Quarterly report pursuant to Section 13 or 15(d)

Commitments and Contingencies

v2.4.0.8
Commitments and Contingencies
 3 Months Ended
Mar. 31, 2014
Commitments and Contingencies Disclosure [Abstract]  
Commitments and Contingencies
Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of March 31, 2014:
 
2014
 
2015
 
2016
 
2017
 
2018
 
Thereafter
 
Total
Debt obligations
$
508,030

 
$
7,482

 
$
4,265

 
$
310,928

 
$
79

 
$
2,650,000

 
$
3,480,784

Cash interest payments
154,711

 
149,256

 
149,059

 
149,101

 
138,063

 
399,813

 
1,140,003

Satellite and transmission
30,172

 
14,062

 
4,326

 
3,404

 
3,992

 
16,524

 
72,480

Programming and content
166,602

 
223,583

 
101,917

 
74,166

 
60,150

 
108,333

 
734,751

Marketing and distribution
19,571

 
15,793

 
10,053

 
6,724

 
6,186

 
6,639

 
64,966

Satellite incentive payments
9,739

 
11,439

 
12,268

 
13,212

 
14,212

 
55,398

 
116,268

Operating lease obligations
28,417

 
44,158

 
37,667

 
31,232

 
29,312

 
223,660

 
394,446

Other
374,945

 
11,518

 
4,135

 
1,345

 
846

 
80

 
392,869

Total (1)
$
1,292,187

 
$
477,291

 
$
323,690

 
$
590,112

 
$
252,840

 
$
3,460,447

 
$
6,396,567


(1)
The table does not include our reserve for uncertain tax positions, which at March 31, 2014 totaled $1,432, as the specific timing of any cash payments cannot be projected with reasonable certainty.

Debt obligations.    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.

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 new 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 our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to two satellites used in the XM system, XM-3 and XM-4, based on the expected operating performance exceeding 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, the manufacturer of six of our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to three of our satellites, XM-5, FM-5 and FM-6, based on their expected operating performance exceeding 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 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.

In our opinion, the result of these investigations, including a possible settlement, will likely not have a material adverse effect on our business, financial condition or results of operations.
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 matters, in our opinion, is likely to have a material adverse effect on our business, financial condition or results of operations.