XM Radio 2011 Annual Report Download - page 64

Depreciation and Amortization represents the systematic recognition in earnings of the acquisition cost of
assets used in operations, including our satellite constellations, property, equipment and intangible assets, over
their estimated service lives.
•2011 vs. 2010: For the years ended December 31, 2011 and 2010, depreciation and amortization
expense was $267,880 and $273,691, respectively, a decrease of 2%, or $5,811, and decreased as a
percentage of total revenue. The decrease was primarily due to a reduction in the amortization of
subscriber relationships, partially offset by depreciation recognized on additional assets placed in service.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, depreciation and amortization
expense was $273,691 and $309,450, respectively, a decrease of 12%, or $35,759, and decreased as a
percentage of total revenue. The decrease was primarily due to a $38,136 reduction in the depreciation of
acquired satellite constellation and amortization of subscriber relationships, partially offset by
depreciation recognized on additional assets placed in-service.
We expect depreciation expenses to increase in future periods as we complete construction and launch our
FM-6 satellite, which will be partially offset by reduced amortization associated with the stepped-up basis in
assets acquired in the Merger (including intangible assets, satellites, property and equipment) through the end of
their estimated service lives, principally through 2017.
Restructuring, Impairments and Related Costs represents charges related to the re-organization of our staff
and restructuring of contracts, as well as charges related to the impairment of assets when those costs are deemed
to provide no future benefit.
•2011 vs. 2010: In 2011, we did not record any restructuring, impairments, and related costs. For the
year ended December 31, 2010, restructuring, impairments and related costs were $63,800 primarily due
to the impairment of our FM-4 satellite as a result of the launch of XM-5 in 2010, and contract
terminations.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, restructuring, impairments and
related costs were $63,800 and $32,807, respectively, an increase of 94%, or $30,993. The increase was
primarily due to the impairment of our FM-4 satellite as a result of the launch of XM-5 in 2010, and
contract termination costs in the year ended December 31, 2010 compared to losses incurred on
capitalized installment payments which were expected to provide no future benefit due to the
counterparty’s bankruptcy filing in the year ended December 31, 2009.
Other Income (Expense)
Interest Expense, Net of Amounts Capitalized, includes interest on outstanding debt, reduced by interest
capitalized in connection with the construction of our satellites and related launch vehicles.
•2011 vs. 2010: For the years ended December 31, 2011 and 2010, interest expense was $304,938 and
$295,643, respectively, an increase of 3%, or $9,295. The increase was primarily due to lower capitalized
interest related to the construction of our satellites and related launch vehicles, partially offset by the mix
of outstanding debt with lower interest rates.
•2010 vs. 2009: For the years ended December 31, 2010 and 2009, interest expense was $295,643 and
$315,668, respectively, a decrease of 6%, or $20,025. The decrease was primarily due to decreases in the
weighted average interest rate on our outstanding debt in the year ended December 31, 2010 compared to
the year ended December 31, 2009 and the redemption of XM’s 10% Senior PIK Secured Notes due 2011
on June 1, 2010.
Following the launch of our FM-6 satellite, which is anticipated during the first half of 2012, the
capitalization of interest expense related to the construction of our satellites and related launch vehicles will be
eliminated. As a result, we expect interest expense to increase, offset partially as our outstanding debt declines
due to retirements at maturity, redemptions and repurchases.
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