SIRIUS XM RADIO INC. FORM 10-K (Annual Report) Filed 02/06/13 for the Period Ending 12/31/12 Address 1221 AVENUE OF THE AMERICAS 36TH FLOOR NEW YORK, NY 10020 Telephone 212-584-5100 CIK 0000908937 Symbol SIRI SIC Code 4832 - Radio Broadcasting Stations Industry Broadcasting & Cable TV Sector Services Fiscal Year 12/31 http://www.edgar-online.com © Copyright 2013, EDGAR Online, Inc. All Rights Reserved. Distribution and use of this document restricted under EDGAR Online, Inc. Terms of Use. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2012 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO ________ COMMISSION FILE NUMBER 001-34295 SIRIUS XM RADIO INC. (Exact name of registrant as specified in its charter) Delaware 52-1700207 (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1221 Avenue of the Americas, 36th Floor New York, New York 10020 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (212) 584-5100 Securities registered pursuant to Section 12(b) of the Act: Title of Each Class: Name of Each Exchange on Which Registered: Common Stock, par value $0.001 per share The Nasdaq Global Select Market Securities registered pursuant to Section 12(g) of the Act: None (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No The aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of June 30, 2012 was $6,943,176,756 . All executive officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates” of the registrant. The number of shares of the registrant's common stock outstanding as of February 1, 2013 was 6,558,986,663 . DOCUMENTS INCORPORATED BY REFERENCE Information included in our definitive proxy statement for our 2013 annual meeting of stockholders scheduled to be held on Tuesday, May 21 2013 is incorporated by reference in Items 10, 11, 12, 13 and 14 of Part III of this report. SIRIUS XM RADIO INC. AND SUBSIDIARIES 2012 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Item No. Description PART I Item 1. Business 1 Item 1A. Risk Factors 10 Item 1B . Unresolved Staff Comments 17 Item 2. Properties 17 Item 3. Legal Proceedings 17 Item 4. Mine Safety Disclosures 18 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 18 Item 6. Selected Financial Data 21 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 22 Item 7A. Quantitative and Qualitative Disclosures About Market Risks 45 Item 8. Financial Statements and Supplementary Data 46 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46 Item 9A. Controls and Procedures 46 Item 9B. Other Information 46 PART III Item 10. Directors, Executive Officers and Corporate Governance 46 Item 11. Executive Compensation 47 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 47 Item 13. Certain Relationships and Related Transactions and Director Independence 47 Item 14. Principal Accountant Fees and Services 47 PART IV Item 15. Exhibits and Financial Statement Schedules 47 Signatures 48 PART I ITEM 1. BUSINESS We broadcast our 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 new features such as SiriusXM On Demand, over the Internet, including through applications for mobile devices. As of December 31, 2012, we had 23,900,336 subscribers. Our subscribers include: • 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; • certain radios activated for daily rental fleet programs; • subscribers to our Internet services who do not also have satellite radio subscriptions; and • certain subscribers to our weather, traffic, data and Backseat TV services. Our primary source of revenue is subscription fees, with most of our customers subscribing on an annual, semi-annual, quarterly or monthly basis. We offer discounts for prepaid and long-term subscription plans as well as discounts for multiple subscriptions on each platform. 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, data and Backseat TV services. Our satellite radios are primarily distributed through automakers; retail locations nationwide; and through our website. We have agreements with every major automaker to offer satellite radios in their vehicles. Satellite radio services are also offered to customers of certain rental car companies. As of January 17, 2013, Liberty Media Corporation beneficially owned, directly and indirectly, over 50% of the outstanding shares of our common stock. Liberty Media owns interests in a broad range of media, communications and entertainment businesses, including its subsidiaries Atlanta National League Baseball Club, Inc. and TruePosition, Inc., its interests in Live Nation Entertainment, Barnes & Noble, and minority equity investments in Time Warner Inc. and Viacom. Certain other important dates in our corporate history are listed below: • Satellite CD Radio, Inc. was incorporated in the State of Delaware on May 17, 1990. • On December 7, 1992, Satellite CD Radio, Inc. changed its name to CD Radio Inc., and Satellite CD Radio, Inc. was formed as a wholly owned subsidiary. • On November 18, 1999, CD Radio Inc. changed its name to Sirius Satellite Radio Inc. • In July 2008, our wholly owned subsidiary, Vernon Merger Corporation, merged (the “Merger”) with and into XM Satellite Radio Holdings Inc. • On August 5, 2008, we changed our name from Sirius Satellite Radio Inc. to Sirius XM Radio Inc. • In April 2010, XM Satellite Radio Holdings Inc. merged with and into XM Satellite Radio Inc.; and in January 2011, XM Satellite Radio Inc., our wholly-owned subsidiary, merged with and into Sirius XM Radio Inc. Programming We offer a dynamic programming lineup of commercial-free music plus sports, entertainment, talk, news, traffic and weather. The channel line-ups for our services vary in certain respects and are available at siriusxm.com. Our subscription packages allow most listeners to enhance our standard programming lineup. Our “XM Premier” package offers subscribers the Howard Stern channels, SiriusXM NFL Radio, SiriusXM NASCAR Radio, Playboy Radio, Sex Radio and play-by-play NFL games and college sports programming. Our “Sirius Premier” package offers subscribers Oprah Radio, Opie and Anthony, SiriusXM Public Radio, MLB Network Radio, SiriusXM NHL Network Radio, SiriusXM PGA TOUR Radio, SiriusXM Fantasy Sports Radio and select play-by-play of NBA and NHL games and college sports programming. Subscribers with a la carte-capable radios may customize the programming they receive through our a la carte subscription packages. We also offer family friendly, “mostly music” and “mostly sports, news and talk” packages. 1 We also offer an expanded channel lineup, including music, sports and comedy channels as well as SiriusXM Latino, a suite of Latin channels, online and over certain new radios. These channels were the first phase of SiriusXM 2.0, an upgrade and evolution of our satellite and Internet delivered service that spans hardware, software, audio, and data services. We make changes to our programming lineup from time to time as we strive to attract new subscribers and offer content which appeals to a broad range of audiences and to our existing subscribers.