XM Radio 2013 Annual Report Download

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Table of contents

  • Page 1

  • Page 2

  • Page 3
    ... audience. This great programming is now more available than ever to new and used car buyers. SiriusXM radios were installed in nearly 70% of new cars sold in the U.S. in 2013, driving sales of SiriusXM enabled vehicles to a record 10.7 million. As of the end of the year, approximately 60 million...

  • Page 4
    ...to position our Company for continued long-term success. We are thankful for our tens of millions of subscribers and thrilled to be welcoming more into the SiriusXM family. In the year ahead, we look forward to continuing to provide the best radio on radio and to enhancing value for our stockholders...

  • Page 5
    ... access our Proxy Statement and Annual Report for the year ended December 31, 2013 over the Internet and how to vote. Items of Business: Whether or not you expect to attend in person, we urge you to vote your shares over the Internet, by phone, or by signing, dating, and returning a proxy card at...

  • Page 6

  • Page 7
    ... Ownership Reporting Compliance ...GOVERNANCE OF THE COMPANY ...How does the board of directors oversee our risk management process? ...What are our policies and procedures for related party transactions? ...What is the relationship between Sirius XM and Liberty Media Corporation? ...Does Sirius XM...

  • Page 8
    ... Pension Benefits ...Potential Payments or Benefits Upon Termination or Change-in-Control ...ITEM 2 - ADVISORY VOTE TO APPROVE NAMED EXECUTIVE OFFICERS COMPENSATION ...ITEM 3 - RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS ...Principal Accountant Fees and Services ...Pre-Approval Policy...

  • Page 9
    ... the formation of a holding company without a vote of the stockholders of the constituent corporations. In connection with the Reorganization, among other things: • each share of common stock of Sirius XM Radio Inc. was converted automatically into the right to receive one validly issued, fully...

  • Page 10
    ... under its long-term incentive plans, including under various award and related agreements; • Sirius XM Holdings Inc. assumed and agreed to perform all of Sirius XM Radio Inc.'s obligations under its existing warrants for the issuance of common stock, with the number of shares issuable upon...

  • Page 11
    ... New York City time. What constitutes a quorum? The presence, in person or by proxy, of the holders of a majority of the aggregate voting power of the issued and outstanding shares of our common stock entitled to vote at the annual meeting is necessary to constitute a quorum to transact business...

  • Page 12
    ...proxy materials? To receive free of charge a separate copy of the Notice and, if applicable, this proxy statement and our annual report, stockholders may write or call us at the following: Investor Relations Sirius XM Holdings Inc. 1221 Avenue of the Americas 36th Floor New York, New York 10020 (212...

  • Page 13
    ... of a director nomination or any other business for consideration at a stockholders' meeting must be received by our Corporate Secretary at our principal executive offices not less than 70 days nor more than 90 days prior to the first anniversary of the preceding year's annual meeting. Therefore...

  • Page 14
    ... are standing for election at the annual meeting. The Nominating and Corporate Governance Committee of our board of directors has nominated the director nominees listed below after consideration of each individual's qualifications, contributions to the company and other reasons discussed in this...

  • Page 15
    ..., Business Development and Evangelism, of Microsoft Corporation. Prior to July 2013, he was the President of Microsoft's Skype Division since its acquisition by Microsoft in 2011. Mr. Bates was the Chief Executive Officer of Skype, a leading provider of software applications and related internet...

  • Page 16
    ... subscriber base and other segments of our existing and targeted customer base. Name Age Position, Principal Occupation, Business Experience and Directorships David J.A. Flowers ...59 Mr. Flowers has been a director since April 2009. Mr. Flowers has served as Senior Vice President and Managing...

  • Page 17
    ... Officer of DIRECTV, Inc., Mr. Hartenstein has extensive experience in building, managing, marketing and operating a satellite service. He brings direct and highly relevant expertise to the board in such areas as the construction and procurement of satellites, managing a large consumer subscriber...

  • Page 18
    ... Occupation, Business Experience and Directorships Gregory B. Maffei ...53 Mr. Maffei has been a director since March 2009 and has served as the chairman of our board since April 2013. He has served as a director and the President and Chief Executive Officer of Liberty Media Corporation (formerly...

  • Page 19
    ...Mr. Mooney held a number of positions with IBM Corporation, including Chief Financial Officer of the Americas. Mr. Mooney was previously a member of the board of directors of Sidera Networks, LLC, a provider of high capacity communications services to carrier and enterprise customers. Key Attributes...

  • Page 20
    ... a diversified communications company providing broadband cable and direct-to-home satellite services in Canada, Universal Electronics, Inc., a provider of wireless control technology for connected homes, and is a member of the board of directors, audit committee, corporate governance and nominating...

  • Page 21
    ... subscriber base, including trends in the audio entertainment industry. The board of directors recommends a vote "FOR" the election of each of the nominees named above. What are the responsibilities of the board of directors? The business and affairs of our company are managed under the direction...

  • Page 22
    ... its fundamental role of providing advice to, and oversight of, management. Further, the board recognizes that the Chief Executive Officer position requires a significant dedication of time, effort, and energy in the current business environment. Our Corporate Governance Guidelines (the "Guidelines...

  • Page 23
    ... of this review, the Nominating and Corporate Governance Committee determined that all of our directors and nominees are independent under the standards set forth in our Guidelines and applicable NASDAQ listing standards, with the exception of James E. Meyer, our Chief Executive Officer, Gregory...

  • Page 24
    ... annual meeting of stockholders. How can stockholders communicate with the board of directors? Stockholders may communicate directly with our board of directors, or specified individual directors, according to the procedures described on our website at http://investor.siriusxm.com under "Corporate...

  • Page 25
    ... table provides compensation information for the year ended December 31, 2013 for each of our non-employee directors. Directors who are employees do not receive compensation for their services as directors. Change in Pension Value of Non-Qualified Non-Equity Deferred Fee Earned or Stock Option...

  • Page 26
    ... Annual Report on Form 10-K for the year ended December 31, 2013. On May 22, 2013, non-employee directors, excluding Mr. Bates and Mr. Bodenheimer, were each awarded 49,059 options at an exercise price of $3.5150 per share with a grant date fair value of $70,000. Upon joining our board of directors...

  • Page 27
    ...and 92,888,561 shares of common stock subject to the Share Repurchase Agreement, dated as of October 9, 2013, as amended, between Liberty Media Corporation and Sirius XM Holdings Inc. How much stock do our directors and executive officers own? The following table shows the number of shares of common...

  • Page 28
    ... of common stock. (1) These amounts include shares of common stock, restricted shares of common stock and restricted stock units that the individuals hold. Also included are the following numbers of shares of common stock acquired under and held in the Sirius XM Radio Inc. 401(k) savings plan as of...

  • Page 29
    ... policy, "related persons" include executive officers, directors or their immediate family members, or stockholders owning five percent or greater of our common stock. Our related person transaction policy requires: • that any transaction in which a related person has a material direct or indirect...

  • Page 30
    ...transaction pursuant to which all outstanding shares of our common stock not owned by Liberty Media would be converted into the right to receive 0.0760 of a new share of Liberty Series C common stock, which would have no voting rights. Our board of directors formed a Special Committee of independent...

  • Page 31
    ... directors and employees, including our chief executive officer, principal financial officer and principal accounting officer. Our Guidelines and the Code of Ethics are available on our website at http://investor.siriusxm.com under "Corporate Governance" and in print to any stockholder who provides...

  • Page 32
    ..., Inc.'s connected vehicle services business for $530 million, establishing Sirius XM as one of the leading providers of telematics services; retiring on attractive terms $1.5 billion of debt; and managing our stock buyback program. In addition, 2013 was marked by key subscriber and content-based...

  • Page 33
    ... each named executive officer within a particular range related to levels provided by peers. The Compensation Committee relies on the general business and industry knowledge and experience of its members and occasionally uses informal market comparisons as one of many factors in making compensation...

  • Page 34
    ... executive officers, in 2013, the Compensation Committee adopted a bonus plan that generally measures our performance using various criteria, such as increases in subscribers, revenue, adjusted EBITDA and free cash flow. This plan does not require the Compensation Committee to provide a guaranteed...

  • Page 35
    ... price equal to the market price on the date of grant, and therefore provide value to the executives if the executives create value for our stockholders. In 2013, the Compensation Committee determined that in light of current market conditions, long-term compensation for our named executive officers...

  • Page 36
    ... of the employment agreements for the named executive officers provide for any special payments solely due to a change-in-control. Under the terms of the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the "Plan"), if the employment of any of our named executive officers is terminated by...

  • Page 37
    ... non-music channels; and understanding and analyzing customer satisfaction levels as they relate to our programming and content offerings. Mr. Cook was awarded a bonus for his contributions during the year, including his role in analyzing, evaluating and managing our subscriber churn and new vehicle...

  • Page 38
    ... of information technology. Mr. Rodriguez was awarded a bonus for his contributions during the year, including his role in integrating and managing our newly acquired connected vehicle services business; reducing subscriber acquisition costs; overseeing the development of our transmission and radio...

  • Page 39
    ..., Inc.'s connected vehicle services business for $530 million, establishing Sirius XM as one of the leading providers of telematics services; launching MySXM; continuing to expand our ability to identify and acquire subscribers in certified pre-owned and used vehicles and managing our investment in...

  • Page 40
    ... homes to our offices in New York City. That agreement also released us from our future obligation to pay Mr. Meyer an additional amount to hold him harmless as a result of any federal, state or New York City income taxes imputed in respect of the expenses for which he receives reimbursement. "All...

  • Page 41
    ... made during fiscal year 2013 to the named executive officers. All Other Stock Awards: Number of Shares of Stock or Units (#)(1) All Other Option Awards: Number of Securities Underlying Options (#)(2) Exercise or Base Price of Option Awards ($/Sh)(3) Grant Date Fair Value of Stock and Option Awards...

  • Page 42
    ... officers. Number of Securities Underlying Unexercised Options (#) Exercisable Option Awards Number of Securities Underlying Unexercised Option Options Exercise (#) Price Unexercisable ($) Stock Awards Name Option Expiration Date Number of Shares or Units that have not Vested (#) Market Value...

  • Page 43
    ... and Stock Vested in 2013 The following table provides information with respect to option exercises and restricted stock units that vested during 2013. Option Awards Number of Shares Acquired Value Realized on Exercise on Exercise (#) ($)(1) Stock Awards Number of Shares Acquired on Value Realized...

  • Page 44
    ... employment agreement), subject to his execution of a release of claims and his compliance with certain restrictive covenants, we are obligated to pay him a lump sum payment equal to his then annual base salary and the cash value of the bonus last paid or payable to him in respect of the fiscal year...

  • Page 45
    ... awards granted to these named executive officers are subject to potential accelerated vesting upon a change of control. In addition, Mr. Frear's award agreements relating to options and restricted stock units granted to him in February 2008 under the 2003 plan provide that such equity awards are...

  • Page 46
    ...(b) the number of shares of common stock underlying the options. The accelerated vesting of restricted stock units is valued at the closing price times the number of shares of restricted stock units. (2) Assumes that health benefits would be continued under COBRA for up to 18 months at current rates...

  • Page 47
    ...annual meeting of stockholders, approximately 98% of the votes cast supported the say-on-pay proposal. We encourage our stockholders to evaluate our executive compensation program over a multi-year horizon and to review our named executive officers' compensation over the past three years as reported...

  • Page 48
    ... by KPMG related to audits of employee benefit plans, financial due diligence services, and other attestation services required by contract. (3) Tax fees billed by KPMG were for services relating to state and local tax consulting. (4) All other fees billed by KPMG related to seminars purchased by us...

  • Page 49
    ...services related to SEC filings, employee benefit plan audits and subsidiary audits; • The Audit Committee reviews and pre-approves a detailed list of permitted non-audit services annually or more frequently, if required; and • The Audit Committee pre-approves each proposed engagement to provide...

  • Page 50
    ... annual report for the year ended December 31, 2013 are available for you to view online at http://www.envisionreports.com/SIRI. By Order of the Board of Directors, Patrick L. Donnelly Executive Vice President, General Counsel and Secretary New York, New York April 8, 2014 We make available, free...

  • Page 51
    2013 ANNUAL REPORT

  • Page 52

  • Page 53
    ... our regular pricing plans; discounted pricing plans; subscribers that have prepaid, including payments either made or due from automakers for subscriptions included in the sale or lease price of a vehicle; subscribers to our Internet services who do not also have satellite radio subscriptions; and...

  • Page 54
    ... non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our weather, traffic, data and Backseat TV services. In certain cases, automakers and dealers include a subscription to our radio services in the sale or lease price of new vehicles or...

  • Page 55
    ...799,095 Operating expenses: Cost of services: Revenue share and royalties ...677,642 Programming and content . . 290,323 Customer service and billing ...320,755 Satellite and transmission . . 79,292 Cost of equipment ...26,478 Subscriber acquisition costs ...495,610 Sales and marketing ...291,024...

  • Page 56
    ... vehicle subscribers, promotions, subscription plan mix, and identification of additional revenue streams from subscribers. We increased certain of our subscription rates beginning January 2014. Advertising Revenue includes the sale of advertising on certain non-music channels, net of agency fees...

  • Page 57
    ... production for which we receive royalty payments for our technology and, to a lesser extent, on the volume and mix of equipment sales in our aftermarket and direct to consumer business. Other Revenue includes amounts earned from subscribers for the U.S. Music Royalty Fee, revenue from our Canadian...

  • Page 58
    ... reductions in the benefit to earnings from purchase price accounting adjustments associated with the Merger attributable to the amortization of the deferred credit on acquired programming executory contracts and increased personnel costs. • 2012 vs. 2011: For the years ended December 31, 2012 and...

  • Page 59
    ... by improved OEM subsidy rates per vehicle and increases in the benefit to earnings from the amortization of the deferred credit for acquired executory contracts recognized in purchase price accounting associated with the Merger. We expect total subscriber acquisition costs to decrease as a result...

  • Page 60
    total revenue. The increase was primarily due to additional subscriber communications and retention programs associated with a greater number of subscribers and promotional trials. • 2012 vs. 2011: For the years ended December 31, 2012 and 2011, sales and marketing expenses were $248,905 and $222,...

  • Page 61
    ...25% Senior Secured Notes due 2013 and our 3.25% Convertible Notes due 2011. Interest and Investment Income includes realized gains and losses, interest income, and our share of the income of Sirius XM Canada. • 2013 vs. 2012: For the year ended December 31, 2013, interest and investment income was...

  • Page 62
    ... the XM Canada and Sirius Canada merger in the second quarter of 2011. Loss on change in value of derivatives represents the change in fair value of the commitments under the share repurchase agreement with Liberty Media, which are accounted for as a derivative. • 2013 vs. 2012: For the year ended...

  • Page 63
    ... primarily due to increases in new car sales and new subscriptions in previously owned vehicles. These increases were offset in part by a change from a paid trial to an unpaid trial in the fourth quarter of 2013 pursuant to an agreement with an OEM. The increase in deactivated subscribers was due to...

  • Page 64
    ... in Sirius XM Canada, the recognition of subscriber revenues not recognized in purchase price accounting and the elimination of the earnings benefit of deferred credits on executory contracts, which are primarily attributable to third party arrangements with an OEM and certain programming providers...

  • Page 65
    ...retention programs and a decrease in the contribution from the U.S. Music Royalty Fee. SAC, Per Gross Subscriber Addition, is derived from subscriber acquisition costs and margins from the sale of radios, components and accessories, excluding share-based payment expense and purchase price accounting...

  • Page 66
    ... subscription rates. The increase in expenses was primarily driven by higher revenue share and royalties expenses associated with growth in revenues, sales and marketing costs related to subscriber communications and retention marketing, customer service and billing costs related to increased agent...

  • Page 67
    ... related to increased OEM installations, customer service and billing costs related to longer average handle times and higher subscriber volume, and sales and marketing costs related to subscriber communications and cooperative marketing, partially offset by lower programming and content costs...

  • Page 68
    ... of 2013. The increase in cash flows used in investing activities was primarily due to the investment in Sirius XM Connected Vehicle Services Inc., satellite launch-related payments, an increase in spending to enhance our terrestrial repeater network, and the purchase of certain long-lead parts for...

  • Page 69
    ... of the Special Committee of our board of directors formed to review and evaluate the Liberty Media proposal. During the year ended December 31, 2013, we repurchased 520,257,866 shares of our common stock for $1,762,360, including fees and commissions, on the open market and in privately negotiated...

  • Page 70
    ... the excess of the purchase price over the estimated fair value of net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our single reporting unit is performed as of the fourth quarter of each year. Assessments are performed at...

  • Page 71
    ... 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...

  • Page 72
    ... 31, 2013 2012 2011 Net income (GAAP): ...$ 377,215 $ 3,472,702 $ 426,961 Add back items excluded from Adjusted EBITDA: Purchase price accounting adjustments: Revenues (see pages 21-23) ...7,251 7,479 10,910 Operating expenses (see pages 21-23) ...(207,854) (289,278) (277,258) Share-based payment...

  • Page 73
    ...2012 and 2011: Unaudited For the Year Ended December 31, 2013 Purchase Price Allocation of Accounting Share-based As Reported Adjustments Payment Expense Adjusted (in thousands) Revenue: Subscriber revenue ...$3,284,660 Advertising revenue ...89,288 Equipment revenue ...80,573 Other revenue ...344...

  • Page 74
    ... 2012 Purchase Price Allocation of Accounting Share-based As Reported Adjustments Payment Expense Adjusted Revenue: Subscriber revenue ...Advertising revenue ...Equipment revenue ...Other revenue ...Total revenue ...Operating expenses Cost of services: Revenue share and royalties ...Programming and...

  • Page 75
    ... 2011 Purchase Price Allocation of Accounting Share-based As Reported Adjustments Payment Expense Adjusted Revenue: Subscriber revenue ...Advertising revenue ...Equipment revenue ...Other revenue ...Total revenue ...Operating expenses Cost of services: Revenue share and royalties ...Programming and...

  • Page 76
    ... the Years Ended December 31, 2013 2012 2011 Customer service and billing expenses (GAAP) ...Less: share-based payment expense, net of purchase price accounting adjustments ...Add: purchase price accounting adjustments ...Daily weighted average number of subscribers ...Customer service and billing...

  • Page 77
    ..., except for subscriber and per subscriber amounts): Unaudited For the Years Ended December 31, 2013 2012 2011 Subscriber acquisition costs (GAAP) ...Less: margin from direct sales of radios and accessories (GAAP) ...Add: purchase price accounting adjustments ...Gross subscriber additions ...SAC...

  • Page 78
    ... of Dollar Value of Shares Purchased Shares that May Total Average as Part of Publicly Yet Be Purchased Number of Price Paid Announced Plans Under the Plans Shares Purchased Per Share (1) or Programs or Programs (1) Period October 1, 2013 - October 31, 2013 ...November 1, 2013 - November 30, 2013...

  • Page 79
    ...A dividend with respect to our common stock was declared in 2012 only. 3,000 2,500 2,000 1,500 1,000 500 0 Dec - 08 Dec - 09 Dec - 10 Dec - 11 PERIOD ENDING S&P 500 Index Dec - 12 Dec - 13 DOLLARS Nasdaq Telecommunications Index Sirius XM Holdings Inc. Stockholder Return Performance Table NASDAQ...

  • Page 80
    ... of Holdings and Sirius XM and related notes thereto included in this Annual Report and "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in this Annual Report. Sirius XM Holdings Inc. As of and for the Years Ended December 31, 2012 (2) 2011 2010 2013...

  • Page 81
    ... and approximately two months of activity related to the acquisition of the connected vehicle business of Agero, Inc. in November 2013 and the fair value adjustments for debt and equity related instruments. (2) Net income per share for Sirius XM is not presented since Sirius XM is a wholly-owned...

  • Page 82
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  • Page 83
    ...We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Sirius XM Holdings Inc. and subsidiaries' internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework...

  • Page 84
    ... the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Sirius XM Holdings Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income, stockholders' equity, and cash flows for each of the years in...

  • Page 85
    ... of Sirius XM Radio Inc. and its subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013 in accordance with U.S. generally accepted accounting principles. /s/ KPMG LLP New York, New...

  • Page 86
    ... ...Advertising revenue ...Equipment revenue ...Other revenue ...Total revenue ...Operating expenses: Cost of services: Revenue share and royalties ...Programming and content ...Customer service and billing ...Satellite and transmission ...Cost of equipment ...Subscriber acquisition costs ...Sales...

  • Page 87
    ... credit on executory contracts ...Long-term debt ...Long-term related party debt ...Related party long-term liabilities ...Other long-term liabilities ...Total liabilities ...Commitments and contingencies (Note 16) Stockholders' equity: Convertible perpetual preferred stock, series B-1, par value...

  • Page 88
    ... ...Issuance of common stock to employees and employee benefit plans, net of forfeitures ...Share-based payment expense ...Exercise of options and vesting of restricted stock units ...Issuance of common stock upon exercise of warrants ...Return of shares under share borrow agreements ...Balance at...

  • Page 89
    ...of costs ...Payment of premiums on redemption of debt ...Repayment of long-term borrowings and revolving credit facility ...Repayment of related party long-term borrowings ...Common stock repurchased and retired ...Dividends paid ...Net cash used in financing activities ...Net (decrease) increase in...

  • Page 90
    ... Non-Cash Flow Information Cash paid during the period for: Interest, net of amounts capitalized ...Income taxes paid ...Acquisition related costs ...Non-cash investing and financing activities: Capital lease obligations incurred to acquire assets ...Conversion of Series B preferred stock to common...

  • Page 91
    ... ...Advertising revenue ...Equipment revenue ...Other revenue ...Total revenue ...Operating expenses: Cost of services: Revenue share and royalties ...Programming and content ...Customer service and billing ...Satellite and transmission ...Cost of equipment ...Subscriber acquisition costs ...Sales...

  • Page 92
    ... of Sirius XM Holdings Inc.) CONSOLIDATED BALANCE SHEETS As of December 31, 2013 2012 (in thousands, except share and per share data) ASSETS Current assets: Cash and cash equivalents ...Accounts receivable, net ...Receivables from distributors ...Inventory, net ...Prepaid expenses ...Related party...

  • Page 93
    ...932 - - - 426,961 432,893 Issuance of common stock to employees and employee benefit plans, net of forfeitures ...- - 1,882,801 2 - 3,480 - - - 3,482 Share-based payment expense 48,581 - - - 48,581 Exercise of options and vesting of restricted stock units ...- - 13,401,048 13 - 11,540 - - - 11,553...

  • Page 94
    ...of costs ...Payment of premiums on redemption of debt ...Repayment of long-term borrowings and revolving credit facility ...Repayment of related party long-term borrowings ...Common stock repurchased and retired ...Dividends paid ...Net cash used in financing activities ...Net (decrease) increase in...

  • Page 95
    ...) For the Years Ended December 31, 2013 2012 2011 Supplemental Disclosure of Cash and Non-Cash Flow Information Cash paid during the period for: Interest, net of amounts capitalized ...Income taxes paid ...Acquisition related costs ...Non-cash investing and financing activities: Capital lease...

  • Page 96
    ... customers subscribing on an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and longer term subscription plans as well as discounts for multiple subscriptions. We also derive revenue from activation and other fees, the sale of advertising on select non-music channels...

  • Page 97
    ... January 3, 2014, Holdings' Board of Directors received a non-binding letter from Liberty Media proposing a transaction pursuant to which all outstanding shares of common stock of Holdings not owned by Liberty Media would be converted into the right to receive 0.0760 of a new share of Liberty Series...

  • Page 98
    ... against deferred tax assets. (2) Acquisitions On November 4, 2013, we purchased all of the outstanding shares of the capital stock of the connected vehicle business of Agero, Inc. ("Agero") for $525,352, net of acquired cash of $1,966. Agero's connected vehicle business provides services to several...

  • Page 99
    ... of the investment. Property and Equipment Property and equipment, including satellites, are stated at cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the...

  • Page 100
    ...of customer relationships, OEM relationships and proprietary software acquired in business combinations, licensing agreements, and certain information technology related costs. These assets are amortized over their respective estimated useful lives to their estimated residual values and reviewed for...

  • Page 101
    ... from subscribers consists of subscription fees, daily rental fleet revenue and non-refundable activation and other fees. Revenue is recognized as it is realized or realizable and earned. We recognize subscription fees as our services are provided. At the time of sale, vehicle owners purchasing or...

  • Page 102
    ...prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chip sets and certain other components used in manufacturing radios; device royalties for certain radios; commissions paid to automakers as incentives to purchase, install and activate radios; product...

  • Page 103
    ...based awards granted to employees, non-employees and members of our board of directors include warrants, stock options, restricted stock awards and restricted stock units. Income Taxes Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying...

  • Page 104
    ... Related party current liabilities, with changes in fair value recorded to Holdings' statements of comprehensive income. For a further discussion of this derivative, refer to Note 14. We used Level 3 inputs to fair value the 8% convertible unsecured subordinated debentures issued by Sirius XM Canada...

  • Page 105
    ... average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (convertible debt, preferred stock, warrants, stock options, restricted stock awards and restricted stock units) were exercised or converted into common stock, calculated using the...

  • Page 106
    ...3,744,606 2,586,977 - 169,239 6,500,822 0.07 0.07 Sirius XM Net income per share for Sirius XM is not presented since Sirius XM is a wholly-owned subsidiary of Holdings. (5) Accounts Receivable, net Accounts receivable, net, are stated at amounts due from customers net of an allowance for doubtful...

  • Page 107
    ... is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for resale in our direct to consumer distribution channel and...

  • Page 108
    ...certain stock options and vesting of certain restricted stock units that were recorded at fair value in connection with the Merger. (8) Intangible Assets We recorded intangible assets at fair value related to the Merger that were formerly held by XM Satellite Radio Holdings Inc. In November 2013, we...

  • Page 109
    ...(Dollar amounts in thousands, unless otherwise stated) 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 ...SIRIUS...

  • Page 110
    ...our FM-6 satellite and related launch vehicle during 2011 through its placement into operation in the fourth quarter 2013. We also incurred interest costs on our debt instruments and on our satellite incentive agreements. The following is a summary of our interest costs: For the Years Ended December...

  • Page 111
    ...We currently own a fleet of ten orbiting satellites. The chart below provides certain information on these satellites: Satellite Designation Year Delivered Estimated End of Depreciable Life FM-1* ...FM-2* ...FM-3 ...FM-5 ...FM-6 ...XM-1* ...XM-2* ...XM-3 ...XM-4 ...XM-5 ... 2000 2000 2000 2009 2013...

  • Page 112
    ... Stock and additional purchases of shares of our common stock, Liberty Media beneficially owned, directly and indirectly, over 50% of our outstanding common stock as of December 31, 2013. Two current Liberty Media executives and one Liberty Media director are members of our board of directors...

  • Page 113
    ... following Related party current asset balances attributable to Sirius XM Canada at December 31, 2013 and 2012: December 31, 2013 December 31, 2012 Deferred programming costs and accrued interest ...Dividends receivable ...Chip set and other services reimbursement ...Fair value of host contract of...

  • Page 114
    ...radio service in Canada. The agreements have an initial ten-year term, and Sirius XM Canada has the unilateral option to extend the agreements for an additional five-year term. We receive a 15% royalty for all subscriber fees earned by XM Canada each month for its basic service and an activation fee...

  • Page 115
    ... to this license and services agreement, we had the right to receive a royalty equal to a percentage of Sirius Canada's gross revenues based on subscriber levels (ranging between 5% and 15%) and the number of Canadian-specific channels made available to Sirius Canada. We recorded the following...

  • Page 116
    ... share of XM Canada's net loss was $6,045 for the year ended December 31, 2011. M-Way As part of the acquisition of the connected vehicle business of Agero in November 2013, we acquired a 30% ownership in M-Way Solutions GmbH ("M-Way"), a German mobile software solutions provider, which is accounted...

  • Page 117
    ... Sirius XM (a)(c) . . May 2013 4.625% Senior Notes (the "4.625% Notes") Sirius XM (f) ...December Senior Secured 2012 Revolving Credit Facility (the "Credit Facility") Sirius XM ...Various Capital leases Total Debt ...Less: total current maturities (g) ...Total long-term ...Less: long-term related...

  • Page 118
    ... used for working capital and other general corporate purposes, including dividends, financing of acquisitions and share repurchases. Interest on borrowings is payable on a quarterly basis and accrues at a rate based on LIBOR plus an applicable rate. Sirius XM is also required to pay a variable fee...

  • Page 119
    ... our corporate reorganization in November 2013, all of the outstanding shares of Sirius XM's common stock were converted, on a share for share basis, into identical shares of common stock of Holdings. The certificate of incorporation, the bylaws, the executive officers and the board of directors of...

  • Page 120
    ... board of directors that has been formed to review and evaluate the Liberty Media proposal. See "Note 1 - Recent Developments." The share repurchase agreement was transferred from Sirius XM to Holdings' effective November 15, 2013. Commitments under the share repurchase agreement are accounted for...

  • Page 121
    ... the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the "2009 Plan"). Employees, consultants and members of our board of directors are eligible to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and...

  • Page 122
    ... option value is zero for all periods. There were no options granted to third parties, other than non-employee members of our board of directors, during the years ended December 31, 2013, 2012 and 2011. The following table summarizes stock option activity under our share-based plans for the years...

  • Page 123
    ... units granted to third parties during the years ended December 31, 2013, 2012 and 2011. Total unrecognized compensation costs related to unvested share-based payment awards for stock options, restricted stock awards, restricted stock units and shares granted to employees and members of our board...

  • Page 124
    ... 6% of an employee's pre-tax salary, in cash which is used to purchase shares of our common stock on the open market. Employer matching contributions under the Sirius XM Plan vest at a rate of 33.33% for each year of employment and are fully vested after three years of employment for all current and...

  • Page 125
    ... into various marketing, sponsorship and distribution agreements to promote our brand and are obligated to make payments to sponsors, retailers, automakers and radio manufacturers under these agreements. Certain programming and content agreements also require us to purchase advertising on properties...

  • Page 126
    ... - (Continued) (Dollar amounts in thousands, unless otherwise stated) focuses on practices relating to the cancellation of subscriptions; automatic renewal of subscriptions; charging, billing, collecting, and refunding or crediting of payments from consumers; and soliciting customers. A separate...

  • Page 127
    ...) (Dollar amounts in thousands, unless otherwise stated) The following table indicates the significant elements contributing to the difference between the federal tax expense (benefit) at the statutory rate and at our effective rate: For the Years Ended December 31, 2013 2012 2011 Federal tax...

  • Page 128
    ... tax rate. This liability is recorded in Other long-term liabilities. No penalties have been accrued for. We do not currently anticipate that our existing reserves related to uncertain tax positions as of December 31, 2013 will significantly increase or decrease during the twelve-month period...

  • Page 129
    ... the statutory rate and at Sirius XM's effective rate: For the Years Ended December 31, 2013 2012 2011 Federal tax expense, at statutory rate ...State income tax expense, net of federal benefit ...State income rate changes ...Non-deductible expenses ...Change in valuation allowance ...Fair value of...

  • Page 130
    ...Dollar amounts in thousands, unless otherwise stated) Sirius XM Radio Inc. For the Three Months Ended June 30 September 30 December 31 March 31 2013 (1) Total revenue ...Cost of services...156,244 (1) Net income per share for Sirius XM is not presented since Sirius XM is a wholly-owned subsidiary of...

  • Page 131
    SIRIUS XM HOLDINGS INC. & SUBSIDIARIES Schedule II - Schedule of Valuation & Qualifying Accounts Holdings and Sirius XM: Balance January 1, Charged to Expenses (Benefit) Write-offs/ Payments/ Other Balance December 31, (in thousands) Description 2011 Allowance for doubtful accounts ...Deferred tax...

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  • Page 133
    ... Director Private Investor Vanessa A. Wittman Director Senior Vice President and CFO Motorola Mobility David M. Zaslav Director President and Chief Executive Officer Discovery Communications, Inc. Executive Offices Sirius XM Holdings Inc. 1221 Avenue of the Americas 36th Floor New York, New York...

  • Page 134
    Stockholder Information Annual Stockholders Meeting The annual meeting of Sirius XM stockholders is scheduled for 9:00 a.m., New York City time, on Monday, May 19, 2014 in the Auditorium at The McGraw Hill Building 1221 Avenue of the Americas New York, New York 10020 Transfer Agent and Registrar ...

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