Current Report





 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 


 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 7, 2012

 

SIRIUS XM RADIO INC.

(Exact Name of Registrant as Specified in Charter)


 

 

 

Delaware

001-34295

52-1700207

(State or other Jurisdiction
of Incorporation)

(Commission File Number)

(I.R.S. Employer
Identification No.)


 

 

1221 Avenue of the Americas, 36th Fl., New York, NY

10020

(Address of Principal Executive Offices)

(Zip Code)


 

Registrant’s telephone number, including area code: (212) 584-5100

 


          Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))





 

 

Item 2.02

Results of Operations and Financial Condition

          On August 7, 2012, we reported our financial and operating results for the three and six months ended June 30, 2012. These results are discussed in the press release attached hereto as Exhibit 99.1, which is incorporated by reference in its entirety.

 

 

Item 9.01

Financial Statements and Exhibits

          (a) Not Applicable.

          (b) Not Applicable.

          (c) Not Applicable.

          (d) Exhibits.

          The Exhibit Index attached hereto is incorporated herein.

2


SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

 

 

 

SIRIUS XM RADIO INC.

 

 

 

 

 

By: 

/s/ 

Patrick L. Donnelly

 

 



 

 

 

Patrick L. Donnelly

 

 

 

Executive Vice President, General

 

 

 

Counsel and Secretary

Dated: August 7, 2012

3


EXHIBITS

 

 

 

Exhibit

 

Description of Exhibit


 


99.1

 

Press Release dated August 7, 2012.

4


Exhibit 99.1

(SIRIUSXM LOGO)

SiriusXM Reports Second Quarter 2012 Results

 

 

 

 

Subscribers Grow by 622,000 to a Record 22.9 Million

 

Record Revenue of $838 Million, Up 13%

 

Net Income of $3.1 Billion Includes a $3.0 Billion Income Tax Benefit

 

Adjusted EBITDA Grows 28% to a Record $237 Million

 

Free Cash Flow Grows 39% to a Record $230 Million

 

Company Raises 2012 Adjusted EBITDA Guidance to Approximately $900 Million

NEW YORK – August 7, 2012 – Sirius XM Radio (NASDAQ: SIRI) today announced second quarter 2012 financial and operating results, including revenue of $838 million, up 13% over second quarter 2011 revenue of $744 million. Net income for the second quarter 2012 and 2011 was $3.1 billion and $173 million, respectively. Adjusted EBITDA for the second quarter of 2012 was $237 million, up 28% from $185 million in the second quarter of 2011.

“SiriusXM continued its exceptional performance in the second quarter, adding over 600,000 subscribers, which represents a post-merger record, despite the mixed macroeconomic trends. We also attained a record-level free cash flow of $230 million - the highest single quarterly free cash flow figure in SiriusXM’s history. We are very pleased with the strong operating results we have delivered since the merger, especially our performance in 2012, as we have grown revenue, tightly controlled expenses, and produced substantial growth in adjusted EBITDA and free cash flow,” remarked Mel Karmazin, Chief Executive Officer, SiriusXM.

“We’ve also raised our subscriber, revenue, and adjusted EBITDA guidance as the Company exceeds its targets and as subscribers demonstrate how much they love our great content. We are excited to deliver our new SiriusXM On-Demand service to our subscribers via the internet and smartphones, and our program to launch a personalized music feature via these same channels by the end of the year is on track. We intend to provide more innovative ways for our subscribers to access our best-in-class content, and we believe this focus on satisfying subscribers will also satisfy our shareholders,” said Karmazin.

Additional highlights from the second quarter include:

 

 

 

 

Record subscriber growth. Self-pay net subscriber additions improved by 28% year-over-year to 463,000, pushing the self-pay subscriber base to an all-time high of 18.7 million subscribers. The total paid subscriber base rose to a record high 22.9 million subscribers. Strong auto sales helped lift total paid and unpaid trial inventory by approximately 400,000 from the first quarter to 6.1 million.

 

Churn and conversion stable. Self-pay monthly churn was 1.9% in the second quarter of 2012, unchanged from the 1.9% reported in the second quarter of 2011. The new




 

 

 

 

 

vehicle consumer conversion rate was 45% in the second quarter of 2012, also unchanged from the second quarter of 2011.

 

Free cash flow grows to record level. Free cash flow was $230 million in the second quarter of 2012, an improvement of 39% from the $165 million recorded in the second quarter of 2011, and SiriusXM attained an all-time record for free cash flow generated in a single quarter in the history of satellite radio.

 

Significant net income items . Included in the second quarter 2012 net income was an income tax benefit of approximately $3.0 billion related to a reversal of substantially all of the Company’s deferred income tax valuation allowance. On a comparative basis, the second quarter 2011 net income included a gain of $84 million associated with the Canadian merger of Sirius and XM.

“We ended the second quarter with $868 million of cash, after the repurchase of approximately $101 million in aggregate principal amount of our debt during the quarter. Our leverage at the end of the second quarter of 2012 improved to 3.6x our adjusted EBITDA,” said David Frear, SiriusXM’s Executive Vice President and Chief Financial Officer. “We called the remaining $186 million of our 9.75% Senior Secured Notes due 2015 for redemption on September 1, 2012. Following the repayment of these notes, our gross debt will stand at approximately $2.7 billion and our leverage, based upon our 2012 adjusted EBITDA guidance, will be at our 3.0x target, a significant improvement from 4.4x one year ago.”

2012 GUIDANCE

“Our increase in adjusted EBITDA guidance to approximately $900 million indicates strong confidence in our ability to continue to execute in the back half of the year,” said Karmazin. “We were also pleased to raise our subscriber guidance for the second time this year just last month.”

The Company’s 2012 subscriber, revenue, adjusted EBITDA and free cash flow guidance are as follows:

 

 

 

 

Net subscriber growth approaching 1.6 million,

 

Revenue approaching $3.4 billion,

 

Adjusted EBITDA of approximately $900 million, and

 

Free cash flow of approximately $700 million.




 

SECOND QUARTER 2012 RESULTS

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

(in thousands, except per share data)

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

730,285

 

$

639,642

 

$

1,430,526

 

$

1,262,080

 

Advertising revenue, net of agency fees

 

 

20,786

 

 

18,227

 

 

39,456

 

 

34,785

 

Equipment revenue

 

 

16,417

 

 

17,022

 

 

33,370

 

 

32,889

 

Other revenue

 

 

70,055

 

 

69,506

 

 

138,912

 

 

138,482

 

 

 



 



 



 



 

Total revenue

 

 

837,543

 

 

744,397

 

 

1,642,264

 

 

1,468,236

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

135,426

 

 

116,741

 

 

267,537

 

 

223,670

 

Programming and content

 

 

65,169

 

 

67,399

 

 

135,265

 

 

140,358

 

Customer service and billing

 

 

68,679

 

 

62,592

 

 

134,866

 

 

128,429

 

Satellite and transmission

 

 

17,551

 

 

18,998

 

 

35,661

 

 

37,558

 

Cost of equipment

 

 

7,150

 

 

7,601

 

 

12,956

 

 

14,006

 

Subscriber acquisition costs

 

 

119,475

 

 

105,162

 

 

235,596

 

 

210,432

 

Sales and marketing

 

 

57,422

 

 

51,442

 

 

115,781

 

 

99,261

 

Engineering, design and development

 

 

6,272

 

 

13,939

 

 

18,962

 

 

25,074

 

General and administrative

 

 

65,664

 

 

60,479

 

 

125,550

 

 

116,831

 

Depreciation and amortization

 

 

66,793

 

 

67,062

 

 

132,910

 

 

135,462

 

 

 



 



 



 



 

Total operating expenses

 

 

609,601

 

 

571,415

 

 

1,215,084

 

 

1,131,081

 

 

 



 



 



 



 

Income from operations

 

 

227,942

 

 

172,982

 

 

427,180

 

 

337,155

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net of amounts capitalized

 

 

(72,770

)

 

(76,196

)

 

(149,742

)

 

(154,414

)

Loss on extinguishment of debt and credit facilities, net

 

 

(15,650

)

 

(1,212

)

 

(25,621

)

 

(7,206

)

Interest and investment (loss) income

 

 

(1,728

)

 

80,182

 

 

(2,871

)

 

78,298

 

Other (loss) income

 

 

(173

)

 

183

 

 

(749

)

 

1,799

 

 

 



 



 



 



 

Total other (expense) income

 

 

(90,321

)

 

2,957

 

 

(178,983

)

 

(81,523

)

 

 



 



 



 



 

Income before income taxes

 

 

137,621

 

 

175,939

 

 

248,197

 

 

255,632

 

Income tax benefit (expense)

 

 

2,996,549

 

 

(2,620

)

 

2,993,747

 

 

(4,192

)

 

 



 



 



 



 

Net income

 

$

3,134,170

 

$

173,319

 

$

3,241,944

 

$

251,440

 

 

 



 



 



 



 

Realized loss on XM Canada investment foreign currency adjustment, net of tax

 

 

 

 

6,072

 

 

 

 

6,072

 

Foreign currency translation adjustment, net of tax

 

 

18

 

 

10

 

 

(38

)

 

77

 

 

 



 



 



 



 

Comprehensive income

 

$

3,134,188

 

$

179,401

 

$

3,241,906

 

$

257,589

 

 

 



 



 



 



 

Net income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.83

 

$

0.05

 

$

0.86

 

$

0.07

 

 

 



 



 



 



 

Diluted

 

$

0.48

 

$

0.03

 

$

0.50

 

$

0.04

 

 

 



 



 



 



 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

3,765,573

 

 

3,744,375

 

 

3,766,508

 

 

3,739,731

 

 

 



 



 



 



 

Diluted

 

 

6,506,159

 

 

6,804,297

 

 

6,521,614

 

 

6,790,729

 

 

 



 



 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

June 30, 2012

 

December 31, 2011

 

 

 


 


 

(in thousands, except share and per share data)

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

868,330

 

$

773,990

 

Accounts receivable, net

 

 

113,705

 

 

101,705

 

Receivables from distributors

 

 

97,076

 

 

84,817

 

Inventory, net

 

 

36,884

 

 

36,711

 

Prepaid expenses

 

 

163,009

 

 

125,967

 

Related party current assets

 

 

7,326

 

 

14,702

 

Deferred tax asset

 

 

899,485

 

 

132,727

 

Other current assets

 

 

8,600

 

 

6,335

 

 

 



 



 

Total current assets

 

 

2,194,415

 

 

1,276,954

 

Property and equipment, net

 

 

1,631,110

 

 

1,673,919

 

Long-term restricted investments

 

 

3,973

 

 

3,973

 

Deferred financing fees, net

 

 

35,552

 

 

42,046

 

Intangible assets, net

 

 

2,546,061

 

 

2,573,638

 

Goodwill

 

 

1,815,673

 

 

1,834,856

 

Related party long-term assets

 

 

51,827

 

 

54,953

 

Long-term deferred tax asset

 

 

1,237,393

 

 

 

Other long-term assets

 

 

19,077

 

 

35,657

 

 

 



 



 

Total assets

 

$

9,535,081

 

$

7,495,996

 

 

 



 



 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

491,704

 

$

543,193

 

Accrued interest

 

 

62,971

 

 

70,405

 

Current portion of deferred revenue

 

 

1,440,983

 

 

1,333,965

 

Current portion of deferred credit on executory contracts

 

 

278,401

 

 

284,108

 

Current maturities of long-term debt

 

 

5,158

 

 

1,623

 

Related party current liabilities

 

 

15,803

 

 

14,302

 

 

 



 



 

Total current liabilities

 

 

2,295,020

 

 

2,247,596

 

Deferred revenue

 

 

170,525

 

 

198,135

 

Deferred credit on executory contracts

 

 

76,458

 

 

218,199

 

Long-term debt

 

 

2,543,249

 

 

2,683,563

 

Long-term related party debt

 

 

330,393

 

 

328,788

 

Deferred tax liability

 

 

 

 

1,011,084

 

Related party long-term liabilities

 

 

20,354

 

 

21,741

 

Other long-term liabilities

 

 

85,492

 

 

82,745

 

 

 



 



 

Total liabilities

 

 

5,521,491

 

 

6,791,851

 

 

 



 



 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 50,000,000 authorized at June 30, 2012 and December 31, 2011:

 

 

 

 

 

 

 

Series A convertible preferred stock; no shares issued and outstanding at June 30, 2012 and December 31, 2011

 

 

 

 

 

Convertible perpetual preferred stock, series B-1 (liquidation preference of $0.001 per share at June 30, 2012 and December 31, 2011); 12,500,000 shares issued and outstanding at June 30, 2012 and December 31, 2011

 

 

13

 

 

13

 

Common stock, par value $0.001; 9,000,000,000 shares authorized at June 30, 2012 and December 31, 2011; 3,824,178,762 and 3,753,201,929 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

 

 

3,824

 

 

3,753

 

Accumulated other comprehensive income, net of tax

 

 

33

 

 

71

 

Additional paid-in capital

 

 

10,551,868

 

 

10,484,400

 

Accumulated deficit

 

 

(6,542,148

)

 

(9,784,092

)

 

 



 



 

Total stockholders’ equity

 

 

4,013,590

 

 

704,145

 

 

 



 



 

Total liabilities and stockholders’ equity

 

$

9,535,081

 

$

7,495,996

 

 

 



 



 



SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

 

 

 

 

 

 

 

 

For the Six Months Ended June 30,

 

 

 


 

(in thousands)

 

2012

 

2011

 

 

 


 


 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income

 

$

3,241,944

 

$

251,440

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

132,910

 

 

135,462

 

Non-cash interest expense, net of amortization of premium

 

 

21,031

 

 

19,234

 

Provision for doubtful accounts

 

 

14,879

 

 

17,744

 

Amortization of deferred income related to equity method investment

 

 

(1,388

)

 

(1,388

)

Loss on extinguishment of debt and credit facilities, net

 

 

25,621

 

 

7,206

 

Gain on merger of unconsolidated entities

 

 

 

 

(83,718

)

Loss on unconsolidated entity investments, net

 

 

3,469

 

 

6,045

 

Loss on disposal of assets

 

 

488

 

 

269

 

Share-based payment expense

 

 

28,869

 

 

23,591

 

Deferred income taxes

 

 

(2,995,542

)

 

2,223

 

Other non-cash purchase price adjustments

 

 

(147,328

)

 

(134,862

)

Distribution from investment in unconsolidated entity

 

 

 

 

4,849

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

 

(26,879

)

 

3,080

 

Receivables from distributors

 

 

(12,259

)

 

(13,438

)

Inventory

 

 

(173

)

 

(10,399

)

Related party assets

 

 

6,813

 

 

31,076

 

Prepaid expenses and other current assets

 

 

(39,308

)

 

(20,871

)

Other long-term assets

 

 

16,579

 

 

15,974

 

Accounts payable and accrued expenses

 

 

(51,596

)

 

(101,552

)

Accrued interest

 

 

(7,434

)

 

(1,888

)

Deferred revenue

 

 

79,288

 

 

63,649

 

Related party liabilities

 

 

1,501

 

 

(42

)

Other long-term liabilities

 

 

2,238

 

 

(194

)

 

 



 



 

Net cash provided by operating activities

 

 

293,723

 

 

213,490

 

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Additions to property and equipment

 

 

(48,944

)

 

(75,298

)

Release of restricted investments

 

 

 

 

250

 

Return of capital from investment in unconsolidated entity

 

 

 

 

10,117

 

 

 



 



 

Net cash used in investing activities

 

 

(48,944

)

 

(64,931

)

 

 



 



 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from exercise of stock options

 

 

38,671

 

 

6,921

 

Payment of premiums on redemption of debt

 

 

(19,211

)

 

(5,020

)

Repayment of long-term borrowings

 

 

(169,899

)

 

(208,824

)

 

 



 



 

Net cash used in financing activities

 

 

(150,439

)

 

(206,923

)

 

 



 



 

Net increase (decrease) in cash and cash equivalents

 

 

94,340

 

 

(58,364

)

Cash and cash equivalents at beginning of period

 

 

773,990

 

 

586,691

 

 

 



 



 

Cash and cash equivalents at end of period

 

$

868,330

 

$

528,327

 

 

 



 



 



          Subscriber Data and Operating Metrics

The following table contains actual subscriber data and key operating metrics for the three and six months ended June 30, 2012 and 2011, respectively:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended June 30,

 

For the Six Months Ended June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning subscribers

 

 

22,297,420

 

 

20,564,028

 

 

21,892,824

 

 

20,190,964

 

Gross subscriber additions

 

 

2,481,004

 

 

2,179,348

 

 

4,642,697

 

 

4,231,715

 

Deactivated subscribers

 

 

(1,858,962

)

 

(1,727,201

)

 

(3,616,059

)

 

(3,406,504

)

 

 



 



 



 



 

Net additions

 

 

622,042

 

 

452,147

 

 

1,026,638

 

 

825,211

 

 

 



 



 



 



 

Ending subscribers

 

 

22,919,462

 

 

21,016,175

 

 

22,919,462

 

 

21,016,175

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

18,670,966

 

 

17,170,306

 

 

18,670,966

 

 

17,170,306

 

Paid promotional

 

 

4,248,496

 

 

3,845,869

 

 

4,248,496

 

 

3,845,869

 

 

 



 



 



 



 

Ending subscribers

 

 

22,919,462

 

 

21,016,175

 

 

22,919,462

 

 

21,016,175

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Self-pay

 

 

462,876

 

 

362,663

 

 

762,224

 

 

483,507

 

Paid promotional

 

 

159,166

 

 

89,484

 

 

264,414

 

 

341,704

 

 

 



 



 



 



 

Net additions

 

 

622,042

 

 

452,147

 

 

1,026,638

 

 

825,211

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

22,553,702

 

 

20,715,630

 

 

22,272,282

 

 

20,475,720

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average self-pay monthly churn

 

 

1.9

%

 

1.9

%

 

1.9

%

 

1.9

%

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New vehicle consumer conversion rate

 

 

45

%

 

45

%

 

45

%

 

45

%

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

$

11.97

 

$

11.53

 

$

11.87

 

$

11.53

 

SAC, per gross subscriber addition

 

$

54

 

$

54

 

$

57

 

$

56

 

          Subscribers. The improvement was due to the 14% increase in gross subscriber additions, primarily resulting from new vehicle shipments and light vehicle sales, as well as an increase in conversions from unpaid promotional trials and returning subscriber activations including consumers in previously owned cars. This increase in gross additions was partially offset by an increase in deactivations. The increase in deactivations was primarily due to paid promotional trial deactivations stemming from the growth of paid trials, along with growth in our subscriber base. Self-pay net additions increased 28% as trial conversions increased and the self-pay churn rate declined.

          Average Self-pay Monthly Churn for the three months ended June 30, 2012 and 2011 was 1.9%.

          New Vehicle Consumer Conversion Rate for the three months ended June 30, 2012 and 2011 was 45%.

          ARPU increased primarily due to the increase in certain subscription rates beginning in January 2012 and an increase in sales of premium services, including Premier packages, data services and streaming. These factors were partially offset by an increase in subscriber retention programs, the number of subscribers on promotional plans and a decrease in the contribution from the U.S. Music Royalty Fee due to the December 2010 reduction in the rate from 15.3% to 10.8%.

          SAC, Per Gross Subscriber Addition, remained flat at $54 for the three months ended June 30, 2012 and 2011. Higher subsidies related to increased OEM installations occurring in


advance of acquiring the subscriber were offset by improved OEM subsidy rates per vehicle and a 14% increase in gross subscribers compared to the three months ended June 30, 2011.

Glossary

Adjusted EBITDA - EBITDA is defined as net income before interest and investment loss; interest expense, net of amounts capitalized; income tax expense and depreciation and amortization. We adjust EBITDA to remove the impact of other income and expense, loss on extinguishment of debt as well as certain other charges discussed below. This measure is one of the primary Non-GAAP financial measures on which we (i) evaluate the performance of our businesses, (ii) base our internal budgets and (iii) compensate management. Adjusted EBITDA is a Non-GAAP financial performance measure that excludes (if applicable): (i) certain adjustments as a result of the purchase price accounting for the Merger, (ii) goodwill impairment, (iii) restructuring, impairments, and related costs, (iv) depreciation and amortization and (v) share-based payment expense. The purchase price accounting adjustments include: (i) the elimination of deferred revenue associated with the investment in XM Canada, (ii) recognition of deferred subscriber revenues not recognized in purchase price accounting, and (iii) elimination of the benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and programming providers. We believe adjusted EBITDA is a useful measure of the underlying trend of our operating performance, which provides useful information about our business apart from the costs associated with our physical plant, capital structure and purchase price accounting. We believe investors find this Non-GAAP financial measure useful when analyzing our results and comparing our operating performance to the performance of other communications, entertainment and media companies. We believe investors use current and projected adjusted EBITDA to estimate our current and prospective enterprise value and to make investment decisions. Because we fund and build-out our satellite radio system through the periodic raising and expenditure of large amounts of capital, our results of operations reflect significant charges for depreciation expense. The exclusion of depreciation and amortization expense is useful given significant variation in depreciation and amortization expense that can result from the potential variations in estimated useful lives, all of which can vary widely across different industries or among companies within the same industry. We believe the exclusion of restructuring, impairments and related costs is useful given the nature of these expenses. We also believe the exclusion of share-based payment expense is useful given the significant variation in expense that can result from changes in the fair value as determined using the Black-Scholes-Merton model which varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates.

Adjusted EBITDA has certain limitations in that it does not take into account the impact to our statements of comprehensive income of certain expenses, including share-based payment expense and certain purchase price accounting for the Merger. We endeavor to compensate for the limitations of the Non-GAAP measure presented by also providing the comparable GAAP measure with equal or greater prominence and descriptions of the reconciling items, including quantifying such items, to derive the Non-GAAP measure. Investors that wish to compare and evaluate our operating results after giving effect for these costs, should refer to net income as disclosed in our consolidated statements of comprehensive income. Since adjusted EBITDA is a Non-GAAP financial performance measure, our calculation of adjusted EBITDA may be susceptible to varying calculations; may not be comparable to other similarly titled measures of other companies; and should not be considered in isolation, as a substitute for, or superior to measures of financial performance prepared in accordance with GAAP. The reconciliation of net income to the adjusted EBITDA is calculated as follows (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (GAAP):

 

$

3,134,170

 

$

173,319

 

$

3,241,944

 

$

251,440

 

Add back items excluded from Adjusted EBITDA:

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase price accounting adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

1,867

 

 

2,938

 

 

3,747

 

 

6,660

 

Operating expenses

 

 

(73,423

)

 

(68,623

)

 

(147,449

)

 

(136,595

)

Share-based payment expense, net of purchase price accounting adjustments

 

 

13,917

 

 

10,735

 

 

28,869

 

 

23,772

 

Depreciation and amortization (GAAP)

 

 

66,793

 

 

67,062

 

 

132,910

 

 

135,462

 

Interest expense, net of amounts capitalized (GAAP)

 

 

72,770

 

 

76,196

 

 

149,742

 

 

154,414

 

Loss on extinguishment of debt and credit facilities, net (GAAP)

 

 

15,650

 

 

1,212

 

 

25,621

 

 

7,206

 

Interest and investment loss (income) (GAAP)

 

 

1,728

 

 

(80,182

)

 

2,871

 

 

(78,298

)

Other loss (income) (GAAP)

 

 

173

 

 

(183

)

 

749

 

 

(1,799

)

Income tax (benefit) expense (GAAP)

 

 

(2,996,549

)

 

2,620

 

 

(2,993,747

)

 

4,192

 

 

 



 



 



 



 

Adjusted EBITDA

 

$

237,096

 

$

185,094

 

$

445,257

 

$

366,454

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 















Adjusted Revenues and Operating Expenses - We define this Non-GAAP financial measure as our actual revenues and operating expenses adjusted to exclude the impact of certain purchase price accounting adjustments and share-based payment expense. We use this Non-GAAP financial measure to manage our business, set operational goals and as a basis for determining performance-based compensation for our employees. The following tables reconcile our actual revenues and operating expenses to our adjusted revenues and operating expenses for the three and six months ended June 30, 2012 and 2011:



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended June 30, 2012

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

730,285

 

$

54

 

$

 

$

730,339

 

Advertising revenue, net of agency fees

 

 

20,786

 

 

 

 

 

 

20,786

 

Equipment revenue

 

 

16,417

 

 

 

 

 

 

16,417

 

Other revenue

 

 

70,055

 

 

1,813

 

 

 

 

71,868

 

 

 



 



 



 



 

Total revenue

 

$

837,543

 

$

1,867

 

$

 

$

839,410

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

135,426

 

 

36,024

 

 

 

 

171,450

 

Programming and content

 

 

65,169

 

 

10,431

 

 

(1,231

)

 

74,369

 

Customer service and billing

 

 

68,679

 

 

 

 

(388

)

 

68,291

 

Satellite and transmission

 

 

17,551

 

 

 

 

(688

)

 

16,863

 

Cost of equipment

 

 

7,150

 

 

 

 

 

 

7,150

 

Subscriber acquisition costs

 

 

119,475

 

 

23,530

 

 

 

 

143,005

 

Sales and marketing

 

 

57,422

 

 

3,438

 

 

(2,053

)

 

58,807

 

Engineering, design and development

 

 

6,272

 

 

 

 

(1,282

)

 

4,990

 

General and administrative

 

 

65,664

 

 

 

 

(8,275

)

 

57,389

 

Depreciation and amortization (a)

 

 

66,793

 

 

 

 

 

 

66,793

 

Share-based payment expense

 

 

 

 

 

 

13,917

 

 

13,917

 

 

 



 



 



 



 

Total operating expenses

 

$

609,601

 

$

73,423

 

$

 

$

683,024

 

 

 



 



 



 



 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the three months ended June 30, 2012 was $14,000.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Three Months Ended June 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

639,642

 

$

1,125

 

$

 

$

640,767

 

Advertising revenue, net of agency fees

 

 

18,227

 

 

 

 

 

 

18,227

 

Equipment revenue

 

 

17,022

 

 

 

 

 

 

17,022

 

Other revenue

 

 

69,506

 

 

1,813

 

 

 

 

71,319

 

 

 



 



 



 



 

Total revenue

 

$

744,397

 

$

2,938

 

$

 

$

747,335

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

116,741

 

 

31,134

 

 

 

 

147,875

 

Programming and content

 

 

67,399

 

 

11,787

 

 

(960

)

 

78,226

 

Customer service and billing

 

 

62,592

 

 

 

 

(308

)

 

62,284

 

Satellite and transmission

 

 

18,998

 

 

74

 

 

(565

)

 

18,507

 

Cost of equipment

 

 

7,601

 

 

 

 

 

 

7,601

 

Subscriber acquisition costs

 

 

105,162

 

 

21,810

 

 

 

 

126,972

 

Sales and marketing

 

 

51,442

 

 

3,818

 

 

(1,614

)

 

53,646

 

Engineering, design and development

 

 

13,939

 

 

 

 

(974

)

 

12,965

 

General and administrative

 

 

60,479

 

 

 

 

(6,314

)

 

54,165

 

Depreciation and amortization (a)

 

 

67,062

 

 

 

 

 

 

67,062

 

Share-based payment expense (b)

 

 

 

 

 

 

10,735

 

 

10,735

 

 

 



 



 



 



 

Total operating expenses

 

$

571,415

 

$

68,623

 

$

 

$

640,038

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the three months ended June 30, 2011 was $15,000.

 

(b) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

960

 

$

 

$

 

$

960

 

Customer service and billing

 

 

308

 

 

 

 

 

 

308

 

Satellite and transmission

 

 

565

 

 

 

 

 

 

565

 

Sales and marketing

 

 

1,614

 

 

 

 

 

 

1,614

 

Engineering, design and development

 

 

974

 

 

 

 

 

 

974

 

General and administrative

 

 

6,314

 

 

 

 

 

 

6,314

 

 

 



 



 



 



 

Total share-based payment expense

 

$

10,735

 

$

 

$

 

$

10,735

 

 

 



 



 



 



 




 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Six Months Ended June 30, 2012

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

1,430,526

 

$

121

 

$

 

$

1,430,647

 

Advertising revenue, net of agency fees

 

 

39,456

 

 

 

 

 

 

39,456

 

Equipment revenue

 

 

33,370

 

 

 

 

 

 

33,370

 

Other revenue

 

 

138,912

 

 

3,626

 

 

 

 

142,538

 

 

 



 



 



 



 

Total revenue

 

$

1,642,264

 

$

3,747

 

$

 

$

1,646,011

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

267,537

 

 

70,870

 

 

 

 

338,407

 

Programming and content

 

 

135,265

 

 

22,134

 

 

(2,606

)

 

154,793

 

Customer service and billing

 

 

134,866

 

 

 

 

(815

)

 

134,051

 

Satellite and transmission

 

 

35,661

 

 

 

 

(1,473

)

 

34,188

 

Cost of equipment

 

 

12,956

 

 

 

 

 

 

12,956

 

Subscriber acquisition costs

 

 

235,596

 

 

47,616

 

 

 

 

283,212

 

Sales and marketing

 

 

115,781

 

 

6,829

 

 

(4,413

)

 

118,197

 

Engineering, design and development

 

 

18,962

 

 

 

 

(2,714

)

 

16,248

 

General and administrative

 

 

125,550

 

 

 

 

(16,848

)

 

108,702

 

Depreciation and amortization (a)

 

 

132,910

 

 

 

 

 

 

132,910

 

Share-based payment expense

 

 

 

 

 

 

28,869

 

 

28,869

 

 

 



 



 



 



 

Total operating expenses

 

$

1,215,084

 

$

147,449

 

$

 

$

1,362,533

 

 

 



 



 



 



 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the six months ended June 30, 2012 was $28,000.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited For the Six Months Ended June 30, 2011

 

 

 


 

(in thousands)

 

As Reported

 

Purchase Price
Accounting
Adjustments

 

Allocation of
Share-based
Payment Expense

 

Adjusted

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue

 

$

1,262,080

 

$

3,034

 

$

 

$

1,265,114

 

Advertising revenue, net of agency fees

 

 

34,785

 

 

 

 

 

 

34,785

 

Equipment revenue

 

 

32,889

 

 

 

 

 

 

32,889

 

Other revenue

 

 

138,482

 

 

3,626

 

 

 

 

142,108

 

 

 



 



 



 



 

Total revenue

 

$

1,468,236

 

$

6,660

 

$

 

$

1,474,896

 

 

 



 



 



 



 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of services:

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue share and royalties

 

 

223,670

 

 

61,067

 

 

 

 

284,737

 

Programming and content

 

 

140,358

 

 

24,611

 

 

(3,470

)

 

161,499

 

Customer service and billing

 

 

128,429

 

 

18

 

 

(675

)

 

127,772

 

Satellite and transmission

 

 

37,558

 

 

313

 

 

(1,132

)

 

36,739

 

Cost of equipment

 

 

14,006

 

 

 

 

 

 

14,006

 

Subscriber acquisition costs

 

 

210,432

 

 

43,466

 

 

 

 

253,898

 

Sales and marketing

 

 

99,261

 

 

7,030

 

 

(3,489

)

 

102,802

 

Engineering, design and development

 

 

25,074

 

 

31

 

 

(2,117

)

 

22,988

 

General and administrative

 

 

116,831

 

 

59

 

 

(12,889

)

 

104,001

 

Depreciation and amortization (a)

 

 

135,462

 

 

 

 

 

 

135,462

 

Share-based payment expense (b)

 

 

 

 

 

 

23,772

 

 

23,772

 

 

 



 



 



 



 

Total operating expenses

 

$

1,131,081

 

$

136,595

 

$

 

$

1,267,676

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(a) Purchase price accounting adjustments included above exclude the incremental depreciation and amortization associated with the $785,000 stepped up basis in property, equipment and intangible assets as a result of the Merger. The increased depreciation and amortization for the six months ended June 30, 2011 was $30,000.

 

(b) Amounts related to share-based payment expense included in operating expenses were as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Programming and content

 

$

3,443

 

$

27

 

$

 

$

3,470

 

Customer service and billing

 

 

657

 

 

18

 

 

 

 

675

 

Satellite and transmission

 

 

1,113

 

 

19

 

 

 

 

1,132

 

Sales and marketing

 

 

3,462

 

 

27

 

 

 

 

3,489

 

Engineering, design and development

 

 

2,086

 

 

31

 

 

 

 

2,117

 

General and administrative

 

 

12,830

 

 

59

 

 

 

 

12,889

 

 

 



 



 



 



 

Total share-based payment expense

 

$

23,591

 

$

181

 

$

 

$

23,772

 

 

 



 



 



 



 

ARPU - is derived from total earned subscriber revenue, net advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. Other subscription-related revenue includes the U.S. Music Royalty Fee. Purchase price accounting adjustments include the recognition of deferred subscriber revenues not recognized in purchase price accounting associated with the Merger. ARPU is calculated as follows (in thousands, except for subscriber and per subscriber amounts):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Subscriber revenue (GAAP)

 

$

730,285

 

$

639,642

 

$

1,430,526

 

$

1,262,080

 

Add: net advertising revenue (GAAP)

 

 

20,786

 

 

18,227

 

 

39,456

 

 

34,785

 

Add: other subscription-related revenue (GAAP)

 

 

58,753

 

 

57,642

 

 

116,474

 

 

116,173

 

Add: purchase price accounting adjustments

 

 

54

 

 

1,125

 

 

121

 

 

3,034

 

 

 



 



 



 



 

 

 

$

809,878

 

$

716,636

 

$

1,586,577

 

$

1,416,072

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

22,553,702

 

 

20,715,630

 

 

22,272,282

 

 

20,475,720

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ARPU

 

$

11.97

 

$

11.53

 

$

11.87

 

$

11.53

 

 

 



 



 



 



 

Average self-pay monthly churn - is defined as the monthly average of self-pay deactivations for the period divided by the average number of self-pay subscribers for the period.

Customer service and billing expenses, per average subscriber - is derived from total customer service and billing expenses, excluding share-based payment expense and purchase price accounting adjustments associated with the Merger, divided by the number of months in the period, divided by the daily weighted average number of subscribers for the period. We believe the exclusion of share-based payment expense in our calculation of customer service and billing expenses, per average subscriber, is useful given the significant variation in expense that can result from changes in the fair market value of our common stock, the effect of which is unrelated to the operational conditions that give rise to variations in the components of our customer service and billing expenses. Purchase price accounting adjustments associated with the Merger include the elimination of the benefit associated with incremental share-based payment arrangements recognized at the Merger date. Customer service and billing expenses, per average subscriber, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

 

 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Customer service and billing expenses (GAAP)

 

$

68,679

 

$

62,592

 

$

134,866

 

$

128,429

 

Less: share-based payment expense, net of purchase price accounting adjustments

 

 

(388

)

 

(308

)

 

(815

)

 

(675

)

Add: purchase price accounting adjustments

 

 

 

 

 

 

 

 

18

 

 

 



 



 



 



 

 

 

 

68,291

 

 

62,284

 

 

134,051

 

 

127,772

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Daily weighted average number of subscribers

 

 

22,553,702

 

 

20,715,630

 

 

22,272,282

 

 

20,475,720

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer service and billing expenses, per average subscriber

 

$

1.01

 

$

1.00

 

$

1.00

 

$

1.04

 

 

 



 



 



 



 

Free cash flow - is derived from cash flow provided by operating activities, capital expenditures and restricted and other investment activity. Free cash flow is calculated as follows (in thousands):



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

Cash Flow information

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

253,775

 

$

195,381

 

$

293,723

 

$

213,490

 

Net cash used in investing activities

 

 

(23,757

)

 

(29,948

)

 

(48,944

)

 

(64,931

)

Net cash used in financing activities

 

 

(108,264

)

 

(70,801

)

 

(150,439

)

 

(206,923

)

Free Cash Flow

 

 

 

 

 

 

 

 

 

 

 

 

 

Net cash provided by operating activities

 

$

253,775

 

$

195,381

 

$

293,723

 

$

213,490

 

Additions to property and equipment

 

 

(23,757

)

 

(40,315

)

 

(48,944

)

 

(75,298

)

Restricted and other investment activity

 

 

 

 

10,367

 

 

 

 

10,367

 

 

 



 



 



 



 

Free cash flow

 

$

230,018

 

$

165,433

 

$

244,779

 

$

148,559

 

 

 



 



 



 



 

New vehicle consumer conversion rate - is defined as the percentage of owners and lessees of new vehicles that receive our service and convert to become self-paying subscribers after the initial promotion period. At the time satellite radio enabled vehicles are sold or leased, the owners or lessees generally receive trial subscriptions ranging from three to twelve months. Promotional periods generally include the period of trial service plus 30 days to handle the receipt and processing of payments. We measure conversion rate three months after the period in which the trial service ends. The metric excludes rental and fleet vehicles.

Subscriber acquisition cost, per gross subscriber addition - or SAC, per gross subscriber addition, is derived from subscriber acquisition costs and margins from the sale of radios and accessories, excluding share-based payment expense and purchase price accounting adjustments, divided by the number of gross subscriber additions for the period. Purchase price accounting adjustments associated with the Merger include the elimination of the benefit of amortization of deferred credits on executory contracts recognized at the Merger date attributable to an OEM. SAC, per gross subscriber addition, is calculated as follows (in thousands, except for subscriber and per subscriber amounts):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unaudited

 

 

 


 

 

 

For the Three Months Ended
June 30,

 

For the Six Months Ended
June 30,

 

 

 


 


 

 

 

2012

 

2011

 

2012

 

2011

 

 

 


 


 


 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscriber acquisition costs (GAAP)

 

$

119,475

 

$

105,162

 

$

235,596

 

$

210,432

 

Less: margin from direct sales of radios and accessories (GAAP)

 

 

(9,267

)

 

(9,421

)

 

(20,414

)

 

(18,883

)

Add: purchase price accounting adjustments

 

 

23,530

 

 

21,810

 

 

47,616

 

 

43,466

 

 

 



 



 



 



 

 

 

$

133,738

 

$

117,551

 

$

262,798

 

$

235,015

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross subscriber additions

 

 

2,481,004

 

 

2,179,348

 

 

4,642,697

 

 

4,231,715

 

 

 



 



 



 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SAC, per gross subscriber addition

 

$

54

 

$

54

 

$

57

 

$

56

 

 

 



 



 



 



 

###

About Sirius XM Radio

Sirius XM Radio Inc . is the world’s largest radio broadcaster measured by revenue and has nearly 23 million subscribers. SiriusXM creates and broadcasts commercial-free music; premier sports talk and live events; comedy; news; exclusive talk and entertainment; and the most comprehensive Latin music, sports and talk programming in radio. SiriusXM is available in vehicles from every major car company in the U.S., from retailers nationwide, and online at siriusxm.com . SiriusXM programming is also available


through the SiriusXM Internet Radio App for Android , Apple , and BlackBerry smartphones and other connected devices. SiriusXM also holds a minority interest in SiriusXM Canada which has more than 2 million subscribers.

This communication contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about future financial and operating results, our plans, objectives, expectations and intentions with respect to future operations, products and services; and other statements identified by words such as “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimated,” “believe,” “intend,” “plan,” “projection,” “outlook” or words of similar meaning. Such forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. Actual results may differ materially from the results anticipated in these forward-looking statements.

The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: our competitive position versus other forms of audio entertainment; our dependence upon automakers; general economic conditions; failure of our satellites, which, in most cases, are not insured; our ability to attract and retain subscribers at a profitable level; royalties we pay for music rights; the unfavorable outcome of pending or future litigation; failure of third parties to perform; and our substantial indebtedness. Additional factors that could cause our results to differ materially from those described in the forward-looking statements can be found in our Annual Report on Form 10-K for the year ended December 31, 2011, which is filed with the Securities and Exchange Commission (the “SEC”) and available at the SEC’s Internet site ( http://www.sec.gov ). The information set forth herein speaks only as of the date hereof, and we disclaim any intention or obligation to update any forward looking statements as a result of developments occurring after the date of this communication.

 

 

 

 

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Contact Information for Investors and Financial Media:

Investors:

Hooper Stevens
212 901 6718
hooper.stevens@siriusxm.com

Media:

Patrick Reilly
212 901 6646
patrick.reilly@siriusxm.com