Sirius XM Holdings Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Composition of Certain Financial Statement Captions

Composition of Certain Financial Statement Captions

12 Months Ended

Dec. 31, 2014

Composition of Certain Financial Statement Captions

Composition of Certain Financial Statement Captions

Cash, Cash Equivalents and Investments

Cash, cash equivalents and investments consisted of the following:



	As of December 31,
	2013		2014
	(in thousands)
Cash and cash equivalents
Cash	$	89,176	$	72,487
Money market funds	98,437		89,113
Commercial paper	54,247		9,349
Corporate debt securities	3,895		5,008
Total cash and cash equivalents	$	245,755	$	175,957
Short-term investments
Commercial paper	$	47,526	$	45,443
Corporate debt securities	50,436		128,691
U.S. government and government agency debt securities	700		4,497
Total short-term investments	$	98,662	$	178,631
Long-term investments
Corporate debt securities	$	100,690	$	100,998
U.S. government and government agency debt securities	4,996		3,245
Total long-term investments	$	105,686	$	104,243
Total cash, cash equivalents and investments	$	450,103	$	458,831

Our short-term investments have maturities of twelve months or less and are classified as available-for-sale. Our long-term investments have maturities of greater than twelve months and are classified as available-for-sale.

The following tables summarizes our available-for-sale securities’ adjusted cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category as of December 31, 2013 and 2014.



	As of December 31, 2013
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Cash equivalents and marketable securities
Money market funds	$	98,437	$	—	$	—		$	98,437
Commercial paper	101,773		—		—			101,773
Corporate debt securities	155,273		6		(258		)	155,021
U.S. government and government agency debt securities	5,700		—		(4		)	5,696
Total cash equivalents and marketable securities	$	361,183	$	6	$	(262	)	$	360,927



	As of December 31, 2014
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(in thousands)
Cash equivalents and marketable securities
Money market funds	$	89,113	$	—	$	—		$	89,113
Commercial paper	54,792		—		—			54,792
Corporate debt securities	235,135		6		(444		)	234,697
U.S. government and government agency debt securities	7,751		—		(9		)	7,742
Total cash equivalents and marketable securities	$	386,791	$	6	$	(453	)	$	386,344

The following tables present available-for-sale investments by contractual maturity date as of December 31, 2013 and 2014.



	As of December 31, 2013
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	255,278	$	255,241
Due after one year through three years	105,905		105,686
Total	$	361,183	$	360,927



	As of December 31, 2014
	Adjusted Cost		Fair Value
	(in thousands)
Due in one year or less	$	282,206	$	282,101
Due after one year through three years	104,585		104,243
Total	$	386,791	$	386,344

The following tables summarize our available-for-sale securities’ fair value and gross unrealized losses aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position as of December 31, 2013 and 2014.



	As of December 31, 2013
	Twelve Months or Less					More than Twelve Months				Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
	(in thousands)
Money market funds	$	—	$	—		$	—	$	—	$	—	$	—
Commercial paper	—		—			—		—		—		—
Corporate debt securities	130,308		(258		)	—		—		130,308		(258		)
U.S. government and government agency debt securities	5,697		(4		)	—		—		5,697		(4		)
Total	$	136,005	$	(262	)	$	—	$	—	$	136,005	$	(262	)



	As of December 31, 2014
	Twelve Months or Less					More than Twelve Months					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)
Money market funds	$	—	$	—		$	—	$	—		$	—	$	—
Commercial paper	—		—			—		—			—		—
Corporate debt securities	192,699		(422		)	12,148		(22		)	204,847		(444		)
U.S. government and government agency debt securities	5,240		(9		)	—		—			5,240		(9		)
Total	$	197,939	$	(431	)	$	12,148	$	(22	)	$	210,087	$	(453	)

Our investment policy requires investments to be investment grade, primarily rated “A1” by Standard & Poor’s or “P1” by Moody’s or better for short-term investments and rated “A” by Standard & Poor’s or “A2” by Moody’s or better for long-term investments, with the objective of minimizing the potential risk of principal loss. In addition, the investment policy limits the amount of credit exposure to any one issuer.

The unrealized losses on our available-for-sale securities as of December 31, 2014 were primarily a result of unfavorable changes in interest rates subsequent to the initial purchase of these securities. As of December 31, 2014, we owned 151 securities that were in an unrealized loss position. We do not intend nor expect to need to sell these securities before recovering the associated unrealized losses. We expect to recover the full carrying value of these securities. As a result, no portion of the unrealized losses at December 31, 2014 is deemed to be other-than-temporary and the unrealized losses are not deemed to be credit losses. When evaluating the investments for other-than-temporary impairment, we review factors such as the length of time and extent to which fair value has been below cost basis, the financial condition of the issuer and any changes thereto, and our intent to sell, or whether it is more likely than not we will be required to sell, the investment before recovery of the investment’s amortized cost basis. During the twelve months ended months ended December 31, 2014, we did not recognize any impairment charges.

Accounts Receivable



	As of December 31,
	2013			2014
	(in thousands)
Accounts receivable, net
Accounts receivable	$	165,295		$	219,655
Allowance for doubtful accounts	(1,272		)	(1,218		)
Total accounts receivable, net	$	164,023		$	218,437

The following table summarizes our beginning allowance for doubtful accounts balance for each period, additions, write-offs net of recoveries and the balance at the end of each period for the twelve months ended January 31, 2013, the eleven months ended December 31, 2013 and the twelve months ended December 31, 2014:



Allowance for Doubtful Accounts	Balance at Beginning of Period		Additions	Write-offs, Net of Recoveries		Balance at End of Period
	(in thousands)
For the twelve months ended January 31, 2013	$	590	659	(488	)	$	761
For the eleven months ended December 31, 2013	$	761	948	(437	)	$	1,272
For the twelve months ended December 31, 2014	$	1,272	1,064	(1,118	)	$	1,218

Property and Equipment, net



	As of December 31,
	2013			2014
	(in thousands)
Property and equipment
Servers, computers and other related equipment	$	27,361		$	39,890
Leasehold improvements	11,314			25,893
Office furniture and equipment	2,248			2,721
Construction in progress	13,575			5,075
Software developed for internal use	2,173			4,519
Total property and equipment	$	56,671		$	78,098
Less accumulated depreciation and amortization	(21,520		)	(35,177		)
Total property and equipment, net	$	35,151		$	42,921

Depreciation expenses totaled $7.1 million, $9.7 million and $14.7 million for the twelve months ended January 31, 2013, the eleven months ended December 31, 2013 and the twelve months ended December 31, 2014, respectively. There were no material write-offs during the twelve months ended January 31, 2013, the eleven months ended December 31, 2013 or the twelve months ended December 31, 2014.

Software developed for internal use generally has an expected useful life of three years from the date placed in service. As of December 31, 2013 and 2014 the net carrying amount was $1.5 million and $2.8 million, including accumulated amortization of $0.7 million and $1.7 million. Amortization expense for the twelve months ended January 31, 2013, the eleven months ended December 31, 2013 and the twelve months ended December 31, 2014 was $0.1 million, $0.6 million and $1.1 million, respectively.

Other Long-Term Liabilities

Other long-term liabilities consisted of the following as of December 31, 2014:



	As of December 31,
	2013		2014
	(in thousands)
Other long-term liabilities
Long-term deferred rent	$	8,352	$	15,068
Other	746		1,705
Total other long-term liabilities	$	9,098	$	16,773

For operating leases that include escalation clauses over the term of the lease, tenant improvement reimbursements and rent abatement periods, we recognize rent expense on a straight-line basis over the lease term including expected renewal periods. The difference between rent expense and rent payments is recorded as deferred rent.