Annual report pursuant to Section 13 and 15(d)

Related Party Transactions

v3.6.0.2
Related Party Transactions
12 Months Ended
Dec. 31, 2016
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 December 31, 2016, Liberty Media beneficially owned, directly and indirectly, approximately 67% 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. We have not had any related party transactions with Liberty Media during the years ended December 31, 2016 and 2015.
On October 9, 2013, we entered into an agreement with Liberty Media to repurchase $500,000 of our common stock from Liberty Media. Pursuant to that agreement, we repurchased $160,000 of our common stock from Liberty Media in 2013 and in April 2014, we completed the final purchase installment under this share repurchase agreement and repurchased the remaining $340,000 of our shares of common stock from Liberty Media at a price of $3.66 per share. As there were certain terms in the forward purchase contract that could have caused the obligation to not be fulfilled, the instrument was recorded as a liability and was marked to fair value with $34,485 recorded to Loss on change in value of derivatives within our consolidated statements of comprehensive income during the year ended December 31, 2014.
During the year ended December 31, 2014, we recognized $1,025 in Interest expense associated with the portion of our 7% Exchangeable Senior Subordinated Notes due 2014 (the “Exchangeable Notes”) held by Liberty Media through November 2014.

Sirius XM Canada
We hold an equity method investment in Sirius XM Canada.  As of December 31, 2016, we owned approximately 47,300 of Sirius XM Canada’s Class A shares on a converted basis, representing an approximate 37% equity interest and an approximate 25% voting interest.  We primarily provide programming and content services to Sirius XM Canada and are reimbursed from Sirius XM Canada for certain product development costs, production and distribution of chipset radios, as well as for information technology and streaming support costs. Refer to Note 1 Business & Basis of Presentation for information on the pending transaction with Sirius XM Canada.
Investments in which we have the ability to exercise significant influence but not control are accounted for pursuant to the equity method of accounting. We recognize our proportionate share of earnings or losses of Sirius XM Canada as they occur as a component of Other income in our consolidated statements of comprehensive income on a one month lag.
The difference between our investment and our share of the fair value of the underlying net assets of Sirius XM Canada is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. We follow ASC 350, Intangibles - Goodwill and Other, which requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. The amortization of equity method finite-lived intangible assets is recorded in Interest and investment income in our consolidated statements of comprehensive income. We periodically evaluate our equity method investments to determine if there has been an other-than temporary decline in fair value below carrying value. Equity method finite-lived intangibles, indefinite-lived intangibles and goodwill are included in the carrying amount of the investment.
We had the following related party balances associated with Sirius XM Canada:
 
December 31, 2016
 
December 31, 2015
Related party current assets
$
6,170

 
$
5,941

Related party long-term assets
$
8,918

 
$

Related party current liabilities
$
2,840

 
$
2,840

Related party long-term liabilities
$
7,955

 
$
10,795


Our related party current asset balances primarily consist of activation fees and streaming and chipset costs for which we are reimbursed.  Our related party long-term asset balance as of December 31, 2016 primarily included our investment balance in Sirius XM Canada. Our related party liabilities as of December 31, 2016 and 2015 included $2,776 for the current portion of deferred revenue and $7,867 and $10,639, respectively, for the long-term portion of deferred revenue recorded as of the Merger date related to agreements with 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 income associated with Sirius XM Canada in our consolidated statements of comprehensive income:
 
For the Years Ended December 31,
 
2016
 
2015
 
2014
Revenue (a)
$
45,962


$
56,397

 
$
49,691

Other income





 
 

Share of net earnings (b)
$
12,529


$

 
$
7,889

Dividends (c)
$
3,575


$
12,645

 
$
7,628

(a)
Under our agreements with Sirius XM Canada, we currently receive a percentage-based royalty of 10% and 15% for certain types of subscription revenue earned by Sirius XM Canada for 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 consolidated statements of comprehensive income.  The current license and services agreement entered into with Sirius Canada will expire in 2017.  The current license agreement entered into with XM Canada will expire in 2020.
(b)
We recognize our proportionate share of earnings or losses of Sirius XM Canada as they occur as a component of Other income in our consolidated statements of comprehensive income on a one month lag. For the year ended December 31, 2014, this amount included amortization related to the equity method intangible assets of $363 and a gain of $1,251 related to the fair value received in excess of the carrying value associated with the redemption of our investment in Sirius XM Canada's 8% convertible unsecured subordinated debentures in February 2014.
(c)
Pursuant to the Arrangement Agreement, Sirius XM Canada did not pay any dividends during the second half of the year ended December 31, 2016. Sirius XM Canada paid gross dividends to us of $7,548, $15,645 and $43,492 during the years ended December 31, 2016, 2015 and 2014, 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 income for the remaining portion.