þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2017 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ________ |
Delaware | 38-3916511 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) | |
1290 Avenue of the Americas, 11th Floor | ||
New York, New York | 10104 | |
(Address of principal executive offices) | (Zip Code) |
Title of Each Class: | Name of Each Exchange on Which Registered: | |
Common Stock, par value $0.001 per share | The Nasdaq Global Select Market |
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | ||
(Do not check if a smaller reporting company) | ||||
Smaller reporting company o | Emerging growth company o |
Item No. | Description | ||
ITEM 1. | BUSINESS |
• | subscribers under our regular and discounted pricing plans; |
• | subscribers that have prepaid, including payments made or due from automakers for subscriptions included in the sale or lease price of a vehicle; |
• | subscribers to our Internet services who do not also have satellite radio subscriptions; and |
• | certain subscribers to our weather, traffic and data services who do not also have satellite radio subscriptions. |
• | an extensive selection of music genres, ranging from rock, pop and hip-hop to country, dance, jazz, Latin and classical; |
• | live play-by-play sports from major leagues and colleges; |
• | a multitude of talk and entertainment channels for a variety of audiences; |
• | a wide range of national, international and financial news; and |
• | exclusive limited run channels. |
• | satellites, terrestrial repeaters and other satellite facilities; |
• | studios; and |
• | radios. |
• | the licensing of our satellite systems; |
• | preventing interference with or to other users of radio frequencies; and |
• | compliance with FCC rules established specifically for U.S. satellites and satellite radio services. |
• | monies or other consideration attributable to the sale and/or license of equipment and/or other technology, including but not limited to bandwidth, sales of devices that receive our satellite radio services and any shipping and handling fees therefor; |
• | royalties paid to us for intellectual property rights; |
• | sales and use taxes; |
• | credit card, invoice, activation, swap and early termination fees charged to subscribers and reasonably related to the expenses to which they pertain; |
• | bad debt expense; and |
• | revenues attributable to our current and future data services offered for a separate charge (such as weather, traffic, destination information, messaging, sports scores, stock ticker information, extended program associated data, video and photographic images, and such other telematics and/or data services as may exist from time to time); channels, programming, products and/or other services offered for a separate charge where such channels use only incidental performances of sound recordings; channels, programming, products and/or other services provided outside of the United States; and channels, programming, products and/or other services for which the performance of the recordings is exempt from any license requirement or is separately licensed, including by a statutory license. |
Name | Age | Position |
James E. Meyer | 63 | Chief Executive Officer |
Scott A. Greenstein | 58 | President and Chief Content Officer |
David J. Frear | 61 | Senior Executive Vice President and Chief Financial Officer |
Dara F. Altman | 59 | Executive Vice President and Chief Administrative Officer |
James A. Cady | 57 | Executive Vice President, Operations, Products and Connected Vehicle |
Stephen Cook | 62 | Executive Vice President, Sales and Automotive |
Patrick L. Donnelly | 56 | Executive Vice President, General Counsel and Secretary |
Joseph A. Verbrugge | 48 | Executive Vice President, Emerging Business |
Jennifer C. Witz | 49 | Executive Vice President, Chief Marketing Officer |
ITEM 1A. | RISK FACTORS |
• | the price of our service; |
• | the health of the economy; |
• | the sale or lease rate of new vehicles in the United States; |
• | the rate at which our existing self-pay subscribers buy and sell new and used vehicles in the United States; |
• | our ability to convince owners and lessees of new and previously owned vehicles that include satellite radios to purchase subscriptions to our service; |
• | the effectiveness of our marketing programs; |
• | the entertainment value of our programming and the products and packages we offer; |
• | our ability to respond to evolving consumer tastes; and |
• | actions by our competitors, such as other audio entertainment and information providers. |
• | degradation and durability of solar panels; |
• | quality of construction; |
• | random failure of satellite components, which could result in significant damage to or loss of a satellite; |
• | amount of fuel the satellite consumes; and |
• | damage or destruction as a result of electrostatic storms, terrorist attacks, collisions with other objects in space or other events, such as nuclear detonations, occurring in space. |
• | manufacturers that build and distribute satellite radios; |
• | companies that manufacture and sell integrated circuits for satellite radios; |
• | programming providers and on-air talent; |
• | vendors that operate our call centers; and |
• | vendors that have designed or built, and vendors that support or operate, other important elements of our systems, including our satellites. |
ITEM 1B. | UNRESOLVED STAFF COMMENTS |
ITEM 2. | PROPERTIES |
Location | Purpose | Own/Lease | ||
New York, NY | Corporate headquarters, office facilities and studio/production facilities | Lease | ||
Washington, DC | Office, studio/production facilities and data center | Own | ||
Lawrenceville, NJ | Office and technical/engineering facilities | Lease | ||
Deerfield Beach, FL | Office and technical/engineering facilities | Lease | ||
Farmington Hills, MI | Office and technical/engineering facilities | Lease | ||
Nashville, TN | Studio/production facilities | Lease | ||
Vernon, NJ | Technical/engineering facilities | Own | ||
Ellenwood, GA | Technical/engineering facilities | Lease | ||
Fredericksburg, VA | Warehouse and technical/engineering facilities | Lease | ||
Los Angeles, CA | Office and studio/production facilities | Lease | ||
Irving, TX | Office and engineering facilities/call center | Lease | ||
San Francisco, CA | Office and engineering facilities | Lease |
ITEM 3. | LEGAL PROCEEDINGS |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
High | Low | Cash Dividends Declared | |||||||||
Year Ended December 31, 2016 | |||||||||||
First Quarter | $ | 4.04 | $ | 3.29 | $ | — | |||||
Second Quarter | $ | 4.05 | $ | 3.74 | $ | — | |||||
Third Quarter | $ | 4.44 | $ | 3.92 | $ | — | |||||
Fourth Quarter | $ | 4.65 | $ | 4.05 | $ | 0.010 | |||||
Year Ended December 31, 2017 | |||||||||||
First Quarter | $ | 5.53 | $ | 4.40 | $ | 0.010 | |||||
Second Quarter | $ | 5.50 | $ | 4.73 | $ | 0.010 | |||||
Third Quarter | $ | 5.89 | $ | 5.32 | $ | 0.010 | |||||
Fourth Quarter | $ | 5.79 | $ | 5.20 | $ | 0.011 |
Period | Total Number of Shares Purchased | Average Price Paid Per Share (a) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (a) | ||||||||||
October 1, 2017 - October 31, 2017 | 12,777,558 | $ | 5.58 | 12,777,558 | $ | 967,721,497 | ||||||||
November 1, 2017 - November 30, 2017 | 34,750,000 | $ | 5.41 | 34,750,000 | $ | 779,818,997 | ||||||||
December 1, 2017 - December 31, 2017 | 28,675,299 | $ | 5.47 | 28,675,299 | $ | 622,880,009 | ||||||||
Total | 76,202,857 | $ | 5.46 | 76,202,857 |
(a) | These amounts include fees and commissions associated with the shares repurchased. All of these repurchases were made pursuant to our share repurchase program. |
NASDAQ Telecommunications Index | S&P 500 Index | Sirius XM Holdings Inc. | |||||||||
December 31, 2012 | $ | 100.00 | $ | 100.00 | $ | 100.00 | |||||
December 31, 2013 | $ | 124.02 | $ | 129.60 | $ | 120.76 | |||||
December 31, 2014 | $ | 135.07 | $ | 144.36 | $ | 121.11 | |||||
December 31, 2015 | $ | 124.94 | $ | 143.31 | $ | 140.83 | |||||
December 31, 2016 | $ | 143.52 | $ | 156.98 | $ | 153.98 | |||||
December 31, 2017 | $ | 168.54 | $ | 187.47 | $ | 185.47 |
Plan Category (shares in thousands) | Column (a) Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(1) | Column (b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights(2) | Column (c) Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding Securities Reflected in Column (a)) | |||||||
Equity compensation plans approved by security holders | 311,780 | $ | 3.76 | 171,388 | ||||||
Equity compensation plans not approved by security holders | — | — | — | |||||||
Total | 311,780 | $ | 3.76 | 171,388 |
(1) | In addition to shares issuable upon exercise of stock options, amount also includes approximately 31,323 shares underlying restricted stock units, including performance-based restricted stock units (“PRSUs”) and dividend equivalents thereon. The number of shares to be issued in respect of PRSUs and dividend equivalents thereon have been calculated based on the assumption that the maximum levels of performance applicable to the PRSUs will be achieved. |
(2) | The weighted-average exercise price of outstanding options, warrants and rights relates solely to stock options, which are the only currently outstanding exercisable security. |
As of and for the Years Ended December 31, | |||||||||||||||||||
(in thousands, except per share data) | 2017 | 2016 (1) | 2015 | 2014 | 2013 (2) | ||||||||||||||
Statements of Comprehensive Income Data: | |||||||||||||||||||
Total revenue | $ | 5,425,129 | $ | 5,017,220 | $ | 4,570,058 | $ | 4,181,095 | $ | 3,799,095 | |||||||||
Net income | $ | 647,908 | $ | 745,933 | $ | 509,724 | $ | 493,241 | $ | 377,215 | |||||||||
Net income per share - basic (3) | $ | 0.14 | $ | 0.15 | $ | 0.09 | $ | 0.09 | $ | 0.06 | |||||||||
Net income per share - diluted (3) | $ | 0.14 | $ | 0.15 | $ | 0.09 | $ | 0.08 | $ | 0.06 | |||||||||
Weighted average common shares outstanding - basic | 4,637,553 | 4,917,050 | 5,375,707 | 5,788,944 | 6,227,646 | ||||||||||||||
Weighted average common shares outstanding - diluted | 4,723,535 | 4,964,728 | 5,435,166 | 5,862,020 | 6,384,791 | ||||||||||||||
Cash dividends declared per share | $ | 0.041 | $ | 0.010 | $ | — | $ | — | $ | — | |||||||||
Balance Sheet Data: | |||||||||||||||||||
Cash and cash equivalents | $ | 69,022 | $ | 213,939 | $ | 111,838 | $ | 147,724 | $ | 134,805 | |||||||||
Restricted investments | $ | 10,352 | $ | 9,888 | $ | 9,888 | $ | 5,922 | $ | 5,718 | |||||||||
Total assets (4) | $ | 8,329,374 | $ | 8,003,595 | $ | 8,046,662 | $ | 8,369,065 | $ | 8,826,959 | |||||||||
Long-term debt, net of current portion (4) | $ | 6,741,243 | $ | 5,842,764 | $ | 5,443,614 | $ | 4,487,419 | $ | 3,088,701 | |||||||||
Stockholders' (deficit) equity | $ | (1,523,874 | ) | $ | (792,015 | ) | $ | (166,491 | ) | $ | 1,309,837 | $ | 2,745,742 |
(1) | For the year ended December 31, 2016, we recorded $293,896 as an increase to our Deferred tax assets and decrease to our Accumulated deficit as a result of the adoption of Accounting Standards Update 2016-09, Compensation-Stock Compensation (Topic 718). |
(2) | The selected financial data for 2013 includes the balances and approximately two months of activity related to the acquisition of the connected vehicle business of Agero, Inc. in November 2013. |
(3) | The 2017 net income per basic and diluted share includes the impact of $184,599 in income tax expense, or a decrease of approximately $0.04 per share, recorded in the fourth quarter of 2017 due to the reduction in our net deferred tax asset balance as a result of the Tax Cut and Jobs Act signed into law on December 22, 2017. For additional information refer to Note 16 to our consolidated financial statements in Item 8 of this Annual Report on Form 10-K. |
(4) | The 2013 – 2015 balances reflect the adoption of Accounting Standards Update 2015-03, Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, and Accounting Standards Update 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Agreements. As a result of our adoption of these ASUs, Total Assets was reduced by $7,155, $6,444 and $17,821 for the years ended December 31, 2015, 2014 and 2013, respectively, and Long-term debt, net of current portion, was reduced by $7,155, $6,444 and $5,120 for the years ended December 31, 2015, 2014 and 2013, respectively. |
ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
For the Years Ended December 31, | 2017 vs 2016 Change | 2016 vs 2015 Change | |||||||||||||||||||||||
2017 | 2016 | 2015 | Amount | % | Amount | % | |||||||||||||||||||
Revenue: | |||||||||||||||||||||||||
Subscriber revenue | $ | 4,472,522 | $ | 4,196,852 | $ | 3,824,793 | $ | 275,670 | 7 | % | $ | 372,059 | 10 | % | |||||||||||
Advertising revenue | 160,347 | 138,231 | 122,292 | 22,116 | 16 | % | 15,939 | 13 | % | ||||||||||||||||
Equipment revenue | 131,586 | 118,947 | 110,923 | 12,639 | 11 | % | 8,024 | 7 | % | ||||||||||||||||
Other revenue | 660,674 | 563,190 | 512,050 | 97,484 | 17 | % | 51,140 | 10 | % | ||||||||||||||||
Total revenue | 5,425,129 | 5,017,220 | 4,570,058 | 407,909 | 8 | % | 447,162 | 10 | % | ||||||||||||||||
Operating expenses: | |||||||||||||||||||||||||
Cost of services: | |||||||||||||||||||||||||
Revenue share and royalties | 1,210,323 | 1,108,515 | 1,034,832 | 101,808 | 9 | % | 73,683 | 7 | % | ||||||||||||||||
Programming and content | 388,033 | 353,779 | 293,091 | 34,254 | 10 | % | 60,688 | 21 | % | ||||||||||||||||
Customer service and billing | 385,431 | 387,131 | 377,908 | (1,700 | ) | — | % | 9,223 | 2 | % | |||||||||||||||
Satellite and transmission | 82,747 | 103,020 | 94,609 | (20,273 | ) | (20 | )% | 8,411 | 9 | % | |||||||||||||||
Cost of equipment | 35,448 | 40,882 | 42,724 | (5,434 | ) | (13 | )% | (1,842 | ) | (4 | )% | ||||||||||||||
Subscriber acquisition costs | 499,492 | 512,809 | 532,599 | (13,317 | ) | (3 | )% | (19,790 | ) | (4 | )% | ||||||||||||||
Sales and marketing | 437,739 | 386,724 | 354,189 | 51,015 | 13 | % | 32,535 | 9 | % | ||||||||||||||||
Engineering, design and development | 112,427 | 82,146 | 64,403 | 30,281 | 37 | % | 17,743 | 28 | % | ||||||||||||||||
General and administrative | 334,023 | 341,106 | 324,801 | (7,083 | ) | (2 | )% | 16,305 | 5 | % | |||||||||||||||
Depreciation and amortization | 298,602 | 268,979 | 272,214 | 29,623 | 11 | % | (3,235 | ) | (1 | )% | |||||||||||||||
Total operating expenses | 3,784,265 | 3,585,091 | 3,391,370 | 199,174 | 6 | % | 193,721 | 6 | % | ||||||||||||||||
Income from operations | 1,640,864 | 1,432,129 | 1,178,688 | 208,735 | 15 | % | 253,441 | 22 | % | ||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||
Interest expense | (345,820 | ) | (331,225 | ) | (299,103 | ) | (14,595 | ) | (4 | )% | (32,122 | ) | (11 | )% | |||||||||||
Loss on extinguishment of debt | (43,679 | ) | (24,229 | ) | — | (19,450 | ) | (80 | )% | (24,229 | ) | — | % | ||||||||||||
Other income | 12,844 | 14,985 | 12,379 | (2,141 | ) | (14 | )% | 2,606 | 21 | % | |||||||||||||||
Total other expense | (376,655 | ) | (340,469 | ) | (286,724 | ) | (36,186 | ) | (11 | )% | (53,745 | ) | (19 | )% | |||||||||||
Income before income taxes | 1,264,209 | 1,091,660 | 891,964 | 172,549 | 16 | % | 199,696 | 22 | % | ||||||||||||||||
Income tax expense | (616,301 | ) | (345,727 | ) | (382,240 | ) | (270,574 | ) | (78 | )% | 36,513 | 10 | % | ||||||||||||
Net income | $ | 647,908 | $ | 745,933 | $ | 509,724 | $ | (98,025 | ) | (13 | )% | $ | 236,209 | 46 | % |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, subscriber revenue was $4,472,522 and $4,196,852, respectively, an increase of 7%, or $275,670. The increase was primarily attributable to a 4% increase in the daily weighted average number of subscribers as well as a 3% increase in average monthly revenue per subscriber resulting from certain rate increases. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, subscriber revenue was $4,196,852 and $3,824,793, respectively, an increase of 10%, or $372,059. The increase was primarily attributable to an 8% increase in the daily weighted average number of subscribers as well as a 3% increase in average monthly revenue per subscriber resulting from certain rate increases. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, advertising revenue was $160,347 and $138,231, respectively, an increase of 16%, or $22,116. The increase was primarily due to a greater number of advertising spots sold and transmitted as well as increases in rates charged per spot. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, advertising revenue was $138,231 and $122,292, respectively, an increase of 13%, or $15,939. The increase was primarily due to a greater number of advertising spots sold and transmitted as well as increases in rates charged per spot. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, equipment revenue was $131,586 and $118,947, respectively, an increase of 11%, or $12,639. The increase was driven by royalty revenue on certain satellite radio components starting in the second quarter of 2016 due to our transition to a new generation of chipsets and revenue from the sales of connected vehicle devices since the acquisition of Automatic, partially offset by lower revenue generated through satellite radio sales to distributors and consumers and lower OEM production. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, equipment revenue was $118,947 and $110,923, respectively, an increase of 7%, or $8,024. The increase was driven by an increase in OEM production and an increase in royalty revenue on certain satellite radio components starting in the second quarter of 2016 due to our transition to a new generation of chipsets, partially offset by lower revenue generated through satellite radio sales to distributors and consumers. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, other revenue was $660,674 and $563,190, respectively, an increase of 17%, or $97,484. The increase was primarily driven by higher revenue from Sirius XM Canada due to the new Services Agreement and Advisory Services Agreement entered into in the second quarter of 2017, additional revenues from the U.S. Music Royalty Fee due to an increase in the number of subscribers and subscribers paying at a higher rate and higher revenue generated from our connected vehicle services. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, other revenue was $563,190 and $512,050, respectively, an increase of 10%, or $51,140. The increase was primarily driven by additional revenues from the U.S. Music Royalty Fee due to an increase in the number of subscribers and subscribers paying at a higher rate. These increases were offset by lower non-recurring engineering fees associated with our connected vehicle services, lower activation revenues from Sirius XM Canada and a change in accounting for a programming contract in the third quarter of 2015. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, revenue share and royalties were $1,210,323 and $1,108,515, respectively, an increase of 9%, or $101,808, and increased as a percentage of total revenue. The increase was due to overall greater revenues subject to music royalties and revenue share to automakers and a 5% increase in the statutory royalty rate applicable to our use of post-1972 recordings, which increased from 10.5% in 2016 to 11% in 2017. We recorded $45,100 and $45,900 of expense related to music royalty legal settlements and related reserves, in 2017 and 2016, respectively. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, revenue share and royalties were $1,108,515 and $1,034,832, respectively, an increase of 7%, or $73,683, but decreased as a percentage of total revenue. The increase was due to overall greater revenues subject to music royalties and revenue share to automakers, a 5% increase in the statutory royalty rate applicable to our use of post-1972 recordings, and $45,900 related to music royalty legal settlements and related reserves recorded in the fourth quarter of 2016. The increase was mitigated by $128,256 in expense recorded during the twelve months ended December 31, 2015 for a portion of the settlement of the Capitol Records LLC et al. v. Sirius XM Radio Inc. lawsuit related to our use of pre-1972 sound recordings. We recorded $39,808 in expense related to this settlement through the twelve months ended December 31, 2016. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, programming and content expenses were $388,033 and $353,779, respectively, an increase of 10%, or $34,254, and increased as a percentage of total revenue. The increase was primarily due to the addition of video content rights, payment for which started during the third quarter of 2016, as well as talent and personnel-related costs. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, programming and content expenses were $353,779 and $293,091, respectively, an increase of 21%, or $60,688, and increased as a percentage of total revenue. The increase was primarily due to renewed programming licenses as well as talent and personnel-related costs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, customer service and billing expenses were $385,431 and $387,131, respectively, a decrease of less than 1%, or $1,700, and decreased as a percentage of total revenue. The decrease was primarily due to a decline in call center agent rates and contact rates, partially offset by increased transaction fees based on a higher subscriber base. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, customer service and billing expenses were $387,131 and $377,908, respectively, an increase of 2%, or $9,223, but decreased as a percentage of total revenue. The increase was primarily due to costs associated with a higher subscriber base driving increased bad debt expenses, transaction fees, and call center costs, partially offset by lower personnel-related costs and the classification of wireless transmission costs related to our connected vehicle services to Satellite and transmission expense in 2016. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, satellite and transmission expenses were $82,747 and $103,020, respectively, a decrease of 20%, or $20,273, and decreased as a percentage of total revenue. The decrease was driven by lower wireless costs associated with our connected vehicle services, and a reduction in terrestrial repeater costs as a result of the elimination of duplicative repeater sites; partially offset by increased Internet streaming costs. Satellite and transmission costs in 2016 included a loss on disposal of certain obsolete satellite parts of $12,912 in the second quarter of 2016. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, satellite and transmission expenses were $103,020 and $94,609, respectively, an increase of 9%, or $8,411, but decreased as a percentage of total revenue. We recorded a loss on disposal of certain obsolete satellite parts of $12,912 in the second quarter of 2016 and a loss on disposal of certain obsolete terrestrial repeaters and related parts of $7,384 in the fourth quarter of 2015. Excluding the losses on disposal of these assets, the increase was driven by the inclusion of wireless transmission costs related to our connected vehicle services that were previously recorded to Customer service and billing expense in 2015, partially offset by lower web streaming costs from in-sourcing certain activities. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, cost of equipment was $35,448 and $40,882, respectively, a decrease of 13%, or $5,434, and decreased as a percentage of equipment revenue. The decrease was primarily due to lower sales to distributors and consumers, partially offset by the incremental costs associated with the sale of connected vehicle devices since the acquisition of Automatic. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, cost of equipment was $40,882 and $42,724, respectively, a decrease of 4%, or $1,842, and decreased as a percentage of equipment revenue. The decrease was primarily due to lower aftermarket and direct to consumer sales, partially offset by higher inventory reserves. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, subscriber acquisition costs were $499,492 and $512,809, respectively, a decrease of 3%, or $13,317, and decreased as a percentage of total revenue. The decrease was driven by reductions to OEM hardware subsidy rates, lower subsidized costs related to the transition of chipsets, and a decrease in installations. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, subscriber acquisition costs were $512,809 and $532,599, respectively, a decrease of 4%, or $19,790, and decreased as a percentage of total revenue. The decrease was driven by lower subsidized costs related to the transition of chipsets and reductions to OEM hardware subsidy rates, partially offset by higher radio installations. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, sales and marketing expenses were $437,739 and $386,724, respectively, an increase of 13%, or $51,015, and increased as a percentage of total revenue. The increase was primarily due to additional subscriber communications, retention programs and acquisition campaigns as well as higher personnel-related costs; partially offset by the timing of certain OEM marketing campaigns. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, sales and marketing expenses were $386,724 and $354,189, respectively, an increase of 9%, or $32,535, but decreased as a percentage of total revenue. The increase was primarily due to additional subscriber communications, retention programs and acquisition campaigns as well as higher personnel-related costs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, engineering, design and development expenses were $112,427 and $82,146, respectively, an increase of 37%, or $30,281, and increased as a percentage of total revenue. The increase was driven by development of our connected vehicle services and additional costs associated with the development of our audio and video streaming products. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, engineering, design and development expenses were $82,146 and $64,403, respectively, an increase of 28%, or $17,743, and increased as a percentage of total revenue. The increase was primarily driven by the inclusion of personnel-related costs from our connected vehicle services that were previously recorded in Sales and marketing and General and administrative expense in 2015, partially offset by lower research and development costs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, general and administrative expenses were $334,023 and $341,106, respectively, a decrease of 2%, or $7,083, and decreased as a percentage of total revenue. The decrease was primarily driven by lower legal costs, litigation reserves and consulting costs. The decrease was partially offset by higher personnel-related costs. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, general and administrative expenses were $341,106 and $324,801, respectively, an increase of 5%, or $16,305, but decreased as a percentage of total revenue. The increase was primarily driven by consulting and legal costs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, depreciation and amortization expense was $298,602 and $268,979, respectively, an increase of 11%, or $29,623, and increased as a percentage of total revenue. Depreciation increased as a result of the acceleration of amortization related to a shorter useful life of certain software as well as additional assets placed in-service. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, depreciation and amortization expense was $268,979 and $272,214, respectively, a decrease of 1%, or $3,235, and decreased as a percentage of total revenue. Depreciation decreased as certain satellites reached the end of their estimated service lives offset by additional assets placed in-service. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, interest expense was $345,820 and $331,225, respectively, an increase of 4%, or $14,595. The increase was primarily due to higher average debt during the year ended December 31, 2017 compared to the year ended December 31, 2016. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, interest expense was $331,225 and $299,103, respectively, an increase of 11%, or $32,122. The increase was primarily due to higher average debt during the year ended December 31, 2016 compared to the year ended December 31, 2015. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, loss on extinguishment of debt, net, was $43,679 and $24,229, respectively. During the year ended December 31, 2017, we recorded losses on extinguishment of debt due to the redemption of our 4.25% Senior Notes due 2020, 5.75% Senior Notes due 2021, and 5.25% Senior Secured Notes due 2022. During the year ended December 31, 2016, a loss was recorded on the redemption of our then outstanding 5.875% Senior Notes due 2020. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, loss on extinguishment of debt, net, was $24,229 and $0, respectively. During the year ended December 31, 2016, a loss was recorded on the redemption of our then outstanding 5.875% Senior Notes due 2020. There was no loss on extinguishment of debt during the year ended December 31, 2015. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, other income was $12,844 and $14,985, respectively. Other income for the year ended December 31, 2017, included interest earned on our loan to Sirius XM Canada, and our share of Sirius XM Canada's net income, partially offset by transaction costs associated with our investment in Pandora. Other income for the year ended December 31, 2016 was primarily driven by our share of Sirius XM Canada’s net income and dividends received from Sirius XM Canada in excess of our investment. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, other income was $14,985 and $12,379, respectively. Other income for the year ended December 31, 2016 was primarily driven by our share of Sirius XM Canada’s net income and dividends received from Sirius XM Canada in excess of our investment. Other income for the year ended December 31, 2015 was driven by dividends received from Sirius XM Canada in excess of our investment. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, income tax expense was $616,301 and $345,727, respectively, and our effective tax rate was 48.7% and 31.7%, respectively. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that affects 2017, including, but not limited to, accelerated depreciation that will allow for full expensing of qualified property. The Tax Act also establishes new tax laws that will affect 2018 and after, including a reduction in the U.S. federal corporate income tax rate from 35% to 21%. As a result of the reduction of the federal corporate income tax rate, we have revalued our net deferred tax asset, excluding after tax credits, as of December 31, 2017. Based on this revaluation, we have recorded a net tax expense of $184,599 to reduce our net deferred tax asset balance, which was recorded as additional income tax expense for the year ended December 31, 2017. Our effective tax rate increased by 14.6% to 48.7% primarily as a result of the revaluation of our net deferred tax asset. We have recorded provisional adjustments but we have not completed our accounting for income tax effects for certain elements of the Tax Act, principally due to the accelerated depreciation that will allow for full expensing of qualified property. For the years ended December 31, 2017 and 2016, we recorded a $21,700 and a $66,326 tax credit, respectively, under the Protecting Americans from Tax Hikes Act of 2015 related to research and development activities, which reduced our effective tax rate by 1.7% and 6.1%, respectively. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, income tax expense was $345,727 and $382,240, respectively. Our annual effective tax rate for the year ended December 31, 2016 was 31.7%. In the fourth quarter of 2016, we recognized a $66,326 tax credit under the Protecting Americans from Tax Hikes Act of 2015 related to research and development activities, which reduced our effective tax rate by 6.1%. Our annual effective tax rate for the year ended December 31, 2015 was 42.9%, which was impacted by tax law changes in the District of Columbia and New York City. The tax law change in the District of Columbia will reduce our future taxes and use less of certain net operating losses in the future. The District of Columbia tax law change resulted in a $44,392 increase in our valuation allowance during the year ended December 31, 2015. The tax law change in New York City will increase certain net operating losses to be utilized in the future. The New York City tax law change resulted in a $14,831 increase in our deferred tax asset during the year ended December 31, 2015. |
• | In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. |
• | In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). |
• | In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). The implementation will not have a significant impact to our Net income, or our key financial performance metrics, adjusted EBITDA and free cash flow. We expect the implementation will impact certain of our operating performance metrics, specifically a reduction in ARPU by approximately 23 cents and SAC, per installation, by approximately 31 cents. |
• | In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). |
As of December 31, | 2017 vs 2016 Change | 2016 vs 2015 Change | ||||||||||||||||||
2017 | 2016 | 2015 | Amount | % | Amount | % | ||||||||||||||
Self-pay subscribers | 27,513 | 25,951 | 24,288 | 1,562 | 6 | % | 1,663 | 7 | % | |||||||||||
Paid promotional subscribers | 5,223 | 5,395 | 5,306 | (172 | ) | (3 | )% | 89 | 2 | % | ||||||||||
Ending subscribers | 32,736 | 31,346 | 29,594 | 1,390 | 4 | % | 1,752 | 6 | % |
For the Years Ended December 31, | 2017 vs 2016 Change | 2016 vs 2015 Change | |||||||||||||||||||||||
2017 | 2016 | 2015 | Amount | % | Amount | % | |||||||||||||||||||
Self-pay subscribers | 1,562 | 1,663 | 1,765 | (101 | ) | (6 | )% | (102 | ) | (6 | )% | ||||||||||||||
Paid promotional subscribers | (172 | ) | 89 | 517 | (261 | ) | (293 | )% | (428 | ) | (83 | )% | |||||||||||||
Net additions (a) | 1,390 | 1,752 | 2,283 | (362 | ) | (21 | )% | (531 | ) | (23 | )% | ||||||||||||||
Daily weighted average number of subscribers | 31,866 | 30,494 | 28,337 | 1,372 | 4 | % | 2,157 | 8 | % | ||||||||||||||||
Average self-pay monthly churn | 1.8 | % | 1.9 | % | 1.8 | % | (0.1 | )% | (5 | )% | 0.1 | % | 6 | % | |||||||||||
New vehicle consumer conversion rate | 40 | % | 39 | % | 40 | % | 1 | % | 3 | % | (1 | )% | (3 | )% | |||||||||||
ARPU | $ | 13.25 | $ | 12.91 | $ | 12.53 | $ | 0.34 | 3 | % | $ | 0.38 | 3 | % | |||||||||||
SAC, per installation | $ | 29.53 | $ | 30.61 | $ | 33.07 | $ | (1.08 | ) | (4 | )% | $ | (2.46 | ) | (7 | )% | |||||||||
Customer service and billing expenses, per average subscriber | $ | 0.94 | $ | 1.00 | $ | 1.01 | $ | (0.06 | ) | (6 | )% | $ | (0.01 | ) | (1 | )% | |||||||||
Adjusted EBITDA | $ | 2,115,886 | $ | 1,875,775 | $ | 1,657,617 | $ | 240,111 | 13 | % | $ | 218,158 | 13 | % | |||||||||||
Free cash flow | $ | 1,559,772 | $ | 1,509,113 | $ | 1,315,193 | $ | 50,659 | 3 | % | $ | 193,920 | 15 | % | |||||||||||
Diluted weighted average common shares outstanding (GAAP) | 4,723,535 | 4,964,728 | 5,435,166 | (241,193 | ) | (5 | )% | (470,438 | ) | (9 | )% |
(a) | Amounts may not sum as a result of rounding. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, net additions were 1.4 million and 1.8 million, respectively, a decrease of 21%, or 0.4 million. The decline in paid promotional net additions was due to paid promotional subscription ends outpacing paid promotional subscription starts as starts from automakers offering paid promotional subscriptions remained relatively flat. Self-pay net additions declined due to higher vehicle turnover of our subscriber base mitigated by growth in gross additions. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, net additions were 1.8 million and 2.3 million, respectively, a decrease of 23%, or 0.5 million. The decline in paid promotional net additions was due to paid promotional subscription ends out-pacing paid promotional subscription starts as a result of lower shipments from automakers offering paid promotional subscriptions. Self-pay net additions declined due to higher vehicle turnover of our subscriber base partially mitigated by growth in gross additions. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, our average self-pay monthly churn rate was 1.8% and 1.9%, respectively. The decrease was due to improvements in non-pay and voluntary churn. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, our average self-pay monthly churn rate was 1.9% and 1.8%, respectively. The increase was due to an increase in vehicle-related, non-pay, and to a lesser extent voluntary churn. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, our new vehicle consumer conversion rate was 40% and 39%, respectively. The increase was driven by improvements in the conversion of paid promotional subscribers who were also existing self-pay subscribers. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, our new vehicle consumer conversion rate was 39% and 40%, respectively. The decrease in conversion was primarily due to certain manual dialing inefficiencies introduced by our call center vendors as a precautionary response to the Federal Communications Commission’s July 2015 order relating to the Telephone Consumer Protection Act of 1991, increased vehicle penetration rate, and lower conversion of first-time buyers and lessees of satellite radio enabled cars. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, ARPU was $13.25 and $12.91, respectively. The increase was driven primarily by increases in certain of our subscription rates in 2016, partially offset by growth in subscription discounts offered through customer acquisition and retention programs. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, ARPU was $12.91 and $12.53, respectively. The increase was driven primarily by increases in certain of our subscription rates, partially offset by growth in subscription discounts offered through customer acquisition and retention programs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, SAC, per installation, was $29.53 and $30.61, respectively. The decrease was driven by reductions to OEM hardware subsidy rates as well as lower subsidized costs related to the transition of chipsets. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, SAC, per installation, was $30.61 and $33.07, respectively. The decrease was driven by lower subsidized costs related to the transition of chipsets as well as lower OEM hardware subsidy rates. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, customer service and billing expenses, per average subscriber, were $0.94 and $1.00, respectively. The decrease was primarily related to lower call center costs due to lower contact rates and lower agent rates, partially offset by higher transaction fees. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, customer service and billing expenses, per average subscriber, were $1.00 and $1.01, respectively. The decrease was primarily related to efficiencies achieved from call center process enhancements, partially offset by increased bad debt expense. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, adjusted EBITDA was $2,115,886 and $1,875,775, respectively, an increase of 13%, or $240,111. The increase was due to: a growth in revenues resulting from an increase in our subscriber base; an increase in certain of our subscription prices; an increase in Other revenue from higher revenue from Sirius XM Canada under the new Services Agreement and Advisory Services Agreement; additional amounts produced by the U.S. Music Royalty Fee; and lower general and administrative costs and subscriber acquisition costs. These favorable variances were partially offset by higher revenue share and royalty costs due to growth in our revenues and royalty rates, programming and content, sales and marketing and engineering, design and development costs. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, adjusted EBITDA was $1,875,775 and $1,657,617, respectively, an increase of 13%, or $218,158. The increase was due to growth in revenues primarily as a result of the increase in our subscriber base and certain of our subscription rates and lower subscriber acquisition costs, partially offset by higher revenue share and royalties costs due to growth in our revenues and royalty rates, programming and content, sales and marketing, and general and administrative costs. |
• | 2017 vs. 2016: For the years ended December 31, 2017 and 2016, free cash flow was $1,559,772 and $1,509,113, respectively, an increase of $50,659, or 3%. The increase was driven by higher net cash provided by operating activities resulting from improved operating performance, partially offset by an increase in additions to property and equipment resulting from new satellite construction. |
• | 2016 vs. 2015: For the years ended December 31, 2016 and 2015, free cash flow was $1,509,113 and $1,315,193, respectively, an increase of $193,920, or 15%. The increase was primarily driven by higher net cash provided by operating activities resulting from improved operating performance; partially offset by an increase in additions to property and equipment resulting primarily from new satellite construction. The $210,000 pre-1972 sound recordings legal settlement payment made in 2015 was excluded from free cash flow. |
For the Years Ended December 31, | |||||||||||||||||||
2017 | 2016 | 2015 | 2017 vs 2016 | 2016 vs 2015 | |||||||||||||||
Net cash provided by operating activities | $ | 1,855,589 | $ | 1,719,237 | $ | 1,244,051 | $ | 136,352 | $ | 475,186 | |||||||||
Net cash used in investing activities | (1,146,812 | ) | (210,124 | ) | (138,858 | ) | (936,688 | ) | (71,266 | ) | |||||||||
Net cash used in financing activities | (853,694 | ) | (1,407,012 | ) | (1,141,079 | ) | 553,318 | (265,933 | ) | ||||||||||
Net (decrease) increase in cash and cash equivalents | (144,917 | ) | 102,101 | (35,886 | ) | (247,018 | ) | 137,987 | |||||||||||
Cash and cash equivalents at beginning of period | 213,939 | 111,838 | 147,724 | 102,101 | (35,886 | ) | |||||||||||||
Cash and cash equivalents at end of period | $ | 69,022 | $ | 213,939 | $ | 111,838 | $ | (144,917 | ) | $ | 102,101 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Net income: | $ | 647,908 | $ | 745,933 | $ | 509,724 | |||||
Add back items excluded from Adjusted EBITDA: | |||||||||||
Purchase price accounting adjustments: | |||||||||||
Revenues | 7,251 | 7,251 | 7,251 | ||||||||
Operating expenses | — | — | (1,394 | ) | |||||||
Sound recording legal settlements and reserves | 45,100 | 45,900 | 109,164 | ||||||||
Loss on disposal of assets | — | 12,912 | 7,384 | ||||||||
Share-based payment expense | 124,069 | 108,604 | 84,310 | ||||||||
Depreciation and amortization | 298,602 | 268,979 | 272,214 | ||||||||
Interest expense | 345,820 | 331,225 | 299,103 | ||||||||
Loss on extinguishment of debt | 43,679 | 24,229 | — | ||||||||
Other income | (12,844 | ) | (14,985 | ) | (12,379 | ) | |||||
Income tax expense | 616,301 | 345,727 | 382,240 | ||||||||
Adjusted EBITDA | $ | 2,115,886 | $ | 1,875,775 | $ | 1,657,617 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Subscriber revenue, excluding connected vehicle services | $ | 4,388,676 | $ | 4,108,547 | $ | 3,726,340 | |||||
Add: advertising revenue | 160,347 | 138,231 | 122,292 | ||||||||
Add: other subscription-related revenue | 518,457 | 478,063 | 410,644 | ||||||||
$ | 5,067,480 | $ | 4,724,841 | $ | 4,259,276 | ||||||
Daily weighted average number of subscribers | 31,866 | 30,494 | 28,337 | ||||||||
ARPU | $ | 13.25 | $ | 12.91 | $ | 12.53 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Customer service and billing expenses, excluding connected vehicle services | $ | 365,005 | $ | 367,978 | $ | 346,789 | |||||
Less: share-based payment expense | (4,229 | ) | (3,735 | ) | (2,982 | ) | |||||
$ | 360,776 | $ | 364,243 | $ | 343,807 | ||||||
Daily weighted average number of subscribers | 31,866 | 30,494 | 28,337 | ||||||||
Customer service and billing expenses, per average subscriber | $ | 0.94 | $ | 1.00 | $ | 1.01 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Cash Flow information | |||||||||||
Net cash provided by operating activities | $ | 1,855,589 | $ | 1,719,237 | $ | 1,244,051 | |||||
Net cash used in investing activities | $ | (1,146,812 | ) | $ | (210,124 | ) | $ | (138,858 | ) | ||
Net cash used in financing activities | $ | (853,694 | ) | $ | (1,407,012 | ) | $ | (1,141,079 | ) | ||
Free Cash Flow | |||||||||||
Net cash provided by operating activities | $ | 1,855,589 | $ | 1,719,237 | $ | 1,244,051 | |||||
Additions to property and equipment | (287,970 | ) | (205,829 | ) | (134,892 | ) | |||||
Purchases of restricted and other investments | (7,847 | ) | (4,295 | ) | (3,966 | ) | |||||
Pre-1972 sound recordings legal settlement | — | — | 210,000 | ||||||||
Free cash flow | $ | 1,559,772 | $ | 1,509,113 | $ | 1,315,193 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Subscriber acquisition costs, excluding connected vehicle services | $ | 499,492 | $ | 512,809 | $ | 532,599 | |||||
Less: margin from sales of radios and accessories, excluding connected vehicle services | (96,110 | ) | (78,065 | ) | (68,199 | ) | |||||
$ | 403,382 | $ | 434,744 | $ | 464,400 | ||||||
Installations | 13,662 | 14,203 | 14,041 | ||||||||
SAC, per installation | $ | 29.53 | $ | 30.61 | $ | 33.07 |
ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
• | Pandora Media, Inc. ("Pandora") Series A Preferred Stock, which we have elected to account for under the fair value option. As of December 31, 2017, the fair value of this investment was $480.5 million which was based on a Black-Scholes option pricing model and an income approach - discounted cash flow analysis. Had the market price of Pandora's common stock been 10% lower as of December 31, 2017, the value of this investment would have been approximately $11.6 million lower. |
• | In connection with the recapitalization of Sirius XM Canada Holdings Inc. ("Sirius XM Canada") on May 25, 2017, we loaned Sirius XM Canada $130.8 million. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. The loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. The carrying value of the loan as of December 31, 2017 was $140.1 million and approximated its fair value. The loan is denominated in Canadian dollars and it is subject to changes in foreign currency. Had the Canadian to U.S. dollar exchange rate been 10% lower as of December 31, 2017, the value of this loan would have been approximately $14.0 million lower. |
ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
ITEM 9A. | CONTROLS AND PROCEDURES |
ITEM 9B. | OTHER INFORMATION |
ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
ITEM 11. | EXECUTIVE COMPENSATION |
ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
ITEM 14. | PRINCIPAL ACCOUNTANT FEES AND SERVICES |
ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
ITEM 16. | FORM 10-K SUMMARY |
Exhibit | Description | ||
2.1 | |||
2.2 | |||
3.1 | |||
3.2 | |||
4.1 | |||
4.2 | |||
4.3 | |||
4.4 | |||
4.5 | |||
4.6 | |||
4.7 | |||
4.8 | |||
4.9 | |||
4.10 | |||
10.1 | |||
10.2 | |||
10.3 |
Exhibit | Description | ||
**10.4 | |||
*10.5 | |||
*10.6 | |||
*10.7 | |||
*10.8 | |||
*10.9 | |||
*10.10 | |||
*10.11 | |||
*10.12 | |||
*10.13 | |||
*10.14 | |||
*10.15 | |||
*10.16 | |||
*10.17 | |||
*10.18 | |||
*10.19 | |||
*10.20 | |||
*10.21 | |||
Exhibit | Description | ||
*10.22 | |||
*10.23 | |||
*10.24 | |||
*10.25 | |||
*10.26 | |||
*10.27 | |||
*10.28 | |||
*10.29 | |||
*10.30 | |||
*10.31 | |||
*10.32 | |||
*10.33 | |||
*10.34 | |||
21.1 | |||
23.1 | |||
31.1 | |||
31.2 | |||
32.1 | |||
32.2 | |||
Exhibit | Description | ||
99.1 | |||
99.2 | |||
101.1 | The following financial information from our Annual Report on Form 10-K for the year ended December 31, 2017 formatted in eXtensible Business Reporting Language (XBRL): (i) Consolidated Statements of Comprehensive Income for the years ended December 31, 2017, 2016 and 2015; (ii) Consolidated Balance Sheets as of December 31, 2017 and 2016; (iii) Consolidated Statements of Stockholders’ (Deficit) Equity for the years ended December 31, 2017, 2016 and 2015; (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015; and (v) Combined Notes to Consolidated Financial Statements. |
* | This document has been identified as a management contract or compensatory plan or arrangement. |
** | Pursuant to the Commission’s Orders Granting Confidential Treatment under Rule 406 of the Securities Act of 1933 or Rule 24(b)-2 under the Securities Exchange Act of 1934, certain confidential portions of this Exhibit were omitted by means of redacting a portion of the text. |
SIRIUS XM HOLDINGS INC. | ||
By: | /s/ DAVID J. FREAR | |
David J. Frear | ||
Senior Executive Vice President and | ||
Chief Financial Officer | ||
(Principal Financial Officer and Authorized Officer) |
Signature | Title | Date | |
/s/ GREGORY B. MAFFEI | Chairman of the Board of Directors and Director | January 31, 2018 | |
(Gregory B. Maffei) | |||
/s/ JAMES E. MEYER | Chief Executive Officer and Director (Principal Executive Officer) | January 31, 2018 | |
(James E. Meyer) | |||
/s/ DAVID J. FREAR | Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) | January 31, 2018 | |
(David J. Frear) | |||
/s/ THOMAS D. BARRY | Senior Vice President and Controller (Principal Accounting Officer) | January 31, 2018 | |
(Thomas D. Barry) | |||
/s/ JOAN L. AMBLE | Director | January 31, 2018 | |
(Joan L. Amble) | |||
/s/ GEORGE W. BODENHEIMER | Director | January 31, 2018 | |
(George W. Bodenheimer) | |||
/s/ MARK D. CARLETON | Director | January 31, 2018 | |
(Mark D. Carleton) | |||
/s/ EDDY W. HARTENSTEIN | Director | January 31, 2018 | |
(Eddy W. Hartenstein) | |||
/s/ JAMES P. HOLDEN | Director | January 31, 2018 | |
(James P. Holden) | |||
/s/ EVAN D. MALONE | Director | January 31, 2018 | |
(Evan D. Malone) | |||
/s/ JAMES F. MOONEY | Director | January 31, 2018 | |
(James F. Mooney) | |||
/s/ MICHAEL RAPINO | Director | January 31, 2018 | |
(Michael Rapino) | |||
/s/ CARL E. VOGEL | Director | January 31, 2018 | |
(Carl E. Vogel) | |||
/s/ VANESSA A. WITTMAN | Director | January 31, 2018 | |
(Vanessa A. Wittman) | |||
/s/ DAVID M. ZASLAV | Director | January 31, 2018 | |
(David M. Zaslav) |
For the Years Ended December 31, | |||||||||||
(in thousands, except per share data) | 2017 | 2016 | 2015 | ||||||||
Revenue: | |||||||||||
Subscriber revenue | $ | 4,472,522 | $ | 4,196,852 | $ | 3,824,793 | |||||
Advertising revenue | 160,347 | 138,231 | 122,292 | ||||||||
Equipment revenue | 131,586 | 118,947 | 110,923 | ||||||||
Other revenue | 660,674 | 563,190 | 512,050 | ||||||||
Total revenue | 5,425,129 | 5,017,220 | 4,570,058 | ||||||||
Operating expenses: | |||||||||||
Cost of services: | |||||||||||
Revenue share and royalties | 1,210,323 | 1,108,515 | 1,034,832 | ||||||||
Programming and content | 388,033 | 353,779 | 293,091 | ||||||||
Customer service and billing | 385,431 | 387,131 | 377,908 | ||||||||
Satellite and transmission | 82,747 | 103,020 | 94,609 | ||||||||
Cost of equipment | 35,448 | 40,882 | 42,724 | ||||||||
Subscriber acquisition costs | 499,492 | 512,809 | 532,599 | ||||||||
Sales and marketing | 437,739 | 386,724 | 354,189 | ||||||||
Engineering, design and development | 112,427 | 82,146 | 64,403 | ||||||||
General and administrative | 334,023 | 341,106 | 324,801 | ||||||||
Depreciation and amortization | 298,602 | 268,979 | 272,214 | ||||||||
Total operating expenses | 3,784,265 | 3,585,091 | 3,391,370 | ||||||||
Income from operations | 1,640,864 | 1,432,129 | 1,178,688 | ||||||||
Other income (expense): | |||||||||||
Interest expense | (345,820 | ) | (331,225 | ) | (299,103 | ) | |||||
Loss on extinguishment of debt | (43,679 | ) | (24,229 | ) | — | ||||||
Other income | 12,844 | 14,985 | 12,379 | ||||||||
Total other expense | (376,655 | ) | (340,469 | ) | (286,724 | ) | |||||
Income before income taxes | 1,264,209 | 1,091,660 | 891,964 | ||||||||
Income tax expense | (616,301 | ) | (345,727 | ) | (382,240 | ) | |||||
Net income | $ | 647,908 | $ | 745,933 | $ | 509,724 | |||||
Foreign currency translation adjustment, net of tax | 18,546 | 363 | (100 | ) | |||||||
Total comprehensive income | $ | 666,454 | $ | 746,296 | $ | 509,624 | |||||
Net income per common share: | |||||||||||
Basic | $ | 0.14 | $ | 0.15 | $ | 0.09 | |||||
Diluted | $ | 0.14 | $ | 0.15 | $ | 0.09 | |||||
Weighted average common shares outstanding: | |||||||||||
Basic | 4,637,553 | 4,917,050 | 5,375,707 | ||||||||
Diluted | 4,723,535 | 4,964,728 | 5,435,166 | ||||||||
Dividends declared per common share | $ | 0.041 | $ | 0.010 | $ | — |
As of December 31, | |||||||
(in thousands, except per share data) | 2017 | 2016 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 69,022 | $ | 213,939 | |||
Receivables, net | 241,727 | 223,029 | |||||
Inventory, net | 20,199 | 20,363 | |||||
Related party current assets | 10,284 | 6,170 | |||||
Prepaid expenses and other current assets | 129,669 | 179,148 | |||||
Total current assets | 470,901 | 642,649 | |||||
Property and equipment, net | 1,462,766 | 1,398,693 | |||||
Intangible assets, net | 2,522,846 | 2,544,801 | |||||
Goodwill | 2,286,582 | 2,205,107 | |||||
Related party long-term assets | 962,080 | 8,918 | |||||
Deferred tax assets | 505,528 | 1,084,330 | |||||
Other long-term assets | 118,671 | 119,097 | |||||
Total assets | $ | 8,329,374 | $ | 8,003,595 | |||
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable and accrued expenses | $ | 794,341 | $ | 713,034 | |||
Accrued interest | 137,428 | 114,633 | |||||
Current portion of deferred revenue | 1,881,825 | 1,832,609 | |||||
Current maturities of long-term debt | 5,105 | 5,485 | |||||
Related party current liabilities | 2,839 | 2,840 | |||||
Total current liabilities | 2,821,538 | 2,668,601 | |||||
Deferred revenue | 174,579 | 176,319 | |||||
Long-term debt | 6,741,243 | 5,842,764 | |||||
Related party long-term liabilities | 7,364 | 7,955 | |||||
Deferred tax liabilities | 8,169 | 6,418 | |||||
Other long-term liabilities | 100,355 | 93,553 | |||||
Total liabilities | 9,853,248 | 8,795,610 | |||||
Commitments and contingencies (Note 15) | |||||||
Stockholders’ (deficit) equity: | |||||||
Common stock, par value $0.001; 9,000,000 shares authorized; 4,530,928 and 4,746,047 shares issued; 4,527,742 and 4,740,947 outstanding at December 31, 2017 and December 31, 2016, respectively | 4,530 | 4,745 | |||||
Accumulated other comprehensive income (loss), net of tax | 18,407 | (139 | ) | ||||
Additional paid-in capital | 1,713,816 | 3,117,666 | |||||
Treasury stock, at cost; 3,186 and 5,100 shares of common stock at December 31, 2017 and December 31, 2016, respectively | (17,154 | ) | (22,906 | ) | |||
Accumulated deficit | (3,243,473 | ) | (3,891,381 | ) | |||
Total stockholders’ (deficit) equity | (1,523,874 | ) | (792,015 | ) | |||
Total liabilities and stockholders’ (deficit) equity | $ | 8,329,374 | $ | 8,003,595 |
Common Stock | Accumulated Other Comprehensive (Loss) Income | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Total Stockholders’ (Deficit) Equity | |||||||||||||||||||||||||
(in thousands) | Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||
Balance at January 1, 2015 | 5,653,529 | $ | 5,653 | $ | (402 | ) | $ | 6,771,554 | 7,410 | $ | (26,034 | ) | $ | (5,440,934 | ) | $ | 1,309,837 | |||||||||||||
Comprehensive income (loss), net of tax | — | — | (100 | ) | — | — | — | 509,724 | 509,624 | |||||||||||||||||||||
Share-based payment expense | — | — | — | 84,310 | — | — | — | 84,310 | ||||||||||||||||||||||
Exercise of options and vesting of restricted stock units | 19,740 | 20 | — | 240 | — | — | — | 260 | ||||||||||||||||||||||
Minimum withholding taxes on net share settlement of stock-based compensation | — | — | — | (54,575 | ) | — | — | — | (54,575 | ) | ||||||||||||||||||||
Issuance of common stock upon exercise of warrants | 6,010 | 6 | — | (6 | ) | — | — | — | — | |||||||||||||||||||||
Common stock repurchased | — | — | — | — | 524,222 | (2,015,947 | ) | — | (2,015,947 | ) | ||||||||||||||||||||
Common stock retired | (525,828 | ) | (526 | ) | — | (2,017,728 | ) | (525,828 | ) | 2,018,254 | — | — | ||||||||||||||||||
Balance at December 31, 2015 | 5,153,451 | $ | 5,153 | $ | (502 | ) | $ | 4,783,795 | 5,804 | $ | (23,727 | ) | $ | (4,931,210 | ) | $ | (166,491 | ) | ||||||||||||
Cumulative effect of change in accounting principle | — | — | — | — | — | — | 293,896 | 293,896 | ||||||||||||||||||||||
Comprehensive income, net of tax | — | — | 363 | — | — | — | 745,933 | 746,296 | ||||||||||||||||||||||
Share-based payment expense | — | — | — | 97,539 | — | — | — | 97,539 | ||||||||||||||||||||||
Exercise of options and vesting of restricted stock units | 13,411 | 13 | — | 335 | — | — | — | 348 | ||||||||||||||||||||||
Minimum withholding taxes on net share settlement of stock-based compensation | — | — | — | (42,827 | ) | — | — | — | (42,827 | ) | ||||||||||||||||||||
Cash dividends paid on common shares | — | — | — | (48,079 | ) | — | — | — | (48,079 | ) | ||||||||||||||||||||
Common stock repurchased | — | — | — | — | 420,111 | (1,672,697 | ) | — | (1,672,697 | ) | ||||||||||||||||||||
Common stock retired | (420,815 | ) | (421 | ) | — | (1,673,097 | ) | (420,815 | ) | 1,673,518 | — | — | ||||||||||||||||||
Balance at December 31, 2016 | 4,746,047 | $ | 4,745 | $ | (139 | ) | $ | 3,117,666 | 5,100 | $ | (22,906 | ) | $ | (3,891,381 | ) | $ | (792,015 | ) | ||||||||||||
Comprehensive income, net of tax | — | — | 18,546 | — | — | — | 647,908 | 666,454 | ||||||||||||||||||||||
Issuance of common stock as part of recapitalization of Sirius XM Canada | 35,000 | 35 | — | 178,815 | — | — | — | 178,850 | ||||||||||||||||||||||
Share-based payment expense | — | — | — | 108,871 | — | — | — | 108,871 | ||||||||||||||||||||||
Exercise of options and vesting of restricted stock units | 22,322 | 22 | — | 752 | — | — | — | 774 | ||||||||||||||||||||||
Minimum withholding taxes on net share settlement of stock-based compensation | — | — | — | (93,283 | ) | — | — | — | (93,283 | ) | ||||||||||||||||||||
Cash dividends paid on common stock | — | — | — | (190,242 | ) | — | — | — | (190,242 | ) | ||||||||||||||||||||
Common stock repurchased | — | — | — | — | 270,527 | (1,403,283 | ) | — | (1,403,283 | ) | ||||||||||||||||||||
Common stock retired | (272,441 | ) | (272 | ) | — | (1,408,763 | ) | (272,441 | ) | 1,409,035 | — | — | ||||||||||||||||||
Balance at December 31, 2017 | 4,530,928 | $ | 4,530 | $ | 18,407 | $ | 1,713,816 | 3,186 | $ | (17,154 | ) | $ | (3,243,473 | ) | $ | (1,523,874 | ) |
For the Years Ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 647,908 | $ | 745,933 | $ | 509,724 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization | 298,602 | 268,979 | 272,214 | ||||||||
Non-cash interest expense, net of amortization of premium | 9,050 | 8,608 | 7,872 | ||||||||
Provision for doubtful accounts | 55,715 | 55,941 | 47,237 | ||||||||
Amortization of deferred income related to equity method investment | (2,776 | ) | (2,772 | ) | (2,776 | ) | |||||
Loss on extinguishment of debt | 43,679 | 24,229 | — | ||||||||
Gain on unconsolidated entity investments, net | (4,561 | ) | (12,529 | ) | — | ||||||
Dividend received from unconsolidated entity investment | 3,606 | 7,160 | 14,788 | ||||||||
Loss on disposal of assets | — | 12,912 | 7,384 | ||||||||
Share-based payment expense | 124,069 | 108,604 | 84,310 | ||||||||
Deferred income taxes | 583,520 | 323,562 | 365,499 | ||||||||
Other non-cash purchase price adjustments | — | — | (1,394 | ) | |||||||
Changes in operating assets and liabilities: | |||||||||||
Receivables | (73,777 | ) | (44,188 | ) | (61,440 | ) | |||||
Inventory | 1,874 | 1,932 | (2,898 | ) | |||||||
Related party, net | (2,210 | ) | (3,485 | ) | (14,953 | ) | |||||
Prepaid expenses and other current assets | 50,194 | 7,156 | (67,204 | ) | |||||||
Other long-term assets | 7,333 | 38,835 | (130,741 | ) | |||||||
Accounts payable and accrued expenses | 41,367 | 78,920 | 52,696 | ||||||||
Accrued interest | 22,795 | 22,978 | 11,215 | ||||||||
Deferred revenue | 41,894 | 79,404 | 145,242 | ||||||||
Other long-term liabilities | 7,307 | (2,942 | ) | 7,276 | |||||||
Net cash provided by operating activities | 1,855,589 | 1,719,237 | 1,244,051 | ||||||||
Cash flows from investing activities: | |||||||||||
Additions to property and equipment | (287,970 | ) | (205,829 | ) | (134,892 | ) | |||||
Purchases of restricted and other investments | (7,847 | ) | (4,295 | ) | (3,966 | ) | |||||
Acquisition of business, net of cash acquired | (107,736 | ) | — | — | |||||||
Investments in related parties | (612,465 | ) | — | — | |||||||
Loan to related party | (130,794 | ) | — | — | |||||||
Net cash used in investing activities | (1,146,812 | ) | (210,124 | ) | (138,858 | ) | |||||
Cash flows from financing activities: | |||||||||||
Proceeds from exercise of stock options | 774 | 348 | 260 | ||||||||
Taxes paid in lieu of shares issued for stock-based compensation | (92,619 | ) | (42,824 | ) | (54,539 | ) | |||||
Net (repayments) borrowings related to revolving credit facility | (90,000 | ) | 50,000 | (40,000 | ) | ||||||
Proceeds from long-term borrowings, net of costs | 2,473,071 | 987,143 | 983,571 | ||||||||
Principal payments of long-term borrowings | (1,512,578 | ) | (660,985 | ) | (12,117 | ) | |||||
Payment of premiums on redemption of debt | (33,065 | ) | (19,097 | ) | — | ||||||
Common stock repurchased and retired | (1,409,035 | ) | (1,673,518 | ) | (2,018,254 | ) | |||||
Dividends paid | (190,242 | ) | (48,079 | ) | — | ||||||
Net cash used in financing activities | (853,694 | ) | (1,407,012 | ) | (1,141,079 | ) | |||||
Net (decrease) increase in cash and cash equivalents | (144,917 | ) | 102,101 | (35,886 | ) | ||||||
Cash and cash equivalents at beginning of period | 213,939 | 111,838 | 147,724 | ||||||||
Cash and cash equivalents at end of period | $ | 69,022 | $ | 213,939 | $ | 111,838 |
For the Years Ended December 31, | |||||||||||
(in thousands) | 2017 | 2016 | 2015 | ||||||||
Supplemental Disclosure of Cash and Non-Cash Flow Information | |||||||||||
Cash paid during the period for: | |||||||||||
Interest, net of amounts capitalized | $ | 310,492 | $ | 292,556 | $ | 269,925 | |||||
Income taxes paid | $ | 28,045 | $ | 20,639 | $ | 12,384 | |||||
Non-cash investing and financing activities: | |||||||||||
Capital lease obligations incurred to acquire assets | $ | 2,577 | $ | 6,647 | $ | 7,487 | |||||
Treasury stock not yet settled | $ | 17,154 | $ | 22,906 | $ | 23,727 | |||||
Issuance of common stock as part of recapitalization of Sirius XM Canada | $ | 178,850 | $ | — | $ | — | |||||
Other comprehensive income (loss), net of tax for related party | $ | 18,546 | $ | 363 | $ | (100 | ) |
(1) | Business & Basis of Presentation |
• | On April 18, 2017, Sirius XM acquired Automatic Labs Inc. (“Automatic”). Refer to Note 2 for information on this transaction. |
• | On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada Holdings Inc. (“Sirius XM Canada”). Refer to Note 11 for information on this transaction. |
• | On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora Media, Inc. (“Pandora”). Refer to Note 11 for information on this transaction. |
(2) | Acquisition |
Acquired Assets: | |||
Intangible assets subject to amortization | $ | 14,700 | |
Goodwill | 81,475 | ||
Deferred income tax asset, net | 14,760 | ||
Other assets | 4,019 | ||
Trademark | 800 | ||
Total Assets | $ | 115,754 | |
Assumed Liabilities: | |||
Deferred revenue | (5,582 | ) | |
Other liabilities | (1,617 | ) | |
Total Liabilities | $ | (7,199 | ) |
Total Consideration | $ | 108,555 |
(3) | Summary of Significant Accounting Policies |
(4) | Fair Value Measurements |
i. | Level 1 input: unadjusted quoted prices in active markets for identical instrument; |
ii. | Level 2 input: observable market data for the same or similar instrument but not Level 1, including quoted prices for identical or similar assets or liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and |
iii. | Level 3 input: unobservable inputs developed using management's assumptions about the inputs used for pricing the asset or liability. |
December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total Fair Value | Level 1 | Level 2 | Level 3 | Total Fair Value | ||||||||||||||||||||||
Assets: | |||||||||||||||||||||||||||||
Pandora - investment (a) | $ | — | 480,472 | — | $ | 480,472 | $ | — | — | — | $ | — | |||||||||||||||||
Sirius XM Canada - investment (b) | $ | — | — | — | $ | — | $ | 178,696 | — | — | $ | 178,696 | |||||||||||||||||
Liabilities: | |||||||||||||||||||||||||||||
Debt (c) | — | $ | 6,987,473 | — | $ | 6,987,473 | — | $ | 6,008,205 | — | $ | 6,008,205 |
(a) | During the year ended December 31, 2017, Sirius XM completed a $480,000 investment in Pandora. We have elected the fair value option to account for this investment. Refer to Note 11 for information on this transaction. |
(b) | During the year ended December 31, 2017, Sirius XM completed a recapitalization of Sirius XM Canada. Following this recapitalization, Sirius XM Canada ceased to be a publicly traded company. Refer to Note 11 for information on this transaction. The amount as of December 31, 2016 approximated fair value. The carrying value of our investment in Sirius XM Canada was $341,214 and $8,615 as of December 31, 2017 and 2016, respectively. Additionally, as part of this transaction we loaned Sirius XM Canada $130,794. The carrying value of the loan as of December 31, 2017 was $140,073 and approximated its fair value. |
(c) | The fair value for non-publicly traded instruments is based upon estimates from a market maker and brokerage firm. Refer to Note 12 for information related to the carrying value of our debt as of December 31, 2017 and 2016. |
(5) | Earnings per Share |
For the Years Ended December 31, | |||||||||||
2017 (1) | 2016 | 2015 | |||||||||
Numerator: | |||||||||||
Net income available to common stockholders for basic and diluted net income per common share | $ | 647,908 | $ | 745,933 | $ | 509,724 | |||||
Denominator: | |||||||||||
Weighted average common shares outstanding for basic net income per common share | 4,637,553 | 4,917,050 | 5,375,707 | ||||||||
Weighted average impact of dilutive equity instruments | 85,982 | 47,678 | 59,459 | ||||||||
Weighted average shares for diluted net income per common share | 4,723,535 | 4,964,728 | 5,435,166 | ||||||||
Net income per common share: | |||||||||||
Basic | $ | 0.14 | $ | 0.15 | $ | 0.09 | |||||
Diluted | $ | 0.14 | $ | 0.15 | $ | 0.09 |
(1) | Our net income per basic and diluted share includes the impact of $184,599 in income tax expense, or a decrease of approximately $0.04 per share, recorded in the fourth quarter of 2017 due to the reduction in our net deferred tax asset balance as a result of the Tax Cut and Jobs Act signed into law on December 22, 2017. Refer to Note 16 for additional information. |
(6) | Receivables, net |
December 31, 2017 | December 31, 2016 | ||||||
Gross customer accounts receivable | $ | 100,342 | $ | 105,737 | |||
Allowance for doubtful accounts | (9,500 | ) | (8,658 | ) | |||
Customer accounts receivable, net | $ | 90,842 | $ | 97,079 | |||
Receivables from distributors | 121,410 | 98,498 | |||||
Other receivables | 29,475 | 27,452 | |||||
Total receivables, net | $ | 241,727 | $ | 223,029 |
(7) | Inventory, net |
December 31, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 6,489 | $ | 10,219 | |||
Finished goods | 21,225 | 19,581 | |||||
Allowance for obsolescence | (7,515 | ) | (9,437 | ) | |||
Total inventory, net | $ | 20,199 | $ | 20,363 |
(8) | Goodwill |
(9) | Intangible Assets |
December 31, 2017 | December 31, 2016 | ||||||||||||||||||||||||
Weighted Average Useful Lives | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | Gross Carrying Value | Accumulated Amortization | Net Carrying Value | |||||||||||||||||||
Indefinite life intangible assets: | |||||||||||||||||||||||||
FCC licenses | Indefinite | $ | 2,083,654 | $ | — | $ | 2,083,654 | $ | 2,083,654 | $ | — | $ | 2,083,654 | ||||||||||||
Trademarks | Indefinite | 250,800 | — | 250,800 | 250,000 | — | 250,000 | ||||||||||||||||||
Definite life intangible assets: | |||||||||||||||||||||||||
Subscriber relationships | 9 years | 380,000 | (380,000 | ) | — | 380,000 | (364,893 | ) | 15,107 | ||||||||||||||||
OEM relationships | 15 years | 220,000 | (61,111 | ) | 158,889 | 220,000 | (46,444 | ) | 173,556 | ||||||||||||||||
Licensing agreements | 12 years | 45,289 | (34,350 | ) | 10,939 | 45,289 | (30,664 | ) | 14,625 | ||||||||||||||||
Software and technology | 7 years | 43,915 | (25,351 | ) | 18,564 | 29,215 | (21,356 | ) | 7,859 | ||||||||||||||||
Total intangible assets | $ | 3,023,658 | $ | (500,812 | ) | $ | 2,522,846 | $ | 3,008,158 | $ | (463,357 | ) | $ | 2,544,801 |
FCC satellite licenses | Expiration year | |
SIRIUS FM-5 | 2025 | |
SIRIUS FM-6 | 2022 | |
XM-3 | 2021 | |
XM-4 | 2022 | |
XM-5 | 2018 |
Years ending December 31, | Amount | |||
2018 | $ | 23,138 | ||
2019 | 22,701 | |||
2020 | 22,121 | |||
2021 | 16,678 | |||
2022 | 15,542 | |||
Thereafter | 88,212 | |||
Total definite life intangible assets, net | $ | 188,392 |
(10) | Property and Equipment |
Satellite system | 15 years |
Terrestrial repeater network | 5 - 15 years |
Broadcast studio equipment | 3 - 15 years |
Capitalized software and hardware | 2 - 7 years |
Satellite telemetry, tracking and control facilities | 3 - 15 years |
Furniture, fixtures, equipment and other | 2 - 7 years |
Building | 20 or 30 years |
Leasehold improvements | Lesser of useful life or remaining lease term |
December 31, 2017 | December 31, 2016 | ||||||
Satellite system | $ | 1,586,794 | $ | 1,586,794 | |||
Terrestrial repeater network | 123,254 | 127,854 | |||||
Leasehold improvements | 57,635 | 53,898 | |||||
Broadcast studio equipment | 96,582 | 84,697 | |||||
Capitalized software and hardware | 639,516 | 558,101 | |||||
Satellite telemetry, tracking and control facilities | 69,147 | 77,290 | |||||
Furniture, fixtures, equipment and other | 96,965 | 90,214 | |||||
Land | 38,411 | 38,411 | |||||
Building | 61,824 | 61,597 | |||||
Construction in progress | 301,153 | 144,954 | |||||
Total property and equipment | 3,071,281 | 2,823,810 | |||||
Accumulated depreciation and amortization | (1,608,515 | ) | (1,425,117 | ) | |||
Property and equipment, net | $ | 1,462,766 | $ | 1,398,693 |
December 31, 2017 | December 31, 2016 | ||||||
Satellite system | $ | 183,243 | $ | 43,977 | |||
Terrestrial repeater network | 2,515 | 1,139 | |||||
Capitalized software and hardware | 94,456 | 82,204 | |||||
Other | 20,939 | 17,634 | |||||
Construction in progress | $ | 301,153 | $ | 144,954 |
Satellite Description | Year Delivered | Estimated End of Depreciable Life | ||
SIRIUS FM-5 | 2009 | 2024 | ||
SIRIUS FM-6 | 2013 | 2028 | ||
XM-3 | 2005 | 2020 | ||
XM-4 | 2006 | 2021 | ||
XM-5 | 2010 | 2025 |
(11) | Related Party Transactions |
December 31, 2017 | December 31, 2016 | ||||||
Related party current assets | $ | 10,284 | $ | 6,170 | |||
Related party long-term assets | $ | 481,608 | $ | 8,918 | |||
Related party current liabilities | $ | 2,839 | $ | 2,840 | |||
Related party long-term liabilities | $ | 7,364 | $ | 7,955 |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Revenue (a)(b) | $ | 87,111 | $ | 45,962 | $ | 56,397 | |||||
Other income | |||||||||||
Share of net earnings (b) | $ | 4,561 | $ | 12,529 | $ | — | |||||
Dividends (c) | $ | — | $ | 3,575 | $ | 12,645 | |||||
Interest income (d) | $ | 6,243 | $ | — | $ | — |
(a) | Prior to the Transaction, under our former agreements with Sirius XM Canada, we received a percentage-based fee of 10% and 15% for certain types of subscription revenue earned by Sirius XM Canada for the use of the Sirius and XM platforms, respectively, and additional fees for premium services and fees for activation fees and reimbursements for other charges. We record revenue from Sirius XM Canada as Other revenue in our consolidated statements of comprehensive income. |
(b) | Prior to the Transaction, we recognized our proportionate share of revenue and earnings or losses attributable to Sirius XM Canada on a one month lag. As a result of the Transaction, there is no longer a one-month lag and Sirius XM Canada changed its fiscal year-end to December 31 to align with that of Sirius XM. For the year ended December 31, 2017 this amount included $1,501 of amortization related to equity method intangible assets. |
(c) | Sirius XM Canada paid gross dividends to us of $3,796, $7,548 and $15,645 during the years ended December 31, 2017, 2016 and 2015, respectively. These dividends were first recorded as a reduction to our investment balance in Sirius XM Canada to the extent a balance existed and then as Other income for the remaining portion. |
(d) | This interest income relates to the loan to Sirius XM Canada and is recorded as Other income in our consolidated statements of comprehensive income. |
(12) | Debt |
Carrying value(a) at | ||||||||||||||||||||
Issuer / Borrower | Issued | Debt | Maturity Date | Interest Payable | Principal Amount at December 31, 2017 | December 31, 2017 | December 31, 2016 | |||||||||||||
Sirius XM (b)(e) | May 2013 | 4.25% Senior Notes (the "4.25% Notes") | May 15, 2020 | semi-annually on May 15 and November 15 | $ | — | $ | — | $ | 497,069 | ||||||||||
Sirius XM (b)(f) | August 2013 | 5.75% Senior Notes (the "5.75% Notes") | August 1, 2021 | semi-annually on February 1 and August 1 | — | — | 596,386 | |||||||||||||
Sirius XM (b)(g) | July 2017 | 3.875% Senior Notes (the "3.875% Notes") | August 1, 2022 | semi-annually on February 1 and August 1 | 1,000,000 | 992,011 | — | |||||||||||||
Sirius XM (b) | May 2013 | 4.625% Senior Notes (the "4.625% Notes") | May 15, 2023 | semi-annually on May 15 and November 15 | 500,000 | 496,646 | 496,111 | |||||||||||||
Sirius XM (b) | May 2014 | 6.00% Senior Notes (the "6.00% Notes") | July 15, 2024 | semi-annually on January 15 and July 15 | 1,500,000 | 1,488,002 | 1,486,556 | |||||||||||||
Sirius XM (b) | March 2015 | 5.375% Senior Notes (the "5.375% Notes due 2025") | April 15, 2025 | semi-annually on April 15 and October 15 | 1,000,000 | 991,285 | 990,340 | |||||||||||||
Sirius XM (b) | May 2016 | 5.375% Senior Notes (the "5.375% Notes due 2026") | July 15, 2026 | semi-annually on January 15 and July 15 | 1,000,000 | 990,138 | 989,259 | |||||||||||||
Sirius XM (b)(g) | July 2017 | 5.00% Senior Notes (the "5.00% Notes") | August 1, 2027 | semi-annually on February 1 and August 1 | 1,500,000 | 1,486,162 | — | |||||||||||||
Sirius XM (b)(c)(h) | August 2012 | 5.25% Senior Secured Notes (the "5.25% Notes") | August 15, 2022 | semi-annually on February 15 and August 15 | — | — | 396,232 | |||||||||||||
Sirius XM (d) | December 2012 | Senior Secured Revolving Credit Facility (the "Credit Facility") | June 16, 2020 | variable fee paid quarterly | 1,750,000 | 300,000 | 390,000 | |||||||||||||
Sirius XM | Various | Capital leases | Various | n/a | n/a | 10,597 | 13,559 | |||||||||||||
Total Debt | 6,754,841 | 5,855,512 | ||||||||||||||||||
Less: total current maturities | 5,105 | 5,485 | ||||||||||||||||||
Less: total deferred financing costs for Notes | 8,493 | 7,263 | ||||||||||||||||||
Total long-term debt | $ | 6,741,243 | $ | 5,842,764 |
(a) | The carrying value of the obligations is net of any remaining unamortized original issue discount. |
(b) | Substantially all of our domestic wholly-owned subsidiaries have guaranteed these notes. |
(c) | The liens that secured the 5.25% Notes were equal and ratable to the liens granted to secure the Credit Facility. |
(d) | Sirius XM's obligations under the Credit Facility are guaranteed by certain of its material domestic subsidiaries and are secured by a lien on substantially all of Sirius XM's assets and the assets of its material domestic subsidiaries. Interest on borrowings is payable on a monthly basis and accrues at a rate based on LIBOR plus an applicable rate. Sirius XM is also required to pay a variable fee on the average daily unused portion of the Credit Facility which is payable on a quarterly basis. The variable rate for the unused portion of the Credit Facility was 0.25% per annum as of December 31, 2017. Sirius XM's outstanding borrowings under the Credit Facility are classified as Long-term debt within our consolidated balance sheets due to the long-term maturity of this debt. |
(e) | On July 27, 2017, Sirius XM redeemed $500,000 in outstanding principal amount of the 4.25% Notes for an aggregate purchase price, including premium and interest, of $509,565. We recognized $8,393 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a result of this redemption. |
(f) | On August 4, 2017, Sirius XM redeemed $600,000 in outstanding principal amount of the 5.75% Notes for an aggregate purchase price, including premium and interest, of $617,538. We recognized $20,964 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a result of this redemption. |
(g) | In July 2017, Sirius XM issued $1,000,000 aggregate principal amount of the 3.875% Notes and $1,500,000 aggregate principal amount of the 5.00% Notes with a net original issuance discount and deferred financing costs in the aggregate of $10,291 and $16,638, respectively. |
(h) | On September 1, 2017, Sirius XM redeemed $400,000 in outstanding principal amount of the 5.25% Notes for an aggregate purchase price, including premium and interest, of $411,433. We recognized $14,322 to Loss on extinguishment of debt, consisting primarily of unamortized discount, deferred financing fees and repayment premium, as a result of this redemption. All security interests and other liens securing the 5.25% Notes were released. |
(13) | Stockholders’ Equity |
Declaration Date | Dividend Per Share | Record Date | Total Amount | Payment Date | ||||||||
January 24, 2017 | $ | 0.010 | February 7, 2017 | $ | 47,137 | February 28, 2017 | ||||||
April 25, 2017 | $ | 0.010 | May 10, 2017 | $ | 46,501 | May 31, 2017 | ||||||
July 11, 2017 | $ | 0.010 | August 10, 2017 | $ | 46,216 | August 31, 2017 | ||||||
October 3, 2017 | $ | 0.011 | November 9, 2017 | $ | 50,388 | November 30, 2017 |
December 31, 2017 | December 31, 2016 | December 31, 2015 | |||||||||||||||||||
Share Repurchase Type | Shares | Amount | Shares | Amount | Shares | Amount | |||||||||||||||
Open Market (a) | 270,527 | $ | 1,403,283 | 420,111 | $ | 1,672,697 | 524,222 | $ | 2,015,947 |
(a) | As of December 31, 2017, $17,154 of common stock repurchases had not settled, nor been retired, and were recorded as Treasury stock within our consolidated balance sheets and consolidated statements of stockholders’ (deficit) equity. For a discussion of subsequent events refer to Note 17. |
(14) | Benefit Plans |
For the Years Ended December 31, | |||||
2017 | 2016 | 2015 | |||
Risk-free interest rate | 1.8% | 1.1% | 1.4% | ||
Expected life of options — years | 4.59 | 4.25 | 4.17 | ||
Expected stock price volatility | 24% | 22% | 26% | ||
Expected dividend yield | 0.7% | 0.0% | 0.0% |
For the Year Ended December 31, | |
2015 | |
Risk-free interest rate | 2.0% |
Expected life of options — years | 7.00 |
Expected stock price volatility | 37% |
Expected dividend yield | 0.0% |
Options | Weighted- Average Exercise Price Per Share | Weighted- Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||
Outstanding at the beginning of January 1, 2015 | 267,854 | $ | 2.72 | |||||||||
Granted | 145,366 | $ | 3.95 | |||||||||
Exercised | (57,667 | ) | $ | 1.88 | ||||||||
Forfeited, cancelled or expired | (17,072 | ) | $ | 4.60 | ||||||||
Outstanding as of December 31, 2015 | 338,481 | $ | 3.29 | |||||||||
Granted | 55,222 | $ | 4.14 | |||||||||
Exercised | (50,728 | ) | $ | 2.66 | ||||||||
Forfeited, cancelled or expired | (10,327 | ) | $ | 4.30 | ||||||||
Outstanding as of December 31, 2016 | 332,648 | $ | 3.50 | |||||||||
Granted | 27,339 | $ | 5.49 | |||||||||
Exercised | (73,296 | ) | $ | 3.21 | ||||||||
Forfeited, cancelled or expired | (6,234 | ) | $ | 4.07 | ||||||||
Outstanding as of December 31, 2017 | 280,457 | $ | 3.76 | 6.65 | $ | 453,955 | ||||||
Exercisable as of December 31, 2017 | 131,025 | $ | 3.23 | 5.47 | $ | 279,101 |
Shares | Grant Date Fair Value Per Share | |||||
Nonvested at the beginning of January 1, 2015 | 11,575 | $ | 3.47 | |||
Granted | 8,961 | $ | 3.92 | |||
Vested | (3,464 | ) | $ | 3.44 | ||
Forfeited | (984 | ) | $ | 3.52 | ||
Nonvested as of December 31, 2015 | 16,088 | $ | 3.73 | |||
Granted | 18,523 | $ | 4.21 | |||
Vested | (4,212 | ) | $ | 3.68 | ||
Forfeited | (506 | ) | $ | 3.75 | ||
Nonvested as of December 31, 2016 | 29,893 | $ | 4.03 | |||
Granted | 11,721 | $ | 5.35 | |||
Vested | (8,842 | ) | $ | 3.92 | ||
Forfeited | (1,449 | ) | $ | 4.42 | ||
Nonvested as of December 31, 2017 | 31,323 | $ | 4.54 |
(15) | Commitments and Contingencies |
2018 | 2019 | 2020 | 2021 | 2022 | Thereafter | Total | |||||||||||||||||||||
Debt obligations | $ | 5,105 | $ | 3,808 | $ | 301,077 | $ | 607 | $ | 1,000,000 | $ | 5,500,000 | $ | 6,810,597 | |||||||||||||
Cash interest payments | 356,525 | 348,148 | 341,781 | 334,381 | 334,375 | 915,938 | 2,631,148 | ||||||||||||||||||||
Satellite and transmission | 134,736 | 87,751 | 43,881 | 4,296 | 2,387 | 4,280 | 277,331 | ||||||||||||||||||||
Programming and content | 331,353 | 305,956 | 258,873 | 175,421 | 51,600 | 162,438 | 1,285,641 | ||||||||||||||||||||
Marketing and distribution | 20,573 | 13,645 | 8,620 | 7,801 | 1,608 | 188 | 52,435 | ||||||||||||||||||||
Satellite incentive payments | 13,690 | 10,652 | 10,197 | 8,574 | 8,558 | 61,767 | 113,438 | ||||||||||||||||||||
Operating lease obligations | 39,983 | 40,161 | 37,902 | 32,068 | 27,504 | 126,638 | 304,256 | ||||||||||||||||||||
Other | 49,237 | 18,401 | 3,265 | 941 | 51 | 20 | 71,915 | ||||||||||||||||||||
Total (1) | $ | 951,202 | $ | 828,522 | $ | 1,005,596 | $ | 564,089 | $ | 1,426,083 | $ | 6,771,269 | $ | 11,546,761 |
(1) | The table does not include our reserve for uncertain tax positions, which at December 31, 2017 totaled $12,190, as the specific timing of any cash payments cannot be projected with reasonable certainty. |
(16) | Income Taxes |
For the Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Current taxes: | |||||||||||
Federal | $ | — | $ | — | $ | — | |||||
State | (32,579 | ) | (21,782 | ) | (15,916 | ) | |||||
Foreign | (202 | ) | (383 | ) | (825 | ) | |||||
Total current taxes | (32,781 | ) | (22,165 | ) | (16,741 | ) | |||||
Deferred taxes: | |||||||||||
Federal | (564,171 | ) | (304,179 | ) | (318,933 | ) | |||||
State | (19,349 | ) | (19,383 | ) | (46,566 | ) | |||||
Total deferred taxes | (583,520 | ) | (323,562 | ) | (365,499 | ) | |||||
Total income tax expense | $ | (616,301 | ) | $ | (345,727 | ) | $ | (382,240 | ) |
For the Years Ended December 31, | ||||||||
2017 | 2016 | 2015 | ||||||
Federal tax expense, at statutory rate | 35.0 | % | 35.0 | % | 35.0 | % | ||
State income tax expense, net of federal benefit | 2.8 | % | 2.8 | % | 2.9 | % | ||
Change in valuation allowance | (0.1 | )% | — | % | 4.9 | % | ||
Tax credit | (1.7 | )% | (6.1 | )% | — | % | ||
Stock-based compensation | (2.9 | )% | (0.6 | )% | — | % | ||
Federal tax reform - deferred rate change | 14.6 | % | — | % | — | % | ||
Other, net | 1.0 | % | 0.6 | % | 0.1 | % | ||
Effective tax rate | 48.7 | % | 31.7 | % | 42.9 | % |
For the Years Ended December 31, | |||||||
2017 | 2016 | ||||||
Deferred tax assets: | |||||||
Net operating loss carryforwards and tax credits | $ | 686,277 | $ | 1,376,012 | |||
Deferred revenue | 500,461 | 760,774 | |||||
Accrued bonus | 24,150 | 35,225 | |||||
Expensed costs capitalized for tax | 13,914 | 19,610 | |||||
Investments | 29,881 | 44,129 | |||||
Stock based compensation | 50,065 | 74,544 | |||||
Other | 20,819 | 31,133 | |||||
Total deferred tax assets | 1,325,567 | 2,341,427 | |||||
Deferred tax liabilities: | |||||||
Depreciation of property and equipment | (156,003 | ) | (259,491 | ) | |||
FCC license | (506,578 | ) | (783,822 | ) | |||
Other intangible assets | (105,471 | ) | (172,520 | ) | |||
Other | (7,273 | ) | — | ||||
Total deferred tax liabilities | (775,325 | ) | (1,215,833 | ) | |||
Net deferred tax assets before valuation allowance | 550,242 | 1,125,594 | |||||
Valuation allowance | (52,883 | ) | (47,682 | ) | |||
Total net deferred tax asset | $ | 497,359 | $ | 1,077,912 |
2017 | 2016 | ||||||
Balance, beginning of year | $ | 303,583 | $ | 253,277 | |||
Increases in tax positions for prior years | 14,530 | — | |||||
Increases in tax positions for current years | 16,141 | 51,738 | |||||
Decreases in tax positions for prior years | — | (1,432 | ) | ||||
Balance, end of year | $ | 334,254 | $ | 303,583 |
(17) | Subsequent Events |
(18) | Quarterly Financial Data--Unaudited |
For the Three Months Ended | |||||||||||||||
March 31 | June 30 | September 30 | December 31 | ||||||||||||
2017 | |||||||||||||||
Total revenue | $ | 1,294,066 | $ | 1,347,569 | $ | 1,379,596 | $ | 1,403,898 | |||||||
Cost of services | $ | (497,107 | ) | $ | (513,446 | ) | $ | (519,024 | ) | $ | (572,405 | ) | |||
Income from operations | $ | 393,840 | $ | 416,353 | $ | 433,965 | $ | 396,706 | |||||||
Net income (loss) | $ | 207,073 | $ | 202,109 | $ | 275,722 | $ | (36,996 | ) | ||||||
Net income (loss) per common share--basic (1) | $ | 0.04 | $ | 0.04 | $ | 0.06 | $ | (0.01 | ) | ||||||
Net income (loss) per common share--diluted (1) | $ | 0.04 | $ | 0.04 | $ | 0.06 | $ | (0.01 | ) | ||||||
2016 | |||||||||||||||
Total revenue | $ | 1,201,010 | $ | 1,235,566 | $ | 1,277,646 | $ | 1,302,998 | |||||||
Cost of services | $ | (467,028 | ) | $ | (486,317 | ) | $ | (488,659 | ) | $ | (551,323 | ) | |||
Income from operations | $ | 348,234 | $ | 362,156 | $ | 392,179 | $ | 329,560 | |||||||
Net income (2) | $ | 172,440 | $ | 174,965 | $ | 193,901 | $ | 204,627 | |||||||
Net income per common share--basic (2) | $ | 0.03 | $ | 0.04 | $ | 0.04 | $ | 0.04 | |||||||
Net income per common share--diluted (2) | $ | 0.03 | $ | 0.04 | $ | 0.04 | $ | 0.04 |
(1) | The sum of quarterly net income per share applicable to common stockholders does not necessarily agree to the net income per share for the year due to rounding. |
(2) | These amounts reflect the adoption of ASU 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. |
(in thousands) | |||||||||||||
Description | Balance January 1, | Charged to Expenses (Benefit) | Write-offs/ Payments/ Other | Balance December 31, | |||||||||
2015 | |||||||||||||
Allowance for doubtful accounts | $ | 7,815 | 47,187 | (48,884 | ) | $ | 6,118 | ||||||
Deferred tax assets—valuation allowance | $ | 4,995 | 44,100 | — | $ | 49,095 | |||||||
2016 | |||||||||||||
Allowance for doubtful accounts | $ | 6,118 | 55,941 | (53,401 | ) | $ | 8,658 | ||||||
Deferred tax assets—valuation allowance | $ | 49,095 | (1,019 | ) | (394 | ) | $ | 47,682 | |||||
2017 | |||||||||||||
Allowance for doubtful accounts | $ | 8,658 | 55,715 | (54,873 | ) | $ | 9,500 | ||||||
Deferred tax assets—valuation allowance | $ | 47,682 | 4,395 | 806 | $ | 52,883 |
/s/ Dara F. Altman |
Dara F. Altman |
Executive Vice President and |
Chief Administrative Officer |
/s/ Jennifer Witz |
Jennifer Witz |
By: | Exhibit A | Exhibit A | |
Dara F. Altman | JENNIFER WITZ | ||
Executive Vice President and | |||
Chief Administrative Officer |
By: | Exhibit B | Exhibit B | |
Dara F. Altman | JENNIFER WITZ | ||
Executive Vice President and | |||
Chief Administrative Officer |
By: | Exhibit C | Exhibit C | |
Dara F. Altman | JENNIFER WITZ | ||
Executive Vice President and | |||
Chief Administrative Officer |
SIRIUS XM RADIO INC. | ||||
Dated: | By: | Exhibit D | ||
Name: | ||||
Title: | ||||
Dated: | Exhibit D | |||
JENNIFER WITZ |
1. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of Sirius XM Holdings Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ JAMES E. MEYER | |
James E. Meyer Chief Executive Officer (Principal Executive Officer) |
1. | I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2017 of Sirius XM Holdings Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
By: | /s/ DAVID J. FREAR | |
David J. Frear Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ JAMES E. MEYER | |
James E. Meyer Chief Executive Officer (Principal Executive Officer) |
(1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
By: | /s/ DAVID J. FREAR | |
David J. Frear Senior Executive Vice President and Chief Financial Officer (Principal Financial Officer) |
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Document and Entity Information - USD ($) |
12 Months Ended | ||
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Dec. 31, 2017 |
Jan. 29, 2018 |
Jun. 30, 2017 |
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Document And Entity Information [Abstract] | |||
Entity Registrant Name | SIRIUS XM HOLDINGS INC. | ||
Entity Central Index Key | 0000908937 | ||
Trading Symbol | SIRI | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2017 | ||
Document Fiscal Year Focus | 2017 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | Yes | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Large Accelerated Filer | ||
Entity Public Float | $ 7,957,495,699 | ||
Entity Common Stock, Shares Outstanding | 4,491,863,747 |
Consolidated Statements of Comprehensive Income - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
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Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
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Revenue: | |||
Subscriber revenue | $ 4,472,522 | $ 4,196,852 | $ 3,824,793 |
Advertising revenue | 160,347 | 138,231 | 122,292 |
Equipment revenue | 131,586 | 118,947 | 110,923 |
Other revenue | 660,674 | 563,190 | 512,050 |
Total revenue | 5,425,129 | 5,017,220 | 4,570,058 |
Cost of services: | |||
Revenue share and royalties | 1,210,323 | 1,108,515 | 1,034,832 |
Programming and content | 388,033 | 353,779 | 293,091 |
Customer service and billing | 385,431 | 387,131 | 377,908 |
Satellite and transmission | 82,747 | 103,020 | 94,609 |
Cost of equipment | 35,448 | 40,882 | 42,724 |
Subscriber acquisition costs | 499,492 | 512,809 | 532,599 |
Sales and marketing | 437,739 | 386,724 | 354,189 |
Engineering, design and development | 112,427 | 82,146 | 64,403 |
General and administrative | 334,023 | 341,106 | 324,801 |
Depreciation and amortization | 298,602 | 268,979 | 272,214 |
Total operating expenses | 3,784,265 | 3,585,091 | 3,391,370 |
Income from operations | 1,640,864 | 1,432,129 | 1,178,688 |
Other income (expense): | |||
Interest expense | (345,820) | (331,225) | (299,103) |
Loss on extinguishment of debt | (43,679) | (24,229) | 0 |
Other income | 12,844 | 14,985 | 12,379 |
Total other expense | (376,655) | (340,469) | (286,724) |
Income before income taxes | 1,264,209 | 1,091,660 | 891,964 |
Income tax expense | (616,301) | (345,727) | (382,240) |
Net income | 647,908 | 745,933 | 509,724 |
Foreign currency translation adjustment, net of tax | 18,546 | 363 | (100) |
Total comprehensive income | $ 666,454 | $ 746,296 | $ 509,624 |
Net income per common share: | |||
Basic (in dollars per share) | $ 0.14 | $ 0.15 | $ 0.09 |
Diluted (in dollars per share) | $ 0.14 | $ 0.15 | $ 0.09 |
Weighted average common shares outstanding: | |||
Basic (in shares) | 4,637,553 | 4,917,050 | 5,375,707 |
Diluted (in shares) | 4,723,535 | 4,964,728 | 5,435,166 |
Dividends declared per common share (in dollars per share) | $ 0.041 | $ 0.01 | $ 0 |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 9,000,000,000 | 9,000,000,000 |
Common stock, shares issued (in shares) | 4,530,928,000 | 4,746,047,000 |
Common stock, shares outstanding (in shares) | 4,527,742,000 | 4,740,947,000 |
Treasury stock (in shares) | 3,186,000 | 5,100,000 |
Business & Basis of Presentation |
12 Months Ended | ||||||||||||
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Dec. 31, 2017 | |||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||
Business & Basis of Presentation | Business & Basis of Presentation This Annual Report on Form 10-K presents information for Sirius XM Holdings Inc. (“Holdings”). The terms “Holdings,” “we,” “us,” “our,” and “our company” as used herein and unless otherwise stated or indicated by context, refer to Sirius XM Holdings Inc. and its subsidiaries, and “Sirius XM” refers to our wholly-owned subsidiary Sirius XM Radio Inc. Holdings has no operations independent of its wholly-owned subsidiary, Sirius XM. Business We transmit music, sports, entertainment, comedy, talk, news, traffic and weather channels, as well as infotainment services, in the United States on a subscription fee basis through our two proprietary satellite radio systems. Subscribers can also receive music and other channels, plus features such as SiriusXM On Demand, over our Internet radio service, including through applications for mobile devices, home devices and other consumer electronic equipment. We also provide connected vehicle services. Our connected vehicle services are designed to enhance the safety, security and driving experience for vehicle operators while providing marketing and operational benefits to automakers and their dealers. We have agreements with every major automaker (“OEMs”) to offer satellite radio in their vehicles, through which we acquire the majority of our subscribers. We also acquire subscribers through marketing to owners and lessees of previously owned vehicles that include factory-installed satellite radios that are not currently subscribing to our services. Our satellite radios are primarily distributed through automakers, retailers, and our website. Satellite radio services are also offered to customers of certain rental car companies. Our primary source of revenue is subscription fees, with most of our customers subscribing to annual, semi-annual, quarterly or monthly plans. We offer discounts for prepaid, longer-term subscription plans, as well as a multiple subscription discount. We also derive revenue from activation and other fees, the sale of advertising on select non-music channels, the direct sale of satellite radios and accessories, and other ancillary services, such as our weather, traffic and data services. In certain cases, a subscription to our radio services is included in the sale or lease price of new or previously owned vehicles. The length of these subscriptions varies but is typically three to twelve months. We receive payments for these subscriptions from certain automakers. We also reimburse various automakers for certain costs associated with satellite radios installed in new vehicles and pay revenue share to various automakers. During the year ended December 31, 2017, we entered into several strategic transactions:
As of December 31, 2017, Liberty Media Corporation (“Liberty Media”) beneficially owned, directly and indirectly, approximately 70% of the outstanding shares of our common stock. As a result, we are a “controlled company” for the purposes of the NASDAQ corporate governance requirements. Basis of Presentation The accompanying consolidated financial statements of Holdings and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation. Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision makers in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have one reportable segment as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the consolidated results of operations of our business. We have evaluated events subsequent to the balance sheet date and prior to the filing of this Annual Report on Form 10-K for the year ended December 31, 2017 and have determined that no events have occurred that would require adjustment to our consolidated financial statements. For a discussion of subsequent events that do not require adjustment to our consolidated financial statements refer to Note 17. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, and income taxes. |
Acquisition |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition | Acquisition On April 18, 2017, Sirius XM acquired Automatic, a connected vehicle device and mobile application company, for an aggregate purchase price of $107,736, net of cash and restricted cash acquired of $819. Automatic has created and operates a data-driven platform that enables vehicle owners to be safer and drive smarter. The company's proprietary Automatic Pro and Automatic Lite connected car adapters provide, among other things, vehicle diagnostic alerts, emergency crash assistance, fuel monitoring, access to parking information and live vehicle location tracking. The condensed table below summarizes the fair value of the assets acquired and liabilities assumed:
The transaction was accounted for using the acquisition method of accounting. The fair value assessed for the majority of the assets acquired and liabilities assumed equaled their carrying value. The excess purchase price over identifiable net assets of $81,475 has been recorded to Goodwill in our consolidated balance sheets as of December 31, 2017. A total of $14,700 has been allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of software and technology and a total of $800 has been allocated to the Automatic trademark. We recognized acquisition related costs of $922 that were expensed in General and administrative expenses in our consolidated statements of comprehensive income during the year ended December 31, 2017. Pro forma financial information related to this acquisition has not been provided as it is not material to our consolidated results of operations. |
Summary of Significant Accounting Policies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies In addition to the significant accounting policies discussed in this Note 3, the following table includes our significant accounting policies that are described in other notes to our consolidated financial statements, including the number and page of the note:
Cash and Cash Equivalents Our cash and cash equivalents consist of cash on hand, money market funds, certificates of deposit, in-transit credit card receipts and highly liquid investments purchased with an original maturity of three months or less. Revenue Recognition We derive revenue primarily from subscribers, advertising and sales of radios and accessories. Revenue from subscribers consists primarily of subscription fees and other ancillary subscription based revenues. Revenue is recognized as it is realized or realizable and earned. We recognize subscription fees as our services are provided. Consumers purchasing or leasing a vehicle with a factory-installed satellite radio typically receive between a three and twelve month subscription to our service. In certain cases, the subscription fee for these consumers are prepaid by the applicable automaker. Prepaid subscription fees received from certain automakers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon retail sale and activation. There is no revenue recognized for unpaid trial subscriptions. We recognize revenue from the sale of advertising as the advertising is transmitted. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue. We pay certain third parties a percentage of advertising revenue. Advertising revenue is recorded gross of such revenue share payments as we are the primary obligor in the transaction. Advertising revenue share payments are recorded to Revenue share and royalties during the period in which the advertising is transmitted. Equipment revenue and royalties from the sale of satellite radios, components and accessories are recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to customers are recorded as revenue. Shipping and handling costs associated with shipping goods to customers are reported as a component of Cost of equipment. Other revenue primarily includes U.S. Music Royalty Fees which are recorded as other revenue and the cost component as Revenue share and royalties expense. Fees received from subscribers for the U.S. Music Royalty Fee are recorded as deferred revenue and amortized to revenue ratably over the service period. We report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a customer in our consolidated statements of comprehensive income. Accounting Standards Codification (“ASC”) 605, Revenue Recognition, provides guidance on how and when to recognize revenues for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets, such as in our bundled subscription plans. Revenue arrangements with multiple deliverables are required to be divided into separate units of accounting if the deliverables in the arrangement meet certain criteria. Consideration must be allocated at the inception of the arrangement to all deliverables based on their relative selling price, which has been determined using vendor specific objective evidence of the selling price to self-pay customers. Revenue Share We share a portion of our subscription revenues earned from self-pay subscribers and paid promotional subscribers with certain automakers. The terms of the revenue share agreements vary with each automaker, but are typically based upon the earned audio revenue as reported or gross billed audio revenue. Revenue share is recorded as an expense in our consolidated statements of comprehensive income and not as a reduction to revenue. Programming Costs Programming costs which are for a specified number of events are amortized on an event-by-event basis; programming costs which are for a specified season or include programming through a dedicated channel are amortized over the season or period on a straight-line basis. We allocate a portion of certain programming costs which are related to sponsorship and marketing activities to Sales and marketing expense on a straight-line basis over the term of the agreement. Advertising Costs Media is expensed when aired and advertising production costs are expensed as incurred. Advertising production costs include expenses related to marketing and retention activities, including expenses related to direct mail, outbound telemarketing and email communications. We also incur advertising production costs related to cooperative marketing and promotional events and sponsorships. During the years ended December 31, 2017, 2016 and 2015, we recorded advertising costs of $262,701, $226,969 and $206,351, respectively. These costs are reflected in Sales and marketing expense in our consolidated statements of comprehensive income. Subscriber Acquisition Costs Subscriber acquisition costs consist of costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; product warranty obligations; freight; and provisions for inventory allowance attributable to inventory consumed in our OEM and retail distribution channels. Subscriber acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios. Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment, receipt of product or activation and are included in Subscriber acquisition costs because we are responsible for providing the service to the customers. Commissions paid to retailers and automakers are expensed upon either the sale or activation of radios. Chipsets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers. Costs for chipsets not held on consignment are expensed as Subscriber acquisition costs when the automaker confirms receipt. Research & Development Costs Research and development costs are expensed as incurred and primarily include the cost of new product development, chipset design, software development and engineering. During the years ended December 31, 2017, 2016 and 2015, we recorded research and development costs of $96,917, $69,025 and $54,933, respectively. These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income. Accumulated Other Comprehensive Income (Loss) Accumulated other comprehensive income of $18,407 was primarily comprised of the cumulative foreign currency translation adjustments related to Sirius XM Canada (refer to Note 11 for additional information). During the year ended December 31, 2017, we recorded a foreign currency translation adjustment gain of $18,546, which is recorded net of tax of $11,286. During the years ended December 31, 2016 and 2015, we recorded a foreign currency translation adjustment gain of $363 and loss of $100, respectively, net of tax. Recent Accounting Pronouncements We elected to early adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, in the third quarter of 2016, which required that any adjustments be reflected as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture calculations, and classification on the statement of cash flows. The primary impact of adoption of ASU 2016-09 was the recognition of excess tax benefits in our provision for income taxes. Additionally, we recognized net operating losses related to excess share-based compensation tax return deductions that were previously tracked off balance sheet but not recorded in our financial statements. As of January 1, 2016, $293,896, net of a $1,946 reserve for an uncertain tax position, was recorded as an increase to our Deferred tax assets and decrease to our Accumulated deficit in our consolidated balance sheets as a result of the cumulative effect of this change in accounting principle. Additional amendments to this ASU related to income taxes and minimum statutory withholding tax requirements had no impact to Accumulated deficit, where the cumulative effect of these changes are required to be recorded. Further, there was no impact to our classification of awards as either equity or liabilities. We also elected to true-up forfeitures in the period of adoption and now recognize forfeitures as they occur. This ASU also required excess tax benefits to be separated from other income tax cash flows and classified as an operating activity, however, prior to adoption, there was no impact to the consolidated statement of cash flows as we have not had any excess tax benefits (windfalls) recorded for book purposes. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in our consolidated statement of cash flows as such cash flows have historically been presented as a financing activity. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This ASU eliminates Step 2 from the goodwill impairment test. Under the new guidance, entities should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, this ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We elected to early adopt ASU 2017-04 in the fourth quarter of 2017, which did not have an impact on our consolidated financial statements. Refer to Note 8 for information on this adoption. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption was permitted only for fiscal years beginning after December 15, 2016. In 2016, the FASB issued additional guidance which clarified principal versus agent considerations, identification of performance obligations and the implementation guidance for licensing. In addition, the FASB issued guidance regarding practical expedients related to disclosures of remaining performance obligations, as well as other amendments to the guidance on transition, collectibility, non-cash consideration and the presentation of sales and other similar taxes. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We will adopt this ASU under the modified retrospective method. We have completed our evaluation of the impact this ASU will have on our revenue streams. Based on our assessment of the impact of adopting this ASU on January 1, 2018, the most significant impact of the ASU relates to the reclassification of approximately $90,000 of Subscriber revenue to offset Revenue share and royalties and certain subsidy payments made to automakers associated with a paid promotional subscription and the impact of the timing of recognition of activation revenues. The adoption will not have a significant impact to our Net income. Within our consolidated balance sheets, upon adoption, the amount of revenue share associated with a paid promotional subscription to an automaker will be classified as a liability separate from deferred revenue. We expect the adjustment to our opening balance of Accumulated deficit to be approximately $19,000, net of tax, upon adoption. We have implemented the necessary changes to our business processes, systems and controls to support recognition and disclosure of this ASU upon adoption on January 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. This ASU must be adopted using a modified retrospective approach. We plan to adopt this ASU on January 1, 2019. We are in the process of evaluating the impact of adoption of this ASU on our consolidated financial statements. We currently believe that the most significant changes will be related to the recognition of right-of-use assets and lease liability on our consolidated balance sheets for operating leases. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements The fair value of a financial instrument is the amount at which the instrument could be exchanged in an orderly transaction between market participants. As of December 31, 2017 and 2016, the carrying amounts of cash and cash equivalents, receivables, and accounts payable approximated fair value due to the short-term nature of these instruments. ASC 820, Fair Value Measurements and Disclosures, establishes a fair value hierarchy for input into valuation techniques as follows:
Investments are periodically reviewed for impairment and an impairment is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, we consider, among other factors, the severity and duration of the decline as well as the likelihood of a recovery within a reasonable timeframe. Our assets and liabilities measured at fair value were as follows:
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Earnings per Share |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings per Share | Earnings per Share Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period. Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options and restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. We had no participating securities during the years ended December 31, 2017, 2016 and 2015. Common stock equivalents of 40,541 for the year ended December 31, 2017 and 208,202 and 151,112 for the years ended December 31, 2016 and 2015, respectively, were excluded from the calculation of diluted net income per common share as the effect would have been anti-dilutive.
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Receivables, net |
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables, net | Receivables, net Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. Customer accounts receivable, net, includes receivables from our subscribers and other customers, including advertising, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors. We consider historical experience, the age of the receivable balances, current economic conditions and other factors that may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and billing expense in our consolidated statements of comprehensive income. Receivables from distributors primarily include billed and unbilled amounts due from OEMs for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced. We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with OEMs or other third parties. Receivables, net, consists of the following:
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Inventory, net |
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Inventory, net | Inventory, net Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios and connected vehicle devices. Inventory is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for resale in our direct to consumer distribution channel and components held for resale by us is reported as a component of Cost of equipment in our consolidated statements of comprehensive income. The provision related to inventory consumed in our OEM channel is reported as a component of Subscriber acquisition costs in our consolidated statements of comprehensive income. Inventory, net, consists of the following:
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Goodwill |
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Goodwill and Intangible Assets Disclosure [Abstract] | |
Goodwill | Goodwill Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our single reporting unit is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), during the fourth quarter of 2017. ASC 350 states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Under the updated guidance, the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment is eliminated. The carrying amount and goodwill recorded for our one reporting unit was $(1,523,874) and $2,286,582, respectively, as of December 31, 2017. We were not aware of any adverse qualitative factors that would indicate any impairment to our goodwill as of the date of our annual assessment for 2017 and as of December 31, 2017. No impairment losses were recorded for goodwill during the years ended December 31, 2017, 2016 and 2015. As of December 31, 2017, the cumulative balance of goodwill impairments recorded since the July 2008 merger (the “Merger”) between our wholly owned subsidiary, Vernon Merger Corporation, and XM Satellite Radio Holdings Inc. (“XM”), was $4,766,190, which was recognized during the year ended December 31, 2008. As a result of the acquisition of Automatic, we recorded additional goodwill of $81,475 during the year ended December 31, 2017. |
Intangible Assets |
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Intangible Assets | Intangible Assets Our intangible assets include the following:
Indefinite Life Intangible Assets We have identified our FCC licenses and the XM trademark as indefinite life intangible assets after considering the expected use of the assets, the regulatory and economic environment within which they are used and the effects of obsolescence on their use. As part of the Automatic acquisition in April 2017, we have also identified $800 related to its trademark. We hold FCC licenses to operate our satellite digital audio radio service and provide ancillary services. The following table outlines the years in which each of our satellite licenses expires:
Prior to expiration, we are 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. Each of the FCC licenses authorizes us to use the radio spectrum, which is a renewable, reusable resource that does not deplete or exhaust over time. ASC 350-30-35, Intangibles - Goodwill and Other, provides for an option to first perform a qualitative assessment to determine whether it is more likely than not that an asset is impaired. If the qualitative assessment supports that it is more likely than not that the fair value of the asset exceeds its carrying value, a quantitative impairment test is not required. If the qualitative assessment does not support the fair value of the asset, then a quantitative assessment is performed. Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. We completed qualitative assessments of our FCC licenses and XM trademark during the fourth quarter of 2017, 2016 and 2015. As of the date of our annual assessment for 2017, 2016 and 2015, our qualitative impairment assessment of the fair value of our indefinite intangible assets indicated that such assets substantially exceeded their carrying value and therefore was not at risk of impairment. No impairments were recorded for intangible assets with indefinite lives during the years ended December 31, 2017, 2016 and 2015. Definite Life Intangible Assets Definite-lived intangible assets are amortized over their respective estimated useful lives to their estimated residual values, in a pattern that reflects when the economic benefits will be consumed, and are reviewed for impairment under the provisions of ASC 360-10-35, Property, Plant and Equipment/Overall/Subsequent Measurement. We review intangible assets subject to amortization for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the carrying amount of the asset exceeds its fair value. No impairments were recorded for intangible assets with definite lives during the years ended December 31, 2017, 2016 and 2015. As part of the Automatic acquisition in April 2017, $14,700 was allocated to identifiable intangible assets subject to amortization and relates to the assessed fair value of software and technology. Amortization expense for all definite life intangible assets was $37,455, $48,545 and $51,700 for the years ended December 31, 2017, 2016 and 2015, respectively. Expected amortization expense for the each of the fiscal years 2018 through 2022 and for periods thereafter is as follows:
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Property and Equipment |
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Property and Equipment | Property and Equipment Property and equipment, including satellites, are stated at cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the following estimated useful life of the asset:
We review long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated future cash flows, an impairment charge is recognized in an amount by which the carrying amount exceeds the fair value of the asset. We did not record any impairments during the years ended December 31, 2017, 2016 and 2015. Property and equipment, net, consists of the following:
Construction in progress consists of the following:
Depreciation and amortization expense on property and equipment was $261,147, $220,434 and $220,514 for the years ended December 31, 2017, 2016 and 2015, respectively. We retired property and equipment of $78,559, $843,129 and $43,833 during the years ended December 31, 2017, 2016 and 2015, respectively, which included approximately $801,206 related to satellites during 2016. We recognized a loss on disposal of assets of $12,912 and $7,384, which was recorded in Satellite and transmission expense in our consolidated statements of comprehensive income, during the years ended December 31, 2016 and 2015, respectively, which related to the disposal of certain obsolete spare parts for a future satellite and obsolete terrestrial repeaters and related parts, respectively. We did not recognize any loss on disposal of assets during the year ended December 31, 2017. We capitalize a portion of the interest on funds borrowed to finance the construction and launch of our satellites and launch vehicles. Capitalized interest is recorded as part of the asset’s cost and depreciated over the satellite’s useful life. Capitalized interest costs were $4,948 and $419 for the years ended December 31, 2017 and 2016, respectively, which related to the construction of our SXM-7 and SXM-8 satellites. We did not capitalize any interest costs for the year ended December 31, 2015. Satellites As of December 31, 2017, we owned a fleet of five satellites. The chart below provides certain information on our satellites as of December 31, 2017:
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Related Party Transactions |
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Related Party Transactions | Related Party Transactions In the normal course of business, we enter into transactions with related parties. Liberty Media As of December 31, 2017, Liberty Media beneficially owned, directly and indirectly, approximately 70% of the outstanding shares of our common stock. Liberty Media has two executives and one of its directors on our board of directors. Gregory B. Maffei, the President and Chief Executive Officer of Liberty Media, is the Chairman of our board of directors. Sirius XM Canada On May 25, 2017, Sirius XM completed a recapitalization of Sirius XM Canada (the “Transaction”), which is now a privately held corporation. Following the Transaction, Sirius XM holds a 70% equity interest and 33% voting interest in Sirius XM Canada, with the remainder of the voting power and equity interests held by two of Sirius XM Canada’s previous shareholders. The total consideration from Sirius XM to Sirius XM Canada, excluding transaction costs, during the year ended December 31, 2017 was $308,526, which included $129,676 in cash and we issued 35,000 shares of our common stock with an aggregate value of $178,850 to the holders of the shares of Sirius XM Canada acquired in the Transaction. Sirius XM received common stock, non-voting common stock and preferred stock of Sirius XM Canada. We own 590,950 shares of preferred stock of Sirius XM Canada, which has a liquidation preference of one Canadian dollar per share. In connection with the Transaction, Sirius XM also made a contribution in the form of a loan to Sirius XM Canada in the aggregate amount of $130,794. The loan is denominated in Canadian dollars and is considered a long-term investment with any unrealized gains or losses reported within Accumulated other comprehensive (loss) income. The loan has a term of fifteen years, bears interest at a rate of 7.62% per annum and includes customary covenants and events of default, including an event of default relating to Sirius XM Canada’s failure to maintain specified leverage ratios. The terms of the loan require Sirius XM Canada to prepay a portion of the outstanding principal amount of the loan within sixty days of the end of each fiscal year in an amount equal to any cash on hand in excess of C$10,000 at the last day of the financial year if all target dividends have been paid in full. In connection with the Transaction, Sirius XM also entered into a Services Agreement and an Advisory Services Agreement with Sirius XM Canada. Each agreement has a thirty year term. Pursuant to the Services Agreement, Sirius XM Canada will pay Sirius XM 25% of its gross revenues on a monthly basis through December 31, 2021 and 30% of its gross revenues on a monthly basis thereafter. Pursuant to the Advisory Services Agreement, Sirius XM Canada will pay Sirius XM 5% of its gross revenues on a monthly basis. These agreements superseded and replaced the former agreements between Sirius XM Canada and its predecessors and Sirius XM. Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance. The difference between our investment and our share of the fair value of the underlying net assets of Sirius XM Canada is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. We follow ASC 350, Intangibles - Goodwill and Other, which requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. The amortization of equity method finite-lived intangible assets is recorded in Other income in our consolidated statements of comprehensive income. We periodically evaluate our equity method investments to determine if there has been an other-than temporary decline in fair value below carrying value. Equity method finite-lived intangibles, indefinite-lived intangibles and goodwill are included in the carrying amount of the investment. We had the following related party balances associated with Sirius XM Canada:
Under the former agreement with Sirius XM Canada, as of December 31, 2016, our related party current assets balance primarily consisted of activation fees and streaming and chipset costs for which we were reimbursed. As of December 31, 2017, our related party current asset balance included amounts due under the Services Agreement and Advisory Services Agreement and certain amounts related to transactions outside the scope of the new services arrangements. Our related party long-term assets balance as of December 31, 2017 and December 31, 2016 included the carrying value of our investment balance in Sirius XM Canada of $341,214 and $8,615, respectively, and, as of December 31, 2017, also included $140,073 for the current value of the outstanding loan to Sirius XM Canada. Our related party liabilities as of each of December 31, 2017 and December 31, 2016 included $2,776 for the current portion of deferred revenue and $5,088 and $7,867, respectively, for the long-term portion of deferred revenue recorded as of the Merger date related to agreements with legacy XM Canada, now Sirius XM Canada. These costs are being amortized on a straight line basis through 2020. We recorded the following revenue and other income associated with Sirius XM Canada in our consolidated statements of comprehensive income:
Pandora On September 22, 2017, Sirius XM completed a $480,000 investment in Pandora. Pursuant to an Investment Agreement with Pandora, Sirius XM purchased 480 shares of Pandora’s Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $480,000. The Series A Preferred Stock, including accrued but unpaid dividends, represents a stake of approximately 19% of Pandora's currently outstanding common stock, and approximately a 16% interest on an as-converted basis. Pandora operates an internet-based music discovery platform, offering a personalized experience for listeners. The Series A Preferred Stock is convertible at the option of the holders at any time into shares of common stock of Pandora (“Pandora Common Stock”) at an initial conversion price of $10.50 per share of Pandora Common Stock and an initial conversion rate of 95.2381 shares of Pandora Common Stock per share of Series A Preferred Stock, subject to certain customary anti-dilution adjustments. Holders of the Series A Preferred Stock are entitled to a cumulative dividend at the rate of 6.0% per annum, payable quarterly in arrears, if and when declared. Pandora has the option to pay dividends in cash when authorized by their Board and declared by Pandora or accumulate dividends in lieu of paying cash. Any conversion of Series A Preferred Stock may be settled by Pandora, at its option, in shares of Pandora Common Stock, cash or any combination thereof. However, unless and until Pandora’s stockholders have approved the issuance of greater than 19.99% of the outstanding Pandora Common Stock, the Series A Preferred Stock may not be converted into more than 19.99% of Pandora’s outstanding Pandora Common Stock as of June 9, 2017. The liquidation preference of the Series A Preferred Stock, including accrued dividends of $10,849, was $490,849 as of December 31, 2017. The investment includes a mandatory redemption feature on any date from and after September 22, 2022 whereby Sirius XM, at its option, may require Pandora to purchase the Series A Preferred Stock at a price equal to 100% of the liquidation preference plus accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, and as such the investment qualifies as a debt security under ASC 320, Investments-Debt and Equity Securities. As the investment includes a conversion option, we have elected to account for this investment under the fair value option to reduce the accounting asymmetry that would otherwise arise when recognizing the changes in the fair value of available-for-sale investments. Under the fair value option, any gains (losses) associated with the change in fair value will be recognized in Other income within our consolidated statements of comprehensive income. A $472 unrealized gain was recognized during the year ended December 31, 2017 as Other income in our consolidated statements of comprehensive income associated with this investment. The fair value of our investment, including accrued dividends, as of December 31, 2017 was $480,472 and is recorded as a related party long-term asset within our consolidated balance sheets. This investment does not meet the requirements for the equity method of accounting as it does not qualify as in-substance common stock. We have appointed James E. Meyer, our Chief Executive Officer, David J. Frear, our Senior Executive Vice President and Chief Financial Officer, and Gregory B. Maffei, the Chairman of our Board of Directors, to Pandora's Board of Directors pursuant to our designation rights under the Investment Agreement. Mr. Maffei also serves as the Chairman of Pandora's Board of Directors. Upon certain change of control events involving Pandora, Pandora is required to repurchase all of the Series A Preferred Stock at a price equal to the greater of (1) an amount in cash equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends through June 9, 2022 (assuming such shares of Series A Preferred Stock remain outstanding through such date) and (2) the consideration the holders would have received if they had converted their shares of Series A Preferred Stock into Pandora Common Stock immediately prior to the change of control event (disregarding the 19.99% cap). Beginning on September 22, 2020, if the volume weighted average price per share of Pandora Common Stock exceeds $18.375, as may be adjusted, for at least 20 trading days in any period of 30 consecutive trading days, Pandora may redeem all of the outstanding Series A Preferred Stock at a price equal to 100% of the liquidation preference thereof plus all accrued but unpaid dividends for, at the election of Pandora, cash, shares of Pandora Common Stock or a combination thereof, provided that, unless stockholder approval has been received, Pandora may not settle the redemption for shares of Pandora Common Stock to the extent the 19.99% cap would be exceeded. |
Debt |
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Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt Our debt as of December 31, 2017 and 2016 consisted of the following:
Covenants and Restrictions Under the Credit Facility, Sirius XM, our wholly-owned subsidiary, must comply with a debt maintenance covenant that it cannot exceed a total leverage ratio, calculated as consolidated total debt to consolidated operating cash flow, of 5.0 to 1.0. The Credit Facility generally requires compliance with certain covenants that restrict Sirius XM's 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 Sirius XM's assets, and (vii) make voluntary prepayments of certain debt, in each case subject to exceptions. The indentures governing Sirius XM's notes restrict Sirius XM's non-guarantor subsidiaries' ability to create, assume, incur or guarantee additional indebtedness without such non-guarantor subsidiary guaranteeing each such series of notes on a pari passu basis. The indentures governing the notes also contain covenants that, among other things, limit Sirius XM's ability and the ability of its subsidiaries to create certain liens; enter into sale/leaseback transactions; and merge or consolidate. Under Sirius XM's debt agreements, the following generally constitute an event of default: (i) a default in the payment of interest; (ii) a default in the payment of principal; (iii) failure to comply with covenants; (iv) failure to pay other indebtedness after final maturity or acceleration of other indebtedness exceeding a specified amount; (v) certain events of bankruptcy; (vi) a judgment for payment of money exceeding a specified aggregate amount; and (vii) voidance of subsidiary guarantees, subject to grace periods where applicable. If an event of default occurs and is continuing, our debt could become immediately due and payable. At December 31, 2017 and 2016, we were in compliance with our debt covenants. |
Stockholders' Equity |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' Equity | Stockholders’ Equity Common Stock, par value $0.001 per share We are authorized to issue up to 9,000,000 shares of common stock. There were 4,530,928 and 4,746,047 shares of common stock issued and 4,527,742 and 4,740,947 shares outstanding on December 31, 2017 and 2016, respectively. As part of the recapitalization of Sirius XM Canada, we issued 35,000 shares of our common stock to the holders of the shares of Sirius XM Canada. As of December 31, 2017, there were 311,780 shares of common stock reserved for issuance in connection with outstanding stock based awards and common stock to be granted to members of our board of directors, employees and third parties. Quarterly Dividends During the year ended December 31, 2017, our board of directors declared the following dividends:
Stock Repurchase Program As of December 31, 2017, our board of directors had approved for repurchase an aggregate of $10,000,000 of our common stock. Our board of directors did not establish an end date for this stock repurchase program. Shares of common stock may be purchased from time to time on the open market, pursuant to pre-set trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act, in privately negotiated transactions, including transactions with Liberty Media and its affiliates, or otherwise. As of December 31, 2017, our cumulative repurchases since December 2012 under our stock repurchase program totaled 2,474,135 shares for $9,377,120, and $622,880 remained available under our stock repurchase program. The following table summarizes our total share repurchase activity for the years ended:
Preferred Stock, par value $0.001 per share We are authorized to issue up to 50,000 shares of undesignated preferred stock with a liquidation preference of $0.001 per share. There were no shares of preferred stock issued or outstanding as of December 31, 2017 and 2016. |
Benefit Plans |
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Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans We recognized share-based payment expense of $124,069, $108,604 and $84,310 for the years ended December 31, 2017, 2016 and 2015, respectively. We account for equity instruments granted to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on fair value. Upon adoption of ASU 2016-09 as of January 1, 2016 we recorded actual forfeitures and no longer estimate forfeitures. For the year ended December 31, 2015, we estimated forfeitures at the time of the grant. We use the Black-Scholes-Merton option-pricing model to value stock option awards and have elected to treat awards with graded vesting as a single award. Share-based compensation expense is recognized ratably over the requisite service period, which is generally the vesting period. We measure restricted stock awards and units using the fair market value of the restricted shares of common stock on the day the award is granted. Stock-based awards granted to employees, non-employees and members of our board of directors include stock options, stock awards and restricted stock units. We apply variable accounting to our non-employee stock-based awards, whereby we remeasure the value of such awards at each balance sheet date. Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility, expected dividend yield and risk-free interest rates. For the years ended December 31, 2017, 2016 and 2015, we estimated the fair value of awards granted using the hybrid approach for volatility, which weights observable historical volatility and implied volatility of qualifying actively traded options on our common stock. The expected life assumption represents the weighted-average period stock-based awards are expected to remain outstanding. These expected life assumptions are established through a review of historical exercise behavior of stock-based award grants with similar vesting periods. Where historical patterns do not exist, contractual terms are used. Dividend yield is based on the current expected annual dividend per share and our stock price. The risk-free interest rate represents the daily treasury yield curve rate at the grant date based on the closing market bid yields on actively traded U.S. treasury securities in the over-the-counter market for the expected term. Our assumptions may change in future periods. 2015 Long-Term Stock Incentive Plan In May 2015, our stockholders approved the Sirius XM Holdings Inc. 2015 Long-Term Stock Incentive Plan (the “2015 Plan”). Employees, consultants and members of our board of directors are eligible to receive awards under the 2015 Plan. The 2015 Plan provides for the grant of stock options, restricted stock awards, restricted stock units and other stock-based awards that the compensation committee of our board of directors deem appropriate. Stock-based awards granted under the 2015 Plan are generally subject to a graded vesting requirement, which is generally three to four years from the grant date. Stock options generally expire ten years from the date of grant. Restricted stock units include performance-based restricted stock units (“PRSUs”), the vesting of which are subject to the achievement of performance goals and the employee's continued employment and generally cliff vest on the three-year anniversary of the grant date. Each restricted stock unit entitles the holder to receive one share of common stock upon vesting. As of December 31, 2017, 171,388 shares of common stock were available for future grants under the 2015 Plan. Other Plans We maintain three other share-based benefit plans — the Sirius XM Radio Inc. 2009 Long-Term Stock Incentive Plan, the XM 2007 Stock Incentive Plan and the Amended and Restated Sirius Satellite Radio 2003 Long-Term Stock Incentive Plan. Excluding dividend equivalent units granted as a result of a declared dividend, no further awards may be made under these plans. The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of our board of directors:
The following table summarizes the weighted-average assumptions used to compute the fair value of options granted in 2015 to third parties, other than non-employee members of our board of directors:
There were no options granted to third parties during the years ended December 31, 2017 and 2016. Since we did not historically pay dividends on our common stock prior to the fourth quarter of 2016, the expected dividend yield used in the Black-Scholes-Merton option-pricing model was less than one percent for the year ended December 31, 2016 and zero for the year ended December 31, 2015. The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2017, 2016 and 2015:
The weighted average grant date fair value per share of options granted during the years ended December 31, 2017, 2016 and 2015 was $1.17, $0.81 and $1.11, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2017, 2016 and 2015 was $166,517, $81,204, and $117,944, respectively. During the years ended December 31, 2017, 2016 and 2015 the number of net settled shares which were issued as a result of stock option exercises were 16,957, 10,918 and 17,652, respectively. We recognized share-based payment expense associated with stock options of $78,491, $80,266 and $70,084 for the years ended December 31, 2017, 2016 and 2015, respectively. The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the years ended December 31, 2017, 2016 and 2015:
The total intrinsic value of restricted stock units and stock awards vesting during the years ended December 31, 2017, 2016 and 2015, was $48,473, $17,807 and $13,720, respectively. During the years ended December 31, 2017, 2016 and 2015 the number of net settled shares which were issued as a result of restricted stock units vesting and the number of share issued from stock awards granted totaled 5,365, 2,493 and 2,088, respectively. During the years ended December 31, 2017 and 2016, we granted 938 and 3,036 PRSUs to certain employees, respectively. We believe it is probable that the performance target applicable to these PRSUs will be achieved. In connection with the cash dividends paid during the years ended December 31, 2017 and 2016, we granted 247 and 70 restricted stock units, respectively, including PRSUs, in accordance with the terms of existing award agreements. These grants did not result in any additional incremental share-based payment expense being recognized during the years ended December 31, 2017 and 2016. We recognized share-based payment expense associated with restricted stock units, including PRSUs, and stock awards of $45,578, $28,338 and $14,226 for the years ended December 31, 2017, 2016 and 2015, respectively. Total unrecognized compensation costs related to unvested share-based payment awards for stock options and restricted stock units granted to employees, members of our board of directors and third parties at December 31, 2017 and 2016 were $241,521 and $266,045, respectively. The total unrecognized compensation costs at December 31, 2017 are expected to be recognized over a weighted-average period of 2.5 years. 401(k) Savings Plan Sirius XM sponsors the Sirius XM Radio Inc. 401(k) Savings Plan (the “Sirius XM Plan”) for eligible employees. The Sirius XM Plan allows eligible employees to voluntarily contribute from 1% to 50% of their pre-tax eligible earnings, subject to certain defined limits. We match 50% of an employee’s voluntary contributions per pay period on the first 6% of an employee’s pre-tax salary up to a maximum of 3% of eligible compensation. We may also make additional discretionary matching, true-up matching and non-elective contributions to the Sirius XM Plan. Employer matching contributions under the Sirius XM Plan vest at a rate of 33.33% for each year of employment and are fully vested after three years of employment for all current and future contributions. Our cash employer matching contributions are not used to purchase shares of our common stock on the open market, unless the employee elects our common stock as their investment option for this contribution. We recognized $7,582, $7,104 and $8,144 in expense during the years ended December 31, 2017, 2016 and 2015, respectively, in connection with the Sirius XM Plan. Sirius XM Holdings Inc. Deferred Compensation Plan In 2015, we adopted the Sirius XM Holdings Inc. Deferred Compensation Plan (the “DCP”). The DCP allows members of our board of directors and certain eligible employees to defer all or a portion of their base salary, cash incentive compensation and/or board of directors’ cash compensation, as applicable. Pursuant to the terms of the DCP, we may elect to make additional contributions beyond amounts deferred by participants, but we are under no obligation to do so. We have established a grantor (or “rabbi”) trust to facilitate the payment of our obligations under the DCP. Contributions to the DCP, net of withdrawals, for the years ended December 31, 2017 and 2016 were $7,628 and $4,295, respectively. There were no contributions to the DCP for the year ended December 31, 2015. As of December 31, 2017 and 2016, the fair value of the investments held in the trust were $14,641 and $4,854, respectively, which are included in Other long-term assets in our consolidated balance sheets and are classified as trading securities. Trading gains and losses associated with these investments are recorded in Other income within our consolidated statements of comprehensive income. The associated liability is recorded within Other long-term liabilities in our consolidated balance sheets, and any increase or decrease in the liability is recorded in General and administration expense within our consolidated statements of comprehensive income. For the years ended December 31, 2017 and 2016, we recorded an immaterial amount of unrealized gains on investments held in the trust. |
Commitments and Contingencies |
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Commitments and Contingencies | Commitments and Contingencies The following table summarizes our expected contractual cash commitments as of December 31, 2017:
Debt obligations. Debt obligations include principal payments on outstanding debt and capital lease obligations. Cash interest payments. Cash interest payments include interest due on outstanding debt and capital lease payments through maturity. Satellite and transmission. We have entered into agreements to design, build, launch and insure two satellites, SXM-7 and SXM-8, with several third parties. We also have entered into agreements with third parties to operate and maintain satellite telemetry, tracking and control facilities and certain components of our terrestrial repeater networks. Programming and content. We have entered into various programming agreements. Under the terms of these agreements, our obligations include fixed payments, advertising commitments and revenue sharing arrangements. Our future revenue sharing costs are dependent upon many factors and are difficult to estimate; therefore, they are not included in our minimum contractual cash commitments. Marketing and distribution. We have entered into various marketing, sponsorship and distribution agreements to promote our brand and are obligated to make payments to sponsors, retailers, automakers and radio manufacturers under these agreements. Certain programming and content agreements also require us to purchase advertising on properties owned or controlled by the licensors. We also reimburse automakers for certain costs associated with the incorporation of satellite radios into new vehicles they manufacture. Satellite incentive payments. Boeing Satellite Systems International, Inc., the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to XM-3 and XM-4 meeting their fifteen-year design life, which we expect to occur. Boeing may also be entitled to up to $10,000 of additional incentive payments if our XM-4 satellite continues to operate above baseline specifications during the five years beyond the satellite’s fifteen-year design life. Space Systems/Loral, the manufacturer of certain of our in-orbit satellites, may be entitled to future in-orbit performance payments with respect to XM-5, SIRIUS FM-5 and SIRIUS FM-6 meeting their fifteen-year design life, which we expect to occur. Operating lease obligations. We have entered into both cancelable and non-cancelable operating leases for office space, equipment and terrestrial repeaters. These leases provide for minimum lease payments, additional operating expense charges, leasehold improvements and rent escalations that have initial terms ranging from one to fifteen years, and certain leases have options to renew. The effect of the rent holidays and rent concessions are recognized on a straight-line basis over the lease term, including reasonably assured renewal periods. Total rent recognized in connection with leases for the years ended December 31, 2017, 2016 and 2015 was $43,375, $46,968 and $47,679, respectively. Other. We have entered into various agreements with third parties for general operating purposes. In addition to the minimum contractual cash commitments described above, we have entered into agreements with other variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate; however, these costs may be substantial. We may enter into additional programming, distribution, marketing and other agreements that contain similar variable cost provisions. The cost of our common stock acquired in our capital return program but not paid for as of December 31, 2017 was also included in this category. In addition to the expected contractual cash commitments above, we also have a surety bond of approximately $45,000 primarily used as security against non-performance in the normal course of business. We do not have any other significant off-balance sheet financing arrangements that are reasonably likely to have a material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. Legal Proceedings In the ordinary course of business, we are a defendant or party to various claims and lawsuits, including the following discussed below. We record a liability when we believe that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. We evaluate developments in legal matters that could affect the amount of liability that has been previously accrued and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss. We may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others, because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) there remain significant factual issues to be determined or resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal theories. In such instances, there may be considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. SoundExchange Royalty Claims. In August 2013, SoundExchange, Inc. filed a complaint in the United States District Court for the District of Columbia (“SoundExchange I”) alleging that we underpaid royalties for statutory licenses in violation of the regulations established by the Copyright Royalty Board for the 2007-2012 period. SoundExchange principally alleges that we improperly reduced our gross revenues subject to royalties by deducting revenue attributable to pre-1972 recordings and Premier package revenue that was not “separately charged” as required by the regulations. We believe that we properly applied the gross revenue exclusions contained in the regulations established by the Copyright Royalty Board. SoundExchange is seeking compensatory damages of not less than $50,000 and up to $100,000 or more, payment of late fees and interest, and attorneys’ fees and costs. In August 2014, the United States District Court for the District of Columbia, in response to our motion to dismiss the complaint, stayed the case on the grounds that it properly should be pursued in the first instance before the Copyright Royalty Board rather than the District Court. In its opinion, the District Court concluded that the gross revenue exclusions in the regulations established by the Copyright Royalty Board for the 2007-2012 period were ambiguous and did not, on their face, make clear whether our royalty calculation approaches were permissible under the regulations. In December 2014, SoundExchange filed a petition with the Copyright Royalty Board requesting an order interpreting the applicable regulations. On September 11, 2017, the Copyright Royalty Board issued a ruling concluding that we correctly interpreted the revenue exclusions applicable to pre-1972 recordings. Given the limitations on its jurisdiction, the Copyright Royalty Board deferred to further proceedings in the District Court the question of whether we properly applied those pre-1972 revenue exclusions when calculating our royalty payments. The Judges also concluded that we improperly claimed a revenue exclusion based on our Premier package upcharge, because, in the Judges’ view, the portion of the package that contained programming that did not include sound recordings was not offered for a “separate charge.” We have filed a notice of appeal of this ruling to the United States Court of Appeals for the District of Columbia Circuit. We expect that the ruling by the Copyright Royalty Board in this matter will be transmitted back to the District Court for further proceedings, such as adjudication of claims relating to damages and defenses, although those proceedings may be delayed pending the appeal of the Judges’ interpretive decision. We believe we have substantial defenses to SoundExchange claims that can be asserted in the District Court, and will continue to defend this action vigorously. This matter is captioned SoundExchange, Inc. v. Sirius XM Radio, Inc., No.13-cv-1290-RJL (D.D.C.); the Copyright Royalty Board referral was adjudicated under the caption Determination of Rates and Terms for Preexisting Subscription Services and Satellite Digital Audio Radio Services, United States Copyright Royalty Board, No. 2006-1 CRB DSTRA. Information concerning SoundExchange I is publicly available in filings under the docket numbers. On December 12, 2017, SoundExchange filed second action against us under the Copyright Act in the United States District Court for the District of Columbia (“SoundExchange II”). This action includes claims that SoundExchange has also attempted to add to the SoundExchange I litigation through a proposed amended complaint. SoundExchange alleges that we have systematically underpaid it for our statutory license by impermissible understating our gross revenues, as defined in the applicable regulations and, in certain cases, understating the performances of recordings on our internet radio service. Specifically, the complaint in SoundExchange II alleges that: from at least 2013 through the present, we improperly excluded from gross revenues a portion of our revenues received from our Premier and All Access packages attributable to premium channels; at least between 2010 and 2012, we improperly excluded late fees received from subscribers from the calculation of gross revenues; at least between 2010 and 2012, we improperly excluded certain credits, adjustments and bad debt for which the underlying revenues had never been included in the first instance; at least between 2010 and 2012, we improperly deducted from gross revenues certain transaction fees and other expenses - for instance, credit card processing fees, collection fees and sales and use taxes - that are purportedly not permitted by the Copyright Royalty Board regulations; at least between 2010 and 2012, we improperly deducted amounts attributable to performances of recordings claimed to be directly licensed on both our satellite radio and internet radio services, even though they were not; at least between 2010 and 2012, we improperly excluded from royalty calculations performances of recordings less than thirty seconds long under the provisions of the Copyright Royalty Board regulations and the Webcaster Settlement Agreement; from 2010 through 2012, we excluded from royalty calculations performances of songs on our internet radio services that we claimed we were unable to identify; we owe associated late fees for the previously identified underpayments under the applicable Copyright Royalty Board regulations; and we have underpaid SoundExchange by an amount exceeding 10% of the royalty payment and we are therefore obligated to pay the reasonable costs of an audit. We believe that we properly applied in all material respects the regulations established by the Copyright Royalty Board. SoundExchange is seeking compensatory damages in an amount to be determined at trial from the alleged underpayments, unspecified late fees and penalties pursuant to the Copyright Royalty Board’s regulations and the Webcaster Settlement Agreement and costs, including reasonable attorney fees and expenses. This matter is titled SoundExchange, Inc. v. Sirius XM Radio, Inc., No.17-cv-02666-RJL (D.D.C.). Information concerning SoundExchange II is publicly available in filings under the docket number. As of December 31, 2017, we concluded a loss, in excess of our recorded liabilities, was considered remote in connection with SoundExchange I or SoundExchange II. The assumptions underlying our conclusions may change from time to time and the actual loss may vary from the amounts recorded. Telephone Consumer Protection Act Suits. On March 13, 2017, Thomas Buchanan, individually and on behalf of all others similarly situated, filed a class action complaint against us in the United States District Court for the Northern District of Texas, Dallas Division. The plaintiff in this action alleges that we violated the Telephone Consumer Protection Act of 1991 (the “TCPA”) by, among other things, making telephone solicitations to persons on the National Do-Not-Call registry, a database established to allow consumers to exclude themselves from telemarketing calls unless they consent to receive the calls in a signed, written agreement, and making calls to consumers in violation of our internal Do-Not-Call registry. The plaintiff is seeking various forms of relief, including statutory damages of five hundred dollars for each violation of the TCPA or, in the alternative, treble damages of up to fifteen hundred dollars for each knowing and willful violation of the TCPA and a permanent injunction prohibiting us from making, or having made, any calls to land lines that are listed on the National Do-Not-Call registry or our internal Do-Not-Call registry. We believe we have substantial defenses to the claims asserted in this action, and we intend to defend this action vigorously. Other Matters. In the ordinary course of business, we are a defendant in various other lawsuits and arbitration proceedings, including derivative actions; actions filed by subscribers, both on behalf of themselves and on a class action basis; former employees; parties to contracts or leases; and owners of patents, trademarks, copyrights or other intellectual property. None of these other matters, in our opinion, is likely to have a material adverse effect on our business, financial condition or results of operations. |
Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes There is no current U.S. federal income tax provision, as all federal taxable income was offset by utilizing U.S. federal net operating loss carryforwards. The current state income tax provision is primarily related to taxable income in certain States that have suspended or limited the ability to use net operating loss carryforwards or where net operating losses have been fully utilized. The current foreign income tax provision is primarily related to foreign withholding taxes on dividends paid to us by Sirius XM Canada. Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities. We file a consolidated federal income tax return for all of our wholly-owned subsidiaries, including Sirius XM. Income tax expense consisted of the following:
The following table presents a reconciliation of the U.S. federal statutory tax rate and our effective tax rate:
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code that affects 2017, including, but not limited to, accelerated depreciation that will allow for full expensing of qualified property. The Tax Act also establishes new tax laws that will affect 2018 and after, including a reduction in the U.S. federal corporate income tax rate from 35% to 21%. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740, Income Taxes. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record and provisional estimate in the financial statements. As a result of the reduction of the federal corporate income tax rate, we have revalued our net deferred tax asset, excluding after tax credits, as of December 31, 2017. Based on this revaluation, we have recorded a net tax expense of $184,599 to reduce our net deferred tax asset balance, which was recorded as additional income tax expense for the year ended December 31, 2017. Our effective tax rate increased by 14.6% to 48.7% primarily as a result of the revaluation of our net deferred tax asset. We have recorded provisional adjustments but we have not completed our accounting for income tax effects for certain elements of the Tax Act, principally due to the accelerated depreciation that will allow for full expensing of qualified property. For the year ended December 31, 2017 and 2016, we recorded a tax credit under the Protecting Americans from Tax Hikes Act of 2015 related to research and development activities. For the year ended December 31, 2015, we recorded additional tax expense to increase our valuation allowance due to a tax law change in the District of Columbia which will reduce our future tax and will limit our ability to use certain net operating losses in the future. Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences can be carried forward under tax law. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence, including historical financial performance, scheduled reversal of deferred tax assets and liabilities, projected taxable income and tax planning strategies. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities, shown before jurisdictional netting, are presented below:
Net operating loss carryforwards decreased as a result of the utilization of net operating losses related to current year taxable income and due to the Tax Act. For the years ended December 31, 2017 and 2016, we recorded a $21,700 and a $66,326 tax credit, respectively, under the Protecting Americans from Tax Hikes Act of 2015 related to research and development activities. For the year ended December 31, 2016, we recognized $293,896 of additional net operating losses related to excess share-based compensation deductions due to our adoption of ASU 2016-09, Compensation-Stock Compensation (Topic 718). Our net deferred tax assets were primarily related to gross federal net operating loss carryforwards of approximately $1,977,407. As of December 31, 2017 and 2016, we had a valuation allowance related to deferred tax assets of $52,883 and $47,682, respectively, which were not likely to be realized due to certain state net operating loss limitations. During the year ended December 31, 2017, our valuation allowance increased primarily due to the impact of the Tax Act as the federal rate decreases from 35% to 21% affected the value of the state valuation allowances. The net operating loss carryforwards upon which the valuation allowance is assessed are projected to expire on various dates through 2035. ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. If the tax position is not more likely than not to be sustained, the gross amount of the unrecognized tax position will not be recorded in the financial statements but will be shown in tabular format within the uncertain income tax positions. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs due to the following conditions: (1) the tax position is “more likely than not” to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. A number of years may elapse before an uncertain tax position is effectively settled or until there is a lapse in the applicable statute of limitations. We record interest and penalties related to uncertain tax positions in Income tax expense in our consolidated statements of comprehensive income. As of December 31, 2017 and 2016, the gross liability for income taxes associated with uncertain tax positions was $334,254 and $303,583, respectively. If recognized, $256,525 of unrecognized tax benefits would affect our effective tax rate. Uncertain tax positions are recognized in Other long-term liabilities which, as of December 31, 2017 and 2016, were $12,190 and $4,780, respectively. No penalties have been accrued. We have state income tax audits pending. We do not expect the ultimate outcome of these audits to have a material adverse effect on our financial position or results of operations. We also do not currently anticipate that our existing reserves related to uncertain tax positions as of December 31, 2017 will significantly increase or decrease during the twelve month period ending December 31, 2018. Various events could cause our current expectations to change. Should our position with respect to the majority of these uncertain tax positions be upheld, the effect would be recorded in our consolidated statements of comprehensive income as part of the income tax provision. We recorded interest expense of $708 and $100 for the years ended December 31, 2017 and 2016, respectively, related to unrecognized tax benefits. Changes in our uncertain income tax positions, from January 1 through December 31 are presented below:
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Subsequent Events |
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Subsequent Events [Abstract] | |
Subsequent Events | Subsequent Events For the period from January 1, 2018 to January 29, 2018, we repurchased 36,840 shares of our common stock on the open market for an aggregate purchase price of $202,006, including fees and commissions. On January 23, 2018, our board of directors approved an additional $2,000,000 for repurchase of our common stock. The new approval increases the amount of common stock that we have been authorized to repurchase to an aggregate of $12,000,000. Shares of common stock may be purchased from time to time on the open market and in privately negotiated transactions, including in accelerated stock repurchase transactions and transactions with Liberty Media and its affiliates. We intend to fund the additional repurchases through a combination of cash on hand, cash generated by operations and future borrowings. On January 23, 2018, our board of directors declared a quarterly dividend on our common stock in the amount of $0.011 per share of common stock payable on February 28, 2018 to stockholders of record as of the close of business on February 7, 2018. |
Quarterly Financial Data -- Unaudited |
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Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Data -- Unaudited | Quarterly Financial Data--Unaudited Our quarterly results of operations are summarized below:
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Schedule II - Schedule of Valuation and Qualifying Accounts |
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Schedule II - Schedule of Valuation and Qualifying Accounts | SIRIUS XM HOLDINGS INC. AND SUBSIDIARIES Schedule II - Schedule of Valuation and Qualifying Accounts
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Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||
Basis of Presentation | The accompanying consolidated financial statements of Holdings and its subsidiaries have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All significant intercompany transactions have been eliminated in consolidation. Certain numbers in our prior period consolidated financial statements and footnotes have been reclassified or consolidated to conform to our current period presentation. Public companies are required to disclose certain information about their reportable operating segments. Operating segments are defined as significant components of an enterprise for which separate financial information is available and is evaluated on a regular basis by the chief operating decision makers in deciding how to allocate resources to an individual segment and in assessing performance of the segment. We have determined that we have one reportable segment as our chief operating decision maker, our Chief Executive Officer, assesses performance and allocates resources based on the consolidated results of operations of our business. |
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Use of Estimates | The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and footnotes. Estimates, by their nature, are based on judgment and available information. Actual results could differ materially from those estimates. Significant estimates inherent in the preparation of the accompanying consolidated financial statements include asset impairment, depreciable lives of our satellites, share-based payment expense, and income taxes. |
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Cash and Cash Equivalents | Our cash and cash equivalents consist of cash on hand, money market funds, certificates of deposit, in-transit credit card receipts and highly liquid investments purchased with an original maturity of three months or less. |
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Revenue Recognition | We derive revenue primarily from subscribers, advertising and sales of radios and accessories. Revenue from subscribers consists primarily of subscription fees and other ancillary subscription based revenues. Revenue is recognized as it is realized or realizable and earned. We recognize subscription fees as our services are provided. Consumers purchasing or leasing a vehicle with a factory-installed satellite radio typically receive between a three and twelve month subscription to our service. In certain cases, the subscription fee for these consumers are prepaid by the applicable automaker. Prepaid subscription fees received from certain automakers are recorded as deferred revenue and amortized to revenue ratably over the service period which commences upon retail sale and activation. There is no revenue recognized for unpaid trial subscriptions. We recognize revenue from the sale of advertising as the advertising is transmitted. Agency fees are calculated based on a stated percentage applied to gross billing revenue for our advertising inventory and are reported as a reduction of advertising revenue. We pay certain third parties a percentage of advertising revenue. Advertising revenue is recorded gross of such revenue share payments as we are the primary obligor in the transaction. Advertising revenue share payments are recorded to Revenue share and royalties during the period in which the advertising is transmitted. Equipment revenue and royalties from the sale of satellite radios, components and accessories are recognized upon shipment, net of discounts and rebates. Shipping and handling costs billed to customers are recorded as revenue. Shipping and handling costs associated with shipping goods to customers are reported as a component of Cost of equipment. Other revenue primarily includes U.S. Music Royalty Fees which are recorded as other revenue and the cost component as Revenue share and royalties expense. Fees received from subscribers for the U.S. Music Royalty Fee are recorded as deferred revenue and amortized to revenue ratably over the service period. We report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction between a seller and a customer in our consolidated statements of comprehensive income. Accounting Standards Codification (“ASC”) 605, Revenue Recognition, provides guidance on how and when to recognize revenues for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets, such as in our bundled subscription plans. Revenue arrangements with multiple deliverables are required to be divided into separate units of accounting if the deliverables in the arrangement meet certain criteria. Consideration must be allocated at the inception of the arrangement to all deliverables based on their relative selling price, which has been determined using vendor specific objective evidence of the selling price to self-pay customers. |
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Revenue Share | We share a portion of our subscription revenues earned from self-pay subscribers and paid promotional subscribers with certain automakers. The terms of the revenue share agreements vary with each automaker, but are typically based upon the earned audio revenue as reported or gross billed audio revenue. Revenue share is recorded as an expense in our consolidated statements of comprehensive income and not as a reduction to revenue. |
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Programming Costs | Programming costs which are for a specified number of events are amortized on an event-by-event basis; programming costs which are for a specified season or include programming through a dedicated channel are amortized over the season or period on a straight-line basis. We allocate a portion of certain programming costs which are related to sponsorship and marketing activities to Sales and marketing expense on a straight-line basis over the term of the agreement. |
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Advertising Costs | Media is expensed when aired and advertising production costs are expensed as incurred. Advertising production costs include expenses related to marketing and retention activities, including expenses related to direct mail, outbound telemarketing and email communications. We also incur advertising production costs related to cooperative marketing and promotional events and sponsorships. |
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Subscriber Acquisition Costs | Subscriber acquisition costs consist of costs incurred to acquire new subscribers which include hardware subsidies paid to radio manufacturers, distributors and automakers, including subsidies paid to automakers who include a satellite radio and a prepaid subscription to our service in the sale or lease price of a new vehicle; subsidies paid for chipsets and certain other components used in manufacturing radios; device royalties for certain radios and chipsets; commissions paid to retailers and automakers as incentives to purchase, install and activate radios; product warranty obligations; freight; and provisions for inventory allowance attributable to inventory consumed in our OEM and retail distribution channels. Subscriber acquisition costs do not include advertising costs, loyalty payments to distributors and dealers of radios and revenue share payments to automakers and retailers of radios. Subsidies paid to radio manufacturers and automakers are expensed upon installation, shipment, receipt of product or activation and are included in Subscriber acquisition costs because we are responsible for providing the service to the customers. Commissions paid to retailers and automakers are expensed upon either the sale or activation of radios. Chipsets that are shipped to radio manufacturers and held on consignment are recorded as inventory and expensed as Subscriber acquisition costs when placed into production by radio manufacturers. Costs for chipsets not held on consignment are expensed as Subscriber acquisition costs when the automaker confirms receipt. |
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Research and Development Costs | Research and development costs are expensed as incurred and primarily include the cost of new product development, chipset design, software development and engineering. During the years ended December 31, 2017, 2016 and 2015, we recorded research and development costs of $96,917, $69,025 and $54,933, respectively. These costs are reported as a component of Engineering, design and development expense in our consolidated statements of comprehensive income. |
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Recent Accounting Pronouncements | We elected to early adopt Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-09, Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, in the third quarter of 2016, which required that any adjustments be reflected as of January 1, 2016, the beginning of the annual period that includes the interim period of adoption. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, forfeiture calculations, and classification on the statement of cash flows. The primary impact of adoption of ASU 2016-09 was the recognition of excess tax benefits in our provision for income taxes. Additionally, we recognized net operating losses related to excess share-based compensation tax return deductions that were previously tracked off balance sheet but not recorded in our financial statements. As of January 1, 2016, $293,896, net of a $1,946 reserve for an uncertain tax position, was recorded as an increase to our Deferred tax assets and decrease to our Accumulated deficit in our consolidated balance sheets as a result of the cumulative effect of this change in accounting principle. Additional amendments to this ASU related to income taxes and minimum statutory withholding tax requirements had no impact to Accumulated deficit, where the cumulative effect of these changes are required to be recorded. Further, there was no impact to our classification of awards as either equity or liabilities. We also elected to true-up forfeitures in the period of adoption and now recognize forfeitures as they occur. This ASU also required excess tax benefits to be separated from other income tax cash flows and classified as an operating activity, however, prior to adoption, there was no impact to the consolidated statement of cash flows as we have not had any excess tax benefits (windfalls) recorded for book purposes. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact to any of the periods presented in our consolidated statement of cash flows as such cash flows have historically been presented as a financing activity. In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350). This ASU eliminates Step 2 from the goodwill impairment test. Under the new guidance, entities should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Additionally, this ASU eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this ASU are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, and is applied on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We elected to early adopt ASU 2017-04 in the fourth quarter of 2017, which did not have an impact on our consolidated financial statements. Refer to Note 8 for information on this adoption. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. This ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In August 2015, the FASB issued ASU 2015-14 which amended the effective date of this ASU to fiscal years beginning after December 15, 2017, and early adoption was permitted only for fiscal years beginning after December 15, 2016. In 2016, the FASB issued additional guidance which clarified principal versus agent considerations, identification of performance obligations and the implementation guidance for licensing. In addition, the FASB issued guidance regarding practical expedients related to disclosures of remaining performance obligations, as well as other amendments to the guidance on transition, collectibility, non-cash consideration and the presentation of sales and other similar taxes. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. We will adopt this ASU under the modified retrospective method. We have completed our evaluation of the impact this ASU will have on our revenue streams. Based on our assessment of the impact of adopting this ASU on January 1, 2018, the most significant impact of the ASU relates to the reclassification of approximately $90,000 of Subscriber revenue to offset Revenue share and royalties and certain subsidy payments made to automakers associated with a paid promotional subscription and the impact of the timing of recognition of activation revenues. The adoption will not have a significant impact to our Net income. Within our consolidated balance sheets, upon adoption, the amount of revenue share associated with a paid promotional subscription to an automaker will be classified as a liability separate from deferred revenue. We expect the adjustment to our opening balance of Accumulated deficit to be approximately $19,000, net of tax, upon adoption. We have implemented the necessary changes to our business processes, systems and controls to support recognition and disclosure of this ASU upon adoption on January 1, 2018. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires a company to recognize lease assets and liabilities arising from operating leases in the statement of financial position. This ASU does not significantly change the previous lease guidance for how a lessee should recognize the recognition, measurement, and presentation of expenses and cash flows arising from a lease. Additionally, the criteria for classifying a finance lease versus an operating lease are substantially the same as the previous guidance. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, and early adoption is permitted. This ASU must be adopted using a modified retrospective approach. We plan to adopt this ASU on January 1, 2019. We are in the process of evaluating the impact of adoption of this ASU on our consolidated financial statements. We currently believe that the most significant changes will be related to the recognition of right-of-use assets and lease liability on our consolidated balance sheets for operating leases. |
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Fair Value Measurements | Investments are periodically reviewed for impairment and an impairment is recorded whenever declines in fair value below carrying value are determined to be other than temporary. In making this determination, we consider, among other factors, the severity and duration of the decline as well as the likelihood of a recovery within a reasonable timeframe. |
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Earnings per Share | Basic net income per common share is calculated by dividing the income available to common stockholders by the weighted average common shares outstanding during each reporting period. Diluted net income per common share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents (stock options and restricted stock units) were exercised or converted into common stock, calculated using the treasury stock method. |
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Receivables, net | Receivables, net, includes customer accounts receivable, receivables from distributors and other receivables. Customer accounts receivable, net, includes receivables from our subscribers and other customers, including advertising, and is stated at amounts due, net of an allowance for doubtful accounts. Our allowance for doubtful accounts is based upon our assessment of various factors. We consider historical experience, the age of the receivable balances, current economic conditions and other factors that may affect the counterparty’s ability to pay. Bad debt expense is included in Customer service and billing expense in our consolidated statements of comprehensive income. Receivables from distributors primarily include billed and unbilled amounts due from OEMs for services included in the sale or lease price of vehicles, as well as billed amounts due from wholesale distributors of our satellite radios. Other receivables primarily include amounts due from manufacturers of our radios, modules and chipsets where we are entitled to subsidies and royalties based on the number of units produced. We have not established an allowance for doubtful accounts for our receivables from distributors or other receivables as we have historically not experienced any significant collection issues with OEMs or other third parties. |
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Inventory, net | Inventory consists of finished goods, refurbished goods, chipsets and other raw material components used in manufacturing radios and connected vehicle devices. Inventory is stated at the lower of cost or market. We record an estimated allowance for inventory that is considered slow moving or obsolete or whose carrying value is in excess of net realizable value. The provision related to products purchased for resale in our direct to consumer distribution channel and components held for resale by us is reported as a component of Cost of equipment in our consolidated statements of comprehensive income. The provision related to inventory consumed in our OEM channel is reported as a component of Subscriber acquisition costs in our consolidated statements of comprehensive income. |
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Goodwill | Goodwill represents the excess of the purchase price over the estimated fair value of the net tangible and identifiable intangible assets acquired in business combinations. Our annual impairment assessment of our single reporting unit is performed as of the fourth quarter of each year, and an assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. We adopted ASU 2017-04, Intangibles - Goodwill and Other (Topic 350), during the fourth quarter of 2017. ASC 350 states that an entity should perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. Under the updated guidance, the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment is eliminated. |
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Indefinite Life Intangible Assets | ASC 350-30-35, Intangibles - Goodwill and Other, provides for an option to first perform a qualitative assessment to determine whether it is more likely than not that an asset is impaired. If the qualitative assessment supports that it is more likely than not that the fair value of the asset exceeds its carrying value, a quantitative impairment test is not required. If the qualitative assessment does not support the fair value of the asset, then a quantitative assessment is performed. Our annual impairment assessment of our identifiable indefinite lived intangible assets is performed as of the fourth quarter of each year. An assessment is performed at other times if an event occurs or circumstances change that would more likely than not reduce the fair value of the asset below its carrying value. If the carrying value of the intangible assets exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. |
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Definite Life Intangible Assets | Definite-lived intangible assets are amortized over their respective estimated useful lives to their estimated residual values, in a pattern that reflects when the economic benefits will be consumed, and are reviewed for impairment under the provisions of ASC 360-10-35, Property, Plant and Equipment/Overall/Subsequent Measurement. We review intangible assets subject to amortization for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected cash flows, undiscounted and without interest, is less than the carrying amount of the asset, an impairment loss is recognized in an amount by which the carrying amount of the asset exceeds its fair value. |
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Property and Equipment | Property and equipment, including satellites, are stated at cost, less accumulated depreciation. Equipment under capital leases is stated at the present value of minimum lease payments. Depreciation is calculated using the straight-line method over the following estimated useful life of the asset:
We review long-lived assets, such as property and equipment, for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds the estimated future cash flows, an impairment charge is recognized in an amount by which the carrying amount exceeds the fair value of the asset. |
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Equity Method Investments | Sirius XM Canada is accounted for as an equity method investment, and its results are not consolidated in our consolidated financial statements. Sirius XM Canada does not meet the requirements for consolidation as we do not have the ability to direct the most significant activities that impact Sirius XM Canada's economic performance. The difference between our investment and our share of the fair value of the underlying net assets of Sirius XM Canada is first allocated to either finite-lived intangibles or indefinite-lived intangibles and the balance is attributed to goodwill. We follow ASC 350, Intangibles - Goodwill and Other, which requires that equity method finite-lived intangibles be amortized over their estimated useful life while indefinite-lived intangibles and goodwill are not amortized. The amortization of equity method finite-lived intangible assets is recorded in Other income in our consolidated statements of comprehensive income. We periodically evaluate our equity method investments to determine if there has been an other-than temporary decline in fair value below carrying value. Equity method finite-lived intangibles, indefinite-lived intangibles and goodwill are included in the carrying amount of the investment. |
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Benefit Plans | We account for equity instruments granted to employees in accordance with ASC 718, Compensation - Stock Compensation. ASC 718 requires all share-based compensation payments to be recognized in the financial statements based on fair value. Upon adoption of ASU 2016-09 as of January 1, 2016 we recorded actual forfeitures and no longer estimate forfeitures. For the year ended December 31, 2015, we estimated forfeitures at the time of the grant. We use the Black-Scholes-Merton option-pricing model to value stock option awards and have elected to treat awards with graded vesting as a single award. Share-based compensation expense is recognized ratably over the requisite service period, which is generally the vesting period. We measure restricted stock awards and units using the fair market value of the restricted shares of common stock on the day the award is granted. Stock-based awards granted to employees, non-employees and members of our board of directors include stock options, stock awards and restricted stock units. We apply variable accounting to our non-employee stock-based awards, whereby we remeasure the value of such awards at each balance sheet date. Fair value as determined using the Black-Scholes-Merton model varies based on assumptions used for the expected life, expected stock price volatility, expected dividend yield and risk-free interest rates. For the years ended December 31, 2017, 2016 and 2015, we estimated the fair value of awards granted using the hybrid approach for volatility, which weights observable historical volatility and implied volatility of qualifying actively traded options on our common stock. The expected life assumption represents the weighted-average period stock-based awards are expected to remain outstanding. These expected life assumptions are established through a review of historical exercise behavior of stock-based award grants with similar vesting periods. Where historical patterns do not exist, contractual terms are used. Dividend yield is based on the current expected annual dividend per share and our stock price. The risk-free interest rate represents the daily treasury yield curve rate at the grant date based on the closing market bid yields on actively traded U.S. treasury securities in the over-the-counter market for the expected term. Our assumptions may change in future periods. |
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Legal Reserves | We record a liability when we believe that it is both probable that a liability will be incurred, and the amount of loss can be reasonably estimated. We evaluate developments in legal matters that could affect the amount of liability that has been previously accrued and make adjustments as appropriate. Significant judgment is required to determine both probability and the estimated amount of a loss or potential loss. We may be unable to reasonably estimate the reasonably possible loss or range of loss for a particular legal contingency for various reasons, including, among others, because: (i) the damages sought are indeterminate; (ii) the proceedings are in the relative early stages; (iii) there is uncertainty as to the outcome of pending proceedings (including motions and appeals); (iv) there is uncertainty as to the likelihood of settlement and the outcome of any negotiations with respect thereto; (v) there remain significant factual issues to be determined or resolved; (vi) the relevant law is unsettled; or (vii) the proceedings involve novel or untested legal theories. In such instances, there may be considerable uncertainty regarding the ultimate resolution of such matters, including a possible eventual loss, if any. |
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Income Taxes | Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year-end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences can be carried forward under tax law. Our evaluation of the realizability of deferred tax assets considers both positive and negative evidence, including historical financial performance, scheduled reversal of deferred tax assets and liabilities, projected taxable income and tax planning strategies. The weight given to the potential effects of positive and negative evidence is based on the extent to which it can be objectively verified. A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized. ASC 740, Income Taxes, requires a company to first determine whether it is more likely than not that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information. A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority. If the tax position is not more likely than not to be sustained, the gross amount of the unrecognized tax position will not be recorded in the financial statements but will be shown in tabular format within the uncertain income tax positions. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs due to the following conditions: (1) the tax position is “more likely than not” to be sustained, (2) the tax position, amount, and/or timing is ultimately settled through negotiation or litigation, or (3) the statute of limitations for the tax position has expired. A number of years may elapse before an uncertain tax position is effectively settled or until there is a lapse in the applicable statute of limitations. We record interest and penalties related to uncertain tax positions in Income tax expense in our consolidated statements of comprehensive income. |
Acquisition (Tables) |
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Schedule of Recognized Identified Assets Acquired and Liabilities Assumed | The condensed table below summarizes the fair value of the assets acquired and liabilities assumed:
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Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |
Schedule of Significant Accounting Policies | In addition to the significant accounting policies discussed in this Note 3, the following table includes our significant accounting policies that are described in other notes to our consolidated financial statements, including the number and page of the note: |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of assets and liabilities measured at fair value | Our assets and liabilities measured at fair value were as follows:
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Earnings per Share (Tables) |
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Accounts receivable, net | Receivables, net, consists of the following:
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Summary of inventory, net | Inventory, net, consists of the following:
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of indefinite-lived intangible assets | Our intangible assets include the following:
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Schedule of finite-lived intangible assets | Our intangible assets include the following:
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Years in which satellite licenses expire | The following table outlines the years in which each of our satellite licenses expires:
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Expected future amortization expense | Expected amortization expense for the each of the fiscal years 2018 through 2022 and for periods thereafter is as follows:
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Property and Equipment (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment, net | Property and equipment, net, consists of the following:
Depreciation is calculated using the straight-line method over the following estimated useful life of the asset:
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Summary of orbiting satellites | The chart below provides certain information on our satellites as of December 31, 2017:
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Construction in progress | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment, net | Construction in progress consists of the following:
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Related Party Transactions (Tables) - Equity Method Investee |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related Party Transaction [Line Items] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of related party balances | We had the following related party balances associated with Sirius XM Canada:
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Schedule of related party revenues and other income | We recorded the following revenue and other income associated with Sirius XM Canada in our consolidated statements of comprehensive income:
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Debt (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt instruments | Our debt as of December 31, 2017 and 2016 consisted of the following:
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Stockholders' Equity (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of dividends declared | During the year ended December 31, 2017, our board of directors declared the following dividends:
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Schedule of repurchase agreements | The following table summarizes our total share repurchase activity for the years ended:
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Benefit Plans (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Retirement Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value of options granted | The following table summarizes the weighted-average assumptions used to compute the fair value of options granted to employees and members of our board of directors:
The following table summarizes the weighted-average assumptions used to compute the fair value of options granted in 2015 to third parties, other than non-employee members of our board of directors:
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Stock options activity under share-based payment plans | The following table summarizes stock option activity under our share-based plans for the years ended December 31, 2017, 2016 and 2015:
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Summary of restricted stock unit and stock award activity | The following table summarizes the restricted stock unit, including PRSU, activity under our share-based plans for the years ended December 31, 2017, 2016 and 2015:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expected contractual cash commitments | The following table summarizes our expected contractual cash commitments as of December 31, 2017:
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of components of income tax expense | We file a consolidated federal income tax return for all of our wholly-owned subsidiaries, including Sirius XM. Income tax expense consisted of the following:
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Schedule of effective income tax rate reconciliation | The following table presents a reconciliation of the U.S. federal statutory tax rate and our effective tax rate:
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Schedule of deferred tax assets and liabilities | The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities, shown before jurisdictional netting, are presented below:
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Summary of income tax contingencies | Changes in our uncertain income tax positions, from January 1 through December 31 are presented below:
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Quarterly Financial Data -- Unaudited (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2017 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of quarterly financial information | Our quarterly results of operations are summarized below:
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Business & Basis of Presentation (Details) $ in Thousands |
12 Months Ended | |||
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Sep. 22, 2017
USD ($)
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Dec. 31, 2017
USD ($)
segment
satellite_radio_system
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Dec. 31, 2016
USD ($)
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Dec. 31, 2015
USD ($)
|
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||
Number of satellite radio systems | satellite_radio_system | 2 | |||
Related Party Transaction [Line Items] | ||||
Investment in convertible preferred stock | $ 612,465 | $ 0 | $ 0 | |
Segment Reporting, Disclosure of Entity's Reportable Segments [Abstract] | ||||
Number of reportable segments | segment | 1 | |||
Pandora | Investee | ||||
Related Party Transaction [Line Items] | ||||
Investment in convertible preferred stock | $ 480,000 | $ 480,000 | ||
Liberty Media | Common Stock | Management | ||||
Related Party Transactions [Abstract] | ||||
Related party ownership percentage | 70.00% | |||
Minimum | ||||
Related Party Transaction [Line Items] | ||||
Length of prepaid subscriptions, term | 3 months | |||
Maximum | ||||
Related Party Transaction [Line Items] | ||||
Length of prepaid subscriptions, term | 12 months |
Acquisition (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Apr. 18, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Business Acquisition [Line Items] | ||||
Purchase price | $ 107,736 | $ 0 | $ 0 | |
Acquired Assets: | ||||
Goodwill | 2,286,582 | $ 2,205,107 | ||
Automatic | ||||
Business Acquisition [Line Items] | ||||
Purchase price | $ 107,736 | |||
Cash acquired | 819 | |||
Acquired Assets: | ||||
Intangible assets subject to amortization | 14,700 | |||
Goodwill | 81,475 | |||
Deferred income tax asset, net | 14,760 | |||
Other assets | 4,019 | |||
Total Assets | 115,754 | |||
Assumed Liabilities: | ||||
Deferred revenue | (5,582) | |||
Other liabilities | (1,617) | |||
Total Liabilities | (7,199) | |||
Total Consideration | 108,555 | |||
Acquisition related costs | $ 922 | |||
Automatic | Trademarks | ||||
Acquired Assets: | ||||
Trademark | $ 800 |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Other Income and Expenses [Abstract] | ||||
Advertising expense | $ 262,701 | $ 226,969 | $ 206,351 | |
Research and development expense | 96,917 | 69,025 | 54,933 | |
Stockholders’ (deficit) equity | (1,523,874) | (792,015) | (166,491) | $ 1,309,837 |
Foreign currency translation adjustment, net of tax | 18,546 | 363 | (100) | |
Foreign currency translation adjustment, tax | $ 11,286 | |||
Minimum | ||||
Deferred Revenue Arrangement [Line Items] | ||||
Length of prepaid subscriptions, term | 3 months | |||
Maximum | ||||
Deferred Revenue Arrangement [Line Items] | ||||
Length of prepaid subscriptions, term | 12 months | |||
Accumulated Other Comprehensive (Loss) Income | ||||
Other Income and Expenses [Abstract] | ||||
Stockholders’ (deficit) equity | $ 18,407 | $ (139) | $ (502) | $ (402) |
Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details) - USD ($) $ in Thousands |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2018 |
Jan. 01, 2018 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Reserve for uncertain tax position | $ 1,946 | |||
Decrease to accumulated deficit | $ (293,896) | |||
Accumulated Deficit | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Decrease to accumulated deficit | $ (293,896) | |||
Accounting Standards Update 2016-09 | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Increase in deferred tax assets | $ 293,896 | |||
Accounting Standards Update 2014-09 | Forecast | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Decrease in revenue, as a percent (less than) | $ 90,000 | |||
Accounting Standards Update 2014-09 | Subsequent Event | Accumulated Deficit | ||||
New Accounting Pronouncement, Early Adoption [Line Items] | ||||
Decrease to accumulated deficit | $ 19,000 |
Earnings per Share - Additional Information (Details) - shares |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Earnings Per Share [Abstract] | |||
Participating securities (in shares) | 0 | 0 | 0 |
Anti-dilutive common stock equivalents (in shares) | 40,541,000 | 208,202,000 | 151,112,000 |
Earnings per Share - Schedule of Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Numerator: | |||||||||||
Net income available to common stockholders for basic and diluted net income per common share | $ (36,996) | $ 275,722 | $ 202,109 | $ 207,073 | $ 204,627 | $ 193,901 | $ 174,965 | $ 172,440 | $ 647,908 | $ 745,933 | $ 509,724 |
Denominator: | |||||||||||
Weighted average common shares outstanding for basic net income per common share (in shares) | 4,637,553 | 4,917,050 | 5,375,707 | ||||||||
Weighted average impact of dilutive equity instruments (in shares) | 85,982 | 47,678 | 59,459 | ||||||||
Weighted average shares for diluted net income per common share (in shares) | 4,723,535 | 4,964,728 | 5,435,166 | ||||||||
Net income per common share: | |||||||||||
Basic (in dollars per share) | $ (0.01) | $ 0.06 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.03 | $ 0.14 | $ 0.15 | $ 0.09 |
Diluted (in dollars per share) | $ (0.01) | $ 0.06 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.03 | $ 0.14 | $ 0.15 | $ 0.09 |
Adjustment of deferred tax assets | $ (184,599) | $ (184,599) | |||||||||
Adjustment of deferred tax assets (in dollars per share) | $ 0.04 |
Receivables, net (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Accounts receivable, net | ||
Gross customer accounts receivable | $ 100,342 | $ 105,737 |
Allowance for doubtful accounts | (9,500) | (8,658) |
Customer accounts receivable, net | 90,842 | 97,079 |
Receivables from distributors | 121,410 | 98,498 |
Other receivables | 29,475 | 27,452 |
Total receivables, net | $ 241,727 | $ 223,029 |
Inventory, net (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Inventory Disclosure [Abstract] | ||
Raw materials | $ 6,489 | $ 10,219 |
Finished goods | 21,225 | 19,581 |
Allowance for obsolescence | (7,515) | (9,437) |
Total inventory, net | $ 20,199 | $ 20,363 |
Goodwill (Details) |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Dec. 31, 2017
USD ($)
reporting_unit
|
Dec. 31, 2017
USD ($)
|
Dec. 31, 2017
USD ($)
segment
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
Apr. 18, 2017
USD ($)
|
Dec. 31, 2014
USD ($)
|
|
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||
Number of reporting units | 1 | 1 | |||||
Stockholders’ (deficit) equity | $ (1,523,874,000) | $ (1,523,874,000) | $ (1,523,874,000) | $ (792,015,000) | $ (166,491,000) | $ 1,309,837,000 | |
Goodwill | 2,286,582,000 | 2,286,582,000 | 2,286,582,000 | 2,205,107,000 | |||
Business Acquisition [Line Items] | |||||||
Impairment losses for goodwill | 0 | $ 0 | $ 0 | ||||
Accumulated impairment of goodwill since the merger | $ 4,766,190,000 | 4,766,190,000 | $ 4,766,190,000 | ||||
Automatic | |||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||
Goodwill | $ 81,475,000 | ||||||
Business Acquisition [Line Items] | |||||||
Goodwill acquired during period | $ 81,475,000 |
Intangible Assets - Indefinite Life Intangible Assets (Details) - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Apr. 18, 2017 |
|
Indefinite-lived Intangible Assets [Line Items] | ||||
Impairment of intangible assets, indefinite-lived (excluding goodwill) | $ 0 | $ 0 | $ 0 | |
Automatic | Trademarks | ||||
Indefinite-lived Intangible Assets [Line Items] | ||||
Trademark | $ 800,000 |
Intangible Assets - Definite Life Intangible Assets (Details) - USD ($) |
12 Months Ended | |||
---|---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Apr. 18, 2017 |
|
Goodwill and Intangible Assets Disclosure [Abstract] | ||||
Impairment of intangible assets with definite lives | $ 0 | $ 0 | $ 0 | |
Finite-Lived Intangible Assets [Line Items] | ||||
Amortization of intangible assets | $ 37,455,000 | $ 48,545,000 | $ 51,700,000 | |
Automatic | ||||
Finite-Lived Intangible Assets [Line Items] | ||||
Intangible assets subject to amortization | $ 14,700,000 |
Intangible Assets - Expected Amortization Expense for Each of the Fiscal Years (Details) $ in Thousands |
Dec. 31, 2017
USD ($)
|
---|---|
Expected amortization expense for each of the fiscal years | |
2018 | $ 23,138 |
2019 | 22,701 |
2020 | 22,121 |
2021 | 16,678 |
2022 | 15,542 |
Thereafter | 88,212 |
Net Carrying Value | $ 188,392 |
Property and Equipment - Additional Information (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017
USD ($)
satellite
|
Dec. 31, 2016
USD ($)
|
Dec. 31, 2015
USD ($)
|
|
Property, Plant and Equipment [Line Items] | |||
Asset impairment charges | $ 0 | $ 0 | $ 0 |
Depreciation and amortization expense on property and equipment | 261,147,000 | 220,434,000 | 220,514,000 |
Disposal of property and equipment | 78,559,000 | 843,129,000 | 43,833,000 |
Loss on disposal of assets | 0 | 12,912,000 | 7,384,000 |
Capitalized interest costs | $ 4,948,000 | 419,000 | $ 0 |
Number of owned satellites | satellite | 5 | ||
Satellite system | |||
Property, Plant and Equipment [Line Items] | |||
Disposal of property and equipment | $ 801,206,000 |
Property and Equipment - Schedule of Construction in Progress (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Construction in progress | $ 301,153 | $ 144,954 |
Satellite system | ||
Property, Plant and Equipment [Line Items] | ||
Construction in progress | 183,243 | 43,977 |
Terrestrial repeater network | ||
Property, Plant and Equipment [Line Items] | ||
Construction in progress | 2,515 | 1,139 |
Capitalized software and hardware | ||
Property, Plant and Equipment [Line Items] | ||
Construction in progress | 94,456 | 82,204 |
Other | ||
Property, Plant and Equipment [Line Items] | ||
Construction in progress | $ 20,939 | $ 17,634 |
Related Party Transactions - Summary of Related Party Balances (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Related Party Transaction [Line Items] | ||
Related party current assets | $ 10,284 | $ 6,170 |
Related party long-term assets | 962,080 | 8,918 |
Related party current liabilities | 2,839 | 2,840 |
Related party long-term liabilities | 7,364 | 7,955 |
Equity Method Investee | Sirius XM Canada | ||
Related Party Transaction [Line Items] | ||
Related party current assets | 10,284 | 6,170 |
Related party long-term assets | 481,608 | 8,918 |
Related party current liabilities | 2,839 | 2,840 |
Related party long-term liabilities | $ 7,364 | $ 7,955 |
Related Party Transactions - Schedule of Related Party Revenue and Other Income (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Other income | |||
Share of net earnings | $ 4,561 | $ 12,529 | $ 0 |
Dividends | 3,606 | 7,160 | 14,788 |
Sirius XM Canada | Equity Method Investee | |||
Related Party Transaction [Line Items] | |||
Revenue | 87,111 | 45,962 | 56,397 |
Other income | |||
Share of net earnings | 4,561 | 12,529 | 0 |
Dividends | 0 | 3,575 | 12,645 |
Interest income | $ 6,243 | $ 0 | $ 0 |
Related Party Transactions - Schedule of Related Party Revenue and Other Income, Additional Information (Details) - USD ($) $ in Thousands |
5 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
May 24, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Related Party Transaction [Line Items] | ||||
Amortization of intangible assets | $ 37,455 | $ 48,545 | $ 51,700 | |
Sirius XM Canada | Equity Method Investee | ||||
Related Party Transaction [Line Items] | ||||
Earning recognition lag period | 1 month | |||
Amortization of intangible assets | 1,501 | |||
Equity method investment, dividends, including reduction of investment | $ 3,796 | $ 7,548 | $ 15,645 | |
Sirius XM Canada | Equity Method Investee | Sirius Platform | ||||
Related Party Transaction [Line Items] | ||||
Percentage-based fee | 10.00% | |||
Sirius XM Canada | Equity Method Investee | X M Platform | ||||
Related Party Transaction [Line Items] | ||||
Percentage-based fee | 15.00% |
Debt - Additional Information (Details) |
12 Months Ended |
---|---|
Dec. 31, 2017 | |
Senior Secured Revolving Credit Facility | |
Debt Instrument [Line Items] | |
Maximum consolidated leverage ratio | 5.0 |
Stockholders' Equity - Common Stock (Details) - $ / shares |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Class of Stock [Line Items] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 9,000,000,000 | 9,000,000,000 |
Common stock, shares issued (in shares) | 4,530,928,000 | 4,746,047,000 |
Common stock, shares outstanding (in shares) | 4,527,742,000 | 4,740,947,000 |
Common stock reserved for issuance (in shares) | 311,780,000 | |
Common Stock | ||
Class of Stock [Line Items] | ||
Issuance of common stock as part of recapitalization of Sirius XM Canada (in shares) | 35,000,000 | |
Common Stock | Equity Method Investee | ||
Class of Stock [Line Items] | ||
Issuance of common stock as part of recapitalization of Sirius XM Canada (in shares) | 35,000,000 |
Stockholders' Equity - Quarterly Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Oct. 03, 2017 |
Jul. 11, 2017 |
Apr. 25, 2017 |
Jan. 24, 2017 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Equity [Abstract] | |||||||
Dividends Per Share (in dollars per share) | $ 0.011 | $ 0.01 | $ 0.01 | $ 0.01 | $ 0.041 | $ 0.01 | $ 0 |
Total Amount | $ 50,388 | $ 46,216 | $ 46,501 | $ 47,137 |
Stockholders' Equity - Stock Repurchase Program (Details) shares in Thousands |
Dec. 31, 2017
USD ($)
shares
|
---|---|
Class of Stock [Line Items] | |
Number of shares repurchased (in shares) | shares | 2,474,135 |
Aggregate cost for shares repurchased | $ 9,377,120,000 |
Remaining amount authorized under the stock repurchase program | 622,880,000 |
Common Stock | |
Class of Stock [Line Items] | |
Stock repurchase program, aggregate authorized amount | $ 10,000,000,000 |
Stockholders' Equity - Schedule of Repurchase Agreements (Details) - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Shares Repurchase Activity [Line Items] | |||
Amount | $ 1,403,283 | $ 1,672,697 | $ 2,015,947 |
Treasury stock value | $ 17,154 | $ 22,906 | |
Open Market | |||
Shares Repurchase Activity [Line Items] | |||
Shares (in shares) | 270,527 | 420,111 | 524,222 |
Amount | $ 1,403,283 | $ 1,672,697 | $ 2,015,947 |
Stockholders' Equity - Preferred Stock (Details) - $ / shares |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Equity [Abstract] | ||
Preferred stock, par value (in dollars per share) | $ 0.001 | |
Undesignated preferred stock authorized (in shares) | 50,000,000 | |
Preferred stock liquidation preference per share (in dollars per share) | $ 0.001 | |
Preferred stock issued (in shares) | 0 | 0 |
Preferred stock outstanding (in shares) | 0 | 0 |
Benefit Plans - Fair Value of Options Granted (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Retirement Benefits [Abstract] | |||
Risk-free interest rate | 1.80% | 1.10% | 1.40% |
Expected life of options — years | 4 years 7 months 2 days | 4 years 2 months 30 days | 4 years 2 months 1 day |
Expected stock price volatility | 24.00% | 22.00% | 26.00% |
Expected dividend yield | 0.70% | 0.00% | 0.00% |
Benefit Plans - Fair Value of Options Granted to Non-Employees (Details) |
12 Months Ended |
---|---|
Dec. 31, 2015 | |
Retirement Benefits [Abstract] | |
Risk-free interest rate | 2.00% |
Expected life of options — years | 7 years |
Expected stock price volatility | 37.00% |
Expected dividend yield | 0.00% |
Benefit Plans - Summary of Restricted Stock Unit and Stock Award Activity (Details) - Restricted Stock Units (RSUs) and Performance Shares - $ / shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Shares | |||
Nonvested as of beginning of period (in shares) | 29,893 | 16,088 | 11,575 |
Granted (in shares) | 11,721 | 18,523 | 8,961 |
Vested (in shares) | (8,842) | (4,212) | (3,464) |
Forfeited (in shares) | (1,449) | (506) | (984) |
Nonvested as of end of period (in shares) | 31,323 | 29,893 | 16,088 |
Grant Date Fair Value Per Share | |||
Nonvested as of beginning of period (in dollars per share) | $ 4.03 | $ 3.73 | $ 3.47 |
Granted (in dollars per share) | 5.35 | 4.21 | 3.92 |
Vested (in dollars per share) | 3.92 | 3.68 | 3.44 |
Forfeited (in dollars per share) | 4.42 | 3.75 | 3.52 |
Nonvested as of end of period (in dollars per share) | $ 4.54 | $ 4.03 | $ 3.73 |
Income Taxes - Schedule of Components of Income Tax Expense (Details) - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Current taxes: | |||
Federal | $ 0 | $ 0 | $ 0 |
State | (32,579,000) | (21,782,000) | (15,916,000) |
Foreign | (202,000) | (383,000) | (825,000) |
Total current taxes | (32,781,000) | (22,165,000) | (16,741,000) |
Deferred taxes: | |||
Federal | (564,171,000) | (304,179,000) | (318,933,000) |
State | (19,349,000) | (19,383,000) | (46,566,000) |
Total deferred taxes | (583,520,000) | (323,562,000) | (365,499,000) |
Total income tax expense | $ (616,301,000) | $ (345,727,000) | $ (382,240,000) |
Income Taxes - Schedule of Effective Income Tax Rate Reconciliation (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Income Tax Disclosure [Abstract] | |||
Federal tax expense, at statutory rate | 35.00% | 35.00% | 35.00% |
State income tax expense, net of federal benefit | 2.80% | 2.80% | 2.90% |
Change in valuation allowance | (0.10%) | 0.00% | 4.90% |
Tax credit | (1.70%) | (6.10%) | (0.00%) |
Stock-based compensation | (2.90%) | (0.60%) | (0.00%) |
Federal tax reform - deferred rate change | 14.60% | 0.00% | 0.00% |
Other, net | 1.00% | 0.60% | 0.10% |
Effective tax rate | 48.70% | 31.70% | 42.90% |
Income Taxes - Schedule of Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2017 |
Dec. 31, 2016 |
---|---|---|
Deferred tax assets: | ||
Net operating loss carryforwards and tax credits | $ 686,277 | $ 1,376,012 |
Deferred revenue | 500,461 | 760,774 |
Accrued bonus | 24,150 | 35,225 |
Expensed costs capitalized for tax | 13,914 | 19,610 |
Investments | 29,881 | 44,129 |
Stock based compensation | 50,065 | 74,544 |
Other | 20,819 | 31,133 |
Total deferred tax assets | 1,325,567 | 2,341,427 |
Deferred tax liabilities: | ||
Depreciation of property and equipment | (156,003) | (259,491) |
FCC license | (506,578) | (783,822) |
Other intangible assets | (105,471) | (172,520) |
Other | (7,273) | 0 |
Total deferred tax liabilities | (775,325) | (1,215,833) |
Net deferred tax assets before valuation allowance | 550,242 | 1,125,594 |
Valuation allowance | (52,883) | (47,682) |
Total net deferred tax asset | $ 497,359 | $ 1,077,912 |
Income Taxes - Summary of Income Tax Contingencies (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
|
Changes in uncertain income tax positions | ||
Balance, beginning of year | $ 303,583 | $ 253,277 |
Increases in tax positions for prior years | 14,530 | 0 |
Increases in tax positions for current years | 16,141 | 51,738 |
Decreases in tax positions for prior years | 0 | (1,432) |
Balance, end of year | $ 334,254 | $ 303,583 |
Quarterly Financial Data -- Unaudited (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2017 |
Sep. 30, 2017 |
Jun. 30, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Total revenue | $ 1,403,898 | $ 1,379,596 | $ 1,347,569 | $ 1,294,066 | $ 1,302,998 | $ 1,277,646 | $ 1,235,566 | $ 1,201,010 | $ 5,425,129 | $ 5,017,220 | $ 4,570,058 |
Cost of services | (572,405) | (519,024) | (513,446) | (497,107) | (551,323) | (488,659) | (486,317) | (467,028) | |||
Income from operations | 396,706 | 433,965 | 416,353 | 393,840 | 329,560 | 392,179 | 362,156 | 348,234 | 1,640,864 | 1,432,129 | 1,178,688 |
Net income | $ (36,996) | $ 275,722 | $ 202,109 | $ 207,073 | $ 204,627 | $ 193,901 | $ 174,965 | $ 172,440 | $ 647,908 | $ 745,933 | $ 509,724 |
Net income (loss) per common share--basic (in dollars per share) | $ (0.01) | $ 0.06 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.03 | $ 0.14 | $ 0.15 | $ 0.09 |
Net income (loss) per common share--diluted (in dollars per share) | $ (0.01) | $ 0.06 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.04 | $ 0.03 | $ 0.14 | $ 0.15 | $ 0.09 |
Schedule II - Schedule of Valuation and Qualifying Accounts (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2017 |
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Allowance for doubtful accounts | |||
Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance January 1, | $ 8,658 | $ 6,118 | $ 7,815 |
Charged to Expenses (Benefit) | 55,715 | 55,941 | 47,187 |
Write-offs/ Payments/ Other | (54,873) | (53,401) | (48,884) |
Balance December 31, | 9,500 | 8,658 | 6,118 |
Deferred tax assets—valuation allowance | |||
Movement in Valuation Allowances and Reserves [Roll Forward] | |||
Balance January 1, | 47,682 | 49,095 | 4,995 |
Charged to Expenses (Benefit) | 4,395 | (1,019) | 44,100 |
Write-offs/ Payments/ Other | 806 | (394) | 0 |
Balance December 31, | $ 52,883 | $ 47,682 | $ 49,095 |
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