Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v2.4.0.8
Commitments and Contingencies
 9 Months Ended
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of September 30, 2013:
 
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
Long-term debt obligations
$
540,605

 
$
508,911

 
$
6,593

 
$
3,359

 
$
40,000

 
$
2,650,000

 
$
3,749,468

Cash interest payments
60,895

 
179,741

 
143,596

 
143,403

 
144,103

 
537,875

 
1,209,613

Satellite and transmission
35,812

 
29,123

 
13,871

 
4,321

 
3,404

 
20,334

 
106,865

Programming and content
45,565

 
237,143

 
212,880

 
92,278

 
72,800

 
168,483

 
829,149

Marketing and distribution
6,276

 
22,252

 
14,166

 
9,301

 
6,650

 
12,775

 
71,420

Satellite incentive payments
2,117

 
12,377

 
11,478

 
12,311

 
13,259

 
69,066

 
120,608

Operating lease obligations
9,763

 
36,994

 
41,790

 
35,593

 
29,357

 
247,016

 
400,513

Other
19,227

 
34,243

 
9,072

 
2,879

 
829

 
390

 
66,640

Total (1)
$
720,260

 
$
1,060,784

 
$
453,446

 
$
303,445

 
$
310,402

 
$
3,705,939

 
$
6,554,276


(1)
The table does not include our reserve for uncertain tax positions, which at September 30, 2013 totaled $1,432, as the specific timing of any cash payments cannot be projected with reasonable certainty.

Long-term debt obligations.    Long-term debt obligations include principal payments on outstanding debt and capital lease obligations.

Cash interest payments.    Cash interest payments include interest due on outstanding debt and capital lease payments through maturity.

Satellite and transmission.    We have entered into agreements with third parties to operate and maintain the off-site satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater networks. We have also entered into various agreements to design and construct a satellite and related launch vehicle for use in our systems.

Programming and content.    We have entered into various programming agreements. Under the terms of these agreements, our obligations include fixed payments, advertising commitments and revenue sharing arrangements. Our future revenue sharing costs are dependent upon many factors and are difficult to estimate; therefore, they are not included in our minimum contractual cash commitments.

Marketing and distribution.    We have entered into various marketing, sponsorship and distribution agreements to promote our brand and are obligated to make payments to sponsors, retailers, automakers and radio manufacturers under these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors. We also reimburse automakers for certain engineering and development costs associated with the incorporation of satellite radios into vehicles they manufacture. In addition, in the event certain new products are not shipped by a distributor to its customers within 90 days of the distributor’s receipt of goods, we have agreed to purchase and take title to the product.
 
Satellite incentive payments.    Boeing Satellite Systems International, Inc., the manufacturer of four of XM’s in-orbit satellites, may be entitled to future in-orbit performance payments with respect to two of XM’s satellites. As of September 30, 2013, we have accrued $27,075 related to contingent in-orbit performance payments for our XM-3 and XM-4 satellites based on expected operating performance over their fifteen-year design life. Boeing may also be entitled to an additional $10,000 if our XM-4 satellite continues to operate above baseline specifications during the five years beyond the satellite’s fifteen-year design life.

Space Systems/Loral, a manufacturer of our in-orbit satellites, may be entitled to future in-orbit performance payments. As of September 30, 2013, we have accrued $6,993 and $21,787 related to contingent performance payments for our FM-5 and XM-5 satellites, respectively, based on their expected operating performance over their fifteen-year design life.

Operating lease obligations.    We have entered into both cancelable and non-cancelable operating leases for office space, equipment and terrestrial repeaters. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years, and certain leases that have options to renew. The effect of the rent holidays and rent concessions are recognized on a straight-line basis over the lease term, including reasonably assured renewal periods.

Other.    We have entered into various agreements with third parties for general operating purposes. In addition to the minimum contractual cash commitments described above, we have entered into agreements with other variable cost arrangements. These future costs are dependent upon many factors, including subscriber growth, and are difficult to anticipate; however, these costs may be substantial. We may enter into additional programming, distribution, marketing and other agreements that contain similar variable cost provisions.

We do not have any other significant off-balance sheet financing arrangements that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

Legal Proceedings
State Consumer Investigations. A Multistate Working Group of 32 State Attorneys General, led by the Attorney General of the State of Ohio, is investigating certain of our consumer practices. The investigation focuses on practices relating to the cancellation of subscriptions; automatic renewal of subscriptions; charging, billing, collecting, and refunding or crediting of payments from consumers; and soliciting customers.
A separate investigation into our consumer practices is being conducted by the Attorneys General of the State of Florida and the State of New York. We are cooperating with these investigations and believe our consumer practices comply with all applicable federal and state laws and regulations.
Other Matters. In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property. None of these other actions are, in our opinion, likely to have a material adverse effect on our business, financial condition or results of operations.