XM Radio 2014 Annual Report Download

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Table of contents

  • Page 1

  • Page 2
    ... program, repurchasing approximately $2.5 billion of our common stock in 2014. • Building the best entertainment bundle in subscription media as the leader in audio entertainment. We launched new channels and shows with major entertainment brands and talent, across almost all of our music, sports...

  • Page 3
    ... an increasingly larger pool of used cars with satellite radio installed. In the massive used car market-a fertile field for us to find new subscribers since used car sales far exceed the annual sales rate of new cars-we now have a national network of more than 15,000 dealers enrolled in our program...

  • Page 4
    ...to execute on our growth plans and position SiriusXM for sustained long-term success, we want to thank our tens of millions of subscribers, and we look forward to bringing SiriusXM to more customers than ever before. As we start 2015, we are excited to continue to provide the best radio on radio and...

  • Page 5
    ...AXA Equitable Center 787 Seventh Avenue New York, New York 10019 1. To elect the thirteen director nominees listed herein; 2. To approve the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan; 3. To ratify the appointment of KPMG LLP as our independent registered public accountants for 2015...

  • Page 6
    ... for 2014 ...STOCK OWNERSHIP ...Who are the principal owners of our stock? ...How much stock do our directors and executive officers own? ...Section 16(a) Beneficial Ownership Reporting Compliance ...GOVERNANCE OF THE COMPANY ...How does the board of directors oversee our risk management process...

  • Page 7
    ...Pension Benefits ...Potential Payments or Benefits Upon Termination or Change-in-Control ...ITEM 2-APPROVAL OF THE SIRIUS XM HOLDINGS INC. 2015 LONG-TERM STOCK INCENTIVE PLAN ...ITEM 3-RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS ...Principal Accountant Fees and Services ...Pre-Approval...

  • Page 8
    ...the approval of the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan; • Item 3-the ratification of the appointment of KPMG LLP as our independent registered public accountants for 2015; and • such other business that may properly be conducted at the annual meeting or any adjournments...

  • Page 9
    ...at the annual meeting. The affirmative vote of the holders of a majority of the voting power of our common stock, present in person or represented by proxy, and entitled to vote on the matter is required for Item 2 (the approval of the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan) and...

  • Page 10
    ... the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan), your shares will be considered "broker non-votes" and will not be counted in determining the outcome of the vote. How do I vote? Stockholders of record can vote as follows: • By Internet: Stockholders may vote over the Internet at...

  • Page 11
    ...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 12
    ... 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 13
    ... Biographical information about this year's nominees: Name Age Position, Principal Occupation, Business Experience and Directorships Joan L. Amble... 61 Ms. Amble has been a director since July 2008. From December 2006 until the closing of our merger with XM Satellite Radio Holdings Inc. ("XM") in...

  • Page 14
    ... as a director at Microsoft Corporation during the last five years. Key Attributes, Experience and Skills: Mr. Bates brings to the board of directors extensive executive leadership experience in the technology industry, including the management of worldwide operations, sales, service and support...

  • Page 15
    ... a short- and long-term perspective. He also brings to the board, among his other skills and qualifications, financial and accounting expertise acquired while serving as a partner at KPMG LLP. In addition, Mr. Carleton's service on other public company boards has provided him with a number of skills...

  • Page 16
    ... 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 17
    ...a director at Motors Liquidation Corporation and Meridian Automotive during the last five years. Key Attributes, Experience and Skills: Mr. Holden has spent his career in the automotive business, a key market for our services. Mr. Holden's perspective on, and knowledge of, the workings, business and...

  • Page 18
    ...experience based on his senior policy-making positions at Liberty Media, Oracle, 360networks and Microsoft. He also provides the board with executive leadership perspective on the operations and management of large public companies, including companies in the technology, media and telecommunications...

  • Page 19
    ... and ´, director of Drive Passion PC Services, CC, an Internet cafe telecommunications and document services company, in South Africa since 2007 and served as an applied physics technician for Fermi National Accelerator Laboratory, part of the national laboratory system of the Office of Science...

  • Page 20
    ...executing our goals and strategies. Mr. Meyer provides the board not only with a knowledge of our daily workings, but also with the essential experience, insight and expertise that can be provided only by a person who is intimately involved in running our business. His ability as a director to share...

  • Page 21
    ... business, from March 2003 until June 2013. From December 2004 to December 2007, Mr. Mooney was the chairman of the board of directors of RCN Corporation, a provider of bundled telephone, cable and high speed internet services. From April 2001 to September 2002, Mr. Mooney was the Executive...

  • Page 22
    ...Media. Mr. Vogel is a member of the boards of directors and corporate governance committee of Shaw Communications, Inc., a diversified communications company providing broadband cable and direct-to-home satellite services in Canada, a member of the board of directors and audit committee of Universal...

  • Page 23
    ... the board of directors of Ulta Salon, Beauty & Fragrance, Inc., a beauty products retailer. During the last five years, Ms. Wittman served as a director of kgb, an independent provider of directory assistance and enhanced information services, and Infospace, an internet search services company. Key...

  • Page 24
    ... 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 25
    ... Executive Officer. The board of directors has determined that it is currently in our best interests to separate the Chairman of the board position and the Chief Executive Officer position because it allows the Chief Executive Officer to focus on our day-to-day business, including risk management...

  • Page 26
    ... of Marsh & McLennan Companies, Inc. ("MMC"). Ms. Wittman served as an executive officer of MMC until March 2012. The board found that the amount we paid to this subsidiary of MMC was less than one tenth of one percent of MMC's reported consolidated revenues in the applicable year. Similarly, with...

  • Page 27
    ...Vanessa A. Wittman • Selects our independent registered public accounting firm • Reviews reports of our independent registered public accounting firm • Reviews and approves the scope and cost of all services, including all non-audit services, provided by the firm selected to conduct the audit...

  • Page 28
    ... for 2014 The following table provides compensation information for the year ended December 31, 2014 for each of our non-employee directors. Directors who are employees do not receive compensation for their services as directors. Name Fee Earned or Paid in Cash ($) Stock Awards(2) ($) Option Awards...

  • Page 29
    ... on the business day following that year's annual meeting of stockholders. All options to purchase our common stock awarded to our non-employee directors will vest over a four-year period, with 25% vesting on each anniversary of the date of grant. Each member will also receive shares of our common...

  • Page 30
    ... Senior Subordinated Notes due 2014 beneficially owned by Liberty Media Corporation that were converted in full prior to the maturity of the Notes. How much stock do our directors and executive officers own? The following table shows the number of shares of common stock beneficially owned by each...

  • Page 31
    ... numbers of shares of common stock acquired under and held in the Sirius XM Radio Inc. 401(k) savings plan as of February 28, 2015: Mr. Meyer-5,355 shares; Mr. Greenstein-72,728 shares; Mr. Donnelly- 18,194 shares; Mr. Frear-85,046 shares; Mr. Rodriguez-0 shares; and all other executive officers...

  • Page 32
    ... transaction, be reviewed and approved or ratified by a committee of the board composed solely of independent directors who are disinterested or by the disinterested members of the board; and • that any employment relationship or transaction involving an executive officer and the Company must be...

  • Page 33
    ... 25, 2014, the date of the final purchase installment under the agreement. On April 25, 2014, we repurchased $340 million of our shares of common stock from Liberty Media. We entered into this amendment at the request of the Special Committee of our board of directors that was formed to review and...

  • Page 34
    ... extending the terms of our executive agreements, we have, among other things, eliminated golden parachute excise tax gross ups and added clawback provisions. At our annual meeting last year we held an advisory "say on pay" vote on the compensation of our named executive officers. In May 2014, our...

  • Page 35
    ... the integration of our connected vehicle services business and establishing Sirius XM as a leading provider of telematics services; and • increasing our stock buyback program from $4 billion to $6 billion. In addition, 2014 was marked by key subscriber and content-based achievements and other...

  • Page 36
    ... pay equity and the compensation that may be awarded to the officer, including salary, annual bonus, long-term incentives, perquisites and other benefits. In addition, the Compensation Committee considers the other benefits to which the officer is entitled under the officer's employment agreement...

  • Page 37
    ... officers are described below under "Fiscal Year 2014 Pay Implications-Payment of Performance-Based Discretionary Annual Bonuses for 2014" and are reflected in the Summary Compensation Table. Long-term Incentive Compensation The Compensation Committee grants long-term incentive awards to directly...

  • Page 38
    ... executive officers provide for any special payments solely due to a change in control. Under the terms of both the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan and, if approved by stockholders, the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (collectively, the "Plans...

  • Page 39
    ... agreement. In 2014, no other base salary increases were made for our named executive officers. Payment of Performance-Based Discretionary Annual Bonuses for 2014 In 2014, the Compensation Committee again adopted, under the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, a bonus program...

  • Page 40
    ... named executive officers. Long-Term Equity Grants for 2014 In January 2014, we entered into a new employment agreement with Mr. Donnelly to continue to serve as our Executive Vice President, General Counsel and Secretary. In connection with his new agreement, we granted Mr. Donnelly stock options...

  • Page 41
    ... 2-Approval of the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan" for more information. Related Policies and Considerations Compensation of our Chief Executive Officer The material terms of Mr. Meyer's employment agreement are described below under "Potential Payments or Benefits Upon...

  • Page 42
    ... vehicle services business and establishing Sirius XM as a leading provider of telematics services; • managing our significant investments in research and development; • continuing to expand our ability to identify and acquire subscribers in certified pre-owned and used vehicles and managing...

  • Page 43
    ... table provides information with respect to equity grants made during fiscal year 2014 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 (#)(1) Exercise or Base Price of Option Awards...

  • Page 44
    ... named executive officers. Option Awards Number of Number of Securities Securities Underlying Underlying Unexercised Unexercised Option Options Options Exercise (#) (#) Price Exercisable Unexercisable ($) Stock Awards Number of Market Value of Shares or Shares or Units Units that of Stock that have...

  • Page 45
    ... "Potential Payments or Benefits Upon Termination or Change in Control." Option Exercises and Stock Vested in 2014 The following table provides information with respect to option exercises and restricted stock and RSUs that vested during 2014. Option Awards Number of Value Realized Shares Acquired...

  • Page 46
    ... to approved increases, and obligates us to offer Mr. Meyer a three-year consulting agreement upon the expiration of his employment agreement on October 31, 2015. Mr. Meyer is also entitled to participate in any bonus plans generally offered to our executive officers, with an annual target bonus...

  • Page 47
    ... and Frear also have outstanding options as of December 31, 2014 that were granted under our 2003 Long-Term Stock Incentive Plan. Under the 2003 Long-Term Stock Incentive Plan, the outstanding equity awards granted to these named executive officers are subject to potential accelerated vesting...

  • Page 48
    ...under the named executive officers' agreements and our stock incentive plans to which they would have been entitled if a termination of employment or change in control had occurred as of December 31, 2014: Lump Sum Severance Payment ($) Accelerated Continuation of Equity Insurance Excise Tax Vesting...

  • Page 49
    ... for one year (18 months in the case of Messrs. Meyer and Donnelly) at 2014 rates. Assumes that life insurance would be continued at rate of two times current employer cost. Mr. Meyer is also eligible to receive a prorated bonus for the year in which his employment is terminated. Payment is based...

  • Page 50
    ... SIRIUS XM HOLDINGS INC. 2015 LONG-TERM STOCK INCENTIVE PLAN Our board of directors has adopted the 2015 Plan, subject to the approval of our stockholders. If the 2015 Plan is approved by our stockholders, no future equity awards will be made pursuant to the Sirius XM Radio Inc. 2009 Long-Term Stock...

  • Page 51
    ...,367 shares were outstanding; • stock options to purchase 255,907,697 shares of our common stock were outstanding, with an average exercise price of $2.76 and an average remaining term of approximately 6.96 years; and • 20,382,926 shares remained available for issuance under the 2009 Plan. Upon...

  • Page 52
    ... stock options, or combinations of the two. Stock options granted under the 2015 Plan will be subject to such terms and conditions, including exercise price and conditions and timing of exercise, as may be determined by the Committee and specified in the applicable award agreement. Payment...

  • Page 53
    ... exercise price of the option. No stock option may be exercisable more than 10 years from the date of grant. Stock Appreciation Rights. SARs granted under the 2015 Plan will be subject to such terms and conditions, including grant price and the conditions and limitations applicable to exercise...

  • Page 54
    ... amortization, earnings before interest, taxes, depreciation and amortization, number of subscribers, growth of subscribers, operating expenses, capital expenses, subscriber acquisition costs, share price, enterprise value, equity market capitalization or market share. To the extent required under...

  • Page 55
    ... from the number of shares otherwise issuable upon the exercise of the option or the settlement in shares a number of shares with a fair market value equal to such withholding liability. Detrimental Activity and Recapture Provisions Any award agreement may provide for the cancellation or forfeiture...

  • Page 56
    ..., upon terms and conditions as may be determined by the Committee from time to time, if a participant, during his or her employment or other service with us or a subsidiary engages in activity detrimental to our business. In addition, any award agreement may also provide for the cancellation or...

  • Page 57
    ... to the excess of the fair market value of such shares (determined without regard to the Restrictions) over the purchase price, if any, of such restricted stock. If a Section 83(b) election has not been made, any dividends received with respect to restricted stock that is subject to the Restrictions...

  • Page 58
    ... exercise price. Vote Required The affirmative vote of a majority in voting power of our common stock represented in person or by proxy and entitled to vote is required for the approval of the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan. The board of directors recommends a vote "FOR...

  • Page 59
    ... management guidelines and policies. The Audit Committee is composed solely of independent directors meeting the requirements of applicable ...recent Public Company Accounting Oversight Board reports on KPMG and its peer firms; • the appropriateness of KPMG's fees for audit and non-audit services, ...

  • Page 60
    ...make a statement if they desire to do so. The board of directors recommends a vote "FOR" the ratification of KPMG LLP as our independent registered public accountants for 2015. Principal Accountant Fees and Services The following table sets forth the fees billed to us by KPMG as of and for the years...

  • Page 61
    ... regard, the Audit Committee reviewed and discussed, with management and our independent registered public accounting firm, management's annual report on the effectiveness of internal control over financial reporting as of December 31, 2014 and KPMG's related attestation report. The Audit Committee...

  • Page 62
    ...recommended to the board of directors, and the board approved, that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 filed with the SEC. This report is provided by the following independent directors, who comprise...

  • Page 63
    ... annual report for the fiscal year ended December 31, 2014 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 6, 2015 We make available...

  • Page 64
    ...A SIRIUS XM HOLDINGS INC. 2015 LONG-TERM STOCK INCENTIVE PLAN SECTION 1. Purpose. The purposes of this Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan are to promote the interests of Sirius XM Holdings Inc. and its stockholders by: (a) attracting and retaining employees and directors of...

  • Page 65
    ... Long-Term Stock Incentive Plan, the XM Satellite Radio Holdings Inc. 2007 Stock Incentive Plan, the XM Satellite Radio Holdings Inc. Talent Option Plan and Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan. "Fair Market Value" shall mean: (i) with respect to any property other than Shares...

  • Page 66
    ...such term is defined, then, unless otherwise defined in the applicable Award Agreement, for purposes of this Plan, the Participant shall not be entitled to terminate his or her employment or service for Good Reason. "Incentive Stock Option" shall mean a right to purchase Shares from the Company that...

  • Page 67
    ..., joint-stock company, trust, unincorporated organization, government or political subdivision. "Plan" shall mean this Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan. "Restricted Stock" shall mean any Share granted under Section 8 of the Plan. "Restricted Stock Unit" shall mean any unit...

  • Page 68
    ... to which Incentive Stock Options may be granted under the Plan shall be 75 million. Subject to adjustment as provided in Section 4(b), the maximum number of Shares with respect to which Options and Stock Appreciation Rights may be granted to any single Participant in any fiscal year shall be 75...

  • Page 69
    ... or cancelled, and upon payment in cash of the benefit provided by any Award, any Shares that were covered by such Award will be available for issue hereunder. In addition, (A) if Shares are tendered or otherwise used in payment of the exercise price of an Option, the total number of Shares covered...

  • Page 70
    ... or substituted or converted for and need not comply with other specific terms of this Plan, and may account for Shares substituted for the securities covered by the original awards and the number of shares subject to the original awards, as well as any exercise or purchase prices applicable to the...

  • Page 71
    ... Fair Market Value of any such Shares so tendered to the Company or withheld as of the date of such tender or withholding is at least equal to such aggregate exercise price. (ii) Wherever in this Plan or any Award Agreement a Participant is permitted to pay the exercise price of an Option or taxes...

  • Page 72
    ... Stock Units shall be paid directly to the Participant, withheld by the Company subject to vesting of the Restricted Stock or Restricted Stock Units, as applicable, pursuant to the terms of the applicable Award Agreement, or may be reinvested in additional Shares of Restricted Stock or in additional...

  • Page 73
    ...provided in the applicable Award Agreement, a Participant must be employed by the Company on the last day of a Performance Period to be eligible for payment in respect of a Performance Compensation Award for such Performance Period. (ii) Limitation. A Participant shall be eligible to receive payment...

  • Page 74
    ... the Plan. (d) Repricing. Except in connection with a corporate transaction or event described in Section 4(b) hereof, the terms of outstanding Awards may not be amended to reduce the exercise price of Options or the grant price of Stock Appreciation Rights, or cancel Options or Stock Appreciation...

  • Page 75
    ..., during employment or other service with the Company or a subsidiary, shall engage in activity detrimental to the business of the Company. In addition, notwithstanding anything in this Plan to the contrary, any Award Agreement may also provide for the cancellation or forfeiture of an award...

  • Page 76
    ...of the Option (or the settlement of such Award in Shares) a number of Shares with a Fair Market Value equal to such withholding liability. (f) Award Agreements. Awards hereunder shall be evidenced by an Award Agreement specifying the terms and conditions of the Award and any rules applicable thereto...

  • Page 77
    ... Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of options, restricted stock, restricted stock units, Shares and other types of Awards...

  • Page 78
    ... avoid taxes or penalties under Section 409A of the Code, then the Company shall not pay such amount on the otherwise scheduled payment date but shall instead pay it, with interest, on the earlier of the first business day of the seventh month or death. (d) Notwithstanding any provision of this Plan...

  • Page 79

  • Page 80
    2014 ANNUAL REPORT

  • Page 81

  • Page 82
    ... otherwise stated) Executive Summary We broadcast music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through our two proprietary satellite radio systems. Subscribers can also receive music...

  • Page 83
    ...twelve months. We receive subscription payments for these trials from certain automakers. We also reimburse various automakers for certain costs associated with satellite radios installed in new vehicles. Liberty Media beneficially owns, directly and indirectly, over 50% of the outstanding shares of...

  • Page 84
    ... number of subscribers, the inclusion of a full year of subscription revenue generated by our connected vehicle business and the increase in certain of our subscription rates beginning in January 2014. These increases were partially offset by subscription discounts and limited channel line-up plans...

  • Page 85
    ... to increase based on the growth of our subscriber base, including connected vehicle subscribers, changes in our subscription rates and the sale of additional services to subscribers. Advertising Revenue includes the sale of advertising on certain non-music channels. • 2014 vs. 2013: For the years...

  • Page 86
    ... of deferred credits on executory contracts initially recognized in purchase price accounting associated with the Merger. We expect our revenue share and royalty costs to increase as our revenues grow and our royalty rates increase. As determined by the Copyright Royalty Board's decision, we paid...

  • Page 87
    ... to earnings in 2014 from the amortization of deferred credits on executory contracts initially recognized in purchase price accounting associated with the Merger and increased subsidy costs related to a larger number of satellite radio installations in new vehicles. For the year ended December 31...

  • Page 88
    ... year of costs associated with our connected vehicle services business, increased personnel costs, and the elimination of the benefit to earnings in 2014 from the amortization of the deferred credit for acquired executory contracts recognized in purchase price accounting associated with the Merger...

  • Page 89
    ... costs associated with our connected vehicle services business and additional assets placed in-service, including our FM-6 satellite which was placed in-service in late 2013. The increase was offset by a reduction of amortization associated with the stepped-up basis in assets acquired in the Merger...

  • Page 90
    ... $259,877, respectively. Our annual effective tax rate for the year ended December 31, 2014 was 41%. The primary driver for the increase over the statutory rate is related to the $34,485 loss on the change in fair value of the derivative related to the share repurchase agreement with Liberty Media...

  • Page 91
    ... monthly revenue per subscriber, or ARPU; customer service and billing expenses, per average subscriber; subscriber acquisition cost, or SAC, per installation; free cash flow; and adjusted EBITDA. These measures exclude the impact of sharebased payment expense and certain purchase price accounting...

  • Page 92
    ...-pay subscribers ...Paid promotional subscribers ...Net additions ...Daily weighted average number of subscribers ...Average self-pay monthly churn ...New vehicle consumer conversion rate...ARPU ...SAC, per installation(1) ...Customer service and billing expenses, per average subscriber(1) ...Free...

  • Page 93
    ... mix of sales by OEMs. ARPU is derived from total earned subscriber revenue (excluding revenue derived from our connected vehicle services business), net advertising revenue and other subscription-related revenue, net of purchase price accounting adjustments, divided by the number of months in the...

  • Page 94
    ... certain of our 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...

  • Page 95
    ...in our stock option program and the purchase of common stock under our share repurchase program. Proceeds from long-term debt, related party debt and equity issuances have been used to fund our operations, acquire the connected vehicle business of Agero, Inc., construct and launch new satellites and...

  • Page 96
    ... satellite radio business. Stock Repurchase Program Since December 2012, our board of directors has approved for repurchase an aggregate of $6,000,000 of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased...

  • Page 97
    ... 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 98
    ... life intangible assets during the years ended December 31, 2014 or 2013. Useful Life of Broadcast/Transmission System. Our satellite system includes the costs of our satellite construction, launch vehicles, launch insurance, capitalized interest, spare satellites, terrestrial repeater network and...

  • Page 99
    ... 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...

  • Page 100
    ... 31, 2014 Allocation of Purchase Price Share-based Accounting Payment Expense Adjusted Adjustments As Reported (in thousands) Revenue: Subscriber revenue...Advertising revenue ...Equipment revenue...Other revenue ...Total revenue ...Operating expenses Cost of services: Revenue share and royalties...

  • Page 101
    ... Purchase Price Share-based Accounting Payment Expense Adjusted Adjustments As Reported Revenue: Subscriber revenue...Advertising revenue ...Equipment revenue...Other revenue ...Total revenue ...Operating expenses Cost of services: Revenue share and royalties ...Programming and content ...Customer...

  • Page 102
    ... with our connected vehicle business, 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. ARPU is calculated...

  • Page 103
    ... of new vehicles that receive our satellite radio 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...

  • Page 104
    ...we received 19.4 million shares of our common stock. In addition, during October 2014, we purchased 36.5 million shares of our common stock on the open market at an average price of $3.33 per share. See Note 15 to the consolidated financial statements included in this Annual Report. (b) COMPARISON...

  • Page 105
    ...Sirius XM. This selected financial data should be read in conjunction with the audited Consolidated Financial Statements 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...

  • Page 106
    ... to changes in interest rates. Sirius XM's borrowings under the Credit Facility carry a variable interest rate based on LIBOR plus an applicable rate based on its debt to operating cash flow ratio. Currently, we do not use interest rate derivative instruments to manage our exposure to interest...

  • Page 107
    ... respects, the information set forth therein. 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, 2014, based on criteria...

  • Page 108
    ... OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Sirius XM Holdings Inc. and subsidiaries: We have audited Sirius XM Holdings Inc. and subsidiaries' internal control over financial reporting as of December 31, 2014, based on criteria established in Internal...

  • Page 109
    ... ...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 and...

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    ... per share data) ASSETS As of December 31, 2014 2013 Current assets: Cash and cash equivalents ...Receivables, net ...Inventory, net ...Prepaid expenses ...Related party current assets ...Deferred tax asset ...Other current assets ...Total current assets ...Property and equipment, net ...Long-term...

  • Page 111
    ...250,100 Comprehensive income, net of tax ...- Share-based payment expense...- Exercise of options and vesting of restricted stock units...- Minimum withholding taxes on net share settlement of stock-based compensation ...- Conversion of preferred stock to common stock...(6,250,100) Conversion of...

  • Page 112
    ... share data) Shares Amount Shares Shares Amount Common stock repurchased ...Common stock retired ...Initial fair value of forward contract. Balance at December 31, 2013 ...Comprehensive income, net of tax . Share-based payment expense ...Exercise of options and vesting of restricted stock units...

  • Page 113
    ... ...Share-based payment expense ...Deferred income taxes ...Other non-cash purchase price adjustments ...Changes in operating assets and liabilities: Receivables ...Inventory ...Related party assets ...Prepaid expenses and other current assets . . Other long-term assets ...Accounts payable...

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    ... the Years Ended December 31, 2014 2013 2012 (in thousands) Cash flows from financing activities: Proceeds from exercise of stock options ...Taxes paid in lieu of shares issued for stock-based compensation...Proceeds from long-term borrowings and revolving credit facility, net of costs ...Payment...

  • Page 115
    ... of Presentation Business We broadcast music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through our two proprietary satellite radio systems. Subscribers can also receive music and other...

  • Page 116
    ... outstanding shares of the capital stock of the connected vehicle business of Agero, Inc. ("Agero"). The transaction was accounted for using the acquisition method of accounting. During the year ended December 31, 2014, the purchase price allocation associated with the connected vehicle business of...

  • Page 117
    ... share and royalties expense. Fees received from subscribers for the U.S. Music Royalty Fee are recorded as deferred revenue and amortized to revenue ratably over the service period which coincides with the recognition of the subscriber's subscription revenue. We report revenues net of any tax...

  • Page 118
    ... costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies...

  • Page 119
    ... Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer...

  • Page 120
    ... from the host contract. Sirius XM Canada redeemed and converted the debentures during the year ended December 31, 2014. The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm. Refer to Note 14 for information related to the carrying...

  • Page 121
    ... net income per share. (b) (6) Receivables, net Receivables, net includes customer accounts receivable, receivables from distributors and other receivables. Customer accounts receivable, net, includes receivables from our subscribers and advertising customers and is stated at amounts due net...

  • Page 122
    ... in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to a subsidy based on the number of units produced...

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    ... during the years ended December 31, 2014, 2013 and 2012. During the year ended December 31, 2014, the purchase price allocation and working capital calculation associated with the connected vehicle business we purchased from Agero were adjusted. These adjustments resulted in a net increase to...

  • Page 124
    ... on their use. 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 satellite licenses expires: FCC satellite licenses Expiration year SIRIUS FM-1...SIRIUS FM-2...SIRIUS FM-3...SIRIUS FM...

  • Page 125
    ... for the years ended December 31, 2014, 2013 and 2012, respectively. (11) 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...

  • Page 126
    ...and hardware...Satellite telemetry, tracking and control facilities ...Furniture, fixtures, equipment and other ...Building ...Leasehold improvements ... 2-15 years 5-15 years 3-15 years 3-7 years 3-15 years 2-7 years 20 or 30 years Lesser of useful life or remaining lease term We review long-lived...

  • Page 127
    ... otherwise stated) Satellites We currently own a fleet of nine operating satellites. The chart below provides certain information on these satellites: Estimated End of Depreciable Life Satellite Designation Year Delivered FM-1* ...FM-2* ...FM-3 ...FM-5 ...FM-6 ...XM-1* ...XM-3 ...XM-4 ...XM...

  • Page 128
    ...our agreements with Sirius XM Canada, we receive a percentage-based royalty for certain types of subscription revenue earned by Sirius XM Canada for the distribution of Sirius and XM channels, royalties for activation fees and reimbursements for other charges. We record revenue from Sirius XM Canada...

  • Page 129
    ... otherwise stated) (b) During the year ended December 31, 2014, our share of Sirius XM Canada's net earnings included a gain of $1,251 related to the fair value received in excess of the carrying value associated with the redemption of our investment in Sirius XM Canada's 8% convertible unsecured...

  • Page 130
    ...are used for working capital and other general corporate purposes, including dividends, financing of acquisitions and share repurchases. Interest on borrowings is payable on a monthly basis and accrues at a rate based on LIBOR plus an applicable rate. Sirius XM is also required to pay a variable fee...

  • Page 131
    ... generally requires compliance with certain covenants that restrict Sirius XM's ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions...

  • Page 132
    ... Media in 2013. On April 25, 2014, we completed the final purchase installment and repurchased 92,888,561 shares of our common stock for $340,000 from Liberty Media at a price of $3.66 per share. As there were certain terms in the forward purchase contract with Liberty Media that could have caused...

  • Page 133
    ... and units using the fair market value of the restricted shares of common stock on the day the award is granted. Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility and risk-free interest rates. In 2014...

  • Page 134
    ... 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 135
    ..., unless otherwise stated) The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2014, 2013 and 2012 (options in thousands): Weighted-Average Exercise Price(1) Weighted-Average Remaining Contractual Term (Years) Aggregate Intrinsic...

  • Page 136
    ...investment option for this contribution. Prior to January 2014, the cash from employer matching contributions was used to purchase shares of our common stock on the open market. We contributed $5,385 and $4,181 during the years ended December 31, 2014 and 2013, respectively, to the Sirius XM Plan in...

  • Page 137
    ... these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors. We also reimburse automakers for certain engineering and development costs associated with the incorporation of satellite radios into new vehicles...

  • Page 138
    ... leases for office space, equipment and terrestrial repeaters. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years, and certain leases have options to renew...

  • Page 139
    ... et al. v. Sirius XM Radio Inc., No. BC-520981 (Super. Ct. L.A. County). Additional information concerning each of these actions is publicly available in court filings under their docket numbers. In addition, in August 2013, SoundExchange, Inc. filed a complaint in the United States District Court...

  • Page 140
    ... Sirius XM Radio, Inc.. No.13-cv-1290-RJL (D.D.C.), and Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, United States Copyright Royalty Board, No. 2006-1 CRB DSTRA. Additional information concerning each of these actions is publicly...

  • Page 141
    ... to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable...

  • Page 142
    ...: For the Years Ended December 31, 2014 2013 Deferred tax assets: Net operating loss carryforwards ...GM payments and liabilities ...Deferred revenue ...Severance accrual...Accrued bonus ...Expensed costs capitalized for tax ...Deferred financing costs ...Investments ...Stock based compensation...

  • Page 143
    ... 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, 2014 will significantly increase or decrease during the twelve-month period...

  • Page 144
    ...otherwise stated) (20) Quarterly Financial Data-Unaudited Our quarterly results of operations are summarized below: March 31 For the Three Months Ended June 30 September 30 December 31 2014 Total revenue ...Cost of services...Income from operations...Net income ...Net income per common share-basic...

  • Page 145
    SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES Schedule II - Schedule of Valuation and Qualifying Accounts Balance January 1, Charged to Expenses (Benefit) Write-offs/ Payments/Other Balance December 31, (in thousands) Description 2014 Allowance for doubtful accounts ...Deferred tax assets-valuation ...

  • Page 146
    ... Katherine Kohler Thomson Executive Vice President, Chief Marketing Officer Board of Directors Gregory B. Maffei Chairman of the Board of Sirius XM Holdings Inc. President and CEO Liberty Media Corporation Eddy W. Hartenstein Lead Independent Director of Sirius XM Holdings Inc. President and CEO...

  • Page 147
    ... annual meeting of Sirius XM stockholders is scheduled for 9:00 a.m., New York City time, on Tuesday, May 19, 2015 in the Auditorium at The AXA Equitable Center, 787 Seventh Avenue, New York, New York 10019 Transfer Agent and Registrar The transfer agent and registrar for the Company's common stock...

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