Quarterly report pursuant to Section 13 or 15(d)

Related Party Transactions

v2.4.0.8
Related Party Transactions
 9 Months Ended
Sep. 30, 2014
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions

In the normal course of business, we enter into transactions with related parties. Our related parties include Liberty Media, which has beneficially owned over 50% of our outstanding common stock since January 2013 and has two executives and one director 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 hold an equity method investment in Sirius XM Canada. We own approximately 47,300,000 shares of Sirius XM Canada, representing a 37.0% equity interest and a 25.0% voting interest. We primarily provide programming and content services to Sirius XM Canada.

During the nine months ended September 30, 2014, we evaluated our investment in M-Way Solutions GmbH ("M-Way") and determined that there was an other than temporary decline in its fair value. As a result, we reduced our investment balance to zero and recognized a loss of $2,342 in Other income (loss) in our unaudited consolidated statements of comprehensive income during the nine months ended September 30, 2014.

We had the following related party balances at September 30, 2014 and December 31, 2013:
 
Related party current assets
 
Related party long-term assets
 
Related party current liabilities
 
Related party current debt
 
Related party long-term liabilities
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
 
2014
 
2013
Liberty Media
$
53

 
$
278

 
$
—

 
$
—

 
$
257

 
$
15,766

 
$
10,992

 
$
10,959

 
$
—

 
$
—

Sirius XM Canada
3,953

 
8,867

 
1,679

 
27,619

 
3,011

 
4,554

 
—

 
—

 
14,345

 
16,337

M-Way
—

 
—

 
—

 
2,545

 
—

 
—

 
—

 
—

 
—

 
—

Total
$
4,006

 
$
9,145

 
$
1,679

 
$
30,164

 
$
3,268

 
$
20,320

 
$
10,992

 
$
10,959

 
$
14,345

 
$
16,337



Liberty Media
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. As of December 31, 2013, $15,702 was recorded to Related party current liabilities for the fair value of the derivative associated with the share repurchase agreement with Liberty Media as there were certain terms in the forward purchase contract that could cause the obligation to not be fulfilled. As a result, the instrument was a liability and was marked to fair value with any gain or loss recorded to our unaudited consolidated statements of comprehensive income. On April 25, 2014, we completed the final purchase installment under this share repurchase agreement and repurchased $340,000 of our shares of common stock from Liberty Media at a price of $3.66 per share. We recognized $34,485 to Loss on change in value of derivatives in our unaudited consolidated statements of comprehensive income related to this agreement during the nine months ended September 30, 2014.
    
We understand that Liberty Media held $11,000 in principal amount of our 7% Exchangeable Senior Subordinated Notes due 2014 at September 30, 2014 and December 31, 2013.

Sirius XM Canada
Our related party current asset balances primarily consist of deferred programming costs, accrued interest and chip set costs that we are reimbursed for. Our related party long-term asset balances primarily include our investment balance in Sirius XM Canada. As of September 30, 2014, $1,292 of our investment balance in Sirius XM Canada related to equity method goodwill and as of December 31, 2013, $26,161 of our investment balance related to equity method goodwill and intangible assets. Our related party liabilities as of September 30, 2014 and December 31, 2013 include $2,776 for the current portion of deferred revenue and $14,109 and $16,190, 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. The estimated fair value of deferred revenue from XM Canada as of the Merger date was approximately $34,000, which is amortized on a straight-line basis through 2020, the end of the expected term of the current existing agreements.

We recorded the following revenue and expenses associated with our related parties which were recorded in our unaudited consolidated statements of comprehensive income:
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Sirius XM Canada:
 
 
 
 
 
 
 
Revenue (a)
$
11,963

 
$
10,669

 
$
36,303

 
$
33,980

Share of net earnings (b)
$
6,302

 
$
1,449

 
$
9,610

 
$
2,831

Liberty Media:
 
 
 
 
 
 
 
Expenses (c)
$
(281
)
 
$
(3,619
)
 
$
(837
)
 
$
(12,978
)
(a)
Under our agreements with Sirius XM Canada, we receive a percentage-based royalty for certain types of subscription revenue earned by Sirius XM Canada for the distribution of Sirius and XM channels, royalties for activation fees and reimbursements for other charges. We record revenue from Sirius XM Canada as Other revenue in our unaudited consolidated statements of comprehensive income.
(b)
Our share of Sirius XM Canada's net earnings is recorded to Interest and investment income in our unaudited consolidated statements of comprehensive income on a one month lag. During the nine months ended September 30, 2014, our share of Sirius XM Canada’s net earnings included 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. Sirius XM Canada declared dividends to us of $4,591 and $4,727 during the three months ended September 30, 2014 and 2013, respectively, and $39,046 and $12,209 during the nine months ended September 30, 2014 and 2013, respectively. These dividends were recorded as a reduction to our investment balance in Sirius XM Canada through the second quarter of 2014 and as Interest and investment income beginning in the third quarter of 2014. This amount includes amortization related to the equity method intangible assets of $0 and $364 for the three months ended September 30, 2014 and 2013, respectively, and $363 and $1,091 for the nine months ended September 30, 2014 and 2013, respectively.
(c)
We recognize Interest expense associated with the portion of the 7% Exchangeable Senior Subordinated Notes due 2014 held by Liberty Media.