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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED June 30, 2019
OR
 
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 HOLDINGS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
38-3916511
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
1290 Avenue of the Americas, 11th Floor, New York, NY
(Address of Principal Executive Offices)
10104
(Zip Code)
Registrant’s telephone number, including area code: (212584-5100
Former name, former address and former fiscal year, if changed since last report: Not Applicable
Title of each class
 
Trading Symbol(s)
 
Name of exchange on which registered
Common stock, $0.001 par value
 
SIRI
 
NASDAQ Global Select Market
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  ☑        No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑        No  ☐
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”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
 
Accelerated filer
 
Non-accelerated filer
 
 
 
 
 
 
 
Smaller reporting company
 
Emerging growth company
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No ☑
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
(Class)
 
(Outstanding as of July 26, 2019)
Common stock, $0.001 PAR VALUE
 
4,449,815,890
shares
 


Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

Item No.
 
Description
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



Table of Contents


SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
(in millions, except per share data)
2019
 
2018
 
2019
 
2018
Revenue:
 

 
 

 
 
 
 
Subscriber revenue
$
1,537

 
$
1,304

 
$
2,995

 
$
2,562

Advertising revenue
358

 
47

 
567

 
89

Equipment revenue
41

 
37

 
82

 
72

Other revenue
41

 
44

 
77

 
84

Total revenue
1,977

 
1,432

 
3,721

 
2,807

Operating expenses:
 

 
 

 
 
 
 
Cost of services:
 

 
 

 
 
 
 
Revenue share and royalties
600

 
404

 
1,092

 
714

Programming and content
116

 
106

 
222

 
207

Customer service and billing
120

 
95

 
233

 
189

Transmission
40

 
24

 
71

 
46

Cost of equipment
6

 
8

 
12

 
15

Subscriber acquisition costs
104

 
120

 
212

 
243

Sales and marketing
232

 
119

 
415

 
226

Engineering, design and development
74

 
27

 
128

 
58

General and administrative
120

 
92

 
255

 
177

Depreciation and amortization
119

 
75

 
226

 
147

Acquisition and other related costs
7

 

 
83

 

Total operating expenses
1,538

 
1,070

 
2,949

 
2,022

Income from operations
439

 
362

 
772

 
785

Other (expense) income:
 

 
 

 
 
 
 
Interest expense
(97
)
 
(86
)
 
(187
)
 
(176
)
Loss on extinguishment of debt

 

 
(1
)
 

Other (expense) income
(3
)
 
88

 
(2
)
 
124

Total other (expense) income
(100
)
 
2

 
(190
)
 
(52
)
Income before income taxes
339

 
364

 
582

 
733

Income tax expense
(76
)
 
(71
)
 
(157
)
 
(151
)
Net income
$
263

 
$
293

 
$
425

 
$
582

Foreign currency translation adjustment, net of tax
7

 
(9
)
 
14

 
(18
)
Total comprehensive income
$
270

 
$
284

 
$
439

 
$
564

Net income per common share:
 

 
 

 
 
 
 
Basic
$
0.06

 
$
0.07

 
$
0.09

 
$
0.13

Diluted
$
0.06

 
$
0.06

 
$
0.09

 
$
0.13

Weighted average common shares outstanding:
 

 
 

 
 
 
 
Basic
4,568

 
4,482

 
4,569

 
4,487

Diluted
4,675

 
4,589

 
4,677

 
4,589

Dividends declared per common share
$
0.0121

 
$
0.0110

 
$
0.0242

 
$
0.0220

 
See accompanying notes to the unaudited consolidated financial statements.


2

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions, except per share data)
June 30, 2019

December 31, 2018
ASSETS
(unaudited)



Current assets:
 

 
 

Cash and cash equivalents
$
215

 
$
54

Receivables, net
628

 
233

Inventory, net
17

 
22

Related party current assets
11

 
11

Prepaid expenses and other current assets
211

 
158

Total current assets
1,082

 
478

Property and equipment, net
1,583

 
1,513

Intangible assets, net
3,543

 
2,501

Goodwill
3,852

 
2,290

Related party long-term assets
456

 
960

Deferred tax assets
218

 
293

Operating lease right-of-use assets
442



Other long-term assets
140

 
138

Total assets
$
11,316

 
$
8,173

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
 

 
 

Current liabilities:
 

 
 

Accounts payable and accrued expenses
$
1,102

 
$
736

Accrued interest
134

 
128

Current portion of deferred revenue
1,974

 
1,932

Current maturities of debt
3

 
3

Operating lease current liabilities
47



Related party current liabilities
4

 
4

Total current liabilities
3,264

 
2,803

Long-term deferred revenue
140

 
149

Long-term debt
7,843

 
6,885

Related party long-term liabilities
2

 
4

Deferred tax liabilities
48

 
47

Operating lease liabilities
418



Other long-term liabilities
90

 
102

Total liabilities
11,805

 
9,990

Commitments and contingencies (Note 15)


 


Stockholders’ equity (deficit):
 

 
 

Common stock, par value $0.001 per share; 9,000 shares authorized; 4,497 and 4,346 shares issued; 4,492 and 4,346 outstanding at June 30, 2019 and December 31, 2018, respectively
4

 
4

Accumulated other comprehensive income (loss), net of tax
8

 
(6
)
Additional paid-in capital
1,159

 
242

Treasury stock, at cost; 5 and 0 shares of common stock at June 30, 2019 and December 31, 2018, respectively
(28
)
 

Accumulated deficit
(1,632
)
 
(2,057
)
Total stockholders’ equity (deficit)
(489
)
 
(1,817
)
Total liabilities and stockholders’ equity (deficit)
$
11,316

 
$
8,173


See accompanying notes to the unaudited consolidated financial statements.

3

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Six Months Ended June 30, 2019
 
 
Common Stock
 
Accumulated
Other
Comprehensive Income (Loss)
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Total
Stockholders’ Equity (Deficit)
(in millions)
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balance at December 31, 2018
 
4,346

 
$
4

 
$
(6
)
 
$
242

 

 
$

 
$
(2,057
)
 
$
(1,817
)
Comprehensive income, net of tax
 

 

 
14

 

 

 

 
425

 
439

Share-based payment expense
 

 

 

 
134

 

 

 

 
134

Exercise of options and vesting of restricted stock units
 
13

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(47
)
 

 

 

 
(47
)
Cash dividends paid on common stock, $0.0242 per share
 

 

 

 
(113
)
 

 

 

 
(113
)
Issuance of common stock as part of Pandora Acquisition
 
392

 
1

 

 
2,354

 

 

 

 
2,355

Equity component of convertible note
 

 

 

 
62

 

 

 

 
62

Common stock repurchased
 

 

 

 

 
259

 
(1,502
)
 

 
(1,502
)
Common stock retired
 
(254
)
 
(1
)
 

 
(1,473
)
 
(254
)
 
1,474

 

 

Balance at June 30, 2019
 
4,497

 
$
4

 
$
8

 
$
1,159

 
5

 
$
(28
)
 
$
(1,632
)
 
$
(489
)

See accompanying notes to the unaudited consolidated financial statements.

4

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Three Months Ended June 30, 2019
 
 
Common Stock
 
Accumulated
Other
Comprehensive Income (Loss)
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Total
Stockholders’ Equity (Deficit)
(in millions)
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balance at March 31, 2019
 
4,650

 
$
5

 
$
1

 
$
2,071

 
5

 
$
(28
)
 
$
(1,895
)
 
$
154

Comprehensive income, net of tax
 

 

 
7

 

 

 

 
263

 
270

Share-based payment expense
 

 

 

 
60

 

 

 

 
60

Exercise of options and vesting of restricted stock units
 
5

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(13
)
 

 

 

 
(13
)
Cash dividends paid on common stock, $0.0121 per share
 

 

 

 
(56
)
 

 

 

 
(56
)
Equity component of convertible note
 

 

 

 
(6
)
 

 

 

 
(6
)
Common stock repurchased
 

 

 

 

 
158

 
(898
)
 

 
(898
)
Common stock retired
 
(158
)
 
(1
)
 

 
(897
)
 
(158
)
 
898

 

 

Balance at June 30, 2019
 
4,497

 
$
4

 
$
8

 
$
1,159

 
5

 
$
(28
)
 
$
(1,632
)
 
$
(489
)

See accompanying notes to the unaudited consolidated financial statements.


5

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Six Months Ended June 30, 2018
 
 
Common Stock
 
Accumulated
Other
Comprehensive Income (Loss)
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Total Stockholders’ Equity (Deficit)
(in millions)
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balance at December 31, 2017
 
4,531

 
$
4

 
$
19

 
$
1,713

 
3

 
$
(17
)
 
$
(3,243
)
 
$
(1,524
)
Cumulative effect of change in accounting principles
 

 

 
4

 

 

 

 
14

 
18

Comprehensive income, net of tax
 

 

 
(18
)
 

 

 

 
582

 
564

Share-based payment expense
 

 

 

 
58

 

 

 

 
58

Exercise of options and vesting of restricted stock units
 
14

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(71
)
 

 

 

 
(71
)
Cash dividends paid on common stock, $0.0220 per share
 

 

 

 
(99
)
 

 

 

 
(99
)
Common stock repurchased
 

 

 

 

 
56

 
(317
)
 

 
(317
)
Common stock retired
 
(59
)
 

 

 
(334
)
 
(59
)
 
334

 

 

Balance at June 30, 2018
 
4,486

 
$
4

 
$
5

 
$
1,267

 

 
$

 
$
(2,647
)
 
$
(1,371
)

See accompanying notes to the unaudited consolidated financial statements.

6

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)
(UNAUDITED)
For the Three Months Ended June 30, 2018
 
 
Common Stock
 
Accumulated
Other
Comprehensive Income (Loss)
 
Additional
Paid-in
Capital
 
Treasury Stock
 
Accumulated
Deficit
 
Total Stockholders’ Equity (Deficit)
(in millions)
 
Shares
 
Amount
 
 
 
Shares
 
Amount
 
 
Balance at March 31, 2018
 
4,481

 
$
4

 
$
14

 
$
1,360

 

 
$
(3
)
 
$
(2,940
)
 
$
(1,565
)
Cumulative effect of change in accounting principles
 

 

 

 

 

 

 

 

Comprehensive income, net of tax
 

 

 
(9
)
 

 

 

 
293

 
284

Share-based payment expense
 

 

 

 
29

 

 

 

 
29

Exercise of options and vesting of restricted stock units
 
9

 

 

 

 

 

 

 

Withholding taxes on net share settlement of stock-based compensation
 

 

 

 
(47
)
 

 

 

 
(47
)
Cash dividends paid on common stock, $0.0110 per share
 

 

 

 
(50
)
 

 

 

 
(50
)
Common stock repurchased
 

 

 

 

 
4

 
(22
)
 

 
(22
)
Common stock retired
 
(4
)
 

 

 
(25
)
 
(4
)
 
25

 

 

Balance at June 30, 2018
 
4,486

 
$
4

 
$
5

 
$
1,267

 

 
$

 
$
(2,647
)
 
$
(1,371
)

See accompanying notes to the unaudited consolidated financial statements.


7

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
 
For the Six Months Ended June 30,
(in millions)
2019
 
2018
Cash flows from operating activities:
 
 
 
Net income
$
425

 
$
582

Adjustments to reconcile net income to net cash provided by operating activities:
 

 
 

Depreciation and amortization
226

 
147

Non-cash interest expense, net of amortization of premium
7

 
5

Provision for doubtful accounts
27

 
24

Amortization of deferred income related to equity method investment
(1
)
 
(1
)
Loss on extinguishment of debt
1

 

Loss on unconsolidated entity investments, net
10

 

Gain on fair value instrument

 
(118
)
Dividend received from unconsolidated entity investment
1

 
1

Share-based payment expense
127

 
70

Deferred income taxes
146

 
134

Changes in operating assets and liabilities:
 

 
 

Receivables
(69
)
 
(29
)
Inventory
6

 
1

Related party, net
(1
)
 
(2
)
Prepaid expenses and other current assets
(20
)
 

Other long-term assets
4

 
8

Operating lease right-of-use assets
2

 

Accounts payable and accrued expenses
36

 
88

Accrued interest
6

 
(9
)
Deferred revenue
(4
)
 
85

Operating lease liabilities
7

 

Other long-term liabilities
5

 
8

Net cash provided by operating activities
941

 
994

Cash flows from investing activities:
 

 
 

Additions to property and equipment
(160
)
 
(174
)
Purchases of other investments
(7
)
 
(7
)
Cash received from Pandora Acquisition
313

 

Sale of short-term investments
72

 

Investments in related parties and other equity investees
(9
)

(6
)
Repayment from related party

 
3

Net cash provided by (used in) investing activities
209

 
(184
)
Cash flows from financing activities:
 

 
 

Proceeds from exercise of stock options
1

 

Taxes paid from net share settlements for stock-based compensation
(47
)
 
(71
)
Revolving credit facility, net of deferred financing costs
(439
)
 
(303
)
Proceeds from long-term borrowings, net of costs
1,236

 

Proceeds from sale of capped call security
3

 

Principal payments of long-term borrowings
(156
)
 
(8
)
Common stock repurchased and retired
(1,474
)
 
(334
)
Dividends paid
(113
)

(99
)
Net cash used in financing activities
(989
)
 
(815
)
Net decrease in cash, cash equivalents and restricted cash
161

 
(5
)
Cash, cash equivalents and restricted cash at beginning of period
65

 
79

Cash, cash equivalents and restricted cash at end of period(1)
$
226

 
$
74


See accompanying notes to the unaudited consolidated financial statements.

8

Table of Contents

SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - Continued
(UNAUDITED)

 
For the Six Months Ended June 30,
(in millions)
2019
 
2018
Supplemental Disclosure of Cash and Non-Cash Flow Information
 
 
 
Cash paid during the period for:
 
 
 
Interest, net of amounts capitalized
$
171

 
$
179

Income taxes paid
$
5

 
$
6

Non-cash investing and financing activities:
 
 
 
Treasury stock not yet settled
$
(28
)
 
$
17

Fair value of shares issued related to acquisition of a business
$
2,355

 
$

Accumulated other comprehensive income (loss), net of tax
$
14

 
$
(18
)



(1)
The following table reconciles cash, cash equivalents and restricted cash per the statement of cash flows to the balance sheet. The restricted cash balances are primarily due to letters of credit which have been issued to the landlords of leased office space. The terms of the letters of credit primarily extend beyond one year.
(in millions)
June 30, 2019
 
December 31, 2018
 
June 30, 2018
 
December 31, 2017
Cash and cash equivalents
$
215

 
$
54

 
$
63

 
$
69

Restricted cash included in Other long-term assets
11

 
11

 
11

 
10

Total cash, cash equivalents and restricted cash at end of period
$
226

 
$
65

 
$
74

 
$
79



See accompanying notes to the unaudited consolidated financial statements.


9

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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)



(1)
Business & Basis of Presentation
This Quarterly Report on Form 10-Q presents information for Sirius XM Holdings Inc. (“Holdings”).  The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein, and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries. “Sirius XM” refers to our wholly owned subsidiary Sirius XM Radio Inc. and its subsidiaries. “Pandora” refers to Sirius XM's wholly owned subsidiary Pandora Media, LLC (the successor to Pandora Media, Inc.) and its subsidiaries. Holdings has no operations independent of Sirius XM and Pandora.
Business
We operate two complementary audio entertainment businesses - our Sirius XM business and our Pandora business. 

Sirius XM
Our Sirius XM business features music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis. The Sirius XM service is distributed through our two proprietary satellite radio systems and through the internet via applications for mobile devices, home devices and other consumer electronic equipment. Satellite radios are primarily distributed through automakers, retailers and our website. Our Sirius XM service is also available through our user interface, which we call “360L,” that combines our satellite and streaming services into a single, cohesive in-vehicle entertainment experience. The primary source of revenue from our Sirius XM business is generated from subscription fees, with most of our customers subscribing to monthly, quarterly, semi-annual or annual plans.  We also derive revenue from advertising on select non-music channels, direct sales of our satellite radios and accessories, and other ancillary services.  As of June 30, 2019, our Sirius XM business had approximately 34.3 million subscribers.
In addition to our audio entertainment businesses, we provide connected vehicle services to several automakers and directly to consumers through aftermarket devices. These services are designed to enhance the safety, security and driving experience of consumers. We also offer a suite of data services that includes graphical weather, fuel prices, sports schedules and scores and movie listings, a traffic information service that includes information as to road closings, traffic flow and incident data to consumers with compatible in-vehicle navigation systems, and real-time weather services designed for improving situational awareness in vehicles, boats and planes.
Sirius XM also holds a 70% equity interest and 33% voting interest in Sirius XM Canada Holdings Inc. ("Sirius XM Canada"). Sirius XM Canada's subscribers are not included in our subscriber count or subscriber-based operating metrics.

Pandora
Our Pandora business operates a music, comedy and podcast streaming discovery platform, offering a personalized experience for each listener wherever and whenever they want to listen, whether through mobile devices, car speakers or connected devices in the home.  Pandora enables listeners to create personalized stations and playlists, discover new content, hear artist- and expert-curated playlists, podcasts and select Sirius XM content as well as search and play songs and albums on-demand.  Pandora is available as an ad-supported radio service, a radio subscription service, called Pandora Plus, and an on-demand subscription service, called Pandora Premium.  As of June 30, 2019, Pandora had approximately 7.0 million subscribers. The majority of revenue from our Pandora business is generated from advertising on our Pandora ad-supported radio service. In addition, as a result of the May 2018 acquisition of AdsWizz Inc. by Pandora, we provide a comprehensive digital audio advertising technology platform, which connects audio publishers and advertisers. As of June 30, 2019, our Pandora business had approximately 64.9 million active users.
Liberty Media
As of June 30, 2019, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 70% of the outstanding shares of our common stock.  As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements.

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Table of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

Basis of Presentation
The accompanying unaudited consolidated financial statements of Holdings have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation. Music Royalty Fee revenue was reported as Other revenue in our June 30, 2018 Quarterly Report on Form 10-Q. This revenue was reclassified to Subscriber revenue to conform with the current period presentation.
 
For the Three Months Ended June 30, 2018
 
For the Six Months Ended June 30, 2018
 
As Reported
 
Reclassification
 
Current Report
 
As Reported
 
Reclassification
 
Current Report
Subscriber revenue
$
1,139

 
$
165

 
$
1,304

 
$
2,256

 
$
306

 
$
2,562

Advertising revenue
47

 

 
47

 
89

 

 
89

Equipment revenue
37

 

 
37

 
72

 

 
72

Other revenue
209

 
(165
)
 
44

 
390

 
(306
)
 
84

Total revenue
$
1,432

 
$

 
$
1,432

 
$
2,807

 
$

 
$
2,807


In the opinion of our management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of June 30, 2019 and for the three and six months ended June 30, 2019 and 2018 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, 2018, which was filed with the SEC on January 30, 2019.
Public companies are required to disclose certain information about their reportable operating segments.  Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision maker in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have two reportable segments as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the financial results of these segments. Refer to Note 16 for information related to our segments.
We have evaluated events subsequent to the balance sheet date and prior to the filing of this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2019 and have determined that no events have occurred that would require adjustment to our unaudited consolidated financial statements.  For a discussion of subsequent events that do not require adjustment to our unaudited consolidated financial statements refer to Note 18.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes.  Estimates, by their nature, are based on judgment and available information.  Actual results could differ materially from those estimates.  Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, income taxes, and the purchase accounting related to the Pandora Acquisition (defined below).

(2)
Acquisition
On February 1, 2019, through a series of transactions, Pandora Media, Inc., became an indirect wholly owned subsidiary of Sirius XM and continues to operate as Pandora Media, LLC (the “Pandora Acquisition”). In connection with the Pandora Acquisition, we purchased all of the outstanding shares of the capital stock of Pandora for $2,355 by converting each outstanding share of Pandora common stock into 1.44 shares of our common stock and we also canceled our preferred stock investment in Pandora for $524 for total consideration of $2,879. Net cash acquired was $313. As part of the Pandora

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Table of Contents
SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
(UNAUDITED)
(Dollars and shares in millions, except per share amounts)

Acquisition, Holdings unconditionally guaranteed all of the payment obligations of Pandora under its outstanding 1.75% convertible senior notes due 2020 and 1.75% convertible senior notes due 2023.
The table below shows the value of the consideration paid in connection with the Pandora Acquisition:
 
Total
Pandora common stock outstanding
272

Exchange ratio
1.44

Common stock issued
392

Price per share of Holdings common stock
$
5.83

Value of common stock issued to Pandora stockholders
$
2,285

Value of replacement equity awards attributable to pre-combination service
$
70

Consideration of common stock and replacement equity awards for pre-combination service
$
2,355

Sirius XM’s Pandora preferred stock investment (related party fair value instrument) canceled
$
524

Total consideration for transactions
$
2,879

Value attributed to par at $0.001 par value
$
1

Balance to capital in excess of par value
$
2,354


The table below summarizes the fair value of the assets acquired and liabilities assumed as of the acquisition date:
Acquired Assets:
 
Cash and cash equivalents
$
313

Receivables, net
353

Prepaid expenses and other current assets
109