UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 2002
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[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 0-24710
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
Sirius Satellite Radio 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) PLAN
Plan No. 001
EIN: 52-1700207
INDEX
Part I - Financial Statements Page
Report of Independent Public Auditors 1
Statements of Net Assets Available for Benefits as of December 31, 2002 2
and 2001
Statement of Changes in Net Assets Available for Benefits for the year 3
ended December 31, 2002
Notes to Financial Statements 4
Part II - Supplemental Schedules
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 10
Schedule H, line 4j - Schedule of Reportable Transactions 11
Signatures 12
Exhibit 23.1 - Consent of Independent Public Auditors
Exhibit 99.1 - Certification by the Chief Executive Officer
Exhibit 99.2 - Certification by the Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC AUDITORS
To the Plan Administrator of the Sirius Satellite Radio 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Sirius Satellite Radio 401(k) Savings Plan, as of December 31, 2002 and
2001, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2002. These financial statements are the
responsibility of the Plan's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the principles used and the significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the year ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2002 and reportable transactions for
the year then ended are presented for purposes of additional analysis and are
not a required part of the financial statements but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974, as amended. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
ERNST & YOUNG LLP
New York, New York
June 6, 2003
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
As of December 31,
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2002 2001
------ ------
Investments, at market value $3,404 $4,807
Employer contribution receivable 33 26
Employee contribution receivable 45 34
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NET ASSETS AVAILABLE FOR BENEFITS $3,482 $4,867
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The accompanying notes are an integral part of these financial statements.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
For the year ended
December 31, 2002
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ADDITIONS:
Interest $ 14
Contributions:
Employer 1,231
Employee 1,677
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Total additions 2,922
DEDUCTIONS:
Net realized and unrealized depreciation
in fair value of investments 4,130
Distributions 157
Administrative expenses 20
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Total deductions 4,307
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Net decrease 1,385
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $4,867
------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $3,482
======
The accompanying notes are an integral part of this financial statement.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Notes to Financial Statements
1. Description of the Plan
Sirius Satellite Radio Inc. sponsors the Sirius Satellite Radio 401(k)
Savings Plan (the "Plan") to provide eligible employees with a method of savings
for their retirement and other needs. The Plan is a defined contribution plan
that is subject to the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The inception date of the Plan was
September 1, 1998 and the Plan has a December 31 fiscal year end. The following
description of the Plan provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions and information regarding eligibility, contributions, distributions,
vesting, withdrawals, loans, fund redistribution and definitions of all terms.
Assets Held in Trust
Effective December 1, 2001, all assets of the Plan were transferred
from Merrill Lynch Trust Co. to CIGNA Retirement & Investment Services (the
"Trustee"). The Trustee is responsible for, among other things, the custody and
investing of the assets of the Plan and for the payment of benefits to eligible
participants. All contributions are invested by the Trustee as designated by the
Plan participants. The investment options available to the participants as of
December 31, 2002 and their related investment objectives were as follows:
Alliance Balanced Shares Fund - Class A. This separate account invests
wholly in Class A shares of the Alliance Balanced Shares Fund. This
fund seeks a combination of income and capital appreciation by
investing primarily in equity securities of high quality, financially
strong, dividend-paying companies.
Alliance Growth & Income - Class A. This separate account invests
wholly in Class A shares of the Alliance Growth & Income Fund. This
fund seeks income and capital appreciation by investing primarily in
high quality, dividend-paying common stocks. This fund offers investors
diversification potential among stocks, fixed income and convertible
securities.
American Century Heritage Account. This separate account invests wholly
in the American Century Heritage Fund. This fund seeks to provide
long-term growth of capital through investments in equity securities of
small or medium-sized companies.
CIGNA Lifetime Funds. This family of funds is comprised of five
distinct multi-asset class investment portfolios, which offer a range
of risk/return characteristics. The investment objective for each of
the five funds varies, in keeping with the investment time horizon and
associated asset allocation of the underlying portfolios.
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Core Bond Fund. This separate account invests in high quality domestic
fixed income securities, including actively managed separate accounts
of investment-grade corporate bonds, mortgage-backed and asset-backed
securities and government issues.
Fidelity Advisor Equity Growth Account. This separate account invests
wholly in the Fidelity Advisor Equity Growth Fund. This fund seeks to
achieve capital appreciation through investments in stocks of companies
that have above-average growth potential. These growth characteristics
are often associated with companies that have new products,
technologies, distribution channels or that have a strong relative
market position.
Franklin Balance Sheet Investment Fund - Class A. This separate account
invests wholly in Class A shares of the Franklin Balance Sheet
Investment Fund. This fund seeks income and capital appreciation by
investing primarily in equity securities of small or relatively new
companies that are believed to be under priced at the time of purchase,
but have the potential for significant capital growth.
International Growth/Putnam Fund. This separate account invests
primarily in common stocks, preferred stocks and convertible securities
of companies incorporated or domiciled outside the United States and
securities traded on foreign stock exchanges with market capitalization
of $2 billion and larger.
Janus Adviser Balanced Account. This separate account invests wholly in
the Janus Adviser Series Balanced Fund. This fund seeks long-term
capital growth, consistent with preservation of capital, balanced by
current income.
Oakmark Select Fund - Class II. This separate account invests wholly in
Class II shares of the Oakmark Select Fund. This fund seeks long-term
capital appreciation by investing in a non-diversified portfolio of
equity securities consisting primarily of common stocks of U.S.
companies.
Small Cap Growth/TimesSquare Fund. This separate account seeks to
achieve long-term capital appreciation through investments in the
common and preferred stocks of U.S. companies with market
capitalization between $30 million and $3 billion. This account focuses
on growth companies with new product developments and technological
breakthroughs.
Templeton Growth Account. This separate account invests wholly in the
Templeton Growth Fund. This fund seeks to provide long-term capital
growth by investing primarily in debt and equity securities of domestic
and foreign companies, including emerging markets.
Guaranteed Income Fund. This fund offers safety of principal and seeks
to provide competitive yields relative to comparable guaranteed fixed
income investment funds. It invests in a diversified portfolio of high
quality, fixed income instruments within Connecticut General Life
Insurance Company's general account.
Sirius Satellite Radio Inc. Common Stock. This option allows
participants to invest in the common stock of Sirius Satellite Radio
Inc.
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Eligibility
Participation in the Plan begins on the first day of the calendar month
following the date in which an employee attained the age of 21 and completed one
full month of service, as defined in the Plan document.
Contributions
Participants may elect to contribute from 1% to 16% of their
compensation, as defined, provided their contributions do not exceed maximum
allowable amounts under the Internal Revenue Code, as amended (the "Code").
Under the Code, individual contributions for which taxes may be deferred were
limited to $11,000 in 2002 and $10,500 in 2001. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
defined contribution plans. Participants' contributions vest immediately and can
only be withdrawn pursuant to the appropriate provisions of the Code.
The Plan provides for discretionary employer matching contributions
based on employee elective deferral percentages. The company made employer
matching contributions equal to 100% of employee elective deferrals from
inception of the Plan through November 30, 2001 and 75% during the period
December 1, 2001 through December 31, 2002. This employer matching contribution
is in the form of Sirius Satellite Radio Inc. common stock. The company reviews
and determines the employer matching contribution annually. Employees are
eligible to receive the employer matching contribution during a year in which
the employee has performed at least one hour of service, regardless of
employment status on the last day of the year.
The company may also elect to contribute to the profit sharing portion
of the Plan based upon the total compensation of all participants eligible to
receive an allocation. These additional contributions, referred to as regular
employer contributions, will be limited to profits as determined by the 401(k)
committee and will be determined for each year by the company. Employees are
only eligible to share in regular employer contributions during any year in
which they are employed on the last day of the year. There have been no regular
employer contributions to date.
Loans
The Plan provides for loans to active participants. Participants may
borrow up to $50,000 or 50% of the vested portions of the participant's account
balance, whichever is lesser. The amount available for future borrowings by
participants is reduced by the amount of their highest outstanding loan balance
during the previous one-year period. Loans are secured by the balance in the
participants' account and bear interest at the prime interest rate made under
similar circumstances by persons in the business of lending money plus 1%. The
term of any loan is no greater than five years, except in the case of a loan
used to acquire a principal residence. Repayment of any loan is required to be
completed not less frequently than quarterly.
Participant Accounts
Each participant's account is credited with participant contributions,
employer matching and regular employer contributions and allocations of Plan
earnings. Allocations of Plan
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earnings are based on participant account balances. A participant is entitled to
the benefit that can be provided from the participant's vested account balance.
Vesting
Participants are immediately vested in their contributions plus
earnings thereon. Vesting in employer matching and regular employer
contributions begins one year after employment at a rate of 33 1/3% per year
until the completion of the third year of employment, when 100% is vested. In
addition, a participant becomes fully vested in his or her employer matching and
regular employer contributions upon his or her normal retirement date (age 65),
disability or death, or if there is a partial or full termination of the Plan.
Distributions of Benefits
Upon termination of employment due to death, disability, retirement or
upon attaining age 59 1/2, a participant may receive a lump sum amount equal to
the value of the participant's vested interest in his or her account. In
addition, participants may elect to withdraw funds from their respective
accounts in the event of hardship, as defined.
Forfeitures
Non-vested employer matching contributions are forfeited upon
termination of employment or a participant's withdrawal from the Plan.
Forfeitures are used to pay Plan expenses and to reduce employer matching
contributions. Forfeitures for the year ended December 31, 2002 were
approximately $11,000. Unallocated non-vested assets were approximately $3,000
and $1,000 as of December 31, 2002 and 2001, respectively.
Administrative Expenses
Administrative expenses are paid through participant forfeitures or by
the company.
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of financial statements in conformity with GAAP requires the Plan
administrator 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 income and expenses during the reporting period. Actual
results may differ from those estimates.
Investment Valuation and Income Recognition
Investments in funds are valued based on the Plan's pro rata share of
fund equity as determined by the Trustee, based on market quotes. Investments in
Sirius Satellite Radio Inc. common stock are valued based on market quotes.
Realized gains and losses from the sale of investments are computed using the
participant's cost basis in the investment aggregated at the Plan level. Net
unrealized appreciation/depreciation in investments represents the difference
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between the fair value of investments held at year-end and the cost of
investments purchased in the current fiscal year or the fair value of
investments held at the end of the preceding year.
The Plan provides for various investments in funds containing debt and
equity securities. Investments in securities are generally exposed to various
risks, such as interest rate, credit and overall market volatility risks. Due to
the level of risk associated with certain investment securities, changes in the
values of investment securities may occur in the near term.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. Tax Status
The Plan has received a determination letter from the Internal Revenue
Service dated September 1, 1999, stating that the Plan is qualified under
Section 401(a) of the Internal Revenue Code (the "Code") and, therefore, the
related trust is exempt from taxation. The Plan has filed for a new IRS
determination letter following the amendments effective December 1, 2001. Once
qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan Administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code and,
therefore, believes that the Plan is qualified and the related trust is tax
exempt.
4. Plan Termination
Although it has not expressed any intention to do so, the company
reserves the right to terminate the Plan, in whole or in part, at any time. In
the event that such termination occurs, all amounts credited to participant
accounts will become 100% vested and the Trustee, in accordance with the Plan
document, will distribute the net assets of the Plan in a uniform and
non-discretionary manner.
5. Party-in-Interest Transactions
Sirius Satellite Radio Inc., Connecticut General Life Insurance Company
and CIGNA Financial Services were parties-in-interest with respect to the Plan
under the provisions of ERISA. The records of the Plan indicate no
party-in-interest transactions, which are prohibited by Section 406 of ERISA and
for which no statutory or administrative exemption exists.
6. Investments
The fair value of investments that individually represent 5% or more of
the Plan's net assets are as follows:
December 31,
---------------------
2002 2001
------ ------
(In thousands)
Sirius Satellite Radio Inc. common stock - $ 461 $2,080
Non-participant Directed
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Sirius Satellite Radio Inc. common stock - 110 625
Participant Directed
Alliance Growth & Income - Class A 1,247 1,364
Fidelity Advisor Equity Growth Account 282 268
Guaranteed Income Fund 409 -
Core Bond Fund 262 -
Templeton Growth Account 220 -
During 2002 the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) decreased in value
by $4,130 as follows:
December 31,
2002
--------------
(In thousands)
Sirius Satellite Radio Inc. common stock $(3,570)
Mutual funds (560)
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Total decrease in fair value of investments $(4,130)
=======
7. Non-participant Directed Investments
Non-participant directed funds are invested solely in Sirius Satellite
Radio Inc. common stock. On October 15, 2002, the company amended the Plan to
allow participants to transfer employer matching contributions from Sirius
Satellite Radio Inc. common stock to other investments within the Plan.
Non-participant directed investments totaled $461 and $2,080 as of December 31,
2002 and 2001, respectively. The components of the change in net assets relating
to non-participant directed investments are as follows:
December 31,
2002
--------------
(In thousands)
Contributions $ 1,231
Net decrease in fair value of investments (2,768)
Benefits paid to participants (15)
Forfeitures (19)
Administrative expenses (1)
Transfers to participant-directed investments (47)
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Change in non-participant directed funds $(1,619)
=======
8. Subsequent Events
On April 1, 2003, the company reduced the amount of employer matching
contributions. The company made employer matching contributions equal to 75% of
employee elective deferrals from December 1, 2001 through April 1, 2003.
Effective April 1, 2003, the company makes employer matching contributions equal
to 50% of employee elective deferrals up to 6% of employee compensation.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Schedule H, line 4i-Schedule of Assets (Held at End of Year)
As of December 31, 2002
(In thousands)
(a) (b) (c) (e)
Identity of Issue, Description of Investment, Including Current
Borrower, Lessor or Maturity Date, Rate of Interest, Collateral, Value
Similar Party Par or Maturity Value
--------------------------------------------------------------------------------------------------------------------
* Connecticut General Life Janus Adviser Balanced Account: $ 35
Insurance Company 1,458 shares in participation
* Connecticut General Life Alliance Balanced Fund - Class A: 8
Insurance Company 576 shares in participation
* Connecticut General Life CIGNA Lifetime20: 10
Insurance Company 926 shares in participation
* Connecticut General Life CIGNA Lifetime30: 20
Insurance Company 1,888 shares in participation
* Connecticut General Life CIGNA Lifetime40: 13
Insurance Company 1,212 shares in participation
* Connecticut General Life CIGNA Lifteime50: 2
Insurance Company 181 shares in participation
* Connecticut General Life Oakmark Select II Fund: 106
Insurance Company 4,491 shares in participation
* Connecticut General Life American Century Heritage Account: 46
Insurance Company 2,448 shares in participation
* Connecticut General Life Franklin Balance Sheet Investment - Class A: 76
Insurance Company 1,937 shares in participation
* Connecticut General Life Small Cap Growth/Timessquare: 37
Insurance Company 2,835 shares in participation
* Connecticut General Life International Growth/Putnam: 25
Insurance Company 3,558 shares in participation
* Connecticut General Life Alliance Growth & Income - Class A: 1,247
Insurance Company 459,508 shares in participation
* Connecticut General Life Core Bond Fund: 262
Insurance Company 19,836 shares in participation
* Connecticut General Life Fidelity Advisor Equity Growth Account: 282
Insurance Company 5,068 shares in participation
* Connecticut General Life Guaranteed Income Fund: 409
Insurance Company 15,147 shares in participation
* CIGNA Financial Sirius Satellite Radio Inc. Common Stock: 571 **
Services, Inc. 891,465 shares in participation
* Connecticut General Life Templeton Growth Account: 220
Insurance Company 7,848 shares in participation
* Participant Loans 5.75% 35
------
Total Assets $3,404
======
* Represents a party-in-interest
** Balances consist of participant and non-participant directed investments
The accompanying notes are an integral part of this schedule.
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SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Schedule H, line 4j - Schedule of Reportable Transactions
Year Ended December 31, 2002
(In thousands)
(h)
Current (i)
Value Net
(a) (b) (c) (d) (g) of Asset on Gain
Identity of Party Description Number of Purchase Selling Cost of Transaction or
Involved of Asset Transactions Price Price Asset Date (Loss)
---------------------------------------------------------------------------------------------------------------------------
Category (iii) - series of transactions in excess of 5 percent of plan assets.*
**Sirius Satellite Common 24 $1,168 N/A $1,168 $1,168 N/A
Radio Inc. Stock
Non-participant
Directed
* There were no category (i), (ii), or (iv) reportable transactions during 2002.
** Represents a party-in-interest
The accompanying notes are an integral part of this schedule.
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SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
By: /s/ EDWARD WEBER, JR.
----------------------
Edward Weber, Jr.
Vice President, Controller and
Chief Accounting Officer
(Principal Accounting Officer)
June 30, 2003
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