XM Radio 2010 Annual Report Download - page 73

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Included in restructuring, impairments and related costs for the year ended December 31, 2010 are contract
termination costs of $7,361 and a loss on the full impairment of our FM-4 satellite of $56,100.
Loss on extinguishment of debt and credit facilities, net, includes losses incurred as a result of the conversion
and retirement of certain debt instruments. Future charges related to the retirement or conversions of debt are
dependent upon many factors, including the conversion price of debt or our ability to refinance or retire specific debt
instruments.
Share-based payment expense is expected to increase in future periods as we grant equity awards to our
employees and directors. Compensation expense for share-based awards is recorded in the financial statements
based on the fair value. The fair value of stock option awards are determined using the Black-Scholes-Merton
option-pricing model which is subject to various assumptions including the market price of our stock, estimated
forfeiture rates of awards and the volatility of our stock price. The fair value of restricted shares and restricted stock
units is based on the market price at date of grant.
Other non-cash purchase price adjustments include liabilities recorded as a result of the Merger related to
executory contracts with an OEM and certain programming providers, as well as amortization resulting from
changes in the value of deferred revenue as a result of the Merger.
• Changes in operating assets and liabilities contributed $112,097, $219,344 and $21,152 to operating cash
flows for the years ended December 31, 2010, 2009 and 2008, respectively. Significant changes in operating
assets and liabilities include the growth in deferred revenue, the timing of collections from our customers
and distributors and the timing of payments to vendors and related parties. As we continue to grow our
subscriber and revenue base, we expect that deferred revenue and amounts due from customers and
distributors will continue to increase. Amounts payable to vendors are also expected to increase as our
business grows. The timing of payments to vendors and related parties are based on both contractual
commitments and the terms and conditions of each of our vendors.
Cash Flows (Used in) Provided by Investing Activities
Cash used for investing activities consists primarily of capital expenditures for property and equipment.
Capital expenditures have increased as we have continued to invest in the construction of our satellites and related
launch vehicles and improvements in infrastructure to support the growth of our business. We will continue to incur
significant costs to construct and launch our new satellites and improve our terrestrial repeater network and
broadcast and administrative infrastructure. We have entered into various agreements to design, construct, and
launch our satellites in the normal course of business.
Cash Flows Used in Financing Activities
Cash flows used in financing activities have generally been the result of the issuance and repayment of long-
term debt and related party debt and cash proceeds from equity issuances. Proceeds from long-term debt, related
party debt and equity issuances have been used to fund our operations, construct and launch new satellites and invest
in other infrastructure improvements.
Financings and Capital Requirements
We have historically financed our operations through the sale of debt and equity securities. The Certificate of
Designations for our Series B Preferred Stock provides that, so long as Liberty Media beneficially owns at least half
of its initial equity investment, Liberty Media’s consent is required for certain actions, including the grant or
issuance of our equity securities and the incurrence of debt (other than, in general, debt incurred to refinance
existing debt) in amounts greater than $10,000 in any calendar year.
Future Liquidity and Capital Resource Requirements
We have entered into various agreements to design, construct, and launch our satellites in the normal course of
business. As disclosed in Note 15 in our consolidated financial statements, as of December 31, 2010, we expect to
incur capital expenditures of approximately $120,444 and $5,481 in 2011 and 2012, respectively, and an additional
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