Exhibit 99.1

(SIRIUSXM LOGO)

SiriusXM Reports Second Quarter 2011 Results

 

 

 

 

Subscribers Exceed 21 Million, an All-Time High

 

Record Revenue of $744 Million, Up 6% Over Second Quarter 2010

 

Record Adjusted EBITDA of $185 Million, Up 20% Over Second Quarter 2010

 

Company Raises Guidance; 1.6 Million Net Subscriber Additions and Free Cash Flow Approaching $400 Million Expected in 2011

NEW YORK – August 2, 2011 – Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2011 results, including revenue of $744 million, up 6% over second quarter 2010 revenue of $700 million, and adjusted EBITDA of $185 million, up 20% from $154 million in the second quarter of 2010.

“Our results in the second quarter were strong, and we are proud of our record levels of subscribers, revenue, and adjusted EBITDA and growth in free cash flow. Despite a dip in the seasonal rate of auto sales in the second quarter, SiriusXM continues to perform well, and we are pleased to raise our subscriber guidance and, for the second time this year, our free cash flow guidance,” said Mel Karmazin, Chief Executive Officer, SiriusXM.

Highlights from the quarter include:

 

 

Subscriber growth continues. Auto sales growth and higher OEM penetration year-over-year drove ending subscribers as of June 30, 2011 to 21,016,175, up 8% from the 19,527,448 subscribers reported as of June 30, 2010. Self-pay net additions in the second quarter of 2011 were 362,663, up 19% from 304,043 in the second quarter of 2010.

Churn stable. Average self-pay monthly churn was 1.9% in the second quarter 2011, compared to 2.0% in the first quarter 2011 and 1.8% in the second quarter of 2010.

SAC improves. Subscriber acquisition cost (SAC) per gross subscriber addition was $54 in the second quarter of 2011, an 8% improvement from the $59 reported in the second quarter of 2010.



“Demand for satellite radio continues to grow, with gross additions reaching the highest level of any quarter since the merger of Sirius and XM. Our all-time high OEM penetration rate is a reflection of the automakers’ satisfaction and their commitment to offer our service to their customers,” said Karmazin. “We intend to drive future growth through innovations to our satellite and internet platforms, with the goal of better delivering our unparalleled content to our valued customers. We’re also excited to launch a variety of additional new music and talk channels later this year.”

Free cash flow in the second quarter of 2011 was $165 million, a 53% improvement from the $108 million reported in the second quarter 2010. These improvements were driven by cash received from the Canada Merger, a decline in satellite capital expenditures, and improved adjusted EBITDA. Net income in the second quarters of 2011 and 2010 was $173 million and $15 million, respectively, or $0.03 and $0.00 per diluted share, respectively.

“We ended the second quarter with $528 million of cash and cash equivalents after using approximately $75 million to repurchase debt in the second quarter,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “We continue to make steady progress toward reaching our leverage target. Our net debt to adjusted EBITDA declined to 3.7x at the end of the second quarter of 2011 from 5.2x at the end of the second quarter of 2010. The company is examining ways to start efficiently returning capital to shareholders beginning in 2012,” added Frear.

The discussion of adjusted EBITDA excludes the effects of stock-based compensation and certain purchase price accounting adjustments. A reconciliation of non-GAAP items to their nearest GAAP equivalent is contained in the financial supplements included with this release.

2011 GUIDANCE

“With the excellent subscriber performance recorded in the first half of 2011, we are now confident that we will exceed our previously announced 1.4 million net subscriber addition guidance for 2011. Today we are raising our full-year guidance to a projected 1.6 million net subscriber additions,” added Karmazin. “After a strong first half, we now expect free cash flow in 2011 will approach $400 million, up from our prior guidance of approaching $350 million.”

In 2011, the company continues to expect full-year revenue of approximately $3 billion. SiriusXM’s adjusted EBITDA projection remains at approximately $715 million. Full year self-pay churn and conversion rates for 2011 should be broadly similar to those seen in 2010.

SECOND QUARTER 2011 RESULTS

          Subscriber Data.

          The following table contains actual subscriber data for the three and six months ended June 30, 2011 and 2010, respectively:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning subscribers

 

 

20,564,028

 

 

18,944,199

 

 

20,190,964

 

 

18,772,758

 

Gross subscriber additions

 

 

2,179,348

 

 

2,020,507

 

 

4,231,715

 

 

3,741,355

 

Deactivated subscribers

 

 

(1,727,201

)

 

(1,437,258

)

 

(3,406,504

)

 

(2,986,665

)

 

 



 



 



 



 

Net additions

 

 

452,147

 

 

583,249

 

 

825,211

 

 

754,690

 

 

 



 



 



 



 

Ending subscribers

 

 

21,016,175

 

 

19,527,448

 

 

21,016,175

 

 

19,527,448

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

17,170,306

 

 

16,077,714

 

 

17,170,306

 

 

16,077,714

 

Paid promotional

 

 

3,845,869

 

 

3,449,734

 

 

3,845,869

 

 

3,449,734

 

 

 



 



 



 



 

Ending subscribers

 

 

21,016,175

 

 

19,527,448

 

 

21,016,175

 

 

19,527,448

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

362,663

 

 

304,043

 

 

483,507

 

 

373,782

 

Paid promotional

 

 

89,484

 

 

279,206

 

 

341,704

 

 

380,908

 

 

 



 



 



 



 

Net additions

 

 

452,147

 

 

583,249

 

 

825,211

 

 

754,690

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

20,715,630

 

 

19,139,926

 

 

20,475,720

 

 

18,962,580

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average self-pay monthly churn (1)

 

 

1.9

%

 

1.8

%

 

1.9

%

 

1.9

%

 

 



 



 



 



 

Conversion rate (2)

 

 

45.2

%

 

46.7

%

 

44.9

%

 

45.9

%

 

 



 



 



 



 


 


 

See accompanying footnotes.

          Subscribers. The improvement in the three months ended June 30, 2011 was due to the 8% increase in gross subscriber additions, primarily resulting from an increase in U.S. light vehicle sales, new vehicle penetration and returning activations.

          Average Self-pay Monthly Churn increased in the three months ended June 30, 2011 due to changes in vehicle ownership which were offset by reductions in non-pay cancellation rates.

          Conversion Rate. The decrease in the three months ended June 30, 2011 was primarily due to the changing mix of sales among auto manufacturers.

          Metrics.

          The following table contains our key operating metrics based on our unaudited adjusted results of operations for the three and six months ended June 30, 2011 and 2010, respectively:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

(in thousands, except for per subscriber amounts)

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU(3)

 

$

11.53

 

$

11.81

 

$

11.53

 

$

11.65

 

SAC, per gross subscriber addition (4)

 

$

54

 

$

59

 

$

56

 

$

59

 

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

 

$

1.00

 

$

1.01

 

$

1.04

 

$

1.00

 

Free cash flow (6)

 

$

165,433

 

$

108,331

 

$

148,559

 

$

(18,872

)

Adjusted total revenue (8)

 

$

747,335

 

$

705,560

 

$

1,474,896

 

$

1,376,122

 

Adjusted EBITDA (7)

 

$

185,094

 

$

154,313

 

$

366,454

 

$

312,070

 


 


 

See accompanying footnotes.

          ARPU decreased in the three months ended June 30, 2011 by $0.28, primarily as a result of an increase in subscriber retention programs, the number of subscribers on OEM paid promotional plans and the decrease in the U.S. Music Royalty rate, partially offset by an increase in sales of premium services, including “Best of” programming, data services and streaming.

          SAC, Per Gross Subscriber Addition, decreased in the three months ended June 30, 2011 primarily due to an 8% increase in gross subscriber additions and lower per radio subsidy rates for certain OEMs.

          Customer Service and Billing Expenses, Per Average Subscriber, decreased in the three months ended June 30, 2011 primarily due to the 8% growth in daily weighted average subscribers relative to a 7% increase in customer service and billing expenses due to higher call volume and handle time per call and personnel costs.

          Free Cash Flow increased in the three months ended June 30, 2011 principally as a result of improvements in net cash provided by operating activities and decreases in capital expenditures. Net cash provided by operating activities increased $16 million to $195 million for the three months ended June 30, 2011, compared to the $179 million provided by operations for the three months ended June 30, 2010. The increase in net cash provided by operating activities was primarily the result of improved operating performance driving higher adjusted EBITDA, cash received from the Canada merger and higher collections from subscribers and distributors. Capital expenditures for property and equipment for the three months ended June 30, 2011 decreased $30 million to $40 million, compared to $70 million for the three months ended June 30, 2010. The decrease in capital expenditures for the three months ended June 30, 2011 was primarily the result of decreased satellite construction and launch expenditures due to the launch in the fourth quarter of 2010 of our XM-5 satellite. The increase in net cash from restricted and other investment activities was driven by the return of capital resulting from the Canada merger.


          Adjusted Total Revenue. Set forth below are our adjusted total revenue for the three and six months ended June 30, 2011 and 2010, respectively. Our adjusted total revenue includes the recognition of deferred subscriber revenues acquired in the merger between SIRIUS and XM (the “Merger”) that are not recognized in our results under purchase price accounting and the elimination of the benefit in earnings from deferred revenue associated with our investment in XM Canada acquired in the Merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

(in thousands)

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates (GAAP)

 

$

639,642

 

$

601,630

 

$

1,262,080

 

$

1,181,139

 

Advertising revenue, net of agency fees (GAAP)

 

 

18,227

 

 

15,797

 

 

34,785

 

 

30,323

 

Equipment revenue (GAAP)

 

 

17,022

 

 

18,520

 

 

32,889

 

 

32,802

 

Other revenue (GAAP)

 

 

69,506

 

 

63,814

 

 

138,482

 

 

119,280

 

 

 



 



 



 



 

Total revenue (GAAP)

 

 

744,397

 

 

699,761

 

 

1,468,236

 

 

1,363,544

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

 

1,125

 

 

3,986

 

 

3,034

 

 

8,952

 

Other revenue

 

 

1,813

 

 

1,813

 

 

3,626

 

 

3,626

 

 

 



 



 



 



 

Adjusted total revenue

 

$

747,335

 

$

705,560

 

$

1,474,896

 

$

1,376,122

 

 

 



 



 



 



 

For the three months ended June 30, 2011, the increase in subscriber revenue was primarily attributable to an 8% increase in daily weighted average subscribers and an increase in sales of premium services, including “Best of” programming, data services and streaming. The increase in other revenue was driven by an increase in subscribers subject to the U.S. Music Royalty Fee and increased royalty revenue from Sirius Canada.

          Adjusted EBITDA. EBITDA is defined as net income (loss) before interest and investment income (loss); interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. Adjusted EBITDA removes the impact of other income and expense, losses on extinguishment of debt as well as certain other charges, such as goodwill impairment; restructuring, impairments and related costs; certain 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,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Total revenue

 

$

747,335

 

$

705,560

 

$

1,474,896

 

$

1,376,122

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

147,875

 

 

134,318

 

 

284,737

 

 

257,857

 

Programming and content

 

 

78,226

 

 

83,931

 

 

161,499

 

 

174,402

 

Customer service and billing

 

 

62,284

 

 

57,763

 

 

127,772

 

 

113,340

 

Satellite and transmission

 

 

18,507

 

 

19,235

 

 

36,739

 

 

38,622

 

Cost of equipment

 

 

7,601

 

 

7,805

 

 

14,006

 

 

15,724

 

Subscriber acquisition costs

 

 

126,972

 

 

130,683

 

 

253,898

 

 

237,728

 

Sales and marketing

 

 

53,646

 

 

57,076

 

 

102,802

 

 

107,018

 

Engineering, design and development

 

 

12,965

 

 

9,635

 

 

22,988

 

 

19,462

 

General and administrative

 

 

54,165

 

 

50,801

 

 

104,001

 

 

99,899

 

 

 



 



 



 



 

Total operating expenses

 

 

562,241

 

 

551,247

 

 

1,108,442

 

 

1,064,052

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

185,094

 

$

154,313

 

$

366,454

 

$

312,070

 

 

 



 



 



 



 

For the three months ended June 30, 2011, the increase in adjusted EBITDA was primarily due to an increase of 6%, or $42 million, in adjusted revenues, partially offset by an increase of 2%, or $11 million, in expenses included in adjusted EBITDA. The increase in adjusted revenue was primarily due to the increase in our subscriber base and by the additional subscribers subject to the U.S. Music Royalty Fee. The increase in expenses was primarily driven by higher revenue share and royalties expenses associated with growth in revenues and increased customer service and billing expenses associated with subscriber growth, partially offset by lower subscriber acquisition costs, sales and marketing expenses, and programming and content costs.


SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited Actual

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

(in thousands, except per share data)

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

639,642

 

$

601,630

 

$

1,262,080

 

$

1,181,139

 

Advertising revenue, net of agency fees

 

 

18,227

 

 

15,797

 

 

34,785

 

 

30,323

 

Equipment revenue

 

 

17,022

 

 

18,520

 

 

32,889

 

 

32,802

 

Other revenue

 

 

69,506

 

 

63,814

 

 

138,482

 

 

119,280

 

 

 



 



 



 



 

Total revenue

 

 

744,397

 

 

699,761

 

 

1,468,236

 

 

1,363,544

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

116,741

 

 

107,901

 

 

223,670

 

 

206,085

 

Programming and content

 

 

67,399

 

 

72,019

 

 

140,358

 

 

150,452

 

Customer service and billing

 

 

62,592

 

 

58,414

 

 

128,429

 

 

114,625

 

Satellite and transmission

 

 

18,998

 

 

19,982

 

 

37,558

 

 

40,100

 

Cost of equipment

 

 

7,601

 

 

7,805

 

 

14,006

 

 

15,724

 

Subscriber acquisition costs

 

 

105,162

 

 

110,383

 

 

210,432

 

 

199,762

 

Sales and marketing

 

 

51,442

 

 

56,177

 

 

99,261

 

 

105,294

 

Engineering, design and development

 

 

13,939

 

 

11,247

 

 

25,074

 

 

22,684

 

General and administrative

 

 

60,479

 

 

59,166

 

 

116,831

 

 

116,746

 

Depreciation and amortization

 

 

67,062

 

 

69,230

 

 

135,462

 

 

139,495

 

Restructuring, impairments and related costs

 

 

 

 

1,803

 

 

 

 

1,803

 

 

 



 



 



 



 

Total operating expenses

 

 

571,415

 

 

574,127

 

 

1,131,081

 

 

1,112,770

 

 

 



 



 



 



 

Income from operations

 

 

172,982

 

 

125,634

 

 

337,155

 

 

250,774

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(76,196

)

 

(76,802

)

 

(154,414

)

 

(154,670

)

Loss on extinguishment of debt and credit facilities, net

 

 

(1,212

)

 

(31,987

)

 

(7,206

)

 

(34,437

)

Interest and investment income (loss)

 

 

80,182

 

 

378

 

 

78,298

 

 

(2,892

)

Other income (loss)

 

 

183

 

 

(485

)

 

1,799

 

 

728

 

 

 



 



 



 



 

Total other income (expense)

 

 

2,957

 

 

(108,896

)

 

(81,523

)

 

(191,271

)

 

 



 



 



 



 

Income before income taxes

 

 

175,939

 

 

16,738

 

 

255,632

 

 

59,503

 

Income tax expense

 

 

(2,620

)

 

(1,466

)

 

(4,192

)

 

(2,633

)

 

 



 



 



 



 

Net income

 

$

173,319

 

$

15,272

 

$

251,440

 

$

56,870

 

 

 



 



 



 



 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.05

 

$

0.00

 

$

0.07

 

$

0.02

 

 

 



 



 



 



 

Diluted

 

$

0.03

 

$

0.00

 

$

0.04

 

$

0.01

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,744,375

 

 

3,683,595

 

 

3,739,731

 

 

3,682,750

 

 

 



 



 



 



 

Diluted

 

 

6,804,297

 

 

6,363,955

 

 

6,790,729

 

 

6,357,507

 

 

 



 



 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

June 30, 2011

 

December 31, 2010

 

 

 


 


 

 

 

(unaudited)

 

 

 

(in thousands, except share and per share data)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

528,327

 

$

586,691

 

Accounts receivable, net

 

 

100,834

 

 

121,658

 

Receivables from distributors

 

 

81,014

 

 

67,576

 

Inventory, net

 

 

32,317

 

 

21,918

 

Prepaid expenses

 

 

156,530

 

 

134,994

 

Related party current assets

 

 

6,264

 

 

6,719

 

Deferred tax asset

 

 

54,828

 

 

44,787

 

Other current assets

 

 

5,167

 

 

7,432

 

 

 



 



 

Total current assets

 

 

965,281

 

 

991,775

 

Property and equipment, net

 

 

1,722,673

 

 

1,761,274

 

Long-term restricted investments

 

 

3,146

 

 

3,396

 

Deferred financing fees, net

 

 

48,062

 

 

54,135

 

Intangible assets, net

 

 

2,602,425

 

 

2,632,688

 

Goodwill

 

 

1,834,856

 

 

1,834,856

 

Related party long-term assets

 

 

71,323

 

 

33,475

 

Other long-term assets

 

 

56,019

 

 

71,487

 

 

 



 



 

Total assets

 

$

7,303,785

 

$

7,383,086

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

481,977

 

$

593,174

 

Accrued interest

 

 

70,565

 

 

72,453

 

Current portion of deferred revenue

 

 

1,295,653

 

 

1,201,346

 

Current portion of deferred credit on executory contracts

 

 

281,071

 

 

271,076

 

Current maturities of long-term debt

 

 

25,894

 

 

195,815

 

Related party current liabilities

 

 

15,802

 

 

15,845

 

 

 



 



 

Total current liabilities

 

 

2,170,962

 

 

2,349,709

 

Deferred revenue

 

 

244,573

 

 

273,973

 

Deferred credit on executory contracts

 

 

361,899

 

 

508,012

 

Long-term debt

 

 

2,671,770

 

 

2,695,856

 

Long-term related party debt

 

 

327,296

 

 

325,907

 

Deferred tax liability

 

 

927,120

 

 

914,637

 

Related party long-term liabilities

 

 

23,129

 

 

24,517

 

Other long-term liabilities

 

 

82,425

 

 

82,839

 

 

 



 



 

Total liabilities

 

 

6,809,174

 

 

7,175,450

 

 

 



 



 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2011 and December 31, 2010:

 

 

 

 

 

 

 

Series A convertible preferred stock; no shares issued and outstanding at June 30, 2011 and December 31, 2010

 

 

 

 

 

Convertible perpetual preferred stock, series B-1 (liquidation preference of $13 at June 30, 2011 and December 31, 2010); 12,500,000 shares issued and outstanding at June 30, 2011 and December 31, 2010

 

 

13

 

 

13

 

Convertible preferred stock, series C junior; no shares issued and outstanding at June 30, 2011 and December 31, 2010

 

 

 

 

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at June 30, 2011 and December 31, 2010; 3,948,913,078 and 3,933,195,112 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively

 

 

3,949

 

 

3,933

 

Accumulated other comprehensive income (loss), net of tax

 

 

288

 

 

(5,861

)

Additional paid-in capital

 

 

10,449,974

 

 

10,420,604

 

Accumulated deficit

 

 

(9,959,613

)

 

(10,211,053

)

 

 



 



 

Total stockholders’ equity

 

 

494,611

 

 

207,636

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

7,303,785

 

$

7,383,086

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

Unaudited Actual

 

 

 


 

 

 

For the Six Months Ended June 30,

 

 

 


 

(in thousands)

 

2011

 

2010

 

 

 


 


 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

251,440

 

$

56,870

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

135,462

 

 

139,495

 

Non-cash interest expense, net of amortization of premium

 

 

19,234

 

 

22,294

 

Provision for doubtful accounts

 

 

17,744

 

 

15,756

 

Restructuring, impairments and related costs

 

 

 

 

1,803

 

Amortization of deferred income related to equity method investment

 

 

(1,388

)

 

(2,137

)

Loss on extinguishment of debt and credit facilities, net

 

 

7,206

 

 

34,437

 

Gain on merger of unconsolidated entities

 

 

(83,718

)

 

 

Loss on unconsolidated entity investments, net

 

 

6,045

 

 

6,065

 

Loss on disposal of assets

 

 

269

 

 

(18

)

Share-based payment expense

 

 

23,591

 

 

33,083

 

Deferred income taxes

 

 

2,223

 

 

2,633

 

Other non-cash purchase price adjustments

 

 

(134,862

)

 

(120,706

)

Distribution from investment in unconsolidated entity

 

 

4,849

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

3,080

 

 

(14,296

)

Receivables from distributors

 

 

(13,438

)

 

(26,655

)

Inventory

 

 

(10,399

)

 

2,467

 

Related party assets

 

 

31,076

 

 

(701

)

Prepaid expenses and other current assets

 

 

(20,871

)

 

10,245

 

Other long-term assets

 

 

15,974

 

 

10,947

 

Accounts payable and accrued expenses

 

 

(101,552

)

 

(76,144

)

Accrued interest

 

 

(1,888

)

 

(4,796

)

Deferred revenue

 

 

63,649

 

 

105,004

 

Related party liabilities

 

 

(42

)

 

(54,978

)

Other long-term liabilities

 

 

(194

)

 

319

 

 

 



 



 

Net cash provided by operating activities

 

 

213,490

 

 

140,987

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(75,298

)

 

(169,313

)

Sale of restricted and other investments

 

 

 

 

9,454

 

Release of restricted investments

 

 

250

 

 

 

Return of capital from investment in unconsolidated entity

 

 

10,117

 

 

 

 

 



 



 

Net cash used in investing activities

 

 

(64,931

)

 

(159,859

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

6,921

 

 

 

Long-term borrowings, net of costs

 

 

 

 

637,406

 

Related party long-term borrowings, net of costs

 

 

 

 

147,094

 

Payment of premiums on redemption of debt

 

 

(5,020

)

 

(24,065

)

Repayment of long-term borrowings

 

 

(208,824

)

 

(810,977

)

Repayment of related party long-term borrowings

 

 

 

 

(55,221

)

 

 



 



 

Net cash used in financing activities

 

 

(206,923

)

 

(105,763

)

 

 



 



 

Net decrease in cash and cash equivalents

 

 

(58,364

)

 

(124,635

)

Cash and cash equivalents at beginning of period

 

 

586,691

 

 

383,489

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

528,327

 

$

258,854

 

 

 



 



 



Footnotes

 

 

(1)

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

 

 

(2)

We measure the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers 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 trial subscriptions ranging from three to twelve months. 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.

 

 

(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 the U.S. Music Royalty Fee. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the Merger. 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,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Subscriber revenue (GAAP)

 

$

639,642

 

$

601,630

 

$

1,262,080

 

$

1,181,139

 

Add: net advertising revenue (GAAP)

 

 

18,227

 

 

15,797

 

 

34,785

 

 

30,323

 

Add: other subscription-related revenue (GAAP)

 

 

57,642

 

 

56,694

 

 

116,173

 

 

104,641

 

Add: purchase price accounting adjustments

 

 

1,125

 

 

3,986

 

 

3,034

 

 

8,952

 

 

 



 



 



 



 

 

 

$

716,636

 

$

678,107

 

$

1,416,072

 

$

1,325,055

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

20,715,630

 

 

19,139,926

 

 

20,475,720

 

 

18,962,580

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

$

11.53

 

$

11.81

 

$

11.53

 

$

11.65

 

 

 



 



 



 



 


 

 

(4)

Subscriber acquisition cost, per gross subscriber addition (or SAC, per gross subscriber addition) is derived from subscriber acquisition costs and margins from the direct sale of radios and accessories, excluding purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments associated with the Merger include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the Merger date attributable to 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,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Subscriber acquisition costs (GAAP)

 

$

105,162

 

$

110,383

 

$

210,432

 

$

199,762

 

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

 

 

(9,421

)

 

(10,715

)

 

(18,883

)

 

(17,078

)

Add: purchase price accounting adjustments

 

 

21,810

 

 

20,300

 

 

43,466

 

 

37,966

 

 

 



 



 



 



 

 

 

$

117,551

 

$

119,968

 

$

235,015

 

$

220,650

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,179,348

 

 

2,020,507

 

 

4,231,715

 

 

3,741,355

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

54

 

$

59

 

$

56

 

$

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 associated with the Merger, 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 associated with the Merger include the elimination of the benefit associated with incremental 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,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Customer service and billing expenses (GAAP)

 

$

62,592

 

$

58,414

 

$

128,429

 

$

114,625

 

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

 

 

(308

)

 

(729

)

 

(675

)

 

(1,457

)

Add: purchase price accounting adjustments

 

 

 

 

78

 

 

18

 

 

172

 

 

 



 



 



 



 

 

 

$

62,284

 

$

57,763

 

$

127,772

 

$

113,340

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

20,715,630

 

 

19,139,926

 

 

20,475,720

 

 

18,962,580

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service and billing expenses, per average subscriber

 

$

1.00

 

$

1.01

 

$

1.04

 

$

1.00

 

 

 



 



 



 



 




 

 

(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,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Net cash provided by operating activities

 

$

195,381

 

$

178,675

 

$

213,490

 

$

140,987

 

Additions to property and equipment

 

 

(40,315

)

 

(70,348

)

 

(75,298

)

 

(169,313

)

Restricted and other investment activity

 

 

10,367

 

 

4

 

 

10,367

 

 

9,454

 

 

 



 



 



 



 

Free cash flow

 

$

165,433

 

$

108,331

 

$

148,559

 

$

(18,872

)

 

 



 



 



 



 


 

 

(7)

EBITDA is defined as net income before interest and investment income (loss); interest expense, net of amounts capitalized; taxes expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and 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 results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.




 

 

 

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 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 to the adjusted EBITDA is calculated as follows (in thousands):


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

 

 

2011

 

2010

 

2011

 

2010

 

 

 


 


 


 


 

Net income (GAAP):

 

$

173,319

 

$

15,272

 

$

251,440

 

$

56,870

 

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

2,938

 

 

5,799

 

 

6,660

 

 

12,578

 

Operating expenses

 

 

(68,623

)

 

(64,857

)

 

(136,595

)

 

(127,467

)

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

 

 

10,735

 

 

16,704

 

 

23,772

 

 

34,887

 

Depreciation and amortization (GAAP)

 

 

67,062

 

 

69,230

 

 

135,462

 

 

139,495

 

Restructuring, impairments and related costs

 

 

 

 

1,803

 

 

 

 

1,803

 

Interest expense, net of amounts capitalized (GAAP)

 

 

76,196

 

 

76,802

 

 

154,414

 

 

154,670

 

Loss on extinguishment of debt and credit facilities, net (GAAP)

 

 

1,212

 

 

31,987

 

 

7,206

 

 

34,437

 

Interest and investment (income) loss (GAAP)

 

 

(80,182

)

 

(378

)

 

(78,298

)

 

2,892

 

Other (income) loss (GAAP)

 

 

(183

)

 

485

 

 

(1,799

)

 

(728

)

Income tax expense (GAAP)

 

 

2,620

 

 

1,466

 

 

4,192

 

 

2,633

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

185,094

 

$

154,313

 

$

366,454

 

$

312,070

 

 

 



 



 



 



 




 

 

(8)

The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and six months ended June 30, 2011 and 2010:


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended June 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

639,642

 

$

1,125

 

$

 

$

640,767

 

Advertising revenue, net of agency fees

 

 

18,227

 

 

 

 

 

 

18,227

 

Equipment revenue

 

 

17,022

 

 

 

 

 

 

17,022

 

Other revenue

 

 

69,506

 

 

1,813

 

 

 

 

71,319

 

 

 



 



 



 



 

Total revenue

 

$

744,397

 

$

2,938

 

$

 

$

747,335

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

116,741

 

 

31,134

 

 

 

 

147,875

 

Programming and content

 

 

67,399

 

 

11,787

 

 

(960

)

 

78,226

 

Customer service and billing

 

 

62,592

 

 

 

 

(308

)

 

62,284

 

Satellite and transmission

 

 

18,998

 

 

74

 

 

(565

)

 

18,507

 

Cost of equipment

 

 

7,601

 

 

 

 

 

 

7,601

 

Subscriber acquisition costs

 

 

105,162

 

 

21,810

 

 

 

 

126,972

 

Sales and marketing

 

 

51,442

 

 

3,818

 

 

(1,614

)

 

53,646

 

Engineering, design and development

 

 

13,939

 

 

 

 

(974

)

 

12,965

 

General and administrative

 

 

60,479

 

 

 

 

(6,314

)

 

54,165

 

Depreciation and amortization (a)

 

 

67,062

 

 

 

 

 

 

67,062

 

Restructuring, impairments and related costs

 

 

 

 

 

 

 

 

 

Share-based payment expense (b)

 

 

 

 

 

 

10,735

 

 

10,735

 

 

 



 



 



 



 

Total operating expenses

 

$

571,415

 

$

68,623

 

$

 

$

640,038

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the three months ended June 30, 2011 was $15,000.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

960

 

$

 

$

 

$

960

 

Customer service and billing

 

 

308

 

 

 

 

 

 

308

 

Satellite and transmission

 

 

565

 

 

 

 

 

 

565

 

Sales and marketing

 

 

1,614

 

 

 

 

 

 

1,614

 

Engineering, design and development

 

 

974

 

 

 

 

 

 

974

 

General and administrative

 

 

6,314

 

 

 

 

 

 

6,314

 

 

 



 



 



 



 

Total share-based payment expense

 

$

10,735

 

$

 

$

 

$

10,735

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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 (a)

 

 

69,230

 

 

 

 

 

 

69,230

 

Restructuring, impairments and related costs

 

 

1,803

 

 

 

 

 

 

1,803

 

Share-based payment expense (b)

 

 

 

 

 

 

16,704

 

 

16,704

 

 

 



 



 



 



 

Total operating expenses

 

$

574,127

 

$

64,857

 

$

 

$

638,984

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the three months ended June 30, 2010 was $17,000.

 

(b) 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

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Six Months Ended June 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue, including effects of rebates

 

$

1,262,080

 

$

3,034

 

$

 

$

1,265,114

 

Advertising revenue, net of agency fees

 

 

34,785

 

 

 

 

 

 

34,785

 

Equipment revenue

 

 

32,889

 

 

 

 

 

 

32,889

 

Other revenue

 

 

138,482

 

 

3,626

 

 

 

 

142,108

 

 

 



 



 



 



 

Total revenue

 

$

1,468,236

 

$

6,660

 

$

 

$

1,474,896

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

223,670

 

 

61,067

 

 

 

 

284,737

 

Programming and content

 

 

140,358

 

 

24,611

 

 

(3,470

)

 

161,499

 

Customer service and billing

 

 

128,429

 

 

18

 

 

(675

)

 

127,772

 

Satellite and transmission

 

 

37,558

 

 

313

 

 

(1,132

)

 

36,739

 

Cost of equipment

 

 

14,006

 

 

 

 

 

 

14,006

 

Subscriber acquisition costs

 

 

210,432

 

 

43,466

 

 

 

 

253,898

 

Sales and marketing

 

 

99,261

 

 

7,030

 

 

(3,489

)

 

102,802

 

Engineering, design and development

 

 

25,074

 

 

31

 

 

(2,117

)

 

22,988

 

General and administrative

 

 

116,831

 

 

59

 

 

(12,889

)

 

104,001

 

Depreciation and amortization (a)

 

 

135,462

 

 

 

 

 

 

135,462

 

Restructuring, impairments and related costs

 

 

 

 

 

 

 

 

 

Share-based payment expense (b)

 

 

 

 

 

 

23,772

 

 

23,772

 

 

 



 



 



 



 

Total operating expenses

 

$

1,131,081

 

$

136,595

 

$

 

$

1,267,676

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the six months ended June 30, 2011 was $30,000.

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

3,443

 

$

27

 

$

 

$

3,470

 

Customer service and billing

 

 

657

 

 

18

 

 

 

 

675

 

Satellite and transmission

 

 

1,113

 

 

19

 

 

 

 

1,132

 

Sales and marketing

 

 

3,462

 

 

27

 

 

 

 

3,489

 

Engineering, design and development

 

 

2,086

 

 

31

 

 

 

 

2,117

 

General and administrative

 

 

12,830

 

 

59

 

 

 

 

12,889

 

 

 



 



 



 



 

Total share-based payment expense

 

$

23,591

 

$

181

 

$

 

$

23,772

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

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 (a)

 

 

139,495

 

 

 

 

 

 

139,495

 

Restructuring, impairments and related costs

 

 

1,803

 

 

 

 

 

 

1,803

 

Share-based payment expense (b)

 

 

 

 

 

 

34,887

 

 

34,887

 

 

 



 



 



 



 

Total operating expenses

 

$

1,112,770

 

$

127,467

 

$

 

$

1,240,237

 

 

 



 



 



 



 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the six months ended June 30, 2010 was $36,000.

 

(b) 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

 

 

 



 



 



 



 

####



About Sirius XM Radio
Sirius XM Radio is America’s satellite radio company. SiriusXM broadcasts more than 135 satellite radio channels of commercial-free music, and premier sports, news, talk, entertainment, traffic, weather, and data services to over 21 million subscribers. SiriusXM offers an array of content from many of the biggest names in entertainment, as well as from professional sports leagues, major colleges, and national news and talk providers.

SiriusXM programming is available on more than 800 devices, including pre-installed and after-market radios in cars, trucks, boats and aircraft, smartphones and mobile devices, and consumer electronics products for homes and offices. SiriusXM programming is also available at siriusxm.com, and on Apple, BlackBerry and Android-powered mobile devices.

SiriusXM has arrangements with every major automaker and its radio products are available for sale at shop.siriusxm.com as well as retail locations nationwide.

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, our 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 our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. 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 competitive position versus other forms of audio and video entertainment; our ability to retain subscribers and maintain our average monthly revenue per subscriber; our dependence upon automakers and other third parties; the first quarter tragedy in Japan, which may have certain adverse effects on automakers, radio manufacturers and other third parties; our substantial indebtedness; and the useful life of our satellites, which, in most cases, are not insured. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2010, which is 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 we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

 

 

 

 

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Contact Information for Investors and Financial Media:

Investors:

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212 901 6718
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