XM Radio 2014 Annual Report Download - page 138

to XM-3 and XM-4 based on the expected operating performance meeting their fifteen-year design
life. Boeing may also be entitled to additional incentive payments up to $10,000 if our XM-4 satellite
continues to operate above baseline specifications during the five years beyond the satellite’s
fifteen-year design life.
Space Systems/Loral, the manufacturer of certain of our in-orbit satellites, may be entitled to
future in-orbit performance payments with respect to XM-5, FM-5 and FM-6 based on their
expected operating performance meeting their fifteen-year design life.
Operating lease obligations. We have entered into both cancelable and non-cancelable
operating 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. The effect of the rent holidays and rent concessions are recognized on a straight-line
basis over the lease term, including reasonably assured renewal periods. Total rent recognized in
connection with leases for the years ended December 31, 2014, 2013 and 2012 was $45,107,
$39,228 and $37,474, respectively.
Other. We have entered into various agreements with third parties for general operating
purposes. In addition to the minimum contractual cash commitments described above, we have
entered into agreements with other variable cost arrangements. These future costs are dependent
upon many factors, including subscriber growth, and are difficult to anticipate; however, these costs
may be substantial. We may enter into additional programming, distribution, marketing and other
agreements that contain similar variable cost provisions. The cost of our stock acquired from a
third-party financial institution but not paid for as of December 31, 2014 is included in this category.
We do not have any other significant off-balance sheet financing arrangements that are
reasonably likely to have a material effect on our financial condition, results of operations, liquidity,
capital expenditures or capital resources.
Legal Proceedings
In the ordinary course of business, we are a defendant or party to various claims and lawsuits,
including those discussed below. These claims are at various stages of arbitration or adjudication.
We record a liability when we believe that it is both probable that a liability will be incurred, and
the amount of loss can be reasonably estimated. We evaluate developments in legal matters that
could affect the amount of liability that has been previously accrued and make adjustments as
appropriate. Significant judgment is required to determine both probability and the estimated amount
of a loss or potential loss. We may be unable to reasonably estimate the reasonably possible loss
or range of loss for a particular legal contingency for various reasons, including, among others,
because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early
stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and
appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any
negotiations with respect thereto; (v) there remain significant factual issues to be determined or
resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal
theories. In such instances, there may be considerable uncertainty regarding the ultimate resolution
of such matters, including a possible eventual loss, if any.
State Consumer Investigations. In December 2014, we entered into agreements with 46 States
and the District of Columbia to settle a multistate investigation into certain of our consumer
practices. The investigation focused 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. As part of the settlement agreements, we
agreed to certain changes in our consumer practices relating to: the sale and cancellation of self-
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SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollar amounts in thousands, unless otherwise stated)