Quarterly report pursuant to Section 13 or 15(d)

Intangible Assets

v2.4.0.8
Intangible Assets
 6 Months Ended
Jun. 30, 2014
Goodwill and Intangible Assets Disclosure [Abstract]  
Intangible Assets
Intangible Assets

We recorded intangible assets at fair value related to the Merger that were formerly held by XM. In November 2013, we recorded intangible assets at fair value as a result of the acquisition of the connected vehicle business of Agero. Our intangible assets include the following:
 
 
 
June 30, 2014
 
December 31, 2013
 
Weighted Average
Useful Lives
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
 
Gross
Carrying
Value
 
Accumulated
Amortization
 
Net Carrying
Value
Due to the Merger:
 
 
 
 
 
 
 
 
 
 
 
 
 
Indefinite life intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
FCC licenses
Indefinite
 
$
2,083,654

 
$
—

 
$
2,083,654

 
$
2,083,654

 
$
—

 
$
2,083,654

Trademark
Indefinite
 
250,000

 
—

 
250,000

 
250,000

 
—

 
250,000

Definite life intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
Subscriber relationships
9 years
 
380,000

 
(288,999
)
 
91,001

 
380,000

 
(271,372
)
 
108,628

Licensing agreements
9.1 years
 
45,289

 
(21,447
)
 
23,842

 
45,289

 
(19,604
)
 
25,685

Proprietary software
6 years
 
16,552

 
(13,678
)
 
2,874

 
16,552

 
(13,384
)
 
3,168

Developed technology
10 years
 
2,000

 
(1,183
)
 
817

 
2,000

 
(1,083
)
 
917

Leasehold interests
7.4 years
 
132

 
(105
)
 
27

 
132

 
(96
)
 
36

Due to acquisition of connected vehicle business of Agero:
 
 
 
 
 
 
 
 
 
 
 
 
 
Definite life intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
OEM relationships
15 years
 
220,000

 
(9,778
)
 
210,222

 
220,000

 
(2,444
)
 
217,556

Proprietary software
10 years
 
10,663

 
(982
)
 
9,681

 
10,663

 
(245
)
 
10,418

Total intangible assets
 
 
$
3,008,290

 
$
(336,172
)
 
$
2,672,118

 
$
3,008,290

 
$
(308,228
)
 
$
2,700,062



Indefinite Life Intangible Assets
We have identified our FCC licenses and the XM trademark as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our licenses expires:
FCC satellite licenses
 
Expiration year
SIRIUS FM-1
 
2017
SIRIUS FM-2
 
2017
SIRIUS FM-3
 
2017
SIRIUS FM-5
 
2017
SIRIUS FM-6 (1)
 

XM-1 (2)
 

XM-2 (3)
 

XM-3
 
2021
XM-4
 
2014
XM-5
 
2018

(1)
The FCC license for our FM-6 satellite will be issued for a period of eight years, beginning on the date we certify to the FCC that the satellite has been successfully placed into orbit and that the operations of the satellite fully conform to the terms and conditions of the space station radio authorization.
(2)
The FCC license for our XM-1 satellite expired on May 31, 2014. The FCC has granted us special temporary authority for approximately six months to operate our XM-1 satellite and prepare it for deorbiting maneuvers.
(3)
The FCC license for our XM-2 satellite expired on March 31, 2014. The FCC has granted us special temporary authority for approximately six months to operate our XM-2 satellite and perform deorbiting maneuvers.

Prior to expiration, we are required to apply for a renewal of our FCC licenses. The renewal and extension of our licenses is reasonably certain at minimal cost, which is expensed as incurred. Each of the FCC licenses authorizes us to use the broadcast spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time. We have filed an application to renew the license for our XM-4 satellite which expires in December 2014.  That application is being processed by the FCC and we expect it will be granted in due course.

In connection with the Merger, $250,000 of the purchase price was allocated to the XM trademark. As of June 30, 2014, there were no legal, regulatory or contractual limitations associated with the XM trademark.

Our annual impairment assessment of our indefinite intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized. As June 30, 2014, there were no indicators of impairment, and no impairment loss was recorded for intangible assets with indefinite lives during the three and six months ended June 30, 2014 and 2013.

Definite Life Intangible Assets
Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects the estimated pattern in which the economic benefits will be consumed. Other definite life intangible assets include certain licensing agreements, which are amortized over a weighted average useful life of 9.1 years on a straight-line basis. The fair value of the OEM relationships and proprietary software acquired from the acquisition of the connected vehicle business of Agero are being amortized over their estimated weighted average useful lives of 15 and 10 years, respectively.

Amortization expense for all definite life intangible assets was $13,860 and $12,345 for the three months ended June 30, 2014 and 2013, respectively, and $27,944 and $24,936 for the six months ended June 30, 2014 and 2013, respectively. Expected amortization expense for the remaining period in 2014, each of the fiscal years 2015 through 2018 and for periods thereafter is as follows:
Year ending December 31,
  
Amount
2014 (remaining)
  
$
27,072

2015
  
51,700

2016
  
48,545

2017
  
34,882

2018
  
19,463

Thereafter
  
156,802

Total definite life intangible assets, net
  
$
338,464