XM Radio 2000 Annual Report Download - page 41

RADiO TO THE POWER OF X
XM SATELLiTE RADiO 2000 Annual Report
(c) Conversion of Class B Common Stock to Class A Common Stock
On March 8, 2000, at the request of the Company, one of the Class B common stockholders converted
1,314,914 shares of the Company’s Class B common stock into Class A common stock on a one-for-one basis.
As of March 31, 2000, Motient held all of the Company’s outstanding Class B common stock.
On January 12, 2001, Motient converted 2,652,243 shares of the Company’s Class B common stock into Class
A common stock on a one-for-one basis. See note 11(j) for further discussion of the Company’s filing of an application
for change of control with the FCC.
(d) Secondary Offering and Sale of Series B Convertible Redeemable Preferred Stock
On January 31, 2000, the Company closed on a secondary offering of its Class A common stock and newly designated
Series B convertible redeemable preferred stock. The Company sold 4,000,000 shares of its Class A common
stock for $32.00 per share, which yielded net proceeds of $120,837,000. The Company concurrently sold
2,000,000 shares of its Series B convertible redeemable preferred stock for $50.00 per share, which yielded
net proceeds of $96,472,000. The Series B convertible redeemable preferred stock provides for 8.25 percent
cumulative dividends that may be paid in Class A common stock or cash. The Series B convertible redeemable
preferred stock is convertible into Class A common stock at a conversion price of $40 per share and is
redeemable in Class A common stock on February 3, 2003.
On February 9, 2000, the underwriters exercised a portion of the over-allotment option for 370,000 shares of
Class A common stock, which yielded net proceeds of approximately $11,233,000.
On August 1, 2000, the Company entered into agreements with certain holders of its 8.25 percent Series B convertible
redeemable preferred stock to exchange their shares of 8.25 percent Series B convertible redeemable preferred
stock for shares of the Company’s Class A common stock. By August 31, 2000, Holdings had issued
1,700,016 shares of its Class A common stock in exchange for 1,132,711 shares of its 8.25 percent Series B
convertible redeemable preferred stock. Holdings recorded an $11.2 million charge to earnings attributable to
common stockholders in the third quarter related to this transaction. This charge represents the difference in the
fair value of the stock issued upon this conversion in excess of the stock that the holders were entitled to upon
a voluntary conversion.
The Company paid the quarterly dividends on the 8.25 percent Series B convertible redeemable preferred stock
on May 1, 2000, August 1, 2000 and November 1, 2000 by issuing 62,318, 57,114 and 25,734, respectively,
shares of Class A common stock to the respective holders of record.
(e) Series C Convertible Redeemable Preferred Stock
On July 7, 2000, the Company reached an agreement for a private offering of 235,000 shares of its Series C
convertible redeemable preferred stock for $1,000 per share, which closed on August 8, 2000 and yielded net
proceeds of $206,379,000 and a stock subscription of $20,000,000 that earned interest at 7 percent per
annum until it was paid on November 30, 2000. The stock subscription was received in November 2000 and
provided an additional $20,443,000. The Series C convertible redeemable preferred stock provides for 8.25
percent cumulative dividends payable in cash. The Series C convertible redeemable preferred stock is convertible,
at the holders’ option, into Class A common stock at the conversion price then in effect. Currently, the conversion
price is $26.50, but may change upon the occurrence of certain dilutive events. The Company must redeem the
Series C convertible redeemable preferred stock in Class A common stock on February 1, 2012. At its option,
the Company may redeem the Series C convertible redeemable preferred stock beginning on February 8, 2005
in cash or, at the holder’s option, in Class A common stock.
As a result of the current conversion price of $26.50 being less than the market value of Holdings’ Class A common
stock of $40.375 on the commitment date, the Company recorded a $123.0 million beneficial conversion
charge that reduced earnings available to common stockholders. The issuance of the Series C preferred stock
also caused the exercise price of the warrants sold in March 2000 to be adjusted to $47.94 and the number of
warrant shares to be increased to 8.285948 per warrant.
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