provision for)
income taxes |
|
|
|
|
|
|
(2,311 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,311 |
) |
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,311 |
|
|
|
939 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(645,181 |
) |
|
|
158,937 |
|
|
|
(464 |
) |
|
|
58,059 |
|
|
|
(216,532 |
) |
|
|
(645,181 |
) |
|
|
(682,381 |
) |
|
|
11,532 |
|
|
|
2,344 |
|
|
|
(583 |
) |
|
|
643,420 |
|
|
|
(670,849 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: net loss attributable to
noncontrolling interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,532 |
) |
|
|
(11,532 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss): XM Satellite
Radio Holdings Inc. and Subsidiaries |
|
$ |
(645,181 |
) |
|
$ |
158,937 |
|
|
$ |
(464 |
) |
|
$ |
58,059 |
|
|
$ |
(216,532 |
) |
|
$ |
(645,181 |
) |
|
$ |
(682,381 |
) |
|
$ |
11,532 |
|
|
$ |
2,344 |
|
|
$ |
(583 |
) |
|
$ |
631,888 |
|
|
$ |
(682,381 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-37
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENT OF STOCKHOLDERS DEFICIT AND COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2009, 2008 AND 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated XM |
|
|
|
|
|
|
Satellite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated XM |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
Satellite Radio |
|
|
XM Satellite Radio |
|
|
Leasing (702-4), |
|
|
XM 1500 |
|
|
XM Investment |
|
|
|
|
|
|
Satellite Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Inc. |
|
|
Holdings Inc. |
|
|
LLT |
|
|
Eckington LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Balance at January 1, 2007 |
|
$ |
(447,174 |
) |
|
$ |
376,908 |
|
|
$ |
55,824 |
|
|
$ |
599,929 |
|
|
$ |
(1,032,661 |
) |
|
$ |
(447,174 |
) |
|
$ |
(397,880 |
) |
|
$ |
|
|
|
$ |
27,502 |
|
|
$ |
8,893 |
|
|
$ |
410,779 |
|
|
$ |
(397,880 |
) |
Net income (loss) |
|
|
(645,181 |
) |
|
|
158,937 |
|
|
|
(464 |
) |
|
|
58,059 |
|
|
|
(216,532 |
) |
|
|
(645,181 |
) |
|
|
(682,381 |
) |
|
|
11,532 |
|
|
|
2,344 |
|
|
|
(583 |
) |
|
|
643,420 |
|
|
|
(670,849 |
) |
Net loss attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,532 |
) |
|
|
(11,532 |
) |
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
Realized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
125 |
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(677,005 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(677,005 |
) |
Capital stock issuances |
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,000 |
|
|
|
22,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(22,000 |
) |
|
|
22,000 |
|
Contributions (distributions)
to (from) paid-in capital |
|
|
226,871 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
226,871 |
|
|
|
4,383 |
|
|
|
49,993 |
|
|
|
36,096 |
|
|
|
138 |
|
|
|
(313,098 |
) |
|
|
4,383 |
|
Share-based payment expense |
|
|
64,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
64,199 |
|
|
|
64,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(64,199 |
) |
|
|
64,199 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2007 |
|
$ |
(779,285 |
) |
|
$ |
535,845 |
|
|
$ |
55,360 |
|
|
$ |
657,988 |
|
|
$ |
(1,249,193 |
) |
|
$ |
(779,285 |
) |
|
$ |
(984,303 |
) |
|
$ |
61,525 |
|
|
$ |
65,942 |
|
|
$ |
8,448 |
|
|
$ |
643,370 |
|
|
$ |
(984,303 |
) |
Net income (loss) |
|
|
(316,789 |
) |
|
|
102,764 |
|
|
|
(96 |
) |
|
|
33,824 |
|
|
|
(136,492 |
) |
|
|
(316,789 |
) |
|
|
(322,458 |
) |
|
|
7,443 |
|
|
|
6,254 |
|
|
|
216 |
|
|
|
310,319 |
|
|
|
(315,015 |
) |
Net loss attributable to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,443 |
) |
|
|
(7,443 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(910 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(910 |
) |
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(277 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(277 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323,645 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(323,645 |
) |
Capital stock issuances |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
976 |
|
Contributions (distributions)
to (from) paid-in capital |
|
|
(15,226 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
(15,224 |
) |
|
|
(2,534 |
) |
|
|
(4,718 |
) |
|
|
(7,839 |
) |
|
|
7,994 |
|
|
|
19,787 |
|
|
|
(2,534 |
) |
Share-based payment expense |
|
|
34,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,485 |
|
|
|
34,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,485 |
) |
|
|
34,485 |
|
Acquisition transactions |
|
|
315,273 |
|
|
|
1,143,032 |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1,143,032 |
) |
|
|
315,271 |
|
|
|
7,111,384 |
|
|
|
(89 |
) |
|
|
34,991 |
|
|
|
742 |
|
|
|
(350,915 |
) |
|
|
7,111,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at July 31, 2008 |
|
$ |
(761,542 |
) |
|
$ |
1,781,641 |
|
|
$ |
55,263 |
|
|
$ |
691,811 |
|
|
$ |
(2,528,715 |
) |
|
$ |
(761,542 |
) |
|
$ |
5,836,363 |
|
|
$ |
64,161 |
|
|
$ |
99,348 |
|
|
$ |
17,400 |
|
|
$ |
580,633 |
|
|
$ |
5,836,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at August 1, 2008 |
|
$ |
(761,542 |
) |
|
$ |
1,781,641 |
|
|
$ |
55,263 |
|
|
$ |
691,811 |
|
|
$ |
(2,528,715 |
) |
|
$ |
(761,542 |
) |
|
$ |
5,836,363 |
|
|
$ |
64,161 |
|
|
$ |
99,348 |
|
|
$ |
17,400 |
|
|
$ |
580,633 |
|
|
$ |
5,836,363 |
|
|
Net income (loss) |
|
|
199,462 |
|
|
|
71,184 |
|
|
|
935 |
|
|
|
24,314 |
|
|
|
(96,433 |
) |
|
|
199,462 |
|
|
|
(6,438,185 |
) |
|
|
1,588 |
|
|
|
2,769 |
|
|
|
151 |
|
|
|
(203,970 |
) |
|
|
(6,438,185 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,040 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,040 |
) |
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,831 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,446,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,446,056 |
) |
Restricted shares withheld |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(84 |
) |
Contributions (distributions)
to (from) paid-in capital |
|
|
53,458 |
|
|
|
(1 |
) |
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
53,458 |
|
|
|
(701 |
) |
|
|
(65,749 |
) |
|
|
|
|
|
|
156 |
|
|
|
12,135 |
|
|
|
(701 |
) |
Share-based payment expense |
|
|
34,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34,924 |
|
|
|
34,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,924 |
) |
|
|
34,924 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
(473,698 |
) |
|
$ |
1,852,824 |
|
|
$ |
56,198 |
|
|
$ |
716,126 |
|
|
$ |
(2,625,148 |
) |
|
$ |
(473,698 |
) |
|
$ |
(575,554 |
) |
|
$ |
|
|
|
$ |
102,117 |
|
|
$ |
17,707 |
|
|
$ |
353,874 |
|
|
$ |
(575,554 |
) |
Net income (loss) |
|
|
(190,777 |
) |
|
|
173,111 |
|
|
|
4,984 |
|
|
|
58,167 |
|
|
|
(236,262 |
) |
|
|
(190,777 |
) |
|
|
(246,830 |
) |
|
|
|
|
|
|
6,902 |
|
|
|
554 |
|
|
|
183,321 |
|
|
|
(246,830 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
473 |
|
Foreign currency translation
adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(245,540 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(245,540 |
) |
Contributions (distributions)
to (from) paid-in capital |
|
|
109,822 |
|
|
|
1 |
|
|
|
2,591 |
|
|
|
|
|
|
|
(2,592 |
) |
|
|
109,822 |
|
|
|
119,198 |
|
|
|
|
|
|
|
1 |
|
|
|
58 |
|
|
|
(109,881 |
) |
|
|
119,198 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009 |
|
$ |
(554,653 |
) |
|
$ |
2,025,936 |
|
|
$ |
63,773 |
|
|
$ |
774,293 |
|
|
$ |
(2,864,002 |
) |
|
$ |
(554,653 |
) |
|
$ |
(701,896 |
) |
|
$ |
|
|
|
$ |
109,020 |
|
|
$ |
18,319 |
|
|
$ |
427,314 |
|
|
$ |
(701,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-38
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2009 (SUCCESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated XM |
|
|
XM Satellite |
|
|
XM 1500 |
|
|
|
|
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
Satellite Radio |
|
|
Radio Holdings |
|
|
Eckington |
|
|
XM Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Inc. |
|
|
Inc. |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Net cash provided by
operating activities |
|
$ |
221,569 |
|
|
$ |
|
|
|
$ |
1 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
221,570 |
|
|
$ |
45,626 |
|
|
$ |
4,855 |
|
|
$ |
782 |
|
|
$ |
|
|
|
$ |
272,833 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(7,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,250 |
) |
|
|
(46,215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,465 |
) |
Sale (purchase) of restricted and other
investments |
|
|
(48,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,450 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities |
|
|
(55,700 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,700 |
) |
|
|
(46,215 |
) |
|
|
|
|
|
|
|
|
|
|
48,450 |
|
|
|
(53,465 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings, net of costs |
|
|
388,399 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
388,399 |
|
|
|
48,450 |
|
|
|
|
|
|
|
|
|
|
|
(48,450 |
) |
|
|
388,399 |
|
Related party long-term borrowings,
net of costs |
|
|
93,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,818 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
93,818 |
|
Repayment of long-term borrowings |
|
|
(530,645 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(530,645 |
) |
|
|
(48,450 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(579,095 |
) |
Repayment of long-term related
party borrowings |
|
|
(100,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
Payment of premiums on
redemption of debt |
|
|
(12,003 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,003 |
) |
|
|
(5,072 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
financing activities |
|
|
(160,431 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(160,431 |
) |
|
|
(5,072 |
) |
|
|
|
|
|
|
|
|
|
|
(48,450 |
) |
|
|
(213,953 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents |
|
|
5,438 |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
5,439 |
|
|
|
(5,661 |
) |
|
|
4,855 |
|
|
|
782 |
|
|
|
|
|
|
|
5,415 |
|
Cash and cash equivalents at
beginning of period |
|
|
199,938 |
|
|
|
|
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
199,953 |
|
|
|
5,923 |
|
|
|
760 |
|
|
|
104 |
|
|
|
|
|
|
|
206,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
205,376 |
|
|
$ |
|
|
|
$ |
16 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
205,392 |
|
|
$ |
262 |
|
|
$ |
5,615 |
|
|
$ |
886 |
|
|
$ |
|
|
|
$ |
212,155 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-39
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD AUGUST 1, 2008 THROUGH DECEMBER 31, 2008 (SUCCESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated XM |
|
|
XM Satellite |
|
|
Satellite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
Satellite Radio |
|
|
Radio Holdings |
|
|
Leasing (702-4), |
|
|
XM 1500 |
|
|
XM Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Inc. |
|
|
Inc. |
|
|
LLT |
|
|
Eckington LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Net cash (used in) provided by
operating activities |
|
$ |
26,463 |
|
|
$ |
|
|
|
$ |
(18 |
) |
|
$ |
|
|
|
$ |
|
|
|
$ |
26,445 |
|
|
$ |
(21,535 |
) |
|
$ |
1,479 |
|
|
$ |
746 |
|
|
$ |
104 |
|
|
$ |
|
|
|
$ |
7,239 |
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(13,116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,116 |
) |
|
|
(331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,447 |
) |
Purchases of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities |
|
|
(13,116 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,116 |
) |
|
|
25,069 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,953 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of
warrants and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions from
Holdings |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings, net of costs |
|
|
531,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
531,743 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
531,743 |
|
Payments to noncontrolling
interest |
|
|
(60,401 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,401 |
) |
|
|
|
|
|
|
(1,479 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,880 |
) |
Repayment of long-term borrowings |
|
|
(1,083,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,083,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,083,143 |
) |
Payment of premiums on
redemption of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,693 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,693 |
) |
Other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
financing activities |
|
|
(611,801 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(611,801 |
) |
|
|
(18,693 |
) |
|
|
(1,479 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(631,973 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents |
|
|
(598,454 |
) |
|
|
|
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
(598,472 |
) |
|
|
(15,159 |
) |
|
|
|
|
|
|
746 |
|
|
|
104 |
|
|
|
|
|
|
|
(612,781 |
) |
Cash and cash equivalents at
beginning of period |
|
|
798,392 |
|
|
|
|
|
|
|
33 |
|
|
|
|
|
|
|
|
|
|
|
798,425 |
|
|
|
21,082 |
|
|
|
|
|
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
819,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
199,938 |
|
|
$ |
|
|
|
$ |
15 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
199,953 |
|
|
$ |
5,923 |
|
|
$ |
|
|
|
$ |
760 |
|
|
$ |
104 |
|
|
$ |
|
|
|
$ |
206,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-40
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE PERIOD JANUARY 1, 2008 THROUGH JULY 31, 2008 (PREDECESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XM Non- |
|
|
|
|
|
|
Consolidated XM |
|
|
XM Satellite |
|
|
Satellite |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
Satellite Radio |
|
|
Radio Holdings |
|
|
Leasing (702-4), |
|
|
XM 1500 |
|
|
XM Investment |
|
|
|
|
|
|
Radio |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Inc. |
|
|
Inc. |
|
|
LLT |
|
|
Eckington LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Holdings Inc. |
|
|
Net cash (used in) provided by
operating activities |
|
$ |
(278,970 |
) |
|
$ |
|
|
|
$ |
22 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(278,948 |
) |
|
$ |
20,961 |
|
|
$ |
6,897 |
|
|
$ |
4 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(251,086 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(23,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,854 |
) |
|
|
(6,989 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(30,843 |
) |
Purchases of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,825 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(34,825 |
) |
Sale of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in
investing activities |
|
|
(23,854 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(23,854 |
) |
|
|
(41,814 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(65,668 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of
warrants and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
964 |
|
Capital contributions from
Holdings |
|
|
13,125 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,125 |
|
|
|
(13,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term borrowings, net of costs |
|
|
1,023,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,023,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,023,190 |
|
Payments to noncontrolling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,897 |
) |
Repayment of long-term borrowings |
|
|
(35,210 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,210 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,210 |
) |
Other, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,458 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,458 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
1,001,105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,001,105 |
|
|
|
(14,619 |
) |
|
|
(6,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
979,589 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents |
|
|
698,281 |
|
|
|
|
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
698,303 |
|
|
|
(35,472 |
) |
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
662,835 |
|
Cash and cash equivalents at
beginning of period |
|
|
100,111 |
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
100,122 |
|
|
|
56,554 |
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
|
|
|
|
156,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
798,392 |
|
|
$ |
|
|
|
$ |
33 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
798,425 |
|
|
$ |
21,082 |
|
|
$ |
|
|
|
$ |
14 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
819,521 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-41
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
XM SATELLITE RADIO INC., SUBSIDIARIES AND AFFILIATES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2007 (PREDECESSOR ENTITY)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
XM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
|
|
|
|
|
|
|
|
Equipment |
|
|
XMSR Non- |
|
|
|
|
|
|
Consolidated |
|
|
XM Satellite |
|
|
Satellite |
|
|
XM 1500 |
|
|
XM |
|
|
|
|
|
|
XM Satellite |
|
|
|
XM Satellite |
|
|
XM Radio |
|
|
Leasing |
|
|
Guarantor |
|
|
|
|
|
|
XM Satellite |
|
|
Radio |
|
|
Leasing (702-4), |
|
|
Eckington |
|
|
Investment |
|
|
|
|
|
|
Radio Holdings |
|
(in thousands) |
|
Radio Inc. |
|
|
Inc. |
|
|
LLC |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
Holdings Inc. |
|
|
LLT |
|
|
LLC |
|
|
LLC |
|
|
Eliminations |
|
|
Inc. |
|
|
Net cash (used in) provided by
operating activities |
|
$ |
(162,982 |
) |
|
$ |
25 |
|
|
$ |
13,646 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
(149,311 |
) |
|
$ |
(55,626 |
) |
|
$ |
9,486 |
|
|
$ |
33,830 |
|
|
$ |
6,891 |
|
|
$ |
|
|
|
$ |
(154,730 |
) |
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(53,892 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,917 |
) |
|
|
(79,421 |
) |
|
|
(288,500 |
) |
|
|
|
|
|
|
|
|
|
|
288,500 |
|
|
|
(133,338 |
) |
Sales of property and equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(288,500 |
) |
|
|
|
|
Purchases of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of restricted and other
investments |
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
110 |
|
|
|
|
|
|
|
|
|
|
|
1,367 |
|
|
|
346 |
|
|
|
|
|
|
|
1,823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities |
|
|
(53,782 |
) |
|
|
(25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,807 |
) |
|
|
209,079 |
|
|
|
(288,500 |
) |
|
|
1,367 |
|
|
|
346 |
|
|
|
|
|
|
|
(131,515 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of
warrants and stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,244 |
|
Capital contributions from
Holdings |
|
|
230,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,736 |
|
|
|
(230,736 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital contributions from outside
investor to noncontrolling interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57,700 |
|
|
|
|
|
|
|
|
|
|
|
(57,700 |
) |
|
|
|
|
Proceeds from insuance of debt by
noncontrolling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
230,800 |
|
|
|
|
|
|
|
|
|
|
|
(230,800 |
) |
|
|
|
|
Long term borrowings, net of
related costs |
|
|
(4,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,262 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
288,500 |
|
|
|
284,238 |
|
Payments to noncontrolling
interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,486 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,486 |
) |
Repayment of long term borrowings |
|
|
|
|
|
|
|
|
|
|
(13,667 |
) |
|
|
|
|
|
|
|
|
|
|
(13,667 |
) |
|
|
|
|
|
|
|
|
|
|
(32,410 |
) |
|
|
(6,467 |
) |
|
|
|
|
|
|
(52,544 |
) |
Payment of premiums on
redemption of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,923 |
) |
|
|
(770 |
) |
|
|
|
|
|
|
(3,693 |
) |
Other, net |
|
|
(2,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,044 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
224,430 |
|
|
|
|
|
|
|
(13,667 |
) |
|
|
|
|
|
|
|
|
|
|
210,763 |
|
|
|
(222,492 |
) |
|
|
279,014 |
|
|
|
(35,333 |
) |
|
|
(7,237 |
) |
|
|
|
|
|
|
224,715 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash
and cash equivalents |
|
|
7,666 |
|
|
|
|
|
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
7,645 |
|
|
|
(69,039 |
) |
|
|
|
|
|
|
(136 |
) |
|
|
|
|
|
|
|
|
|
|
(61,530 |
) |
Cash and cash equivalents at
beginning of period |
|
|
92,445 |
|
|
|
|
|
|
|
32 |
|
|
|
|
|
|
|
|
|
|
|
92,477 |
|
|
|
125,593 |
|
|
|
|
|
|
|
146 |
|
|
|
|
|
|
|
|
|
|
|
218,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
100,111 |
|
|
$ |
|
|
|
$ |
11 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
100,122 |
|
|
$ |
56,554 |
|
|
$ |
|
|
|
$ |
10 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
156,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-42
XM SATELLITE RADIO HOLDINGS INC. AND SUBSIDIARIES
Schedule IISchedule of Valuation and Qualifying Accounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Write-offs/ |
|
|
|
|
|
|
|
|
(in thousands) |
|
Beginning of |
|
|
Charged to |
|
|
Payments/ |
|
|
|
|
|
|
Balance at |
|
Description |
|
Period |
|
|
Expenses |
|
|
Other |
|
|
Adjustments |
|
|
End of Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
4,946 |
|
|
|
12,740 |
|
|
|
(11,816 |
) |
|
$ |
|
|
|
$ |
5,870 |
|
Deferred tax assetsvaluation allowance |
|
$ |
1,274,456 |
|
|
|
263,035 |
|
|
|
|
|
|
$ |
|
|
|
$ |
1,537,491 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Write-offs/ |
|
|
|
|
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Payments/ |
|
|
|
|
|
|
Balance at |
|
Description |
|
Period |
|
|
Expenses |
|
|
Other |
|
|
Adjustments |
|
|
End of Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Predecessor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from January 1, 2008 to July 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
5,870 |
|
|
|
8,523 |
|
|
|
(7,267 |
) |
|
$ |
(7,126 |
)(1) |
|
$ |
|
|
Deferred tax assetsvaluation allowance |
|
$ |
1,537,491 |
|
|
|
113,497 |
|
|
|
|
|
|
$ |
(1,650,988 |
)(1) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
Write-offs/ |
|
|
|
|
|
|
|
|
|
|
Beginning of |
|
|
Charged to |
|
|
Payments/ |
|
|
|
|
|
|
Balance at |
|
Description |
|
Period |
|
|
Expenses |
|
|
Other |
|
|
Adjustments |
|
|
End of Period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Successor Entity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period from August 1, 2008 to December 31, 2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
|
|
|
|
7,529 |
|
|
|
(1,330 |
) |
|
$ |
|
|
|
$ |
6,199 |
|
Deferred tax assetsvaluation allowance |
|
$ |
1,950,833 |
(1) |
|
|
(65,433 |
) |
|
|
|
|
|
$ |
|
|
|
$ |
1,885,400 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts |
|
$ |
6,199 |
|
|
|
15,649 |
|
|
|
(16,491 |
) |
|
$ |
|
|
|
$ |
5,357 |
|
Deferred tax assetsvaluation allowance |
|
$ |
1,885,400 |
|
|
|
94,713 |
|
|
|
|
|
|
$ |
|
|
|
$ |
1,980,113 |
|
|
|
|
(1) |
|
Adjustments to reflect allocation of the purchase price in connection with the Merger. |
F-43
EXHIBIT INDEX
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
2.1 |
|
|
|
|
Agreement and Plan of Merger,
dated as of February 19, 2007,
among Sirius XM Radio Inc.,
Vernon Merger Corporation and XM
Satellite Radio Holdings Inc.
(incorporated by reference to
Exhibit 2.1 to XM Satellite Radio
Holdings Inc.s Current Report on
Form 8-K dated February 21,
2007). |
|
|
|
|
|
|
|
|
3.1 |
|
|
|
|
Amended and Restated Certificate
of Incorporation of XM Satellite
Radio Holdings Inc. (incorporated
by reference to Exhibit 3.1 to XM
Satellite Radio Holdings Inc.s
Current Report on Form 8-K dated
December 9, 2009). |
|
|
|
|
|
|
|
|
3.2 |
|
|
|
|
Bylaws of Vernon Merger
Corporation (incorporated by
reference to Exhibit 3.2 to XM
Satellite Radio Holdings Inc.s
Current Report on Form 8-K filed
July 30, 2008).**** |
|
|
|
|
|
|
|
|
3.3 |
|
|
|
|
Restated Certificate of
Incorporation of XM Satellite
Radio Inc. (incorporated by
reference to XM Satellite Radio
Holdings Inc.s Registration
Statement on Form S-4, File No.
333-391789). |
|
|
|
|
|
|
|
|
3.4 |
|
|
|
|
Amended and Restated Bylaws of XM
Satellite Radio Inc.
(incorporated by reference to
Exhibit 3.10 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
3.5 |
|
|
|
|
Certificate of Ownership and
Merger, dated August 5, 2008
(incorporated by reference to
Exhibit 3.1 to Sirius XM Radio
Inc.s Current Report on Form 8-K
dated August 5, 2008). |
|
|
|
|
|
|
|
|
4.1 |
|
|
|
|
Form of certificate for shares of
Sirius XM Radio Inc.s Common
Stock (incorporated by reference
to Exhibit 4.3 to Sirius XM Radio
Inc.s Registration Statement on
Form S-1 (File No. 33-74782)). |
|
|
|
|
|
|
|
|
4.2 |
|
|
|
|
Warrant Agreement, dated March
15, 2000, between XM Satellite
Radio Holdings Inc., as Issuer,
and United States Trust Company
of New York, as Warrant Agent
(incorporated by reference to
Amendment No. 1 to Exhibit 4.5 to
XM Satellite Radio Holdings
Inc.s Registration Statement on
Form S-1, File No. 333-39176). |
|
|
|
|
|
|
|
|
4.3 |
|
|
|
|
Warrant Registration Rights
Agreement, dated March 15, 2000,
among XM Satellite Radio Holdings
Inc., Bear, Stearns & Co., Inc.,
Donaldson, Lufkin and Jenrette
Securities Corporation, Salomon
Smith Barney Inc. and Lehman
Brothers Inc. (incorporated by
reference to Exhibit 4.6 to
Amendment No. 1 to XM Satellite
Radio Holdings Inc.s
Registration Statement on Form
S-1, File No. 333-39176). |
E-1
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
4.4 |
|
|
|
|
Form of Warrant (incorporated by
reference to Exhibit 4.7 to
Amendment No. 1 to XM Satellite
Radio Holdings Inc.s
Registration Statement on Form
S-1, File No. 333-39176). |
|
|
|
|
|
|
|
|
4.5 |
|
|
|
|
Amended and Restated Security
Agreement, dated as of January
28, 2003, between XM Satellite
Radio Inc. and The Bank of New
York (incorporated by reference
to Exhibit 4.3 to XM Satellite
Radio Holdings Inc.s Current
Report on Form 8-K filed on
January 29, 2003). |
|
|
|
|
|
|
|
|
4.6 |
|
|
|
|
Indenture, dated as of May 1,
2006, among XM Satellite Radio
Holdings Inc., XM Satellite Radio
Inc. and The Bank of New York, as
trustee, relating to the 9.75%
Senior Notes due 2014
(incorporated by reference to
Exhibit 4.1 to XM Satellite Radio
Holdings Inc.s Current Report on
Form 8-K filed on May 5, 2006). |
|
|
|
|
|
|
|
|
4.7 |
|
|
|
|
Form of 9.75% Senior Note due
2014 (incorporated by reference
to Exhibit 4.3 to XM Satellite
Radio Holdings Inc.s Current
Report on Form 8-K filed on May
5, 2006). |
|
|
|
|
|
|
|
|
4.8 |
|
|
|
|
Purchase Agreement, dated as of
July 24, 2008, among XM Escrow
LLC, XM Satellite Radio Inc., XM
Satellite Radio Holdings Inc., XM
Equipment Leasing LLC, XM Radio
Inc., J.P. Morgan Securities
Inc., Morgan Stanley & Co.
Incorporated and UBS Securities
LLC, relating to the 13% Senior
Notes due 2013 (incorporated by
reference to Exhibit 4.65 to
Sirius XM Radio Inc.s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2008). |
|
|
|
|
|
|
|
|
4.9 |
|
|
|
|
Purchase Agreement, dated as of
July 28, 2008, among XM Satellite
Radio Inc., XM Satellite Radio
Holdings Inc., XM Equipment
Leasing LLC, XM Radio Inc.,
Sirius XM Radio Inc., J.P. Morgan
Securities Inc., Morgan Stanley &
Co. Incorporated and UBS
Securities LLC, relating to the
7% Exchangeable Senior
Subordinated Notes due 2014
(incorporated by reference to
Exhibit 4.66 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.10 |
|
|
|
|
First Supplemental Warrant
Agreement, dated July 28, 2008,
among Sirius XM Radio Inc., XM
Satellite Radio Holdings Inc. and
The Bank of New York Mellon
relating to the Warrants, dated
March 15, 2000, with the United
States Trust Company of New York
(incorporated by reference to
Exhibit 4.67 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.11 |
|
|
|
|
First Supplemental Indenture,
dated July 28, 2008, among XM
Satellite Radio Inc., as issuer,
XM Satellite Radio Holdings Inc.,
XM Equipment Leasing LLC, XM
Radio Inc. and The Bank of New
York Mellon, relating to the
9.75% Senior Notes due 2014
(incorporated by reference to
Exhibit 4.72 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
E-2
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
4.12 |
|
|
|
|
Second Supplemental Indenture,
dated July 28, 2008, among XM
Satellite Radio Inc., as issuer,
XM Satellite Radio Holdings Inc.,
XM Equipment Leasing LLC, XM
Radio Inc. and The Bank of New
York Mellon, relating to the
9.75% Senior Notes due 2014
(incorporated by reference to
Exhibit 4.73 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.13 |
|
|
|
|
Indenture, dated as of July 31,
2008, among XM Escrow LLC and The
Bank of New York Mellon, relating
to the 13% Senior Notes due 2013
(incorporated by reference to
Exhibit 4.77 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.14 |
|
|
|
|
Supplemental Indenture, dated as
of July 31, 2008, among XM
Satellite Radio Holdings Inc., XM
Satellite Radio Inc., XM
Equipment Leasing LLC, XM Radio
Inc., and The Bank of New York
Mellon, relating to the 13%
Senior Notes due 2013
(incorporated by reference to
Exhibit 4.78 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.15 |
|
|
|
|
Supplemental Indenture, dated as
of July 31, 2008, among XM
Satellite Radio Holdings Inc., XM
Escrow LLC and The Bank of New
York Mellon, relating to the 13%
Senior Notes due 2013
(incorporated by reference to
Exhibit 4.79 to Sirius XM Radio
Inc.s Quarterly Report on Form
10-Q for the quarter ended
September 30, 2008). |
|
|
|
|
|
|
|
|
4.16 |
|
|
|
|
Indenture, dated as of August 1,
2008 among XM Satellite Radio
Inc., XM Satellite Radio Holdings
Inc., XM Equipment LLC, XM Radio
Inc., Sirius XM Radio Inc. and
The Bank of New York Mellon, as
trustee, relating to the 7%
Exchangeable Senior Subordinated
Notes due 2014 (incorporated by
reference to Exhibit 4.80 to
Sirius XM Radio Inc.s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2008). |
|
|
|
|
|
|
|
|
4.17 |
|
|
|
|
Registration Rights Agreement,
dated August 1, 2008, among XM
Satellite Radio Inc., XM
Satellite Radio Holdings Inc., XM
Equipment Leasing LLC, XM Radio
Inc., Sirius Satellite Radio
Inc., J.P. Morgan Securities
Inc., Morgan Stanley & Co.
Incorporated and UBS Securities
LLC, relating to the 7%
Exchangeable Senior Subordinated
Notes due 2014 (incorporated by
reference to Exhibit 4.81 to
Sirius XM Radio Inc.s Quarterly
Report on Form 10-Q for the
quarter ended September 30,
2008). |
|
|
|
|
|
|
|
|
4.18 |
|
|
|
|
Note Purchase Agreement, dated as
of February 13, 2009, among
Sirius XM Radio Inc., XM
Satellite Radio Holdings Inc., XM
1500 Eckington LLC, XM Investment
LLC and the purchasers listed on
schedule I thereto, relating to
XM Satellite Radio Holdings
Inc.s 10% Senior PIK Secured
Notes due 2011 (incorporated by
reference to Exhibit 4.1 to
Sirius XM Radio Inc.s Current
Report on Form 8-K filed on
February 17, 2009). |
|
|
|
|
|
|
|
|
4.19 |
|
|
|
|
Indenture, dated as of February
13, 2009, among Sirius XM Radio
Inc., XM Satellite Radio Holdings
Inc., XM 1500 Eckington LLC, XM
Investment LLC and U.S. Bank
National Association, as trustee
and collateral trustee, relating
to XM Satellite Radio Holdings
Inc.s 10% Senior PIK Secured
Notes due 2011 (incorporated by
reference to Exhibit 4.2 to
Sirius XM Radio Inc.s Current
Report on Form 8-K filed on
February 17, 2009). |
|
|
|
|
|
|
|
|
4.20 |
|
|
|
|
Security Agreement, dated as of
February 13, 2009, among XM 1500
Eckington LLC, XM Investment LLC
and U.S. Bank National
Association, as collateral
trustee, relating to XM Satellite
Radio Holdings Inc.s 10% Senior
PIK Secured Notes due 2011
(incorporated by reference to
Exhibit 4.3 to Sirius XM Radio
Inc.s Current Report on Form 8-K
filed on February 17, 2009). |
E-3
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
4.21 |
|
|
|
|
Deed of Trust, Assignment of
Leases and Rents, Security
Agreement and Fixture Filing,
dated as of February 13, 2009,
from XM 1500 Eckington LLC, as
grantor, to Stewart Title of
Maryland Inc., as trustee for the
benefit of U.S. Bank National
Association as collateral agent,
as beneficiary (incorporated by
reference to Exhibit 4.4 to
Sirius XM Radio Inc.s Current
Report on Form 8-K filed on
February 17, 2009). |
|
|
|
|
|
|
|
|
4.22 |
|
|
|
|
Deed of Trust, Assignment of
Leases and Rents, Security
Agreement and Fixture Filing,
dated as of February 13, 2009,
from XM Investment LLC, as
grantor, to Stewart Title of
Maryland Inc., as trustee for the
benefit of U.S. Bank National
Association as collateral agent,
as beneficiary (incorporated by
reference to Exhibit 4.5 to
Sirius XM Radio Inc.s Current
Report on Form 8-K filed on
February 17, 2009). |
|
|
|
|
|
|
|
|
4.23 |
|
|
|
|
Registration Rights Agreement,
dated as of February 13, 2009,
among Sirius XM Radio Inc., XM
Satellite Radio Holdings Inc., XM
1500 Eckington LLC, XM Investment
LLC and the purchasers signatory
thereto, relating to XM Satellite
Radio Holdings Inc.s 10% Senior
PIK Secured Notes due 2011
(incorporated by reference to
Exhibit 4.6 to Sirius XM Radio
Inc.s Current Report on Form 8-K
filed on February 17, 2009). |
|
|
|
|
|
|
|
|
4.24 |
|
|
|
|
Third Supplemental Indenture,
dated as of March 6, 2009, among
XM Satellite Radio Inc., XM
Equipment Leasing LLC, XM Radio
Inc. and the Bank of New York
Mellon, as trustee, relating to
the 9.75% Senior Notes due 2014
(incorporated by reference to
Exhibit 4.56 to Sirius XM Radio
Inc.s Annual Report on Form 10-K
for the year ended December 31,
2008). |
|
|
|
|
|
|
|
|
4.25 |
|
|
|
|
Indenture, dated June 30, 2009,
between XM Satellite Radio Inc.
and U.S. Bank National
Association relating to the
11.25% Senior Secured Notes due
2013 (incorporated by reference
to Exhibit 4.59 to Sirius XM
Radio Inc.s Quarterly Report on
Form 10-Q for the quarter ended
June 30, 2009). |
|
|
|
|
|
|
|
|
**10.1 |
|
|
|
|
Operational Assistance Agreement,
dated as of June 7, 1999, between
XM Satellite Radio Inc. and Clear
Channel Communications, Inc.
(incorporated by reference to
Exhibit 10.10 to Amendment No. 1
to XM Satellite Radio Holdings
Inc.s Registration Statement on
Form S-1, File No. 333-83619). |
|
|
|
|
|
|
|
|
**10.2 |
|
|
|
|
Technology Licensing Agreement
among XM Satellite Radio Inc., XM
Satellite Radio Holdings Inc.,
WorldSpace Management Corporation
and American Mobile Satellite
Corporation, dated as of January
1, 1998, amended by Amendment No.
1 to Technology Licensing
Agreement, dated June 7, 1999
(incorporated by reference to
Exhibit 10.3 to XM Satellite
Radio Holdings Inc.s Annual
Report on Form 10-K for the
period year December 31, 2007). |
|
|
|
|
|
|
|
|
***10.3 |
|
|
|
|
Third Amended and Restated
Distribution and Credit
Agreement, dated as of February
6, 2008, among General Motors
Corporation, XM Satellite Radio
Holdings Inc. and XM Satellite
Radio Inc. (incorporated by
reference to Exhibit 10.63 to XM
Satellite Radio Holdings Inc.s
Annual Report on Form 10-K for
the year ended December 31,
2007). |
|
|
|
|
|
|
|
|
**10.4 |
|
|
|
|
Third Amended and Restated
Satellite Purchase Contract for
In-Orbit Delivery, dated as of
May 15, 2001, between XM
Satellite Radio Inc. and Boeing
Satellite Systems International
Inc. (incorporated by reference
to Exhibit 10.36 to Amendment No.
1 to XM Satellite Radio Holdings
Inc.s Registration Statement on
Form S-3, File No. 333-89132). |
|
|
|
|
|
|
|
|
10.5 |
|
|
|
|
Assignment and Novation
Agreement, dated as of December
5, 2001, among XM Satellite Radio
Holdings Inc., XM Satellite Radio
Inc. and Boeing Satellite Systems
International Inc. (incorporated
by reference to Exhibit 10.3 to
XM Satellite Radio Holdings
Inc.s Current Report on Form 8-K
filed on December 6, 2001). |
E-4
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
**10.6 |
|
|
|
|
Amendment to the Satellite
Purchase Contract for In-Orbit
Delivery, dated as of December 5,
2001, between XM Satellite Radio
Inc. and Boeing Satellite Systems
International Inc. (incorporated
by reference to Exhibit 10.4 to
XM Satellite Radio Holdings
Inc.s Current Report on Form 8-K
filed on December 6, 2001). |
|
|
|
|
|
|
|
|
10.7 |
|
|
|
|
Amended and Restated Assignment
and Use Agreement, dated as of
January 28, 2003, between XM
Satellite Radio Inc. and XM Radio
Inc. (incorporated by reference
to Exhibit 10.7 to XM Satellite
Radio Holdings Inc.s Current
Report on Form 8-K filed on
January 29, 2003). |
|
|
|
|
|
|
|
|
**10.8 |
|
|
|
|
Amended and Restated Amendment to
the Satellite Purchase Contract
for In-Orbit Delivery, dated May
23, 2003, among XM Satellite
Radio Inc. and XM Satellite Radio
Holdings Inc. and Boeing
Satellite Systems International,
Inc. (incorporated by reference
to Exhibit 10.53 to XM Satellite
Radio Holdings Inc.s Quarterly
Report on Form 10-Q for the
quarter ended June 30, 2003). |
|
|
|
|
|
|
|
|
**10.9 |
|
|
|
|
Amendment to the Satellite
Purchase Contract for In-Orbit
Delivery, dated July 31, 2003,
among XM Satellite Radio Inc. and
XM Satellite Radio Holdings Inc.
and Boeing Satellite Systems
International, Inc. (incorporated
by reference to Exhibit 10.54 to
XM Satellite Radio Holdings
Inc.s Quarterly Report on Form
10-Q for the quarter ended June
30, 2003). |
|
|
|
|
|
|
|
|
10.10 |
|
|
|
|
December 2003 Amendment to the
Satellite Purchase Contract for
In-Orbit Delivery, dated December
19, 2003, among XM Satellite
Radio Inc., XM Satellite Radio
Holdings Inc. and Boeing
Satellite Systems International,
Inc. (incorporated by reference
to Exhibit 10.57 to XM Satellite
Radio Holdings Inc.s Annual
Report on Form 10-K for the year
ended December 31, 2003). |
|
|
|
|
|
|
|
|
10.11 |
|
|
|
|
Waiver and Letter Agreement,
dated as of July 14, 2008, among
XM Satellite Radio Inc., XM
Satellite Radio Holdings Inc. and
certain beneficial owners of XM
Satellite Radio Inc.s 9.75%
Senior Notes due 2014
(incorporated by reference to
Exhibit 10.6 to XM Satellite
Radio Inc.s Current Report on
Form 8-K filed on July 17, 2008). |
|
|
|
|
|
|
|
|
10.12 |
|
|
|
|
Collateral Agreement, dated as of
December 31, 2009, by and among
XM Satellite Radio Holdings Inc.,
XM Satellite Radio Inc., certain
subsidiaries thereof, and U.S.
Bank National Association, as
collateral agent relating to the
11.25% Senior Secured Notes due
2013 (incorporated by reference
to XM Satellite Radio Holdings
Inc.s Current Report on Form 8-K
filed on January 6, 2010). |
|
|
|
|
|
|
|
|
*10.13 |
|
|
|
|
Form of Non-Qualified Stock Option Agreement (incorporated by reference
to Exhibit 10.2 to XM Satellite Radio Holdings Inc.s Current Report on
Form 8-K filed June 1, 2007). |
|
|
|
|
|
|
|
|
*10.14 |
|
|
|
|
Form of Restricted Stock Agreement (incorporated by reference to Exhibit
10.3 to XM Satellite Radio Holdings Inc.s Current Report on Form 8-K
filed June 1, 2007). |
|
|
|
|
|
|
|
|
*10.15 |
|
|
|
|
XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan (incorporated
by reference to Exhibit 10.5 to XM Satellite Radio Holdings Inc.s
Quarterly Report on Form 10-Q for the quarter ended June 30, 2007). |
|
|
|
|
|
|
|
|
21.1 |
|
|
|
|
List of Subsidiaries (filed herewith). |
|
|
|
|
|
|
|
|
23.1 |
|
|
|
|
Consent of KPMG LLP (filed herewith). |
|
|
|
|
|
|
|
|
31.1 |
|
|
|
|
Certificate of Mel Karmazin, President of XM Satellite Radio Holdings
Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
|
|
|
|
|
31.2 |
|
|
|
|
Certificate of Mel Karmazin, President of XM Satellite Radio Inc.,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
|
|
|
|
|
31.3 |
|
|
|
|
Certificate of David J. Frear, Treasurer of XM Satellite Radio Holdings
Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
|
|
|
|
|
31.4 |
|
|
|
|
Certificate of David J. Frear, Treasurer of XM Satellite Radio Inc.,
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
E-5
|
|
|
|
|
|
|
Exhibit |
|
|
|
Description |
|
32.1 |
|
|
|
|
Certificate of Mel Karmazin, President and David J. Frear, Treasurer of
XM Satellite Radio Holdings Inc., 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 Mel Karmazin, President and David J. Frear, Treasurer of
XM Satellite Radio Inc., pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed
herewith). |
|
|
|
* |
|
This document has been identified as a management contract or compensatory plan or
arrangement. |
|
** |
|
Pursuant to the Commissions Orders Granting Confidential Treatment under Rule 406 of the
Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of 1934, certain
confidential portions of this Exhibit were omitted by means of redacting a portion of the
text. |
|
*** |
|
Confidential treatment has been requested with respect to portions of this Exhibit that have
been omitted by redacting a portion of the text. |
|
**** |
|
In accordance with the Agreement and Plan of Merger, dated as of February 17, 2007, entered
into by and among XM Satellite Radio Holdings Inc., Sirius Satellite Radio Inc. and Vernon
Merger Corporation (filed as Exhibit 2.1 herewith), the bylaws of Vernon Merger Corporation
became the bylaws of XM Satellite Radio Holdings Inc. upon the effectiveness of the Merger. |
E-6