XM Radio 2012 Annual Report Download - page 121

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Long-term debt obligations. Long-term debt obligations include principal payments on outstanding debt
and capital lease obligations.
Cash interest payments. Cash interest payments include interest due on outstanding debt and capital lease
payments through maturity.
Satellite and transmission. We have entered into agreements with third parties to operate and maintain the
off-site satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater
networks. We have also entered into various agreements to design and construct a satellite and related launch
vehicle for use in our systems.
Programming and content. We have entered into various programming agreements. Under the terms of
these agreements, our obligations include fixed payments, advertising commitments and revenue sharing
arrangements.
Marketing and distribution. We have entered 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 owned or controlled by the licensors. We also reimburse automakers for
certain engineering and development costs associated with the incorporation of satellite radios into vehicles they
manufacture. In addition, in the event certain new products are not shipped by a distributor to its customers
within 90 days of the distributor’s receipt of goods, we have agreed to purchase and take title to the product.
Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer of four of
XM’s in-orbit satellites, may be entitled to future in-orbit performance payments with respect to two of XM’s
satellites. As of December 31, 2012, we have accrued $27,832 related to contingent in-orbit performance
payments for our XM-3 and XM-4 satellites based on expected operating performance over their fifteen-year
design life. Boeing may also be entitled to an additional $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, a manufacturer of our in-orbit satellites, may be entitled to future in-orbit performance
payments. As of December 31, 2012, we have accrued $8,663 and $21,450 related to contingent performance
payments for our FM-5 and XM-5 satellites, respectively, based on their expected operating performance over
their fifteen-year design life.
Operating lease obligations. We have entered into 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 that 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, 2012, 2011 and 2010 was $37,474,
$34,143 and $36,652, 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.
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