Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

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Related Party Transactions
 6 Months Ended
Jun. 30, 2017
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions 
In the normal course of business, we enter into transactions with related parties.

Liberty Media
As of June 30, 2017, Liberty Media beneficially owned, directly and indirectly, approximately 68% of the outstanding shares of our common stock and has two executives and one of its directors on our board of directors.  Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors.

Sirius XM Canada
On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada (the “Transaction”), which is now a privately held corporation.
Following the Transaction, Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, with the remainder of the voting power and equity interest held by two of Sirius XM Canada’s previous shareholders. The total consideration from Sirius XM to Sirius XM Canada, excluding transaction costs, during the three and six months ended June 30, 2017 was $308,526, which included $129,676 in cash and we issued 35,000 shares of our common stock with an aggregate value of $178,850 to the holders of the shares of Sirius XM Canada acquired in the Transaction. Sirius XM received common stock, non-voting common stock and preferred stock of Sirius XM Canada. Sirius XM now owns a total of 590,950 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share.
In connection with the Transaction, Sirius XM also made a contribution in the form of a loan to Sirius XM Canada in the aggregate amount of $130,794 on May 25, 2017. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. Such loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. In addition, the terms of the loan require Sirius XM Canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of C$10,000 at the last day of the financial year if all target dividends have been paid in full.
In connection with the Transaction, Sirius XM also entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, Sirius XM Canada will pay Sirius XM 25% of its gross revenues on a monthly basis through December 31, 2021 and 30% of its gross revenues on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, Sirius XM Canada will pay Sirius XM 5% of its gross revenues on a monthly basis. These agreements supersede and replace the existing agreements between Sirius XM Canada and its predecessors and Sirius XM.
Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our consolidated financial statements. As we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance, we do not meet the requirements for consolidation.
We had the following related party balances associated with Sirius XM Canada:
June 30, 2017

December 31, 2016
Related party current assets
$
12,085

 
$
6,170

Related party long-term assets
$
449,417

 
$
8,918

Related party current liabilities
$
2,840

 
$
2,840

Related party long-term liabilities
$
6,535

 
$
7,955


Under the legacy agreement, as of December 31, 2016, our related party current assets balance primarily consisted of activation fees and streaming and chipset costs for which we were reimbursed. As of June 30, 2017, our related party current asset balance included amounts due under the new royalty arrangement and certain amounts due prior to the recapitalization. Our related party long-term assets balance as of June 30, 2017 and December 31, 2016 included the carrying value of our investment balance in Sirius XM Canada of $313,698 and $8,615, respectively, and, as of June 30, 2017, also included $135,421 for the current value of the outstanding loan to Sirius XM Canada. Our related party liabilities as of each of June 30, 2017 and December 31, 2016 included $2,776 for the current portion of deferred revenue and $6,476 and $7,867, respectively, for the long-term portion of deferred revenue recorded as of the Merger date related to agreements with legacy XM Canada, now Sirius XM Canada.  These costs are being amortized on a straight line basis through 2020.
We recorded the following revenue and other (expense) income associated with Sirius XM Canada in our unaudited consolidated statements of comprehensive income:
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2017
 
2016
 
2017
 
2016
Revenue (a)(b)
$
28,129

 
$
10,667

 
$
40,345


$
20,578

Other (expense) income
 

 
 

 





Share of net (loss) earnings (b)
$
(5,197
)
 
$
2,177

 
$
(2,183
)

$
8,451

Dividends (c)
$
—

 
$
—

 
$
3,796


$
3,575

Interest income (d)
$
803


$
—


$
803


$
—

(a)
Prior to the Transaction, under our legacy agreements with Sirius XM Canada, we received a percentage-based royalty of 10% and 15% for certain types of subscription revenue earned by Sirius XM Canada for the use of Sirius and XM platforms, respectively, and additional royalties for premium services and royalties for activation fees and reimbursements for other charges.  We record revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income.
(b)
Prior to the Transaction, we recognized our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada as they occurred as Other revenue and as a component of Other (expense) income, respectively, in our unaudited consolidated statements of comprehensive income on a one month lag. As a result of the Transaction, there is no longer a one-month lag for recognizing our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada.
(c)
Sirius XM Canada paid dividends to us on a gross basis of $3,973 during the three months ended June 30, 2016, and $3,796 and $7,548 during the six months ended June 30, 2017 and 2016, respectively.  These dividends were first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance existed and then as Other (expense) income for the remaining portion. Sirius XM Canada did not pay any dividends to us during the three months ended June 30, 2017.
(d)
This interest income relates to the loan to Sirius XM Canada and is recorded as Other (expense) income in our unaudited consolidated statements of comprehensive income.