UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURTIES EXCHANGE ACT OF
1934
For the fiscal year ended: December 31, 2001
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 0-24710
A. Full title of the plan and the address of the Plan, if different from that
of the issuer named below:
Sirius Satellite Radio 401(k) Savings Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Sirius Satellite Radio Inc.
1221 Avenue of the Americas
36th Floor
New York, New York 10020
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) PLAN
Plan No. 001
EIN: 52-1700207
INDEX
Page
Part I - Financial Statements
Report of Independent Public Auditors 1
Report of Independent Public Accountants 2
Statements of Net Assets Available for Benefits as of December 31, 2001 3
and 2000
Statement of Changes in Net Assets Available for Benefits for the Year 4
ended December 31, 2001
Notes to Financial Statements 5
Part II - Supplemental Schedules
Schedule H, line 4i - Schedule of Assets (Held at End of Year) 12
Schedule H, line 4j - Schedule of Reportable Transactions 13
Schedule G, Part III - Schedule of Nonexempt Transactions 14
Signatures 15
Exhibit 23.1 - Consent of Independent Public Auditors
Exhibit 23.2 - Notice Regarding Consent of Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC AUDITORS
To the Plan Administrator of the Sirius Satellite Radio 401(k) Savings Plan:
We have audited the accompanying statement of net assets available for benefits
of the Sirius Satellite Radio 401(k) Savings Plan, as of December 31, 2001, and
the related statement of changes in net assets available for benefits for the
year then ended. These financial statements are the responsibility of the Plan's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the principles used and the significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2001, and the changes in its net assets available for benefits for
the year then ended, in conformity with accounting principles generally accepted
in the United States.
Our audit was performed for the purpose of forming an opinion on the financial
statements taken as a whole. The accompanying supplemental schedules of assets
(held at end of year) as of December 31, 2001, reportable transactions and
nonexempt transactions for the year then ended are presented for purposes of
additional analysis and are not a required part of the financial statements but
are supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedules are the responsibility of the
Plan's management. The supplemental schedules have been subjected to the
auditing procedures applied in the audit of the financial statements and, in our
opinion, are fairly stated in all material respects in relation to the financial
statements taken as a whole.
ERNST & YOUNG LLP
New York, New York
June 17, 2002
This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Plan's filing on Form 11-K for the year ended December 31,
2000. This audit report has not been reissued by Arthur Andersen LLP in
connection with this filing on Form 11-K. See exhibit 23.2 for further
discussion.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Plan Administrator of the Sirius Satellite Radio 401(k) Savings Plan:
We have audited the accompanying statements of net assets available for benefits
of the Sirius Satellite Radio 401(k) Savings Plan, as of December 31, 2000 and
1999, and the related statement of changes in net assets available for benefits
for the year ended December 31, 2000. These financial statements and the
schedules referred to below are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the principles used and the significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2000 and 1999, and the changes in its net assets available for
benefits for the year ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes and reportable transactions are presented for purposes of
additional analysis and are not a required part of the basic financial
statements but are supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedules have been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
New York, New York
June 29, 2001
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
As of December 31,
-----------------------------------------
2001 2000
------------------- --------------------
Investments, at market value (See Notes 6 & 7) $ 4,807 $ 3,137
Employer contribution receivable 26 5
Employee contribution receivable 34 27
------------------- --------------------
NET ASSETS AVAILABLE FOR BENEFITS $ 4,867 $ 3,169
=================== ====================
The accompanying notes are an integral part of these statements.
3
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
Plan No. 001
EIN: 52-1700207
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(In thousands)
For the Year ended
December 31, 2001
------------------
ADDITIONS:
Interest and dividends $ 10
Contributions:
Employer 1,224
Employee 1,321
---------------
Total additions 2,555
DEDUCTIONS:
Net realized and unrealized depreciation 688
in fair value of investments (See Notes 6 & 7)
Distributions 164
Administrative expenses 5
--------------
Total deductions 857
--------------
Net increase 1,698
NET ASSETS AVAILABLE FOR BENEFITS, beginning of year $ 3,169
--------------
NET ASSETS AVAILABLE FOR BENEFITS, end of year $ 4,867
==============
The accompanying notes are an integral part of this statement.
4
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Notes to Financial Statements
(Dollar amounts in thousands, unless otherwise stated)
1. Description of the Plan
Sirius Satellite Radio Inc. sponsors the Sirius Satellite Radio 401(k)
Savings Plan (the "Plan") to provide eligible employees with a method of savings
for their retirement and other needs. The Plan is a defined contribution plan
that is subject to the applicable provisions of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"). The inception date of the Plan was
September 1, 1998 and the Plan has a December 31 fiscal year end. The following
description of the Plan provides only general information. Participants should
refer to the Plan document for a more complete description of the Plan's
provisions and information regarding eligibility, contributions, distributions,
vesting, withdrawals, loans, fund redistribution and definitions of all terms.
Assets Held in Trust
Effective December 1, 2001, all plan assets were transferred from
Merrill Lynch Trust Co. to CIGNA Retirement & Investment Services (the
"Trustee"). Among other duties, the Trustee is responsible for the custody and
investing of Plan assets and for the payment of benefits to eligible
participants. All contributions are invested by the Trustee as designated by the
Plan participants. The investment options available to the participants as of
December 31, 2001 and their related investment objectives are as follows:
Alliance Balanced Shares Fund - Class A. This separate account invests
wholly in Class A shares of the Alliance Balanced Shares Fund. This
fund seeks a combination of income and capital appreciation by
investing primarily in equity securities of high quality, financially
strong, dividend-paying companies.
Alliance Growth & Income - Class A. This separate account invests
wholly in Class A shares of the Alliance Growth & Income Fund. This
fund seeks income and capital appreciation by investing primarily in
high quality, dividend-paying common stocks. This fund offers investors
diversification potential among stocks, fixed income and convertible
securities.
CIGNA Lifetime Funds. This family of funds is comprised of five
distinct multi-asset class investment portfolios, which offer a range
of risk/return characteristics. The
5
investment objective for each of the five funds varies, in keeping
with the investment time horizon and associated asset allocation of
the underlying portfolios.
Core Bond Fund. This separate account is a "fund of funds" that invests
in high quality domestic fixed income securities, including actively
managed separate accounts of investment-grade corporate bonds,
mortgage-backed and asset-backed securities and government issues.
American Century Heritage Account. This separate account invests wholly
in the American Century Heritage Fund. This fund seeks to provide
long-term growth of capital through investments in equity securities of
small or medium-sized companies.
Fidelity Advisor Equity Growth Account. This separate account invests
wholly in the Fidelity Advisor Equity Growth Fund. This fund seeks to
achieve capital appreciation through investments in stocks of companies
that have above-average growth potential. These growth characteristics
are often associated with companies that have new products,
technologies, distribution channels or that have a strong relative
market position.
Franklin Balance Sheet Investment Fund. This separate account invests
wholly in Class A shares of the Franklin Balance Sheet Investment Fund.
This fund seeks income and capital appreciation by investing primarily
in equity securities of small or relatively new companies that are
believed to be under priced at the time of purchase, but have the
potential for significant capital growth.
International Growth/Putnam Fund. This separate account invests
primarily in common stocks, preferred stocks and convertible securities
of companies incorporated or domiciled outside the United States and
securities traded on foreign stock exchanges with market capitalization
of $2 billion and larger.
Janus Adviser Balanced Account. This separate account invests wholly in
the Janus Adviser Series Balanced Fund. This fund seeks long-term
capital growth, consistent with preservation of capital and balanced by
current income.
Oakmark Select II Fund. This separate account invests wholly in Class
II shares of the Oakmark Select Fund. This fund seeks long-term capital
appreciation by investing in a non-diversified portfolio of equity
securities consisting primarily of common stocks of U.S. companies.
Small Cap Growth/TimesSquare Fund. This separate account seeks to
achieve long-term capital appreciation through investments in the
common and preferred stocks of U.S. companies with market
capitalization between $30 million and $3 billion. This account focuses
on growth companies with new product development and technological
breakthroughs.
Templeton Growth Account. This separate account invests wholly in the
Templeton Growth Fund. This fund seeks to provide long-term capital
growth by investing primarily
6
in debt and equity securities of domestic and foreign companies,
including emerging markets.
Guaranteed Income Fund. This fund offers safety of principal and seeks
to provide competitive yields relative to comparable guaranteed fixed
income investment funds. It invests in a diversified portfolio of high
quality, fixed income instruments within Connecticut General Life
Insurance Company's general account.
Sirius Satellite Radio Inc. Common Stock. This option allows
participants to invest in the common stock of Sirius Satellite Radio
Inc.
Eligibility
From inception of the Plan through November 30, 2001, participation in
the Plan began on the first day of the calendar month following the date of hire
for an employee who had attained age 21. Effective December 1, 2001,
participation in the plan began on the first day of the calendar month following
the date in which an employee attained the age of 21 and completed one full
month of service, as defined in the Plan document.
Contributions
Participants may elect to contribute from 1% to 16% of compensation, as
defined, provided their contributions do not exceed maximum allowable amounts
under the Internal Revenue Code, as amended (the "Code"). Under the Code,
individual contributions for which taxes may be deferred were limited to $10.5
in 2001 and 2000. Participants may also contribute amounts representing
distributions from other qualified defined benefit or defined contribution
plans. Participants' contributions vest immediately and can only be withdrawn
pursuant to the appropriate provisions of the Code.
The Plan provides for discretionary employer matching contributions
based on employee elective deferral percentages. The company made employer
matching contributions equal to 100% of employee elective deferrals from
inception of the Plan through November 30, 2001 and 75% during the period
December 1, 2001 through December 31, 2001. This employer matching contribution
is in the form of Sirius Satellite Radio Inc. common stock. Each year, the
company reviews and determines the employer matching contribution for the
subsequent plan year. Employees are eligible to receive the employer matching
contribution during a year in which the employee has performed at least one hour
of service, regardless of employment status on the last day of the plan year.
The company may also elect to contribute to the profit sharing portion
of the Plan based upon the total compensation of all participants eligible to
receive an allocation. These additional contributions, referred to as regular
employer contributions, will be limited to profits as determined by the 401(k)
committee and will be determined for each Plan year by the company. Employees
are only eligible to share in regular employer contributions during any Plan
year in which they are employed on the last day of the Plan year. There have
been no regular employer contributions to date.
7
Loans
The Plan provides for loans to active participants. Participants may
borrow up to the lesser of $50 or 50% of the vested portions of the
participant's account balance. The amount available for future borrowings by the
participant will be reduced by the amount of their highest outstanding loan
balance during the previous one-year period. Loans are secured by the balance in
the participant's account and bear interest at the prime interest rate made
under similar circumstances by persons in the business of lending money plus 1%.
The term of any loan shall be no greater than five years, except in the case of
a loan used to acquire a principal residence. Repayment of any loan is required
to be completed not less frequently than quarterly.
Participant Accounts
Each participant's account is credited with participant, employer
matching and regular employer contributions and allocations of Plan earnings.
Allocations of Plan earnings are based on participant account balances. A
participant is entitled to the benefit that can be provided from the
participant's vested account balance.
Vesting
Participants are immediately vested in their contributions plus
earnings thereon. Vesting in company matching and regular employer contributions
begins one year after employment at a rate of 33 1/3% per year until the
completion of the third year of employment when, 100% is vested. In addition, a
participant becomes fully vested in his or her company matching and regular
contributions upon his or her retirement, disability, death, upon reaching age
65 or if there is a termination or partial termination of the Plan.
Distributions of Benefits
Upon termination of employment due to death, disability, retirement or
upon attaining age 59 1/2, a participant may receive a lump sum amount equal to
the value of the participant's vested interest in his or her account. In
addition, participants may elect to withdraw funds from their respective
accounts in the event of hardship, as defined.
Forfeitures
Non-vested employer matching contributions are forfeited upon
termination or withdrawal. Forfeitures are used to pay Plan expenses and to
reduce employer matching contributions. Forfeitures for the year ended December
31, 2001 were $6. Unallocated non-vested assets were $1 and $23 as of December
31, 2001 and 2000, respectively.
Administrative Expenses
Administrative expenses are paid through the use of Plan forfeitures or
by the company.
8
2. Summary of Significant Accounting Policies
Basis of Accounting
The financial statements of the Plan have been prepared in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of financial statements in conformity with GAAP requires the Plan
administrator to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses during the reporting period. Actual
results may differ from those estimates.
Investment Valuation and Income Recognition
Investments in funds are valued based on the Plan's pro rata share of
fund equity as determined by the Trustee, based on market quotes. Investments in
Sirius Satellite Radio Inc. common stock are valued based on market quotes.
Realized gains and losses from the sale of investments are computed using the
participant's cost basis in the investment aggregated at the plan level. Net
unrealized appreciation/depreciation in investments represents the difference
between the fair value of investments held at year-end and the cost of
investments purchased in the current fiscal year or the fair value of
investments held at the end of the preceding year.
The Plan provides for various investments in funds containing debt and
equity securities. Investments in securities are generally exposed to various
risks, such as interest rate, credit and overall market volatility risks. Due to
the level of risk associated with certain investment securities, it is
reasonably possible that the changes in the values of investment securities will
occur in the near term.
Purchases and sales of securities are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date.
3. Tax Status
The Plan received a favorable Internal Revenue Service ("IRS")
determination letter dated September 1, 1999 stating that the Plan as designed
prior to December 1, 2001 was in accordance with applicable sections of the
Code. The Plan has filed for a new IRS determination letter following the
amendments effective December 1, 2001. The Plan administrator believes that the
Plan is designed and currently being operated in accordance with the applicable
requirements of the Code.
4. Plan Termination
Although it has not expressed any intention to do so, the company
reserves the right to terminate the Plan, in whole or in part, at any time. In
the event that such termination occurs, all amounts credited to participant
accounts will become 100% vested and the Trustee, in accordance with the Plan
document, will distribute the net assets of the Plan in a uniform and
non-discretionary manner.
9
5. Party-in-Interest Transactions
Sirius Satellite Radio Inc., Merrill Lynch Trust Co., Connecticut
General Life Insurance Company and National Financial Services were
parties-in-interest with respect to the Plan under the provisions of ERISA. The
records of the Plan indicate no party-in-interest transactions, which are
prohibited by Section 406 of ERISA and for which no statutory or administrative
exemption exists.
6. Investments
The fair value of investments that individually represent 5% or more of
the Plan's net assets are as follows:
December 31,
---------------------------------
2001 2000
-------------- --------------
Sirius Satellite Radio Inc. common stock - $ 2,080 $ 1,161
Non-participant Directed
Sirius Satellite Radio Inc. common stock - 625 466
Participant Directed
Alliance Growth & Income - Class A 1,364 -
Fidelity Advisor Equity Growth Account 268 -
Merrill Lynch S&P 500 Index - 399
Davis New York Venture Fund - 301
MFS Emerging Growth Fund - 198
AIM Constellation Fund - 193
During 2001, the Plan's investments (including gains and losses on
investments bought and sold, as well as held during the year) decreased in value
by $688 as follows:
Sirius Satellite Radio Inc. common stock $ (448)
Mutual funds (240)
----------
Total decrease in fair value of investments $ (688)
==========
10
7. Non-participant Directed Investments
Non-participant directed funds are invested solely in Sirius Satellite
Radio Inc. common stock. Non-participant directed investments totaled $2,080 and
$1,161 as of December 31, 2001 and 2000, respectively. The components of the
change in net assets relating to non-participant directed investments were:
Contributions $ 1,224
Net decrease in fair value of investments (265)
Benefits paid to participants (34)
Forfeitures (6)
---------
Change in non-participant directed funds $ 919
=========
11
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Schedule H, line 4i-Schedule of Assets (Held at End of Year)
(In thousands)
(a) (b) (c) (d) (e)
Identity of Issue, Borrower, Description of Investment, Including Maturity Date, Cost Current
Lessor or Similar Party Rate of Interest, Collateral, Par or Maturity Value Value
----------------------------------------------------------------------------------------------------------------------------
* Connecticut General Life Alliance Growth & Income - Class A: N/A $ 1,364
Insurance Company 368,047 shares in participation
* Connecticut General Life Core Bond Fund: N/A 103
Insurance Company 8,511 shares in participation
* Connecticut General Life Fidelity Advisor Equity Growth Account: N/A 268
Insurance Company 3,332 shares in participation
* Connecticut General Life Guaranteed Income Fund: N/A 199
Insurance Company 7,700 shares in participation
* National Financial Services Sirius Satellite Radio Inc. Common Stock: 3,329** 2,705**
232,582 shares in participation
* Connecticut General Life Templeton Growth Account: N/A 167
Insurance Company 5,390 shares in participation
* Participant Loans 7.75% N/A 1
---------
Total Assets $ 4,807
=========
* Represents a party-in-interest
** Balances consist of participant and non-participant directed investments
The accompanying notes are an integral part of this schedule.
12
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Schedule H, line 4j - Schedule of Reportable Transactions
(In thousands)
(a) (b) (c) (d) (g) (h) (i)
Current Value Net
Identity of Party Description Number of Purchase Selling Cost of of Asset on Gain or
Involved of Asset Transactions Price Price Asset Transaction Date (Loss)
-------------------------- --------------- ------------------ ------------- ---------- ----------- ----------------- ---------
Category (iii) - series of transactions in excess of 5 percent of plan assets.*
**Sirius Satellite Radio Common Stock 23 $1,198 N/A $1,198 $1,198 N/A
Inc.
Non-participant
Directed
* There were no category (i), (ii), or (iv) reportable transactions during 2001.
** Represents a party-in-interest
The accompanying notes are an integral part of this schedule.
13
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
EIN 52-1700207
Plan No. 001
Schedule G, Part III - Schedule of Nonexempt Transactions
(In thousands)
(a) (b) (c)
Identity of Party Relationship to Plan, Description of Transactions, including (e)
Involved Employer or Other Party Maturity Date, Rate of Interest, Collateral Current
in Interest and Maturity Value Value
--------------------------------------------------------------------------------------------------------------
Sirius Satellite Employer Late remittance of participant contributions $ 44
Radio Inc. withheld on 1/15/2001 and remitted to the
Trustee on 2/27/2001
Sirius Satellite Employer Late remittance of participant contributions $ 44
Radio Inc. withheld on 1/31/2001 and remitted to the
Trustee on 2/27/2001
Sirius Satellite Employer Late remittance of participant contributions $ 44
Radio Inc. withheld on 4/30/2001 and remitted to the
Trustee on 5/25/2001
The accompanying notes are an integral part of this schedule.
14
SIGNATURES
The Plan. Pursuant to the requirements of the Securities and Exchange
Act of 1934, the trustees (or other persons who administer the employee benefit
plan) have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
SIRIUS SATELLITE RADIO 401(k) SAVINGS PLAN
/s/ John J. Scelfo
-----------------------------
John J. Scelfo
Executive Vice President and
Chief Financial Officer
June 17, 2002
15