UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-34295

SIRIUS XM RADIO INC.

Delaware (State or other jurisdiction of incorporation of organization)		52-1700207 (I.R.S. Employer Identification Number)
1221 Avenue of the Americas, 36th Floor
New York, New York		10020
(Address of principal executive offices)		(Zip Code)

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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ		Accelerated filer o		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

(Class)		(Outstanding as of October 31, 2009)
COMMON STOCK, $0.001 PAR VALUE		3,858,653,816 SHARES

 

 

SIRIUS XM RADIO INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q

Item No.		Description
PART I — Financial Information
Item 1.		Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2009 and 2008			1
		Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and December 31, 2008			2
		Unaudited Consolidated Statements of Stockholders’ Equity and Comprehensive Loss for the nine months ended September 30, 2009			3
		Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008			4
		Notes to Unaudited Consolidated Financial Statements			6
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations			36
Item 3.		Quantitative and Qualitative Disclosures About Material Risk			62
Item 4.		Controls and Procedures			62
PART II — Other Information
Item 1.		Legal Proceedings			63
Item 1A.		Risk Factors			63
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds			63
Item 3.		Defaults Upon Senior Securities			63
Item 4.		Submission of Matters to a Vote of Security Holders			63
Item 5.		Other Information			63
Item 6.		Exhibits			64
		Signatures			77
Exhibit 4.61
Exhibit 4.62
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

PART I: FINANCIAL INFORMATION

ITEM 1.		FINANCIAL STATEMENTS

SIRIUS XM RADIO INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
(in thousands, except per share data)		2009				2008				2009				2008
Revenue:
Subscriber revenue, including effects of rebates		$	578,304			$	458,237			$	1,699,455			$	980,396
Advertising revenue, net of agency fees			12,418				14,674				37,287				31,413
Equipment revenue			10,506				11,271				31,343				25,290
Other revenue			17,428				4,261				28,379				4,710
Total revenue			618,656				488,443				1,796,464				1,041,809
Operating expenses (depreciation and amortization shown separately below) (1):
Cost of services:
Satellite and transmission			19,542				19,526				59,435				34,800
Programming and content			78,315				106,037				230,825				222,975
Revenue share and royalties			100,558				85,592				296,855				177,635
Customer service and billing			56,529				47,432				175,570				97,218
Cost of equipment			11,944				13,773				27,988				28,007
Sales and marketing			52,530				63,637				152,647				151,237
Subscriber acquisition costs			90,054				86,616				230,773				257,832
General and administrative			56,923				57,310				182,953				148,555
Engineering, design and development			11,252				10,434				32,975				28,091
Impairment of goodwill			—				4,750,859				—				4,750,859
Depreciation and amortization			72,100				66,774				231,624				120,793
Restructuring, impairments and related costs			2,554				7,430				30,167				7,457
Total operating expenses			552,301				5,315,420				1,651,812				6,025,459
Income (loss) from operations			66,355				(4,826,977	)			144,652				(4,983,650	)
Other income (expense):
Interest and investment income			962				4,940				2,602				9,167
Interest expense, net of amounts capitalized			(78,527	)			(49,216	)			(240,062	)			(83,636	)
Loss on extinguishment of debt and credit facilities, net			(138,053	)			—				(263,767	)			—
(Loss) gain on investments			(58	)			(3,089	)			457				(3,089	)
Other income (expense)			1,246				(3,870	)			2,505				(3,935	)
Total other expense			(214,430	)			(51,235	)			(498,265	)			(81,493	)
Loss before income taxes			(148,075	)			(4,878,212	)			(353,613	)			(5,065,143	)
Income tax expense			(1,115	)			(1,215	)			(3,344	)			(2,301	)
Net loss			(149,190	)			(4,879,427	)			(356,957	)			(5,067,444	)
Preferred stock beneficial conversion feature			—				—				(186,188	)			—
Net loss attributable to common stockholders		$	(149,190	)		$	(4,879,427	)		$	(543,145	)		$	(5,067,444	)
Net loss per common share (basic and diluted)		$	(0.04	)		$	(1.93	)		$	(0.15	)		$	(2.76	)
Weighted average common shares outstanding (basic and diluted)			3,621,062				2,527,692				3,577,587				1,836,834

Satellite and transmission		$	1,086			$	1,331			$	3,020			$	2,887
Programming and content			3,037				3,529				7,418				7,477
Customer service and billing			734				596				2,052				1,137
Sales and marketing			2,722				3,672				10,081				11,376
Subscriber acquisition costs			—				—				—				14
General and administrative			8,442				12,904				40,141				36,359
Engineering, design and development			1,653				1,973				4,841				4,167
Total share-based payment expense		$	17,674			$	24,005			$	67,553			$	63,417

See accompanying Notes to the unaudited consolidated financial statements.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

(in thousands, except share and per share data)		September 30, 2009				December 31, 2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	380,372			$	380,446
Accounts receivable, net of allowance for doubtful accounts of $9,872 and $10,860, respectively			87,148				102,024
Receivables from distributors			41,755				45,950
Inventory, net			20,996				24,462
Prepaid expenses			107,350				67,203
Related party current assets			109,172				114,177
Other current assets			64,317				58,744
Total current assets			811,110				793,006
Property and equipment, net			1,694,235				1,703,476
FCC licenses			2,083,654				2,083,654
Restricted investments			3,400				141,250
Deferred financing fees, net			35,889				40,156
Intangible assets, net			629,288				688,671
Goodwill			1,834,856				1,834,856
Related party long-term assets			114,073				124,607
Other long-term assets			62,438				81,019
Total assets		$	7,268,943			$	7,490,695
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued expenses		$	521,621			$	642,820
Accrued interest			65,537				76,463
Current portion of deferred revenue			987,177				985,180
Current portion of deferred credit on executory contracts			247,566				234,774
Current maturities of long-term debt			103,674				399,726
Related party current liabilities			90,869				68,373
Total current liabilities			2,016,444				2,407,336
Deferred revenue			285,488				247,889
Deferred credit on executory contracts			851,955				1,037,190
Long-term debt			2,874,391				2,851,740
Long-term related party debt			265,659				—
Deferred tax liability			906,428				894,453
Related party long-term liabilities			21,928				—
Other long-term liabilities			39,005				43,550
Total liabilities			7,261,298				7,482,158
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, par value $0.001; 50,000,000 authorized at September 30, 2009 and December 31, 2008:
Series A convertible preferred stock (liquidation preference of $51,370 at September 30, 2009 and December 31, 2008); 24,808,959 shares issued and outstanding at September 30, 2009 and December 31, 2008			25				25
Convertible perpetual preferred stock, series B (liquidation preference of $13 and $0 at September 30, 2009 and December 31, 2008, respectively); 12,500,000 and zero shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively			13				—
Convertible preferred stock, series C junior; no shares issued and outstanding at September 30, 2009 and December 31, 2008			—				—
Common stock, par value $0.001; 9,000,000,000 and 8,000,000,000 shares authorized at September 30, 2009 and December 31, 2008, respectively; 3,858,186,839 and 3,651,765,837 shares issued and outstanding at September 30, 2009 and December 31, 2008, respectively			3,858				3,652
Accumulated other comprehensive loss, net of tax			(6,598	)			(7,871	)
Additional paid-in capital			10,265,752				9,724,991
Accumulated deficit			(10,255,405	)			(9,712,260	)
Total stockholders’ equity			7,645				8,537
Total liabilities and stockholders’ equity		$	7,268,943			$	7,490,695

See accompanying Notes to the unaudited consolidated financial statements.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

		Series A								Series B																								Accumulated
		Convertible								Convertible																Additional								Other				Total
		Preferred Stock								Preferred Stock								Common Stock								Paid-in				Accumulated				Comprehensive				Stockholders’
(in thousands, except share and per share data)		Shares				Amount				Shares				Amount				Shares				Amount				Capital				Deficit				Loss				Equity
Balance at December 31, 2008			24,808,959			$	25				—			$	—				3,651,765,837			$	3,652			$	9,724,991			$	(9,712,260	)		$	(7,871	)		$	8,537
Net loss																															(356,957	)							(356,957	)
Other comprehensive loss:
Unrealized gain on available-for-sale securities, net of tax			—				—				—				—				—				—				—				—				579				579
Foreign currency translation adjustment, net of tax			—				—				—				—				—				—				—				—				694				694
Total comprehensive loss			—				—				—				—				—				—				—				—				—				(355,684	)
Issuance of preferred stock — related party, net of issuance costs			—				—				12,500,000				13				—				—				410,179				(186,188	)			—				224,004
Issuance of common stock to employees and employee benefit plans, net of forfeitures			—				—				—				—				8,520,957				9				1,917				—				—				1,926
Structuring fee on 10% Senior PIK Secured Notes due 2011			—				—				—				—				59,178,819				59				5,859				—				—				5,918
Share-based payment expense			—				—				—				—				91,666				—				56,500				—				—				56,500
Returned shares under share borrow agreements			—				—				—				—				(60,000,000	)			(60	)			60				—				—				—
Issuance of restricted stock units in satisfaction of accrued compensation			—				—				—				—				59,229,560				59				31,221				—				—				31,280
Exchange of 21/2% Convertible Notes due 2009, including accrued interest			—				—				—				—				139,400,000				139				35,025				—				—				35,164
Balance at September 30, 2009			24,808,959			$	25				12,500,000			$	13				3,858,186,839			$	3,858			$	10,265,752			$	(10,255,405	)		$	(6,598	)		$	7,645

See accompanying Notes to the unaudited consolidated financial statements.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

		For the Nine Months
		Ended September 30,
(in thousands)		2009				2008
Cash flows from operating activities:
Net loss		$	(356,957	)		$	(5,067,444	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization			231,624				114,923
Impairment of goodwill			—				4,750,859
Non-cash interest expense, net of amortization of premium			32,909				(1,933	)
Provision for doubtful accounts			23,879				11,125
Amortization of deferred income related to equity method investment			(2,082	)			(471	)
Loss on extinguishment of debt and credit facilities, net			263,767				—
Restructuring, impairments and related costs			26,954				—
Loss on disposal of assets			—				4,879
Loss on investments			10,967				3,089
Share-based payment expense			67,553				63,417
Deferred income taxes			3,344				2,301
Other non-cash purchase price adjustments			(142,487	)			(23,770	)
Other			—				1,643
Changes in operating assets and liabilities:
Accounts receivable			(9,002	)			1,575
Inventory			3,466				2,952
Receivables from distributors			4,195				9,595
Related party assets			15,539				(1,357	)
Prepaid expenses and other current assets			30,188				3,528
Other long-term assets			64,034				37,110
Accounts payable and accrued expenses			(68,135	)			(122,969	)
Accrued interest			(6,600	)			(2,810	)
Deferred revenue			11,569				(4,577	)
Related party liabilities			44,424				3,315
Other long-term liabilities			3,958				(1,972	)
Net cash provided by (used in) operating activities			253,107				(216,992	)
Cash flows from investing activities:
Additions to property and equipment			(217,335	)			(102,705	)
Sales of property and equipment			—				105
Purchases of restricted and other investments			—				(3,000	)
Acquisition of acquired entity cash			—				819,521
Merger related costs			—				(13,047	)
Sale of restricted and other investments			—				65,642
Net cash (used in) provided by investing activities			(217,335	)			766,516
Cash flows from financing activities:
Proceeds from exercise of warrants and stock options			—				471
Preferred stock issuance costs, net			(3,712	)			—
Long-term borrowings, net			579,936				533,941
Related party long-term borrowings, net			364,964				—
Short-term financings			2,220				—
Payment of premiums on redemption of debt			(17,075	)			(18,693	)
Payments to minority interest holder			—				(61,880	)
Repayment of long-term borrowings			(610,932	)			(1,082,428	)
Repayment of related party long-term borrowings			(351,247	)			—
Other			—				(98	)
Net cash used in financing activities			(35,846	)			(628,687	)
Net decrease in cash and cash equivalents			(74	)			(79,163	)
Cash and cash equivalents at beginning of period			380,446				438,820
Cash and cash equivalents at end of period		$	380,372			$	359,657

		For the Nine Months
		Ended September 30,
(in thousands)		2009				2008
Supplemental Disclosure of Cash and Non-Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized		$	211,143			$	91,309
Non-cash investing and financing activities:
Share-based payments in satisfaction of accrued compensation			31,280				8,729
Common stock issued in exchange of 31/2% Convertible Notes due 2008, including accrued interest			—				33,502
Common stock issued in exchange of 21/2% Convertible Notes due 2009, including accrued interest			35,164				—
Structuring fee on 10% Senior PIK Secured Notes due 2011			5,918				—
Preferred stock issued to Liberty Media			227,716				—
Release of restricted investments			138,000				—
Equity issued in the acquisition of XM			—				5,784,976

See accompanying Notes to the unaudited consolidated financial statements.

SIRIUS XM RADIO INC. AND SUBSIDIARIES

(Dollar amounts in thousands, unless otherwise stated)

(1) Business

We broadcast our music, sports, news, talk, entertainment, traffic and weather channels in the United States for a subscription fee through our proprietary satellite radio systems — the SIRIUS system and the XM system. On July 28, 2008, our wholly owned subsidiary, Vernon Merger Corporation, merged (the “Merger”) with and into XM Satellite Radio Holdings Inc. and, as a result, XM Satellite Radio Holdings Inc. is now our wholly owned subsidiary. The SIRIUS system consists of four in-orbit satellites, over 125 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. The XM system consists of four in-orbit satellites, over 650 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. Subscribers can also receive certain of our music and other channels over the Internet.

Our satellite radios are primarily distributed through automakers (“OEMs”), retailers and our websites. We have agreements with every major automaker to offer SIRIUS or XM satellite radios as factory or dealer-installed equipment in their vehicles. SIRIUS and XM radios are also offered to customers of rental car companies.

Our subscriber totals include subscribers under our regular pricing plans; discounted pricing plans; subscribers that have prepaid, including payments either made or due from automakers and dealers for prepaid subscriptions included in the sale or lease price of a vehicle; certain radios activated for daily rental fleet programs; subscribers to SIRIUS Internet Radio and XM Radio Online, our Internet services; and certain subscribers to our weather, traffic, data and video services.

Our primary source of revenue is subscription fees, with most of our customers subscribing on an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and long-term subscriptions as well as discounts for multiple subscriptions. We also derive revenue from activation fees, the sale of advertising on select non-music channels, the direct sale of satellite radios, components and accessories, and other ancillary services, such as our Backseat TV, data and weather services. In August 2009, we began charging our subscribers a U.S. Music Royalty Fee (the “MRF”).

In certain cases, automakers include a subscription to our radio services in the sale or lease price of vehicles. The length of these prepaid subscriptions varies, but is typically three to twelve months. In many cases, we receive subscription payments from automakers in advance of the activation of our service. We also reimburse various automakers for certain costs associated with satellite radios installed in their vehicles.

We also have an interest in the satellite radio services offered in Canada. Subscribers to the SIRIUS Canada service and the XM Canada service are not included in our subscriber count.

Unless otherwise indicated,

•

“we,” “us,” “our,” the “company,” “the companies” and similar terms refer to Sirius XM Radio Inc. and its consolidated subsidiaries;

•

“SIRIUS” refers to Sirius XM Radio Inc. and its consolidated subsidiaries, excluding XM Satellite Radio Holdings Inc. and its consolidated subsidiaries;

•

“XM Holdings” refers to XM Satellite Radio Holdings Inc. and its consolidated subsidiaries, including XM Satellite Radio Inc.; and

•

“XM” refers to XM Satellite Radio Inc. and its consolidated subsidiaries.

(2) Principles of Consolidation and Basis of Presentation

Principles of Consolidation

The accompanying unaudited consolidated financial statements of Sirius XM Radio Inc. and subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles, the instructions to Form 10-Q and Article 10 of Regulation S-X of the United States Securities and Exchange Commission (“SEC”) for interim financial reporting. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. All intercompany transactions have been eliminated in consolidation.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Basis of Presentation

In presenting unaudited consolidated financial statements, management makes estimates and assumptions that affect the amounts reported and related disclosures. Additionally, estimates were used when recording the fair values of our assets acquired and liabilities assumed in the Merger. Estimates, by their nature, are based on judgment and available information. Actual results could differ from those estimates. In the opinion of management, all normal recurring adjustments necessary for a fair presentation of our unaudited consolidated financial statements as of September 30, 2009, and for the three and nine months ended September 30, 2009 and 2008, have been made.

Interim results are not necessarily indicative of the results that may be expected for a full year. This Quarterly Report on Form 10-Q should be read together with our Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 10, 2009.

We have evaluated events subsequent to the balance sheet date and prior to filing of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2009 through November 5, 2009 and determined there have not been any events that have occurred that would require adjustment to our unaudited consolidated financial statements.

(3) Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and related disclosures.

Significant estimates inherent in the preparation of the accompanying unaudited consolidated financial statements include revenue recognition, asset impairment, useful lives of our satellites, share-based payment expense, and valuation allowances against deferred tax assets. The financial market volatility and economic conditions in the United States have impacted and may continue to impact our business. Such conditions could have a material impact to our significant accounting estimates.

Inventory

Inventory consists of finished goods, refurbished goods, chip sets and other raw material components used in manufacturing radios. Inventory is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving and obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for our direct to consumer distribution channel is reported as a component of Cost of equipment in our unaudited consolidated statements of operations. The remaining provision is reported as a component of Subscriber acquisition costs in our unaudited consolidated statements of operations.

Inventory, net, consists of the following:

		September 30,				December 31,
		2009				2008
Raw materials		$	15,995			$	11,648
Finished goods			30,920				38,323
Allowance for obsolescence			(25,919	)			(25,509	)
Total inventory, net		$	20,996			$	24,462

Fair Value of Financial Instruments

The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants to sell the asset or transfer the liability. As of September 30, 2009 and December 31, 2008, we have determined that the carrying amounts of cash and cash equivalents, accounts and other receivables, and accounts payable approximate fair value due to the short-term nature of these instruments.

The fair value of our long-term debt is determined by either (i) estimating the discounted future cash flows of each instrument at rates currently offered to us for similar debt instruments of comparable maturities, or (ii) quoted market prices at the reporting date for the traded debt securities. As of September 30, 2009 and December 31, 2008, the carrying value of our long-term debt was $3,243,724 and $3,251,466, respectively; and the fair value approximated $3,130,837 and $1,211,613, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Reclassifications

Certain amounts in our prior period unaudited consolidated financial statements have been reclassified to conform to our current period presentation.

Recent Accounting Pronouncements

In September 2009, Accounting Standards Codification (“ASC”) became the source of authoritative U.S. GAAP recognized by the Financial Accounting Standards Board (“FASB”) for nongovernmental entities, except for certain FASB Statements not yet incorporated into ASC. Rules and interpretive releases of the SEC under federal securities laws are also sources of authoritative U.S. GAAP for registrants. The discussion below includes the applicable ASC reference.

We adopted ASC 855, Subsequent Events, which requires disclosure of events occurring after the balance sheet date but before financial statements are issued or are available to be issued. We adopted this guidance effective April 1, 2009, with no impact on our consolidated results of operations or financial position.

In June 2009, the FASB issued Statement No. 167, Amendments to FASB Interpretation No. 46(R), to require an analysis to determine whether our variable interest(s) give us a controlling financial interest in a variable interest entity. Statement 167 has not been incorporated into ASC and is effective for fiscal years beginning after November 15, 2009. We are currently evaluating the impact, if any, the adoption of this guidance will have on our consolidated results of operations and financial position.

In June 2009, the FASB issued Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, which integrated existing accounting standards with other authoritative guidance to provide a single source of authoritative U.S. GAAP for nongovernmental entities. Statement 168 has not been incorporated into ASC and is effective for interim and annual periods ending after September 15, 2009. We adopted this guidance effective July 1, 2009, with no impact on our consolidated results of operations or financial position.

In July 2009, the FASB proposed an update to ASC 470 to incorporate the previously ratified EITF No. 09-1, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance, into the ASC. This proposed standard would require share-lending arrangements in an entity’s own shares to be initially measured at fair value and treated as an issuance cost, excluded from basic and diluted earnings per share, and recognize a charge to earnings if it becomes probable the counterparty will default on the arrangement. This guidance would be effective for fiscal years beginning on or after December 15, 2009, and retrospective application for all arrangements outstanding as of the adoption date would be required. We are evaluating the impact that adoption of this proposed guidance would have on our consolidated results of operations and financial position.

(4) Goodwill

We allocated the consideration paid in connection with the Merger to the fair value of acquired assets and assumed liabilities, respectively, and in 2008 recorded goodwill in the amount of $6,601,046. During 2008, we recorded an impairment charge of $4,766,190, of which $4,750,859 was recognized as of September 30, 2008, resulting in a carrying value of $1,834,856 at December 31, 2008. There has not been any change in the carrying value of goodwill during 2009.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(5) Intangible Assets

Intangible assets consisted of the following:

						September 30, 2009												December 31, 2008
		Weighted Average				Gross Carrying				Accumulated				Net Carrying				Gross Carrying				Accumulated				Net Carrying
		Useful Lives				Value				Amortization				Value				Value				Amortization				Value
Indefinite life intangible assets
FCC licenses		Indefinite				$	2,083,654			$	—			$	2,083,654			$	2,083,654			$	—			$	2,083,654
Trademark		Indefinite					250,000				—				250,000				250,000				—				250,000
Definite life intangible assets
Subscriber relationships		9 years				$	380,000			$	(76,670	)		$	303,330			$	380,000			$	(29,226	)		$	350,774
Proprietary software		6 years					16,552				(6,020	)			10,532				16,552				(2,285	)			14,267
Developed technology		10 years					2,000				(233	)			1,767				2,000				(83	)			1,917
Licensing agreements		9.1 years					75,000				(11,452	)			63,548				75,000				(4,090	)			70,910
Leasehold interests		7.4 years					132				(21	)			111				908				(105	)			803
Total intangible assets						$	2,807,338			$	(94,396	)		$	2,712,942			$	2,808,114			$	(35,789	)		$	2,772,325

Indefinite Life Intangible Assets

We have identified our FCC licenses and the XM trademark as indefinite life intangibles after considering the expected use of the assets, the regulatory and economic environment within which they are being used, and the effects of obsolescence on their use.

We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. SIRIUS’ FCC license for its FM-1, FM-2 and FM-3 satellites (and a ground spare FM-4) expires in 2010, the FCC license for its FM-5 satellite expires in 2017 and the FCC license for its FM-6 satellite will expire eight years after SIRIUS certifies the satellite has been successfully launched and put into operation. XM Holdings’ FCC licenses for its satellites expire in 2013 and 2014. Prior to the expirations, we will be required to apply for a renewal of our FCC licenses. The renewal and extension of our licenses is reasonably certain at minimal cost which is expensed as incurred. The FCC licenses authorize us to use the broadcast spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time.

In connection with the Merger, $250,000 of the purchase price was allocated to the XM trademark. As of September 30, 2009, there are no legal, regulatory or contractual limitations associated with the XM trademark.

We evaluate our indefinite life intangible assets for impairment on an annual basis. During the three and nine months ended September 30, 2009, no impairment loss was recorded for intangible assets with indefinite lives.

Definite Life Intangible Assets

Definite life intangible assets consist primarily of subscriber relationships of $380,000 that were acquired as a result of the Merger. Subscriber relationships are amortized on an accelerated basis over 9 years, which reflects the estimated pattern in which the economic benefits will be consumed. Other definite life intangibles include certain licensing agreements of $75,000, which are being amortized over a weighted average useful life of 9.1 years on a straight-line basis.

Amortization expense was $18,648 and $9,232 for the three months ended September 30, 2009 and 2008, respectively, and $58,759 and $9,232 for the nine months ended September 30, 2009 and 2008, respectively. Expected amortization expense for each of the fiscal years through December 31, 2013 and for periods thereafter is as follows:

Year ending December 31,		Amount
Remaining 2009		$	17,827
2010			65,916
2011			58,850
2012			53,420
2013			47,097
Thereafter			136,178
Total definite life intangibles, net		$	379,288

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Subscriber revenue consists of subscription fees, revenue derived from our agreements with rental car companies, non-refundable activation fees and the effects of rebates. Revenues received from automakers for prepaid subscriptions included in the sale or lease price of vehicles are also included in subscriber revenue over the service period upon activation and sale to the customer.

Subscriber revenue consists of the following:

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
Subscription fees		$	573,611			$	453,540			$	1,683,568			$	963,454
Activation fees			5,171				4,920				16,929				17,271
Effect of rebates			(478	)			(223	)			(1,042	)			(329	)
Total subscriber revenue		$	578,304			$	458,237			$	1,699,455			$	980,396

We capitalize a portion of the interest on funds borrowed to finance the construction costs of our satellites. The following is a summary of our interest costs:

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
Interest costs charged to expense		$	78,527			$	49,216			$	240,062			$	83,636
Interest costs capitalized			12,742				7,791				47,272				14,340
Total interest costs incurred		$	91,269			$	57,007			$	287,334			$	97,976

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(8) Property and Equipment

Property and equipment, net, consists of the following:

		September 30,				December 31,
		2009				2008
Satellite system		$	1,664,286			$	1,414,625
Terrestrial repeater network			108,698				109,228
Leasehold improvements			43,033				42,878
Broadcast studio equipment			49,818				49,186
Capitalized software and hardware			138,174				132,555
Satellite telemetry, tracking and control facilities			56,013				56,217
Furniture, fixtures, equipment and other			59,804				57,995
Land			38,411				38,411
Building			56,322				56,392
Construction in progress			379,748				474,716
Total property and equipment			2,594,307				2,432,203
Accumulated depreciation and amortization			(900,072	)			(728,727	)
Property and equipment, net		$	1,694,235			$	1,703,476

		September 30,				December 31,
		2009				2008
Satellite system		$	353,938			$	449,129
Terrestrial repeater network			19,067				19,070
Leasehold improvements			—				—
Other			6,743				6,517
Construction in progress		$	379,748			$	474,716

Depreciation and amortization expense on property and equipment was $53,452 and $57,542 for the three months ended September 30, 2009 and 2008, respectively, and $172,865 and $111,561 for the nine months ended September 30, 2009 and 2008, respectively.

Satellites

SIRIUS’ initial three orbiting satellites were successfully launched in 2000. Our spare SIRIUS satellite was delivered to ground storage in 2002. SIRIUS’ three-satellite constellation and terrestrial repeater network were placed into service in 2002. On June 30, 2009, SIRIUS launched a satellite into a geostationary orbit and placed it into service in August 2009 along with SIRIUS’ other three orbiting satellites.

SIRIUS has an agreement with Space Systems/Loral for the design and construction of a sixth SIRIUS satellite. In January 2008, SIRIUS entered into an agreement with International Launch Services (“ILS”) to secure a satellite launch on a Proton rocket. We currently expect to launch this satellite in the fourth quarter of 2011.

XM owns four orbiting satellites; two of which, XM-3 and XM-4, currently transmit the XM signal and two of which, XM-1 and XM-2, serve as in-orbit spares. The XM satellites were launched in March 2001, May 2001, February 2005 and October 2006.

Space Systems/Loral has constructed a fifth satellite, XM-5, for use in the XM system. In 2006, XM entered into an agreement with Sea Launch to secure a launch for XM-5. In June 2009, Sea Launch filed for bankruptcy protection under Title 11 of the United States Code and as a result, XM recorded a charge of $24,196 to Restructuring, impairments and related costs in our unaudited consolidated statements of operations for amounts previously paid, including capitalized interest. In October 2009, XM Holdings terminated its satellite launch agreement with Sea Launch with the consent of the Bankruptcy Court. In October 2009, we entered into an agreement with ILS to secure a satellite launch for XM-5 on a Proton rocket. We currently expect to launch XM-5 in the second or third quarter of 2010.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(9) Related Party Transactions

Liberty Media

Liberty Media Corporation and its affiliate, Liberty Media, LLC (collectively, “Liberty Media”) is the holder of our Convertible Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), has representatives on our board of directors and is considered a related party. See Note 11, Debt, to our unaudited consolidated financial statements for further information regarding indebtedness previously owed to Liberty Media.

Investment Agreement

On February 17, 2009, we entered into an Investment Agreement (the “Investment Agreement”) with Liberty Media. Pursuant to the Investment Agreement, we agreed to issue to Liberty Radio, LLC 12,500,000 shares of Series B Preferred Stock with a liquidation preference of $0.001 per share in partial consideration for certain loan investments. The Series B Preferred Stock was issued on March 6, 2009.

The Series B Preferred Stock is convertible into 40% of our outstanding shares of common stock (after giving effect to such conversion). Liberty Radio, LLC has agreed not to acquire more than 49.9% of our outstanding common stock for three years from the date the Series B Preferred Stock was issued, except that Liberty Radio, LLC may acquire more than 49.9% of our outstanding common stock at any time after the second anniversary of such date pursuant to any cash tender offer for all of the outstanding shares of our common stock that are not beneficially owned by Liberty Radio, LLC or its affiliates at a price per share greater than the closing price of the common stock on the trading day preceding the earlier of the public announcement or commencement of such tender offer. The Investment Agreement also provides for certain other standstill provisions during such three year period.

The holder of our Series B Preferred Stock is entitled to appoint a number of directors to our board of directors proportionate to its ownership levels from time to time.

We accounted for the Series B Preferred Stock by recording a $227,716 increase to additional paid-in capital, excluding issuance costs, for the amount of allocated proceeds received and an additional $186,188 increase in paid-in capital for the beneficial conversion feature, which was immediately recognized as a charge to retained earnings.

Loan Investments

On February 17, 2009, SIRIUS entered into a Credit Agreement (the “LM Credit Agreement”) with Liberty Media Corporation, as administrative agent and collateral agent, and Liberty Media, LLC, as lender. The LM Credit Agreement provided for a $250,000 term loan and $30,000 of purchase money loans. In August 2009, we repaid all amounts due and terminated the LM Credit Agreement in connection with the issue and sale of XM’s 9.75% Senior Secured Notes due 2015.

On February 17, 2009, XM entered into a Credit Agreement with Liberty Media Corporation, as administrative agent and collateral agent, and Liberty Media, LLC, as lender. On March 6, 2009, XM amended and restated that credit agreement (the “Second-Lien Credit Agreement”) with Liberty Media Corporation. In June 2009, XM repaid all amounts due and terminated the Second-Lien Credit Agreement in connection with the issue and sale of its 11.25% Senior Secured Notes due 2013.

On March 6, 2009, XM amended and restated the $100,000 Term Loan, dated as of June 26, 2008 and the $250,000 Credit Agreement, dated as of May 5, 2006. These facilities were combined as term loans into the Amended and Restated Credit Agreement, dated as of March 6, 2009. Liberty Media, LLC, purchased $100,000 aggregate principal amount of such loans from the existing lenders. In June 2009, XM used a portion of the net proceeds from the sale of its 11.25% Senior Secured Notes due 2013 to extinguish the Amended and Restated Credit Agreement.

In June 2009, Liberty Media Corporation purchased $100,000 aggregate principal amount of XM’s 11.25% Senior Secured Notes due 2013 as part of the offering of such notes. In August 2009, Liberty Media Corporation purchased $50,000 aggregate principal amount of SIRIUS’ 9.75% Senior Secured Notes due 2015 as part of the offering of such notes.

As of September 30, 2009, we recorded $265,659 as Long-term related party debt related to the transactions with Liberty Media. This amount included the following principal amounts; $87,000 of XM’s 11.25% Senior Secured Notes due 2013, $76,000 of XM’s 13% Senior Notes due 2013, $11,000 of XM’s 7% Exchangeable Senior Subordinated Notes due 2014, $55,221 of SIRIUS’ 9⁵/8% Senior Notes due 2013, and $50,000 of SIRIUS’ 9.75% Senior Secured Notes due 2015. As of September 30, 2009, we recorded $5,737 related to accrued interest with Liberty Media to Related party current liabilities.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

We recognized Interest expense related to Liberty Media of $18,067 and $69,439 for the three and nine months ended September 30, 2009, respectively.

SIRIUS Canada

In 2005, SIRIUS entered into a license and services agreement with SIRIUS Canada. Pursuant to such agreement, SIRIUS is reimbursed for certain costs incurred to provide SIRIUS Canada service, including certain costs incurred for the production and distribution of radios, as well as information technology support costs. In consideration for the rights granted pursuant to this license and services agreement, SIRIUS has the right to receive a royalty equal to a percentage of SIRIUS Canada’s gross revenues based on subscriber levels (ranging between 5% to 15%) and the number of Canadian-specific channels made available to SIRIUS Canada. SIRIUS’ investment in SIRIUS Canada is primarily non-voting shares which carry an 8% cumulative dividend.

Total costs that have been or will be reimbursed by SIRIUS Canada for the three months ended September 30, 2009 and 2008 were $2,471 and $3,345, respectively, and $8,196 and $11,175 for the nine months ended September 30, 2009 and 2008, respectively. We recorded $1,525 and $0 in royalty income for the three months ended September 30, 2009 and 2008, respectively, and $3,695 and $0 for the nine months ended September 30, 2009 and 2008, respectively. Such royalty income was recognized as a component of Other revenue in our unaudited consolidated statements of operations. We also recorded dividend income of $219 and $0 for the three months ended September 30, 2009 and 2008, respectively, and $612 and $0 for the nine months ended September 30, 2009 and 2008, respectively, which was included in Interest and investment income in our unaudited consolidated statements of operations. Receivables recorded relating to royalty income and dividend income were fully utilized to absorb a portion of our share of the losses generated by SIRIUS Canada during the three and nine months ended September 30, 2009.

As of September 30, 2009 and December 31, 2008, other amounts due from SIRIUS Canada recorded in Related party current assets were $3,379 and $1,814, respectively. As of September 30, 2009 and December 31, 2008, amounts payable to SIRIUS Canada to fund its remaining capital requirements recorded in Related party current liabilities were $1,305 and $1,160, respectively.

XM Canada

In 2005, XM entered into agreements to provide XM Canada with the right to offer XM satellite radio service in Canada. The agreements have an initial term of ten years and XM Canada has the unilateral option to extend the term of the agreements for an additional five years at no additional cost beyond the current financial arrangements. XM Canada has expressed its intent to exercise this option at the end of the initial term of the agreements. XM has the right to receive a 15% royalty for all subscriber fees earned by XM Canada each month for its basic service and a nominal activation fee for each gross activation of an XM Canada subscriber on XM’s system. XM Canada is obligated to pay XM a total of $71,800 for the rights to broadcast and market National Hockey League (“NHL”) games for the 10-year term of XM’s contract with the NHL. We recognize these payments on a gross basis as a principal obligor pursuant to the provisions of ASC 605, Revenue Recognition.

The estimated fair value of deferred revenue from XM Canada as of the Merger date was approximately $34,000, and is being amortized on a straight-line basis over the remaining expected term of the agreements. Subsequent to the Merger date, we began to record additional deferred revenue on our agreements with XM Canada involving royalties on subscriber and activation fees. As of September 30, 2009 and December 31, 2008, the carrying value of Deferred revenue related to XM Canada was $39,566 and $36,002, respectively.

XM has extended a Cdn$45,000 standby credit facility to XM Canada which can be utilized to purchase terrestrial repeaters or finance the payment of subscription fees. The facility matures on December 31, 2012 and bears interest at a rate of 17.75% per annum. XM has the right to convert unpaid principal amounts into Class A subordinate voting shares of XM Canada at the price of Cdn$16.00 per share. As of September 30, 2009 and December 31, 2008, amounts drawn by XM Canada on this facility in lieu of payment of subscription fees recorded in Related party long-term assets were $15,522 and $8,311, respectively.

In connection with the deferred income related to XM Canada, we recorded amortization of $694 and $471 for the three months ended September 30, 2009 and 2008, respectively, and $2,082 and $471 for the nine months ended September 30, 2009 and 2008, respectively. The royalty fees XM earns related to subscriber and activation fees are reported as a component of Other revenue in our unaudited consolidated statements of operations. We recorded royalty fees of $225 and $146 for the three months ended September 30, 2009 and 2008, respectively, and $499 and $146 for the nine months ended September 30, 2009 and 2008, respectively. XM Canada pays XM a licensing fee and reimburses XM for advertising, both of which are reported as a component of Other revenue in our unaudited consolidated statements of operations. We recognized licensing fee revenue of $1,500 and $1,000 for the three months ended September 30, 2009 and 2008, respectively, and $4,500 and $1,000 for the nine months ended September 30, 2009 and 2008, respectively. We recognized advertising reimbursements of $0 for each of the three months ended September 30, 2009 and 2008, respectively, and $733 and $0 for the nine months ended September 30, 2009 and 2008, respectively. As of September 30, 2009 and December 31, 2008, amounts due from XM Canada recorded in Related party current assets were $3,408 and $5,594, respectively. As of September 30, 2009 and December 31, 2008, amounts due from XM Canada (in addition to the amounts drawn on the standby credit facility) recorded in Related party long-term assets were $6,000 and $0, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

General Motors

XM has a long-term distribution agreement with General Motors Company (“GM”). GM has a representative on our board of directors and is considered a related party. During the term of the agreement, GM has agreed to distribute the XM service. XM subsidizes a portion of the cost of XM radios and makes incentive payments to GM when the owners of GM vehicles with installed XM radios become subscribers to XM’s service. XM also shares with GM a percentage of the subscriber revenue attributable to GM vehicles with installed XM radios. As part of the agreement, GM provides certain call-center related services directly to XM subscribers who are also GM customers for which we reimburse GM.

XM makes bandwidth available to OnStar Corporation for audio and data transmissions to owners of XM-enabled GM vehicles, regardless of whether the owner is an XM subscriber. OnStar’s use of XM’s bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with XM’s business, and must meet XM’s quality standards. XM also granted to OnStar a certain amount of time to use XM’s studios on an annual basis and agreed to provide certain audio content for distribution on OnStar’s services.

We recorded total revenue from GM, primarily consisting of subscriber revenue, of $8,831 and $6,733 for the three months ended September 30, 2009 and 2008, respectively, and $22,087 and $6,733 for the nine months ended September 30, 2009 and 2008, respectively.

We recognized Sales and marketing expense with GM of $7,720 and $8,539 for the three months ended September 30, 2009 and 2008, respectively, and $23,387 and $8,539 for the nine months ended September 30, 2009 and 2008, respectively. We recognized Revenue share and royalties expense with GM of $15,008 and $26,021 for the three months ended September 30, 2009 and 2008, respectively, and $46,664 and $26,021 for the nine months ended September 30, 2009 and 2008, respectively. We recognized Subscriber acquisition costs with GM of $9,035 and $29,530 for the three months ended September 30, 2009 and 2008, respectively, and $25,066 and $29,530 for the nine months ended September 30, 2009 and 2008, respectively.

As of September 30, 2009, amounts due from GM and prepaid expenses with GM recorded in Related party current assets were $8,175 and $91,902, respectively. As of September 30, 2009, prepaid expenses with GM recorded in Related party long-term assets were $92,551. As of December 31, 2008, amounts due from GM and prepaid expenses with GM recorded in Related party current assets were $10,132 and $94,444, respectively. As of December 31, 2008, prepaid expenses with GM recorded in Related party long-term assets were $116,296.

As of September 30, 2009 and December 31, 2008, amounts due to GM recorded in Related party current liabilities were $79,813 and $63,023, respectively. As of September 30, 2009 and December 31, 2008, amounts due to GM recorded in Related party long-term liabilities were $21,928 and $0, respectively.

American Honda

XM has an agreement to make a certain amount of its bandwidth available to American Honda. American Honda has a representative on our board of directors and is considered a related party. American Honda’s use of XM’s bandwidth must be in compliance with applicable laws, must not compete or adversely interfere with XM’s business, and must meet XM’s quality standards. This agreement remains in effect so long as American Honda holds a certain amount of its investment in us. XM makes incentive payments to American Honda for each purchaser of a Honda or Acura vehicle that becomes a self-paying XM subscriber and shares with American Honda a portion of the subscriber revenue attributable to Honda and Acura vehicles with installed XM radios.

We recorded total revenue from American Honda, primarily consisting of subscriber revenue, of $3,374 and $3,321 for the three months ended September 30, 2009 and 2008, respectively, and $9,201 and $3,321 for the nine months ended September 30, 2009 and 2008, respectively.

We recognized Sales and marketing expense with American Honda of $1,647 and $1,848 for the three months ended September 30, 2009 and 2008, respectively, and $4,391 and $1,848 for the nine months ended September 30, 2009 and 2008, respectively. We recognized Revenue share and royalties expense with American Honda of $1,636 and $747 for the three months ended September 30, 2009 and 2008, respectively, and $4,601 and $747 for the nine months ended September 30, 2009 and 2008, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

As of September 30, 2009 and December 31, 2008, amounts due from American Honda recorded in Related party current assets were $2,308 and $2,194, respectively.

As of September 30, 2009 and December 31, 2008, amounts due to American Honda recorded in Related party current liabilities were $4,014 and $4,190, respectively.

(10) Investments

Investments consist of the following:

		September 30,				December 31,
		2009				2008
Marketable securities		$	11,555			$	10,525
Restricted investments			3,400				141,250
Embedded derivative accounted for separately from the host contract			26				2
Equity method investments			2,679				8,873
Total investments		$	17,660			$	160,650

SIRIUS Canada

We have a 49.9% economic interest in SIRIUS Canada. Our investment in SIRIUS Canada is recorded using the equity method since we have a significant influence, but less than a controlling voting interest in SIRIUS Canada. Under this method, our investment in SIRIUS Canada, originally recorded at cost, is adjusted quarterly to recognize our proportionate share of net earnings or losses as they occur, rather than at the time dividends or other distributions are received, limited to the extent of our investment in, advances to and commitments to fund SIRIUS Canada. Our share of net earnings or losses of SIRIUS Canada is recorded to Gain (loss) on investments in our unaudited consolidated statements of operations. We recorded losses of $1,744 and $0 for the three months ended September 30, 2009 and 2008, respectively, and $4,307 and $0 for the nine months ended September 30, 2009 and 2008, respectively, for our share of SIRIUS Canada’s net loss. We recorded $4,555 and $11,424, respectively, for the three and nine months ended September 30, 2009 to Gain (loss) on investments in our unaudited consolidated statements of operations for payments received from SIRIUS Canada in excess of our carrying value of our investments in, advances to and commitments to such entity. As of September 30, 2009, the carrying value of our equity method investment in SIRIUS Canada was $0.

XM Canada

We have a 23.33% economic interest in XM Canada. The amount of the Merger purchase price allocated to the fair value of our investment in XM Canada was $41,188. Our investment in XM Canada is recorded using the equity method (on a one-month lag) since we have significant influence, but less than a controlling voting interest in XM Canada. Under this method, our investment in XM Canada is adjusted quarterly to recognize our share of net earnings or losses as they occur, rather than at the time dividends or other distributions are received, limited to the extent of our investment in, advances to, and commitments to fund XM Canada. Our share of net earnings or losses of XM Canada is recorded to Gain (loss) on investments in our unaudited consolidated statements of operations. We recorded $2,870 and $1,926 for the three and nine months ended September 30, 2009, respectively, for our share of XM Canada’s net loss. We recorded $3,088 for the three and nine months ended September 30, 2008 for our share of XM Canada’s net loss. During the three and nine months ended September 30, 2009, we reduced the carrying value of our investment in XM Canada due to decreases in fair value that were considered to be other than temporary and recorded impairment charges of $4,734 and $0 for the nine months ended September 30, 2009 and 2008, respectively. In addition, during the three and nine months ended September 30, 2009, we recorded ($35) and $466, respectively, as a foreign exchange gain (loss) to Accumulated other comprehensive loss, net of tax.

XM Holdings holds an investment in Cdn$4,000 face value of 8% convertible unsecured subordinated debentures issued by XM Canada for which the embedded conversion feature is bifurcated from the host contract. The host contract is accounted for as an available-for-sale security at fair value with changes in fair value recorded to Accumulated other comprehensive loss, net of tax. The embedded conversion feature is accounted for as a derivative at fair value with changes in fair value recorded in earnings as Interest and investment income. As of September 30, 2009, the carrying value of our equity method investment in XM Canada was $2,679, while the carrying values of the host contract and embedded derivative related to our investment in the debentures was $2,967 and $26, respectively. As of December 31, 2008, the carrying value of our equity method investment in XM Canada was $8,873, while the carrying values of the host contract and embedded derivative related to our investment in the debentures was $2,540 and $2, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Auction Rate Certificates

Auction rate certificates are long-term securities structured to reset their coupon rates by means of an auction. We account for our investment in auction rate certificates as available-for-sale securities. As of September 30, 2009 and December 31, 2008, the carrying value of these securities was $8,588 and $7,985, respectively.

Restricted Investments

Restricted investments relate to deposits placed into escrow for the benefit of third parties pursuant to programming agreements and reimbursement obligations under letters of credit issued for the benefit of lessors of office space. As of September 30, 2009 and December 31, 2008, the carrying value of our long-term restricted investments was $3,400 and $141,250, respectively.

(11) Debt

Our debt consists of the following:

		Conversion				Long Term Debt
		Price				September 30,				December 31,
		(per share)				2009				2008
SIRIUS Debt
83/4% Convertible Subordinated Notes due 2009		$	28.46			$	—			$	1,744
31/4% Convertible Notes due 2011		$	5.30				230,000				230,000
Senior Secured Term Loan due 2012			N/A				245,000				246,875
95/8% Senior Notes due 2013			N/A				500,000				500,000
9.75% Senior Secured Notes due 2015			N/A				257,000				—
Less: discount							(12,006	)			—
21/2% Convertible Notes due 2009		$	4.41				—				189,586
XM and XM Holdings Debt
10% Convertible Senior Notes due 2009		$	10.87				48,450				400,000
Less: discount							(371	)			(16,449	)
10% Senior Secured Discount Convertible Notes due 2009		$	0.69				33,249				33,249
Add: premium							6,450				34,321
10% Senior PIK Secured Notes due 2011			N/A				172,485				—
Less: discount							(12,870	)			—
11.25% Senior Secured Notes due 2013			N/A				525,750				—
Less: discount							(34,525	)			—
13% Senior Notes due 2013			N/A				778,500				778,500
Less: discount							(66,538	)			(74,986	)
9.75% Senior Notes due 2014			N/A				5,260				5,260
7% Exchangeable Senior Subordinated Notes due 2014		$	1.875				550,000				550,000
Senior Secured Term Loan due 2009			N/A				—				100,000
Senior Secured Revolving Credit Facility due 2009			N/A				—				250,000
Add: premium							—				151
Other debt:
Capital leases			N/A				17,890				23,215
Total debt							3,243,724				3,251,466
Less: current maturities							103,674				399,726
Total long-term							3,140,050				2,851,740
Less: related party							265,659				—
Total long-term, excluding related party						$	2,874,391			$	2,851,740

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

SIRIUS Debt

8³/4% Convertible Subordinated Notes due 2009

In 1999, SIRIUS issued 8³/4% Convertible Subordinated Notes due 2009 (the “8³/4% Notes”). The balance of the 8³/4% Notes matured on September 29, 2009 and were repaid in cash.

3¹/4% Convertible Notes due 2011

In October 2004, SIRIUS issued $230,000 in aggregate principal amount of 3¹/4% Convertible Notes due 2011 (the “3¹/4% Notes”) resulting in net proceeds, after debt issuance costs, of $224,813. The 3¹/4% Notes are convertible, at the option of the holder, into shares of our common stock at any time at a conversion rate of 188.6792 shares of common stock for each $1,000 principal amount, or $5.30 per share of common stock, subject to certain adjustments. The 3¹/4% Notes mature on October 15, 2011 and interest is payable semi-annually on April 15 and October 15 of each year. The obligations under the 3¹/4% Notes are not secured by any of our assets.

Senior Secured Term Loan due 2012

In June 2007, SIRIUS entered into a term credit agreement with a syndicate of financial institutions. The term credit agreement provides for a senior secured term loan (the “Senior Secured Term Loan”) of $250,000, which has been fully drawn. Interest under the Senior Secured Term Loan is based, at our option, on (i) adjusted LIBOR plus 2.25% or (ii) the higher of (a) the prime rate and (b) the Federal Funds Effective Rate plus ¹/2 of 1.00%, plus 1.25%. The current interest rate is 2.563%. The Senior Secured Term Loan amortizes in equal quarterly installments of 0.25% of the initial aggregate principal amount for the first four and a half years, with the balance of the loan thereafter being repaid in four equal quarterly installments. The Senior Secured Term Loan matures on December 20, 2012.

The Senior Secured Term Loan is guaranteed by certain of our wholly owned subsidiaries, including Satellite CD Radio, Inc. (the “Guarantor”), and is secured by a lien on substantially all of SIRIUS’ and the Guarantor’s assets, including SIRIUS’ four in-orbit satellites, one ground spare satellite and the shares of the Guarantor.

The Senior Secured Term Loan contains customary affirmative covenants and event of default provisions. The negative covenants contained in the Senior Secured Term Loan are substantially similar to those contained in the indenture governing SIRIUS’ 9⁵/8% Senior Notes due 2013.

LM Term Loan and LM Purchase Money Loan

In February 2009, SIRIUS entered into a Credit Agreement (the “LM Credit Agreement”) with Liberty Media Corporation, as administrative agent and collateral agent. The LM Credit Agreement provided for a $250,000 term loan (“LM Term Loan”) and $30,000 of purchase money loans (“LM Purchase Money Loan”). Concurrently with entering into the LM Credit Agreement, SIRIUS borrowed $250,000 under the LM Term Loan. The proceeds of the LM Term Loan were used (i) to repay at maturity our outstanding 2¹/2% Convertible Notes due February 17, 2009 and (ii) for general corporate purposes, including related transaction costs.

In August 2009, SIRIUS used net proceeds from the sale of its 9.75% Senior Secured Notes due 2015 to extinguish the LM Term Loan and LM Purchase Money Loan. We recorded an aggregate loss on extinguishment of the LM Term Loan and LM Purchase Money Loan of $134,520 consisting primarily of the unamortized discount, deferred financing fees and unaccreted portion of the repayment premium to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations.

9.75% Senior Secured Notes due 2015

In August 2009, SIRIUS issued $257,000 aggregate principal amount of 9.75% Senior Secured Notes due 2015 (the “9.75% Notes”). Interest is payable semi-annually in arrears on March 1 and September 1 of each year, commencing on March 1, 2010, at a rate of 9.75% per annum. The 9.75% Notes mature on September 1, 2015. The 9.75% Notes were issued for $244,787, resulting in an aggregate original issuance discount, including fees, of $12,213. The proceeds of the 9.75% Notes were used to extinguish the LM Term Loan and LM Purchase Money Loan.

SIRIUS and the domestic subsidiaries of SIRIUS that guarantee certain of the indebtedness of SIRIUS and its restricted subsidiaries guarantee SIRIUS’ obligations under the 9.75% Notes. The 9.75% Notes and related guarantees are secured by first-priority liens on substantially all of the assets of SIRIUS and the guarantors other than certain excluded assets (including cash, accounts receivable and certain inventory).

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

9⁵/8% Senior Notes due 2013

In August 2005, SIRIUS issued $500,000 in aggregate principal amount of 9⁵/8% Senior Notes due 2013 (the “9⁵/8% Notes”) resulting in net proceeds, after debt issuance costs, of $493,005. The 9⁵/8% Notes mature on August 1, 2013 and interest is payable semi-annually on February 1 and August 1 of each year. The obligations under the 9⁵/8% Notes are not secured by any of our assets.

2¹/2% Convertible Notes due 2009

In February 2004, SIRIUS issued $250,000 in aggregate principal amount of 2¹/2% Convertible Notes due 2009 (the “2¹/2% Notes”) resulting in net proceeds, after debt issuance costs, of $244,625. The remaining principal balance of the 2¹/2% Notes matured on February 17, 2009, and was paid in cash at maturity.

Space Systems/Loral Credit Agreement

In July 2007, SIRIUS amended and restated its existing Credit Agreement with Space Systems/Loral (the “Loral Credit Agreement”). Under the Loral Credit Agreement, Space Systems/Loral agreed to make loans to SIRIUS to finance the purchase of its fifth and sixth satellites through June 10, 2010. As of September 30, 2009, Loral’s commitment was approximately $19,730. Loans made under the Loral Credit Agreement will be secured by SIRIUS’ rights under the Satellite Purchase Agreement with Space Systems/Loral, including SIRIUS’ rights to its sixth satellite. The loans will also be entitled to the benefits of a subsidiary guarantee from Satellite CD Radio, Inc., the subsidiary that holds SIRIUS’ FCC license, and any future material subsidiary that may be formed by SIRIUS. The maturity date of the loans is the earliest to occur of (i) June 10, 2010, (ii) 90 days after the sixth satellite becomes available for shipment and (iii) 30 days prior to the scheduled launch of the sixth satellite. The Loral Credit Agreement contains certain conditions to borrowings, including payment of periodic commitment fees. Any loans made under the Loral Credit Agreement generally will bear interest at a variable rate equal to 3-month LIBOR plus 4.75%. The daily unused balance bears interest at a rate per annum equal to 0.50%, payable quarterly on the last day of each March, June, September and December. The Loral Credit Agreement permits SIRIUS to prepay all or a portion of the loans outstanding without penalty. SIRIUS has not borrowed under the Loral Credit Agreement.

XM and XM Holdings Debt

10% Convertible Senior Notes due 2009

XM Holdings has issued $400,000 aggregate principal amount of 10% Convertible Senior Notes due 2009 (the “10% Convertible Notes”). Interest is payable semi-annually at a rate of 10% per annum. The 10% Convertible Notes mature on December 1, 2009. The 10% Convertible Notes may be converted by the holder, at its option, into shares of our common stock at a conversion rate of 92.0 shares of our common stock per $1,000 principal amount, which is equivalent to a conversion price of $10.87 per share of common stock (subject to adjustment in certain events). As a result of the fair valuation at the acquisition date, we recognized an initial discount of $23,700.

In February 2009, we exchanged $172,485 aggregate principal amount of the outstanding 10% Convertible Notes for a like principal amount of XM Holdings’ 10% Senior PIK Secured Notes due 2011. We accounted for the exchange as a modification of debt and recorded $2,008 to General and administrative expense in our unaudited consolidated statements of operations and $10,990 of additional debt discount in our unaudited consolidated balance sheets.

In July 2009, XM used a portion of the net proceeds received from the issuance of its 11.25% Senior Secured Notes due 2013 and cash on hand to purchase at par $179,065 aggregate principal amount of the 10% Convertible Notes. We recorded a loss of $3,031 related to the unamortized discount to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations as a result of this transaction.

10% Senior Secured Discount Convertible Notes due 2009

XM Holdings and XM, as co-obligors, have outstanding $33,249 aggregate principal amount of 10% Senior Secured Discount Convertible Notes due 2009 (the “10% Discount Convertible Notes”). Interest is payable semi-annually at a rate of 10% per annum. The 10% Discount Convertible Notes mature on December 31, 2009. At any time, a holder of the notes may convert all or part of the accreted value of the notes at a conversion price of $0.69 per share. As a result of the fair valuation at the acquisition date, we recognized an initial premium of $57,550.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

10% Senior PIK Secured Notes due 2011

In February 2009, XM Holdings exchanged $172,485 aggregate principal amount of outstanding 10% Convertible Notes for a like principal amount of its 10% Senior PIK Secured Notes due 2011 (the “PIK Notes”). Interest is payable on the PIK Notes semiannually in arrears on June 1 and December 1 of each year at a rate of 10% per annum paid in cash from December 1, 2008 to December 1, 2009; at a rate of 10% per annum paid in cash and 2% per annum paid in kind from December 1, 2009 to December 1, 2010; and at a rate of 10% per annum paid in cash and 4% per annum paid in kind from December 1, 2010 to the maturity date.

The PIK Notes are fully and unconditionally guaranteed by XM 1500 Eckington LLC and XM Investment LLC (together, the “Subsidiary Guarantors”) and are secured by a first-priority lien on substantially all of the property of the Subsidiary Guarantors. XM Holdings may, at its option, redeem some or all of the PIK Notes at any time at 100% of the principal amount prepaid, together with accrued and unpaid interest, if any.

We paid a fee equal to, at each exchanging noteholders’ election, either (i) 833 shares of our common stock (the “Structuring Fee Shares”) for every $1 principal amount of 10% Convertible Notes exchanged or (ii) an amount in cash equal to $0.05 for every $1 principal amount of 10% Convertible Notes exchanged. The total number of Structuring Fee Shares delivered was 59,178,819, and the aggregate cash delivered was approximately $5,100.

In October 2009, we purchased $58,800 aggregate principal amount of the PIK Notes at a price of $60,499, which included accrued interest of $2,287. We will record a net loss of $3,669, related to the unamortized discount and the discount on the purchase, to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations as a result of this transaction.

Amended and Restated Credit Agreement due 2011

In March 2009, XM amended and restated the $100,000 Senior Secured Term Loan due 2009, dated as of June 26, 2008 and the $250,000 Senior Secured Revolving Credit Facility due 2009, dated as of May 5, 2006. These facilities were combined as term loans into the Amended and Restated Credit Agreement, dated as of March 6, 2009. Liberty Media LLC (“Liberty”) purchased $100,000 aggregate principal amount of such loans from the lenders.

In June 2009, XM used net proceeds from the sale of its 11.25% Senior Secured Notes due 2013 to repay amounts due under and extinguish the Amended and Restated Credit Agreement. XM paid a repayment premium of $6,500. We recorded an aggregate loss on extinguishment of the Amended and Restated Credit Agreement of $49,786 consisting primarily of the unamortized discount, deferred financing fees and unaccreted portion of the repayment premium to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations.

11.25% Senior Secured Notes due 2013

In June 2009, XM issued $525,750 aggregate principal amount of 11.25% Senior Secured Notes due 2013 (the “11.25% Notes”). Interest is payable semi-annually in arrears on June 15 and December 15 of each year at a rate of 11.25% per annum. The 11.25% Notes mature on June 15, 2013. The 11.25% Notes were issued for $489,952, resulting in an aggregate original issuance discount, including fees, of $35,798.

XM Holdings and the domestic subsidiaries of XM that guarantee certain of the indebtedness of XM and its restricted subsidiaries guarantee XM’s obligations under the 11.25% Notes. The 11.25% Notes and related guarantees are secured by first-priority liens on substantially all of the assets of XM Holdings, XM and the guarantors.

In June 2009, XM used a portion of the net proceeds from the sale of the 11.25% Notes to repay in full $325,000 principal amount outstanding under the Amended and Restated Credit Agreement. In connection with the sale of the 11.25% Notes, XM terminated the Second-Lien Credit Agreement and repaid all amounts thereunder.

13% Senior Notes due 2013

In July 2008, XM issued $778,500 aggregate principal amount of 13% Senior Notes due 2013 (the “13% Notes”). Interest is payable semi-annually in arrears on February 1 and August 1 of each year at a rate of 13% per annum. The 13% Notes were issued for $700,105, resulting in an original issuance discount of $78,395. The 13% Notes are unsecured and mature on August 1, 2013.

9.75% Senior Notes due 2014

XM has outstanding $5,260 aggregate principal amount of 9.75% Senior Notes due 2014 (the “XM 9.75% Notes”). Interest on the XM 9.75% Notes is payable semi-annually on May 1 and November 1 at a rate of 9.75% per annum. The XM 9.75% Notes are unsecured and mature on May 1, 2014. XM, at its option, may redeem the XM 9.75% Notes at declining redemption prices at any time on or after May 1, 2010, subject to certain restrictions. Prior to May 1, 2010, XM may redeem the XM 9.75% Notes, in whole or in part, at a price equal to 100% of the principal amount thereof, plus a make-whole premium and accrued and unpaid interest to the date of redemption.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

In March 2009, XM executed and delivered a Third Supplemental Indenture (the “XM 9.75% Notes Supplemental Indenture”). The XM 9.75% Notes Supplemental Indenture amended the indenture to eliminate substantially all of the restrictive covenants, eliminated certain events of default and modified or eliminated certain other provisions contained in the indenture and the XM 9.75% Notes.

7% Exchangeable Senior Subordinated Notes due 2014

In August 2008, XM issued $550,000 aggregate principal amount of 7% Exchangeable Senior Subordinated Notes due 2014 (the “Exchangeable Notes”). The Exchangeable Notes are senior subordinated obligations of XM and rank junior in right of payment to its existing and future senior debt and equally in right of payment with its existing and future senior subordinated debt. XM Holdings, XM Equipment Leasing LLC and XM Radio Inc. have guaranteed the Exchangeable Notes on a senior subordinated basis. The Exchangeable Notes are not guaranteed by SIRIUS or Satellite CD Radio, Inc. Interest is payable semi-annually in arrears on June 1 and December 1 of each year at a rate of 7% per annum. The Exchangeable Notes mature on December 1, 2014. The Exchangeable Notes are exchangeable at any time at the option of the holder into shares of our common stock at an initial exchange rate of 533.3333 shares of common stock per $1,000 principal amount of Exchangeable Notes, which is equivalent to an approximate exchange price of $1.875 per share of common stock.

Second-Lien Credit Agreement

In February 2009, XM entered into a Credit Agreement (the “XM Credit Agreement”) with Liberty Media Corporation, as administrative agent and collateral agent. The XM Credit Agreement provided for a $150,000 term loan. On March 6, 2009, XM amended and restated the XM Credit Agreement (the “Second-Lien Credit Agreement”) with Liberty Media Corporation.

In June 2009, XM terminated the Second-Lien Credit Agreement in connection with the sale of the 11.25% Notes and repaid all amounts due thereunder. We recorded a loss on termination of the Second-Lien Credit Agreement of $57,663 related to deferred financing fees to Loss on extinguishment of debt and credit facilities in our unaudited consolidated statements of operations.

Covenants and Restrictions

Our debt generally requires compliance with certain covenants that restrict our ability to, among other things, (i) incur additional indebtedness, (ii) incur liens, (iii) pay dividends or make certain other restricted payments, investments or acquisitions, (iv) enter into certain transactions with affiliates, (v) merge or consolidate with another person, (vi) sell, assign, lease or otherwise dispose of all or substantially all of our assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions. SIRIUS operates XM Holdings as an unrestricted subsidiary for purposes of compliance with the covenants contained in its debt instruments. If we fail to comply with these covenants, our debt could become immediately payable.

At September 30, 2009, we were in compliance with all financial covenants.

(12) Stockholders’ Equity

Common Stock, par value $0.001 per share

We were authorized to issue up to 9,000,000,000 and 8,000,000,000 shares of common stock as of September 30, 2009 and December 31, 2008, respectively. There were 3,858,186,839 and 3,651,765,837 shares of common stock issued and outstanding as of September 30, 2009 and December 31, 2008, respectively.

As of September 30, 2009, approximately 3,848,417,000 shares of common stock were reserved for issuance in connection with outstanding convertible debt, preferred stock, warrants, incentive stock plans and common stock to be granted to third parties upon satisfaction of performance targets. During the three and nine months ended September 30, 2009, employees did not exercise any stock options.

During the third quarter of 2009, Morgan Stanley Capital Services Inc. returned 60,000,000 shares of our common stock initially borrowed in July 2008 to facilitate the offering of the Exchangeable Notes. The returned shares were retired upon receipt.

In January 2004, SIRIUS signed a seven-year agreement with a sports programming provider. Upon execution of this agreement, SIRIUS delivered 15,173,070 shares of common stock valued at $40,967 to that programming provider. These shares of common stock are subject to transfer restrictions which lapse over time. We recognized expense associated with these shares of $1,641 for each of the three months ended September 30, 2009 and 2008, respectively, and $3,501 for each of the nine months ended September 30, 2009 and 2008, respectively. As of September 30, 2009, there was a $9,771 remaining balance of common stock value included in Other current assets and Other long-term assets in the amount of $5,852 and $3,919, respectively. As of December 31, 2008, there was a $13,272 remaining balance of common stock value included in Other current assets and Other long-term assets in the amount of $5,852 and $7,420, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

Preferred Stock, par value $0.001 per share

We were authorized to issue up to 50,000,000 shares of undesignated preferred stock as of September 30, 2009. There were 24,808,959 shares of Series A convertible preferred stock issued and outstanding as of September 30, 2009 and December 31, 2008. There were 12,500,000 shares of Convertible Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), issued and outstanding as of September 30, 2009. There were no shares of Preferred Stock, Series C Junior (the “Series C Junior Preferred Stock”), issued and outstanding at September 30, 2009.

The Series B Preferred Stock is convertible into shares of our common stock at the rate of 206.9581409 shares of common stock for each share of Series B Preferred Stock, representing 40% of our outstanding shares of common stock (after giving effect to such conversion). As holder of the Series B Preferred Stock, Liberty Radio LLC is entitled to a number of votes equal to the number of shares of our common stock into which each such Series B Preferred Stock share is convertible. Liberty Radio LLC will also receive dividends and distributions ratably with our common stock, on an as-converted basis. With respect to dividend rights, the Series B Preferred Stock ranks evenly with our common stock, the Series A Preferred Stock, and each other class or series of our equity securities not expressly provided as ranking senior to the Series B Preferred Stock. With respect to liquidation rights, the Series B Preferred Stock ranks evenly with each other class or series of our equity securities not expressly provided as ranking senior to the Series B Preferred Stock, and will rank senior to our common stock and the Series A Preferred Stock.

During 2009, we accounted for the issuance of Series B Preferred Stock by recording a $227,716 increase to additional paid-in capital for the amount of allocated proceeds received and an additional $186,188 increase to paid-in capital for the beneficial conversion feature, which was recognized as a charge to retained earnings.

In April 2009, our board of directors created and reserved for issuance in accordance with the Rights Plan (as described below) 9,000 shares of the Series C Junior Preferred Stock. The shares of Series C Junior Preferred Stock are not redeemable and rank, with respect to the payment of dividends and the distribution of assets, junior to all other series of our preferred stock, unless the terms of such series shall so provide.

Warrants

We have issued warrants to purchase shares of common stock in connection with distribution and programming agreements, satellite purchase agreements and certain debt issuances. As of September 30, 2009, approximately 49,315,000 warrants to acquire approximately 81,739,000 shares of common stock with an average exercise price of $3.12 per share were outstanding. We recognized expense of $1,318 during the three months ended March 31, 2009 due to the cancellation of certain warrants and the issuance of replacement warrants expiring in March 2015. Warrants vest over time or upon the achievement of milestones and expire at various times through 2015. We recognized aggregate warrant related expense (benefit) of $0 and ($620) for the three months ended September 30, 2009 and 2008, respectively, and $2,522 and $2,236 for the nine months ended September 30, 2009 and 2008, respectively.

Rights Plan

In April 2009, our board of directors adopted a rights plan. The terms of the rights and the rights plan are set forth in a Rights Agreement dated as of April 29, 2009 (the “Rights Plan”). The Rights Plan is intended to act as a deterrent to any person or group acquiring 4.9% or more of our outstanding common stock (assuming for purposes of this calculation that all of our outstanding convertible preferred stock is converted into common stock) without the approval of our board of directors.

The Rights Plan will continue in effect until August 1, 2011, unless it is terminated or redeemed earlier by our board of directors. We plan to submit the Rights Plan to a stockholder vote prior to June 30, 2010, and the failure to obtain this approval will result in a termination of the Rights Plan.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

(13) Benefits Plans

We maintain four share-based benefits plans. We satisfy awards and options granted under these plans through the issuance of new shares. We recognized share-based payment expense of $17,674 and $24,005 for the three months ended September 30, 2009 and 2008, respectively, and $67,553 and $63,417 for the nine months ended September 30, 2009 and 2008, respectively. For a summarized schedule of share-based payment expense, see the appended footnote to our unaudited consolidated statements of operations. We did not realize any income tax benefits from share-based benefits plans during the three and nine months ended September 30, 2009 and 2008, as a result of a full valuation allowance that is maintained for substantially all net deferred tax assets.

2009 Long-Term Stock Incentive Plan

In May 2009, our stockholders approved the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan (the “2009 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2009 Plan. The 2009 Plan provides for the grant of stock options, restricted stock, restricted stock units and other stock-based awards that the compensation committee of our board of directors may deem appropriate. Vesting and other terms of stock-based awards are set forth in the agreements with the individuals receiving the awards. Stock-based awards granted under the 2009 Plan are generally subject to a vesting requirement. Stock-based awards generally expire ten years from the date of grant. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting. As of September 30, 2009, approximately 359,762,000 shares of common stock were available for future grant under the 2009 Plan.

Other Plans

SIRIUS and XM Holdings maintain three other share-based benefit plans — the XM Holdings 2007 Stock Incentive Plan, the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan and the XM Holdings Talent Option Plan. These plans generally provide for the grant of stock options, restricted stock, restricted stock units and other stock based awards. No further awards may be made under these plans. Outstanding awards under these plans will be continued.

The following table summarizes the weighted-average assumptions used to compute reported share-based payment expense to employees and members of our board of directors for the three and nine months ended September 30, 2009 and 2008:

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
Risk-free interest rate			2.5	%			3.1	%			2.5	%			2.7	%
Expected life of options — years			4.57				4.06				4.64				4.06
Expected stock price volatility			88	%			80	%			88	%			80	%
Expected dividend yield		$	—			$	—			$	—			$	—

The following table summarizes the range of assumptions used to compute reported share-based payment expense to third parties, other than non-employee members of our board of directors, for the three and nine months ended September 30, 2009 and 2008:

		For the Three Months								For the Nine Months
		Ended September 30,								Ended September 30,
		2009				2008				2009				2008
Risk-free interest rate			1.45 - 2.53	%			2.0 - 3.0	%			1.08 - 2.54	%			1.6 - 3.3	%
Expected life — years			2.58 - 4.98				1.50 - 4.06				2.50 - 6.19				1.50 - 4.08
Expected stock price volatility			88-112	%			80	%			83-112	%			80	%
Expected dividend yield		$	—			$	—			$	—			$	—

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

The following table summarizes stock option activity under our share-based payment plans for the nine months ended September 30, 2009 (shares in thousands):

						Weighted-				Weighted-Average
						Average				Remaining				Aggregate
						Exercise				Contractual Term				Intrinsic
		Shares				Price				(Years)				Value
Outstanding, December 31, 2008			165,436			$	4.42
Granted			240,239			$	0.52
Exercised			—			$	—
Forfeited, cancelled or expired			(53,985	)		$	5.08
Outstanding, September 30, 2009			351,690			$	1.66				6.83			$	34,683
Exercisable, September 30, 2009			87,205			$	4.53				4.44			$	1

The weighted average grant date fair value of options granted during the nine months ended September 30, 2009 and 2008 was $0.35 and $1.73, respectively. The total intrinsic value of stock options exercised during the nine months ended September 30, 2009 and 2008 was $0 and $127, respectively.

We recognized share-based payment expense associated with stock options of $8,577 and $13,940 for the three months ended September 30, 2009 and 2008, respectively, and $40,890 and $36,465 for the nine months ended September 30, 2009 and 2008, respectively.

The following table summarizes the non-vested restricted stock and restricted stock unit activity under our share-based payment plans for the nine months ended September 30, 2009 (shares in thousands):

						Weighted-Average
						Grant Date
		Shares				Fair Value
Nonvested, December 31, 2008			19,931			$	2.84
Granted			84,851			$	0.37
Vested			(69,123	)		$	0.75
Forfeited			(2,124	)		$	1.97
Nonvested, September 30, 2009			33,535			$	0.96

The weighted average grant date fair value of restricted stock units granted during the nine months ended September 30, 2009 and 2008 was $0.37 and $2.87, respectively. The total intrinsic value of restricted stock units that vested during the nine months ended September 30, 2009 and 2008 was $28,865 and $19,529, respectively.

We recognized share-based payment expense associated with restricted stock units and shares of restricted stock of $5,024 and $6,849 for the three months ended September 30, 2009 and 2008, respectively, and $17,881 and $14,433 for the nine months ended September 30, 2009 and 2008, respectively.

Total unrecognized compensation costs related to unvested share-based payment awards granted to employees and members of our board of directors at September 30, 2009 and December 31, 2008, net of estimated forfeitures, was $118,637 and $90,310, respectively. The weighted-average period over which the compensation expense for these awards is expected to be recognized is three years as of September 30, 2009.

401(k) Savings Plans

We sponsor the Sirius Satellite Radio 401(k) Savings Plan (the “Sirius Plan”) for eligible employees. During 2009, we merged the XM Satellite Radio 401(k) Savings Plan (the “XM Plan”) into the Sirius Plan. All eligible employees under the XM Plan became subject to the contribution, matching and vesting rules of the Sirius Plan.

The Sirius Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax salary subject to certain defined limits. We match 50% of an employee’s voluntary contributions, up to 6% of an employee’s pre-tax salary, in the form of shares of common stock. Matching contributions under the Sirius Plan vest at a rate of 33¹/3% for each year of employment and are fully vested after three years of employment. Expense resulting from the matching contribution to the plans was $895 and $857 for the three months ended September 30, 2009 and 2008, respectively, and $2,484 and $2,086 for the nine months ended September 30, 2009 and 2008, respectively.

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — Continued
(Dollar amounts in thousands, unless otherwise stated)

We may also elect to contribute to the profit sharing portion of the Sirius Plan based upon the total eligible compensation of eligible participants. These additional contributions, referred to as profit-sharing contributions, are determined by the compensation committee of our board of directors. Employees are only eligible to receive profit-sharing contributions during any year in which they are employed on the last day of the year. Profit-sharing contribution expense was $1,537 and $1,665 for the three months ended September 30, 2009 and 2008, respectively, and $573 and $5,025 for the nine months ended September 30, 2009 and 2008, respectively.

(14) Income Taxes

We recorded income tax expense of $1,115 and $1,215 for the three months ended September 30, 2009 and 2008, respectively, and $3,344 and $2,301 for the nine months ended September 30, 2009 and 2008, respectively. Such expense primarily represents the recognition of a deferred tax liability related to the difference in accounting for the FCC license intangible assets, which are amortized over 15 years for tax purposes but are not amortized for book purposes.

(15) Commitments and Contingencies

The following table summarizes our expected contractual cash commitments as of September 30, 2009:

		Remaining
		2009				2010				2011				2012				2013				Thereafter				Total
Long-term debt obligations		$	85,746			$	13,742			$	407,889			$	239,541			$	1,804,406			$	812,260			$	3,363,584
Cash interest payments			65,638				304,935				295,019				276,326				244,049				88,871				1,274,838
Satellite and transmission			34,685				98,933				106,834				36,659				2,370				22,183				301,664
Programming and content			87,630				257,126				147,529				129,236				38,638				29,955				690,114
Marketing and distribution			51,529				43,666				24,868				14,533				3,000				4,500				142,096
Satellite incentive payments			1,801				7,384				8,851				10,505				11,099				74,342				113,982
Operating lease obligations			13,338				37,352				22,851				18,861				15,046				14,854				122,302
Other			16,321				34,096				20,677				8,234				—				—				79,328
Total		$	356,688			$	797,234			$	1,034,518			$	733,895			$	2,118,608			$	1,046,965			$	6,087,908