UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2002
Commission file number 0-24710
SIRIUS SATELLITE RADIO INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1700207
-------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1221 Avenue of the Americas, 36th Floor
New York, New York 10020
-------------------------------------------------------------------------------
(Address of principal executive offices)
(Zip code)
212-584-5100
-------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value 76,716,502 shares
-------------------------------------------------------------------------------
(Class) (Outstanding as of May 9, 2002)
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Part I - Financial Information
Consolidated Statements of Operations for the three months 1
ended March 31, 2002 and 2001 (Unaudited)
Consolidated Balance Sheets as of March 31, 2002 (Unaudited) and 2
December 31, 2001
Consolidated Statements of Stockholders' Equity for the three months 3
ended March 31, 2002 (Unaudited)
Consolidated Statements of Cash Flows for the three months 4
ended March 31, 2002 and 2001 (Unaudited)
Notes to Consolidated Financial Statements (Unaudited) 5
Management's Discussion and Analysis of Financial Condition and Results 12
of Operations
Part II - Other Information 19
Signatures 20
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
For the Three Months
Ended March 31,
---------------------------
2002 2001
------------ ------------
Revenue:
Subscriber revenue $ 4 $ -
Advertising revenue 34 -
Less: Agency fees (5) -
-------- ---------
Total revenue 33 -
-------- --------
Operating expenses:
Broadcast and system operations:
Satellite and transmission 8,757 7,005
Programming and content 3,783 2,014
Customer service center and billing 1,842 1,626
Sales and marketing 15,659 4,974
General and administrative 7,540 5,873
Research and development 7,713 14,814
Depreciation expense 14,481 2,068
Non-cash stock compensation (9,024) 942
-------- --------
Total operating expenses 50,751 39,316
-------- --------
Loss from operations (50,718) (39,316)
Other income (expense):
Interest and investment income 2,000 3,607
Interest expense, net of amounts capitalized (30,193) (18,380)
-------- --------
Total other expense (28,193) (14,773)
-------- --------
Net loss (78,911) (54,089)
Preferred stock dividends (11,042) (10,165)
Preferred stock deemed dividends (171) (169)
-------- --------
Net loss applicable to common stockholders $(90,124) $(64,423)
======== ========
Net loss per share applicable to common
stockholders (basic and diluted) $ (1.22) $ (1.34)
======== ========
Weighted average common shares outstanding
(basic and diluted) 73,861 47,942
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
1
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
March 31, December 31,
2002 2001
---------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 22,947 $ 4,726
Marketable securities 378,311 304,218
Restricted investments, short-term 14,905 14,798
Prepaid expenses and other 10,254 12,303
---------- ----------
Total current assets 426,417 336,045
Property and equipment, net 1,079,793 1,082,915
FCC license 83,654 83,654
Restricted investments, long-term 7,200 7,200
Other long-term assets 16,306 17,791
---------- ----------
Total assets $1,613,370 $1,527,605
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 35,492 $ 39,836
Accrued interest 11,585 5,477
Current portion of long-term debt 22,500 15,000
---------- ----------
Total current liabilities 69,577 60,313
Long-term debt 564,594 589,990
Deferred satellite payments and accrued interest 68,859 67,201
Other long-term liabilities 2,275 2,284
---------- ----------
Total liabilities 705,305 719,788
---------- ----------
Commitments and contingencies
9.2% Series A Junior Cumulative Convertible Preferred Stock, $.001 par
value: 4,300,000 shares authorized, 1,742,512 shares issued and
outstanding at March 31, 2002 and December 31, 2001 (liquidation
preference of $174,251), at net carrying value including accrued dividends 181,046 177,120
9.2% Series B Junior Cumulative Convertible Preferred Stock, $.001 par
value: 2,100,000 shares authorized, 781,548 shares issued and
outstanding at March 31, 2002 and December 31, 2001 (liquidation
preference of $78,155), at net carrying value including accrued dividends 79,153 77,338
9.2% Series D Junior Cumulative Convertible Preferred Stock, $.001 par
value: 10,700,000 shares authorized, 2,343,091 shares issued and
outstanding at March 31, 2002 and December 31, 2001 (liquidation
preference of $234,309), at net carrying value including accrued dividends 236,182 230,710
Stockholders' equity:
Common stock, $.001 par value: 200,000,000 shares authorized,
76,598,316 and 57,455,931 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively 77 57
Additional paid-in capital 995,516 827,590
Accumulated deficit (583,909) (504,998)
---------- ----------
Total stockholders' equity 411,684 322,649
---------- ----------
Total liabilities and stockholders' equity $1,613,370 $1,527,605
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
2
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands, except share and per share amounts)
(Unaudited)
Common Stock
------------------------- Additional Accumulated
Shares Amount Paid-In Capital Deficit Total
----------------------------------------------------------------------
Balance, December 31, 2001........................ 57,455,931 $57 $ 827,590 $(504,998) $322,649
Sale of $.001 par value common stock, $9.25
per share, net of expenses..................... 16,000,000 16 147,484 - 147,500
Conversion of 8 3/4% Convertible Subordinated
Notes due 2009, including accrued interest..... 2,816,483 3 37,990 - 37,993
Compensation in connection with the
issuance of common stock options............... - - (9,500) - (9,500)
Issuance of common stock to employees and
employee benefit plans......................... 322,902 1 2,197 - 2,198
Exercise of stock options, $7.50 per share........ 3,000 - 22 - 22
Warrant expense associated with acquisition
of programming................................. - - 20 - 20
Reduction of warrant exercise price in
connection with the amendment to our Term
Loan Facility.................................. - - 926 - 926
Preferred stock dividends......................... - - (11,042) - (11,042)
Preferred stock deemed dividends.................. - - (171) - (171)
Net loss.......................................... - - - (78,911) (78,911)
---------- --- -------- --------- --------
Balance, March 31, 2002........................... 76,598,316 $77 $995,516 $(583,909) $411,684
========== === ======== ========= ========
The accompanying notes are an integral part of these
consolidated financial statements.
3
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
For the Three Months Ended
March 31,
---------------------------
2002 2001
--------- ---------
Cash flows from operating activities:
Net loss $ (78,911) $ (54,089)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation expense 14,481 2,068
Accretion of debt 11,505 10,466
Expense incurred in connection with the conversion of debt 9,314 -
Non-cash stock compensation (benefit)/charge (9,024) 942
Change in unrealized gain or loss on marketable securities 2,187 1,354
Amortization of debt issuance costs 788 800
Other (86) (556)
Increase (decrease) in cash and cash equivalents resulting from
changes in assets and liabilities:
Marketable securities (76,280) (135,476)
Prepaid expenses and other current assets 2,049 (225)
Other long-term assets (213) 5,827
Accounts payable and accrued expenses (2,624) (4,030)
Accrued interest 8,880 7,843
Satellite construction payable - (9,310)
--------- ---------
Net cash used in operating activities (117,934) (174,386)
--------- ---------
Cash flows from investing activities:
Additions to property and equipment (11,359) (17,438)
--------- ---------
Net cash used in investing activities (11,359) (17,438)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt - 145,000
Proceeds from issuance of common stock, net 147,500 229,407
Other 14 151
--------- ---------
Net cash provided by financing activities 147,514 374,558
--------- ---------
Net increase in cash and cash equivalents 18,221 182,734
Cash and cash equivalents at the beginning of period 4,726 14,397
--------- ---------
Cash and cash equivalents at the end of period $ 22,947 $ 197,131
========= =========
Supplemental disclosure of cash flows from operating activities:
Cash paid during the period for interest 4,079 3,644
Common stock issued in satisfaction of accrued compensation 1,720 2,649
Supplemental disclosure of non-cash investing and financing activities:
Conversion of 8 3/4% Convertible Subordinated Notes due 2009,
including accrued interest 29,589 -
Capitalized interest 4,401 4,362
The accompanying notes are an integral part of these
consolidated financial statements.
4
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
1. Business
Sirius Satellite Radio Inc., a Delaware corporation, broadcasts
digital-quality radio programming via satellites to subscribers. From our three
orbiting satellites, we directly broadcast digital-quality radio to motorists
throughout the continental United States for a monthly subscription fee of
$12.95. We deliver 60 channels of commercial-free music in virtually every
genre, and 40 channels of news, sports, talk, comedy and children's programming.
We launched our service on February 14, 2002 in Denver, Colorado;
Houston, Texas; Phoenix, Arizona; and Jackson, Mississippi. We have since
expanded the availability of our service to include Arkansas, Arizona, Colorado,
Idaho, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Nebraska, New
Mexico, Nevada, North Dakota, Oklahoma, South Dakota, Utah and Wyoming. We
expect to complete our national roll out plan by July 1, 2002.
Our primary sources of revenue will be subscription fees and a one-time
activation fee per subscriber. In addition, we derive revenues from selling
limited advertising on our non-music channels. Currently, our subscription and
advertising revenues and the aggregate number of subscribers to our service are
not material. As of March 31, 2002, we had 412 subscribers to our service.
2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited consolidated financial statements, including
the accounts of Sirius Satellite Radio Inc. and our wholly owned subsidiary,
have been prepared in accordance with accounting principles generally accepted
in the United States and the instructions to Form 10-Q and Article 10 of
Regulation S-X for interim financial reporting. Our financial statements do not
include all of the information and footnotes required by accounting principles
generally accepted in the United States. In the opinion of management, all
adjustments (consisting only of normal, recurring adjustments) considered
necessary for fair presentation have been included. All intercompany
transactions have been eliminated in consolidation.
Our financial statements should be read in connection with our
consolidated financial statements and the notes thereto contained in our Annual
Report on Form 10-K for the year ended December 31, 2001. We emerged from a
development stage enterprise and entered commercial operations on February 14,
2002; as such, we revised our Consolidated Statements of Operations to reflect
our operating results. Operating results for the three months ended March 31,
2002 are not necessarily indicative of the results that may be expected for the
year ending December 31, 2002.
Risks and Uncertainties
Our future operations are subject to the risks and uncertainties
frequently encountered by companies in new and rapidly evolving markets. Among
the key factors that have a direct bearing on our results of operations are our
dependence upon third parties to manufacture, distribute, market and sell Sirius
radios and components for those radios; the potential risk of delay in
implementing our business plan; the unproven market for our service; our
competitive position; and our need for additional financing.
5
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Revenue Recognition
Revenue from subscribers consists of our monthly service fee,
recognized as service is provided, and a non-refundable activation fee,
recognized on a pro rata basis over the term of the subscriber relationship,
currently estimated to be 3.5 years. The estimated term of a subscriber
relationship is based on market research and management's judgment and, if
necessary, will be refined in the future as historical data becomes available.
We recognize advertising revenue from sales of spot announcements to
advertisers as the announcements are broadcast. Agency fees are calculated based
on a stated percentage applied to gross billing revenue for our advertising
inventory and are reported as a reduction of advertising revenue on our
Consolidated Statements of Operations.
Net Loss Per Share
Basic net loss per share is based on the weighted average number of
outstanding shares of our common stock during each reporting period. Diluted net
loss per share adjusts the weighted average for the potential dilution that
could occur if common stock equivalents (convertible preferred stock,
convertible debt, warrants and stock options) were exercised or converted into
common stock. Approximately 16,997,000 and 17,770,000 common stock equivalents
were outstanding as of March 31, 2002 and 2001, respectively, and were excluded
from the calculation of diluted net loss per share, as they were anti-dilutive.
Property and Equipment
All costs incurred related to activities necessary to prepare our
satellite radio system for use were capitalized. Such costs consist of satellite
and launch vehicle construction, broadcast studio equipment, terrestrial
repeater equipment and interest. The estimated useful lives of our property and
equipment are as follows:
Leasehold improvements 15 years
Satellites 15 years
Broadcast studio equipment 3-8 years
Terrestrial repeater equipment 5-15 years
Satellite telemetry, tracking and control 3-15 years
Customer care, billing and conditional access 3-7 years
Furniture, fixtures and equipment 3-7 years
The estimated useful lives of our satellites are fifteen years from the
date that they were placed into orbit. We depreciate our satellites on a
straight-line basis over the respective remaining useful lives from the date we
launched our service. All other property and equipment is depreciated over the
estimated useful lives stated above.
We review our long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset is not
recoverable. At such time as an impairment in value is identified, the
impairment will be measured in accordance with Statement of Financial Accounting
Standard ("SFAS") No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets," as the amount by which the carrying amount of a long-lived
asset exceeds its fair value. To determine fair value we will use an expected
present value
6
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
technique, in which multiple cash flow scenarios that reflect the range of
possible outcomes and a risk-free rate are used. No material impairment losses
have been recognized to date.
FCC License
In June 2001, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 142 requires,
for all fiscal years beginning after December 15, 2001, that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually. In accordance with SFAS No.
142, we determined that our Federal Communications Commission ("FCC") license
has an indefinite life and we will evaluate it for impairment on an annual
basis. We completed an impairment analysis of our FCC license as of January 1,
2002 and concluded no impairment loss was necessary. To date, we have not
recorded any amortization expense related to our FCC license and, therefore,
are not required to include the transitional disclosures contained in SFAS
No. 142.
Recent Accounting Pronouncements
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations," which requires the fair value for an asset retirement
obligation to be recorded in the period in which it is incurred. SFAS No. 143 is
effective for fiscal years beginning after June 15, 2002, with earlier adoption
encouraged. We are currently evaluating the potential impact, if any, the
adoption of SFAS No. 143 will have on our financial position and results of
operations.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reported period. The estimates involve judgments
with respect to, among other things, various future factors which are difficult
to predict and are beyond our control. Actual amounts could differ from these
estimates.
Reclassifications
Certain amounts in the prior year's financial statements have been
reclassified to conform to the current presentation.
3. Investments
Marketable Securities
Marketable securities consist of U.S. government agency obligations and
commercial paper issued by major U.S. corporations with high credit ratings.
Marketable securities are classified as trading securities and are stated at
market value. We recognized unrealized holding gains on marketable securities of
$1,200 for the three months ended March 31, 2002 and unrealized holding losses
on marketable securities of $922 for the three months ended March 31, 2001.
7
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Restricted Investments
Restricted investments consist of fixed income securities and are
stated at amortized cost plus accrued interest. Included in restricted
investments are U.S. Treasury Notes of $14,405 and $14,209 as of March 31, 2002
and December 31, 2001, respectively, which are restricted to provide for
interest payments through May 15, 2002 on our 14 1/2% Senior Secured Notes due
2009. Also included in restricted investments are short-term and long-term
certificates of deposit of $7,700 and $7,789 as of March 31, 2002 and
December 31, 2001, respectively, which are pledged to secure our reimbursement
obligations under letters of credit required by lessors and other creditors. The
U.S. Treasury Notes are classified as held-to-maturity securities and unrealized
holding gains and losses are not reflected in earnings. As of March 31, 2002
and December 31, 2001, we had an unrealized holding gain of $64 and $196,
respectively, related to these held-to-maturity securities.
4. Deferred Satellite Payments
Space Systems/Loral, Inc. ("Loral") has deferred $50,000 due under our
amended and restated contract (the "Loral Satellite Contract"). The amount
deferred, which approximates fair value, bears interest at 10% per year and was
originally due in quarterly installments beginning in June 2002. Our fourth,
spare, satellite was delivered to ground storage on April 19, 2002 and was
originally expected to be delivered to ground storage in October 2000. As
provided in the Loral Satellite Contract, Loral's delay in delivering this
satellite resulted in a revision to the deferred satellite payment schedule as
follows: $8,333 due in 2003, $25,001 due in 2004 and $16,666 due in 2005. We
have the right to prepay any deferred payments together with accrued interest,
without penalty. As collateral security for this deferred amount, we have
granted Loral a security interest in our terrestrial repeater network.
5. Long-term Debt
Long-term debt consists of the following:
Maturity March 31, December 31,
Date 2002 2001
-------- --------- ------------
15% Senior Secured Discount Notes due 2007 12/01/07 $252,142 $242,286
14 1/2% Senior Secured Notes due 2009 5/15/09 177,100 176,346
8 3/4% Convertible Subordinated Notes due 2009 9/29/09 17,461 45,936
Term Loan Facility (current interest rate of 7.1%) Various 140,391 140,422
-------- --------
Total debt $587,094 $604,990
Less: current portion (22,500) (15,000)
-------- --------
Total long-term debt $564,594 $589,990
======== ========
Acquisitions of 8 3/4% Convertible Subordinated Notes due 2009
During the three months ended March 31, 2002, we acquired $28,475 in
aggregate principal amount of our 8 3/4% Convertible Subordinated Notes due 2009
in exchange for 2,816,483 shares of our common stock.
8
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Amendment of Term Loan Facility
On March 26, 2002, we entered into an amendment to our term loan
agreement with Lehman Brothers which adjusted the financial covenants,
accelerated the payment schedule of the term loan and reduced the exercise price
of the warrants from $29.00 to $15.00 per share. In connection with this
exercise price reduction, we adjusted the book value of our Term Loan Facility
and future amortization schedules.
As amended, the term loan matures in installments, commencing on June
30, 2002, in the amounts described below:
INSTALLMENT AMOUNT
----------- ------
June 30, 2002 $ 7,500
September 30, 2002 7,500
December 31, 2002 7,500
March 31, 2003 7,500
June 30, 2003 11,500
March 31, 2004 3,375
June 30, 2004 3,375
September 30, 2004 3,375
December 31, 2004 3,375
March 31, 2005 23,750
June 30, 2005 23,750
September 30, 2005 23,750
December 31, 2005 23,750
At our option, we may defer the payments due on June 30, 2002,
September 30, 2002, December 31, 2002, March 31, 2003 and June 30, 2003 for a
period of ninety days.
6. Commitments and Contingencies
Satellite Contract
Upon our acceptance of our fourth, spare, satellite, which was
delivered on April 19, 2002, we are required to pay Loral $12,500. As a result
of Loral's delay in delivering this satellite, we expect to receive payment for
late delivery penalties from Loral of approximately $1,350.
Radio Commitments
Matsushita Communication Industrial Corporation of USA ("Panasonic")
has constructed a dedicated facility in Peachtree City, Georgia, to manufacture
Sirius radios. During the first year of production of our radios at this
facility, we are obligated to purchase certain radios not purchased by other
customers. If Panasonic were unable to sell any of these, our cost to purchase
these radios could approximate $70,000.
9
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
Programming Agreements
We have entered into agreements with providers of non-music
programming. We are obligated, in certain instances, to pay license fees, to
share advertising revenue from this programming or to purchase advertising on
properties owned or controlled by these providers. These obligations aggregate
$7,157, $18,609, $28,818, $22,507 and $588 for the years ending December 31,
2002, 2003, 2004, 2005 and 2006, respectively. We may enter into additional
programming agreements that contain similar provisions.
7. Common Stock Issuance
In January 2002, we sold 16,000,000 shares of our common stock in an
underwritten public offering, resulting in net proceeds of approximately
$147,500.
8. Interest Expense
Interest expense, net of amounts capitalized, incurred for the three
months ended March 31, 2002 and 2001 was $30,193 and $18,380, respectively.
Included in interest cost for the three months ended March 31, 2002 was a
non-cash expense associated with the induced conversion of our 8 3/4%
Convertible Subordinated Notes due 2009 of $9,314. There were no induced
conversions for the three months ended March 31, 2001.
9. Non-cash Stock Compensation
In connection with the grant of certain stock options, warrants and
other compensation arrangements, we record non-cash stock compensation benefits
or charges. The following table shows the amount of non-cash stock compensation
(benefits)/charges that would have been recorded in the categories of the
Consolidated Statements of Operations had non-cash stock compensation not been
separately stated therein:
For the Three Months
Ended March 31,
-------------------------
2002 2001
-------- --------
Broadcast and system operations:
Satellite and transmission $(1,596) $(12)
Programming and content (1,921) (55)
Customer service center and billing (185) 6
Sales and marketing (1,372) 85
General and administrative (1,856) 451
Research and development (2,094) 467
------- ----
$(9,024) $942
======= ====
10
SIRIUS SATELLITE RADIO INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollar amounts in thousands, unless otherwise stated)
(Unaudited)
In accordance with FASB Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation," we recognized a non-cash stock
compensation benefit of $9,717 for the three month period ended March 31, 2002,
related to certain repriced stock options. We will record future non-cash stock
compensation benefits or charges based on the market value of our common stock
at the end of each reporting period.
11
Management's Discussion and Analysis of
Financial Condition and Results of Operations
(Dollar amounts in thousands, unless otherwise stated)
Special Note Regarding Forward-Looking Statements
The following cautionary statements identify important factors that
could cause our actual results to differ materially from those projected in
forward-looking statements made in this Quarterly Report on Form 10-Q and in
other reports and documents published by us from time to time. Any statements
about our beliefs, plans, objectives, expectations, assumptions, future events
or performance are not historical facts and may be forward-looking. These
statements are often, but not always, made through the use of words or phrases
such as "will likely result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans," "projection" and "outlook." Any
forward-looking statements are qualified in their entirety by reference to the
factors discussed throughout our Annual Report on Form 10-K for the year ended
December 31, 2001 (the "Form 10-K") and in other reports and documents published
by us from time to time, particularly the risk factors described under
"Business--Risk Factors" in Part I of the Form 10-K. Among the significant
factors that could cause our actual results to differ materially from those
expressed in the forward-looking statements are:
o our dependence upon third parties to manufacture, distribute, market
and sell Sirius radios and components for those radios;
o the potential risk of delay in implementing our business plan; o the
unproven market for our service;
o our competitive position; XM Satellite Radio, the other satellite
radio provider in the United States, began offering its service
nationally during the fourth quarter of 2001 and may have certain
competitive advantages; and
o our need for additional financing.
Because the risk factors referred to above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by us or on our behalf, you should not place undue reliance on
any such forward-looking statements. In addition, any forward-looking statements
speak only as of the date on which such statement is made, and we undertake no
obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events or otherwise. New factors emerge
from time to time, and it is not possible for us to predict which will arise or
to assess with any precision the impact of each factor on our business or the
extent to which any factor, or combination of factors, may cause results to
differ materially from those contained in any forward-looking statements.
Overview
From our three orbiting satellites, we directly broadcast
digital-quality radio to motorists throughout the continental United States for
a monthly subscription fee of $12.95. We deliver 60 channels of commercial-free
music in virtually every genre, and 40 channels of news, sports, talk, comedy
and children's programming. Our broad and deep range of almost every music
format as well as our news, sports and entertainment programming is not
available on conventional radio in any market in the United States. We hold one
of only two licenses issued by the FCC to operate a national satellite radio
system.
12
We commenced commercial operations on February 14, 2002. We launched
our service in Denver, Colorado; Houston, Texas; Phoenix, Arizona; and Jackson,
Mississippi and have since expanded the availability of our service to include
Arkansas, Arizona, Colorado, Idaho, Iowa, Kansas, Louisiana, Minnesota,
Missouri, Montana, Nebraska, New Mexico, Nevada, North Dakota, Oklahoma, South
Dakota, Utah and Wyoming. We expect to complete our national roll out plan by
July 1, 2002.
Our primary sources of revenue will be our $12.95 per month
subscription fee and a one-time activation fee per subscriber. We also derive
revenues from directly selling limited advertising on our non-music channels.
Our operating expenses consist primarily of:
o marketing costs, including advertising, promotions, payments to
retailers, dealers, distributors and automakers, and subsidies to
radio manufacturers;
o programming costs, including royalty payments to copyright holders,
license fees to programming providers, and advertising revenue
sharing arrangements;
o expenses of operating and maintaining of our broadcast system,
including costs of tracking and controlling our satellites,
operating our terrestrial repeater network, and maintaining our
national broadcast studio;
o expenses associated with the continuing development of our receiver
technology, including the costs of designing and developing future
integrated circuits ("chip sets")
o general and administrative costs, including salary and employment
related expenses, rent and occupancy costs, insurance expenses and
other miscellaneous costs, such as legal and consulting fees; and
o depreciation expense associated with our satellites, broadcast
studio equipment, terrestrial repeater network and other systems and
facilities.
As of May 9, 2002, we had 301 employees.
Results of Operations
Three Months Ended March 31, 2002 Compared with Three Months Ended March 31,
2001
We had net losses of $78,911 and $54,089 for the three months ended
March 31, 2002 and 2001, respectively. Operating expenses increased to $50,751
for the three months ended March 31, 2002 from $39,316 for the three months
ended March 31, 2001. The increase in operating expenses was mainly attributable
to the depreciation of our satellites, terrestrial repeater network and national
broadcast studio, the implementation of our sales and marketing campaign at the
launch of our service and the increase in our workforce. The increase in
operating expenses for the three months ended March 31, 2002 was offset by a
non-cash stock compensation benefit of $9,024 . We expect operating expenses to
continue to increase as we build our subscriber base, expand our workforce,
complete the national roll out of our service and continue to expand our
operations.
Revenue from subscriptions was $4 for the three months ended March 31,
2002. Revenue from subscribers consists of our monthly subscription fee,
recognized as service is provided, and a non-refundable activation fee,
recognized on a pro rata basis over the term of the subscriber relationship,
currently estimated to be 3.5 years. The estimated term of a subscriber
relationship is based on market research and management's judgment.
13
Advertising revenue, less agency fees, was $29 for the three months
ended March 31, 2002. We recognize advertising revenue from sales of spot
announcements to advertisers as the announcements are broadcast.
Satellite and transmission costs increased to $8,757 for the three
months ended March 31, 2002 from $7,005 for the three months ended March 31,
2001. Satellite and transmission costs consist primarily of personnel costs and
expenses associated with the operation and maintenance of our satellite
telemetry, tracking and control system, terrestrial repeater network and
national broadcast studio operations. The increase in costs related primarily to
the expanded operation of our terrestrial repeater network during the 2002
period. We anticipate that our satellite and transmission costs will increase
until our terrestrial repeater network is operating on a nationwide basis.
Programming and content expenses increased to $3,783 for the three
months ended March 31, 2002 from $2,014 for the three months ended March 31,
2001. Programming and content expenses include license fees to third parties
that provide non-music content, costs associated with the production of our
music and non-music programming, costs of our on-air talent, royalties for music
broadcast on our service and programming personnel costs. The increase in costs
during the 2002 period was primarily attributable to our on-air talent and
license fees paid to acquire programming. We anticipate that our programming
costs will increase as we continue to develop our extensive channel line-up
and our royalties will continue to increase in connection with the increase in
subscription revenue.
Customer service center and billing costs increased to $1,842 for the
three months ended March 31, 2002 from $1,626 for the three months ended March
31, 2001. Customer service center and billing costs include costs associated
with the operation of our customer service center and subscriber management
system. We expect that our customer service and billing costs in aggregate will
increase as we continue to build our subscriber base; however, our customer
service costs per subscriber will be significantly reduced as our fixed
operating costs are spread over a larger subscriber base.
Sales and marketing expenses increased to $15,659 for the three months
ended March 31, 2002 from $4,974 for the three months ended March 31, 2001.
Sales and marketing expenses include, among other costs, advertising and
marketing costs as we build awareness of our brand, amounts paid to retailers
and distributors of Sirius radios and costs to acquire subscribers. We expect
that our sales and marketing costs will increase in the future as we build
nationwide brand awareness of our service and acquire additional subscribers.
General and administrative expenses increased to $7,540 for the three
months ended March 31, 2002 from $5,873 for the three months ended March 31,
2001. The increase related to the costs associated with the expansion of our
workforce and corporate insurance. General and administrative expenses include
rent and occupancy costs, corporate overhead and general and administrative
personnel.
Research and development costs decreased to $7,713 for the three months
ended March 31, 2002 from $14,814 for the three months ended March 31, 2001.
Research and development includes costs associated with our agreements with
Agere Systems, Inc. (the successor to the micro-electronics group of Lucent
Technologies, Inc.) to develop and manufacture chip sets, which will be used in
Sirius radios. In addition, we have entered into agreements with Alpine
Electronics Inc., Audiovox Corporation, Clarion Co., Ltd., Delphi Corporation,
Harman International Industries, Incorporated, Kenwood Corporation, Panasonic,
Pioneer Corporation, Recoton Corporation, Sony Electronics Inc., Visteon
Automotive Systems and others to design, develop and produce Sirius radios and
have agreed to pay certain costs associated with these radios. We record
expenses under these agreements as work is performed. Research and
14
development costs decreased during the 2002 period as we have substantially
completed our chip set design and our radio manufacturers have completed the
initial stages of development.
Depreciation expense increased to $14,481 for the three months ended
March 31, 2002 from $2,068 for the three months ended March 31, 2001. The
increase relates to the depreciation of our satellites, terrestrial repeater
network and broadcast studio equipment during the 2002 period as we commenced
commercial operations.
We recognized a non-cash stock compensation benefit of $9,024 for the
three months ended March 31, 2002 and a non-cash stock compensation charge of
$942 for the three months ended March 31, 2001. The non-cash stock compensation
benefit in the 2002 period resulted primarily from the variable accounting
treatment of certain repriced stock options. Under variable accounting, the
decrease in the market value of our common stock during the period resulted in a
non-cash stock compensation benefit of $9,717. We expect to record future
non-cash stock compensation benefits or charges based on the market value of our
common stock at the end of each reporting period.
Interest and investment income decreased to $2,000 for the three months
ended March 31, 2002, from $3,607 for the three months ended March 31, 2001.
This decrease was attributable to lower returns on our investments in U.S.
government securities during the 2002 period.
Interest expense was $30,193 for the three months ended March 31, 2002
and $18,380 for the three months ended March 31, 2001, net of amounts
capitalized of $4,401 and $4,362, respectively. Gross interest expense for the
2002 period increased by $11,852 and capitalized interest increased by $39,
compared to the 2001 period. Included in gross interest expense for the three
months ended March 31, 2002 is $9,314 of non-cash expense related to the
induced conversion of our 8 3/4% Convertible Subordinated Notes due 2009.
Liquidity and Capital Resources
At March 31, 2002, we had cash, cash equivalents, marketable securities
and restricted investments totaling $423,363 and working capital of $356,840
compared with cash, cash equivalents, marketable securities and short-term
restricted investments totaling $330,942 and working capital of $275,732 at
December 31, 2001.
Sources of Funding. Since inception, we have funded the development of
our system and the introduction of our service through the issuance of debt
and equity securities. As of March 31, 2002, we had raised approximately
$1,250,800 in equity capital from the sale of our common stock and convertible
preferred stock, including the sale of 16,000,000 shares of our common stock
for net proceeds of $147,500 in January 2002. As of March 31, 2002, we had
received approximately $638,000 in net proceeds from public debt offerings and
private credit arrangements.
At March 31, 2002, we had three issues of public debt securities
outstanding: $280,430 in aggregate principal amount at maturity of 15% Senior
Secured Discount Notes due 2007, $200,000 in aggregate principal amount of 14
1/2%Senior Secured Notes due 2009 and $17,461 in aggregate principal amount of 8
3/4%Convertible Subordinated Notes due 2009. As of March 31, 2002, we had
acquired $16,500 in principal amount at maturity of our 15% Senior Secured
Discount Notes due 2007 and $126,289 in principal amount of our 8 3/4%
Convertible Subordinated Notes due 2009 in exchange for shares of our common
stock. In addition to these public debt securities, we have also entered into a
$50,000 Deferral Credit Agreement with Space Systems/Loral and a $150,000 term
loan agreement with Lehman Brothers. We intend to seek opportunities to reduce
our outstanding debt, and may pursue privately negotiated
15
transactions with holders of our debt from time to time or an offer to purchase
all or a portion of our debt in exchange for cash, common stock, new debt or a
combination of those items.
Space Systems/Loral has deferred a total of $50,000 of payments under
the Loral Satellite Contract originally scheduled for payment in 1999. Under the
Deferral Credit Agreement with Space Systems/Loral, these deferred amounts bear
interest at 10% per year and were originally scheduled to be paid in quarterly
installments beginning in June 2002. However, the agreement governing these
deferred amounts provides that this date, and subsequent payment dates, will be
extended by the number of days that the achievement of any milestone under the
Loral Satellite Contract is delayed beyond the dates set forth in the Loral
Satellite Contract. Our fourth satellite was delivered to ground storage on
April 19, 2002 and was originally expected to be delivered to ground storage in
October 2000. The delay in delivering this satellite resulted in a revision to
the deferred satellite payment schedule as follows: $8,333 due in 2003, $25,001
due in 2004 and $16,666 due in 2005. We have the right to prepay any deferred
payments together with accrued interest, without penalty. As collateral security
for this deferred amount, we have granted Loral a security interest in our
terrestrial repeater network.
On March 7, 2001, we borrowed $150,000 under a term loan agreement with
Lehman Brothers. In connection with this term loan, we granted Lehman Brothers
Commercial Paper Inc. 2,100,000 warrants, each to purchase one share of our
common stock, at an exercise price of $29.00 per share. The term loan bears
interest at an annual rate equal to the eurodollar rate plus 4% or a base rate,
typically the prime rate, plus 5%. On March 26, 2002, we entered into an
amendment to this term loan agreement which adjusted the financial covenants,
accelerated the payment schedule of the term loan and reduced the exercise price
of the warrants from $29.00 to $15.00 per share.
As amended, the term loan matures in installments, commencing on June
30, 2002, in the amounts described below:
INSTALLMENT AMOUNT
----------- ------
June 30, 2002 $ 7,500
September 30, 2002 7,500
December 31, 2002 7,500
March 31, 2003 7,500
June 30, 2003 11,500
March 31, 2004 3,375
June 30, 2004 3,375
September 30, 2004 3,375
December 31, 2004 3,375
March 31, 2005 23,750
June 30, 2005 23,750
September 30, 2005 23,750
December 31, 2005 23,750
At our option, we may defer the payments due on June 30, 2002,
September 30, 2002, December 31, 2002, March 31, 2003 and June 30, 2003 for a
period of ninety days.
Our term loan agreement with Lehman Brothers contains financial and
operating covenants. These covenants include requirements that we:
o achieve at least $2,300 in revenues from subscribers for the quarter
ending March 31, 2003, and achieve increasing revenues from
subscribers each quarter thereafter through
16
the maturity of the term loan on December 31, 2005;
o achieve a minimum negative cash flow, before subscriber acquisition
costs, of $65,000 for the quarter ending March 31, 2003, and have
improving cash flow, before subscriber acquisition costs, each
quarter thereafter through the maturity of the term loan;
o achieve a minimum negative cash flow, before subscriber acquisition
costs and adjusted to give effect to subscribers who cancel or fail
to renew their subscriptions, of $58,400 for the quarter ending
September 30, 2003, and have improving adjusted cash flow, each
quarter thereafter through the maturity of the term loan; and
o not permit our capital expenditures, other than the costs of
constructing, launching and insuring replacement satellites and
installing terrestrial repeaters, to exceed $100,000 during the
period from June 1, 2001 through the period in which the term loan
is outstanding.
Our failure to comply with these covenants could result in an event of
default which, if not cured or waived, could have a material adverse effect on
us.
The indentures governing our 15% Senior Secured Discount Notes due
2007, our 14 1/2% Senior Secured Notes due 2009 and our term loan agreement with
Lehman Brothers contain limitations on our ability to incur additional debt. Our
15% Senior Secured Discount Notes due 2007, our 14 1/2%Senior Secured Notes due
2009 and our obligations under the term loan agreement are secured by a pledge
of the stock of Satellite CD Radio, Inc., our subsidiary that holds our FCC
license, and our rights under the Loral Satellite Contract relating to our
fourth, spare, satellite. Under the Deferral Credit Agreement, we granted Space
Systems/Loral a security interest in our terrestrial repeater network.
Funding Requirements. The amount and timing of our cash requirements
depends upon numerous factors, including the rate of growth of our business,
subscriber acquisition costs, costs associated with the design and development
of chip sets for Sirius radios, costs of financing and the possibility of
unanticipated costs.
As of March 31, 2002, we had sufficient cash and cash equivalents to
cover our estimated funding needs through the first quarter of 2003. However, if
the number of actual subscribers, or the cost to acquire each new subscriber,
differs substantially from our expectations, we may need substantial additional
funding. We anticipate that our additional funding needs through the end of 2003
will total approximately $290,000, and that we will require additional funding
thereafter. We have entered into agreements with providers of non-music
programming and, in certain instances, are obligated to pay license fees, to
share advertising revenues from this programming or to purchase advertising on
properties owned or controlled by these providers. These obligations aggregate
$18,609, $28,818, $22,507 and $588 for the years ending December 31, 2003, 2004,
2005 and 2006, respectively. We have also entered into other agreements with
automakers, radio manufacturers and other parties that may include fixed
payments, per-radio and per-subscriber amounts and revenue sharing arrangements.
These future costs are dependent upon many factors and are not possible to
estimate; however, we do expect these costs to be substantial. We plan to fund
our additional capital needs through the issuance of debt and equity securities.
Critical Accounting Policies
Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States, which require
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods. Our significant accounting
policies are described in Note 2 to our consolidated financial statements in
Item 14 of our Annual Report on Form 10-K for the year ended December 31, 2001.
We have identified the following policy as critical to our business and
understanding of our results of operations.
17
Revenue Recognition. Revenue from subscribers consists of our monthly
subscription fee, recognized as the service is provided, and a non-refundable
activation fee, recognized on a pro rata basis over the term of the subscriber
relationship, currently estimated to be 3.5 years. The estimated term of a
subscriber relationship is based on market research and management's judgment
and, if necessary, will be refined in the future as sufficient historical data
becomes available.
18
Part II
Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
See Exhibit Index attached hereto.
(b) Reports on Form 8-K.
On January 3, 2002, we filed a Current Report on Form 8-K to
report the filing of certain exhibits that relates to our
offering of 16,000,000 shares of common stock, which were
registered under the Securities Act of 1933 on Form S-3
(Registration No. 333-64344).
19
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SIRIUS SATELLITE RADIO INC.
By: /s/ John J. Scelfo
--------------------------------
John J. Scelfo
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
May 14, 2002
20
Exhibit Index
Exhibit Description
------- -----------
3.1.1 Certificate of Amendment, dated June 16, 1997, to the Company's
Certificate of Incorporation and the Company's Amended and Restated
Certificate of Incorporation, dated January 31, 1994 (incorporated by
reference to Exhibit 3.1 to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1999).
3.1.2 Certificate of Ownership and Merger merging Sirius Satellite Radio
Inc. into CD Radio Inc. dated November 18, 1999 (incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on
Form S-8 (File No. 333-31362)).
3.2 Amended and Restated By-Laws (incorporated by reference to Exhibit 3.2
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).
3.3 Certificate of Designations of 5% Delayed Convertible Preferred Stock
(incorporated by reference to Exhibit 10.24 to the Company's Annual
Report on Form 10-K/A for the year ended December 31, 1996 (the "1996
Form 10-K")).
3.4 Form of Certificate of Designations of Series B Preferred Stock
(incorporated by reference to Exhibit A to Exhibit 1 to the Company's
Registration Statement on Form 8-A filed on October 30, 1997 (the
"Form 8-A")).
3.5.1 Form of Certificate of Designations, Preferences and Relative,
Participating, Optional and Other Special Rights of 10 1/2% Series C
Convertible Preferred Stock (the "Series C Certificate of
Designations") (incorporated by reference to Exhibit 4.1 to the
Company's Registration Statement on Form S-4 (File No. 333-34761)).
3.5.2 Certificate of Correction to Series C Certificate of Designations
(incorporated by reference to Exhibit 3.5.2 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 (the "1997
Form 10-K")).
3.5.3 Certificate of Increase of 10 1/2% Series C Convertible Preferred
Stock (incorporated by reference to Exhibit 3.5.3 to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998).
3.6 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of the Company's 9.2% Series A
Junior Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 3.6 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
3.7 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of the Company's 9.2% Series B
Junior Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 3.7 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999).
Exhibit Description
------- -----------
3.8 Certificate of Designations, Preferences and Relative, Participating,
Optional and Other Special Rights of the Company's 9.2% Series D
Junior Cumulative Convertible Preferred Stock (incorporated by
reference to Exhibit 99.2 to the Company's Current Report on Form 8-K
dated December 29, 1999).
4.1 Form of certificate for shares of Common Stock (incorporated by
reference to Exhibit 4.3 to the Company's Registration Statement on
Form S-1 (File No. 33-74782) (the "S-1 Registration Statement")).
4.2 Form of certificate for shares of 10 1/2% Series C Convertible
Preferred Stock (incorporated by reference to Exhibit 4.4 to the
Company's Registration Statement on Form S-4 (File No. 333-34761)).
4.3 Form of certificate for shares of 9.2% Series A Junior Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit
4.10.1 to the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (the "1998 Form 10-K")).
4.4 Form of certificate for shares of 9.2% Series B Junior Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit
4.10.2 to the 1998 Form 10-K).
4.5 Form of certificate for shares of 9.2% Series D Junior Cumulative
Convertible Preferred Stock (incorporated by reference to Exhibit 4.5
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (the "1999 Form 10-K")).
4.6.1 Rights Agreement, dated as of October 22, 1997 (the "Rights
Agreement"), between the Company and Continental Stock Transfer &
Trust Company, as rights agent (incorporated by reference to Exhibit 1
to the Form 8-A).
4.6.2 Form of Right Certificate (incorporated by reference to Exhibit B to
Exhibit 1 to the Form 8-A).
4.6.3 Amendment to the Rights Agreement dated as of October 13, 1998
(incorporated by reference to Exhibit 99.2 to the Company's Current
Report on Form 8-K dated October 13, 1998).
4.6.4 Amendment to the Rights Agreement dated as of November 13, 1998
(incorporated by reference to Exhibit 99.7 to the Company's Current
Report on Form 8-K dated November 17, 1998).
4.6.5 Amended and Restated Amendment to the Rights Agreement dated as of
December 22, 1998 (incorporated by reference to Exhibit 6 to Amendment
No. 1 to the Form 8-A filed on January 6, 1999).
4.6.6 Amendment to the Rights Agreement dated as of June 11, 1999
(incorporated by reference to Exhibit 4.1.8 to the Company's
Registration Statement on Form S-4 (File No. 333-82303) (the "1999
Units Registration Statement")).
2
Exhibit Description
------- -----------
4.6.7 Amendment to the Rights Agreement dated as of September 29, 1999
(incorporated by reference to Exhibit 4.1 to the Company's Current
Report on Form 8-K filed on October 13, 1999).
4.6.8 Amendment to the Rights Agreement dated as of December 23, 1999
(incorporated by reference to Exhibit 99.4 to the Company's Current
Report on Form 8-K filed on December 29, 1999).
4.6.9 Amendment to the Rights Agreement dated as of January 28, 2000
(incorporated by reference to Exhibit 4.6.9 to the 1999 Form 10-K).
4.6.10 Amendment to the Rights Agreement dated as of August 7, 2000
(incorporated by reference to Exhibit 4.6.10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2000).
4.6.11 Amendment to the Rights Agreement dated as of January 8, 2002
(incorporated by reference to Exhibit 4.6.11 to the Company's Annual
Report on Form 10-K for the year ended December 31, 2001 (the "2001
Form 10-K")).
4.7 Indenture, dated as of November 26, 1997, between the Company and IBJ
Schroder Bank & Trust Company, as trustee, relating to the Company's
15% Senior Secured Discount Notes due 2007 (incorporated by reference
to Exhibit 4.1 to the Company's Registration Statement on Form S-3
(File No. 333-34769) (the "1997 Units Registration Statement")).
4.8 Form of 15% Senior Secured Discount Note due 2007 (incorporated by
reference to Exhibit 4.2 to the 1997 Units Registration Statement).
4.9 Warrant Agreement, dated as of November 26, 1997, between the Company
and IBJ Schroder Bank & Trust Company, as warrant agent (incorporated
by reference to Exhibit 4.3 to the 1997 Units Registration Statement).
4.10 Form of Warrant (incorporated by reference to Exhibit 4.4 to the 1997
Units Registration Statement).
4.11 Form of Preferred Stock Warrant Agreement, dated as of April 9, 1997,
between the Company and each warrantholder thereof (incorporated by
reference to Exhibit 4.12 to the 1997 Form 10-K).
4.12 Form of Common Stock Purchase Warrant granted by the Company to
Everest Capital Master Fund, L.P. and to The Ravich Revocable Trust of
1989 (incorporated by reference to Exhibit 4.11 to the 1997 Form
10-K).
4.13 Indenture, dated as of May 15, 1999, between the Company and United
States Trust Company of New York, as trustee, relating to the
Company's 14 1/2% Senior Secured Notes due 2009 (incorporated by
reference to Exhibit 4.4.2 to the 1999 Units Registration Statement).
4.14 Form of 14 1/2% Senior Secured Note due 2009 (incorporated by
reference to Exhibit 4.4.3 to the 1999 Units Registration Statement).
3
Exhibit Description
------- -----------
4.15 Warrant Agreement, dated as of May 15, 1999, between the Company and
United States Trust Company of New York, as warrant agent
(incorporated by reference to Exhibit 4.4.4 to the 1999 Units
Registration Statement).
4.16 Common Stock Purchase Warrant granted by the Company to Ford Motor
Company, dated June 11, 1999 (incorporated by reference to Exhibit
4.5.1 to the 1999 Units Registration Statement).
4.17 Indenture, dated as of September 29, 1999, between the Company and
United States Trust Company of Texas, N.A., as trustee, relating to
the Company's 8 3/4% Convertible Subordinated Notes due 2009
(incorporated by reference to Exhibit 4.2 to the Company's Current
Report on Form 8-K filed on October 13, 1999).
4.18 First Supplemental Indenture, dated as of September 29, 1999, between
the Company and United States Trust Company of Texas, N.A., as
trustee, relating to the Company's 8 3/4% Convertible Subordinated
Notes due 2009 (incorporated by reference to Exhibit 4.01 to the
Company's Current Report on Form 8-K filed on October 1, 1999).
4.19 Form of 8 3/4% Convertible Subordinated Note due 2009 (incorporated by
reference to Article VII of Exhibit 4.01 to the Company's Current
Report on Form 8-K filed on October 1, 1999).
4.20 Common Stock Purchase Warrant granted by the Company to
DaimlerChrysler Corporation dated January 28, 2000 (incorporated by
reference to Exhibit 4.23 to the 1999 Form 10-K).
4.21 Term Loan Agreement, dated as of June 1, 2000 (the "Term Loan
Agreement"), among the Company, Lehman Brothers Inc., as arranger, and
Lehman Commercial Paper Inc., as syndication and administrative agent
(incorporated by reference to Exhibit 4.22 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 2000).
4.22 First Amendment, dated as of October 20, 2000, to the Term Loan
Agreement (incorporated by reference to Exhibit 4.22 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2001).
4.23 Second Amendment, dated as of December 27, 2000, to the Term Loan
Agreement (incorporated by reference to Exhibit 4.23 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2001).
4.24 Third Amendment, dated as of March 26, 2002, to the Term Loan
Agreement (filed herewith).
4.25 Amended and Restated Warrant Agreement, dated as of December 27, 2000,
between the Company and United States Trust Company of New York, as
warrant agent and escrow agent (incorporated by reference to Exhibit
4.27 to the Company's Registration Statement on Form S-3 (File No.
333-65602)).
4.26 Second Amended and Restated Pledge Agreement, dated as of March 7,
2001, among the Company, as pledgor, The Bank of New York, as trustee
and collateral
4
Exhibit Description
------- -----------
agent, United States Trust Company of New York, as trustee, and Lehman
Commercial Paper Inc., as administrative agent (incorporated by
reference to Exhibit 4.25 to the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2001).
4.27 Collateral Agreement, dated as of March 7, 2001, between the Company,
as borrower, and The Bank of New York, as collateral agent
(incorporated by reference to Exhibit 4.26 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2001).
4.28 Amended and Restated Intercreditor Agreement, dated as of March 7,
2001, by and between The Bank of New York, as trustee and collateral
agent, United States Trust Company of New York, as trustee, and Lehman
Commercial Paper, as administrative agent (incorporated by reference
to Exhibit 4.27 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 2001).
9.1 Voting Trust Agreement, dated as of August 26, 1997, by and among
Darlene Friedland, as Grantor, David Margolese, as Trustee, and the
Company (incorporated by reference to Exhibit (c) to the Company's
Issuer Tender Offer Statement on Form 13E-4 filed on October 16,
1997).
10.1.1 Lease Agreement, dated as of March 31, 1998, between Rock-McGraw, Inc.
and the Company (incorporated by reference to Exhibit 10.1.2 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1998).
10.1.2 Supplemental Indenture, dated as of March 22, 2000, between
Rock-McGraw, Inc. and the Company (incorporated by reference to
Exhibit 10.1.2 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
10.1.3 Supplemental Indenture, dated as of November 30, 2001, between
Rock-McGraw, Inc. and the Company (incorporated by reference to
Exhibit 10.1.3 to the 2001 Form 10-K).
*10.2 Employment Agreement, dated as of March 28, 2000, between the Company
and Joseph S. Capobianco (incorporated by reference to Exhibit 10.5 to
the 1999 Form 10-K).
*10.3 Employment Agreement, dated as of March 28, 2000, between the Company
and Patrick L. Donnelly (incorporated by reference to Exhibit 10.6 to
the 1999 Form 10-K).
*10.4 Employment Agreement, dated as of March 7, 2001, between the Company
and John J. Scelfo (incorporated by reference to Exhibit 10.7 to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 2001).
*10.5 Employment Agreement, dated as of August 29, 2001, between the Company
and Michael S. Ledford (incorporated by reference to Exhibit 10.6 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 2001).
*10.6 Employment Agreement, dated as of November 26, 2002, between the
Company and Joseph P. Clayton (incorporated by reference to Exhibit
10.6 to the 2001 Form 10-K).
5
Exhibit Description
------- -----------
*10.7 Employment Agreement, dated as of January 7, 2002, between the Company
and Guy Johnson (incorporated by reference to Exhibit 10.7 to the 2001
Form 10-K).
*10.8 Agreement, dated as of October 16, 2001, between the Company and David
Margolese (incorporated by reference to Exhibit 10.7 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
2001).
*10.9 1994 Stock Option Plan (incorporated by reference to Exhibit 10.21 to
the S-1 Registration Statement).
*10.10 Amended and Restated 1994 Directors' Nonqualified Stock Option Plan
(incorporated by reference to Exhibit 10.22 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1995).
*10.11 CD Radio Inc. 401(k) Savings Plan (incorporated by reference to
Exhibit 4.4 to the Company's Registration Statement on Form S-8 (File
No. 333-65473)).
*10.12 Sirius Satellite Radio 1999 Long-Term Stock Incentive Plan
(incorporated by reference to Exhibit 4.4 of the Company's
Registration Statement on Form S-8 (File No. 333-31362)).
10.13 Form of Option Agreement, dated as of December 29, 1997, between the
Company and each Optionee (incorporated by reference to Exhibit
10.16.2 to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998).
10.14.1 Stock Purchase Agreement, dated as of November 13, 1998 (the "Apollo
Stock Purchase Agreement"), by and among the Company, Apollo
Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P.
(incorporated by reference to Exhibit 99.1 to the Company's Current
Report on Form 8-K dated November 17, 1998).
10.14.2 First Amendment, dated as of December 23, 1998, to the Apollo Stock
Purchase Agreement (incorporated by reference to Exhibit 10.28.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999).
10.14.3 Second Amendment, dated as of December 23, 1999, to the Apollo Stock
Purchase Agreement (incorporated by reference to Exhibit 99.3 to the
Company's Current Report on Form 8-K filed on December 29, 1999).
10.15 Stock Purchase Agreement, dated as of December 23, 1999, by and
between the Company and Blackstone Capital Partners III Merchant
Banking Fund L.P. (incorporated by reference to Exhibit 99.1 to the
Company's Current Report on Form 8-K filed on December 29, 1999).
10.16 Stock Purchase Agreement, dated as of January 28, 2000, among the
Company, Mercedes-Benz USA, Inc., Freightliner Corporation and
DaimlerChrysler Corporation (incorporated by reference to Exhibit
10.24 to the 1999 Form 10-K).
10.17 Tag-Along Agreement, dated as of November 13, 1998, by and among
Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P.,
the Company and David Margolese (incorporated by reference to Exhibit
99.6 to the Company's Current Report on Form 8-K dated November 17,
1998).
6
Exhibit Description
------- -----------
'D'10.18 Agreement, dated as of June 11, 1999, between the Company and Ford
Motor Company (incorporated by reference to Exhibit 10.33 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1999).
'D'10.19 Joint Development Agreement, dated as of February 16, 2000, between
the Company and XM Satellite Radio Inc. (incorporated by reference to
Exhibit 10.28 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000).
---------------
* This document has been identified as a management contract or compensatory
plan or arrangement.
'D' Portions of these exhibits have been omitted pursuant to Applications for
Confidential treatment filed by the Company with the Securities and
Exchange Commission.
7
STATEMENT OF DIFFERENCES
The dagger symbol shall be expressed as........................... 'D'