Form 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______ to _______
COMMISSION FILE NUMBER 001-34295
SIRIUS XM RADIO INC.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation of organization)
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52-1700207
(I.R.S. Employer
Identification Number) |
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1221 Avenue of the Americas, 36th Floor |
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New York, New York
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10020 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (212) 584-5100
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports) and (2) has been subject
to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) 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 whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer þ
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Accelerated filer o
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Non-accelerated filer o
(Do not check if a smaller reporting company)
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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
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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(Class)
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(Outstanding as of October 31, 2009) |
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COMMON STOCK, $0.001 PAR VALUE
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3,858,653,816 SHARES |
SIRIUS XM RADIO INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I: FINANCIAL INFORMATION
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ITEM 1. |
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FINANCIAL STATEMENTS |
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months |
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For the Nine Months |
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Ended September 30, |
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Ended September 30, |
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(in thousands, except per share data) |
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2009 |
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2008 |
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2009 |
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2008 |
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Revenue: |
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|
|
|
|
|
|
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|
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Subscriber revenue, including effects of
rebates |
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$ |
578,304 |
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$ |
458,237 |
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|
$ |
1,699,455 |
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$ |
980,396 |
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Advertising revenue, net of agency fees |
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12,418 |
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14,674 |
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37,287 |
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31,413 |
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Equipment revenue |
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10,506 |
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11,271 |
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|
31,343 |
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25,290 |
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Other revenue |
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17,428 |
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|
4,261 |
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|
28,379 |
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4,710 |
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Total revenue |
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618,656 |
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488,443 |
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1,796,464 |
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1,041,809 |
|
Operating expenses (depreciation and amortization
shown separately below) (1): |
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Cost of services: |
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|
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|
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Satellite and transmission |
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19,542 |
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19,526 |
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59,435 |
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34,800 |
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Programming and content |
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78,315 |
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106,037 |
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230,825 |
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222,975 |
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Revenue share and royalties |
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100,558 |
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85,592 |
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296,855 |
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177,635 |
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Customer service and billing |
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56,529 |
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47,432 |
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175,570 |
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|
97,218 |
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Cost of equipment |
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11,944 |
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13,773 |
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27,988 |
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28,007 |
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Sales and marketing |
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52,530 |
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63,637 |
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152,647 |
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151,237 |
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Subscriber acquisition costs |
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90,054 |
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86,616 |
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230,773 |
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|
257,832 |
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General and administrative |
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56,923 |
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57,310 |
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182,953 |
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148,555 |
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Engineering, design and development |
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11,252 |
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10,434 |
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32,975 |
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28,091 |
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Impairment of goodwill |
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4,750,859 |
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4,750,859 |
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Depreciation and amortization |
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72,100 |
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66,774 |
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|
|
231,624 |
|
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|
120,793 |
|
Restructuring, impairments and related
costs |
|
|
2,554 |
|
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7,430 |
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30,167 |
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|
7,457 |
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Total operating expenses |
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552,301 |
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5,315,420 |
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1,651,812 |
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6,025,459 |
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Income (loss) from operations |
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66,355 |
|
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|
(4,826,977 |
) |
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144,652 |
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(4,983,650 |
) |
Other income (expense): |
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Interest and investment income |
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962 |
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4,940 |
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2,602 |
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9,167 |
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Interest expense, net of amounts
capitalized |
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(78,527 |
) |
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(49,216 |
) |
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(240,062 |
) |
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|
(83,636 |
) |
Loss on extinguishment of debt and credit
facilities, net |
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|
(138,053 |
) |
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(263,767 |
) |
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(Loss) gain on investments |
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(58 |
) |
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(3,089 |
) |
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|
457 |
|
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|
(3,089 |
) |
Other income (expense) |
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|
1,246 |
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(3,870 |
) |
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2,505 |
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(3,935 |
) |
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Total other expense |
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|
(214,430 |
) |
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|
(51,235 |
) |
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(498,265 |
) |
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|
(81,493 |
) |
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Loss before income taxes |
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(148,075 |
) |
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|
(4,878,212 |
) |
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(353,613 |
) |
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|
(5,065,143 |
) |
Income tax expense |
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(1,115 |
) |
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(1,215 |
) |
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|
(3,344 |
) |
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(2,301 |
) |
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Net loss |
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|
(149,190 |
) |
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|
(4,879,427 |
) |
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|
(356,957 |
) |
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(5,067,444 |
) |
Preferred stock beneficial conversion
feature |
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(186,188 |
) |
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Net loss attributable to
common stockholders |
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$ |
(149,190 |
) |
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$ |
(4,879,427 |
) |
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$ |
(543,145 |
) |
|
$ |
(5,067,444 |
) |
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Net loss per common share (basic and diluted) |
|
$ |
(0.04 |
) |
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$ |
(1.93 |
) |
|
$ |
(0.15 |
) |
|
$ |
(2.76 |
) |
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Weighted average common shares outstanding
(basic and diluted) |
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|
3,621,062 |
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2,527,692 |
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|
3,577,587 |
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|
1,836,834 |
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(1) |
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Amounts related to share-based payment expense included in operating expenses were as follows: |
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|
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|
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|
|
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Satellite and transmission |
|
$ |
1,086 |
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$ |
1,331 |
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|
$ |
3,020 |
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|
$ |
2,887 |
|
Programming and content |
|
|
3,037 |
|
|
|
3,529 |
|
|
|
7,418 |
|
|
|
7,477 |
|
Customer service and billing |
|
|
734 |
|
|
|
596 |
|
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|
2,052 |
|
|
|
1,137 |
|
Sales and marketing |
|
|
2,722 |
|
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|
3,672 |
|
|
|
10,081 |
|
|
|
11,376 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
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|
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|
14 |
|
General and administrative |
|
|
8,442 |
|
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|
12,904 |
|
|
|
40,141 |
|
|
|
36,359 |
|
Engineering, design and development |
|
|
1,653 |
|
|
|
1,973 |
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|
|
4,841 |
|
|
|
4,167 |
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|
|
|
|
|
|
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|
Total share-based payment expense |
|
$ |
17,674 |
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|
$ |
24,005 |
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|
$ |
67,553 |
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$ |
63,417 |
|
|
|
|
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|
|
|
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|
See accompanying Notes to the unaudited consolidated financial statements.
1
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
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|
(in thousands, except share and per share data) |
|
September 30, 2009 |
|
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December 31, 2008 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
|
$ |
380,372 |
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|
$ |
380,446 |
|
Accounts receivable, net of allowance for doubtful accounts of $9,872 and $10,860,
respectively |
|
|
87,148 |
|
|
|
102,024 |
|
Receivables from distributors |
|
|
41,755 |
|
|
|
45,950 |
|
Inventory, net |
|
|
20,996 |
|
|
|
24,462 |
|
Prepaid expenses |
|
|
107,350 |
|
|
|
67,203 |
|
Related party current assets |
|
|
109,172 |
|
|
|
114,177 |
|
Other current assets |
|
|
64,317 |
|
|
|
58,744 |
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|
|
|
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|
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Total current assets |
|
|
811,110 |
|
|
|
793,006 |
|
Property and equipment, net |
|
|
1,694,235 |
|
|
|
1,703,476 |
|
FCC licenses |
|
|
2,083,654 |
|
|
|
2,083,654 |
|
Restricted investments |
|
|
3,400 |
|
|
|
141,250 |
|
Deferred financing fees, net |
|
|
35,889 |
|
|
|
40,156 |
|
Intangible assets, net |
|
|
629,288 |
|
|
|
688,671 |
|
Goodwill |
|
|
1,834,856 |
|
|
|
1,834,856 |
|
Related party long-term assets |
|
|
114,073 |
|
|
|
124,607 |
|
Other long-term assets |
|
|
62,438 |
|
|
|
81,019 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
7,268,943 |
|
|
$ |
7,490,695 |
|
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|
LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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|
|
|
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|
|
|
Accounts payable and accrued expenses |
|
$ |
521,621 |
|
|
$ |
642,820 |
|
Accrued interest |
|
|
65,537 |
|
|
|
76,463 |
|
Current portion of deferred revenue |
|
|
987,177 |
|
|
|
985,180 |
|
Current portion of deferred credit on executory contracts |
|
|
247,566 |
|
|
|
234,774 |
|
Current maturities of long-term debt |
|
|
103,674 |
|
|
|
399,726 |
|
Related party current liabilities |
|
|
90,869 |
|
|
|
68,373 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
2,016,444 |
|
|
|
2,407,336 |
|
Deferred revenue |
|
|
285,488 |
|
|
|
247,889 |
|
Deferred credit on executory contracts |
|
|
851,955 |
|
|
|
1,037,190 |
|
Long-term debt |
|
|
2,874,391 |
|
|
|
2,851,740 |
|
Long-term related party debt |
|
|
265,659 |
|
|
|
|
|
Deferred tax liability |
|
|
906,428 |
|
|
|
894,453 |
|
Related party long-term liabilities |
|
|
21,928 |
|
|
|
|
|
Other long-term liabilities |
|
|
39,005 |
|
|
|
43,550 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
7,261,298 |
|
|
|
7,482,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 15) |
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|
|
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|
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|
Stockholders equity: |
|
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|
|
|
|
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|
Preferred stock, par value $0.001; 50,000,000 authorized at September 30, 2009 and
December 31, 2008: |
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Series A convertible preferred stock (liquidation preference of $51,370 at
September 30, 2009
and December 31, 2008); 24,808,959 shares issued and outstanding at
September 30, 2009
and December 31, 2008 |
|
|
25 |
|
|
|
25 |
|
Convertible perpetual preferred stock, series B (liquidation preference of $13
and $0 at
September 30, 2009 and December 31, 2008, respectively); 12,500,000 and
zero shares issued
and outstanding at September 30, 2009 and December 31, 2008, respectively |
|
|
13 |
|
|
|
|
|
Convertible preferred stock, series C junior; no shares issued and outstanding at
September 30, 2009 and December 31, 2008 |
|
|
|
|
|
|
|
|
Common stock, par value $0.001; 9,000,000,000 and 8,000,000,000 shares authorized at
September 30, 2009 and December 31, 2008, respectively; 3,858,186,839 and
3,651,765,837 shares
issued and outstanding at September 30, 2009 and December 31, 2008, respectively |
|
|
3,858 |
|
|
|
3,652 |
|
Accumulated other comprehensive loss, net of tax |
|
|
(6,598 |
) |
|
|
(7,871 |
) |
Additional paid-in capital |
|
|
10,265,752 |
|
|
|
9,724,991 |
|
Accumulated deficit |
|
|
(10,255,405 |
) |
|
|
(9,712,260 |
) |
|
|
|
|
|
|
|
Total stockholders equity |
|
|
7,645 |
|
|
|
8,537 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity |
|
$ |
7,268,943 |
|
|
$ |
7,490,695 |
|
|
|
|
|
|
|
|
See accompanying Notes to the unaudited consolidated financial statements.
2
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Series A |
|
|
Series B |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
Convertible |
|
|
Convertible |
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred Stock |
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Paid-in |
|
|
Accumulated |
|
|
Comprehensive |
|
|
Stockholders |
|
(in thousands, except share and per share data) |
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Loss |
|
|
Equity |
|
Balance at December 31, 2008 |
|
|
24,808,959 |
|
|
$ |
25 |
|
|
|
|
|
|
$ |
|
|
|
|
3,651,765,837 |
|
|
$ |
3,652 |
|
|
$ |
9,724,991 |
|
|
$ |
(9,712,260 |
) |
|
$ |
(7,871 |
) |
|
$ |
8,537 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(356,957 |
) |
|
|
|
|
|
|
(356,957 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on available-for-sale
securities, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
579 |
|
|
|
579 |
|
Foreign currency translation adjustment, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
694 |
|
|
|
694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(355,684 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of preferred stock related party, net of issuance costs |
|
|
|
|
|
|
|
|
|
|
12,500,000 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
410,179 |
|
|
|
(186,188 |
) |
|
|
|
|
|
|
224,004 |
|
Issuance of common stock to employees
and employee benefit plans, net of forfeitures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,520,957 |
|
|
|
9 |
|
|
|
1,917 |
|
|
|
|
|
|
|
|
|
|
|
1,926 |
|
Structuring fee on 10% Senior PIK Secured Notes due 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,178,819 |
|
|
|
59 |
|
|
|
5,859 |
|
|
|
|
|
|
|
|
|
|
|
5,918 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
91,666 |
|
|
|
|
|
|
|
56,500 |
|
|
|
|
|
|
|
|
|
|
|
56,500 |
|
Returned shares under share borrow agreements |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(60,000,000 |
) |
|
|
(60 |
) |
|
|
60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of restricted stock units in satisfaction of accrued compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
59,229,560 |
|
|
|
59 |
|
|
|
31,221 |
|
|
|
|
|
|
|
|
|
|
|
31,280 |
|
Exchange of 21/2% Convertible Notes due
2009, including accrued interest |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,400,000 |
|
|
|
139 |
|
|
|
35,025 |
|
|
|
|
|
|
|
|
|
|
|
35,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
|
24,808,959 |
|
|
$ |
25 |
|
|
|
12,500,000 |
|
|
$ |
13 |
|
|
|
3,858,186,839 |
|
|
$ |
3,858 |
|
|
$ |
10,265,752 |
|
|
$ |
(10,255,405 |
) |
|
$ |
(6,598 |
) |
|
$ |
7,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying Notes to the unaudited consolidated financial statements.
3
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(356,957 |
) |
|
$ |
(5,067,444 |
) |
Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
231,624 |
|
|
|
114,923 |
|
Impairment of goodwill |
|
|
|
|
|
|
4,750,859 |
|
Non-cash interest expense, net of amortization of premium |
|
|
32,909 |
|
|
|
(1,933 |
) |
Provision for doubtful accounts |
|
|
23,879 |
|
|
|
11,125 |
|
Amortization of deferred income related to equity method investment |
|
|
(2,082 |
) |
|
|
(471 |
) |
Loss on extinguishment of debt and credit facilities, net |
|
|
263,767 |
|
|
|
|
|
Restructuring, impairments and related costs |
|
|
26,954 |
|
|
|
|
|
Loss on disposal of assets |
|
|
|
|
|
|
4,879 |
|
Loss on investments |
|
|
10,967 |
|
|
|
3,089 |
|
Share-based payment expense |
|
|
67,553 |
|
|
|
63,417 |
|
Deferred income taxes |
|
|
3,344 |
|
|
|
2,301 |
|
Other non-cash purchase price adjustments |
|
|
(142,487 |
) |
|
|
(23,770 |
) |
Other |
|
|
|
|
|
|
1,643 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
(9,002 |
) |
|
|
1,575 |
|
Inventory |
|
|
3,466 |
|
|
|
2,952 |
|
Receivables from distributors |
|
|
4,195 |
|
|
|
9,595 |
|
Related party assets |
|
|
15,539 |
|
|
|
(1,357 |
) |
Prepaid expenses and other current assets |
|
|
30,188 |
|
|
|
3,528 |
|
Other long-term assets |
|
|
64,034 |
|
|
|
37,110 |
|
Accounts payable and accrued expenses |
|
|
(68,135 |
) |
|
|
(122,969 |
) |
Accrued interest |
|
|
(6,600 |
) |
|
|
(2,810 |
) |
Deferred revenue |
|
|
11,569 |
|
|
|
(4,577 |
) |
Related party liabilities |
|
|
44,424 |
|
|
|
3,315 |
|
Other long-term liabilities |
|
|
3,958 |
|
|
|
(1,972 |
) |
|
|
|
|
|
|
|
Net cash provided by (used in)
operating activities |
|
|
253,107 |
|
|
|
(216,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Additions to property and equipment |
|
|
(217,335 |
) |
|
|
(102,705 |
) |
Sales of property and equipment |
|
|
|
|
|
|
105 |
|
Purchases of restricted and other investments |
|
|
|
|
|
|
(3,000 |
) |
Acquisition of acquired entity cash |
|
|
|
|
|
|
819,521 |
|
Merger related costs |
|
|
|
|
|
|
(13,047 |
) |
Sale of restricted and other investments |
|
|
|
|
|
|
65,642 |
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities |
|
|
(217,335 |
) |
|
|
766,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of warrants and stock options |
|
|
|
|
|
|
471 |
|
Preferred stock issuance costs, net |
|
|
(3,712 |
) |
|
|
|
|
Long-term borrowings, net |
|
|
579,936 |
|
|
|
533,941 |
|
Related party long-term borrowings, net |
|
|
364,964 |
|
|
|
|
|
Short-term financings |
|
|
2,220 |
|
|
|
|
|
Payment of premiums on redemption of debt |
|
|
(17,075 |
) |
|
|
(18,693 |
) |
Payments to minority interest holder |
|
|
|
|
|
|
(61,880 |
) |
Repayment of long-term borrowings |
|
|
(610,932 |
) |
|
|
(1,082,428 |
) |
Repayment of related party long-term borrowings |
|
|
(351,247 |
) |
|
|
|
|
Other |
|
|
|
|
|
|
(98 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(35,846 |
) |
|
|
(628,687 |
) |
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(74 |
) |
|
|
(79,163 |
) |
Cash and cash equivalents at beginning of period |
|
|
380,446 |
|
|
|
438,820 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
380,372 |
|
|
$ |
359,657 |
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
Supplemental Disclosure of Cash and Non-Cash Flow Information |
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
Interest, net of amounts capitalized |
|
$ |
211,143 |
|
|
$ |
91,309 |
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
|
|
Share-based payments in satisfaction of accrued compensation |
|
|
31,280 |
|
|
|
8,729 |
|
Common stock issued in exchange of 31/2% Convertible Notes due
2008, including accrued interest |
|
|
|
|
|
|
33,502 |
|
Common stock issued in exchange of 21/2% Convertible Notes due
2009, including accrued interest |
|
|
35,164 |
|
|
|
|
|
Structuring fee on 10% Senior PIK Secured Notes due 2011 |
|
|
5,918 |
|
|
|
|
|
Preferred stock issued to Liberty Media |
|
|
227,716 |
|
|
|
|
|
Release of restricted investments |
|
|
138,000 |
|
|
|
|
|
Equity issued in the acquisition of XM |
|
|
|
|
|
|
5,784,976 |
|
See accompanying Notes to the unaudited consolidated financial statements.
5
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(1) Business
We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the
United States for a subscription fee through our proprietary satellite radio systems the SIRIUS
system and the XM system. On July 28, 2008, our wholly owned subsidiary, Vernon Merger Corporation,
merged (the Merger) with and into XM Satellite Radio Holdings Inc. and, as a result, XM Satellite
Radio Holdings Inc. is now our wholly owned subsidiary. The SIRIUS system consists of four in-orbit
satellites, over 125 terrestrial repeaters that receive and retransmit signals, satellite uplink
facilities and studios. The XM 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.
Our satellite radios are primarily distributed through automakers (OEMs), retailers and our
websites. We have agreements with every major automaker to offer SIRIUS or XM satellite radios as
factory or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also offered to
customers of rental car companies.
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; subscribers to SIRIUS Internet Radio and XM Radio
Online, our Internet services; and certain subscribers to our weather, traffic, data and video
services.
Our primary source of revenue is subscription fees, with most of our customers subscribing on
an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and long-term
subscriptions as well as discounts for multiple subscriptions. We also derive revenue from
activation fees, the sale of advertising on select non-music channels, the direct sale of satellite
radios, components and accessories, and other ancillary services, such as our Backseat TV, data and
weather services. In August 2009, we began charging our subscribers a U.S. Music Royalty Fee (the
MRF).
In certain cases, automakers include a subscription to our radio services in the sale or lease
price of vehicles. The length of these prepaid subscriptions varies, but is typically three to
twelve months. In many cases, we receive subscription payments from automakers in advance of the
activation of our service. We also reimburse various automakers for certain costs associated with
satellite radios installed in their vehicles.
We also have an interest in the satellite radio services offered in Canada. Subscribers to the
SIRIUS Canada service and the XM Canada service are not included in our subscriber count.
Unless otherwise indicated,
|
|
|
we, us, our, the company, the companies and similar terms refer to Sirius
XM Radio Inc. and its consolidated subsidiaries; |
|
|
|
SIRIUS refers to Sirius XM Radio Inc. and its consolidated subsidiaries, excluding
XM Satellite Radio Holdings Inc. and its consolidated subsidiaries; |
|
|
|
XM Holdings refers to XM Satellite Radio Holdings Inc. and its consolidated
subsidiaries, including XM Satellite Radio Inc.; and |
|
|
|
XM refers to XM Satellite Radio Inc. and its consolidated subsidiaries. |
(2) Principles of Consolidation and Basis of Presentation
Principles of Consolidation
The accompanying unaudited consolidated financial statements of Sirius XM Radio Inc. and
subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles,
the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and
Exchange Commission (SEC) for interim financial reporting. Accordingly, they do not include all
of the information and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. All intercompany transactions have been eliminated in consolidation.
6
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Basis of Presentation
In presenting unaudited consolidated financial statements, management makes estimates and
assumptions that affect the amounts reported and related disclosures. 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 from those estimates. In the opinion of management, all normal recurring adjustments
necessary for a fair presentation of our unaudited consolidated financial statements as of
September 30, 2009, and for the three and nine months ended September 30, 2009 and 2008, have been
made.
Interim results are not necessarily indicative of the results that may be expected for a full
year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form
10-K for the year ended December 31, 2008, filed with the SEC on March 10, 2009.
We have evaluated events subsequent to the balance sheet date and prior to filing of this
Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 through November 5, 2009 and
determined there have not been any events that have occurred that would require adjustment to our
unaudited consolidated financial statements.
(3) Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting
principles requires management to make estimates and assumptions that affect the amounts reported
and related disclosures.
Significant estimates inherent in the preparation of the accompanying unaudited consolidated
financial statements include revenue recognition, asset impairment, useful lives of our satellites,
share-based payment expense, and valuation allowances against
deferred tax assets. The financial market
volatility and economic conditions in the United States have impacted
and may continue to impact our business. Such conditions could have a
material impact to our significant accounting estimates.
Inventory
Inventory consists of finished goods, refurbished goods, chip sets and other raw material
components used in manufacturing radios. Inventory is stated at the lower of cost 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 unaudited consolidated statements of operations. The remaining provision is reported as a
component of Subscriber acquisition costs in our unaudited consolidated statements of operations.
Inventory, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Raw materials |
|
$ |
15,995 |
|
|
$ |
11,648 |
|
Finished goods |
|
|
30,920 |
|
|
|
38,323 |
|
Allowance for obsolescence |
|
|
(25,919 |
) |
|
|
(25,509 |
) |
|
|
|
|
|
|
|
Total inventory, net |
|
$ |
20,996 |
|
|
$ |
24,462 |
|
|
|
|
|
|
|
|
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the instrument could be
exchanged in an orderly transaction between market participants to sell the asset or transfer the
liability. As of September 30, 2009 and December 31, 2008, we have determined that the carrying
amounts of cash and cash equivalents, accounts and other receivables, and accounts payable
approximate fair value due to the short-term nature of these instruments.
The fair value of our long-term debt is determined by either (i) estimating the discounted
future cash flows of each instrument at rates currently offered to us for similar debt instruments
of comparable maturities, or (ii) quoted market prices at the reporting date for the traded debt
securities. As of September 30, 2009 and December 31, 2008, the carrying value of our long-term
debt was $3,243,724 and $3,251,466, respectively; and the fair value approximated $3,130,837 and
$1,211,613, respectively.
7
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Reclassifications
Certain amounts in our prior period unaudited consolidated financial statements have been
reclassified to conform to our current period presentation.
Recent Accounting Pronouncements
In September 2009, Accounting Standards Codification (ASC) became the source of
authoritative U.S. 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 U.S. GAAP for registrants. The discussion below includes the applicable ASC
reference.
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. 167, Amendments to FASB Interpretation No. 46(R),
to require an analysis to determine whether our variable interest(s) give us a controlling
financial interest in a variable interest entity. Statement 167 has not been incorporated into ASC
and is effective for fiscal years beginning after November 15, 2009. We are currently evaluating
the impact, if any, the adoption of this guidance will have on our consolidated results of
operations and 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 U.S. 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.
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 would be effective for fiscal years
beginning on or after December 15, 2009, and retrospective application for all arrangements
outstanding as of the adoption date would be required. We are evaluating the impact that adoption
of this proposed guidance would have on our consolidated results of operations and financial
position.
(4) Goodwill
We allocated the consideration paid in connection with the Merger to the fair value of
acquired assets and assumed liabilities, respectively, and in 2008 recorded goodwill in the amount
of $6,601,046. During 2008, we recorded an impairment charge of $4,766,190, of which $4,750,859 was
recognized as of September 30, 2008, resulting in a carrying value of $1,834,856 at December 31,
2008. There has not been any change in the carrying value of goodwill during 2009.
8
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(5) Intangible Assets
Intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Weighted Average |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
|
Useful Lives |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
Value |
|
|
Amortization |
|
|
Value |
|
|
|
|
|
|
Indefinite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FCC licenses |
|
Indefinite |
|
$ |
2,083,654 |
|
|
$ |
|
|
|
$ |
2,083,654 |
|
|
$ |
2,083,654 |
|
|
$ |
|
|
|
$ |
2,083,654 |
|
Trademark |
|
Indefinite |
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
|
|
250,000 |
|
|
|
|
|
|
|
250,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Definite life intangible assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber relationships |
|
9 years |
|
$ |
380,000 |
|
|
$ |
(76,670 |
) |
|
$ |
303,330 |
|
|
$ |
380,000 |
|
|
$ |
(29,226 |
) |
|
$ |
350,774 |
|
Proprietary software |
|
6 years |
|
|
16,552 |
|
|
|
(6,020 |
) |
|
|
10,532 |
|
|
|
16,552 |
|
|
|
(2,285 |
) |
|
|
14,267 |
|
Developed technology |
|
10 years |
|
|
2,000 |
|
|
|
(233 |
) |
|
|
1,767 |
|
|
|
2,000 |
|
|
|
(83 |
) |
|
|
1,917 |
|
Licensing agreements |
|
9.1 years |
|
|
75,000 |
|
|
|
(11,452 |
) |
|
|
63,548 |
|
|
|
75,000 |
|
|
|
(4,090 |
) |
|
|
70,910 |
|
Leasehold interests |
|
7.4 years |
|
|
132 |
|
|
|
(21 |
) |
|
|
111 |
|
|
|
908 |
|
|
|
(105 |
) |
|
|
803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets |
|
|
|
|
|
$ |
2,807,338 |
|
|
$ |
(94,396 |
) |
|
$ |
2,712,942 |
|
|
$ |
2,808,114 |
|
|
$ |
(35,789 |
) |
|
$ |
2,772,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM trademark as indefinite life intangibles 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. SIRIUS FCC license for its FM-1, FM-2 and FM-3 satellites (and a ground spare
FM-4) expires in 2010, the FCC license for its FM-5 satellite expires in 2017 and the FCC license
for its FM-6 satellite will expire eight years after SIRIUS certifies the satellite has been
successfully launched and put into operation. XM Holdings FCC licenses for its 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 the XM
trademark. As of September 30, 2009, there are no legal, regulatory or contractual limitations
associated with the XM trademark.
We evaluate our indefinite life intangible assets for impairment on an annual basis. During
the three and nine months ended September 30, 2009, 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 acquired 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 intangibles 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.
Amortization expense was $18,648 and $9,232 for the three months ended September 30, 2009 and
2008, respectively, and $58,759 and $9,232 for the nine months ended September 30, 2009 and 2008,
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 |
|
|
|
|
|
|
Remaining 2009 |
|
$ |
17,827 |
|
2010 |
|
|
65,916 |
|
2011 |
|
|
58,850 |
|
2012 |
|
|
53,420 |
|
2013 |
|
|
47,097 |
|
Thereafter |
|
|
136,178 |
|
|
|
|
|
|
|
|
|
|
Total definite life intangibles, net |
|
$ |
379,288 |
|
|
|
|
|
9
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Subscriber revenue consists of subscription fees, revenue derived from our agreements with
rental car companies, non-refundable activation 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 upon activation and sale to the customer.
Subscriber revenue consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Subscription fees |
|
$ |
573,611 |
|
|
$ |
453,540 |
|
|
$ |
1,683,568 |
|
|
$ |
963,454 |
|
Activation fees |
|
|
5,171 |
|
|
|
4,920 |
|
|
|
16,929 |
|
|
|
17,271 |
|
Effect of rebates |
|
|
(478 |
) |
|
|
(223 |
) |
|
|
(1,042 |
) |
|
|
(329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber revenue |
|
$ |
578,304 |
|
|
$ |
458,237 |
|
|
$ |
1,699,455 |
|
|
$ |
980,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We capitalize a portion of the interest on funds borrowed to finance the construction costs of
our satellites. The following is a summary of our interest costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Interest costs charged to expense |
|
$ |
78,527 |
|
|
$ |
49,216 |
|
|
$ |
240,062 |
|
|
$ |
83,636 |
|
Interest costs capitalized |
|
|
12,742 |
|
|
|
7,791 |
|
|
|
47,272 |
|
|
|
14,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total interest costs incurred |
|
$ |
91,269 |
|
|
$ |
57,007 |
|
|
$ |
287,334 |
|
|
$ |
97,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(8) Property and Equipment
Property and equipment, net, consists of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Satellite system |
|
$ |
1,664,286 |
|
|
$ |
1,414,625 |
|
Terrestrial repeater network |
|
|
108,698 |
|
|
|
109,228 |
|
Leasehold improvements |
|
|
43,033 |
|
|
|
42,878 |
|
Broadcast studio equipment |
|
|
49,818 |
|
|
|
49,186 |
|
Capitalized software and hardware |
|
|
138,174 |
|
|
|
132,555 |
|
Satellite telemetry, tracking and control facilities |
|
|
56,013 |
|
|
|
56,217 |
|
Furniture, fixtures, equipment and other |
|
|
59,804 |
|
|
|
57,995 |
|
Land |
|
|
38,411 |
|
|
|
38,411 |
|
Building |
|
|
56,322 |
|
|
|
56,392 |
|
Construction in progress |
|
|
379,748 |
|
|
|
474,716 |
|
|
|
|
|
|
|
|
Total property and equipment |
|
|
2,594,307 |
|
|
|
2,432,203 |
|
Accumulated depreciation and amortization |
|
|
(900,072 |
) |
|
|
(728,727 |
) |
|
|
|
|
|
|
|
Property and equipment, net |
|
$ |
1,694,235 |
|
|
$ |
1,703,476 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
Satellite system |
|
$ |
353,938 |
|
|
$ |
449,129 |
|
Terrestrial repeater network |
|
|
19,067 |
|
|
|
19,070 |
|
Leasehold improvements |
|
|
|
|
|
|
|
|
Other |
|
|
6,743 |
|
|
|
6,517 |
|
|
|
|
|
|
|
|
Construction in progress |
|
$ |
379,748 |
|
|
$ |
474,716 |
|
|
|
|
|
|
|
|
Depreciation and amortization expense on property and equipment was $53,452 and $57,542 for
the three months ended September 30, 2009 and 2008, respectively, and $172,865 and $111,561 for the
nine months ended September 30, 2009 and 2008, respectively.
Satellites
SIRIUS initial three orbiting satellites were successfully launched in 2000. Our spare SIRIUS
satellite was delivered to ground storage in 2002. SIRIUS three-satellite constellation and
terrestrial repeater network were placed into service in 2002. On June 30, 2009, SIRIUS launched a
satellite into a geostationary orbit and placed it into service in August 2009 along with SIRIUS
other three orbiting satellites.
SIRIUS has an agreement with Space Systems/Loral for the design and construction of a sixth
SIRIUS satellite. In January 2008, SIRIUS entered into an agreement with International Launch
Services (ILS) to secure a satellite launch on a Proton rocket. We currently expect to launch
this satellite in the fourth quarter of 2011.
XM owns 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. The XM satellites were launched
in March 2001, May 2001, February 2005 and October 2006.
Space Systems/Loral has constructed a fifth satellite, XM-5, for use in the XM system. In
2006, XM 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, XM
recorded a charge of $24,196 to Restructuring, impairments and related costs in our unaudited
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, we entered into an agreement with ILS to secure a
satellite launch for XM-5 on a Proton rocket. We currently expect to launch XM-5 in the second or
third quarter of 2010.
11
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(9) Related Party Transactions
Liberty Media
Liberty Media Corporation and its affiliate, Liberty Media, LLC (collectively, Liberty
Media) is the holder of our Convertible Perpetual Preferred Stock, Series B (the Series B
Preferred Stock), has representatives on our board of directors and is considered a related party.
See Note 11, Debt, to our unaudited consolidated financial statements for further information
regarding indebtedness previously owed to Liberty Media.
Investment Agreement
On February 17, 2009, we entered into an Investment Agreement (the Investment Agreement)
with Liberty Media. Pursuant to the Investment Agreement, we agreed to issue 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. The Series B Preferred Stock was issued on
March 6, 2009.
The Series B Preferred Stock is convertible into 40% of our outstanding shares of common stock
(after giving effect to such conversion). Liberty Radio, LLC has agreed not to acquire more than
49.9% of our outstanding common stock for three years from the date the Series B Preferred Stock
was issued, except that Liberty Radio, LLC may acquire more than 49.9% of our outstanding common
stock at any time after the second anniversary of such date pursuant to any cash tender offer for
all of the outstanding shares of our common stock that are not beneficially owned by Liberty Radio,
LLC or its affiliates at a price per share greater than the closing price of the common stock on
the trading day preceding the earlier of the public announcement or commencement of such tender
offer. The Investment Agreement also provides for certain other standstill provisions during such
three year period.
The holder of our Series B Preferred Stock is entitled to appoint a number of directors to our
board of directors proportionate to its ownership levels from time to time.
We accounted for the Series B Preferred Stock by recording a $227,716 increase to additional
paid-in capital, excluding issuance costs, for the amount of allocated proceeds received and an
additional $186,188 increase in paid-in capital for the beneficial conversion feature, which was
immediately recognized as a charge to retained earnings.
Loan Investments
On February 17, 2009, SIRIUS entered into a Credit Agreement (the LM Credit Agreement) with
Liberty Media Corporation, as administrative agent and collateral agent, and Liberty Media, LLC, as
lender. The LM Credit Agreement provided for a $250,000 term loan and $30,000 of purchase money
loans. In August 2009, we repaid all amounts due and terminated the LM Credit Agreement in
connection with the issue and sale of XMs 9.75% Senior Secured Notes due 2015.
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 its 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 its 11.25% Senior Secured Notes due
2013 to extinguish the Amended and Restated Credit Agreement.
In June 2009, Liberty Media Corporation purchased $100,000 aggregate principal amount of XMs
11.25% Senior Secured Notes due 2013 as part of the offering of such notes. In August 2009, Liberty
Media Corporation purchased $50,000 aggregate principal amount of SIRIUS 9.75% Senior Secured
Notes due 2015 as part of the offering of such notes.
As of September 30, 2009, we recorded $265,659 as Long-term related party debt related to the
transactions with Liberty Media. This amount included the following principal amounts; $87,000 of
XMs 11.25% Senior Secured Notes due 2013, $76,000 of XMs 13% Senior Notes due 2013, $11,000 of
XMs 7% Exchangeable Senior Subordinated Notes due 2014, $55,221 of SIRIUS 95/8% Senior Notes due
2013, and $50,000 of SIRIUS 9.75% Senior Secured Notes due 2015. As of September 30, 2009, we
recorded $5,737 related to accrued interest with Liberty Media to Related party current
liabilities.
12
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We recognized Interest expense related to Liberty Media of $18,067 and $69,439 for the three
and nine months ended September 30, 2009, respectively.
SIRIUS Canada
In 2005, SIRIUS entered into a license and services agreement with SIRIUS Canada. Pursuant to
such agreement, SIRIUS is reimbursed for certain costs incurred to provide SIRIUS Canada service,
including certain costs incurred for the production and distribution of radios, as well as
information technology support costs. In consideration for the rights granted pursuant to this
license and services agreement, SIRIUS has the right to receive a royalty equal to a percentage of
SIRIUS Canadas gross revenues based on subscriber levels (ranging between 5% to 15%) and the
number of Canadian-specific channels made available to SIRIUS Canada. SIRIUS investment in SIRIUS
Canada is primarily non-voting shares which carry an 8% cumulative dividend.
Total costs that have been or will be reimbursed by SIRIUS Canada for the three months ended
September 30, 2009 and 2008 were $2,471 and $3,345, respectively, and $8,196 and $11,175 for the
nine months ended September 30, 2009 and 2008, respectively. We recorded $1,525 and $0 in royalty
income for the three months ended September 30, 2009 and 2008, respectively, and $3,695 and $0 for
the nine months ended September 30, 2009 and 2008, respectively. Such royalty income was recognized
as a component of Other revenue in our unaudited consolidated statements of operations. We also
recorded dividend income of $219 and $0 for the three months ended September 30, 2009 and 2008,
respectively, and $612 and $0 for the nine months ended September 30, 2009 and 2008, respectively,
which was included in Interest and investment income in our unaudited consolidated statements of
operations. Receivables recorded relating to royalty income and dividend income were fully utilized
to absorb a portion of our share of the losses generated by SIRIUS Canada during the three and nine
months ended September 30, 2009.
As of September 30, 2009 and December 31, 2008, other amounts due from SIRIUS Canada recorded
in Related party current assets were $3,379 and $1,814, respectively. As of September 30, 2009 and
December 31, 2008, amounts payable to SIRIUS Canada to fund its remaining capital requirements
recorded in Related party current liabilities were $1,305 and $1,160, respectively.
XM Canada
In 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite
radio service in Canada. The agreements have an initial 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. XM has 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 XM a total of
$71,800 for the rights to broadcast and market National Hockey League (NHL) games for the 10-year
term of XMs 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. Subsequent to the Merger date, we began to record additional deferred
revenue on our agreements with XM Canada involving royalties on subscriber and activation fees. As
of September 30, 2009 and December 31, 2008, the carrying value of Deferred revenue related to XM
Canada was $39,566 and $36,002, respectively.
XM has 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. XM has the right to convert
unpaid principal amounts into Class A subordinate voting shares of XM Canada at the price of
Cdn$16.00 per share. As of September 30, 2009 and December 31, 2008, amounts drawn by XM Canada on
this facility in lieu of payment of subscription fees recorded in Related party long-term assets
were $15,522 and $8,311, respectively.
In connection with the deferred income related to XM Canada, we recorded amortization of $694
and $471 for the three months ended September 30, 2009 and 2008, respectively, and $2,082 and $471
for the nine months ended September 30, 2009 and 2008, respectively. The royalty fees XM earns
related to subscriber and activation fees are reported as a component of Other revenue in our
unaudited consolidated statements of operations. We recorded royalty fees of $225 and $146 for the
three months ended September 30, 2009 and 2008, respectively, and $499 and $146 for the nine months
ended September 30, 2009 and 2008, respectively. XM Canada pays XM a licensing fee and reimburses
XM for advertising, both of which are reported as a component of Other revenue in our unaudited
consolidated statements of operations. We recognized licensing fee revenue of $1,500 and $1,000 for
the three months ended September 30, 2009 and 2008, respectively, and $4,500 and $1,000 for the
nine months ended September 30, 2009 and 2008, respectively. We recognized advertising
reimbursements of $0 for each of the three months ended September 30, 2009 and 2008, respectively,
and $733 and $0 for the nine months ended September 30, 2009 and 2008, respectively. As of
September 30, 2009 and December 31, 2008, amounts due from XM Canada recorded in Related party
current assets were $3,408 and $5,594, respectively. As of September 30, 2009 and December 31,
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 $0, respectively.
13
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
General Motors
XM has a long-term distribution agreement with General Motors Company (GM). GM has a
representative on our board of directors and is considered a related party. During the term of the
agreement, GM has agreed to distribute the XM service. XM subsidizes a portion of the cost of XM
radios and makes incentive payments to GM when the owners of GM vehicles with installed XM radios
become subscribers to XMs service. XM also shares 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
XMs bandwidth must be in compliance with applicable laws, must not compete or adversely interfere
with XMs business, and must meet XMs quality standards. XM also granted to OnStar a certain
amount of time to use XMs studios on an annual basis and agreed to provide certain audio content
for distribution on OnStars services.
We recorded total revenue from GM, primarily consisting of subscriber revenue, of $8,831 and
$6,733 for the three months ended September 30, 2009 and 2008, respectively, and $22,087 and $6,733
for the nine months ended September 30, 2009 and 2008, respectively.
We recognized Sales and marketing expense with GM of $7,720 and $8,539 for the three months
ended September 30, 2009 and 2008, respectively, and $23,387 and $8,539 for the nine months ended
September 30, 2009 and 2008, respectively. We recognized Revenue share and royalties expense with
GM of $15,008 and $26,021 for the three months ended September 30, 2009 and 2008, respectively, and
$46,664 and $26,021 for the nine months ended September 30, 2009 and 2008, respectively. We
recognized Subscriber acquisition costs with GM of $9,035 and $29,530 for the three months ended
September 30, 2009 and 2008, respectively, and $25,066 and $29,530 for the nine months ended
September 30, 2009 and 2008, respectively.
As of September 30, 2009, amounts due from GM and prepaid expenses with GM recorded in Related
party current assets were $8,175 and $91,902, respectively. As of September 30, 2009, prepaid
expenses with GM recorded in Related party long-term assets were $92,551. As of December 31, 2008, amounts due from GM and prepaid expenses with GM recorded in Related
party current assets were $10,132 and $94,444, respectively. As of December 31, 2008, prepaid
expenses with GM recorded in Related party long-term assets were $116,296.
As of September 30, 2009 and December 31, 2008, amounts due to GM recorded in Related party
current liabilities were $79,813 and $63,023, respectively. As of September 30, 2009 and
December 31, 2008, amounts due to GM recorded in Related party long-term liabilities were $21,928
and $0, respectively.
American Honda
XM has an agreement to make a certain amount of its bandwidth available to American Honda.
American Honda has a representative on our board of directors and is considered a related party.
American Hondas use of XMs bandwidth must be in compliance with applicable laws, must not compete
or adversely interfere with XMs business, and must meet XMs quality standards. This agreement
remains in effect so long as American Honda holds a certain amount of its investment in us. XM
makes incentive payments to American Honda for each purchaser of a Honda or Acura vehicle that
becomes a self-paying XM subscriber and shares with American Honda a portion of the subscriber
revenue attributable to Honda and Acura vehicles with installed XM radios.
We recorded total revenue from American Honda, primarily consisting of subscriber revenue, of
$3,374 and $3,321 for the three months ended September 30, 2009 and 2008, respectively, and $9,201
and $3,321 for the nine months ended September 30, 2009 and 2008, respectively.
We recognized Sales and marketing expense with American Honda of $1,647 and $1,848 for the
three months ended September 30, 2009 and 2008, respectively, and $4,391 and $1,848 for the nine
months ended September 30, 2009 and 2008, respectively. We recognized Revenue share and royalties
expense with American Honda of $1,636 and $747 for the three months ended September 30, 2009 and
2008, respectively, and $4,601 and $747 for the nine months ended September 30, 2009 and 2008,
respectively.
14
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
As of September 30, 2009 and December 31, 2008, amounts due from American Honda recorded in
Related party current assets were $2,308 and $2,194, respectively.
As of September 30, 2009 and December 31, 2008, amounts due to American Honda recorded in
Related party current liabilities were $4,014 and $4,190, respectively.
(10) Investments
Investments consist of the following:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Marketable securities |
|
$ |
11,555 |
|
|
$ |
10,525 |
|
Restricted investments |
|
|
3,400 |
|
|
|
141,250 |
|
Embedded derivative accounted for separately from the host contract |
|
|
26 |
|
|
|
2 |
|
Equity method investments |
|
|
2,679 |
|
|
|
8,873 |
|
|
|
|
|
|
|
|
Total investments |
|
$ |
17,660 |
|
|
$ |
160,650 |
|
|
|
|
|
|
|
|
SIRIUS Canada
We have a 49.9% economic interest in SIRIUS Canada. Our investment in SIRIUS Canada is
recorded using the equity method since we have a significant influence, but less than a controlling
voting interest in SIRIUS Canada. Under this method, our investment in SIRIUS Canada, originally
recorded at cost, is adjusted quarterly to recognize our proportionate share of net earnings or
losses as they occur, rather than at the time dividends or other distributions are received,
limited to the extent of our investment in, advances to and commitments to fund SIRIUS Canada. Our share of net earnings or losses of SIRIUS Canada is recorded to Gain (loss)
on investments in our unaudited consolidated statements of operations. We recorded losses of $1,744
and $0 for the three months ended September 30, 2009 and 2008, respectively, and $4,307 and $0 for
the nine months ended September 30, 2009 and 2008, respectively, for our share of SIRIUS Canadas
net loss. We recorded $4,555 and $11,424, respectively, for the three and nine months ended
September 30, 2009 to Gain (loss) on investments in our unaudited consolidated statements of
operations for payments received from SIRIUS Canada in excess of our carrying value of our
investments in, advances to and commitments to such entity. As of September 30, 2009, the carrying
value of our equity method investment in SIRIUS Canada was $0.
XM Canada
We have a 23.33% economic interest in XM Canada. The amount of the Merger purchase price
allocated to the fair value of our investment in XM Canada was $41,188. Our investment in XM Canada
is recorded using the equity method (on a one-month lag) 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. Our share of net earnings or losses
of XM Canada is recorded to Gain (loss) on investments in our unaudited consolidated statements of
operations. We recorded $2,870 and $1,926 for the three and nine months ended September 30, 2009,
respectively, for our share of XM Canadas net loss. We recorded $3,088 for the three and nine
months ended September 30, 2008 for our share of XM Canadas net loss. During the three and nine
months ended September 30, 2009, we reduced the carrying value of our investment in XM Canada due
to decreases in fair value that were considered to be other than temporary and recorded impairment
charges of $4,734 and $0 for the nine months ended September 30, 2009 and 2008, respectively. In
addition, during the three and nine months ended September 30, 2009, we recorded ($35) and $466,
respectively, as a foreign exchange gain (loss) to Accumulated other comprehensive loss, net of
tax.
XM Holdings holds an investment in Cdn$4,000 face value of 8% convertible unsecured
subordinated debentures issued by XM Canada for which the embedded conversion feature is bifurcated
from the host contract. The host contract is accounted for 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 September 30, 2009, the
carrying value of our equity method investment in XM Canada was $2,679, while the carrying values
of the host contract and embedded derivative related to our investment in the debentures was $2,967
and $26, respectively. As of December 31, 2008, the carrying value of our equity method investment
in XM Canada was $8,873, while the carrying values of the host contract and embedded derivative
related to our investment in the debentures was $2,540 and $2, respectively.
15
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
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. As of September 30, 2009 and December 31, 2008, the carrying value
of these securities was $8,588 and $7,985, respectively.
Restricted Investments
Restricted investments relate to deposits placed into escrow for the benefit of third parties
pursuant to programming agreements and reimbursement obligations under letters of credit issued for
the benefit of lessors of office space. As of September 30, 2009 and December 31, 2008, the
carrying value of our long-term restricted investments was $3,400 and $141,250, respectively.
(11) Debt
Our debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion |
|
|
Long Term Debt |
|
|
|
Price |
|
|
September 30, |
|
|
December 31, |
|
|
|
(per share) |
|
|
2009 |
|
|
2008 |
|
SIRIUS Debt |
|
|
|
|
|
|
|
|
|
|
|
|
83/4% Convertible Subordinated Notes due 2009 |
|
$ |
28.46 |
|
|
$ |
|
|
|
$ |
1,744 |
|
31/4% Convertible Notes due 2011 |
|
$ |
5.30 |
|
|
|
230,000 |
|
|
|
230,000 |
|
Senior Secured Term Loan due 2012 |
|
|
N/A |
|
|
|
245,000 |
|
|
|
246,875 |
|
95/8% Senior Notes due 2013 |
|
|
N/A |
|
|
|
500,000 |
|
|
|
500,000 |
|
9.75% Senior Secured Notes due 2015 |
|
|
N/A |
|
|
|
257,000 |
|
|
|
|
|
Less: discount |
|
|
|
|
|
|
(12,006 |
) |
|
|
|
|
21/2% Convertible Notes due 2009 |
|
$ |
4.41 |
|
|
|
|
|
|
|
189,586 |
|
XM and XM Holdings Debt |
|
|
|
|
|
|
|
|
|
|
|
|
10% Convertible Senior Notes due 2009 |
|
$ |
10.87 |
|
|
|
48,450 |
|
|
|
400,000 |
|
Less: discount |
|
|
|
|
|
|
(371 |
) |
|
|
(16,449 |
) |
10% Senior Secured Discount Convertible Notes due 2009 |
|
$ |
0.69 |
|
|
|
33,249 |
|
|
|
33,249 |
|
Add: premium |
|
|
|
|
|
|
6,450 |
|
|
|
34,321 |
|
10% Senior PIK Secured Notes due 2011 |
|
|
N/A |
|
|
|
172,485 |
|
|
|
|
|
Less: discount |
|
|
|
|
|
|
(12,870 |
) |
|
|
|
|
11.25% Senior Secured Notes due 2013 |
|
|
N/A |
|
|
|
525,750 |
|
|
|
|
|
Less: discount |
|
|
|
|
|
|
(34,525 |
) |
|
|
|
|
13% Senior Notes due 2013 |
|
|
N/A |
|
|
|
778,500 |
|
|
|
778,500 |
|
Less: discount |
|
|
|
|
|
|
(66,538 |
) |
|
|
(74,986 |
) |
9.75% Senior Notes due 2014 |
|
|
N/A |
|
|
|
5,260 |
|
|
|
5,260 |
|
7% Exchangeable Senior Subordinated Notes due 2014 |
|
$ |
1.875 |
|
|
|
550,000 |
|
|
|
550,000 |
|
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 |
|
|
|
17,890 |
|
|
|
23,215 |
|
|
|
|
|
|
|
|
|
|
|
|
Total debt |
|
|
|
|
|
|
3,243,724 |
|
|
|
3,251,466 |
|
Less: current maturities |
|
|
|
|
|
|
103,674 |
|
|
|
399,726 |
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term |
|
|
|
|
|
|
3,140,050 |
|
|
|
2,851,740 |
|
Less: related party |
|
|
|
|
|
|
265,659 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term, excluding related party |
|
|
|
|
|
$ |
2,874,391 |
|
|
$ |
2,851,740 |
|
|
|
|
|
|
|
|
|
|
|
|
16
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS Debt
83/4% Convertible Subordinated Notes due 2009
In 1999, SIRIUS issued 83/4% Convertible Subordinated Notes due 2009 (the 83/4% Notes). The
balance of the 83/4% Notes matured on September 29, 2009 and were repaid in cash.
31/4% Convertible Notes due 2011
In October 2004, SIRIUS issued $230,000 in aggregate principal amount of 31/4%
Convertible Notes
due 2011 (the 31/4% Notes) resulting in net proceeds, after debt issuance costs, of $224,813. The
31/4% Notes are convertible, at the option of the holder, into shares of our common stock at any time
at a conversion rate of 188.6792 shares of common stock for each $1,000 principal amount, or $5.30
per share of common stock, subject to certain adjustments. The 31/4% Notes mature on October 15, 2011
and interest is payable semi-annually on April 15 and October 15 of each year. The obligations
under the 31/4% Notes are not secured by any of our assets.
Senior Secured Term Loan due 2012
In June 2007, SIRIUS entered into a term credit agreement with a syndicate of financial
institutions. The term credit agreement provides for a senior secured term loan (the Senior
Secured Term Loan) of $250,000, which has been fully drawn. Interest under the Senior Secured Term
Loan is based, at our option, on (i) adjusted LIBOR plus 2.25% or (ii) the higher of (a) the prime
rate and (b) the Federal Funds Effective Rate plus 1/2 of 1.00%, plus 1.25%. The current interest
rate is 2.563%. The Senior Secured Term Loan amortizes in equal quarterly installments of 0.25% of
the initial aggregate principal amount for the first four and a half years, with the balance of the
loan thereafter being repaid in four equal quarterly installments. The Senior Secured Term Loan
matures on December 20, 2012.
The Senior Secured Term Loan is guaranteed by certain of our wholly owned subsidiaries,
including Satellite CD Radio, Inc. (the Guarantor), and is secured by a lien on substantially all
of SIRIUS and the Guarantors assets, including SIRIUS four in-orbit satellites, one ground spare
satellite and the shares of the Guarantor.
The Senior Secured Term Loan contains customary affirmative covenants and event of default
provisions. The negative covenants contained in the Senior Secured Term Loan are substantially
similar to those contained in the indenture governing SIRIUS 95/8% Senior Notes due 2013.
LM Term Loan and LM Purchase Money Loan
In February 2009, SIRIUS entered into a Credit Agreement (the LM Credit Agreement) with
Liberty Media Corporation, as administrative agent and collateral agent. The LM Credit Agreement
provided for a $250,000 term loan (LM Term Loan) and $30,000 of purchase money loans (LM
Purchase Money Loan). Concurrently with entering into the LM Credit Agreement, SIRIUS borrowed
$250,000 under the LM Term Loan. The proceeds of the LM Term Loan were used (i) to repay at
maturity our outstanding 21/2% Convertible Notes due February 17, 2009 and (ii) for general corporate
purposes, including related transaction costs.
In August 2009, SIRIUS used net proceeds from the sale of its 9.75% Senior Secured Notes due
2015 to extinguish the LM Term Loan and LM Purchase Money Loan. We recorded an aggregate loss on
extinguishment of the LM Term Loan and LM Purchase Money Loan of $134,520 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 in our unaudited consolidated statements of
operations.
9.75% Senior Secured Notes due 2015
In August 2009, SIRIUS issued $257,000 aggregate principal amount of 9.75% Senior Secured
Notes due 2015 (the 9.75% Notes). Interest is payable semi-annually in arrears on March 1 and
September 1 of each year, commencing on March 1, 2010, at a rate of 9.75% per annum. The 9.75%
Notes mature on September 1, 2015. The 9.75% Notes were issued for $244,787, resulting in an
aggregate original issuance discount, including fees, of $12,213. The proceeds of the 9.75% Notes
were used to extinguish the LM Term Loan and LM Purchase Money Loan.
SIRIUS and the domestic subsidiaries of SIRIUS that guarantee certain of the indebtedness of
SIRIUS and its restricted subsidiaries guarantee SIRIUS obligations under the 9.75% Notes. The
9.75% Notes and related guarantees are secured by first-priority liens on substantially all of the
assets of SIRIUS and the guarantors other than certain excluded assets (including cash, accounts
receivable and certain inventory).
17
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
95/8% Senior Notes due 2013
In August 2005, SIRIUS issued $500,000 in aggregate principal amount of 95/8% Senior
Notes due
2013 (the 95/8% Notes) resulting in net proceeds, after debt issuance costs, of $493,005. The 95/8%
Notes mature on August 1, 2013 and interest is payable semi-annually on February 1 and August 1 of
each year. The obligations under the 95/8% Notes are not secured by any of our assets.
21/2% Convertible Notes due 2009
In February 2004, SIRIUS issued $250,000 in aggregate principal amount of 21/2%
Convertible
Notes due 2009 (the 21/2% Notes) resulting in net proceeds, after debt issuance costs, of $244,625.
The remaining principal balance of the 21/2% Notes matured on February 17, 2009, and was paid in cash
at maturity.
Space Systems/Loral Credit Agreement
In July 2007, SIRIUS amended and restated its existing Credit Agreement with Space
Systems/Loral (the Loral Credit Agreement). Under the Loral Credit Agreement, Space Systems/Loral
agreed to make loans to SIRIUS to finance the purchase of its fifth
and sixth satellites through June 10, 2010. As of
September 30, 2009, Lorals commitment was approximately
$19,730.
Loans made under the Loral Credit Agreement will be secured by SIRIUS rights under the Satellite
Purchase Agreement with Space Systems/Loral, including SIRIUS rights to its sixth satellite. The
loans will also be entitled to the benefits of a subsidiary guarantee from Satellite CD Radio,
Inc., the subsidiary that holds SIRIUS FCC license, and any future material subsidiary that may be
formed by SIRIUS. The maturity date of the loans is the earliest to occur of (i) June 10, 2010,
(ii) 90 days after the sixth satellite becomes available for shipment and (iii) 30 days prior to
the scheduled launch of the sixth satellite. The Loral Credit Agreement contains certain conditions
to borrowings, including payment of periodic commitment fees. Any loans made under the Loral Credit Agreement generally will bear interest at a
variable rate equal to 3-month LIBOR plus 4.75%. The daily unused balance bears interest at a rate
per annum equal to 0.50%, payable quarterly on the last day of each March, June, September and
December. The Loral Credit Agreement permits SIRIUS to prepay all or a portion of the loans
outstanding without penalty. SIRIUS has not borrowed under the Loral Credit Agreement.
XM and XM Holdings Debt
10% Convertible Senior Notes due 2009
XM Holdings has issued $400,000 aggregate principal amount of 10% Convertible Senior Notes due
2009 (the 10% Convertible Notes). Interest is payable semi-annually at a rate of 10% per annum.
The 10% Convertible Notes mature on December 1, 2009. The 10% Convertible Notes may be converted by
the holder, at its option, into shares of our common stock at a conversion rate of 92.0 shares of
our common stock per $1,000 principal amount, which is equivalent to a conversion price of $10.87
per share of common stock (subject to adjustment in certain events). As a result of the fair
valuation at the acquisition date, we recognized an initial discount of $23,700.
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 unaudited consolidated statements of operations and $10,990 of
additional debt discount in our unaudited consolidated balance sheets.
In July 2009, XM used a portion of the net proceeds received from the issuance of its 11.25%
Senior Secured Notes due 2013 and cash on hand to purchase at par $179,065 aggregate principal
amount of the 10% Convertible Notes. We recorded a loss of $3,031 related to the unamortized
discount to Loss on extinguishment of debt and credit facilities in our unaudited consolidated
statements of operations as a result of this transaction.
10% Senior Secured Discount Convertible Notes due 2009
XM Holdings and XM, as co-obligors, have outstanding $33,249 aggregate principal amount of 10%
Senior Secured Discount Convertible Notes due 2009 (the 10% Discount Convertible Notes). Interest
is payable semi-annually at a rate of 10% per annum. The 10% Discount Convertible Notes mature on
December 31, 2009. At any time, a holder of the notes may convert all or part of the accreted value
of the notes at a conversion price of $0.69 per share. As a result of the fair valuation at the
acquisition date, we recognized an initial premium of $57,550.
18
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
10% Senior PIK Secured Notes due 2011
In February 2009, XM Holdings exchanged $172,485 aggregate principal amount of outstanding 10%
Convertible Notes for a like principal amount of its 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 our
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 will record a net loss of $3,669, related
to the unamortized discount and the discount on the purchase, to Loss on extinguishment of debt and
credit facilities in our unaudited consolidated statements of operations as a result of this
transaction.
Amended and Restated Credit Agreement due 2011
In March 2009, XM 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 (Liberty) purchased $100,000 aggregate
principal amount of such loans from the lenders.
In June 2009, XM used net proceeds from the sale of its 11.25% Senior Secured Notes due 2013
to repay amounts due under and extinguish the Amended and Restated Credit Agreement. XM paid a repayment premium of $6,500. We
recorded an aggregate loss on extinguishment of the Amended and Restated Credit Agreement of
$49,786 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 in our
unaudited consolidated statements of operations.
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 $489,952, resulting in an aggregate original issuance discount, including
fees, of $35,798.
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.
In June 2009, XM used a portion of the net proceeds from the sale of the 11.25% Notes to repay
in full $325,000 principal amount outstanding under the Amended and Restated Credit Agreement. In
connection with the sale of the 11.25% Notes, XM terminated the Second-Lien Credit Agreement and
repaid all amounts thereunder.
13% Senior Notes due 2013
In July 2008, XM issued $778,500 aggregate principal amount of 13% Senior Notes due 2013 (the
13% Notes). Interest is payable semi-annually in arrears on February 1 and August 1 of each year
at a rate of 13% per annum. The 13% Notes were issued for $700,105, resulting in an original
issuance discount of $78,395. The 13% Notes are unsecured and mature on August 1, 2013.
9.75% Senior Notes due 2014
XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the XM
9.75% Notes). Interest on the XM 9.75% Notes is payable semi-annually on May 1 and November 1 at a
rate of 9.75% per annum. The XM 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its
option, may redeem the XM 9.75% Notes at declining redemption prices at any time on or after May 1,
2010, subject to certain restrictions. Prior to May 1, 2010, XM may redeem the XM 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.
19
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
In March 2009, XM executed and delivered a Third Supplemental Indenture (the XM 9.75% Notes
Supplemental Indenture). The XM 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 XM 9.75% Notes.
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. The Exchangeable Notes are not guaranteed by SIRIUS or Satellite CD
Radio, Inc. Interest is payable semi-annually in arrears on June 1 and December 1 of each year at a
rate of 7% per annum. The Exchangeable Notes mature on December 1, 2014. The Exchangeable Notes are
exchangeable at any time at the option of the holder into shares of our common stock at an initial exchange rate of 533.3333 shares
of common stock per $1,000 principal amount of Exchangeable Notes, which is equivalent to an
approximate exchange price of $1.875 per share of common stock.
Second-Lien Credit Agreement
In February 2009, XM entered into a Credit Agreement (the XM Credit Agreement) with Liberty
Media Corporation, as administrative agent and collateral agent. The XM Credit Agreement provided
for a $150,000 term loan. On March 6, 2009, XM amended and restated the XM Credit Agreement (the
Second-Lien Credit Agreement) with Liberty Media Corporation.
In June 2009, XM 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 in our unaudited consolidated statements of
operations.
Covenants and Restrictions
Our 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. SIRIUS operates XM Holdings as an
unrestricted subsidiary for purposes of compliance with the covenants contained in its debt
instruments. If we fail to comply with these covenants, our debt could become immediately payable.
At September 30, 2009, we were in compliance with all financial covenants.
(12) Stockholders Equity
Common Stock, par value $0.001 per share
We
were authorized to issue up to 9,000,000,000 and 8,000,000,000 shares of common stock as of
September 30, 2009 and December 31, 2008, respectively. There were 3,858,186,839 and 3,651,765,837
shares of common stock issued and outstanding as of September 30, 2009 and December 31, 2008,
respectively.
As of September 30, 2009, approximately 3,848,417,000 shares of common stock were reserved for
issuance in connection with outstanding convertible debt, preferred stock, warrants, incentive
stock plans and common stock to be granted to third parties upon satisfaction of performance
targets. During the three and nine months ended September 30, 2009, employees did not exercise any
stock options.
During the third quarter of 2009, Morgan Stanley Capital Services Inc. returned 60,000,000
shares of our common stock initially borrowed in July 2008 to facilitate the offering of the
Exchangeable Notes. The returned shares were retired upon receipt.
In January 2004, SIRIUS signed a seven-year agreement with a sports programming provider. Upon
execution of this agreement, SIRIUS delivered 15,173,070 shares of common stock valued at $40,967
to that programming provider. These shares of common stock are subject to transfer restrictions
which lapse over time. We recognized expense associated with these shares of $1,641 for each of the
three months ended September 30, 2009 and 2008, respectively, and $3,501 for each of the nine
months ended September 30, 2009 and 2008, respectively. As of September 30, 2009, there was a
$9,771 remaining balance of common stock value included in Other current assets and Other long-term
assets in the amount of $5,852 and $3,919, respectively. As of December 31, 2008, there was a
$13,272 remaining balance of common stock value included in Other current assets and Other
long-term assets in the amount of $5,852 and $7,420, respectively.
20
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Preferred Stock, par value $0.001 per share
We
were authorized to issue up to 50,000,000 shares of undesignated preferred stock as of
September 30, 2009. There were 24,808,959 shares of Series A convertible preferred stock issued and
outstanding as of September 30, 2009 and December 31, 2008. There were 12,500,000 shares of
Convertible Perpetual Preferred Stock, Series B (the Series B Preferred Stock), issued and
outstanding as of September 30, 2009. There were no shares of Preferred Stock, Series C Junior (the
Series C Junior Preferred Stock), issued and outstanding at September 30, 2009.
The Series B Preferred Stock is convertible into shares of our common stock at the rate of
206.9581409 shares of common stock for each share of Series B Preferred Stock, representing 40% of
our outstanding shares of common stock (after giving effect to such conversion). As holder of the Series B Preferred Stock, Liberty Radio LLC is entitled to a number of votes
equal to the number of shares of our common stock into which each such Series B Preferred Stock
share is convertible. Liberty Radio LLC will also receive dividends and distributions ratably with
our common stock, on an as-converted basis. With respect to dividend rights, the Series B Preferred
Stock ranks evenly with our common stock, the Series A Preferred Stock, and each other class or
series of our equity securities not expressly provided as ranking senior to the Series B Preferred
Stock. With respect to liquidation rights, the Series B Preferred Stock ranks evenly with each
other class or series of our equity securities not expressly provided as ranking senior to the
Series B Preferred Stock, and will rank senior to our common stock and the Series A Preferred
Stock.
During 2009, we accounted for the issuance of Series B Preferred Stock by recording a $227,716
increase to additional paid-in capital for the amount of allocated proceeds received and an
additional $186,188 increase to paid-in capital for the beneficial conversion feature, which was
recognized as a charge to retained earnings.
In April 2009, our board of directors created and reserved for issuance in accordance with the
Rights Plan (as described below) 9,000 shares of the Series C Junior Preferred Stock. The shares of
Series C Junior Preferred Stock are not redeemable and rank, with respect to the payment of
dividends and the distribution of assets, junior to all other series of our preferred stock, unless
the terms of such series shall so provide.
Warrants
We have issued warrants to purchase shares of common stock in connection with distribution and
programming agreements, satellite purchase agreements and certain debt issuances. As of
September 30, 2009, approximately 49,315,000 warrants to acquire approximately 81,739,000 shares of
common stock with an average exercise price of $3.12 per share were outstanding. We recognized
expense of $1,318 during the three months ended March 31, 2009 due to the cancellation of certain
warrants and the issuance of replacement warrants expiring in March 2015. Warrants vest over time
or upon the achievement of milestones and expire at various times through 2015. We recognized
aggregate warrant related expense (benefit) of $0 and ($620) for the three months ended
September 30, 2009 and 2008, respectively, and $2,522 and $2,236 for the nine months ended
September 30, 2009 and 2008, respectively.
Rights Plan
In April 2009, our board of directors adopted a rights plan. The terms of the rights and the
rights plan are set forth in a Rights Agreement dated as of April 29, 2009 (the Rights Plan). The
Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our
outstanding common stock (assuming for purposes of this calculation that all of our outstanding
convertible preferred stock is converted into common stock) without the approval of our board of
directors.
The Rights Plan will continue in effect until August 1, 2011, unless it is terminated or
redeemed earlier by our board of directors. We plan to submit the Rights Plan to a stockholder vote
prior to June 30, 2010, and the failure to obtain this approval will result in a termination of the
Rights Plan.
21
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(13) Benefits Plans
We maintain four share-based benefits plans. We satisfy awards and options granted under these
plans through the issuance of new shares. We recognized share-based payment expense of $17,674 and
$24,005 for the three months ended September 30, 2009 and 2008, respectively, and $67,553 and
$63,417 for the nine months ended September 30, 2009 and 2008, respectively. For a summarized
schedule of share-based payment expense, see the appended footnote to our unaudited consolidated
statements of operations. We did not realize any income tax benefits from share-based benefits
plans during the three and nine months ended September 30, 2009 and 2008, as a result of a full
valuation allowance that is maintained for substantially all net deferred tax assets.
2009 Long-Term Stock Incentive Plan
In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive
Plan (the 2009 Plan). Employees, consultants and members of our board of directors are eligible
to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options,
restricted stock, restricted stock units and other stock-based awards that the compensation
committee of our board of directors may deem appropriate. Vesting and other terms of stock-based
awards are set forth in the agreements with the individuals receiving the awards. Stock-based
awards granted under the 2009 Plan are generally subject to a vesting requirement. Stock-based
awards generally expire ten years from the date of grant. Each restricted stock unit entitles the
holder to receive one share of common stock upon vesting. As of September 30, 2009, approximately
359,762,000 shares of common stock were available for future grant under the 2009 Plan.
Other Plans
SIRIUS and XM Holdings maintain three other share-based benefit plans the XM Holdings 2007
Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock
Incentive Plan and the XM Holdings Talent Option Plan. These plans generally provide for the grant
of stock options, restricted stock, restricted stock units and other stock based awards. No further
awards may be made under these plans. Outstanding awards under these plans will be continued.
The following table summarizes the weighted-average assumptions used to compute reported
share-based payment expense to employees and members of our board of directors for the three and
nine months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
Risk-free interest rate |
|
|
2.5 |
% |
|
|
3.1 |
% |
|
|
2.5 |
% |
|
|
2.7 |
% |
Expected life of options years |
|
|
4.57 |
|
|
|
4.06 |
|
|
|
4.64 |
|
|
|
4.06 |
|
Expected stock price volatility |
|
|
88 |
% |
|
|
80 |
% |
|
|
88 |
% |
|
|
80 |
% |
Expected dividend yield |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
The following table summarizes the range of assumptions used to compute reported share-based
payment expense to third parties, other than non-employee members of our board of directors, for
the three and nine months ended September 30, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
Risk-free interest rate |
|
|
1.45 - 2.53 |
% |
|
|
2.0 - 3.0 |
% |
|
|
1.08 - 2.54 |
% |
|
|
1.6 - 3.3 |
% |
Expected life years |
|
|
2.58 - 4.98 |
|
|
|
1.50 - 4.06 |
|
|
|
2.50 - 6.19 |
|
|
|
1.50 - 4.08 |
|
Expected stock price volatility |
|
|
88-112 |
% |
|
|
80 |
% |
|
|
83-112 |
% |
|
|
80 |
% |
Expected dividend yield |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
22
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
The following table summarizes stock option activity under our share-based payment plans for
the nine months ended September 30, 2009 (shares in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Weighted-Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual Term |
|
|
Intrinsic |
|
|
|
Shares |
|
|
Price |
|
|
(Years) |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2008 |
|
|
165,436 |
|
|
$ |
4.42 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
240,239 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Forfeited, cancelled or expired |
|
|
(53,985 |
) |
|
$ |
5.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, September 30, 2009 |
|
|
351,690 |
|
|
$ |
1.66 |
|
|
|
6.83 |
|
|
$ |
34,683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, September 30, 2009 |
|
|
87,205 |
|
|
$ |
4.53 |
|
|
|
4.44 |
|
|
$ |
1 |
|
The weighted average grant date fair value of options granted during the nine months ended
September 30, 2009 and 2008 was $0.35 and $1.73, respectively. The total intrinsic value of stock
options exercised during the nine months ended September 30, 2009 and 2008 was $0 and $127,
respectively.
We recognized share-based payment expense associated with stock options of $8,577 and $13,940
for the three months ended September 30, 2009 and 2008, respectively, and $40,890 and $36,465 for
the nine months ended September 30, 2009 and 2008, respectively.
The following table summarizes the non-vested restricted stock and restricted stock unit
activity under our share-based payment plans for the nine months ended September 30, 2009 (shares
in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
|
|
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Nonvested, December 31, 2008 |
|
|
19,931 |
|
|
$ |
2.84 |
|
Granted |
|
|
84,851 |
|
|
$ |
0.37 |
|
Vested |
|
|
(69,123 |
) |
|
$ |
0.75 |
|
Forfeited |
|
|
(2,124 |
) |
|
$ |
1.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested, September 30, 2009 |
|
|
33,535 |
|
|
$ |
0.96 |
|
|
|
|
|
|
|
|
|
The weighted average grant date fair value of restricted stock units granted during the nine
months ended September 30, 2009 and 2008 was $0.37 and $2.87, respectively. The total intrinsic
value of restricted stock units that vested during the nine months ended September 30, 2009 and
2008 was $28,865 and $19,529, respectively.
We recognized share-based payment expense associated with restricted stock units and shares of
restricted stock of $5,024 and $6,849 for the three months ended September 30, 2009 and 2008,
respectively, and $17,881 and $14,433 for the nine months ended September 30, 2009 and 2008,
respectively.
Total unrecognized compensation costs related to unvested share-based payment awards granted
to employees and members of our board of directors at September 30, 2009 and December 31, 2008, net
of estimated forfeitures, was $118,637 and $90,310, respectively. The weighted-average period over
which the compensation expense for these awards is expected to be recognized is three years as of
September 30, 2009.
401(k) Savings Plans
We sponsor the Sirius Satellite Radio 401(k) Savings Plan (the Sirius Plan) for eligible
employees. During 2009, we merged the XM Satellite Radio 401(k) Savings Plan (the XM Plan) into
the Sirius Plan. All eligible employees under the XM 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. We match 50% of an employees voluntary
contributions, up to 6% of an employees pre-tax salary, in the form of shares of common stock.
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 the matching contribution
to the plans was $895 and $857 for the three months ended September 30, 2009 and 2008,
respectively, and $2,484 and $2,086 for the nine months ended September 30, 2009 and 2008,
respectively.
23
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
We may also elect to contribute to the profit sharing portion of the Sirius Plan based upon
the total eligible compensation of eligible participants. These additional contributions, referred
to as profit-sharing contributions, are determined by the compensation committee of our board of
directors. Employees are only eligible to receive profit-sharing contributions during any year in
which they are employed on the last day of the year. Profit-sharing contribution expense was $1,537
and $1,665 for the three months ended September 30, 2009 and 2008, respectively, and $573 and
$5,025 for the nine months ended September 30, 2009 and 2008, respectively.
(14) Income Taxes
We recorded income tax expense of $1,115 and $1,215 for the three months ended September 30,
2009 and 2008, respectively, and $3,344 and $2,301 for the nine months ended September 30, 2009 and
2008, respectively. Such expense primarily represents the recognition of a deferred tax liability
related to the difference in accounting for the FCC license intangible assets, which are amortized
over 15 years for tax purposes but are not amortized for book purposes.
(15) Commitments and Contingencies
The following table summarizes our expected contractual cash commitments as of September 30,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
2011 |
|
|
2012 |
|
|
2013 |
|
|
Thereafter |
|
|
Total |
|
Long-term debt obligations |
|
$ |
85,746 |
|
|
$ |
13,742 |
|
|
$ |
407,889 |
|
|
$ |
239,541 |
|
|
$ |
1,804,406 |
|
|
$ |
812,260 |
|
|
$ |
3,363,584 |
|
Cash interest payments |
|
|
65,638 |
|
|
|
304,935 |
|
|
|
295,019 |
|
|
|
276,326 |
|
|
|
244,049 |
|
|
|
88,871 |
|
|
|
1,274,838 |
|
Satellite and transmission |
|
|
34,685 |
|
|
|
98,933 |
|
|
|
106,834 |
|
|
|
36,659 |
|
|
|
2,370 |
|
|
|
22,183 |
|
|
|
301,664 |
|
Programming and content |
|
|
87,630 |
|
|
|
257,126 |
|
|
|
147,529 |
|
|
|
129,236 |
|
|
|
38,638 |
|
|
|
29,955 |
|
|
|
690,114 |
|
Marketing and distribution |
|
|
51,529 |
|
|
|
43,666 |
|
|
|
24,868 |
|
|
|
14,533 |
|
|
|
3,000 |
|
|
|
4,500 |
|
|
|
142,096 |
|
Satellite incentive payments |
|
|
1,801 |
|
|
|
7,384 |
|
|
|
8,851 |
|
|
|
10,505 |
|
|
|
11,099 |
|
|
|
74,342 |
|
|
|
113,982 |
|
Operating lease obligations |
|
|
13,338 |
|
|
|
37,352 |
|
|
|
22,851 |
|
|
|
18,861 |
|
|
|
15,046 |
|
|
|
14,854 |
|
|
|
122,302 |
|
Other |
|
|
16,321 |
|
|
|
34,096 |
|
|
|
20,677 |
|
|
|
8,234 |
|
|
|
|
|
|
|
|
|
|
|
79,328 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
356,688 |
|
|
$ |
797,234 |
|
|
$ |
1,034,518 |
|
|
$ |
733,895 |
|
|
$ |
2,118,608 |
|
|
$ |
1,046,965 |
|
|
$ |
6,087,908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 networks. We have also entered into various agreements to design and
construct satellites for use in our systems and to launch those satellites. SIRIUS has an agreement
with Space Systems/Loral to design and construct a sixth satellite. In January 2008, SIRIUS entered
into an agreement with International Launch Services (ILS) to secure a satellite launch on a
Proton rocket. We expect to launch our sixth satellite in the fourth quarter of 2011.
Space Systems/Loral has constructed a fifth satellite, XM-5, for use in the XM system. In
2006, XM 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. In October 2009,
XM Holdings terminated its satellite launch agreement with Sea Launch with the consent of the
Bankruptcy Court. In October 2009, we entered into an agreement with ILS to secure a satellite
launch for XM-5 on a Proton rocket. We currently expect to launch XM-5 in the second or 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.
24
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer
of XMs four in-orbit satellites, may be entitled to future in-orbit performance payments with
respect to two of XMs four satellites. As of September 30, 2009, we have accrued $28,655 related
to contingent in-orbit performance payments for XM-3 and XM-4 based on expected operating
performance over their fifteen year design life. Boeing may also be entitled to an additional
$10,000 if XM-4 continues to operate above baseline specifications during the five years beyond the
satellites fifteen-year design life.
Space Systems/Loral may be entitled to an additional $22,500 if FM-5 continues to operate
above baseline specifications during 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.
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 provide letters of credit and deposit
monies in escrow, which place restrictions on cash and cash equivalents. As of September 30, 2009
and December 31, 2008, $3,400 and $141,250, respectively, were classified as Restricted investments
as a result of obligations under these letters of credit and 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. The order
became effective immediately upon adoption. In September 2008, Mt. Wilson FM Broadcasters, Inc.
filed a Petition for Reconsideration of this order. This Petition for Reconsideration remains
pending.
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. In
May 2006, the plaintiffs filed this action in the United States District Court for the Southern
District of New York. The complaint seeks monetary damages and equitable relief, and alleges that
XM radios that include advanced recording functionality infringe upon plaintiffs copyrighted sound
recordings. XM filed a motion to dismiss this matter, and that motion was denied in January 2007.
XM has resolved the lawsuit with respect to Universal Music Group, Warner Music Group, Sony BMG
Music Entertainment and EMI Group, and each of these parties has withdrawn as a party to the
lawsuit, and this lawsuit has been dismissed with respect to such parties.
Music publishing companies and certain other record companies also have filed lawsuits,
purportedly on a class basis, with similar allegations. We believe these allegations are without
merit and that our products comply with applicable copyright law, including the Audio Home
Recording Act. We intend to vigorously defend this matter. There can be no assurance regarding the
ultimate outcome of these matters, 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 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.
25
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
(16) Condensed Consolidating Financial Information
Sirius Asset Management, LLC and Satellite CD Radio, Inc. (collectively, the Guarantor
Subsidiaries) are our wholly owned subsidiaries. The Guarantor Subsidiaries have fully and
unconditionally, jointly and severally, directly or indirectly, guaranteed, on an unsecured basis,
the debt issued by us in connection with certain of our financings. Our unrestricted subsidiary, XM
Holdings and its consolidated subsidiaries, are non-guarantor subsidiaries.
These condensed consolidating financial statements should be read in conjunction with the
consolidated financial statements of Sirius XM Radio Inc. and Subsidiaries.
Basis of Presentation
In presenting our condensed consolidating financial statements, the equity method of
accounting has been applied to (i) our interests in the Guarantor Subsidiaries and (ii) the
Guarantor Subsidiaries interests in the Non-Guarantor Subsidiaries, where applicable, even though
all such subsidiaries meet the requirements to be consolidated under U.S. generally accepted
accounting principles. All intercompany balances and transactions between us, the Guarantor
Subsidiaries and the Non-Guarantor Subsidiaries have been eliminated, as shown in the column
Eliminations.
Our accounting bases in all subsidiaries, including goodwill and identified intangible assets,
have been pushed down to the applicable subsidiaries.
26
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
54,347 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
326,025 |
|
|
$ |
|
|
|
$ |
380,372 |
|
Accounts receivable, net |
|
|
83,660 |
|
|
|
|
|
|
|
|
|
|
|
45,243 |
|
|
|
|
|
|
|
128,903 |
|
Due from subsidiaries/affiliates |
|
|
141,247 |
|
|
|
|
|
|
|
|
|
|
|
103 |
|
|
|
(141,350 |
) |
|
|
|
|
Inventory, net |
|
|
18,073 |
|
|
|
|
|
|
|
|
|
|
|
2,923 |
|
|
|
|
|
|
|
20,996 |
|
Prepaid expenses |
|
|
28,080 |
|
|
|
|
|
|
|
|
|
|
|
79,270 |
|
|
|
|
|
|
|
107,350 |
|
Related party current assets |
|
|
3,500 |
|
|
|
|
|
|
|
|
|
|
|
105,672 |
|
|
|
|
|
|
|
109,172 |
|
Other current assets |
|
|
17,633 |
|
|
|
|
|
|
|
|
|
|
|
57,594 |
|
|
|
(10,910 |
) |
|
|
64,317 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
346,540 |
|
|
|
|
|
|
|
|
|
|
|
616,830 |
|
|
|
(152,260 |
) |
|
|
811,110 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
878,817 |
|
|
|
17,171 |
|
|
|
|
|
|
|
798,247 |
|
|
|
|
|
|
|
1,694,235 |
|
Investment in subsidiaries/affiliates |
|
|
(766,229 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
766,229 |
|
|
|
|
|
FCC licenses |
|
|
|
|
|
|
|
|
|
|
83,654 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
2,083,654 |
|
Restricted investments |
|
|
3,150 |
|
|
|
|
|
|
|
|
|
|
|
250 |
|
|
|
|
|
|
|
3,400 |
|
Deferred financing fees, net |
|
|
8,579 |
|
|
|
|
|
|
|
|
|
|
|
27,310 |
|
|
|
|
|
|
|
35,889 |
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
629,288 |
|
|
|
|
|
|
|
629,288 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,834,856 |
|
|
|
1,834,856 |
|
Due from subsidiaries/affilates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Related party long-term assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114,073 |
|
|
|
|
|
|
|
114,073 |
|
Other long-term assets |
|
|
20,878 |
|
|
|
|
|
|
|
|
|
|
|
41,560 |
|
|
|
|
|
|
|
62,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
491,735 |
|
|
$ |
17,171 |
|
|
$ |
83,654 |
|
|
$ |
4,227,558 |
|
|
$ |
2,448,825 |
|
|
$ |
7,268,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
323,766 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
205,084 |
|
|
$ |
(7,229 |
) |
|
$ |
521,621 |
|
Accrued interest |
|
|
13,279 |
|
|
|
|
|
|
|
|
|
|
|
52,258 |
|
|
|
|
|
|
|
65,537 |
|
Due to subsidiaries/affiliates |
|
|
|
|
|
|
17,548 |
|
|
|
477 |
|
|
|
123,344 |
|
|
|
(141,369 |
) |
|
|
|
|
Current portion of deferred revenue |
|
|
507,241 |
|
|
|
|
|
|
|
|
|
|
|
472,688 |
|
|
|
7,248 |
|
|
|
987,177 |
|
Current portion of deferred credit on
executory contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
247,566 |
|
|
|
|
|
|
|
247,566 |
|
Current maturities of long-term debt |
|
|
2,500 |
|
|
|
|
|
|
|
|
|
|
|
101,300 |
|
|
|
(126 |
) |
|
|
103,674 |
|
Related party current liabilities |
|
|
2,692 |
|
|
|
|
|
|
|
|
|
|
|
88,177 |
|
|
|
|
|
|
|
90,869 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
849,478 |
|
|
|
17,548 |
|
|
|
477 |
|
|
|
1,290,417 |
|
|
|
(141,476 |
) |
|
|
2,016,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
119,587 |
|
|
|
|
|
|
|
|
|
|
|
165,901 |
|
|
|
|
|
|
|
285,488 |
|
Deferred credit on executory contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
851,955 |
|
|
|
|
|
|
|
851,955 |
|
Long-term debt |
|
|
1,113,627 |
|
|
|
|
|
|
|
|
|
|
|
1,636,869 |
|
|
|
123,895 |
|
|
|
2,874,391 |
|
Long-term related party debt |
|
|
103,868 |
|
|
|
|
|
|
|
|
|
|
|
159,275 |
|
|
|
2,516 |
|
|
|
265,659 |
|
Deferred tax liability |
|
|
1,077 |
|
|
|
|
|
|
|
16,372 |
|
|
|
899,889 |
|
|
|
(10,910 |
) |
|
|
906,428 |
|
Related party long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21,928 |
|
|
|
|
|
|
|
21,928 |
|
Other long-term liabilities |
|
|
5,024 |
|
|
|
|
|
|
|
|
|
|
|
33,981 |
|
|
|
|
|
|
|
39,005 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,192,661 |
|
|
|
17,548 |
|
|
|
16,849 |
|
|
|
5,060,215 |
|
|
|
(25,975 |
) |
|
|
7,261,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred and common stock |
|
|
3,896 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,896 |
|
Accumulated other comprehensive loss |
|
|
(6,598 |
) |
|
|
|
|
|
|
|
|
|
|
(6,598 |
) |
|
|
6,598 |
|
|
|
(6,598 |
) |
Additional paid-in-capital |
|
|
10,265,752 |
|
|
|
|
|
|
|
83,654 |
|
|
|
5,989,700 |
|
|
|
(6,073,354 |
) |
|
|
10,265,752 |
|
Retained earnings (accumulated deficit) |
|
|
(11,963,976 |
) |
|
|
(377 |
) |
|
|
(16,849 |
) |
|
|
(6,815,759 |
) |
|
|
8,541,556 |
|
|
|
(10,255,405 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(1,700,926 |
) |
|
|
(377 |
) |
|
|
66,805 |
|
|
|
(832,657 |
) |
|
|
2,474,800 |
|
|
|
7,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity (deficit) |
|
$ |
491,735 |
|
|
$ |
17,171 |
|
|
$ |
83,654 |
|
|
$ |
4,227,558 |
|
|
$ |
2,448,825 |
|
|
$ |
7,268,943 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
AS OF DECEMBER 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
Current assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
173,647 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
206,799 |
|
|
$ |
|
|
|
$ |
380,446 |
|
Accounts receivable, net |
|
|
95,247 |
|
|
|
|
|
|
|
|
|
|
|
52,727 |
|
|
|
|
|
|
|
147,974 |
|
Due from subsidiaries/affiliates |
|
|
64,279 |
|
|
|
|
|
|
|
|
|
|
|
2,751 |
|
|
|
(67,030 |
) |
|
|
|
|
Inventory, net |
|
|
19,973 |
|
|
|
|
|
|
|
|
|
|
|
4,489 |
|
|
|
|
|
|
|
24,462 |
|
Prepaid expenses |
|
|
29,852 |
|
|
|
|
|
|
|
|
|
|
|
37,351 |
|
|
|
|
|
|
|
67,203 |
|
Related party current assets |
|
|
1,814 |
|
|
|
|
|
|
|
|
|
|
|
112,363 |
|
|
|
|
|
|
|
114,177 |
|
Other current assets |
|
|
17,513 |
|
|
|
|
|
|
|
|
|
|
|
53,004 |
|
|
|
(11,773 |
) |
|
|
58,744 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
402,325 |
|
|
|
|
|
|
|
|
|
|
|
469,484 |
|
|
|
(78,803 |
) |
|
|
793,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net |
|
|
816,562 |
|
|
|
12,326 |
|
|
|
|
|
|
|
874,588 |
|
|
|
|
|
|
|
1,703,476 |
|
Investment in subsidiaries/affiliates |
|
|
(525,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
525,687 |
|
|
|
|
|
FCC licenses |
|
|
|
|
|
|
|
|
|
|
83,654 |
|
|
|
2,000,000 |
|
|
|
|
|
|
|
2,083,654 |
|
Restricted investments |
|
|
21,000 |
|
|
|
|
|
|
|
|
|
|
|
120,250 |
|
|
|
|
|
|
|
141,250 |
|
Deferred financing fees, net |
|
|
9,853 |
|
|
|
|
|
|
|
|
|
|
|
30,303 |
|
|
|
|
|
|
|
40,156 |
|
Intangible assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
688,671 |
|
|
|
|
|
|
|
688,671 |
|
Goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,834,856 |
|
|
|
1,834,856 |
|
Related party long-term assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
124,607 |
|
|
|
|
|
|
|
124,607 |
|
Other long-term assets |
|
|
46,735 |
|
|
|
|
|
|
|
|
|
|
|
34,284 |
|
|
|
|
|
|
|
81,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
$ |
770,788 |
|
|
$ |
12,326 |
|
|
$ |
83,654 |
|
|
$ |
4,342,187 |
|
|
$ |
2,281,740 |
|
|
$ |
7,490,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
405,303 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
245,598 |
|
|
$ |
(8,081 |
) |
|
$ |
642,820 |
|
Accrued interest |
|
|
25,920 |
|
|
|
|
|
|
|
|
|
|
|
50,543 |
|
|
|
|
|
|
|
76,463 |
|
Due to subsidiaries/affiliates |
|
|
|
|
|
|
12,481 |
|
|
|
477 |
|
|
|
15,497 |
|
|
|
(28,455 |
) |
|
|
|
|
Current portion of deferred revenue |
|
|
557,392 |
|
|
|
|
|
|
|
|
|
|
|
419,707 |
|
|
|
8,081 |
|
|
|
985,180 |
|
Current portion of deferred credit on
executory contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,774 |
|
|
|
|
|
|
|
234,774 |
|
Current maturities of long-term debt |
|
|
4,244 |
|
|
|
|
|
|
|
|
|
|
|
355,739 |
|
|
|
39,743 |
|
|
|
399,726 |
|
Related party current liabilities |
|
|
23,018 |
|
|
|
|
|
|
|
|
|
|
|
83,930 |
|
|
|
(38,575 |
) |
|
|
68,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
1,015,877 |
|
|
|
12,481 |
|
|
|
477 |
|
|
|
1,405,788 |
|
|
|
(27,287 |
) |
|
|
2,407,336 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred revenue |
|
|
116,634 |
|
|
|
|
|
|
|
|
|
|
|
131,255 |
|
|
|
|
|
|
|
247,889 |
|
Deferred credit on executory contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,037,190 |
|
|
|
|
|
|
|
1,037,190 |
|
Long-term debt |
|
|
1,163,961 |
|
|
|
|
|
|
|
|
|
|
|
1,439,102 |
|
|
|
248,677 |
|
|
|
2,851,740 |
|
Deferred tax liability |
|
|
4,990 |
|
|
|
|
|
|
|
14,761 |
|
|
|
886,475 |
|
|
|
(11,773 |
) |
|
|
894,453 |
|
Related party long-term liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities |
|
|
7,225 |
|
|
|
|
|
|
|
|
|
|
|
36,325 |
|
|
|
|
|
|
|
43,550 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
2,308,687 |
|
|
|
12,481 |
|
|
|
15,238 |
|
|
|
4,936,135 |
|
|
|
209,617 |
|
|
|
7,482,158 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders equity (deficit): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common and preferred stock |
|
|
3,677 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,677 |
|
Accumulated other comprehensive loss |
|
|
(7,871 |
) |
|
|
|
|
|
|
|
|
|
|
(7,871 |
) |
|
|
7,871 |
|
|
|
(7,871 |
) |
Additional paid-in-capital |
|
|
9,724,991 |
|
|
|
|
|
|
|
83,654 |
|
|
|
5,870,502 |
|
|
|
(5,954,156 |
) |
|
|
9,724,991 |
|
Retained earnings (accumulated deficit) |
|
|
(11,258,696 |
) |
|
|
(155 |
) |
|
|
(15,238 |
) |
|
|
(6,456,579 |
) |
|
|
8,018,408 |
|
|
|
(9,712,260 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders equity (deficit) |
|
|
(1,537,899 |
) |
|
|
(155 |
) |
|
|
68,416 |
|
|
|
(593,948 |
) |
|
|
2,072,123 |
|
|
|
8,537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders
equity (deficit) |
|
$ |
770,788 |
|
|
$ |
12,326 |
|
|
$ |
83,654 |
|
|
$ |
4,342,187 |
|
|
$ |
2,281,740 |
|
|
$ |
7,490,695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
293,000 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
325,656 |
|
|
$ |
|
|
|
$ |
618,656 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
144,237 |
|
|
|
1 |
|
|
|
|
|
|
|
122,650 |
|
|
|
|
|
|
|
266,888 |
|
Sales and marketing |
|
|
20,745 |
|
|
|
|
|
|
|
|
|
|
|
31,785 |
|
|
|
|
|
|
|
52,530 |
|
Subscriber acquisition costs |
|
|
54,945 |
|
|
|
|
|
|
|
|
|
|
|
35,109 |
|
|
|
|
|
|
|
90,054 |
|
General and administrative |
|
|
31,705 |
|
|
|
|
|
|
|
|
|
|
|
25,218 |
|
|
|
|
|
|
|
56,923 |
|
Engineering, design and development |
|
|
5,837 |
|
|
|
|
|
|
|
|
|
|
|
5,415 |
|
|
|
|
|
|
|
11,252 |
|
Depreciation and amortization |
|
|
30,474 |
|
|
|
39 |
|
|
|
|
|
|
|
41,587 |
|
|
|
|
|
|
|
72,100 |
|
Restructuring, impairments and related costs |
|
|
(476 |
) |
|
|
|
|
|
|
|
|
|
|
3,030 |
|
|
|
|
|
|
|
2,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
287,467 |
|
|
|
40 |
|
|
|
|
|
|
|
264,794 |
|
|
|
|
|
|
|
552,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
5,533 |
|
|
|
(40 |
) |
|
|
|
|
|
|
60,862 |
|
|
|
|
|
|
|
66,355 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
235 |
|
|
|
|
|
|
|
|
|
|
|
727 |
|
|
|
|
|
|
|
962 |
|
Interest expense, net of amounts capitalized |
|
|
(23,504 |
) |
|
|
|
|
|
|
|
|
|
|
(70,617 |
) |
|
|
15,594 |
|
|
|
(78,527 |
) |
Gain (loss) on change in value of embedded
derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,700 |
) |
|
|
33,700 |
|
|
|
|
|
Loss on extinguishment of debt and
facilities, net |
|
|
(134,520 |
) |
|
|
|
|
|
|
|
|
|
|
(3,786 |
) |
|
|
253 |
|
|
|
(138,053 |
) |
Gain (loss) on investments |
|
|
(51,135 |
) |
|
|
|
|
|
|
|
|
|
|
1,866 |
|
|
|
49,211 |
|
|
|
(58 |
) |
Other income (expense) |
|
|
4,654 |
|
|
|
|
|
|
|
|
|
|
|
(3,408 |
) |
|
|
|
|
|
|
1,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(198,737 |
) |
|
|
(40 |
) |
|
|
|
|
|
|
(48,056 |
) |
|
|
98,758 |
|
|
|
(148,075 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
(537 |
) |
|
|
(578 |
) |
|
|
|
|
|
|
(1,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(198,737 |
) |
|
|
(40 |
) |
|
|
(537 |
) |
|
|
(48,634 |
) |
|
|
98,758 |
|
|
|
(149,190 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common stockholders |
|
$ |
(198,737 |
) |
|
$ |
(40 |
) |
|
$ |
(537 |
) |
|
$ |
(48,634 |
) |
|
$ |
98,758 |
|
|
$ |
(149,190 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
292,963 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
195,480 |
|
|
$ |
|
|
|
$ |
488,443 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
174,329 |
|
|
|
|
|
|
|
|
|
|
|
98,031 |
|
|
|
|
|
|
|
272,360 |
|
Sales and marketing |
|
|
34,407 |
|
|
|
|
|
|
|
|
|
|
|
29,230 |
|
|
|
|
|
|
|
63,637 |
|
Subscriber acquisition costs |
|
|
59,058 |
|
|
|
|
|
|
|
|
|
|
|
27,558 |
|
|
|
|
|
|
|
86,616 |
|
General and administrative |
|
|
38,095 |
|
|
|
|
|
|
|
|
|
|
|
19,215 |
|
|
|
|
|
|
|
57,310 |
|
Engineering, design and development |
|
|
5,243 |
|
|
|
|
|
|
|
|
|
|
|
5,191 |
|
|
|
|
|
|
|
10,434 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750,859 |
|
|
|
|
|
|
|
4,750,859 |
|
Depreciation and amortization |
|
|
32,136 |
|
|
|
18 |
|
|
|
|
|
|
|
34,620 |
|
|
|
|
|
|
|
66,774 |
|
Restructuring, impairments and related costs |
|
|
7,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
350,698 |
|
|
|
18 |
|
|
|
|
|
|
|
4,964,704 |
|
|
|
|
|
|
|
5,315,420 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(57,735 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
(4,769,224 |
) |
|
|
|
|
|
|
(4,826,977 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
977 |
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
|
|
|
|
4,940 |
|
Interest expense, net of amounts capitalized |
|
|
(16,311 |
) |
|
|
|
|
|
|
|
|
|
|
(32,905 |
) |
|
|
|
|
|
|
(49,216 |
) |
Loss on extinguishment of debt and
facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on investments |
|
|
(4,806,394 |
) |
|
|
|
|
|
|
|
|
|
|
(3,089 |
) |
|
|
4,806,394 |
|
|
|
(3,089 |
) |
Other income (expense) |
|
|
204 |
|
|
|
|
|
|
|
|
|
|
|
(4,074 |
) |
|
|
|
|
|
|
(3,870 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(4,879,259 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
(4,805,329 |
) |
|
|
4,806,394 |
|
|
|
(4,878,212 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
(543 |
) |
|
|
(672 |
) |
|
|
|
|
|
|
(1,215 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(4,879,259 |
) |
|
$ |
(18 |
) |
|
$ |
(543 |
) |
|
$ |
(4,806,001 |
) |
|
$ |
4,806,394 |
|
|
$ |
(4,879,427 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
861,354 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
935,110 |
|
|
$ |
|
|
|
$ |
1,796,464 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
417,599 |
|
|
|
9 |
|
|
|
|
|
|
|
373,065 |
|
|
|
|
|
|
|
790,673 |
|
Sales and marketing |
|
|
54,229 |
|
|
|
|
|
|
|
|
|
|
|
98,418 |
|
|
|
|
|
|
|
152,647 |
|
Subscriber acquisition costs |
|
|
147,027 |
|
|
|
|
|
|
|
|
|
|
|
83,746 |
|
|
|
|
|
|
|
230,773 |
|
General and administrative |
|
|
91,263 |
|
|
|
|
|
|
|
|
|
|
|
91,690 |
|
|
|
|
|
|
|
182,953 |
|
Engineering, design and development |
|
|
16,177 |
|
|
|
|
|
|
|
|
|
|
|
16,798 |
|
|
|
|
|
|
|
32,975 |
|
Depreciation and amortization |
|
|
84,949 |
|
|
|
213 |
|
|
|
|
|
|
|
146,462 |
|
|
|
|
|
|
|
231,624 |
|
Restructuring, impairments and related costs |
|
|
553 |
|
|
|
|
|
|
|
|
|
|
|
29,614 |
|
|
|
|
|
|
|
30,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
811,797 |
|
|
|
222 |
|
|
|
|
|
|
|
839,793 |
|
|
|
|
|
|
|
1,651,812 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
49,557 |
|
|
|
(222 |
) |
|
|
|
|
|
|
95,317 |
|
|
|
|
|
|
|
144,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
757 |
|
|
|
|
|
|
|
|
|
|
|
1,845 |
|
|
|
|
|
|
|
2,602 |
|
Interest expense, net of amounts capitalized |
|
|
(63,306 |
) |
|
|
|
|
|
|
|
|
|
|
(226,934 |
) |
|
|
50,178 |
|
|
|
(240,062 |
) |
Gain (loss) on change in value of embedded
derivative |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(111,703 |
) |
|
|
111,703 |
|
|
|
|
|
Loss on extinguishment of debt and
facilities, net |
|
|
(152,157 |
) |
|
|
|
|
|
|
|
|
|
|
(111,863 |
) |
|
|
253 |
|
|
|
(263,767 |
) |
Gain (loss) on investments |
|
|
(353,897 |
) |
|
|
|
|
|
|
|
|
|
|
(6,660 |
) |
|
|
361,014 |
|
|
|
457 |
|
Other income (expense) |
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
2,551 |
|
|
|
|
|
|
|
2,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(519,092 |
) |
|
|
(222 |
) |
|
|
|
|
|
|
(357,447 |
) |
|
|
523,148 |
|
|
|
(353,613 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
(1,611 |
) |
|
|
(1,733 |
) |
|
|
|
|
|
|
(3,344 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(519,092 |
) |
|
|
(222 |
) |
|
|
(1,611 |
) |
|
|
(359,180 |
) |
|
|
523,148 |
|
|
|
(356,957 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock beneficial conversion feature |
|
|
(186,188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(186,188 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to common
stockholders |
|
$ |
(705,280 |
) |
|
$ |
(222 |
) |
|
$ |
(1,611 |
) |
|
$ |
(359,180 |
) |
|
$ |
523,148 |
|
|
$ |
(543,145 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non - |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
846,329 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
195,480 |
|
|
$ |
|
|
|
$ |
1,041,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services |
|
|
462,051 |
|
|
|
|
|
|
|
|
|
|
|
98,584 |
|
|
|
|
|
|
|
560,635 |
|
Sales and marketing |
|
|
120,688 |
|
|
|
|
|
|
|
|
|
|
|
30,549 |
|
|
|
|
|
|
|
151,237 |
|
Subscriber acquisition costs |
|
|
230,264 |
|
|
|
|
|
|
|
|
|
|
|
27,568 |
|
|
|
|
|
|
|
257,832 |
|
General and administrative |
|
|
129,339 |
|
|
|
|
|
|
|
|
|
|
|
19,216 |
|
|
|
|
|
|
|
148,555 |
|
Engineering, design and development |
|
|
22,900 |
|
|
|
|
|
|
|
|
|
|
|
5,191 |
|
|
|
|
|
|
|
28,091 |
|
Impairment of goodwill |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,750,859 |
|
|
|
|
|
|
|
4,750,859 |
|
Depreciation and amortization |
|
|
86,119 |
|
|
|
54 |
|
|
|
|
|
|
|
34,620 |
|
|
|
|
|
|
|
120,793 |
|
Restructuring, impairments and related costs |
|
|
7,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,058,818 |
|
|
|
54 |
|
|
|
|
|
|
|
4,966,587 |
|
|
|
|
|
|
|
6,025,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
(212,489 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
(4,771,107 |
) |
|
|
|
|
|
|
(4,983,650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
5,204 |
|
|
|
|
|
|
|
|
|
|
|
3,963 |
|
|
|
|
|
|
|
9,167 |
|
Interest expense, net of amounts capitalized |
|
|
(50,731 |
) |
|
|
|
|
|
|
|
|
|
|
(32,905 |
) |
|
|
|
|
|
|
(83,636 |
) |
Loss on extinguishment of debt and
facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) on investments |
|
|
(4,809,567 |
) |
|
|
|
|
|
|
|
|
|
|
(3,089 |
) |
|
|
4,809,567 |
|
|
|
(3,089 |
) |
Other income (expense) |
|
|
139 |
|
|
|
|
|
|
|
|
|
|
|
(4,074 |
) |
|
|
|
|
|
|
(3,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes |
|
|
(5,067,444 |
) |
|
|
(54 |
) |
|
|
|
|
|
|
(4,807,212 |
) |
|
|
4,809,567 |
|
|
|
(5,065,143 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
|
|
|
|
|
|
|
|
|
(1,629 |
) |
|
|
(672 |
) |
|
|
|
|
|
|
(2,301 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
(5,067,444 |
) |
|
$ |
(54 |
) |
|
$ |
(1,629 |
) |
|
$ |
(4,807,884 |
) |
|
$ |
4,809,567 |
|
|
$ |
(5,067,444 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
32
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENT OF
STOCKHOLDERS EQUITY (DEFICIT) AND COMPREHENSIVE LOSS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM |
|
|
Sirius Asset |
|
|
Satellite CD |
|
|
Non- |
|
|
|
|
|
|
Sirius XM |
|
(in thousands) |
|
Radio Inc. |
|
|
Mgmt LLC |
|
|
Radio |
|
|
Guarantors |
|
|
Eliminations |
|
|
Radio Inc. |
|
|
|
|
|
|
Balance at December 31, 2008 |
|
$ |
(1,537,899 |
) |
|
$ |
(155 |
) |
|
$ |
68,416 |
|
|
$ |
(593,948 |
) |
|
$ |
2,072,123 |
|
|
$ |
8,537 |
|
Net income (loss) |
|
|
(519,092 |
) |
|
|
(222 |
) |
|
|
(1,611 |
) |
|
|
(359,180 |
) |
|
|
523,148 |
|
|
|
(356,957 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain on
available-for-sale
securities, net of tax |
|
|
579 |
|
|
|
|
|
|
|
|
|
|
|
579 |
|
|
|
(579 |
) |
|
|
579 |
|
Foreign currency translation
adjustment, net of tax |
|
|
694 |
|
|
|
|
|
|
|
|
|
|
|
694 |
|
|
|
(694 |
) |
|
|
694 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss |
|
|
(517,819 |
) |
|
|
(222 |
) |
|
|
(1,611 |
) |
|
|
(357,907 |
) |
|
|
521,875 |
|
|
|
(355,684 |
) |
Issuance of preferred stock
- related party,
net of issuance costs |
|
|
224,004 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
224,004 |
|
Issuance of common stock to
employees
and employee benefit plans, net
of forfeitures |
|
|
1,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,926 |
|
Structuring fee on 10%
Senior PIK Notes
due 2011 |
|
|
5,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,918 |
|
Share-based payment expense |
|
|
56,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,500 |
|
Issuance of restricted
stock units in satisfaction
of accrued compensation |
|
|
31,280 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31,280 |
|
Exchange of 21/2% Convertible
Notes due
2009, including accrued interest |
|
|
35,164 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,164 |
|
Contributed capital |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119,198 |
|
|
|
(119,198 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at September 30, 2009 |
|
$ |
(1,700,926 |
) |
|
$ |
(377 |
) |
|
$ |
66,805 |
|
|
$ |
(832,657 |
) |
|
$ |
2,474,800 |
|
|
$ |
7,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
33
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
|
LLC |
|
|
Satellite CD Radio |
|
|
Non-Guarantors |
|
|
Eliminations |
|
|
Inc. |
|
Net cash provided by (used in)
operating activities |
|
$ |
25,668 |
|
|
$ |
5,058 |
|
|
$ |
|
|
|
$ |
228,562 |
|
|
$ |
(6,181 |
) |
|
$ |
253,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(173,466 |
) |
|
|
(5,058 |
) |
|
|
|
|
|
|
(38,811 |
) |
|
|
|
|
|
|
(217,335 |
) |
Purchases of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Merger related costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of restricted and other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing
activities |
|
|
(173,466 |
) |
|
|
(5,058 |
) |
|
|
|
|
|
|
(38,811 |
) |
|
|
|
|
|
|
(217,335 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock issuance
costs, net |
|
|
(3,712 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,712 |
) |
Long-term borrowings,
net of costs |
|
|
186,571 |
|
|
|
|
|
|
|
|
|
|
|
387,184 |
|
|
|
6,181 |
|
|
|
579,936 |
|
Related party long-term borrowings,
net of costs |
|
|
269,871 |
|
|
|
|
|
|
|
|
|
|
|
95,093 |
|
|
|
|
|
|
|
364,964 |
|
Short-term financings |
|
|
2,220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,220 |
|
Payment of premiums on
redemption of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(17,075 |
) |
|
|
|
|
|
|
(17,075 |
) |
Repayment of related party long-term
borrowings, net of costs |
|
|
(251,247 |
) |
|
|
|
|
|
|
|
|
|
|
(100,000 |
) |
|
|
|
|
|
|
(351,247 |
) |
Repayment of long-term borrowings |
|
|
(175,205 |
) |
|
|
|
|
|
|
|
|
|
|
(435,727 |
) |
|
|
|
|
|
|
(610,932 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in)
financing activities |
|
|
28,498 |
|
|
|
|
|
|
|
|
|
|
|
(70,525 |
) |
|
|
6,181 |
|
|
|
(35,846 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
and cash equivalents |
|
|
(119,300 |
) |
|
|
|
|
|
|
|
|
|
|
119,226 |
|
|
|
|
|
|
|
(74 |
) |
Cash and cash equivalents at
beginning of period |
|
|
173,647 |
|
|
|
|
|
|
|
|
|
|
|
206,799 |
|
|
|
|
|
|
|
380,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
54,347 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
326,025 |
|
|
$ |
|
|
|
$ |
380,372 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
34
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS Continued
(Dollar amounts in thousands, unless otherwise stated)
SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
|
|
Sirius XM Radio |
|
|
Sirius Asset Mgmt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sirius XM Radio |
|
(in thousands) |
|
Inc. |
|
|
LLC |
|
|
Satellite CD Radio |
|
|
Non-Guarantors |
|
|
Eliminations |
|
|
Inc. |
|
Net cash (used in) provided by
operating activities |
|
$ |
(220,763 |
) |
|
$ |
6,744 |
|
|
$ |
|
|
|
$ |
(2,973 |
) |
|
$ |
|
|
|
$ |
(216,992 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property and
equipment |
|
|
(88,068 |
) |
|
|
(6,744 |
) |
|
|
|
|
|
|
(7,893 |
) |
|
|
|
|
|
|
(102,705 |
) |
Sales of property and equipment |
|
|
105 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105 |
|
Purchases of restricted and other
investments |
|
|
(3,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,000 |
) |
Merger related costs |
|
|
(13,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,047 |
) |
Acquisition of acquired entity cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
819,521 |
|
|
|
819,521 |
|
Sale of restricted and other
investments |
|
|
40,242 |
|
|
|
|
|
|
|
|
|
|
|
25,400 |
|
|
|
|
|
|
|
65,642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
investing activities |
|
|
(63,768 |
) |
|
|
(6,744 |
) |
|
|
|
|
|
|
17,507 |
|
|
|
819,521 |
|
|
|
766,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from exercise of
warrants and stock options |
|
|
471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
471 |
|
Long-term borrowings, net of
costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
533,941 |
|
|
|
|
|
|
|
533,941 |
|
Payments to minority interest holder |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(61,880 |
) |
|
|
|
|
|
|
(61,880 |
) |
Payment of premiums on
redemption of debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(18,693 |
) |
|
|
|
|
|
|
(18,693 |
) |
Repayment of long-term borrowings |
|
|
(1,875 |
) |
|
|
|
|
|
|
|
|
|
|
(1,080,553 |
) |
|
|
|
|
|
|
(1,082,428 |
) |
Other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98 |
) |
|
|
|
|
|
|
(98 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in financing
activities |
|
|
(1,404 |
) |
|
|
|
|
|
|
|
|
|
|
(627,283 |
) |
|
|
|
|
|
|
(628,687 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash
and cash equivalents |
|
|
(285,935 |
) |
|
|
|
|
|
|
|
|
|
|
(612,749 |
) |
|
|
819,521 |
|
|
|
(79,163 |
) |
Cash and cash equivalents at
beginning of period |
|
|
430,226 |
|
|
|
|
|
|
|
|
|
|
|
828,115 |
|
|
|
(819,521 |
) |
|
|
438,820 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at
end of period |
|
$ |
144,291 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
215,366 |
|
|
$ |
|
|
|
$ |
359,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS |
(All dollar amounts referenced in this Item 2 are in thousands, unless otherwise stated)
Special Note Regarding Forward-Looking Statements
The following cautionary statements identify important factors that could cause our actual
results to differ materially from those projected in forward-looking statements made in this
Quarterly Report on Form 10-Q and in other reports and documents published by us from time to time.
Any statements about our beliefs, plans, objectives, expectations, assumptions, future events or
performance are not historical facts and may be forward-looking. These statements are often, but
not always, made through the use of words or phrases such as will likely result, are expected
to, will continue, is anticipated, estimated, intend, plan, projection and outlook.
Any forward-looking statements are qualified in their entirety by reference to the factors
discussed throughout our Annual Report on Form 10-K for the year ended December 31, 2008 (the Form
10-K), and in other reports and documents published by us from time to time, particularly the risk
factors described under Business Risk Factors in Item 1A of the 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:
|
|
|
the substantial indebtedness of SIRIUS, 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; |
|
|
|
our dependence upon automakers, many of which have experienced a dramatic drop in
sales and are in financial distress, and other third parties, such as manufacturers and
distributors of satellite radios, retailers and programming providers; and |
|
|
|
the competitive position of SIRIUS and XM versus other forms of audio and video
entertainment including terrestrial radio, HD radio, internet radio, mobile phones,
iPods and other MP3 devices, and emerging next-generation networks and technologies. |
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.
Executive Summary
We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the
United States on a subscription fee basis through our proprietary satellite radio systems the
SIRIUS system and the XM system. On July 28, 2008, our wholly owned subsidiary, Vernon Merger
Corporation, merged (the Merger) with and into XM Satellite Radio Holdings Inc. and, as a result,
XM Satellite Radio Holdings Inc. is now our wholly owned subsidiary. The SIRIUS system consists of
four in-orbit satellites, over 125 terrestrial repeaters that receive and retransmit signals,
satellite uplink facilities and studios. The XM 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 app on the Apple iPhone.
Our satellite radios are primarily distributed through automakers (OEMs), retailers and
through our websites. We have agreements with every major automaker to offer SIRIUS or XM satellite
radios as factory or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also
offered to customers of rental car companies.
As of September 30, 2009, we had 18,515,730 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; subscribers to SIRIUS Internet Radio and XM Radio Online, our Internet
services; and certain subscribers to our weather, traffic, data and video services.
36
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 on each platform. In 2009, we
increased the discounted price for additional subscriptions from $6.99 per month to $8.99 per
month. We also derive revenue from activation fees, the sale of advertising on select non-music
channels, the direct sale of satellite radios, components and accessories, and other ancillary
services, such as our Backseat TV, data and weather services.
In August 2009, we began charging our subscribers a U.S. Music Royalty Fee (the MRF). The
MRF is $1.98 a month on our base subscriptions and $.97 for plans that are eligible for a second
radio discount. The MRF also varies depending upon subscriber package and plan term. Amounts we
collect through the MRF are included in Other revenue on our unaudited consolidated statements of
operations. The FCC decision approving the Merger permits us to pass through to subscribers
increases in music royalties since March 20, 2007, the date we asked the FCC to approve the Merger.
The MRF is the implementation of that FCC decision.
In certain cases, automakers include a subscription to our radio services in the sale or lease
price of vehicles. The length of these prepaid subscriptions varies, but is typically three to
twelve months. In many cases, we receive subscription payments from automakers in advance of the
activation of our service. We also reimburse various automakers for certain costs associated with
satellite radios installed in their vehicles.
We also have an interest in the satellite radio services offered in Canada. Subscribers to the
SIRIUS Canada service and the XM Canada service are not included in our subscriber count.
On August 5, 2008, Sirius Satellite Radio Inc. changed its name to Sirius XM Radio Inc. XM
Satellite Radio Holdings Inc., together with its subsidiaries, is operated as an unrestricted
subsidiary under the agreements governing our existing indebtedness. As an unrestricted subsidiary,
transactions between the companies are required to comply with various contractual provisions in
our respective debt 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 53 through 62) 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.
37
Subscriber and Key Operating Metrics. The following tables contain our actual and pro forma
subscriber and key operating metrics for the three and nine months ended September 30, 2009 and
2008, respectively:
Unaudited Actual and Pro Forma Quarterly Subscribers and Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
(Actual) |
|
|
(Pro Forma) |
|
|
(Actual) |
|
|
(Pro Forma) |
|
Beginning subscribers |
|
|
18,413,435 |
|
|
|
18,576,830 |
|
|
|
19,003,856 |
|
|
|
17,348,622 |
|
Gross subscriber additions |
|
|
1,606,446 |
|
|
|
1,843,785 |
|
|
|
4,325,532 |
|
|
|
5,997,096 |
|
Deactivated subscribers |
|
|
(1,504,151 |
) |
|
|
(1,499,704 |
) |
|
|
(4,813,658 |
) |
|
|
(4,424,807 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
344,081 |
|
|
|
(488,126 |
) |
|
|
1,572,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
7,925,904 |
|
|
|
9,036,420 |
|
|
|
7,925,904 |
|
|
|
9,036,420 |
|
OEM |
|
|
10,488,530 |
|
|
|
9,777,704 |
|
|
|
10,488,530 |
|
|
|
9,777,704 |
|
Rental |
|
|
101,296 |
|
|
|
106,787 |
|
|
|
101,296 |
|
|
|
106,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(309,972 |
) |
|
|
(149,417 |
) |
|
|
(979,298 |
) |
|
|
(202,295 |
) |
OEM |
|
|
407,131 |
|
|
|
492,216 |
|
|
|
492,692 |
|
|
|
1,744,436 |
|
Rental |
|
|
5,136 |
|
|
|
1,282 |
|
|
|
(1,520 |
) |
|
|
30,148 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
344,081 |
|
|
|
(488,126 |
) |
|
|
1,572,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
15,456,748 |
|
|
|
15,190,588 |
|
|
|
15,456,748 |
|
|
|
15,190,588 |
|
Paid promotional |
|
|
3,058,982 |
|
|
|
3,730,323 |
|
|
|
3,058,982 |
|
|
|
3,730,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
35,405 |
|
|
|
361,438 |
|
|
|
(92,838 |
) |
|
|
1,317,242 |
|
Paid promotional |
|
|
66,890 |
|
|
|
(17,357 |
) |
|
|
(395,288 |
) |
|
|
255,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
344,081 |
|
|
|
(488,126 |
) |
|
|
1,572,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
18,393,678 |
|
|
|
18,710,940 |
|
|
|
18,514,041 |
|
|
|
18,187,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.7 |
% |
|
|
2.1 |
% |
|
|
1.7 |
% |
Conversion rate (2)(7) |
|
|
46.8 |
% |
|
|
47.0 |
% |
|
|
45.3 |
% |
|
|
49.2 |
% |
ARPU (3)(7) |
|
$ |
10.87 |
|
|
$ |
10.51 |
|
|
$ |
10.67 |
|
|
$ |
10.53 |
|
SAC, as adjusted, per gross subscriber addition (4)(7) |
|
$ |
69 |
|
|
$ |
74 |
|
|
$ |
63 |
|
|
$ |
76 |
|
Customer service and billing expenses, as adjusted,
per average subscriber (5)(7) |
|
$ |
1.01 |
|
|
$ |
1.05 |
|
|
$ |
1.04 |
|
|
$ |
1.08 |
|
Total revenue |
|
$ |
629,607 |
|
|
$ |
612,776 |
|
|
$ |
1,842,924 |
|
|
$ |
1,792,632 |
|
Free cash flow (6)(7) |
|
$ |
26,724 |
|
|
$ |
(97,594 |
) |
|
$ |
35,772 |
|
|
$ |
(577,648 |
) |
Adjusted income (loss) from operations (8) |
|
$ |
106,140 |
|
|
$ |
(36,851 |
) |
|
$ |
347,198 |
|
|
$ |
(168,096 |
) |
Net loss |
|
$ |
(181,935 |
) |
|
$ |
(217,010 |
) |
|
$ |
(416,090 |
) |
|
$ |
(653,867 |
) |
|
|
|
Note: |
|
See pages 53 through 62 for footnotes. |
38
Subscribers. At September 30, 2009 we had 18,515,730 subscribers, a decrease of 405,181
subscribers, or 2%, from the 18,920,911 subscribers as of September 30, 2008. The decrease was
principally the result of 671,341 fewer paid promotional trials due to the decline in North
American auto sales. This decline was partially offset by an increase of 266,160 in self-pay
subscribers compared to September 30, 2008. Gross subscriber additions decreased approximately 13%
and 28% during the three and nine months ended September 30, 2009 compared to the three and nine
months ended September 30, 2008, respectively. OEM gross subscriber additions decreased due to the
decline in North American automobile sales and retail gross subscriber additions decreased due to
declines in consumer spending. 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.
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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, total ARPU was
$10.87 and $10.51, 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 ad revenue. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, total ARPU was
$10.67 and $10.53, 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. |
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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, SAC, as
adjusted, per gross subscriber addition was $69 and $74, respectively. The decrease in
SAC was primarily due to lower OEM subsidies and lower aftermarket inventory
settlements partially offset by higher OEM subsidies on installations compared to the
three months ended September 30, 2008. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, SAC, as
adjusted, per gross subscriber addition was $63 and $76, respectively. The decrease was
primarily driven by fewer OEM installations relative to gross subscriber additions,
decreased production of certain radios, lower OEM subsidies and lower aftermarket
inventory settlements in the nine months ended September 30, 2009 compared to the nine
months ended September 30, 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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, customer
service and billing expenses, as adjusted, per average subscriber was $1.01 and $1.05,
respectively. The decline was primarily due to decreases in personnel costs and
customer call center expenses. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, customer service
and billing expenses, as adjusted, per average subscriber was $1.04 and $1.08,
respectively. The decline was primarily due to decreases in personnel costs and
customer call center expenses. |
Adjusted Income (Loss) from Operations. We refer to net 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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, our adjusted
income (loss) from operations was $106,140 and ($36,851), respectively. Adjusted income
(loss) from operations was favorably impacted by an increase of 3%, or $16,831, in
revenues and a decrease of 19%, or $126,160, in total expenses included in adjusted
income (loss) from operations. The increase in revenue was due mainly to increased
rates on multi-subscription packages, revenues earned on internet packages, the
introduction of the U.S. Music Royalty Fee and the sale of Best of programming. The
decreases in expenses were primarily driven by lower Subscriber acquisition costs,
lower Sales and marketing discretionary spend, savings in Programming and content
expenses, and lower legal and consulting costs in General and administrative expenses. |
39
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, our adjusted
income (loss) from operations was $347,198 and ($168,096), respectively. Adjusted
income (loss) from operations was favorably impacted by an increase of 3%, or $50,292,
in revenues and a decrease of 24%, or $465,002, 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,
revenues earned on internet packages, the introduction of the U.S. Music Royalty Fee
and the sale of Best of programming. The decreases in expenses were primarily driven
by lower Subscriber acquisition costs, lower Sales and marketing discretionary spend,
savings in Programming and content expenses, 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, or the goodwill impairment charge taken during 2008. See footnote 8 (pages 54 to 55) for a
reconciliation of net loss to adjusted income (loss) from operations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of
rebates |
|
$ |
587,442 |
|
|
$ |
572,355 |
|
|
$ |
1,740,477 |
|
|
$ |
1,669,700 |
|
Advertising revenue, net of agency fees |
|
|
12,418 |
|
|
|
17,867 |
|
|
|
37,287 |
|
|
|
54,156 |
|
Equipment revenue |
|
|
10,506 |
|
|
|
12,856 |
|
|
|
31,343 |
|
|
|
38,687 |
|
Other revenue |
|
|
19,241 |
|
|
|
9,698 |
|
|
|
33,817 |
|
|
|
30,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
629,607 |
|
|
|
612,776 |
|
|
|
1,842,924 |
|
|
|
1,792,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
18,676 |
|
|
|
25,136 |
|
|
|
57,077 |
|
|
|
76,336 |
|
Programming and content |
|
|
93,230 |
|
|
|
131,630 |
|
|
|
277,614 |
|
|
|
341,422 |
|
Revenue share and royalties |
|
|
123,531 |
|
|
|
120,800 |
|
|
|
362,463 |
|
|
|
355,251 |
|
Customer service and billing |
|
|
55,795 |
|
|
|
58,857 |
|
|
|
173,517 |
|
|
|
177,159 |
|
Cost of equipment |
|
|
11,944 |
|
|
|
16,179 |
|
|
|
27,988 |
|
|
|
48,020 |
|
Sales and marketing |
|
|
52,827 |
|
|
|
78,178 |
|
|
|
152,039 |
|
|
|
260,583 |
|
Subscriber acquisition costs |
|
|
109,384 |
|
|
|
132,477 |
|
|
|
274,082 |
|
|
|
444,396 |
|
General and administrative |
|
|
48,481 |
|
|
|
75,981 |
|
|
|
142,812 |
|
|
|
215,440 |
|
Engineering, design and development |
|
|
9,599 |
|
|
|
10,389 |
|
|
|
28,134 |
|
|
|
42,121 |
|
Depreciation and amortization |
|
|
47,997 |
|
|
|
64,111 |
|
|
|
145,596 |
|
|
|
196,051 |
|
Share-based payment expense |
|
|
18,799 |
|
|
|
29,809 |
|
|
|
71,301 |
|
|
|
99,673 |
|
Restructuring, impairments and related costs |
|
|
2,554 |
|
|
|
7,430 |
|
|
|
30,167 |
|
|
|
7,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
592,817 |
|
|
|
750,977 |
|
|
|
1,742,790 |
|
|
|
2,263,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
36,790 |
|
|
|
(138,201 |
) |
|
|
100,134 |
|
|
|
(471,277 |
) |
Other expense |
|
|
(217,610 |
) |
|
|
(77,086 |
) |
|
|
(512,880 |
) |
|
|
(178,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(180,820 |
) |
|
|
(215,287 |
) |
|
|
(412,746 |
) |
|
|
(650,054 |
) |
Income tax expense |
|
|
(1,115 |
) |
|
|
(1,723 |
) |
|
|
(3,344 |
) |
|
|
(3,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(181,935 |
) |
|
$ |
(217,010 |
) |
|
$ |
(416,090 |
) |
|
$ |
(653,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Highlights for the Three Months Ended September 30, 2009. Our revenue grew 3%, or $16,831, in
the three months ended September 30, 2009 compared to the same period in 2008. Subscriber revenue
increased 3%, or $15,087, in the three months ended September 30, 2009 compared to the same period
in 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 decreased 30%,
or $5,449, in the three months ended September 30, 2009 compared to the same period in 2008. The
decrease in advertising revenue was driven by the current economic environment. Equipment revenue
decreased 18%, or $2,350, in the three months ended September 30, 2009 compared to the same period
in 2008. The decrease in equipment revenue was driven by declines in sales through our direct to
consumer distribution channel. Other revenue increased 98%, or $9,543, in the three months ended
September 30, 2009 compared to the same period in 2008. The increase in other revenue was driven by
the U.S. Music Royalty Fee introduced this quarter. The overall increase in revenue, combined with
a decrease of 19%, or $126,160, in adjusted operating costs (total operating expense excluding
restructuring, impairments and related costs, depreciation and amortization and share-based payment
expense), resulted in improved adjusted income (loss) from operations of $106,140 in the three
months ended September 30, 2009 compared to ($36,851) in the same period in 2008.
40
Satellite and transmission costs decreased 26%, or $6,460, in the three months ended
September 30, 2009 compared to the same period in 2008 due to reductions in maintenance costs,
repeater lease expense and personnel costs. Programming and content costs decreased 29%, or
$38,400, in the three months ended September 30, 2009 compared to the same period in 2008, due
mainly to a $27,500 one-time payment recognized in 2008 to a programming provider upon completion
of the Merger, reductions in personnel and on-air talent costs as well as savings on certain
content agreements. Revenue share and royalties increased 2%, or $2,731, in the three months ended
September 30, 2009 compared to the same period in 2008 primarily due to an increase in our revenues
and an increase in the statutory royalty rate for the performance of sound recordings. Customer
service and billing costs decreased 5%, or $3,062, in the three months ended September 30, 2009
compared to the same period in 2008 primarily due to decreases in personnel costs and customer call
center expenses. Cost of equipment decreased 26%, or $4,235, in the three months ended
September 30, 2009 compared to the same period in 2008 as a result of a decrease in our direct to
customer sales and lower inventory write-downs.
Sales and marketing costs decreased 32%, or $25,351, and decreased as a percentage of revenue
to 8% from 13% in the three months ended September 30, 2009 compared to the same period in 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 17%, or $23,093,
and decreased as a percentage of revenue to 17% from 22% in the three months ended September 30,
2009 compared to the same period in 2008. This improvement was driven by fewer OEM installations
relative to gross subscriber additions, decreased production of certain radios, lower OEM subsidies
and lower aftermarket inventory reserves as compared to the three months ended September 30, 2008.
Subscriber acquisition
costs also decreased as a result of the 13% decline in gross additions during the three months
ended September 30, 2009 compared to the three months ended September 30, 2008.
General and administrative costs decreased 36%, or $27,500, in the three months ended
September 30, 2009 compared to the same period in 2008 mainly due to the absence of certain legal
and regulatory charges incurred in 2008 and lower personnel costs. Engineering, design and
development costs decreased 8%, or $790, in the three months ended September 30, 2009 compared to
the same period in 2008, due to lower costs associated with manufacturing of radios, OEM tooling
and manufacturing, and personnel.
Restructuring, impairments and related costs decreased 66%, or $4,876, in the three months
ended September 30, 2009 compared to the same period in 2008 mainly due to fewer restructuring
charges associated with the Merger.
Other expenses increased 182%, or $140,524, in the three months ended September 30, 2009
compared to the same period in 2008 driven mainly by the Loss on extinguishment of debt and credit
facilities of $138,053, and an increase in Interest expense of $11,554, offset by an increase of
$7,491 in Gain on investments. The Loss on the extinguishment of debt and credit facilities was
incurred on the full repayment of SIRIUS LM Credit Agreement. Interest expense increased due
primarily to the issuance of XMs 13% Senior Notes due 2013 and the 7% Exchangeable Senior
Subordinated Notes due 2014 in the third quarter of 2008.
Highlights for the Nine Months Ended September 30, 2009. Our subscriber revenue grew 4%, or
$70,777, in the nine months ended September 30, 2009 compared to the same period in 2008.
Advertising revenue decreased 31%, or $16,869, in the nine months ended September 30, 2009 compared
to the same period in 2008. The decrease in advertising revenue was driven by the current economic
environment. Equipment revenue decreased 19%, or $7,344, in the nine months ended September 30,
2009 compared to the same period in 2008. The decrease in equipment revenue was driven by declines
in sales through our direct to consumer distribution channel. Other revenue increased 12%, or
$3,728, in the nine months ended September 30, 2009 compared to the same period in 2008. The
increase in other revenue was driven by the U.S. Music Royalty Fee introduced this quarter. Total
revenue increased 3%, or $50,292, and combined with a decrease of 24%, or $465,002, in adjusted
operating costs (total operating expenses excluding restructuring, impairments and related costs,
depreciation and amortization and share-based payment expense), resulted in improved adjusted
income (loss) from operations of $347,198 in the nine months ended September 30, 2009 compared to
($168,096) in 2008.
Satellite and transmission costs decreased 25%, or $19,259, in the nine months ended
September 30, 2009 compared to the same period in 2008 due to reductions in maintenance costs,
repeater lease expense, and personnel costs. Programming and content costs decreased 19%, or
$63,808, in the nine months ended September 30, 2009 compared to the same period in 2008, due
mainly to a $27,500 one-time payment recognized in 2008 to a programming provider upon completion
of the Merger, to reductions in personnel and on-air talent costs as well as savings on certain
content agreements. Revenue share and royalties increased 2%, or $7,212, in the nine months ended
September 30, 2009 compared to the same period in 2008. Customer service and billing costs
decreased 2%, or $3,642, in the nine months ended September 30, 2009 compared to the same period in
2008 due to scale efficiencies over a larger subscriber base. Cost of equipment decreased 42%, or
$20,032, in the nine months ended September 30, 2009 compared to the same period in 2008 as a
result of a decrease in direct to customer sales and lower inventory write-downs.
41
Sales and marketing costs decreased 42%, or $108,544, and decreased as a percentage of revenue
to 8% from 15% in the nine months ended September 30, 2009 compared to the same period in 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 38%, or $170,314,
and decreased as a percentage of revenue to 15% from 25% in the nine months ended September 30,
2009 compared to the same period in 2008. This decrease was driven by a 17% improvement in SAC, as
adjusted, per gross addition due to fewer OEM installations relative to gross subscriber additions,
decreased production of certain radios, lower OEM subsidies and lower aftermarket inventory
reserves in the nine months ended September 30, 2009 compared to the nine months ended
September 30, 2008. Subscriber acquisition costs also decreased as a result of the 28% decline in
gross additions during the nine months ended September 30, 2009.
General and administrative costs decreased 34%, or $72,628, 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 $13,987, in the nine months ended September 30, 2009
compared to the same period in 2008, due to lower costs associated with manufacturing of radios,
OEM tooling and manufacturing, and personnel.
Restructuring, impairments and related costs increased 305%, or $22,710, mainly due to a loss
of $24,196 on capitalized installment payments, which are expected to provide no future benefit due
to the counterpartys bankruptcy filing, for the launch of a satellite, offset partially by a
decrease in personnel related restructuring costs.
Other expenses increased 187%, or $334,103, in the nine months ended September 30, 2009
compared to the same period in 2008 driven mainly by the increase in Loss on extinguishment of debt
and credit facilities of $263,767 and an increase in Interest expense of $90,297, offset by an
increase of $16,556 in Gain on investments. The Loss on the extinguishment of debt and credit
facilities was incurred on the full repayment of SIRIUS LM Credit Agreement and XMs Amended and
Restated Credit Agreement and XMs Second-Lien Credit Agreement.
Interest expense increased due primarily to the issuance of XMs 13% Senior Notes due 2013 and
the 7% Exchangeable Senior Subordinated Notes due 2014 in the third quarter of 2008.
42
Unaudited Actual Results of Operations
Our discussion of our unaudited actual results of operations 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 53 through 62)
following our discussion of results of operations for the definitions and a further discussion of
the usefulness of such non-GAAP financial measures.
The discussion of our results of operations for the three and nine months ended September 30,
2009 and 2008 includes the financial results of XM from the date of the Merger. The inclusion of
these results may render direct comparisons with results for prior periods less meaningful.
Accordingly, the discussion below addresses trends we believe are significant.
Subscriber and Key Operating Metrics. The following tables contain our actual subscribers and
key operating metrics for the three and nine months ended September 30, 2009 and 2008:
Unaudited Actual Quarterly Subscribers and Metrics:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning subscribers |
|
|
18,413,435 |
|
|
|
8,924,139 |
|
|
|
19,003,856 |
|
|
|
8,321,785 |
|
Gross subscriber additions |
|
|
1,606,446 |
|
|
|
11,208,193 |
|
|
|
4,325,532 |
|
|
|
13,240,902 |
|
Deactivated subscribers |
|
|
(1,504,151 |
) |
|
|
(1,211,421 |
) |
|
|
(4,813,658 |
) |
|
|
(2,641,776 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
9,996,772 |
|
|
|
(488,126 |
) |
|
|
10,599,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
7,925,904 |
|
|
|
9,036,420 |
|
|
|
7,925,904 |
|
|
|
9,036,420 |
|
OEM |
|
|
10,488,530 |
|
|
|
9,777,704 |
|
|
|
10,488,530 |
|
|
|
9,777,704 |
|
Rental |
|
|
101,296 |
|
|
|
106,787 |
|
|
|
101,296 |
|
|
|
106,787 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail |
|
|
(309,972 |
) |
|
|
4,359,721 |
|
|
|
(979,298 |
) |
|
|
4,395,710 |
|
OEM |
|
|
407,131 |
|
|
|
5,546,161 |
|
|
|
492,692 |
|
|
|
6,112,073 |
|
Rental |
|
|
5,136 |
|
|
|
90,890 |
|
|
|
(1,520 |
) |
|
|
91,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
9,996,772 |
|
|
|
(488,126 |
) |
|
|
10,599,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
15,456,748 |
|
|
|
15,190,588 |
|
|
|
15,456,748 |
|
|
|
15,190,588 |
|
Paid promotional |
|
|
3,058,982 |
|
|
|
3,730,323 |
|
|
|
3,058,982 |
|
|
|
3,730,323 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending subscribers |
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
18,515,730 |
|
|
|
18,920,911 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Self-pay |
|
|
35,405 |
|
|
|
9,048,281 |
|
|
|
(92,838 |
) |
|
|
9,505,524 |
|
Paid promotional |
|
|
66,890 |
|
|
|
948,491 |
|
|
|
(395,288 |
) |
|
|
1,093,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net additions |
|
|
102,295 |
|
|
|
9,996,772 |
|
|
|
(488,126 |
) |
|
|
10,599,126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average
number of subscribers |
|
|
18,393,678 |
|
|
|
15,472,506 |
|
|
|
18,514,041 |
|
|
|
10,887,028 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Average self-pay monthly churn (1)(7) |
|
|
2.0 |
% |
|
|
1.7 |
% |
|
|
2.1 |
% |
|
|
1.7 |
% |
Conversion rate (2)(7) |
|
|
46.8 |
% |
|
|
47.0 |
% |
|
|
45.3 |
% |
|
|
49.1 |
% |
ARPU (7)(10) |
|
$ |
10.71 |
|
|
$ |
10.19 |
|
|
$ |
10.42 |
|
|
$ |
10.33 |
|
SAC, as adjusted, per gross subscriber addition
(7)(11) |
|
$ |
57 |
|
|
$ |
60 |
|
|
$ |
53 |
|
|
$ |
74 |
|
Customer service and billing expenses, as adjusted,
per average subscriber (7)(12) |
|
$ |
1.01 |
|
|
$ |
1.01 |
|
|
$ |
1.04 |
|
|
$ |
0.98 |
|
Total revenue |
|
$ |
618,656 |
|
|
$ |
488,443 |
|
|
$ |
1,796,464 |
|
|
$ |
1,041,809 |
|
Free cash flow (7)(13) |
|
$ |
26,724 |
|
|
$ |
(52,722 |
) |
|
$ |
35,772 |
|
|
$ |
(270,344 |
) |
Adjusted income (loss) from operations (14) |
|
$ |
158,683 |
|
|
$ |
22,091 |
|
|
$ |
473,996 |
|
|
$ |
(41,124 |
) |
Net loss |
|
$ |
(149,190 |
) |
|
$ |
(4,879,427 |
) |
|
$ |
(356,957 |
) |
|
$ |
(5,067,444 |
) |
|
|
|
Note: |
|
See pages 53 through 62 for footnotes. |
Subscribers. At September 30, 2009 we had 18,515,730 subscribers, a decrease of 405,181
subscribers, or 2%, from the 18,920,911 subscribers as of September 30, 2008. The decrease was
principally the result of 671,341 fewer paid promotional trials due to the decline in North
American auto sales. This decline was partially offset by an increase of 266,160 in self-pay
subscribers compared to September 30, 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.
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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, total ARPU was
$10.71 and $10.19, respectively. The increase was driven by the revenues earned for
Best of programming, increased rates on multi-subscription packages and internet
subscriptions. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, total ARPU was
$10.42 and $10.33, respectively. The increase was driven by the revenues earned for
Best of programming, increased rates on multi-subscription packages and internet
subscriptions. |
We expect ARPU to fluctuate based on 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. 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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, SAC, as
adjusted, per gross subscriber addition was $57 and $60, respectively. The decrease in
SAC was attributed to lower OEM subsidies, decreased production of certain radios,
lower aftermarket inventory reserves and improved equipment margins, offset by an
additional month of XM subscriber acquisition costs in the three months ended
September 30, 2009 compared to the prior year period. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, SAC, as
adjusted, per gross subscriber addition was $53 and $74, respectively. The decrease was
primarily driven by the effect of purchase price accounting adjustments, lower OEM
subsidies, decreased production of certain radios, lower aftermarket
inventory reserves and
improved equipment margins in the nine months ended September 30, 2009 compared to the prior year period. |
We expect SAC, as adjusted, per gross subscriber addition to decline as the costs of
subsidized components of SIRIUS and XM radios decrease in the future. Our SAC, as adjusted, per
gross subscriber addition will be impacted by our increasing mix of OEM additions and the effects
of purchase price accounting adjustments.
44
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.
|
|
|
Three Months: For each of the three months ended September 30, 2009 and 2008,
customer service and billing expenses, as adjusted, per average subscriber was $1.01. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, customer service
and billing expenses, as adjusted, per average subscriber was $1.04 and $0.98,
respectively. The increase was primarily due to the inclusion of XM, which has
historically experienced higher customer service and billing 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. We refer to net 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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, our adjusted
income (loss) from operations was $158,683 and $22,091, respectively. Adjusted income
(loss) from operations was favorably impacted by the $130,213 increase in revenues, and
the $6,379 decrease in expenses included in adjusted income (loss) from operations. The
increase was due primarily to the inclusion of XM. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, our adjusted
income (loss) from operations was $473,996 and ($41,124), respectively. Adjusted income
(loss) from operations was favorably impacted by the $754,655 increase in revenues,
partially offset by the $239,535 increase in expenses included in adjusted income
(loss) from operations. The increase was due primarily to the inclusion of XM. |
Three and Nine Months Ended September 30, 2009 Compared with Three and Nine Months Ended
September 30, 2008 Actual
Total Revenue
Subscriber Revenue. Subscriber revenue includes subscription fees, activation fees and the
effects of rebates.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, subscriber
revenue was $578,304 and $458,237, respectively, an increase of 26% or $120,067. The
Merger was responsible for approximately $95,684 of the increase and the remaining
increase was primarily attributable to the sale of Best of programming and increased
internet and multi-subscription rates. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, subscriber
revenue was $1,699,455 and $980,396, respectively, an increase of 73% or $719,059. The
Merger was responsible for approximately $670,870 of the increase and the remaining
increase was primarily attributable to the sale of Best of programming and increased
internet and multi-subscription rates, as well as higher average subscribers. |
The following table contains a breakdown of our subscriber revenue for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months |
|
|
For the Nine Months |
|
|
|
Ended September 30, |
|
|
Ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscription fees |
|
$ |
573,611 |
|
|
$ |
453,540 |
|
|
$ |
1,683,568 |
|
|
$ |
963,454 |
|
Activation fees |
|
|
5,171 |
|
|
|
4,920 |
|
|
|
16,929 |
|
|
|
17,271 |
|
Effect of rebates |
|
|
(478 |
) |
|
|
(223 |
) |
|
|
(1,042 |
) |
|
|
(329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber revenue |
|
$ |
578,304 |
|
|
$ |
458,237 |
|
|
$ |
1,699,455 |
|
|
$ |
980,396 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
45
Advertising Revenue. Advertising revenue includes the sale of advertising on our non-music
channels, net of agency fees. Agency fees are based on a stated percentage per the advertising
agreements applied to gross billing revenue.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, net
advertising revenue was $12,418 and $14,674, respectively, which represents a decrease
of 15%, or $2,256. The decrease in ad revenue was due to the current economic
environment. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, net advertising
revenue was $37,287 and $31,413, respectively, which represents an increase of 19%, or
$5,874. The increase was due to the inclusion of XM revenue from the Merger, which was
offset by a decrease in ad revenue due to the current economic environment. |
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 we continue
to improve brand awareness and content, 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 SIRIUS
and XM radios, components and accessories.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, equipment
revenue was $10,506 and $11,271 respectively, which represents a decrease of 7%, or
$765. The equipment revenue decrease was mainly due to a decrease in sales through our
direct to consumer distribution channel partially offset by the inclusion of XM revenue
from the Merger. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, equipment
revenue was $31,343 and $25,290 respectively, which represents an increase of 24%, or
$6,053. The Merger was responsible for approximately $13,397 of the increase. The
equipment revenue increase was partially offset by a decrease in sales 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.
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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, satellite and
transmission expenses were $19,542 and $19,526, respectively, remaining relatively
flat. The inclusion of a full quarter of XMs satellite and transmission expense was
offset by reductions in personnel costs and maintenance. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, satellite and
transmission expenses were $59,435 and $34,800, respectively, which represents an
increase of 71%, or $24,635. The satellite and transmission increase was primarily due
to the inclusion of XMs satellite and transmission expense, partially offset by
decreases due to the elimination of contracts, decommissioned repeater sites, and
decrease in web-streaming 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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, programming
and content expenses were $78,315 and $106,037, respectively, which represents a
decrease of 26%, or $27,722. The decrease was primarily due to a $27,500 one-time
payment recognized in 2008 to a programming provider upon completion of the Merger,
savings on content agreements, and personnel and on-air talent costs, which were partially
offset by a full quarter of XMs programming and content expense. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, programming and
content expenses were $230,825 and $222,975, respectively, which represents an increase
of 4%, or $7,850. The increase was due to the inclusion of XMs programming and content
expense, which was partially offset by decreases due to a $27,500 one-time payment
recognized in
2008 to a programming provider upon completion of the Merger, the impact of the Merger,
and by savings on content agreements, personnel and on-air talent costs. |
46
Our programming and content expenses, excluding share-based payment expense, are expected to
decrease 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 SIRIUS and XM radios purchased from retailers.
Advertising revenue share is recorded to revenue share and royalties in the period the advertising
is broadcast.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, revenue share
and royalties were $100,558 and $85,592, respectively, which represents an increase of
17%, or $14,966. The increase was primarily attributable to the inclusion of a full
quarter of XMs revenue share and royalty expense as a result of the Merger, an
increase in our revenues and an increase in the statutory royalty rate for the
performance of sound recordings. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, revenue share
and royalties were $296,855 and $177,635, respectively, which represents an increase of
67%, or $119,220. The increase was primarily attributable to the inclusion of XMs
revenue share and royalty expense as a result of the Merger, an increase in our
revenues and an increase in the statutory royalty rate for the performance of sound
recordings. |
We expect these costs to increase as our revenues grow, as we expand our distribution of
SIRIUS and XM radios through automakers, and as a result of statutory increases in the royalty rate
for the performance of sound recordings.
Customer Service and Billing. Customer service and billing expenses include costs associated
with the operation of our customer service centers and subscriber management systems as well as bad
debt expense.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, customer
service and billing expenses were $56,529 and $47,432, respectively, which represents
an increase of 19%, or $9,097. The increase was primarily attributable to the inclusion
of a full quarter of XMs customer service and billing expense as a result of the
Merger and increased bad debt expense due to the current economic environment. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, customer service
and billing expenses were $175,570 and $97,218, respectively, which represents an
increase of 81%, or $78,352. The increase was primarily due to the inclusion of XMs
customer and billing expense as a result of the Merger and increased bad debt expense
due to the current economic environment. |
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 associated with a larger subscriber base.
Cost of Equipment. Cost of equipment includes costs from the sale of SIRIUS and XM radios,
components and accessories.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, cost of
equipment was $11,944 and $13,773, respectively, which represents a decrease of 13%, or
$1,829. The decrease was mainly due to lower sales volume through our direct to
consumer channel and lower inventory related charges, offset by the inclusion of a full
quarter of XMs cost of equipment expense as a result of the Merger. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, cost of
equipment was $27,988 and $28,007, respectively, remaining relatively flat period over
period. This was mainly due to lower sales volume through our direct to consumer
channel and lower inventory related charges, offset by the inclusion of XMs cost of
equipment expense as a result of the Merger. |
We expect cost of equipment to vary in the future with changes in sales through our direct to
consumer distribution channel.
47
Sales and Marketing. Sales and marketing expenses include costs for advertising, media and
production, including promotional events and sponsorships; cooperative marketing; customer
retention and personnel. Cooperative marketing costs include fixed and variable payments to
reimburse retailers and automakers for the cost of advertising and other product awareness
activities.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, sales and
marketing expenses were $52,530 and $63,637, respectively, which represents a decrease
of 17%, or $11,107. The decrease was primarily driven by reductions in consumer
advertising and cooperative marketing, personnel costs and third party distribution
support expenses, offset by the inclusion of a full quarter of XMs sales and marketing
expense. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, sales and
marketing expenses were $152,647 and $151,237, respectively, which represents an
increase of 1%, or $1,410. The increase is due to the inclusion of XMs sales and
marketing expense, partially offset by reductions in consumer advertising and
cooperative marketing, personnel costs and third party distribution support expenses. |
We expect sales and marketing expenses, excluding share-based payment expense, to decrease as
we consolidate our advertising and promotional activities, 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 a SIRIUS or XM 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; commissions paid to retailers and automakers as incentives to purchase, install and
activate SIRIUS and XM radios; product warranty obligations; provisions for inventory allowance;
and personnel 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 of, or concurrent with, acquiring a subscriber. Subscriber acquisition costs do not include
advertising, loyalty payments to distributors and dealers of SIRIUS and XM radios, and revenue
share payments to automakers and retailers of SIRIUS and XM radios.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, subscriber
acquisition costs were $90,054 and $86,616, respectively, which represents an increase
of 4%, or $3,438. This increase was primarily due to the inclusion of a full quarter of
XMs subscriber acquisition costs, partially offset by lower OEM subsidies, and lower
aftermarket inventory settlements in the three months ended September 30, 2009 compared
to the three months ended September 30, 2008. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, subscriber
acquisition costs were $230,773 and $257,832, respectively, which represents a decrease
of 10%, or $27,059. This decrease was primarily due to lower OEM subsidies, and lower
aftermarket inventory settlements in the nine months ended September 30, 2009 compared
to the nine months ended September 30, 2008, partially offset by the inclusion of XMs
subscriber acquisition costs as a result of the Merger. |
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 SIRIUS and XM radios. We intend to continue to offer subsidies, commissions and other
incentives to acquire subscribers.
General and Administrative. General and administrative expenses include rent and occupancy,
finance, legal, human resources, information technology and investor relations costs.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, general and
administrative expenses were $56,923 and $57,310, respectively, remaining relatively
flat, primarily due to the impact of the Merger, offset by lower costs for certain
merger, litigation and regulatory matters. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, general and
administrative expenses were $182,953 and $148,555, respectively, which represents an
increase of 23%, or $34,398, primarily due to the impact of the Merger, offset by lower
costs for certain merger, litigation and regulatory matters. |
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.
48
Engineering, Design and Development. Engineering, design and development expenses include
costs to develop chip sets and new products, research and development for broadcast information,
and costs associated with the incorporation of our radios into vehicles manufactured by automakers.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, engineering,
design and development expenses were $11,252 and $10,434, respectively, which
represents an increase of 8%, or $818. This increase was primarily due to the inclusion
of a full quarter of XMs engineering, design and development expenses, partially
offset by lower costs associated with manufacturing of radios, OEM tooling and
manufacturing, and personnel. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, engineering,
design and development expenses were $32,975 and $28,091, respectively, which
represents an increase of 17%, or $4,884. This increase was primarily due to the
inclusion of XMs engineering, design and development expenses, partially offset by
lower costs associated with manufacturing of radios, OEM tooling and manufacturing, and
personnel. |
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 chipsets.
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.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, interest and
investment income was $962 and $4,940, respectively. The decrease of 81%, or $3,978,
was primarily attributable to lower interest rates in 2009 and a lower average cash
balance. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, interest and
investment income was $2,602 and $9,167, respectively. The decrease of 72%, or $6,565,
was primarily attributable to lower interest rates in 2009 and a lower average cash
balance. |
Interest Expense. Interest expense includes interest on outstanding debt, reduced by interest
capitalized in connection with the construction of our satellites and launch vehicles.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, interest
expense was $78,527 and $49,216, respectively, which represents an increase of 60%, or
$29,311. Interest expense increased significantly as a result of the Merger, due to
additional debt and higher interest rates. Increases in interest expense were partially
offset by the capitalized interest associated with satellite construction and related
launch vehicles. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, interest expense
was $240,062 and $83,636, respectively, which represents an increase of 187%, or
$156,426. Interest expense increased significantly as a result of the Merger, due to
additional debt and higher interest rates. Increases in interest expense were partially
offset by the capitalized interest associated with satellite construction and related
launch vehicles. |
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 and retirement of
certain debt instruments.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, loss on
extinguishment of debt and credit facilities, net, was $138,053 and $0, respectively.
The loss was incurred on the retirement of the outstanding Term Loan and Purchase Money
Loan borrowings from Liberty Media and the repurchase of a portion of
XM Holdings 10% Convertible Senior
Notes due 2009. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, loss on
extinguishment of debt and credit facilities, net, was $263,767 and $0, respectively.
The loss was incurred on the retirement of the outstanding Term Loan and Purchase Money
Loan borrowings from Liberty Media, the repurchase of a portion of XM
Holdings 10% Convertible Senior Notes
due 2009, and the retirement of XMs Amended and Restated Credit Agreement and XMs
Second-Lien Credit Agreement. |
49
Gain (loss) on investments. Gain (loss) on investments includes our share of SIRIUS Canadas
and XM Canadas net losses, and losses recorded from our investment in XM Canada when the fair
value was determined to be other than temporary.
|
|
|
Three Months: For the three months ended September 30, 2009 and 2008, loss on
investment was $58 and $3,089, respectively. The decrease was attributable to payments
received from SIRIUS Canada in excess of our carrying value of our investments,
partially offset by our share of SIRIUS Canadas and XM Canadas net losses for the
three months ended September 30, 2009. |
|
|
|
Nine Months: For the nine months ended September 30, 2009 and 2008, gain (loss) on
investment was $457 and ($3,089), respectively. The increase was attributable to
payments received from SIRIUS Canada in excess of our carrying value of our
investments, partially offset by our share of SIRIUS Canadas and XM Canadas net
losses for the nine months ended September 30, 2009 and an impairment charge related to
our investment in XM Canada. |
Income Taxes
Income Tax Expense. Income tax expense represents the recognition of a deferred tax liability
related to the difference in accounting for our FCC licenses, which is amortized over 15 years for
tax purposes but not amortized for book purposes in accordance with GAAP.
|
|
|
Three Months: We recorded income tax expense of $1,115 and $1,215 for the three
months ended September 30, 2009 and 2008, respectively. |
|
|
|
Nine Months: We recorded income tax expense of $3,344 and $2,301 for the nine months
ended September 30, 2009 and 2008, respectively. The increase is attributed to the
inclusion of XM. |
Liquidity and Capital Resources
Cash Flows for the Nine Months Ended September 30, 2009 Compared with Nine Months Ended
September 30, 2008
As of September 30, 2009 and 2008, we had $380,372 and $359,657, respectively, in cash and
cash equivalents and $380,446 as of December 31, 2008.
The following table presents a summary of our cash flow activity for the periods set forth
below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months |
|
|
|
|
|
|
Ended September 30, |
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
Variance |
|
Net cash provided by (used in) operating activities |
|
$ |
253,107 |
|
|
$ |
(216,992 |
) |
|
$ |
470,099 |
|
Net cash (used in) provided by investing activities |
|
|
(217,335 |
) |
|
|
766,516 |
|
|
|
(983,851 |
) |
Net cash used in financing activities |
|
|
(35,846 |
) |
|
|
(628,687 |
) |
|
|
592,841 |
|
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
|
(74 |
) |
|
|
(79,163 |
) |
|
|
79,089 |
|
Cash and cash equivalents at beginning of period |
|
|
380,446 |
|
|
|
438,820 |
|
|
|
(58,374 |
) |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ |
380,372 |
|
|
$ |
359,657 |
|
|
$ |
20,715 |
|
|
|
|
|
|
|
|
|
|
|
Cash Flows Provided by (Used in) Operating Activities
Net cash provided by operating activities increased $470,099 to $253,107 for the nine months
ended September 30, 2009 from net cash used in operating activities of $216,992 for the nine months
ended September 30, 2008. The increase was primarily the result of a decreased net loss, net of
non-cash operating activities of $300,853, and a decrease in cash used in other operating assets
and liabilities of $169,246.
Cash Flows (Used in) Provided by Investing Activities
Net cash used in investing activities increased $983,851 to $217,335 for the nine months ended
September 30, 2009 from net cash provided by investing activities of $766,516 for the nine months
ended September 30, 2008. The increase was primarily the result of a decrease of $819,521 in net
cash acquired from XM in the Merger, a decrease of $65,642 from the sale of restricted and other
investments and an increase in capital expenditures of $114,630 associated with our satellite
construction and launch, partially offset by a decrease of $13,047 in Merger-related costs.
We will incur significant capital expenditures to construct and launch our new satellites 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.
50
Cash Flows Used in Financing Activities
Net cash used in financing activities decreased $592,841 to $35,846 for the nine months ended
September 30, 2009 from $628,687 for the nine months ended September 30, 2008. The decrease in cash
used in financing activities was primarily due to an increase of $410,959 in net proceeds from our
agreement with Liberty Media and issuance of 11.25% Notes and SIRIUS 9.75% Notes during the nine
months ended September 30, 2009 compared to proceeds from our Exchangeable Notes during the nine
months ended September 30, 2008; a decrease in debt payment of $120,249, principally to holders of
our 21/2% Convertible Notes due 2009, Amended and Restated Credit Agreement and our
agreement with Liberty Media during the nine months ended September 30, 2009 compared to debt
payment to holders of the XM 9.75% Notes, XM Floating Rate Notes and XMs Debt of Consolidated
Variable Interest Entity during the nine months ended September 30, 2008; and a decrease of $61,880
in payments to a minority interest holder.
Financings and Capital Requirements
We have historically financed our operations through the sale of debt and equity securities.
The Certificate of Designations for our Series B Preferred Stock provides that so long as Liberty
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 our equity securities and the incurrence of
debt in amounts greater than a stated threshold.
Future Liquidity and Capital Resource Requirements
Based upon our current plans, we believe that we have sufficient cash, cash equivalents and
marketable securities to cover the estimated funding needs through cash flow breakeven, the point
at which revenues are sufficient to fund expected operating expenses, capital expenditures, working
capital requirements, interest payments and taxes. 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. We have the ability and intend to
manage the timing and related expenditures of certain activities, including the launch of
satellites, the deferral of capital projects, as well as the deferral of other discretionary
expenses. Our financial projections are based on assumptions, which we believe are reasonable but
contain significant uncertainties. There can be no assurance that our plan will be successful.
We are the sole stockholder of XM Holdings and its business is operated as an unrestricted
subsidiary under the agreements governing our existing indebtedness. Under certain circumstances,
SIRIUS may be unwilling or unable to contribute or loan XM capital. Similarly, under certain
circumstances, XM may be unwilling or unable to contribute or loan SIRIUS capital. To the extent
XMs funds are insufficient to support its business, XM may be required to seek additional
financing, which may not be available on favorable terms, or at all. If XM is unable to secure
additional financing, its business and results of operations may be adversely affected.
We regularly evaluate our 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 of third parties that own
programming, distribution, infrastructure, assets, or any combination of the foregoing. In
addition, our operations will also be affected by the FCC order approving the Merger which imposed
certain conditions upon, among other things, our program offerings and our ability to increase
prices. Our future liquidity also may be adversely affected by, among other things, the nature and
extent of the benefits achieved by operating XM as a wholly owned unrestricted subsidiary under our
existing indebtedness.
Off-Balance Sheet Arrangements
We are required under the terms of certain agreements to provide letters of credit and deposit
monies in escrow, which place restrictions on our cash and cash equivalents. As of September 30, 2009
and December 31, 2008, $3,400 and $141,250, respectively, was classified as restricted investments
as a result of obligations under these letters of credit and escrow deposits. In February 2009, we
released to programming providers an aggregate of $138,000 held in escrow in satisfaction of future
obligations under our agreements with them.
We do not have any significant off-balance sheet arrangements other than those disclosed in
Note 15 to our unaudited consolidated financial statements in Item 1 of this Form 10-Q that are
reasonably likely to have a material effect on our financial condition, results of operations,
liquidity, capital expenditures or capital resources.
51
2009 Long-Term Stock Incentive Plan
In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive
Plan (the 2009 Plan). Employees, consultants and members of our board of directors are eligible
to receive awards under the 2009 Plan, which provides for the grant of stock options, restricted
stock, restricted stock units and other stock-based awards that the compensation committee of our
board of directors may deem appropriate. Vesting and other terms of stock-based awards are set
forth in the agreements with the individuals receiving the awards. Stock-based awards granted under
the 2009 Plan are generally subject to a vesting requirement. Stock-based awards generally expire
ten years from the date of grant. Each restricted stock unit entitles the holder to receive one
share of common stock upon vesting. As of September 30, 2009, approximately 359,762,000 shares of
common stock were available for future grant under the 2009 Plan.
Other Plans
SIRIUS and XM Holdings maintain three other share-based benefit plans the XM Holdings 2007
Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock
Incentive Plan and the XM Holdings Talent Option Plan. These plans generally
provide for the grant of stock options, restricted stock, restricted stock units and other
stock based awards. No further awards may be made under these plans. Outstanding awards under these
plans will be continued.
Contractual Cash Commitments
For a discussion of our Contractual Cash Commitments refer to Note 15 to our unaudited
consolidated financial statements in Item 1 of this Form 10-Q.
Related Party Transactions
For a discussion of Related Party Transactions refer to Note 9 to our unaudited consolidated
financial statements in Item 1 of this Form 10-Q.
52
Critical Accounting Policies and Estimates
For a discussion of our Critical Accounting Policies and Estimates refer to Managements
Discussion and Analysis of Financial Condition and Results of Operations within our Annual Report
on Form 10-K for the year ended December 31, 2008 and Note 3 to our unaudited consolidated
financial statements in Item 1 of this Form 10-Q.
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 subscribers 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
generally receive between three and twelve month prepaid trial
subscriptions 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 subscribers 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 per
subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue |
|
$ |
587,442 |
|
|
$ |
572,355 |
|
|
$ |
1,740,477 |
|
|
$ |
1,669,700 |
|
Net advertising revenue |
|
|
12,418 |
|
|
|
17,867 |
|
|
|
37,287 |
|
|
|
54,156 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber and net advertising revenue |
|
$ |
599,860 |
|
|
$ |
590,222 |
|
|
$ |
1,777,764 |
|
|
$ |
1,723,856 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
18,393,678 |
|
|
|
18,710,940 |
|
|
|
18,514,041 |
|
|
|
18,187,927 |
|
ARPU |
|
$ |
10.87 |
|
|
$ |
10.51 |
|
|
$ |
10.67 |
|
|
$ |
10.53 |
|
|
|
|
(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 |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
109,384 |
|
|
$ |
132,477 |
|
|
$ |
274,082 |
|
|
$ |
444,410 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
Less/Add: margin from direct sales of radios
and accessories |
|
|
1,438 |
|
|
|
3,323 |
|
|
|
(3,355 |
) |
|
|
9,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
110,822 |
|
|
$ |
135,800 |
|
|
$ |
270,727 |
|
|
$ |
453,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross subscriber additions |
|
|
1,606,446 |
|
|
|
1,843,785 |
|
|
|
4,325,532 |
|
|
|
5,997,096 |
|
SAC, as adjusted, per gross subscriber addition |
|
$ |
69 |
|
|
$ |
74 |
|
|
$ |
63 |
|
|
$ |
76 |
|
53
|
|
|
(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 |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service and billing expenses |
|
$ |
56,644 |
|
|
$ |
59,786 |
|
|
$ |
175,928 |
|
|
$ |
180,270 |
|
Less: share-based payment expense |
|
|
(849 |
) |
|
|
(929 |
) |
|
|
(2,411 |
) |
|
|
(3,111 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer service and billing expenses, as adjusted |
|
$ |
55,795 |
|
|
$ |
58,857 |
|
|
$ |
173,517 |
|
|
$ |
177,159 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
18,393,678 |
|
|
|
18,710,940 |
|
|
|
18,514,041 |
|
|
|
18,187,927 |
|
Customer service and billing expenses, as adjusted,
per average subscriber |
|
$ |
1.01 |
|
|
$ |
1.05 |
|
|
$ |
1.04 |
|
|
$ |
1.08 |
|
|
|
|
(6) |
|
Free cash flow is calculated as follows (in thousands): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
Net cash provided by (used in) operating
activities |
|
$ |
116,248 |
|
|
$ |
(101,983 |
) |
|
$ |
253,107 |
|
|
$ |
(468,078 |
) |
Additions to property and equipment |
|
|
(89,524 |
) |
|
|
(32,403 |
) |
|
|
(217,335 |
) |
|
|
(133,548 |
) |
Merger related costs |
|
|
|
|
|
|
1,796 |
|
|
|
|
|
|
|
(13,047 |
) |
Restricted and other investment activity |
|
|
|
|
|
|
34,996 |
|
|
|
|
|
|
|
37,025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow |
|
$ |
26,724 |
|
|
$ |
(97,594 |
) |
|
$ |
35,772 |
|
|
$ |
(577,648 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 U.S. generally accepted
accounting principles (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 our 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 loss before interest and investment income; interest
expense net of amounts capitalized, income tax expense; loss from
redemption of debt; gain (loss) on investments; other expense
(income); restructuring, impairments and related costs; depreciation
and amortization; and share related payment expense as adjusted income
(loss) from operations. Adjusted income (loss) from operations is not
a measure of financial performance under U.S. 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. |
54
|
|
|
|
|
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 our 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 unaudited 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): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Pro Forma |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
(in thousands) |
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net loss to Adjusted income (loss)
from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(181,935 |
) |
|
$ |
(217,010 |
) |
|
$ |
(416,090 |
) |
|
$ |
(653,867 |
) |
Add back Net loss items excluded from Adjusted
income (loss) from
operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
(962 |
) |
|
|
(5,534 |
) |
|
|
(2,602 |
) |
|
|
(12,180 |
) |
Interest expense, net of amounts capitalized |
|
|
81,707 |
|
|
|
70,153 |
|
|
|
254,677 |
|
|
|
164,380 |
|
Income tax expense |
|
|
1,115 |
|
|
|
1,723 |
|
|
|
3,344 |
|
|
|
3,813 |
|
Loss on extinguishment of debt and facilities, net |
|
|
138,053 |
|
|
|
|
|
|
|
263,767 |
|
|
|
|
|
Loss (gain) on investments |
|
|
58 |
|
|
|
7,549 |
|
|
|
(457 |
) |
|
|
16,099 |
|
Other (income) expense |
|
|
(1,246 |
) |
|
|
4,918 |
|
|
|
(2,505 |
) |
|
|
10,478 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
36,790 |
|
|
|
(138,201 |
) |
|
|
100,134 |
|
|
|
(471,277 |
) |
Restructuring, impairments and related costs |
|
|
2,554 |
|
|
|
7,430 |
|
|
|
30,167 |
|
|
|
7,457 |
|
Depreciation and amortization |
|
|
47,997 |
|
|
|
64,111 |
|
|
|
145,596 |
|
|
|
196,051 |
|
Share-based payment expense |
|
|
18,799 |
|
|
|
29,809 |
|
|
|
71,301 |
|
|
|
99,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted income (loss) from operations |
|
$ |
106,140 |
|
|
$ |
(36,851 |
) |
|
$ |
347,198 |
|
|
$ |
(168,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 unaudited 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. |
55
|
|
|
(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 September 30, 2009 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
based Payment |
|
|
|
|
|
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Pro Forma |
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
578,304 |
|
|
$ |
9,138 |
|
|
$ |
|
|
|
$ |
587,442 |
|
Advertising revenue, net of agency fees |
|
|
12,418 |
|
|
|
|
|
|
|
|
|
|
|
12,418 |
|
Equipment revenue |
|
|
10,506 |
|
|
|
|
|
|
|
|
|
|
|
10,506 |
|
Other revenue |
|
|
17,428 |
|
|
|
1,813 |
|
|
|
|
|
|
|
19,241 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
618,656 |
|
|
|
10,951 |
|
|
|
|
|
|
|
629,607 |
|
Operating expenses (excludes depreciation and amortization shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
19,542 |
|
|
|
331 |
|
|
|
(1,197 |
) |
|
|
18,676 |
|
Programming and content |
|
|
78,315 |
|
|
|
18,117 |
|
|
|
(3,202 |
) |
|
|
93,230 |
|
Revenue share and royalties |
|
|
100,558 |
|
|
|
22,973 |
|
|
|
|
|
|
|
123,531 |
|
Customer service and billing |
|
|
56,529 |
|
|
|
115 |
|
|
|
(849 |
) |
|
|
55,795 |
|
Cost of equipment |
|
|
11,944 |
|
|
|
|
|
|
|
|
|
|
|
11,944 |
|
Sales and marketing |
|
|
52,530 |
|
|
|
3,155 |
|
|
|
(2,858 |
) |
|
|
52,827 |
|
Subscriber acquisition costs |
|
|
90,054 |
|
|
|
19,330 |
|
|
|
|
|
|
|
109,384 |
|
General and administrative |
|
|
56,923 |
|
|
|
374 |
|
|
|
(8,816 |
) |
|
|
48,481 |
|
Engineering, design and development |
|
|
11,252 |
|
|
|
224 |
|
|
|
(1,877 |
) |
|
|
9,599 |
|
Depreciation and amortization |
|
|
72,100 |
|
|
|
(24,103 |
) |
|
|
|
|
|
|
47,997 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
18,799 |
|
|
|
18,799 |
|
Restructuring, impairments and related costs |
|
|
2,554 |
|
|
|
|
|
|
|
|
|
|
|
2,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
552,301 |
|
|
|
40,516 |
|
|
|
|
|
|
|
592,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
66,355 |
|
|
|
(29,565 |
) |
|
|
|
|
|
|
36,790 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
962 |
|
|
|
|
|
|
|
|
|
|
|
962 |
|
Interest expense, net of amounts capitalized |
|
|
(78,527 |
) |
|
|
(3,180 |
) |
|
|
|
|
|
|
(81,707 |
) |
Loss on extinguishment of debt and facilities, net |
|
|
(138,053 |
) |
|
|
|
|
|
|
|
|
|
|
(138,053 |
) |
Loss on investments |
|
|
(58 |
) |
|
|
|
|
|
|
|
|
|
|
(58 |
) |
Other income |
|
|
1,246 |
|
|
|
|
|
|
|
|
|
|
|
1,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(214,430 |
) |
|
|
(3,180 |
) |
|
|
|
|
|
|
(217,610 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(148,075 |
) |
|
|
(32,745 |
) |
|
|
|
|
|
|
(180,820 |
) |
Income tax expense |
|
|
(1,115 |
) |
|
|
|
|
|
|
|
|
|
|
(1,115 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(149,190 |
) |
|
$ |
(32,745 |
) |
|
$ |
|
|
|
$ |
(181,935 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
1,086 |
|
|
$ |
111 |
|
|
$ |
|
|
|
$ |
1,197 |
|
Programming and content |
|
|
3,037 |
|
|
|
165 |
|
|
|
|
|
|
|
3,202 |
|
Customer service and billing |
|
|
734 |
|
|
|
115 |
|
|
|
|
|
|
|
849 |
|
Sales and marketing |
|
|
2,722 |
|
|
|
136 |
|
|
|
|
|
|
|
2,858 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
8,442 |
|
|
|
374 |
|
|
|
|
|
|
|
8,816 |
|
Engineering, design and development |
|
|
1,653 |
|
|
|
224 |
|
|
|
|
|
|
|
1,877 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
17,674 |
|
|
$ |
1,125 |
|
|
$ |
|
|
|
$ |
18,799 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Three Months Ended September 30, 2008 |
|
|
|
|
|
|
|
Predecessor |
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Financial |
|
|
Accounting |
|
|
based Payment |
|
|
|
|
|
|
As Reported |
|
|
Information |
|
|
Adjustments (a) |
|
|
Expense |
|
|
Pro Forma |
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
458,237 |
|
|
$ |
95,684 |
|
|
$ |
18,434 |
|
|
$ |
|
|
|
$ |
572,355 |
|
Advertising revenue, net of agency fees |
|
|
14,674 |
|
|
|
3,193 |
|
|
|
|
|
|
|
|
|
|
|
17,867 |
|
Equipment revenue |
|
|
11,271 |
|
|
|
1,585 |
|
|
|
|
|
|
|
|
|
|
|
12,856 |
|
Other revenue |
|
|
4,261 |
|
|
|
4,242 |
|
|
|
1,195 |
|
|
|
|
|
|
|
9,698 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
488,443 |
|
|
|
104,704 |
|
|
|
19,629 |
|
|
|
|
|
|
|
612,776 |
|
Operating expenses (excludes depreciation and
amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
19,526 |
|
|
|
6,644 |
|
|
|
638 |
|
|
|
(1,672 |
) |
|
|
25,136 |
|
Programming and content |
|
|
106,037 |
|
|
|
15,991 |
|
|
|
13,912 |
|
|
|
(4,310 |
) |
|
|
131,630 |
|
Revenue share and royalties |
|
|
85,592 |
|
|
|
24,198 |
|
|
|
11,010 |
|
|
|
|
|
|
|
120,800 |
|
Customer service and billing |
|
|
47,432 |
|
|
|
12,249 |
|
|
|
105 |
|
|
|
(929 |
) |
|
|
58,857 |
|
Cost of equipment |
|
|
13,773 |
|
|
|
2,406 |
|
|
|
|
|
|
|
|
|
|
|
16,179 |
|
Sales and marketing |
|
|
63,637 |
|
|
|
17,268 |
|
|
|
2,081 |
|
|
|
(4,808 |
) |
|
|
78,178 |
|
Subscriber acquisition costs |
|
|
86,616 |
|
|
|
33,366 |
|
|
|
12,495 |
|
|
|
|
|
|
|
132,477 |
|
General and administrative |
|
|
57,310 |
|
|
|
33,209 |
|
|
|
777 |
|
|
|
(15,315 |
) |
|
|
75,981 |
|
Engineering, design and development |
|
|
10,434 |
|
|
|
2,611 |
|
|
|
119 |
|
|
|
(2,775 |
) |
|
|
10,389 |
|
Impairment of goodwill |
|
|
4,750,859 |
|
|
|
|
|
|
|
(4,750,859 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
66,774 |
|
|
|
10,828 |
|
|
|
(13,491 |
) |
|
|
|
|
|
|
64,111 |
|
Restructuring, impairments and related costs |
|
|
7,430 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,430 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
29,809 |
|
|
|
29,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
5,315,420 |
|
|
|
158,770 |
|
|
|
(4,723,213 |
) |
|
|
|
|
|
|
750,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(4,826,977 |
) |
|
|
(54,066 |
) |
|
|
4,742,842 |
|
|
|
|
|
|
|
(138,201 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
4,940 |
|
|
|
594 |
|
|
|
|
|
|
|
|
|
|
|
5,534 |
|
Interest expense, net of amounts capitalized |
|
|
(49,216 |
) |
|
|
(14,130 |
) |
|
|
(6,807 |
) |
|
|
|
|
|
|
(70,153 |
) |
Loss on extinguishment of debt and facilities, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investments |
|
|
(3,089 |
) |
|
|
(4,460 |
) |
|
|
|
|
|
|
|
|
|
|
(7,549 |
) |
Other expense |
|
|
(3,870 |
) |
|
|
(1,048 |
) |
|
|
|
|
|
|
|
|
|
|
(4,918 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(51,235 |
) |
|
|
(19,044 |
) |
|
|
(6,807 |
) |
|
|
|
|
|
|
(77,086 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(4,878,212 |
) |
|
|
(73,110 |
) |
|
|
4,736,035 |
|
|
|
|
|
|
|
(215,287 |
) |
Income tax expense |
|
|
(1,215 |
) |
|
|
(508 |
) |
|
|
|
|
|
|
|
|
|
|
(1,723 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(4,879,427 |
) |
|
$ |
(73,618 |
) |
|
$ |
4,736,035 |
|
|
$ |
|
|
|
$ |
(217,010 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
1,331 |
|
|
$ |
305 |
|
|
$ |
36 |
|
|
$ |
|
|
|
$ |
1,672 |
|
Programming and content |
|
|
3,529 |
|
|
|
586 |
|
|
|
195 |
|
|
|
|
|
|
|
4,310 |
|
Customer service and billing |
|
|
596 |
|
|
|
228 |
|
|
|
105 |
|
|
|
|
|
|
|
929 |
|
Sales and marketing |
|
|
3,672 |
|
|
|
770 |
|
|
|
366 |
|
|
|
|
|
|
|
4,808 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
12,904 |
|
|
|
1,634 |
|
|
|
777 |
|
|
|
|
|
|
|
15,315 |
|
Engineering, design and development |
|
|
1,973 |
|
|
|
510 |
|
|
|
292 |
|
|
|
|
|
|
|
2,775 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
24,005 |
|
|
$ |
4,033 |
|
|
$ |
1,771 |
|
|
$ |
|
|
|
$ |
29,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes impairment of goodwill. |
57
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Nine Months Ended September 30, 2009 |
|
|
|
|
|
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Accounting |
|
|
based Payment |
|
|
|
|
|
|
As Reported |
|
|
Adjustments |
|
|
Expense |
|
|
Pro Forma |
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
1,699,455 |
|
|
$ |
41,022 |
|
|
$ |
|
|
|
$ |
1,740,477 |
|
Advertising revenue, net of agency fees |
|
|
37,287 |
|
|
|
|
|
|
|
|
|
|
|
37,287 |
|
Equipment revenue |
|
|
31,343 |
|
|
|
|
|
|
|
|
|
|
|
31,343 |
|
Other revenue |
|
|
28,379 |
|
|
|
5,438 |
|
|
|
|
|
|
|
33,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,796,464 |
|
|
|
46,460 |
|
|
|
|
|
|
|
1,842,924 |
|
Operating expenses (excludes depreciation and
amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
59,435 |
|
|
|
1,013 |
|
|
|
(3,371 |
) |
|
|
57,077 |
|
Programming and content |
|
|
230,825 |
|
|
|
54,708 |
|
|
|
(7,919 |
) |
|
|
277,614 |
|
Revenue share and royalties |
|
|
296,855 |
|
|
|
65,608 |
|
|
|
|
|
|
|
362,463 |
|
Customer service and billing |
|
|
175,570 |
|
|
|
358 |
|
|
|
(2,411 |
) |
|
|
173,517 |
|
Cost of equipment |
|
|
27,988 |
|
|
|
|
|
|
|
|
|
|
|
27,988 |
|
Sales and marketing |
|
|
152,647 |
|
|
|
9,986 |
|
|
|
(10,594 |
) |
|
|
152,039 |
|
Subscriber acquisition costs |
|
|
230,773 |
|
|
|
43,309 |
|
|
|
|
|
|
|
274,082 |
|
General and administrative |
|
|
182,953 |
|
|
|
1,252 |
|
|
|
(41,393 |
) |
|
|
142,812 |
|
Engineering, design and development |
|
|
32,975 |
|
|
|
772 |
|
|
|
(5,613 |
) |
|
|
28,134 |
|
Depreciation and amortization |
|
|
231,624 |
|
|
|
(86,028 |
) |
|
|
|
|
|
|
145,596 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
71,301 |
|
|
|
71,301 |
|
Restructuring, impairments and related costs |
|
|
30,167 |
|
|
|
|
|
|
|
|
|
|
|
30,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
1,651,812 |
|
|
|
90,978 |
|
|
|
|
|
|
|
1,742,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations |
|
|
144,652 |
|
|
|
(44,518 |
) |
|
|
|
|
|
|
100,134 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
2,602 |
|
|
|
|
|
|
|
|
|
|
|
2,602 |
|
Interest expense, net of amounts capitalized |
|
|
(240,062 |
) |
|
|
(14,615 |
) |
|
|
|
|
|
|
(254,677 |
) |
Loss on extinguishment of debt and facilities, net |
|
|
(263,767 |
) |
|
|
|
|
|
|
|
|
|
|
(263,767 |
) |
Gain on investments |
|
|
457 |
|
|
|
|
|
|
|
|
|
|
|
457 |
|
Other income |
|
|
2,505 |
|
|
|
|
|
|
|
|
|
|
|
2,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(498,265 |
) |
|
|
(14,615 |
) |
|
|
|
|
|
|
(512,880 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(353,613 |
) |
|
|
(59,133 |
) |
|
|
|
|
|
|
(412,746 |
) |
Income tax expense |
|
|
(3,344 |
) |
|
|
|
|
|
|
|
|
|
|
(3,344 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(356,957 |
) |
|
$ |
(59,133 |
) |
|
$ |
|
|
|
$ |
(416,090 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
3,020 |
|
|
$ |
351 |
|
|
$ |
|
|
|
$ |
3,371 |
|
Programming and content |
|
|
7,418 |
|
|
|
501 |
|
|
|
|
|
|
|
7,919 |
|
Customer service and billing |
|
|
2,052 |
|
|
|
359 |
|
|
|
|
|
|
|
2,411 |
|
Sales and marketing |
|
|
10,081 |
|
|
|
513 |
|
|
|
|
|
|
|
10,594 |
|
Subscriber acquisition costs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative |
|
|
40,141 |
|
|
|
1,252 |
|
|
|
|
|
|
|
41,393 |
|
Engineering, design and development |
|
|
4,841 |
|
|
|
772 |
|
|
|
|
|
|
|
5,613 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
67,553 |
|
|
$ |
3,748 |
|
|
$ |
|
|
|
$ |
71,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited For the Nine Months Ended September 30, 2008 |
|
|
|
|
|
|
|
Predecessor |
|
|
Purchase Price |
|
|
Allocation of Share- |
|
|
|
|
|
|
|
|
|
|
Financial |
|
|
Accounting |
|
|
based Payment |
|
|
|
|
|
|
As Reported |
|
|
Information |
|
|
Adjustments (a) |
|
|
Expense |
|
|
Pro Forma |
|
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue, including effects of rebates |
|
$ |
980,396 |
|
|
$ |
670,870 |
|
|
$ |
18,434 |
|
|
$ |
|
|
|
$ |
1,669,700 |
|
Advertising revenue, net of agency fees |
|
|
31,413 |
|
|
|
22,743 |
|
|
|
|
|
|
|
|
|
|
|
54,156 |
|
Equipment revenue |
|
|
25,290 |
|
|
|
13,397 |
|
|
|
|
|
|
|
|
|
|
|
38,687 |
|
Other revenue |
|
|
4,710 |
|
|
|
24,184 |
|
|
|
1,195 |
|
|
|
|
|
|
|
30,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
|
1,041,809 |
|
|
|
731,194 |
|
|
|
19,629 |
|
|
|
|
|
|
|
1,792,632 |
|
Operating expenses (excludes depreciation and
amortization
shown separately below) (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
|
34,800 |
|
|
|
46,566 |
|
|
|
638 |
|
|
|
(5,668 |
) |
|
|
76,336 |
|
Programming and content |
|
|
222,975 |
|
|
|
117,156 |
|
|
|
13,912 |
|
|
|
(12,621 |
) |
|
|
341,422 |
|
Revenue share and royalties |
|
|
177,635 |
|
|
|
166,606 |
|
|
|
11,010 |
|
|
|
|
|
|
|
355,251 |
|
Customer service and billing |
|
|
97,218 |
|
|
|
82,947 |
|
|
|
105 |
|
|
|
(3,111 |
) |
|
|
177,159 |
|
Cost of equipment |
|
|
28,007 |
|
|
|
20,013 |
|
|
|
|
|
|
|
|
|
|
|
48,020 |
|
Sales and marketing |
|
|
151,237 |
|
|
|
126,054 |
|
|
|
2,081 |
|
|
|
(18,789 |
) |
|
|
260,583 |
|
Subscriber acquisition costs |
|
|
257,832 |
|
|
|
174,083 |
|
|
|
12,495 |
|
|
|
(14 |
) |
|
|
444,396 |
|
General and administrative |
|
|
148,555 |
|
|
|
116,444 |
|
|
|
777 |
|
|
|
(50,336 |
) |
|
|
215,440 |
|
Engineering, design and development |
|
|
28,091 |
|
|
|
23,045 |
|
|
|
119 |
|
|
|
(9,134 |
) |
|
|
42,121 |
|
Impairment of goodwill |
|
|
4,750,859 |
|
|
|
|
|
|
|
(4,750,859 |
) |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
120,793 |
|
|
|
88,749 |
|
|
|
(13,491 |
) |
|
|
|
|
|
|
196,051 |
|
Restructuring, impairments and related costs |
|
|
7,457 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,457 |
|
Share-based payment expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,673 |
|
|
|
99,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
6,025,459 |
|
|
|
961,663 |
|
|
|
(4,723,213 |
) |
|
|
|
|
|
|
2,263,909 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
|
(4,983,650 |
) |
|
|
(230,469 |
) |
|
|
4,742,842 |
|
|
|
|
|
|
|
(471,277 |
) |
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest and investment income |
|
|
9,167 |
|
|
|
3,013 |
|
|
|
|
|
|
|
|
|
|
|
12,180 |
|
Interest expense, net of amounts capitalized |
|
|
(83,636 |
) |
|
|
(73,937 |
) |
|
|
(6,807 |
) |
|
|
|
|
|
|
(164,380 |
) |
Loss on extinguishment of debt and facilities,
net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on investments |
|
|
(3,089 |
) |
|
|
(13,010 |
) |
|
|
|
|
|
|
|
|
|
|
(16,099 |
) |
Other expense |
|
|
(3,935 |
) |
|
|
(6,543 |
) |
|
|
|
|
|
|
|
|
|
|
(10,478 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense |
|
|
(81,493 |
) |
|
|
(90,477 |
) |
|
|
(6,807 |
) |
|
|
|
|
|
|
(178,777 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(5,065,143 |
) |
|
|
(320,946 |
) |
|
|
4,736,035 |
|
|
|
|
|
|
|
(650,054 |
) |
Income tax expense |
|
|
(2,301 |
) |
|
|
(1,512 |
) |
|
|
|
|
|
|
|
|
|
|
(3,813 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(5,067,444 |
) |
|
$ |
(322,458 |
) |
|
$ |
4,736,035 |
|
|
$ |
|
|
|
$ |
(653,867 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts related to share-based payment expense included in operating expenses were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Satellite and transmission |
|
$ |
2,887 |
|
|
$ |
2,745 |
|
|
$ |
36 |
|
|
$ |
|
|
|
$ |
5,668 |
|
Programming and content |
|
|
7,477 |
|
|
|
4,949 |
|
|
|
195 |
|
|
|
|
|
|
|
12,621 |
|
Customer service and billing |
|
|
1,137 |
|
|
|
1,869 |
|
|
|
105 |
|
|
|
|
|
|
|
3,111 |
|
Sales and marketing |
|
|
11,376 |
|
|
|
7,047 |
|
|
|
366 |
|
|
|
|
|
|
|
18,789 |
|
Subscriber acquisition costs |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14 |
|
General and administrative |
|
|
36,359 |
|
|
|
13,200 |
|
|
|
777 |
|
|
|
|
|
|
|
50,336 |
|
Engineering, design and development |
|
|
4,167 |
|
|
|
4,675 |
|
|
|
292 |
|
|
|
|
|
|
|
9,134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based payment expense |
|
$ |
63,417 |
|
|
$ |
34,485 |
|
|
$ |
1,771 |
|
|
$ |
|
|
|
$ |
99,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) |
|
Includes impairment of goodwill. |
59
|
|
|
(10) |
|
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 per
subscriber amounts): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Actual |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber revenue |
|
$ |
578,304 |
|
|
$ |
458,237 |
|
|
$ |
1,699,455 |
|
|
$ |
980,396 |
|
Net advertising revenue |
|
|
12,418 |
|
|
|
14,674 |
|
|
|
37,287 |
|
|
|
31,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total subscriber and net advertising revenue |
|
$ |
590,722 |
|
|
$ |
472,911 |
|
|
$ |
1,736,742 |
|
|
$ |
1,011,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daily weighted average number of subscribers |
|
|
18,393,678 |
|
|
|
15,472,506 |
|
|
|
18,514,041 |
|
|
|
10,887,028 |
|
ARPU |
|
$ |
10.71 |
|
|
$ |
10.19 |
|
|
$ |
10.42 |
|
|
$ |
10.33 |
|
|
|
|
(11) |
|
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 Actual |
|
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subscriber acquisition cost |
|
$ |
90,054 |
|
|
$ |
86,616 |
|
|
$ |
230,773 |
|
|
$ |
257,832 |
|
Less: share-based payment expense granted
to third parties and employees |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14 |
) |
Less/Add: margin from direct sales of radios
and accessories |
|
|
1,438 |
|
|
|
2,502 |
|
|
|
(3,355 |
) |
|
|
2,717 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SAC, as adjusted |
|
$ |
91,492 |
|
|
$ |
89,118 |
|
|
$ |
227,418 |
|
|
$ |
260,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|