Exhibit 99.1

(SIRIUS LOGO)

 

SIRIUS XM RADIO REPORTS SECOND QUARTER 2010 RESULTS

 

 

Strong Double-Digit Revenue Growth Year Over Year

Adjusted EBITDA of $154 million, Up 17% Year Over Year

Company Raises Financial Guidance

NEW YORK – August 4, 2010 – SIRIUS XM Radio (NASDAQ: SIRI) today announced second quarter 2010 financial and operating results, including:

 

 

 

 

$705.6 million of adjusted revenue, up 16% over second quarter 2009 adjusted revenue of $607.8 million; and

 

$154.3 million in second quarter 2010 adjusted EBITDA, an increase of 17% over second quarter 2009 adjusted EBITDA of $132.2 million.

The discussion of adjusted operating results excludes the effects of stock-based compensation and certain purchase price accounting adjustments. Financial measures and metrics previously reported as “pro forma” have been renamed “adjusted.”

“The sharp subscriber growth and double-digit increase in adjusted revenue and adjusted EBITDA show that we continued to execute on our business plan during the second quarter,” said Mel Karmazin, Chief Executive Officer, SIRIUS XM. “Compared to the year ago quarter, gross additions increased by 46%, deactivations declined by 8%, and customers paid us on average 11% more each month – clearly showing just how much subscribers love our service. Free cash flow in the second quarter 2010 was $108.3 million compared to $12.7 million in the second quarter of 2009. Our business has improved substantially in the past year, and we look forward to a strong second half and 2011.”

SIRIUS XM ended second quarter 2010 with a record-high 19,527,448 subscribers, an increase of more than 1.1 million subscribers compared to the end of second quarter 2009. Net subscriber additions of 583,249 in the second quarter of 2010 improved significantly from a net loss of 185,999 subscribers in the second quarter of 2009. In the second quarter 2010, average revenue per subscriber (ARPU) was $11.81, an increase of 11% from ARPU of $10.66 in the second quarter 2009. The company’s self-pay monthly customer churn rate was 1.8% in the second quarter 2010, as compared with self-pay monthly customer churn of 2.0% in the second quarter 2009.


In June, the company completed the redemption of all of the $114 million of XM’s outstanding 10% Senior PIK Secured Notes due 2011. “We will continue to examine deleveraging opportunities as they arise with the objective of decreasing interest expense and improving free cash flow.” said David Frear, SIRIUS XM’s Chief Financial Officer. “The combination of increased adjusted EBITDA and lower debt has improved our leverage ratio to approximately 4.6x, a historic low for our company.”

On a GAAP basis, net income (loss) attributable to common stockholders for the second quarter of 2010 and 2009 was $15.3 million and ($159.6) million, respectively, or $0.00 and ($0.04) per diluted share, on revenue of $699.8 million and $590.8 million, respectively. The company’s reported net income (loss) attributable to common stockholders included losses on extinguishment of debt in the second quarter of 2010 and 2009 of $31.9 million and $107.8 million, respectively. For the six months ended June 30, 2010 and 2009, net income (loss) attributable to common stockholders was $56.9 million and ($398.5) million, respectively, or $0.01 and ($0.11) per diluted share, on revenue of $1.36 billion and $1.18 billion, respectively.

INCREASED 2010 OUTLOOK

The company is increasing guidance for the full year 2010, projecting adjusted revenue will approach $2.8 billion and free cash flow will approach $150 million. SIRIUS XM continues to target approximately $575 million of adjusted EBITDA in 2010.

As previously announced, SIRIUS XM increased its guidance for net subscriber additions to approximately 1.1 million for the full year.


ADJUSTED RESULTS OF OPERATIONS

          Subscriber Data.

          The following table contains actual subscriber data for the three and six months ended June 30, 2010 and 2009, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 




 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Beginning subscribers

 

 

18,944,199

 

 

18,599,434

 

 

18,772,758

 

 

19,003,856

 

Gross subscriber additions

 

 

2,020,507

 

 

1,380,125

 

 

3,741,355

 

 

2,719,086

 

Deactivated subscribers

 

 

(1,437,258

)

 

(1,566,124

)

 

(2,986,665

)

 

(3,309,507

)

 

 



 



 



 



 

Net additions

 

 

583,249

 

 

(185,999

)

 

754,690

 

 

(590,421

)

 

 



 



 



 



 

Ending subscribers

 

 

19,527,448

 

 

18,413,435

 

 

19,527,448

 

 

18,413,435

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

7,277,446

 

 

8,235,761

 

 

7,277,446

 

 

8,235,761

 

OEM

 

 

12,100,665

 

 

10,081,514

 

 

12,100,665

 

 

10,081,514

 

Rental

 

 

149,337

 

 

96,160

 

 

149,337

 

 

96,160

 

 

 



 



 



 



 

Ending subscribers

 

 

19,527,448

 

 

18,413,435

 

 

19,527,448

 

 

18,413,435

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

16,077,714

 

 

15,421,414

 

 

16,077,714

 

 

15,421,414

 

Paid promotional

 

 

3,449,734

 

 

2,992,021

 

 

3,449,734

 

 

2,992,021

 

 

 



 



 



 



 

Ending subscribers

 

 

19,527,448

 

 

18,413,435

 

 

19,527,448

 

 

18,413,435

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retail

 

 

(142,757

)

 

(301,295

)

 

(448,304

)

 

(669,326

)

OEM

 

 

709,226

 

 

123,165

 

 

1,169,713

 

 

85,561

 

Rental

 

 

16,780

 

 

(7,869

)

 

33,281

 

 

(6,656

)

 

 



 



 



 



 

Net additions

 

 

583,249

 

 

(185,999

)

 

754,690

 

 

(590,421

)

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

304,043

 

 

(14,996

)

 

373,782

 

 

(128,243

)

Paid promotional

 

 

279,206

 

 

(171,003

)

 

380,908

 

 

(462,178

)

 

 



 



 



 



 

Net additions

 

 

583,249

 

 

(185,999

)

 

754,690

 

 

(590,421

)

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,139,926

 

 

18,438,473

 

 

18,962,580

 

 

18,575,219

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average self-pay monthly churn (1)

 

 

1.8

%

 

2.0

%

 

1.9

%

 

2.1

%

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion rate (2)

 

 

46.7

%

 

44.3

%

 

45.9

%

 

44.5

%

 

 



 



 



 



 


 

 


 

See accompanying footnotes.

          Subscribers. The improvement in net additions for the three months ended June 30, 2010 was due to the 46% increase in gross subscriber additions, primarily resulting from an improvement in U.S. auto sales, and the 8% decline in deactivations resulting from improvements in the conversion rate in paid promotional trials and the average self-pay monthly churn.


          Average Self-pay Monthly Churn decreased in the three months ended June 30, 2010 due to an improving economy, the success of retention and win-back programs and reductions in non-pay cancellations.

          Conversion Rate increased in the three months ended June 30, 2010 primarily due to marketing to promotional period subscribers and an improving economy.

          Metrics.

          The following table contains our key operating metrics based on our adjusted results of operations for the three and six months ended June 30, 2010 and 2009, respectively (in thousands, except for per subscriber amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 




 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU(3)

 

$

11.81

 

$

10.66

 

$

11.65

 

$

10.57

 

SAC, per gross subscriber addition (4)

 

$

59

 

$

57

 

$

59

 

$

59

 

Customer service and billing expenses, per average subscriber (5)

 

$

1.01

 

$

1.05

 

$

1.00

 

$

1.06

 

Free cash flow (6)

 

$

108,331

 

$

12,694

 

$

(18,872

)

$

9,048

 

Adjusted total revenue (8)

 

$

705,560

 

$

607,836

 

$

1,376,122

 

$

1,213,317

 

Adjusted EBITDA (7)

 

$

154,313

 

$

132,219

 

$

312,070

 

$

241,055

 


 

 


 

See accompanying footnotes.

          ARPU increased in the three months ended June 30, 2010 primarily due to the inclusion of the U.S. Music Royalty Fee, increased revenues from the sale of “Best of” programming, rate increases on multi-subscription and internet packages, and increased net advertising revenue.

          SAC Per Gross Subscriber Addition increased in the three months ended June 30, 2010 due to the 103% increase in OEM production with factory-installed satellite radios compared to the 46% increase in gross additions, partially offset by lower per radio subsidy rates for certain OEMs and growth in subscriber reactivations and royalties from satellite radio manufacturers.

          Customer Service and Billing Expenses Per Average Subscriber decreased in the three months ended June 30, 2010 primarily due to a lower call center expense as a result of moving calls to lower cost locations.

          Free Cash Flow increased in the three months ended June 30, 2010 principally as a result of improvements in our adjusted EBITDA as well as increases in trade payables related to subsidies and commissions associated with the increase in our subscriber base and growth in deferred revenue; partially offset by growth in receivables from subscribers, radio manufacturers and distributors and the payment of related party obligations and accrued interest. In addition, capital expenditures in the three months ended June 30, 2010 increased by $13.7 million compared to the three months ended June 30, 2009, primarily due to increased satellite and related launch vehicle spending.


          Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and six months ended June 30, 2010 compared with the three and six months ended June 30, 2009. Our adjusted total revenue includes the recognition of deferred subscriber revenues acquired in the merger of SIRIUS and XM that are not recognized in our post-merger results under purchase price accounting and the elimination of the benefit in earnings from deferred revenue associated with our investment in Canadian Satellite Radio acquired in the merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 




 

(in thousands)

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

605,616

 

$

576,958

 

$

1,190,091

 

$

1,153,034

 

Advertising revenue, net of agency fees

 

 

15,797

 

 

12,564

 

 

30,323

 

 

24,869

 

Equipment revenue

 

 

18,520

 

 

10,928

 

 

32,802

 

 

20,837

 

Other revenue

 

 

65,627

 

 

7,386

 

 

122,906

 

 

14,577

 

 

 



 



 



 



 

Adjusted total revenue

 

$

705,560

 

$

607,836

 

$

1,376,122

 

$

1,213,317

 

 

 



 



 



 



 

For the three months ended June 30, 2010, the increase in subscriber revenue was driven by the increase in subscribers as well as an increase in the sale of “Best of” programming and the rate increases on multi-subscription and internet packages. The increase in advertising revenue was driven by improvements in the national market for advertising and increases in our share of the market. The increase in equipment revenue was driven by royalties from increased OEM installations. The increase in other revenue was driven by the introduction of the U.S. Music Royalty Fee in the third quarter of 2009.

          Adjusted EBITDA. Set forth below are our adjusted EBITDA for the three and six months ended June 30, 2010 compared with the three and six months ended June 30, 2009. Adjusted EBITDA is income (loss) from operations, excluding, if applicable: goodwill impairment; restructuring, impairments and related costs; depreciation and amortization; purchase price accounting adjustments and share-based payment expense.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Adjusted

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 




 

(in thousands)

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Total revenue

 

$

705,560

 

$

607,836

 

$

1,376,122

 

$

1,213,317

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

134,318

 

 

117,671

 

 

257,857

 

 

238,932

 

Programming and content

 

 

83,931

 

 

87,707

 

 

174,402

 

 

184,386

 

Customer service and billing

 

 

57,763

 

 

58,054

 

 

113,340

 

 

117,723

 

Satellite and transmission

 

 

19,235

 

 

18,659

 

 

38,622

 

 

38,401

 

Cost of equipment

 

 

7,805

 

 

8,051

 

 

15,724

 

 

16,044

 

Subscriber acquisition costs

 

 

130,683

 

 

80,988

 

 

237,728

 

 

164,698

 

Sales and marketing

 

 

57,076

 

 

48,610

 

 

107,018

 

 

99,212

 

Engineering, design and development

 

 

9,635

 

 

10,123

 

 

19,462

 

 

18,535

 

General and administrative

 

 

50,801

 

 

45,754

 

 

99,899

 

 

94,331

 

 

 



 



 



 



 

Total operating expenses

 

 

551,247

 

 

475,617

 

 

1,064,052

 

 

972,262

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

154,313

 

$

132,219

 

$

312,070

 

$

241,055

 

 

 



 



 



 



 

          For the three months ended June 30, 2010, the increase in adjusted EBITDA was primarily due to an increase in revenues, the increase in our subscriber base and the inclusion of the U.S. Music Royalty Fee, as well as increased advertising and equipment revenue, rate increases on multi-subscription and internet packages, and an increase in the sale of “Best of” programming, partially offset by an increase in expenses, which was primarily driven by higher subscriber acquisition costs related to the 46% increase in gross additions, higher revenue share and royalties expenses associated with growth in revenues subject to revenue sharing and royalty arrangements and additional sales and marketing costs, primarily related to co-operative marketing.


SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months
Ended June 30,

 

For the Six Months
Ended June 30,

 

 

 


 


 

(in thousands, except per share data)

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

601,630

 

$

561,763

 

$

1,181,139

 

$

1,121,151

 

Advertising revenue, net of agency fees

 

 

15,797

 

 

12,564

 

 

30,323

 

 

24,869

 

Equipment revenue

 

 

18,520

 

 

10,928

 

 

32,802

 

 

20,837

 

Other revenue

 

 

63,814

 

 

5,574

 

 

119,280

 

 

10,951

 

 

 



 



 



 



 

Total revenue

 

 

699,761

 

 

590,829

 

 

1,363,544

 

 

1,177,808

 

Operating expenses (depreciation and amortization shown separately below):

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

107,901

 

 

95,831

 

 

206,085

 

 

196,297

 

Programming and content

 

 

72,019

 

 

72,102

 

 

150,452

 

 

152,511

 

Customer service and billing

 

 

58,414

 

 

58,833

 

 

114,625

 

 

119,041

 

Satellite and transmission

 

 

19,982

 

 

19,615

 

 

40,100

 

 

39,894

 

Cost of equipment

 

 

7,805

 

 

8,051

 

 

15,724

 

 

16,044

 

Subscriber acquisition costs

 

 

110,383

 

 

67,651

 

 

199,762

 

 

140,719

 

Sales and marketing

 

 

56,177

 

 

48,693

 

 

105,294

 

 

100,116

 

Engineering, design and development

 

 

11,247

 

 

11,944

 

 

22,684

 

 

21,723

 

General and administrative

 

 

59,166

 

 

66,716

 

 

116,746

 

 

126,031

 

Depreciation and amortization

 

 

69,230

 

 

77,158

 

 

139,495

 

 

159,524

 

Restructuring, impairments and related costs

 

 

1,803

 

 

27,000

 

 

1,803

 

 

27,614

 

 

 



 



 



 



 

Total operating expenses

 

 

574,127

 

 

553,594

 

 

1,112,770

 

 

1,099,514

 

 

 



 



 



 



 

Income from operations

 

 

125,634

 

 

37,235

 

 

250,774

 

 

78,294

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(76,802

)

 

(98,080

)

 

(154,670

)

 

(166,058

)

Loss on extinguishment of debt and credit facilities, net

 

 

(31,871

)

 

(107,756

)

 

(34,437

)

 

(125,713

)

Interest and investment income (loss)

 

 

378

 

 

9,323

 

 

(2,892

)

 

2,157

 

Other (loss) income

 

 

(601

)

 

749

 

 

728

 

 

1,259

 

 

 



 



 



 



 

Total other expense

 

 

(108,896

)

 

(195,764

)

 

(191,271

)

 

(288,355

)

 

 



 



 



 



 

Income (loss) before income taxes

 

 

16,738

 

 

(158,529

)

 

59,503

 

 

(210,061

)

Income tax expense

 

 

(1,466

)

 

(1,115

)

 

(2,633

)

 

(2,229

)

 

 



 



 



 



 

Net income (loss)

 

 

15,272

 

 

(159,644

)

 

56,870

 

 

(212,290

)

Preferred stock beneficial conversion feature

 

 

 

 

 

 

 

 

(186,188

)

 

 



 



 



 



 

Net income (loss) attributable to common stockholders

 

$

15,272

 

$

(159,644

)

$

56,870

 

$

(398,478

)

 

 



 



 



 



 

Net income (loss) per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.00

 

$

(0.04

)

$

0.02

 

$

(0.11

)

 

 



 



 



 



 

Diluted

 

$

0.00

 

$

(0.04

)

$

0.01

 

$

(0.11

)

 

 



 



 



 



 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,683,595

 

 

3,586,742

 

 

3,682,750

 

 

3,555,489

 

 

 



 



 



 



 

Diluted

 

 

6,363,955

 

 

3,586,742

 

 

6,357,507

 

 

3,555,489

 

 

 



 



 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS

 

 

 

 

 

 

 

 

 

 

June 30, 2010

 

December 31, 2009

 

 

 


 


 

(in thousands, except share and per share data)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

258,854

 

$

383,489

 

Accounts receivable, net

 

 

113,341

 

 

113,580

 

Receivables from distributors

 

 

83,208

 

 

48,738

 

Inventory, net

 

 

13,726

 

 

16,193

 

Prepaid expenses

 

 

193,440

 

 

100,273

 

Related party current assets

 

 

5,442

 

 

106,247

 

Deferred tax asset

 

 

77,570

 

 

72,640

 

Other current assets

 

 

14,591

 

 

18,620

 

 

 



 



 

Total current assets

 

 

760,172

 

 

859,780

 

Property and equipment, net

 

 

1,765,347

 

 

1,711,003

 

Long-term restricted investments

 

 

3,396

 

 

3,400

 

Deferred financing fees, net

 

 

59,224

 

 

66,407

 

Intangible assets, net

 

 

2,661,001

 

 

2,695,115

 

Goodwill

 

 

1,834,856

 

 

1,834,856

 

Related party long-term assets

 

 

28,416

 

 

111,767

 

Other long-term assets

 

 

88,520

 

 

39,878

 

 

 



 



 

Total assets

 

$

7,200,932

 

$

7,322,206

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

519,181

 

$

543,686

 

Accrued interest

 

 

68,541

 

 

74,566

 

Current portion of deferred revenue

 

 

1,169,090

 

 

1,083,430

 

Current portion of deferred credit on executory contracts

 

 

263,998

 

 

252,831

 

Current maturities of long-term debt

 

 

8,280

 

 

13,882

 

Related party current liabilities

 

 

12,781

 

 

108,246

 

 

 



 



 

Total current liabilities

 

 

2,041,871

 

 

2,076,641

 

Deferred revenue

 

 

275,212

 

 

255,149

 

Deferred credit on executory contracts

 

 

647,691

 

 

784,078

 

Long-term debt

 

 

2,662,144

 

 

2,799,702

 

Long-term related party debt

 

 

357,806

 

 

263,579

 

Deferred tax liability

 

 

947,468

 

 

940,182

 

Related party long-term liabilities

 

 

26,655

 

 

46,301

 

Other long-term liabilities

 

 

61,657

 

 

61,052

 

 

 



 



 

Total liabilities

 

 

7,020,504

 

 

7,226,684

 

 

 



 



 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2010 and December 31, 2009:

 

 

 

 

 

 

 

Series A convertible preferred stock (liquidation preference of $51,370 at June 30, 2010 and December 31, 2009); 24,808,959 shares issued and outstanding at June 30, 2010 and December 31, 2009

 

 

25

 

 

25

 

Convertible perpetual preferred stock, series B (liquidation preference of $13 at June 30, 2010 and December 31, 2009); 12,500,000 shares issued and outstanding at June 30, 2010 and December 31, 2009

 

 

13

 

 

13

 

Convertible preferred stock, series C junior; no shares issued and outstanding at June 30, 2010 and December 31, 2009

 

 

 

 

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at June 30, 2010 and December 31, 2009; 3,885,905,912 and 3,882,659,087 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively

 

 

3,885

 

 

3,882

 

Accumulated other comprehensive loss, net of tax

 

 

(5,987

)

 

(6,581

)

Additional paid-in capital

 

 

10,379,730

 

 

10,352,291

 

Accumulated deficit

 

 

(10,197,238

)

 

(10,254,108

)

 

 



 



 

Total stockholders’ equity

 

 

180,428

 

 

95,522

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

7,200,932

 

$

7,322,206

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH
FLOWS

 

 

 

 

 

 

 

 

 

 

For the Six Months
Ended June 30,

 

 

 


 

(in thousands)

 

2010

 

2009

 

 

 


 


 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

56,870

 

$

(212,290

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

139,495

 

 

159,524

 

Non-cash interest expense, net of amortization of premium

 

 

22,294

 

 

31,322

 

Provision for doubtful accounts

 

 

15,756

 

 

16,278

 

Restructuring, impairments and related costs

 

 

1,803

 

 

27,614

 

Amortization of deferred income related to equity method investment

 

 

(2,137

)

 

(1,388

)

Loss on extinguishment of debt and credit facilities, net

 

 

34,437

 

 

125,713

 

Loss on investments

 

 

6,065

 

 

6,353

 

Loss on disposal of assets

 

 

(18

)

 

 

Share-based payment expense

 

 

33,083

 

 

49,878

 

Deferred income taxes

 

 

2,633

 

 

2,229

 

Other non-cash purchase price adjustments

 

 

(120,706

)

 

(85,223

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(14,296

)

 

8,483

 

Receivables from distributors

 

 

(26,655

)

 

12,277

 

Inventory

 

 

2,467

 

 

(3,424

)

Related party assets

 

 

(701

)

 

11,629

 

Prepaid expenses and other current assets

 

 

10,245

 

 

24,052

 

Other long-term assets

 

 

10,947

 

 

34,476

 

Accounts payable and accrued expenses

 

 

(76,144

)

 

(106,041

)

Accrued interest

 

 

(4,796

)

 

997

 

Deferred revenue

 

 

105,004

 

 

22,504

 

Related party liabilities

 

 

(54,978

)

 

14,060

 

Other long-term liabilities

 

 

319

 

 

(2,164

)

 

 



 



 

Net cash provided by operating activities

 

 

140,987

 

 

136,859

 

 

 



 



 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(169,313

)

 

(127,811

)

Sale of restricted and other investments

 

 

9,454

 

 

 

 

 



 



 

Net cash used in investing activities

 

 

(159,859

)

 

(127,811

)

 

 



 



 

Cash flows from financing activities:

 

 

 

 

 

 

 

Preferred stock issuance, net of costs

 

 

 

 

(3,712

)

Long-term borrowings, net of costs

 

 

637,406

 

 

384,876

 

Related party long-term borrowings, net of costs

 

 

147,094

 

 

316,340

 

Payment of premiums on redemption of debt

 

 

(24,065

)

 

(16,572

)

Repayment of long-term borrowings

 

 

(810,977

)

 

(427,871

)

Repayment of related party long-term borrowings

 

 

(55,221

)

 

(100,867

)

 

 



 



 

Net cash (used in) provided by financing activities

 

 

(105,763

)

 

152,194

 

 

 



 



 

Net (decrease) increase in cash and cash equivalents

 

 

(124,635

)

 

161,242

 

Cash and cash equivalents at beginning of period

 

 

383,489

 

 

380,446

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

258,854

 

$

541,688

 

 

 



 



 



Footnotes to Adjusted Results of Operations

          Average self-pay monthly churn; conversion rate; ARPU; SAC per gross subscriber addition; customer service and billing expenses, per average subscriber; and free cash flow are not measures of financial performance under GAAP. We believe these operational and Non-GAAP financial performance 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.

          These operational and Non-GAAP financial performance measures are used in addition to and in conjunction with results presented in accordance with GAAP. These Non-GAAP financial performance 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.

 

 

(1)

Average self-pay monthly churn represents the monthly average of self-pay deactivations for the quarter divided by the average self-pay subscriber balance for the quarter.

 

 

(2)

We measure the percentage of vehicle owners and lessees that receive our service and convert to self-paying after the initial promotion period. We refer to this as the “conversion rate.” At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive between three and twelve month trial subscriptions. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. We measure conversion rate three months after the period in which the trial service ends. Based on our experience it may take up to 90 days after the trial service ends for vehicle owners and lessees to respond to our marketing communications and become self-paying subscribers.

 

 

(3)

ARPU is derived from total earned subscriber revenue, net advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes amounts recognized on account of the U.S. Music Royalty Fee since the third quarter of 2009. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Subscriber revenue (GAAP)

 

$

601,630

 

$

561,763

 

$

1,181,139

 

$

1,121,151

 

Net advertising revenue (GAAP)

 

 

15,797

 

 

12,564

 

 

30,323

 

 

24,869

 

Other subscription-related revenue (GAAP)

 

 

56,694

 

 

 

 

104,641

 

 

 

Purchase price accounting adjustments

 

 

3,986

 

 

15,195

 

 

8,952

 

 

31,883

 

 

 



 



 



 



 

 

 

$

678,107

 

$

589,522

 

$

1,325,055

 

$

1,177,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

19,139,926

 

 

18,438,473

 

 

18,962,580

 

 

18,575,219

 

 

 



 



 



 



 

ARPU

 

$

11.81

 

$

10.66

 

$

11.65

 

$

10.57

 

 

 



 



 



 



 


 

 

(4)

SAC, per gross subscriber addition is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding share-based payment expense and purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the merger date attributable to third party arrangements with an OEM. SAC, per gross subscriber addition is calculated as follows (in thousands, except for subscriber and per subscriber amounts):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Subscriber acquisition costs (GAAP)

 

$

110,383

 

$

67,651

 

$

199,762

 

$

140,719

 

Less: margin from direct sales of radios and accessories (GAAP)

 

 

(10,715

)

 

(2,877

)

 

(17,078

)

 

(4,793

)

Add: purchase price accounting adjustments

 

 

20,300

 

 

13,337

 

 

37,966

 

 

23,979

 

 

 



 



 



 



 

 

 

$

119,968

 

$

78,111

 

$

220,650

 

$

159,905

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,020,507

 

 

1,380,125

 

 

3,741,355

 

 

2,719,086

 

 

 



 



 



 



 

SAC, per gross subscriber addition

 

$

59

 

$

57

 

$

59

 

$

59

 

 

 



 



 



 



 


 

 

(5)

Customer service and billing expenses, per average subscriber is derived from total customer service and billing expenses, excluding share-based payment expense and purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber is useful given the significant variation in expense that can result from changes in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Purchase price accounting adjustments include the elimination of the benefit associated with share-based payment arrangements recognized at the merger date. Customer service and billing expenses, per average subscriber is calculated as follows (in thousands, except for subscriber and per subscriber amounts):




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Customer service and billing expenses (GAAP)

 

$

58,414

 

$

58,833

 

$

114,625

 

$

119,041

 

Less: share-based payment expense, net of purchase price accounting adjustments

 

 

(729

)

 

(905

)

 

(1,457

)

 

(1,561

)

Add: purchase price accounting adjustment

 

 

78

 

 

126

 

 

172

 

 

243

 

 

 



 



 



 



 

 

 

$

57,763

 

$

58,054

 

$

113,340

 

$

117,723

 

 

Daily weighted average number of subscribers

 

 

19,139,926

 

 

18,438,473

 

 

18,962,580

 

 

18,575,219

 

 

 



 



 



 



 

Customer service and billing expenses, per average subscriber

 

$

1.01

 

$

1.05

 

$

1.00

 

$

1.06

 

 

 



 



 



 



 


 

 

(6)

Free cash flow is calculated as follows (in thousands):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Net cash provided by operating activities

 

$

178,675

 

$

69,988

 

$

140,987

 

$

136,859

 

Additions to property and equipment

 

 

(70,348

)

 

(56,671

)

 

(169,313

)

 

(127,811

)

Merger related costs

 

 

 

 

(623

)

 

 

 

 

Restricted and other investment activity

 

 

4

 

 

 

 

9,454

 

 

 

 

 



 



 



 



 

Free cash flow

 

$

108,331

 

$

12,694

 

$

(18,872

)

$

9,048

 

 

 



 



 



 



 


 

 

(7)

Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the merger, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in Canadian Satellite Radio, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of our operating performance. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe that investors use current and projected adjusted EBITDA to estimate our current or prospective enterprise value and to make investment decisions.

 

 

 

Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our adjusted results of operations reflect significant charges for depreciation expense. We believe adjusted EBITDA provides useful information about the operating performance of our business apart from the




 

 

 

costs associated with our physical plant. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair market value of our common stock.

 

 

 

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statement of operations of certain expenses, including share-based payment expense and certain purchase price accounting for the merger. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income (loss) as disclosed in our consolidated statements of operations. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP.

 

 

 

The reconciliation of net income (loss) to the adjusted EBITDA is calculated as follows (see footnote 8 for reconciliation of the adjusted amounts to their respective GAAP amounts) (in thousands):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2010

 

2009

 

2010

 

2009

 

 

 


 


 


 


 

Net income (loss) (GAAP):

 

$

15,272

 

$

(159,644

)

$

56,870

 

$

(212,290

)

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price accounting adjustment

 

 

(59,058

)

 

(40,177

)

 

(114,889

)

 

(76,878

)

Depreciation and amortization

 

 

69,230

 

 

77,158

 

 

139,495

 

 

159,524

 

Restructuring, impairments and related costs

 

 

1,803

 

 

27,000

 

 

1,803

 

 

27,614

 

Share-based payment expense, net of purchase price accounting adjustments

 

 

16,704

 

 

31,003

 

 

34,887

 

 

52,501

 

Interest expense, net of amounts capitalized

 

 

76,802

 

 

98,080

 

 

154,670

 

 

166,058

 

Loss on extinguishment of debt and credit facilities, net

 

 

31,871

 

 

107,756

 

 

34,437

 

 

125,713

 

Interest and investment income (loss)

 

 

(378

)

 

(9,323

)

 

2,892

 

 

(2,157

)

Other (loss) income

 

 

601

 

 

(749

)

 

(728

)

 

(1,259

)

Income tax expense

 

 

1,466

 

 

1,115

 

 

2,633

 

 

2,229

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

154,313

 

$

132,219

 

$

312,070

 

$

241,055

 

 

 



 



 



 



 




 

 

(8)

The following tables reconcile our adjusted results of operations to our actual results of operations:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended June 30, 2010

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

601,630

 

$

3,986

 

$

 

$

605,616

 

Advertising revenue, net of agency fees

 

 

15,797

 

 

 

 

 

 

15,797

 

Equipment revenue

 

 

18,520

 

 

 

 

 

 

18,520

 

Other revenue

 

 

63,814

 

 

1,813

 

 

 

 

65,627

 

 

 



 



 



 



 

Total revenue

 

 

699,761

 

 

5,799

 

 

 

 

705,560

 

Operating expenses (depreciation and amortization shown separately below) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

107,901

 

 

26,417

 

 

 

 

134,318

 

Programming and content

 

 

72,019

 

 

13,702

 

 

(1,790

)

 

83,931

 

Customer service and billing

 

 

58,414

 

 

78

 

 

(729

)

 

57,763

 

Satellite and transmission

 

 

19,982

 

 

303

 

 

(1,050

)

 

19,235

 

Cost of equipment

 

 

7,805

 

 

 

 

 

 

7,805

 

Subscriber acquisition costs

 

 

110,383

 

 

20,300

 

 

 

 

130,683

 

Sales and marketing

 

 

56,177

 

 

3,661

 

 

(2,762

)

 

57,076

 

Engineering, design and development

 

 

11,247

 

 

148

 

 

(1,760

)

 

9,635

 

General and administrative

 

 

59,166

 

 

248

 

 

(8,613

)

 

50,801

 

Depreciation and amortization (2)

 

 

69,230

 

 

 

 

 

 

69,230

 

Restructuring, impairments and related costs

 

 

1,803

 

 

 

 

 

 

1,803

 

Share-based payment expense

 

 

 

 

 

 

16,704

 

 

16,704

 

 

 



 



 



 



 

Total operating expenses

 

 

574,127

 

 

64,857

 

 

 

 

638,984

 

 

 



 



 



 



 

Income (loss) from operations

 

$

125,634

 

$

(59,058

)

$

 

$

66,576

 

 

 



 



 



 



 

(1) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

1,662

 

$

128

 

$

 

$

1,790

 

Customer service and billing

 

 

651

 

 

78

 

 

 

 

729

 

Satellite and transmission

 

 

968

 

 

82

 

 

 

 

1,050

 

Sales and marketing

 

 

2,643

 

 

119

 

 

 

 

2,762

 

Engineering, design and development

 

 

1,612

 

 

148

 

 

 

 

1,760

 

General and administrative

 

 

8,365

 

 

248

 

 

 

 

8,613

 

 

 



 



 



 



 

Total share-based payment expense

 

$

15,901

 

$

803

 

$

 

$

16,704

 

 

 



 



 



 



 

(2) Purchase price accounting adjustments included in the tables above exclude the incremental depreciation and amortization associated with the $785 million stepped up basis in property, equipment and intangible assets as a result of the merger with XM. The increased depreciation and amortization for the three months ended June 30, 2010 was $17 million.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended June 30, 2009

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

561,763

 

$

15,195

 

$

 

$

576,958

 

Advertising revenue, net of agency fees

 

 

12,564

 

 

 

 

 

 

12,564

 

Equipment revenue

 

 

10,928

 

 

 

 

 

 

10,928

 

Other revenue

 

 

5,574

 

 

1,812

 

 

 

 

7,386

 

 

 



 



 



 



 

Total revenue

 

 

590,829

 

 

17,007

 

 

 

 

607,836

 

Operating expenses (depreciation and amortization shown separately below) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

95,831

 

 

21,840

 

 

 

 

117,671

 

Programming and content

 

 

72,102

 

 

17,701

 

 

(2,096

)

 

87,707

 

Customer service and billing

 

 

58,833

 

 

126

 

 

(905

)

 

58,054

 

Satellite and transmission

 

 

19,615

 

 

354

 

 

(1,310

)

 

18,659

 

Cost of equipment

 

 

8,051

 

 

 

 

 

 

8,051

 

Subscriber acquisition costs

 

 

67,651

 

 

13,337

 

 

 

 

80,988

 

Sales and marketing

 

 

48,693

 

 

3,173

 

 

(3,256

)

 

48,610

 

Engineering, design and development

 

 

11,944

 

 

247

 

 

(2,068

)

 

10,123

 

General and administrative

 

 

66,716

 

 

406

 

 

(21,368

)

 

45,754

 

Depreciation and amortization (2)

 

 

77,158

 

 

 

 

 

 

77,158

 

Restructuring, impairments and related costs

 

 

27,000

 

 

 

 

 

 

27,000

 

Share-based payment expense

 

 

 

 

 

 

31,003

 

 

31,003

 

 

 



 



 



 



 

Total operating expenses

 

 

553,594

 

 

57,184

 

 

 

 

610,778

 

 

 



 



 



 



 

Income (loss) from operations

 

$

37,235

 

$

(40,177

)

$

 

$

(2,942

)

 

 



 



 



 



 

(1) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

1,891

 

$

205

 

$

 

$

2,096

 

Customer service and billing

 

 

779

 

 

126

 

 

 

 

905

 

Satellite and transmission

 

 

1,177

 

 

133

 

 

 

 

1,310

 

Sales and marketing

 

 

3,072

 

 

184

 

 

 

 

3,256

 

Engineering, design and development

 

 

1,821

 

 

247

 

 

 

 

2,068

 

General and administrative

 

 

20,961

 

 

407

 

 

 

 

21,368

 

 

 



 



 



 



 

Total share-based payment expense

 

$

29,701

 

$

1,302

 

$

 

$

31,003

 

 

 



 



 



 



 

(2) Purchase price accounting adjustments included in the tables above exclude the incremental depreciation and amortization associated with the $785 million stepped up basis in property, equipment and intangible assets as a result of the merger with XM. The increased depreciation and amortization for the three months ended June 30, 2009 was $31 million.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Six Months Ended June 30, 2010

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

1,181,139

 

$

8,952

 

$

 

$

1,190,091

 

Advertising revenue, net of agency fees

 

 

30,323

 

 

 

 

 

 

30,323

 

Equipment revenue

 

 

32,802

 

 

 

 

 

 

32,802

 

Other revenue

 

 

119,280

 

 

3,626

 

 

 

 

122,906

 

 

 



 



 



 



 

Total revenue

 

 

1,363,544

 

 

12,578

 

 

 

 

1,376,122

 

Operating expenses (depreciation and amortization shown separately below) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

206,085

 

 

51,772

 

 

 

 

257,857

 

Programming and content

 

 

150,452

 

 

28,850

 

 

(4,900

)

 

174,402

 

Customer service and billing

 

 

114,625

 

 

172

 

 

(1,457

)

 

113,340

 

Satellite and transmission

 

 

40,100

 

 

626

 

 

(2,104

)

 

38,622

 

Cost of equipment

 

 

15,724

 

 

 

 

 

 

15,724

 

Subscriber acquisition costs

 

 

199,762

 

 

37,966

 

 

 

 

237,728

 

Sales and marketing

 

 

105,294

 

 

7,186

 

 

(5,462

)

 

107,018

 

Engineering, design and development

 

 

22,684

 

 

334

 

 

(3,556

)

 

19,462

 

General and administrative

 

 

116,746

 

 

561

 

 

(17,408

)

 

99,899

 

Depreciation and amortization (2)

 

 

139,495

 

 

 

 

 

 

139,495

 

Restructuring, impairments and related costs

 

 

1,803

 

 

 

 

 

 

1,803

 

Share-based payment expense

 

 

 

 

 

 

34,887

 

 

34,887

 

 

 



 



 



 



 

Total operating expenses

 

 

1,112,770

 

 

127,467

 

 

 

 

1,240,237

 

 

 



 



 



 



 

Income (loss) from operations

 

$

250,774

 

$

(114,889

)

$

 

$

135,885

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

4,612

 

$

288

 

$

 

$

4,900

 

Customer service and billing

 

 

1,285

 

 

172

 

 

 

 

1,457

 

Satellite and transmission

 

 

1,919

 

 

185

 

 

 

 

2,104

 

Sales and marketing

 

 

5,198

 

 

264

 

 

 

 

5,462

 

Engineering, design and development

 

 

3,222

 

 

334

 

 

 

 

3,556

 

General and administrative

 

 

16,847

 

 

561

 

 

 

 

17,408

 

 

 



 



 



 



 

Total share-based payment expense

 

$

33,083

 

$

1,804

 

$

 

$

34,887

 

 

 



 



 



 



 

(2) Purchase price accounting adjustments included in the tables above exclude the incremental depreciation and amortization associated with the $785 million stepped up basis in property, equipment and intangible assets as a result of the merger with XM. The increased depreciation and amortization for the six months ended June 30, 2010 was $36 million.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Six Months Ended June 30, 2009

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

1,121,151

 

$

31,883

 

$

 

$

1,153,034

 

Advertising revenue, net of agency fees

 

 

24,869

 

 

 

 

 

 

24,869

 

Equipment revenue

 

 

20,837

 

 

 

 

 

 

20,837

 

Other revenue

 

 

10,951

 

 

3,626

 

 

 

 

14,577

 

 

 



 



 



 



 

Total revenue

 

 

1,177,808

 

 

35,509

 

 

 

 

1,213,317

 

Operating expenses (depreciation and amortization shown separately below) (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

196,297

 

 

42,635

 

 

 

 

238,932

 

Programming and content

 

 

152,511

 

 

36,592

 

 

(4,717

)

 

184,386

 

Customer service and billing

 

 

119,041

 

 

243

 

 

(1,561

)

 

117,723

 

Satellite and transmission

 

 

39,894

 

 

681

 

 

(2,174

)

 

38,401

 

Cost of equipment

 

 

16,044

 

 

 

 

 

 

16,044

 

Subscriber acquisition costs

 

 

140,719

 

 

23,979

 

 

 

 

164,698

 

Sales and marketing

 

 

100,116

 

 

6,831

 

 

(7,735

)

 

99,212

 

Engineering, design and development

 

 

21,723

 

 

548

 

 

(3,736

)

 

18,535

 

General and administrative

 

 

126,031

 

 

878

 

 

(32,578

)

 

94,331

 

Depreciation and amortization (2)

 

 

159,524

 

 

 

 

 

 

159,524

 

Restructuring, impairments and related costs

 

 

27,614

 

 

 

 

 

 

27,614

 

Share-based payment expense

 

 

 

 

 

 

52,501

 

 

52,501

 

 

 



 



 



 



 

Total operating expenses

 

 

1,099,514

 

 

112,387

 

 

 

 

1,211,901

 

 

 



 



 



 



 

Income (loss) from operations

 

$

78,294

 

$

(76,878

)

$

 

$

1,416

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

4,381

 

$

336

 

$

 

$

4,717

 

Customer service and billing

 

 

1,318

 

 

243

 

 

 

 

1,561

 

Satellite and transmission

 

 

1,934

 

 

240

 

 

 

 

2,174

 

Sales and marketing

 

 

7,358

 

 

377

 

 

 

 

7,735

 

Engineering, design and development

 

 

3,188

 

 

548

 

 

 

 

3,736

 

General and administrative

 

 

31,699

 

 

879

 

 

 

 

32,578

 

 

 



 



 



 



 

Total share-based payment expense

 

$

49,878

 

$

2,623

 

$

 

$

52,501

 

 

 



 



 



 



 

(2) Purchase price accounting adjustments included in the tables above exclude the incremental depreciation and amortization associated with the $785 million stepped up basis in property, equipment and intangible assets as a result of the merger with XM. The increased depreciation and amortization for the six months ended June 30, 2009 was $62 million.

###


About SIRIUS XM Radio

SIRIUS XM Radio is America’s satellite radio company delivering to subscribers commercial-free music channels, premier sports, news, talk, entertainment, and traffic and weather.

SIRIUS XM Radio has content relationships with an array of personalities and artists, including Howard Stern, Martha Stewart, Oprah Winfrey, Rosie O’Donnell, Jamie Foxx, Barbara Walters, Opie & Anthony, Bubba the Love Sponge®, Bob Edwards, Chris “Mad Dog” Russo, Jimmy Buffett, The Grateful Dead, Willie Nelson, Bob Dylan and Tom Petty. SIRIUS XM Radio is the leader in sports programming as the Official Satellite Radio Partner of the NFL, Major League Baseball®, NASCAR®, NBA, NHL®, and PGA TOUR® and major college sports.

SIRIUS XM Radio has arrangements with every major automaker. SIRIUS XM Radio products are available at shop.sirius.com and shop.xmradio.com, and at retail locations nationwide, including Best Buy, RadioShack, Wal-Mart and independent retailers.

SIRIUS XM Radio also offers SIRIUS Backseat TV, the first ever live in-vehicle rear seat entertainment featuring Nickelodeon, Disney Channel and Cartoon Network; XM NavTraffic® service for GPS navigation systems delivers real-time traffic information, including accidents and road construction, for more than 80 North American markets.

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, the combined company’s plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “will likely result,” “ are expected to,” “will continue,”“ is anticipated,” “estimated,” “intend,”“plan”, “projection,” “outlook” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of SIRIUS XM’s management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond the control of SIRIUS and XM. Actual results may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statement: our dependence upon automakers and other third parties, the substantial indebtedness of SIRIUS and XM; the useful life of our satellites; and our competitive position versus other forms of audio and video entertainment. Additional factors that could cause SIRIUS’ and XM’s results to differ materially from those described in the forward-looking statements can be found in SIRIUS’ Annual Report on Form 10-K for the year ended December 31, 2009 and XM’s Annual Report on Form 10-K for the year ended December 31, 2009, which are filed with the Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet site (http://www.sec.gov). The information set forth herein speaks only as of the date hereof, and SIRIUS and XM disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

E-SIRI

Contact Information for Investors and Financial Media:

Investors:

William Prip
212 584 5289
william.prip@siriusxm.com


Hooper Stevens
212 901 6718
hooper.stevens@siriusxm.com

Media:

Patrick Reilly
212 901 6646
patrick.reilly@siriusxm.com