XM Radio 2014 Annual Report Download - page 90

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•2013 vs. 2012: For the year ended December 31, 2013, loss on extinguishment of debt and
credit facilities, net, was $190,577. The loss in 2013 was recorded on the extinguishment of
our 7.625% Senior Notes due 2018 and our 8.75% Senior Notes due 2015. During the year
ended December 31, 2012, a $132,726 loss was recorded on the extinguishment of our 13%
Senior Notes due 2013 and our 9.75% Senior Secured Notes due 2015.
Interest and Investment Income includes realized gains and losses, interest income, and our
share of the income or loss of Sirius XM Canada.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, interest and investment
income was $15,498 and $6,976, respectively. The income for the year ended December 31,
2014 was driven by the dividends received from Sirius XM Canada, our share of Sirius XM
Canada’s net income and income from the conversion of certain debentures into shares of
Sirius XM Canada, partially offset by the amortization expense related to our equity method
intangible assets. The interest and investment income for 2013 was primarily due to the
inclusion of our share of Sirius XM Canada’s net income, partially offset by the amortization
expense related to our equity method intangible assets.
•2013 vs. 2012: For the year ended December 31, 2013, interest and investment income was
$6,976 compared to $716 in 2012. The interest and investment income for 2013 and 2012
was primarily due to our share of Sirius XM Canada’s net income, partially offset by the
amortization expense related to our equity method intangible assets.
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.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, the loss on change in
value of derivatives was $34,485 and $20,393, respectively. The loss resulted from a change
in the market value of our common stock to be purchased under the share repurchase
agreement with Liberty Media. On April 25, 2014, we completed the final purchase
installment under this share repurchase agreement and repurchased $340,000 of our shares
of common stock from Liberty Media at a price of $3.66 per share.
•2013 vs. 2012: For the year ended December 31, 2013, net loss on change in value of
derivatives was $20,393 which resulted from the change in value of the shares to be
repurchased under the share repurchase agreement with Liberty Media.
Income Taxes
Income Tax (Expense) Benefit includes the change in our deferred tax assets, foreign
withholding taxes and current federal and state tax expenses.
•2014 vs. 2013: For the years ended December 31, 2014 and 2013, income tax expense was
$337,545 and $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.
•2013 vs. 2012: For the year ended December 31, 2013, income tax expense was $259,877
compared to an income tax benefit of $2,998,234 for 2012. Our annual effective tax rate for
the year ending December 31, 2013 was 41%. The primary driver for the increase over the
statutory rate is a result of $9,545 of non-deductible expenses, primarily related to the loss
on change in value of derivatives. For the year ended December 31, 2012, we released
$3,195,651 of valuation allowance due to the cumulative positive evidence that it is more
likely than not that our deferred tax assets will be realized.
We account for the effect of tax law changes in the quarter in which they are enacted. Certain
proposed tax legislation would reduce significantly our deferred tax asset related to net operating
loss carryforwards for the District of Columbia. The final tax legislation may result in the
establishment of a valuation allowance and may adversely impact the tax rate in the quarter the
change occurs.
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